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Collection Title

Nelson W.
SeriesNolume

Shelf/Accession No.
LC 77-38

(1/70)

Monetary C317:::Lt3;441ii

MISCEL:lai

2_
(4)GL.

r•

1)2

THE NEW ALDRICH
CURRENCY SYSTEM
REVISED EDITION

ilT2s

191 1
4(1/.)
(-14-1-44

.0oir

WITH THE COMPLIMENTS OF

THE FOURTH NATIONAL BANK OF THE
CITY OF NEW YORK

:or

The New Aldrich Currency System
Els

,
s

THE NEW ALDRICH CURRENCY
SYSTEM
REVISED EDITION

Full texts of the new plan and the original plan as submit
ted by
Senator Aldrich to the National Monetary Commission, in Janua
ry and
in October, MI i—What the new changes are and how it is
planned to
bring them about—The extremely interesting proposals regard
ing the
admittance of State banks and trust companies to the National
Reserve
Association—Important details of a unique system.

1911

WITH THE COMPLIMENTS

THE FOURTH NATIONAL BANK OF THE CITY
OF NEW YORK

MS
C

Preface to the Revised Edition
This publication of the new Aldrich Plan represents really a
revised edition
of the review published by this bank last spring under the title
of the "Aldrich
Currency Reform Plan Analysed." That edition was soon exhausted.
In this, the revised edition, the aim has been to show the reader at a
glance
just what the changes embodied in the new text really are. These
changes are
numerous, and of the highest importance. They concern among other things:
(I) A new plan for the disposition of the $73o,00o,000 United States bonds
now held by the national banks.

(2) Elaboration of the proposal to admit State banks and trust companies to
the National Reserve Association.

(3) Prohibition against the discounting by the National Reserve Association
of notes and bills issued against deposits of securities.

(4)

Operation of savings departments by national banks.

(5) Elasticity of reserves.
(6) Composition of the directorate of the National Reserve Association so as
to minimize the possibility of control by any one section, or any group of
bankers.
(7) Clearing house powers of local associations.
(8) Authority of the local associations to suspend a bank for failing to maintain its reserve, or to otherwise comply with the law.
(9) Reserve against note issues.
If the original Aldrich Plan was remarkable—and students of currency questions have united in declaring it to be—the amendments contained in the new plan
here given, add greatly to its availability as a practical scheme for real currency
reform. There are other changes in addition to those noted in this summary
which make it of the highest importance that the text of the new plan should be
compared with the text of the old plan, paragraph by paragraph, in the effort to
ascertain the real significance of the changes made.

Preface to the 'Revised Edition
excited the general
No proposal for currency reform in the United States has
r Aldrich. They will uninterest shown in these two plans submitted by Senato
of the National Currency
questionably afford the basis for the recommendations
tion.
Commission next winter, touching new financial legisla
no such classification
The new text contains numbered paragraphs. There was
opposite each numbered
in the old text. The following review aims to bring
n of the old text, but this has
paragraph of the new text the corresponding sectio
arrangement of paragraphs
been sometimes difficult because in some instances the
text have been italicized where it
has not been the same. The changes in the new
in that way. But in most cases
has been possible to distinguish the new matter
that in the new text many of the
it has not been possible to do so for the reason
paragraphs have been entirely rewritten.

Reasons for Amendments embodied in Oct.1911 Draft cf
Aldrich Plan.
The desire to place the popular fear of Wall Street seems
evident in the following amendments:inserting the adjectivd "Naticnal" before the Res. Aszccn
limiting stock holdings to 115 capitalstock of holding bk
limiting stockholdings by definite amporticnemnts
limiting dividends to banks to 4%

The National Reserve Association
Capital and Location
NEW TEXT

ORIGINAL TEXT

1. It is proposed to charter the National Reserve Association of the United
States, which shall be the principal fiscal
agent of the Government of the United
States. The authorized capital of the
National Reserve Association shall be
20 per cent. of the capital of the banks
eligible for membership (approximately
300 millions). The length of its charter
shall be so years. The head office of the
Association shall be in Washington, D. C.

It is proposed to charter the Reserve
Association of America, which will be
the principal fiscal agent of the Government of the United States. The authorized capital of the Reserve Association
shall be approximately $30o,000,000. The
length of its charter shall be 50 years.
The head office of the Association shall
be in Washington, D. C.
The country shall be divided into is
districts, and a branch of the Reserve
Association shall be located in each
district.
The Reserve Association and its
branches shall be exempt from State and
local taxation, except in respect to taxes
upon real estate owned by it.

In the revised plan, it will be seen that the name of the central association is
changed to the National Reserve Association, thus continuing the use of the word
"National" to designate an association in which the national banks will be the
strong factor. This is eminently proper, and marks a change that was strongly
recommended by the bankers at the time that the original plan was under discussion last winter. On the basis of the present total capitalization for national banks
alone, the National Reserve Association would have if all national banks subscribed for its stock a capital of $200,000,000 to start with. The other $roo,000,000
would probably be quickly subscribed for by trust companies and State banks.

Membership—How Secured
NEW TEXT

ORIGINAL TEXT

All national banks and all State
2.
banks and trust companies which comply with the requirements for membership hereinafter set forth (secs. 60-64)
may subscribe to the capital stock of
the National Reserve Association. (The
word "bank," when used hereinafter,
shall he understood to refer to all such
national banks, State banks, and trust
companies as shall comply with the requirements for membership hereinafter

Only national banks of the classes
hereinafter provided for may subscribe
to the capital stock of the Reserve Association. A national bank having a
minimum capital of at least $25,000 may
subscribe to an amount of capit;t1 stock
of the Reserve Association equal to 20
per cent. of the stock of the subscribing
national bank, and not less, and each of
such subscribing banks shall become a
member of a local association as herein

The New Aldrich Currency System
defined.) A bank having a minimum
capital of $25,000 may subscribe to an
amount of capital stock of the National
Reserve Association equal to 20 per
cent, of the stock of the subscribing
bank, and not less, and each of such
subscribing banks shall become a member of a local association as hereinafter
provided. Fifty per cent. of the subscriptions to the capital stock of the
National Reserve Association shall he
called in cash; the balance of the subscriptions will remain a liability of the
subscribers, subject to call.

after provided for. Fifty per cent. of
the subscriptions to the capital stock of
the Reserve Association shall be called
in cash; the balance of the subscriptions
will remain a liability of the stockholders, subject to call.

No bank could ever hold a larger amount of the National Reserve Association's
stock than was represented by one-fifth of its own capital stock. In other words,
a national bank capitalized at, say, $25,000, could subscribe for $5,000 of the capital
stock of the Reserve Association of America. Only half of this subscription, or
$2,500, would be paid in at once; the remaining $2,500 would remain a liability of
the stockholders, subject to call.

Shares of Stock

How Held

NEW TEXT

ORIGINAL TEXT

3. Shares of the capital stock of the
National Reserve Association shall riot
be transferable, and under no circumstances may they be owned by any corporation other than the subscribing bank
nor by any individual, nor may they be
owned by any bank in any other amount
than in the proportion herein provided.
In case a subscribing bank increases its
capital, it shall thereupon subscribe for
an additional amount of the capital
stock of the National Reserve Association equal to 20 per cent. of the bae!,'s
increase of capital, paying therekr its
then book value, as shown by tile last
published statement of the Association.
A bank applying for membership in the
Association after its formation must
subscribe for a proportional share of its
capital stock, paying therefor its then
book value. In case a subscribing bank
reduces its capital, it shall snrrender a
proportionate amount of its holdings of
the capital stock of the National Reserve
Association. If a bank goes into liquidation. it shall surrender all of its holdings of the capital stock of the National
Reserve Association. The shares surrendered shall be canceled and the bank

Shares of the capital stock of the
Reserve Association will not be transferable, and under no circumstances
may they be owned by any corporation
other than the subscribing national bank,
nor by any individual; nor may
they be owned by any national bank in
any other amount than in the proportion here provided. In the case of a
national bank increasing its capital after
it once becomes a subscriber to the
stock of the Reserve Association, the
national bank shall thereupon subscribe
for an additional amount of the capital
stock of the Reserve Association equal
to 20 per cent. of the national hank's
increase of capital, paying therefor its
then book value, but only one-half of
this additional subscription will be called in cash, as hereinbefore provided.
In the event of a national bank which
is a holder of the capital stock of the
Reserve Association decreasing its
capital, it shall surrender a proportionate amount of its holdings of the capital
stock of the Reserve Association: or if
a national bank goes into liquidation,
it shall surrender all of its holdings of
the capital stock of the Reserve Asso-

The New Aldrich Currency System
ciation. The capital of the Reserve
Association so surrendered shall be canceled, and the national bank thus surrendering stock in the Reserve Association shall receive in payment therefor a sum equal to the then book value,
as shown on the balance sheet of the
Reserve Association, of the stock so
surrendered.
The new text clears up the situation very well. The explicit statement that
"by any bank in
the shares of the National Reserve Association shall never be held
that all banks,
shows
d"
any other amount than in the proportion herein provide
the shares of
in
interest
ionate
large and small, will always have the same proport
could never
bank
city
great
a
that
the National Reserve Association. This means
ip.
dominate the Association through stock ownersh

shall receive in payment therefor a sum
equal to their book value.

Earnings and Dividends
ORIGINAL TEXT
NEW TEXT
The earnings of the Reserve Asso4. The earnings of the National Reserve Association shall be distributed in ciation shall be distributed in the following manner :
the following manner :
After the payment of all expenses and
After the payment of all expenses and
receive 4
taxes the stockholders shall receive 4 taxes, the stockholders shall
be divishall
s
earning
Further
cent.
dibe
shall
per
s
earning
per cent. Further
of the
surplus
the
to
go
f
to
one-hal
of
ded,
vided, one-half to go to the surplus
surplus
that
until
tion
Associa
until
Reserve
tion
Associa
Reserve
l
the Nationa
cent. of the paidthat surplus shall amount to 20 per cent. shall amount to 20 per to
go to the Govrth
one-fou
capital;
in
go
to
rth
one-fou
al,
capii
paid-in
the
of
and oneStates,
United
the
t
of
ernmen
United
the
of
to the Government
when
but
lders;
stockho
the
to
fourth
States, and one-fourth to the stockds shall reach
dividen
lders'
stockho
the
lders'
stockho
the
when
holders; but
receive
shall
they
dividends shall reach 5 per cent. 5 per cent.
tion. After the
distribu
nal
additio
no
distribu
nal
additio
no
receive
they shall
receive 5 per cent. the
tion. After the stockholders receive 5 stockholders
be divided, one-half to
shall
s
earning
per cent, the earnings shall be divided,
surplus of the Reserve
the
to
added
be
of
surplus
the
to
one-half to he added
one-half to go to the
and
tion
Associa
the National Reserve Association and Government. After the stookholders reAfter
ment.
Govern
the
to
one-half to go
5 per cent, per an. am and the surthe stockholders receive 5 per cent. per ceiveof the Reserve Association amounts
plus
annum and the surplus of the National to 20 per cent. of the paid-in capital.
Reserve Association amounts to 20 per all excess earnings shall go to the Govcent, of the paid -in capital, all excess ernment
. The minimum dividends to
earnings shall go to the Government. the stockholders shall be cumulative.
The minimum dividends to the stockholders shall he cumulative.
to be
These provisions have been generally indorsed. The banks would seem
believe
bankers
Some
entitled to receive 4 per cent, dividends from the Association.
minimum dividend
that the 4 per cent. rate was too small and that a 5 per cent.
ful banks in the
success
would not be excessive, considering the rate paid by most
on under the
objecti
United States. But this would seem to be scarcely a proper
lly a money
essentia
not
is
circumstances, since the National Reserve Association
Assothe
Reserve
of
surplus
making institution. As to the provision that after the
go to
s
should
earning
excess
ciation reaches 20 per cent. of its paid-in capital all
s
cutting
the
of
excess
portion
the Government, some hankers have urged that a

The New Aldrich Currency System
(after the dividend rate reached 5 per cent. and after the surplus
equalled 20 per
cent, of capital) should go to further strengthen the surplus of the
National Reserve
Association. But the new plan does not adopt this form of disburs
ement, repeating
the original proposal.

Local Associations
NEW TEXT

OLD TEXT

5. All subscribing banks shall be
formed into associations of banks, to
be designated as local associations.
Every local association shall have corporate powers and shall be composed
of not less than to banks, and the combined capital and surplus of the members of each local association shall aggregate not less than $5,000,000. The
territory included in the local associations shall be so apportioned that every
bank will be located in the boundaries of some local association. Every
subscribing bank shall become a member of the local association of the territory in which it is situated.
6. All of the local associations shall
be grouped into divisions, to be called
districts.
The country shall be divided at first
into 15 districts, and a branch of the
National Reserve Association shall be
located in each district, the location to
he determined by the directors of the
National Reserve Association. The disiricts way be readjusted from time to
time, and new districts and new branches may be created by the directors.
7. The National Reserve Association
and its branches and the local associations shall be exempt from State and
local taxation, except in respect to taxes
upon real estate.

All subscribing banks shall be formed
into associations of national banks, to
be designated as local associations
Every local association shall be composed of not less than io banks, and the
combined capital and surplus of the
members of each local association shall
aggregate not less than $5,000,o0o.
All the local associations shall be
grouped into 15 divisions, to be called
districts. The territory included in the
local associations shall he so apportionec
that every national bank will be locate(
within the boundaries of some loca
association. Every subscribing nationa
bank shall become a member of the loca
association of the territory in which i
is situated.

These associations could become of great usefulness in many ways.
They must
take in the whole territory in which all of the country's 7,218 or
more national
banks arc located. Every bank that belongs to the Reserve Associa
tion of America
must join the local association of the territory in which it is located.

Officers and Directors
NEW TEXT

ORIGINAL TEXT

(A) DIRECTORS OF LOCAL ASSOCIATIONS.

DIRECTORS OF LOCAL ASSOCIATIONS.

8. Each local association shall elect
annually a board of directors, the nuni
her to he determined by the by-laws of
the local association. Three-fifths of

Each local association shall elect an
nually a board of directors in the following manner :
The number of the directors may be

The New Aldrich Currency System

•

local
determined by the by-laws of the numassociations. Three-fifths of thatby the
ber shall be elected by ballot cast
that are
representatives of the banks ion,
each
members of the local associat
and
ve,
tati
esen
repr
one
bank having
out
each representative one vote, .with
Two
bank
the
of
size
the
to
e
referenc
s
ctor
dire
of
er
numb
e
fifths of the whol
elected
of the local association shall be of
the
ves
tati
esen
repr
e
sam
by these
the
of
s
ber
mem
are
several banks that
ade
thes
for
ng
voti
in
but
ion,
ciat
asso
tative
ditional directors each represen
votes as
shall be entitled to as many ts
holds
the bank which he represen
At
ion.
ciat
Asso
rve
shares in the Rese
ies.
such elections there shall be no prox
of a
The authorized representatives eith
er
bank, as herein provided, must becashier
or
nt,
side
-pre
vice
t,
iden
pres
the
of the bank he represents.
it is interesting to note that the
While both texts are virtually the same,
s shall be determined by the by-laws
new text provides that the number of director
so determined. The new text provides
while the original text says that they may be
corporate powers. It is probable that
also that the local associations shall have
of
ring house. These local associations are
some may exercise the powers of a clea
The
s.
tion
niza
orga
ently representative
great importance. They will be emin
ctors
ingenious. Three-fifths of the dire
y
ainl
cert
scheme of control provided is
ber
mem
each
ion,
ciat
bers of the local asso
shall be chosen by ballot cast by the mem
ber
num
e
whol
the
of
hs
one vote. Two-fift
bank, irrespective of its size, having
ves
tati
esen
repr
ng
voti
the
shall be elected by
of directors of the local association
taesen
repr
ng
voti
each
s
e additional director
of these banks, but in voting for thes
esented
led to cast as many votes as are repr
entit
be
bank
tive (of a member bank) shall
his
that
ica
Amer
of
Reserve Association
by
by the number of shares in the
done
be
must
ng
voti
All
at these elections.
ies
prox
no
be
shall
e
Ther
is
It
s.
hold
esented.
nt, or cashier of the banks repr
side
-pre
vice
t,
iden
pres
ed
the
er
just
eith
be read
provides that the districts shall
significant also that the new text
s see fit.
ctor
dire
the
as
d
adde
be
branches may
from time to time and that new

ballot
that number shall be elected by bank
s
the
of
ves
tati
esen
repr
the
cast by
ciaasso
local
the
that are members of
tion, each bank having one representa-,
tive and each representative one vote.
without reference to the size of the bank
Two-fifths of the whole number of dibe
rectors of the local association shall of
elected by these same representatives of
the several banks that are members e
the association, but in voting for thes
ve
additional directors each representati
the
as
s
vote
y
man
as
to
led
shall be entit
bank which he represents holds shares
in the National Reserve Association.
At such elections there shall be no
proxies. The authorized representatives
of a bank, as herein provided, must be
either the president, vice-president, or
cashier of the bank he represents.

Directing the Branches

ORIGINAL TEXT

NEW TEXT
.

(a) DIRECTORS OF BRANCHES
the Nag. Each of the branches of
l have
shal
ion
ciat
Asso
rve
Rese
al
tion
in the
ted
elec
be
to
s,
ctor
dire
a hoard of
following manner:
each local
The board of directors of ball
ot one
by
t
elec
association shall
s of
ctor
dire
of
d
member of the boar
rve
Rese
onal
Nati
the
of
nch
the bkra
will
e
ther
er
mann
this
Association. In
s of the
thus be elected as many director

DIRECTORS OF BRANCHES.

l
As heretofore provided, all the loca
15
associations shall be grouped intosion
s
divisions, and each of these divi
e
shall be designated a district. Ther
ch
shall be located in each district a bran of
Each
ion.
ciat
of the Reserve Asso
the 15 branches of the Reserve Asso
s,
ctor
of
d
dire
boar
a
have
ciation shall
and those directors shall be elected in
the following manner:
9

The New Aldrich Currency System
branch of the National Reserve Asso
The board of directors of each
tion as there may he local associatcialocal
in the district in which that bran ions association shall elect by ballot one memch
of
ber of the board of director
the National Reserve Association
s of the
is lo- branch of the Reserv
cated.
e Asso
this manner there will thusciation. In
be elected
to. In addition to tat num
there as many directors of the branch of the
shall be elected in the followinber
Reserve Association as ther
g manner
e may be
a number of directors equa
loca
thirds of the number of locall to two- thatl associations in the district in which
associabranch of the Reserv Associat
tions in the district where the bran
ion
is located. In addition toethat
ch
is
located. There shall be chosen
num
ber
ther
banks composing each local asso by the dire e shall be elected a number of the
ctors equal to two-thirds
a voting representative or proxy ciation number
of
hold
of local associations in the the
er.
In choosing such voting repr
district where the branch is loca
ted. Such
each bank shall be entitled toesentative addition
as
al
many
directors shall be elected in
votes as it holds shares in the
the following manner:
Reserve Association. The voti National
There shall be chosen by the
sentatives of the several local ng reprebanks
tions which form a district shalassocia- composing each local association a votl
elec
t
ing
representative or proxy holder.
an additional number of dire
.In
the branch equal to two-thir ctors of choosing such voting representative
ds
of
the
each
ban
k shall be entitled
number elected directly by
the local
votes as it holds shares in to as many
association ; that is, equal to twothe Reserve
thirds Association. The voting
of the number of local associat
representatives
ions
com
of
the
several local associations whi
posing the district. Each voti
ch
sentative at such election shal ng repre- form a district shall then meet at the
l
hav
e
a
offic
e
of
the
branch
number of votes equal to the
number of tional number of dire and elect an addishares in the National Reserv
ctor
e
Asso- equal to two-thirds of thes of the branch
c;ation held by all the banks
number electcomposing ed directly by the loca
the local association which he repr
l associations; that
esents. is, equal to two-thirds of
the num
Ti. The board of the
branch as thus local associations composing theber of
constituted shall at once add to
district
.
Each voting representative
bers by the election of an its num- such elec
at
tion shall have a number of
number of directors equal to additional votes equa
onel
third
to the number of shares
of the number of local associat
in the
erve Association held by all
ated in the district. Such addi ions situ- the banRes
ks composing the local asso
rectors shall fairly represent tional di- tion
ciawhi
the
ch he represents.
indu
strial, commercial, agricultural,
The first business of the boa
interests of the district, and and other
rd of the
be officers of ban. Directors shall not branch as thus constituted shall be to
of banks add to its numbers by
shall not be considered as officers
election of
.
an additional number of the
dire
ctor
s equal
12. The manager of the
to onebran
be ex officio a member of the ch shall ciationsthird the number of local assoboar
situ
d
ated
of
in the district. Such
directors of the branch and
shall be additional directors shall fairly repr
chairman of the board.
esent the industrial, commer
cial, agriThe board of directors of a
cult
ural
,
and
branch of
other interests of the disthe National Reserve Associat
ion will thus
trict and shall not be officers
be composed of—
Directors of banks shall not of banks.
First. A group of direc
be connumber to the number of tors equal in
side
red as officers.
local associations composing the di-:trict, and
this group
The manager of the bra
shall be elected by the local
associations,
each association having one vote.
ex officio a member of the nch shall he
Second. A group of directors
rectors of the branch and board of diequal to
two-thirds of the foregoing grou
shall be chairp
and
man of the board.
elect
ed by stock representation.
The board of director
Third. A group of directors
number to one-third of the firstequal in
of the Reserve Associats of a branch
group,
ion will thus
representing the in
be composed of—
agricultural, and other interestscommercial,
of
the
trict, and elected by the votes of the disFirst. A group of director
first
two groups, each director thus
num
ber to the number of locas equal in
voti
ng
having one vote.
l associations composing the
district, and this

The New Aldrich Currency System
group shall be elected by the directors
of the local association, each director
having one vote.
Second. A group of directors equal
the foregoing group
13. All the members of the board of to two-thirds of
representation.
stock
by
d
ex
electe
and
the
t
excep
h,
directors of the branc
directors equal
of
group
A
.
ng
Third
meeti
officio member, shall at the first
of the first
hird
one-t
to
of the board be classified into three clas- in number senti
rial, comindust
the
ng
repre
,
group
three
these
of
ses, and the terms of office
interests
other
,
and
ltural
agricu
al,
classes shall be, respectively, one, two, merci
d by the votes
electe
and
ct,
distri
ers
the
of
memb
,
after
There
and three years.
two groups, each director
of the board shall be elected for a term of the first
g one vote.
havin
g
thus votin
of three years.
Fourth. The manager of the branch
shall be ex officio a member of the
board of directors of the branch and
shall be chairman of the board
All the members of the board of directors of the branch, except the ex
officio member, shall, at the first meeting of the board, be classified into three
classes, and the terms of office of these
three classes shall be, respectively, one,
two, and three years. Thereafter members of the board shall be elected for a
term of three years.
the original text is retained.
The general scheme of supervision provided in
ors of these branches will have
This deserves to be carefully studied. The direct
rs pertaining to business condigreat influence. They will be consulted on all matte
e of information concerning the
tions in their district. They will be the best sourc
the investments that are being made.
position of their banks and the character of
form of new enterprize is imposing
When a "land craze" develops or any other
ors of these branches will be sure to get
heavy burdens upon the banks, the direct
deal of preventive work and act in an
wind of them. They can do a great
their supervision. While the provisions in
advisory capacity to the banks under
much the same, the phraseology is different
the old and the new texts are
red.
and should be very carefully compa
Fourth. The manager of the branch shall
of
be ex officio a member of the board
directors of the branch and shall be chairman of the board.

ciation
Directing the National Reserve Asso
ORIGINAL TEXT

NEW TEXT
NATIONAL RESERVE
(C) DIRECTORS OF THE
ASSOCIATION.

The board of the National Reiation shall at first consist
Assoc
serve
of 45 directors, and shall be constituted
in the following manner:
First. Six ex officio members, namely, the governor of the National Reserve Association, who shall be chair-man of the board; two deputy gover
14.

N.
DIRECTORS OF THE RF.SERVF. ASSOCIATIO

The board of the Reserve Association shall consist of 45 directors, and it
shall he composed in the following manner:
First. Six ex officio members, namely,
the governor of the Reserve Association, who shall he chairman of the
hoard: two deputy governors of the
Reserve Association, the Secretary of
the Treasury, the Secretary of CoII

The New Aldrich Currency System
nors of the National Reserve Association, the Secretary of the Treasury, the
Secretary of Commerce and Labor, and
the Comptroller of the Currency.
15. Second. Fifteen directors to be
elected, one by the board of directors
of each branch of the National Reserve
Association. In case the number of districts shall be increased hereafter, each
additional district shall be entitled to
elect an additional director.
16. Third. Twelve directors, who
shall be elected by voting representatives
of the various districts, each of whom
shall cast a number of votes equal to
the number of shares in the National
Reserve Association held by all the
banks in the district which he represents.
17. Fourth. The twenty-seven directors thus elected shall in turn elect
twelve additional members, who shall
fairly represent the industrial, commercial, agricultural, and other interests of
the country, and who shall not be officers of banks.
Directors of banks
shall not be considered as officers.
18. Not more than three of the directors elected under paragraphs 16 and 17
shall be chosen from one district.
19. At the first meeting of the board
all the members of the board, except
the ex officio members, shall be classified into three classes, and the terms of
office of these three classes shall be, respectively, one, two, and three years.
Thereafter members of the board shall
be elected for a term of three years.
20.
No member of any national or
State legislative body shall be a director
of the National Reserve Association,
nor of any of the branches, nor of any
local association.

merce and Labor, and the Comptroller
of the Currency.
Second. Fifteen directors to be elected, one by the board of &rectors of
each branch of the Reserve Association.
They shall be elected by ballot, each
member of the branch board having one
vote.
Third. Twelve directors, who shall
be elected by voting representatives, one
representing the banks embraced in each
district.
Each voting representative
shall cast a number of votes equal to
the number of shares in the Reserve
Association held by all the banks in
the district which he represents.
Fourth. The board as thus constituted shall select 12 additional members,
who shall fairly represent the industrial,
commercial, agricultural, and other interests of the country, and who shall
not be officers of banks. Directors of
banks shall not be considered as officers.
At the first meeting of the board all
the members of the board, except the ex
officio membcrs, shall be classified into
three classes, and the terms of office of
these thr2e classes shall be, respectively,
one, two, and three years. Thereafter
members of the board shall be elected
for a term of three years.
No member of any national or State
legislative body shall be a director of
the Reserve Association, nor of any of
the branches, nor of any local association.

Section 18 in the new text does not appear in the old text. It was put in
to
lessen the chance of having several directors from any one section. Admittan
ce to
this board will be more sought after than positions on any oier directorate in the
United States. This is the only board of those named where the membership
is
fixed at a certain number. It is perfectly fair to assume that directors
of such a
board would act with the highest sense of responsibility for the people as
a whole
and not for their own or any special interests. The dignity of such a board
would
be very great and the acts of the directors would be scrutinized by the whole
country. The board would be truly representative of the country's highest balking
and commercial interests. There are men in various sections of the United States
whose ability and high sense of duty would eminently equip them to serve the
people in this way. It has been strongly urged by some critics that it would be a

111

The New Aldrich Currency System
of bankers and business men
better plan to have the board composed wholly
tten however, that the National
%vithout Government officers. It must not be forgo
fiscal agent and will do a vast
Reserve Association will act as the Government's
amount of business for the Government.

Committees
ORIGINAL TEXT
The directors of the Reserve AssociaONAL RE(10 COM NI UTFIES OF THE NATI
tion shall annually elect an executive
SERVE ASSOCIATION.
committee and such other committees
Re- as the by-laws of the Reserve Associa21. The directors of the National
elect
lly
tion may provide. The executive comserve Association shall annua
comtive
execu
an
mittee shall consist of nine members, of
er
numb
their
from
the
as
ttees
commi
which the governor of the Reserve Asmittee and such other
o chairman
by-laws of the National Reserve Asso- sociation shall be ex offici the Compand
ies
tive
deput
execu
two
the
The
and
de.
provi
ciation may
officio memcommittee shall consist of nine mem- troller of the Currency ex
Nathe
of
nor
bers.
gover
the
h
whic
of
bers,
The executive committee shall have
tional Reserve Association shall be ex
vested in the
officio chairman and the two deputies all the authority which ist such as may
ex
excep
ncy
tors,
Curre
direc
of
the
of
board
r
rolle
and the Compt
by the board to
officio members, but not more than onen be specifically delegatedto the executive
or
chose
ttees
be
commi
shall
other
ers
memb
ed
elect
the
of
officers.
from one district.
There shall be a board of supervision
The executive committee shall
22.
in
d
veste
is
ed by the board of directors from
which
elect
rity
autho
have all the
as
such
t
g its number, of which the Secreexcep
amon
the board of directors,
the
by
the Treasury shall be ex officio
of
ated
tary
deleg
ically
specif
be
may
exethe
man.
to
chair
or
ttees
commi
board to other
cutive officers, or such as may be speci
.
board
the
by
ned
retai
or
ved
fically reser
23. There shall be a board of supervision elected by the board of directors
from among its numbers, of which the
Secretary of the Treasury shall be ex
officio chairman.
al important changes. Not more than
The italics in the new text show sever
shall conic from one district. The execuone member of the executive committee
important of all.
hive committee is naturally the most
NEW TEXT

Executive Officers
ORIGINAL TEXT

NEW TEXT
THE NATIONAL
(E) EXECUTIVE OFFICERS OF
N.
IATIO
ASSOC
VE
RESER

EXECUTIVE

THE

RESERVE

ASSOCIATION.

The executive officers of the Reserve
Association shall consist of a governor.
two deputy governors, a secretary, and
such subordinate officers as may be provided by the by-laws. The governor and

24. The executive officers of the Nast
iinnal Reserve Association shall consi
nors,
gover
y
deput
two
of a governor,
e Ofa secretary, and such subordinat
bythe
by
ded
provi
be
ficers as may

OFFICERS

The New Aldrich Currency System
laws. The governor shall be selected deputy governors
by the President of the United States the President of theshall be selected by
from a list submitted by the board of a list submitted by United States from
directors, and shall be subject to re- tors. The governo the board of direcr shall be subject to
moval by a two-thirds vote Of the board removal by the
President of the United
of directors for cause. The term of States for cause.
The term of office of
office of the deputies shall be seven the deputies
years, but the two deputies first elected two deputiesshall be seven years, but the
first appointed shall be for
shall serve for terms of four years and terms of four
years and seven years,
seven years, respectively. 7'he deputies respectively.
shall lie elected by the board of directors
In the absence of the governor or his
and may be removed for cause at any inability to
lime and their places filled by the board. in point of act, the deputy who is senior
service shall act as governor.
In the absence of the governor or his
inability to act, the deputy who is senior
in point of service shall act as governor.
Here again are noteworthy changes. The provision in the original
text that
the deputy governors shall be appointed by the President of the
United States has
been dropped. They are to be appointed by the board. Thirty officers
in all—two
in each branch district—will be selected by the governor.

Officers of Branches
NEW TEXT

ORIGINAL TEXT

(F) EXECUTIVE OFFICERS OF DRANCHES.

EXECUTIVE OFFICERS OF BRANCHES.

25. Each branch shall have a manEach branch shall have a manager
ager and a deputy manager appointed and a deputy manager. They
by the governor of the National Reserve appointed by the governor of shall be
the ReAssociation, with the approval of the serve Association, with the
approva
l of
executive committee.
the executive committee.
26. The powers and duties of the
The powers and duties of
manager and deputy manager and of the ager and deputy manager andthe manvarious committees of the branches shall various committees of the brancheof the
s shall
be prescribed by the by-laws of the Na- be prescribed by the by-laws of th'!
Retional Reserve Assc _iation.
serve Association.
The Governor of the National Reserve Association will have more good positions to bestow than any bank president in the land. The manager, and deputy
manager of each branch will be selected by him.

Officers of Local Associations
NEW TEXT

ORIGINAL TEXT

(G) EXECUTIVE OFFICERS OF THE LOCAL
ASSOCIATIONS.

27. The directors of the local association shall annually elect from among
their number a president, a vice-president, and an executive committee, whose
powers and duties and terms of office
shall be determined by the by-laws of
the local association, subject, however,
to the provisions of this Act.

No Corresponding Provisions.

The New Aldrich Currency System
28. The local associations, the branches, and the National Reserve Association shall each have by-laws which shall
provide, among other things, a method
of filling vacancies on their respective
boards of directors.
The by-laws of the local associations
and of the branches shall be subject 13
the approval of the National Re:erve
Association.
[The Act will provide a preliminary
organization for the Reserve Association, to remain in effect until the permanent organization created by the foregoing sections can be perfected.]

No Corresponding Provisions.

These provisions are new and arc merely an effort to perfect the organization
of the local associations.

Local Associations
NEW TEXT
FUNCTIONS OF THE LOCAL

ORIGINAL TEXT
ASSOCIATIONS.

FUNCTIONS OF THE LOCAL ASSOCIATIONS.

Any member of a local association
may apply to that local association for
a guaranty of the commercial paper
which it desires to rediscount at the
branch of the Reserve Association in its
district. Any such bank receiving a
guaranty from a local association shall
pay a commission to the local association, to be fixed from time to time by
the board of directors of that local association. The guaranty of the members
of the local association, in the event of
loss, shall be met by the members of
the local association in the proportion to
the ratio which their capital and surplus
bears to the aggregate capital and surplus of the local association, and the
commission received for such guaranty,
after the payment of losses and expenses,
shall be distributed among the several
banks of the local association in the
same proportion. A local association
shall have authority to require additional
sect_!rity from any bank offering paper
for guaranty, or may decline to grant
the application.
The total amount of guaranties by a
local association to the Reserve Association shall not at any time exceed the

The New Aldrich Currency System
and surplus or the
and With Hit apProval of the National aggregate capital
guaranteeing asso
the
g
formin
banks
exerand
Reserve Association, assume
cise such of the powers and functions ciation.
of a clearing house as are not inconsistent with the purposes of this Act. The
National Reserve Association may require any local association to pciform
such services in facilitating the domestic
exchanges of the Reserve Association as
the public interests may require.
32. The local associations shall appoint examiners, who shot' hove authority to examine into the condition of
the banks composing the associat;on under such regulations as may be adopted
by the local association, with the approval of the National Reserve Association. Copies of the reports of these examinations shall upon request be furnished to the executive officers of the
National Reserve Association and of its
branches.
33. A local association may by a vote
of two-thirds of its members suspend
a bank from the privileges of membership for a failure for thirty days to
maintain its reserves, or to make the
reports required by this Act, or for misrepresentation in any report or examination as to its condition or as to the
character or extent of its assets or liabilities.
foc
The new provisions materially strengthened the original scheme of action
countithe
for
age
these local associations. They could be of immense advant
The addition
banks, or for banks located at points distant from the reserve cities.
is in line
tions
associa
of a competent examining force to the equipment of these
g houses
clearin
the
where
with the action taken by the banks in the large cities
work
the
ment
to
supple
ers
examin
are now equipped with a force of independent
of national and State examiners.

Functions of National Reserve Association
ORIGINAL TEXT

NEW TEXT
FUNCTIONS

THE

NATIONAL

RESERVE

ASSOCIATION.

FUNCTIONS OF THE RESERVE ASSOCIATION.

All of the privileges and advantages of
the Reserve Association shall be equitably extended to every national bank
of any of the classes herein defined who
shall subscribe to its proportion of the
stock of the Reserve Association and
shall otherwise conform to the requirements of this Act.
The Government of the United States
and those national banks owning stock
:6

TheNew Aldrich Currency System

States and those banks owning stock in
the National Reserve Association shall
be the sole depositors in the National
Reserve Association. All domestic
transactions of the National Reserve Association shall be confined to the Government and the subscribing banks, with
the exception of the purchase or sale of
Government or State securities or securities of foreign governments or of
gold coin or bullion.
36. The Government of the United
States shall deposit its cash balance with
the National Reserve Association, and
thereafter all receipts of the Government shall be deposited with the National Reserve Association, except that
when necessary the Government may
designate national banks for that purpose in cities where there is no branch
of the National Reserve Association.
All disbursements by the Government
shall be made through the National Reserve Association.
37. The National Reserve Association
shall pay no interest on deposits.
38. The National Reserve Association may rediscount for and with the
indorsement of any bank having a deposit with it, notes and bills of exchange
arising out of commercial transactions.
(This language, whenever used, is intended to apply to all notes and bills of
exchange issued or drawn for agricultural, industrial, or commercial purposes, and not for carrying stocks,
bonds, or other investment securities.)
Such notes and bills must have a maturity of not more than 28 days, and
must have been made at least 30 days
prior to the date of rediscount. The
amount so rediscounted shall in no case
exceed the capital of the bank applying for the rediscount. The aggregate
of such notes and bills bearing the signature or indorsement of any one person, company, corporation, or firm, rediscounted for any one bank, shall at no
time exceed TO per cent. of the capital
and surplus of said bank.
39. The National Reserve Association may also rediscount, for and with
the indorsement of any bank having a.
deposit with it, notes and hills of exchange arising out of commercial transactions as hereinbefore defined, having
more than 28 days, but not exceeding
four months, to run, but in such cases the

in the Reserve Association shall be the
sole depositors in the Reserve Association. All domestic transactions of the
Reserve Association shall be confined to
the Government and the subscribing
banks, with the exception of the purchase or sale of Government or State
securities or securities of foreign governments or of gold coin or bullion.
The Government of the United States
shall deposit its cash balance with the
Reserve Association and thereafter all
receipts of the Uovernment shall be deposited with the Reserve Association or
(when necessary) with such national
banks as the Government may designate
for that purpose in cities where there is
no branch of the Reserve Association.
All disbursements by the Government
shall be made through the Reserve Association.
The Reserve Association shall pay no
interest on deposits.
The Reserve Association may rediscount notes and bills of exchange arising out of commercial transactions, for
and with the indorsement of any bank
having a deposit with it. Such notes
and bills must have a maturity of not
more than 28 days, and must have been
made at least 30 days prior to the date
of rediscount. The amount so rediscounted shall in no case exceed the capital of the bank applying for the rediscount. The aggregate of such notes
and bills bearing the signature or indorsement of any one person, company,
corporation, or firm, rediscounted for
any one bank, shall at no time exceed
To per cent. of the capital and surplus
of said bank.
The Reserve Association may also rediscount for any depositing bank, notes
and bills of exchange, arising out of
commercial transactions, having more
than 28 days, Jut not exceeding four
months, to run, hut in such cases the
pape: must be guaranteed by the local
association of which the bank asking
for the rediscount is a member.
Whenever, in the opinion of the governor of the Reserve Association, the
public interests so require, such opinion
to be concurred in by the executive committee of the Reserve Association and
to have the definite approval of the Secretary of the Treasury, the Reserve Association may discount the direct obli-

The New Aldrich Currency System
paper must be guaranteed by the local
association of which the bank asking
for the rediscount is a member.
40. \Vhenever, in the opinion of the
governor of the National Reserve Association, the public interests so require,
such opinion to be concurred in by the
executive committee of the National
Reserve Association and to have the
definite approval of the Secretary of the
Treasury, the National Reserve Association may discount the direct obligation of a depositing bank, indorsed by
its local association, provided that the
indorsement of the local association shall
be fully secured by the pledge and deposit with it of satisfactory securities,
which shall be held by the local association for account of the National Reserve Association; but in no such case
shall the amount loaned by the National
Reserve Association exceed threefourths of the actual value of the securities so pledged.
4t. The rates of discount which the
National Reserve Association shall have
authority to fix from time to time shall
be published when fixed, and shall be
uniform throughout the United States.
42. The National Reserve Association may, whenever its own condition
and the general financial conditions warrant such investment, purchase to a limited amount from a subscribing bank
acceptances of banks or houses of unquestioned financial responsibility. Such
acceptances must have arisen out of
commercial transactions, must have not
exceeding 90 days to run, and must be
of a character generally known in the
market as prime bills. Such acceptances shall bear the indorsement of the
subscribing bank selling the same, which
indorsement must be other than that of
the acceptor.
43. The National Reserve Association
may invest in United States bonds and
in short-term obligations—that is, obligations having not more than one year
to run—of the United States or its dependencies, or of any State, or of foreign governments.
44. The National Reserve Association
shall have power at home and abroad to
deal in gold coin or bullion, to grant
loans thereon, and to contract for loans
of gold coin or bullion, and to give therefor, when necessary, acceptable security, including the hypothecation of any

gation of a depositing bank, indorsed by
its local association, provided that the
indorsement of the local association
shall be fully secured by the pledge and
deposit with it of satisfactory securities,
which shall be held by the local association for account of the Reserve Association ; but in no such case shall the
amount loaned by the Reserve Association exceed two-thirds of the actual
value of the securities so pledged.
The rate of discount of the Reserve
Association, which shall be uniform
throughout the United States, shall be
fixed from time to time by the executive
committee and duly published.
The Reserve Association may, whenever its own condition and the general
financial conditions warrant such investment, purchase to a limited amount from
a depositing bank, acceptances of banks
or houses of unquestioned financial reSuch acceptances must
sponsibility.
arise from commercial transactions and
have a maturity not exceeding 90 days,
and must be of a character generally
known in the market as prime bills.
Such acceptances shall also bear the indorsement of the depositing bank selling the same, which indorsement must
be other than that of the acceptor.
The Reserve Association may invest
in United States bonds and in shortterm obligations—that is, obligations
having not more than one year to run
—of the United States, or of any State,
or of certain foreign governments to be
named in the Act.
The Reserve Association shall have
power at home and abroad to deal in
gold coin or bullion, to grant loans thereon, and to contract for loans of
gold coin or bullion, giving, when
necessary, acceptable security for their
repayment.
The Reserve Association shall have
power to purchase from its depositors
and to sell, with or without its indorsement, checks or bills of exchange payable in England, France, or Germany,
and in such other foreign countries as
the board of the Reserve Association
may decide. These bills of exchange
must arise from commercial transactions
and be of a maturity not exceeding 90
days, and shall bear the signatures of
at least three responsible parties, of
which the last one shall be that of a
depositing bank.

The New Aldrich Currency System
of its holdings of United States bonds.
45. The National Reserve Association shall have power to purchase from
its subscribers and to sell, with or without its indorsement, checks or bills of
exchange payable in England, France or
Germany, and in such other foreign
countries as the board of the National
Reserve Association may decide. These
bills of exchange must have arisen out
of commercial transactions, must have
not exceeding go days to run, and must
bear the signatures of two or more responsible parties, of which the last one
shall be that of a subscribing bank.
46. The National Reserve Association shall have power to open and maintain banking accounts in foreign countries and to establish agencies in foreign
countries for the purpose of purchasing
and selling and collecting foreign bills
of exchange, and it siiall have authority
to buy and sell, with or without its indorsement, through such correspondents
or agencies, checks or prime foreign
bills of exchange which have arisen out
of commercial transactions, which have
not exceeding go days to run, and which
bear the signatures of two or more responsible parties.

The Reserve Association shall have
power to open and maintain banking accounts in foreign countries and to establish agencies in foreign countries, for
the purpose of purchasing and selling
and collecting foreign bills of exchange,
and it shall have authority to buy and
sell, through such agencies, prime foreign bills of exchange arising from commercial transactions, running for a period not exceeding go days, and bearing
the signatures of two or more responsible parties.

The amendments in the new text affecting
this section arc of the highest
significance. They cannot be studied too closely.
The National Reserve Association is absolutely prohibited from rediscounting paper
drawn for "carrying stocks,
bonds, or other investment securities." The discounting privileg
es are otherwise
restricted. The National Reserve Association must serve all banks
alike. There
is no chance for favoritism being shown to any bank, as the propose
d Act is drawn
specifically in the interests of all banks, both large and small, which
thus come into
co-operation with one another. None but the Government of the United
States and
the banks which are the sole owners of the National Reserve Associations
shall
deposit with it. The Association will offer no competition whatever to the other
banks, or interfere in the slightest degree with the operations of existing institutions
except as concerns the taking over of most of the public deposits. It is probable
that the Government will be forced to carry some money in the banks, especially
at points where the Association has no branches. This, howeN er, is not a subject
of immediate concern. The restrictions are sufficient to protect the Association
under all circumstances. Under section 44 the National Reserve Association, in
111,• new text is permitted to hypothecate, if need be, its holdings of United States
bonds.

The New Aldrich Currency System
Domestic Exchanges
NEW TEXT
47. It shall be the duty of the National Reserve Association or any of
its branches, upon request, to transfer
any part of the deposit balance of any
bank having an account with it to the
credit of any other bank having an account with the National Reserve Association. If a deposit balance is transferred from the books of one branch
to the books of another branch, it may
be done, under regulations to be prescribed by the National Reserve Association, by mail or telegraph at rates
to be fixed at the time by the executive
committee of the branch at which the
transaction originates. (See also sec.
72.)

ORIGINAL TEXT
It shall be the duty of the Reserve
Association or any of its branches, upon
request, to transfer any part of the deposit balance of any national bank having an account with it to the credit of
any other bank having an account with
the Reserve Association. If a deposit
balance is transferred from the books of
one branch of the Reserve Association
to the hooks of another branch. it may
he done by mail or telegraph upon terms
to he fixed from time to time by the
executive committee.

Functions of National Banks
NEW TEXT
48. In addition to the rights now
conferred by law, national banks shall
be authorized to accept commercial paper
drawn upon them, having not more than
four months to run, properly secured,
and arising out of commercial transactions. The amount of such acceptances
outstanding shall not exceed one-half
the capital and surplus of the accepting
bank, and shall be subject to the restrictions of section 5200 of the Revised Statutes.
49. The organization of banks to conduct business in foreign countries and
in the dependencies of the United States
shall be authorized. The stock of such
banks may be held by national banks,
but the aggregate of such stock held by
any one bank shall not exceed 20 per
cent. of the capital of that bank.
The bank so organized may have an
office in the United States, but shall not
receive deposits in the United States norcompete with national banks for domes
tic business not necessarily related to the
business being done in foreign countries
d
or in the dependencies of the Unite
States.
50. National banks shall be given the
.trictions and
right, under proper re,
in the Act, to
0
de1mne
be
to
regulations
establish separate savings departments,,
and to lend, under proper restrictions
not more than 40 per cent. of their say-

ORIGINAL TEXT
FUNCTIONS OF

NATIONAL BANKS.

In addition to the rights now conferred by law, national banks shall be
authorized to accept commercial paper
drawn upon them, having not more
than 90 days to run, properly secured,
and arising out of commercial transactions. The amount of such acceptances
shall not exceed one-half the capital
and surplus of the accepting bank.
National banks shall not have authority to establish branches except in the
city or town in which they are located.
The organization of banks to conduct
business in foreign countries shall be
authorized. The stock of such banks
may be held by national banks. The
bank so organized may have an office
in the United States, but shall not compete with national banks for domestic
business not necessarily related to the
business being done in foreign countries.
There shall be established a new class
of national banks, to be known by a
Such
specifically designated name.
banks may have savings departments
and may make properly secured loans
on real estate; such loans to be restrict-

The New Aldrich Currency System
Domestic Exchanges
NEW TEXT
the Na47. It shall be the duty of
any of
or
ion
ciat
Asso
tional Reserve
fer
its branches, upon request, to trans
any
of
nce
bala
it
depos
the
of
any part
to the
bank having an account with it an
acng
hayi
bank
r
othe
any
of
t
credi
Asso
rve
Rese
onal
Nati
count with the
transciation. If a deposit balance is branch
ferred from the books of one it may
to the books of another branch,be prebe done, under regulations to
Assoscribed by the National Reserve
rates
at
raph
teleg
ciation, by mail or
e
utiv
exec
the
by
time
the
at
fixed
to be
the
h
whic
at
ch
bran
the
committee of
transaction originates. (See also sec.
72.)

ORIGINAL TEXT
It shall be the duty of the Reserve
Association or any of its branches, upon
request, to transfer any part of the deposit balance of any national bank having an account with it to the credit of
any other bank having an account with
the Reserve Association. If a deposit
balance is transferred from the books of
n
one branch of the Reserve Associatio
may
to the books of another branch, itterm
s
be done by mail or telegraph upon
the
by
time
to
time
to he fixed from
executive committee.

Functions of National Banks
NEW TEXT
now
48. In addition to the rightss shall
bank
nal
natio
law,
by
d
conferre
paper
be authorized to accept commercial than
drawn upon them, having not more
red,
four months to run, properly secu acteans
al
erci
comm
and arising out of
ces
tons. The amount of such acceptanhalf
oneed
exce
not
shall
outstanding
ting
the capital and surplus of the accep
icrestr
the
to
ct
subje
be
shall
and
bank,
Statsed
Revi
the
of
5200
tions of section
utes.
49. The organization of banks to conand
duct business in foreign countriesState
s
ed
Unit
the
of
cies
nden
depe
the
in
such
of
stock
The
.
rized
autho
shall be
banks,
banks may be held by national held
by
stock
such
of
e
egat
aggr
but the
per
20
ed
exce
not
any one bank shall
.
cent. of the capital of that bankhave an
may
d
nize
orga
so
The bank
shall not
office in the United States, butStates nor
ed
Unit
the
in
its
depos
receive
s for domescompete with national bankrelat
ed to the
y
tic business not necessaril gn countries
forei
in
done
g
bein
business
United
or in the dependencies of the
States.
given the
50. N,tional banks shall be
ns and
ictio
restr
right, under proper
Act, to
the
in
ed
defin
be
to
s
regulation
nts,
rtme
depa
ngs
savi
establish separate
restrictions,
er
prop
mder
lend,
to
and
their saynot more than 40 per cent. of

ORIGINAL TEXT
FUNCTIONS OF

NATIONAL BANKS.

In addition to the rights now conferred by law, national banks shall be
authorized to accept commercial paper
drawn upon them, having not more
than 90 days to run, properly secured,
and arising out of commercial transactions. The amount of such acceptances
shall not exceed one-half the capital
and surplus of the accepting bank.
National banks shall not have authority to establish branches except in the
city or town in which they are located.
The organization of banks to conduct
business in foreign countries shall be
authorized. The stock of such banks
may be held by national banks. The
bank so organized may have an office
in the United States, but shall not compete with national banks for domestic
business not necessarily related to the
business being done in foreign countries
There shall be established a new class
of national banks, to be known by a
Such
specifically designated name.
banks may have savings departments
and may make properly secured loans
on real estate; such loans to be restrict-

The New Aldrich Currency System
ings deposits upon productive real estate, such loans not to exceed 50 per
cent. of the actual value of the property.

ed to a certain proportion of the aggregate time and savings deposits in the
bank.

It will be seen that the revised plan permits the banks to accept paper having
four months to run whereas the original plan placed the limit at 90 days. There
have been also important changes made in the wording of the provision authorizing
the organization of banks to conduct business in foreign fields. One very important provision of the revised plan has to do with the establishment of separate
savings departments by national banks. In this way it will be seen that the revised
plan makes it possible for the national banks to continue to handle the enormous
savings business which many of them now have. It is also provided that a bank,
having a savings department, shall be permitted to invest 40 per cent. of its
deposits in high class real estate mortgages. While this represents a very important
departure in the regulation governing the investments of national banks, it has been
demanded by bankers in various sections of the United States and will, in all
probability, excite support for Senator Aldrich's plan in many sections which would
not have indorsed it without these regulations. Although under the old plan there
was virtually permission given for national banks to establish branches in the city
or the town where they did business, it will be seen that there is no such provision
made in the revised plan. This omission is highly interesting for the reason that
it was believed that with such authority in the law it would be possible for the
National Reserve Association to obtain support from many of the large State banks
a well organized branch
in New York City and elsewhere which have developed
bank system.

Reserves
ORIGINAL TEXT

NEW TEXT
(A) RESERVES

OF SUBSCRIBING BANKS.

51. All subscribing banks must conform to the following requirements as
to reserves to be held against deposits
of var:ous classes, but the deposit balance
of any subscribing bank in the National
Reserve Association and any notes of
the National Reserve Association which
it holds may be counted as a part of its
required reserve.
(I) Demand deposits.—There
52.
shall be no change in the percentages of
reserve required by law to be held
against demand deposits by national
banks in different localities, and hereafter the same percentages of reserve
against demand deposits shall be required of all subscribing banks in the
ame localities.
53. (2) Time deposits.—All time de
,)osits and moneys held in trust payable
or maturing w ithin 30 days shall be
subject to the same reserve requirements
as are demand deposits in the same
locality.

The reserve requirement in such banks
(banks operating savings departments)
will be less against savings and time deposits than against demand deposits.
There shall be no change in the percentage of reserve required by law to be
held against demand deposits by national banks, except as otherwise pro-

The New Aldrich Currency System
All time deposits and moneys held in
trust payable or maturing more than 30
days from date shall be subject to the
same reserve requirements as demand
deposits for the 30 days preceding their maturity, but no reserves shall
be required therefor except for this
period. Such time depo..as and moneys
held in trust must be represented by
certificates or instruments in writing and
be payable only at a stated time not less
than 30 days from date of deposit, and
must not be allowed to be withdrawn
before the time specified without 30
days' notice.
54. (3) Savings deposits.—Savings
deposits to be defined in the Act, shall
be subject to notice of 30 days or more
and shall be covered by a reserve amounting to 40 per cent. of that required
of demand deposits in the same locality.

vided herein, but the deposit balance of
any national bank in the Reserve Association shall be counted as a part of its
legal reserve.

Perhaps nothing in the revised plan will excite more general attention than
these provisions affecting the reserves of subscribing banks. By far the most important change that has been made is that in section 51 oi the revised plan which
says expressly "and any notes of the National Reserve A:.suciation which it holds
may be counted as a part of its required reserve." One reason why many bankers
believe that notes of the National Reserve Association should be made acceptable
as reserve money for a bank to hold is that, inasmuch as a bank is allowed to
on,
count as reserve the balance that it carries with the National Reserve Associati
as
it ought to be allowed to hold the notes of the National Reserve Association
deposit
reserve money, for the reason that those notes represent nothing less than a
this
in bearer form. There is certain to be a great deal of heated discussion over
point however, as some bankers feel that it is not wise to make these notes available
made
as reserve. Besides this, there are some other extremely interesting changes
deposits.
in the requirements affecting demand deposits, time deposits, and savings
revised
Virtually all of these provisions represent new matter which appears in the
plan for the first time.

Reserves of National Reserve Association
ORIGINAL TEXT

NEW TEXT
(B) RESERVES OF NATIONAL RESERVE ASSOCIATION.

55. All demand liabilities, including
deposits and circulating notes, of the
National Reserve Association shall be
covered to the extent of 50 per cent. by
a reserve of gold (including foreign gold
coin and gold bullion) or of other
money of the United States which the
national banks are now authorized to

All note issues of the Reserve Association must be covered to the extent of
at least one-third by gold or other lawful money, and the remaining portion
by bonds of the United States or bankable
commercial paper as herein defined, or
both. (It should be provided either that
the Reserve Association may also hold in
its reserve foreign coin, or that the
Treasury will issue gold certificates
against foreign coin.) The notes are to
22

The New Aldrich Currency System
constitute a first lien upon all the assets
hold as a part of their legal reserve
of the Reserve Association, and adequate
and
er
whenev
that
r,
d,
provide howeve
so long as such reserve shall fall and re- pn,vision must be made for their immemain below so per cent. the National diate redemption in lawful money on
Reserve Association shall pay a special presentation at the head office of the
tax upon the deficiency of reserve at a Reserve Association or any of its
rate increasing in proportion to such de- branches.
2 per
/
ficiency as follows: For each 21
cent. or fraction thereof that the reserve
falls below 50 per cent. the percentage of
taxation shall increase at the rate of 1'A
per cent. per annum.
56. In computing the demand liabilities of the Association a sum equal to
one-half of the amount of the United
States bonds held by the Association
which have been purchased from the national banks, and which had previously
been deposited by those banks to secure
their circulating notes, shall be deducted.

Publicity Reports to Comptroller
NEW TEXT

ORIGINAL TEXT

57. The National Reserve Association
shall make a report, showing the principal items of its balance sheet, to the
Comptroller of the Currency once a
week. These reports shall be made public. In addition, tull reports shall be
made to the Comptroller of the Currency
coincident with the five reports called for
each year from the national banks.
58. All reports of national-bank examiners in regard to the condition of
banks shall hereafter be made in duplicate, and one copy shall be filed with the
National Reserve Association for the
confidential use of its executive officers
and branch managers.
59. All subscribing banks shall, under
regulations to be prescribed, make a report monthly, or oftener if required, to
the National Reserve Association showing the principal items of their balance
sheets.

The Reserve Association shall make a
report, showing the principal items of
its balance sheet, to the Comptroller of
the Currency once a week. These reports shall be made public. In addition,
full reports shall be made to the Comptroller of the Currency coincident with
the five reports called for each year from
the national banks.
All reports of national-bank examiners
in regard to the condition of national
banks shall hereafter be made in duplicate, and one copy shall be filed with the
Reserve Association for the confidential
use of its executive officers.
National banks of all classes shall hereafter make a weekly report tc the Comptroller of the Currency showing the principal items of their balance sheets, such
reports to be available for the use of the
executive officers of the Reserve Association.

State Banks and Trust Companies
NEW TEXT
6o. A bank or a trust company which
is incorporated under the laws of any
State may subscribe to the capital stock
of the National Reserve Association in
the same manner and under 'he same

ORIGINAL TEXT
Another class of national banks shall
be authorized, which shall be in effect
national trust companies, to be designated
by some appropriate name and to exercise all the functions and have all the
23

The New Aldrich Currency Systcm
conditions as prescribed for national
banks, and such subscribing bank shall
become a member of a local association
and have the same rights and privileges
therein as if it were a national bank;
provided6i. (1) That (a) if a bank, it shall
have a paid-in capital of not less than
that required for a national bank in the
same location, and that (b) if a trust
company, it shall have an unimpaired
surplus of not less than 20 per cent, of
its capital, and if located in a city of
25,000 inhabitants or less, shall have a
paid-in capital of not less than $too,000,
and in a larger city a proportionately
greater capital up to $500,000 in a city
of 500,000 inhabitants or more.
62. (2) That it shall have and agree
to maintain against its demand deposits
a reserve of like character and proportion to that required by law of a national bank in the same location; provided, however, that deposits which it
may have with any subscribing national
bank, State bank, or trust company in a
city designated in the national banking
laws as a reserve city or a central reserve
city shall count as reserve in like manner
and to the same extent as similar deposits of a national bank with national
banks in such cities.
63. (3) That it shall have and agree
to maintain against all other classes of
deposits the percentages of reserve required by this Act.
64. (4) That it shall agree to submit
to such examinations and to make such
reports as are required by law and to
comply with the requirements and conditions imposed by this Act.

privileges, including length of charter,
which are given to trust companies by
the laws of the various States. These
national institutions shall be subject, like
other national banks, to inspection and
examination by the National Government.

It will be seen that these are virtually new provisions, and that in the revised
plan a definite method is given for the admittance of State banks and trust companies to the National Reserve Association. One very important feature about
the method proposed is that there is no requirment whatever which would compel
the trust companies to abandon their State charters. As soon as the proposals
of the original Aldrich plan were made public last January there was insta.nt
opposition from the State banks and the trust companies. The heads of
of the important trust companies in the United States said immediately that they
could not afford to abandon their State charters, as that would mean such a
thorough readjustment of their business as to make it impossible for them to
continue existing connections. There is reason to believe, however, that most of
the objections have been overcome by the provisions of the revised plan so that it
will be perfectly possible now for the influential State institutions to apply for
24

The New Aldrich Currency System
e, some minor
admittance to the National Reserve Association. There are, of cours
plan believe
the
ed
studi
have
who
details that remain to be worked out, but those
ing basis
work
ical
a
pract
offer
ns
tutio
that the new provisions made for these insti
has been
on
as
izati
an
organ
in
such
banks
for them to co-operate with the national
proposed.

Note Issues
ORIGINAL TEXT

NEW TEXT
65. There shall be no further issue
of circulating notes beyond the amount
now outstanding by any national bank.
National banks may, if they choose,
maintain their present note issue, but
whenever a bank retires the whole or any
part of its existing issue it shall permanently surrender its right to reissue
the notes so retired.
n
66. The National Reserve Associatioto
offer
year,
one
of
d
perio
a
must, for
purchase at a price not less than par
and accrued interest the 2 per cent.
bonds held by subscribing national banks
and deposited to secure their circulating
notes. The National Reserve Association shall take over these bonds and
assume responsibility for the redemp-g
tion (upon presentation) of outstandin
notes secured thereby. The National
Reserve Association shall issue, on the
terms herein provided, its own notes
as fast as the outstanding notes secured
by such bonds so held shall be presented
for redemption, and may issue other
notes from time to time to meet business
requirements, it being the policy of the
as
United States to retire as rapidly
possible, consistent with the public inter
to
and
n
latio
circu
red
-secu
ests, bond
nal
substitute therefor notes of the Natioand
cter
chara
a
of
n
iatio
Assoc
ve
Reser
er
secured and redeemed in the mann
provided for in this Act.
67. All provisions of law requiring
fer
national banks to hold or to trans
the
of
urer
Treas
the
to
er
deliv
and
United States, United States bonds other
andthan those required to secure outst
nt
rnme
Gove
and
notes
g
ing circulatin
led.
deposits shall be repea
nal
68. All note issues of the Natio
ed
cover
be
must
n
Reserve Associatio
by
to the extent of at least one-third

There is hereafter to be no further
issue, beyond the amount now outstanding, of bank notes by national banks.
National banks may, if they choose,
maintain their present note issue, but
whenever a bank retires the whole or
any part of its existing issue it will
permanently surrender its right to reissue the notes so retired.
The Reserve Association must, for a
period of one year, offer to purchase at
(a price not less than par and
accrued interest) the 2 per cent. bonds
now held by national banks and deposited to secure their circulating notes.
The Reserve Association shall take over
these bonds with the existing currency
privilege attached and assume responsibility for the redemption (upon presentation) of outstanding notes secured
thereby. The Reserve Association shall
issue, on the terms herein provided, its
own notes as fast as the outstanding
notes secured by such bonds so held
shall be presented for redemption, it
being the policy of the United States to
retire as rapidly as possible, consistent
with the public interests, bond-secured
circulation and to substitute therefor
notes of the Reserve Association of a
character and secured and redeemed in
the manner provided for in this Act.
The Reserve Association agrees to
hold, for a period of not less than ten
years, the bonds so purchased, or any
Government security which may be exchanged for them by refunding or otherwise. The Reserve Association, however, shall have the right, with the approval of the Secretary of the Treasury,
after two years to dispose annually of
$50,000,000 of the bonds held by it to
secure circulation. The Government reserves the right at all times to purchase
25

The New Aldrich Currency System
gold or other lawful money, and the remaining portion by bankable commercial paper as herein defined or obligations of the United States, but no notes
shall be issued whenever the lawful
money so held shall fall below one-third
of the notes outstanding.
69. Any notes of the Reserve Association in circulation at any time in excess of $9oo,000,0001 which are not covered by an equal amount of lawful
money held by the Association shall pay
a special tax at the rate of VA per cent.
per annum, and any notes in excess of
$1,2oo,000,000 not so covered shall pay
a special tax at the rate of 5 per cent.
per annum.
70. The notes are to constitute a first
lien upon all the assets of the National
Reserve Association, and shall be re deemable in lawful money on presentation at the head office of the National
Reserve Association or any of i,s
branches.
71. The notes of the National Reserve Association shall be received at
par in payment of all taxes, excises, and
other dues to the United States, and for
all salaries and others debts and demands owing by the United States to
individuals, corporations, or associations, except obligations of the Government which are by their terms specifically payable in gold, and for all debts
due from or by one bank to another,
and for all obligations due to a bank.
72. The National Reserve Association
and its branches shall at once, upon application and without charge for transportation, forward its circulating notes
to any depositing bank against its credit
balance.
1 The $900,000,000 and $1,200,000,000 are to
be understood as including any national-bank
notes which may be outstanding at the time.

at par from the Reserve Association,
through the trustees of the postal savings bank or otherwise, any or all of
such bonds so held.
If the Government should adopt the
policy of issuing securities at a higher
rate of interest than 2 per cent. the Reserve Association shall have the right
to exchange at par the Government
bonds which it may have acquired from
the national banks, previously held by
them to secure circulation, for any
bonds bearing interest at a rate not exceeding 3 per cent., but in that event the
amount of annual taxes to be paid on
notes based upon such new securities
shall be as much greater as the interest
rate of the new securities shall exceed
2 per cent.
To illustrate: If the Government
/
2
should decide hereafter to issue a 21
per cent. bond, the rate of taxation on
currency issued by the Reserve Association thereon would be i per cent.,
instead of one-half of i per cent., as on
the existing twos, and upon a 3 1,cr cent.
bond the rate of taxation would be II/2
per cent.
The notes of the Reserve Association
shall be received at par in payment of
all taxes, excises, and other dues to the
United States, and for all salaries and
other debts and demands owing by the
United States to individuals, corporations, or associations, except obligations
of the Government which are by their
terms specifically payable in gold, and for
all debts due from or by one national
bank to another, and for all obligations
due to a national bank.
The Reserve Association shall at once,
upon application and without charge for
transportation, forward its circulating
notes to any depositing bank against its
credit balance.

United States Bonds
73. Upon the application of the National Reserve Association the Secretary
of the Treasury shall exchange the 2 per
cent. bonds bearing the circulation privilege purchased from the banks for 3 per
cent, bonds without the circulation privilege, payable after so years from the
date of issue.
26

4
)
11

The New Aldrich Currency System
74. The National Reserve Association
shall pay to the Government a special
2 per cent. annually
/
franchise tax of I1
during the period of its charter upon an
amount equal to the par value of such
bonds transferred to it by the subscribing
banks.
75. The Reserve Association shall
agree to hold th.e 3 per cent, bonds so
issued during the period of its corporate
e:cistence, provided that after five years
the Secretary of the Treasury may at his
option permit the Reserve Association to
sell not more than fifty millions of such
bonds annually; and provided further
that the United States reserves the right
at any time ta pay any of such bonds
before maturity, or to purchase any of
them at par for the trustees of the postal
savings, or otherwise.
[The effect of this exchange and agreement will be to enable the United States
to provide permanently for a large part
of the public debt at a net interest
2 per cent.]
/
charge of I1
The plan for the disposal of the 2 per cent, bonds now held by the national
banks is ingenious. It has been generally agreed that the present bond-secured
currency should be done away with, but it has also been contended that the transfer
of $700,000,000 of 2 per cent, bonds to the National Reserve Association would involve a risk, inasmuch as they could not be disposed of without serious loss to the
banks or to the Association. The new plan furnishes a means for bringing an end
to the bond-secured currency without loss to the Government and without imposing
upon the Reserve Association the ownership of $700,000,000 2 per cent. bonds. As
the bonds are taken over by the Reserve Association they are to be refunded into 3
per cents. without the circulation privilege, but the Association is to reimburse the
Government for the additional cost by the payment annually of a 0/2 per cent.
1 2 per cent. upon their 2 per
franchise tax. Inasmuch as the banks return now /
net charge to the Governthe
privilege
cent. bonds on account of their circulation
same under the proposed
the
constitute
will
it
ment to-day is 0/2 per cent., and
3 per cent. bonds instead
hold
will
Association
plan. At the same time the Reserve
market from time to
the
upon
them
of
dispose
of 2 per cents. and will be able to
that many of these
however,
remembered
be
must
time if it chooses so to do. It
accepted by the
formally
been
never
have
They
provisions may be changed.
a basis for the
furnish
undoubtedly
will
they
but
National Monetary Commission,
recommendations of that body.

SUGGESTED PLAN I
FOR

MONETARY
LEGISLATION
SUBMITTED TO THE NATIONAL MONETARY
COMMISSION
BY

HON. NELSON W. ALDRICH

REVISED EDITION
OCTOBER, 1911

WASHINGTON
1911

SUGGESTED PLAN
FOR

MONETARY
LEGISLATION
SUBMITTED TO THE NATIONAL MONETARY
COMMISSION

HON. NELSON W. ALDRICH

REVISED EDITION
OCTOBER, 1911

WASHINGTON
1911

,
.

To the Members of the National Monetary Commission:
When I submitted to the commission in January last
the outline of a plan for monetary reform based upon the
formation of a National Reserve Association, I was not
prepared to offer definite suggestions with reference to
several important phases of the subject. Among the
questions then left for further examination were:
(I) What relation should State banks and trust companies sustain to the Association?
(2) What practical method could be devised by which
the 2 per cent bonds of the United States held by national
banks could be purchased and held by the National
Reserve Association without prejudice to the best interests either of the Government, the national banks, or the
Reserve Association?
(3) What means could be adopted to insure the maintenance of adequate reserves by the association and otherwise to provide such effective regulation of discounts and
note issues as would enable the organization to respond
promptly at all times to normal or unusual demands for
credit or currency without danger of undue expansion or
inflation?
As the plan was originally offered at your request to
serve as a basis for discussion and criticism when the
constructive work of the commission was taken up, it
seems to me desirable before the commencement of this
work that the plan should be presented in as complete a
form as possible. I therefore respectfully submit herewith for your consideration a revision which contains
suggestions covering the points to which I have referred.
NELSON W. ALDRICH,
Chairman National Monetary Commission.
WASHINGTON, October 14, 1911.

THE NATIONAL RESERVE ASSOCIATION OF THE UNITED
STATES.
CHARTER CAPITAL AND LOCATION.

. It is proposed to charter the National Reserve Association of the United States, which shall be the principal
fiscal agent of the Government of the United States.
The authorized capital of the National Reserve Association shall be 20 per cent of the capital of the banks
eligible for membership (approximately 300 millions).
The length of its charter shall be 50 years. The head
office of the association shall be in Washington, D. C.
MEMBERSHIP.

All national banks and all State banks and trust
companies which comply with the requirements for membership hereinafter set forth (secs. 6o-64) may subscribe
to the capital stock of the National Reserve Association.
(The word"bank," when used hereinafter, shall be understood to refer to all such national banks, State banks, and
trust companies as shall comply with the requirements for
membership hereinafter defined.) A bank having a minimum capital of $25,000 may subscribe to an amount of
capital stock of the National Reserve Association equal
to 20 per cent of the stock of the subscribing bank, and
not less, and each of such subscribing banks shall become
a member of a local association as hereinafter provided.
Fifty per cent of the subscriptions to the capital stock of
the National Reserve Association shall be called in cash;
the balance of the subscriptions will remain a liability of
the subscribers, subject to call.
3. Shares of the capital stock of the National Reserve
Association shall not he transferable, and under no cir2.

National Monetary Commission
cumstances may they be owned by any corporation other
than the subscribing bank nor by any individual, nor may
they be owned by any bank in any other amount than in
the proportion herein provided. In case a subscribing
bank increases its capital, it shall thereupon subscribe for
an additional amount of the capital stock of the National
Reserve Association equal to 20 per cent of the bank's
increase of capital, paying therefor its then book value, as
shown by the last published statement of the Association.
A bank applying for membership in the Association after
its formation must subscribe for a proportional share of its
capital stock, paying therefor its then book value. In case
a subscribing bank reduces its capital, it shall surrender a
proportionate amount of its holdings of the capital stock
of the National Reserve Association. If a bank goes into
liquidation, it shall surrender all of its holdings of the
capital stock of the National Reserve Association. The
shares surrendered shall be canceled and the bank shall
receive in payment therefor a sum equal to their book
value.
EARNINGS AND DIVIDENDS.

v4. The earnings of the National Reserve Association
, dishall be distributed in the following manner:
A
After the payment of all expenses and taxes the stockholders shall receive 4 per cent Further earnings shall
be divided, one-half to go to the surplus of the National
Reserve Association until that surplus shall amount to
20 per cent of the paid-in capital, one-fourth to go to the
Government of the United States, and one-fourth to the
stockholders; but when the stockholders' dividends shall
reach 5 per cent they shall receive no additional distribution. After the stockholders receive 5 per cent the earnings shall be divided, one-half to be added to tte surplus
of the National Reserve Association and one-half to go
to the Government. After the stockholders receive 5
6

eop

Suggested Plan for Monetary Legislation

et.

per cent per annum and the surplus of the National
Reserve Association amounts to 20 per cent of the paid-in
capital, all excess earnings shall go to the Government.
The minimum dividend/ to the stockholders shall be
, cumulative.
ORGANIZATION.

5. All subscribing banks shall be formed into associations of banks, to be designated as local associations.
Every local association shall have corporate powers and
shall be composed of not less than ro banks, and the
combined capital and surplus of the members of each local
association shall aggregate not less than $5,000,000. The
territory included in the local associations shall be so
apportioned that every bank will be located within the
g
boundaries of some local association. Every subscribin
n of
bank shall become a member of the local associatio
the territory in which it is situated.
6. All of the local associations shall be grouped into
divisions, to be called districts.
The country shall be divided at first into 15 districts,
be
and a branch of the National Reserve Association shall
by
located in each district, the location to be determined
The
the directors of the National Reserve Association.
new
districts may be readjusted from time to time, and
tors.
districts and new branches may be created by the direc
7. The National Reserve Association and its branches
State and
and the local associations shall be exempt from
real
local taxation, except in respect to taxes upon
estate.
OFFICERS AND DIRECTORS.
IATIONS.
(A) DIRECTORS OF LOCAL ASSOC

a board of
8. Each local association shall elect annually
by-laws of
directors, the number to be determined by the
number shall
the local associations. Three-fifths of that
tives of the
be elected by ballot cast by the representa

National Monetary Commission
banks that are members of the local association, each
bank having one representative and each representative
one vote, without reference to the size of the bank. Twofifths of the whole number of directors of the local association shall be elected by these same representatives of
the several banks that are members of the association,
but in voting for these additional directors each representative shall be entitled to as many votes as the bank
which he represents holds shares in the National Reserve
Association. At such elections there shall be no proxies.
The authorized representatives of a bank, as herein provided, must be either the president, vice president, or
cashier of the bank he represents.
(B) DIRECTORS OF BRANCHES.

9. Each of the branches of the National Reserve Association shall have a board of directors, to be elected in
the following manner:
The board of directors of each local association shall
elect by ballot one member of the board of directors of
the branch of the National Reserve Association. In this
manner there will thus be elected as many directors of the
branch of the National Reserve Association as there may
be local associations in the district in which that branch
of the National Reserve Association is located.
o. In addition to that number there shall be elected in
the following manner a number of directors equal to twothirds of the number of local associations in the district
where the branch is located. There shall be chosen by
the banks composing each local association a voting representative or proxy holder. In choosing such voting
representative each bank shall be entitled to as many
votes as it holds shares in the National Reserve Association. The voting representatives of the several local associations which form a district shall elect a n additional
number of directors of the branch equal to two-thirds of
8

Suggested Plan for Monetary Legislation

the number elected directly by the local association; that
is, equal to two-thirds of the number of local associations
composing the district. Each voting representative at
such election shall have a number of votes equal to the
number of shares in the National Reserve Association
held by all the banks composing the local association
which he represents.
The board of the branch as thus constituted shall at
once add to its numbers by the election of an additional
number of directors equal to one-third the number of
local associations situated in the district. Such additional directors shall fairly represent the industrial, commercial, agricultural, and other interests of the district,
and shall not be officers of banks. Directors of banks
shall not be considered as officers.
12. The manager of the branch shall be ex officio a
member of the board of directors of the branch and shall
be chairman of the board.
The board of directors of a branch of the National Reserve Association will thus be composed of—
First. A group of directors equal in number to the number of local
associations composing the district, and this group shall be elected by
the local associations, each association having one vote.
Second. A group of directors equal to two-thirds of the foregoing
group and elected by stock representation.
Third. A group of directors equal in number to one-third of the first
group, representing the industrial, commercial, agricultural, and other
interests of the district, and elected by the votes of the first two groups,
each director thus voting having one vote.
Fourth. The manager of the branch shall be ex officio a member of
the board of directors of the branch and shall be chairman of the board.

13. All the members of the board of directors of the
branch, except the ex officio member, shall at the first
meeting of the board be classified into three classes, and
the terms of office of these three classes shall be, respectively, one, two, and three years. Thereafter members
of the board shall be elected for a term of three years.

10709°-II------2

National Monetary Commission
(C) DIRECTORS OF THE NATIONAL RESERVE ASSOCIATION.

14. The board of the National Reserve Association
shall at first consist of 45 directors, and shall be constituted in the following manner:
First. Six ex officio members, namely, the governor of
the National Reserve Association, who shall be chairman
of the board; two deputy governors of the National
Reserve Association, the Secretary of the Treasury, the
Secretary of Commerce and Labor, and the Comptroller
of the Cigrency.
15. Second. Fifteen directors to be elected, one by the
board of directors of each branch of the National Reserve
Association. In case the number of districts shall be
increased hereafter, each additional district shall be
entitled to elect an additional director.
16. Third. Twelve directors, who shall be elected by
voting representatives of the various districts, each of
whom shall cast a number of votes equal to the number
of shares in the National Reserve Association held by all
the banks in the district which he represents.
17. Fourth. The twenty-seven directors thus elected
shall in turn elect twelve additional members, who shall
fairly represent the industrial, commercial, agricultural,
and other interests of the country, and who shall not be
officers of banks. Directors of banks shall not be considered as officers.
18. Not more than three of the directors elected under
paragraphs 16 and 17 shall be chosen from one district.
19. At the first meeting of the board all the members
of the board, except the ex officio members, shall be
classified into three classes, and the terms of office of
these three classes shall be, respectively, one, two, and
three years. Thereafter members of the board shall be
elected for a term of three years.

Suggested Plan for Monetary Legislation
No member of any national or State legislative
body shall be a director of the National Reserve Association, nor of any of the branches, nor of any local association.
20.

(D) COMMITTEES OF THE NATIONAL RESERVE ASSOCIATION.

The directors of the National Reserve Association
shall annually elect from their number an executive committee and such other committees as the by-laws of the
National Reserve Association may provide. The executive committee shall consist of nine members, of which
the governor of the National Reserve Association shall be
ex officio chairman and the two deputies and the Comptroller of the Currency ex officio members, but not more
than one of the elected members shall be chosen from one
district.
22. The executive committee shall have all the authority
which is vested in the board of directors, except such as
may be specifically delegated by the board to other committees or to the executive officers, or such as may be
specifically reserved or retained by the board.
23. There shall be a board of supervision elected by the
board of directors from among its number, of which the
Secretary of the Treasury shall be ex officio chairman.
21.

(Z) EXECUTIVE OFFICERS OF THE NATIONAL RESERVE ASSOCIATION.

24. The executive officers of the National Reserve Association shall consist of a governor,two deputy governors,
a secretary, and such subordinate officers as may be provided by the by-laws. The governor shall be selected
the President of the United States from a listoubmitted
by the board of directors, and shall be subject to removal
by a two-thirds vote of the board of directors for cause.
The term of office of the deputies shall be seven years,
but the two deputies first elected shall serve for terms of
four years and seven years, respectively. The deputies

otiw.
,vr.

National Monetary Commission
and may be
shall be elected by the board of directors
s filled by
removed for cause at any time and their place
his inability
the board. In the absence of the governor or
service shall
to act, the deputy who is senior in point of
act as governor.
(F) EXECUTIVE 9FF4CEIS OF BRANCHES.
0
t
e

branch shall have a manager and a deputy
nal Remanager appointedl,by the governor of the Natio
executive ,
serve Association, with the approval of the
*
committee.
,-1,14• vi
owl4
deputy
1026. The powers and dutiesf,of the manager and
ches
pr manager and of the various committees of the bran
Reshall be prescribed by the by-laws of the National
serve Association.
25. Each

IATIONS.
(G) EXECUTIVE OFFICERS OF THE LOCAL ASSOC

27. The directors of the local association shall annually
elect from among their number a president, a vice presi
dent, and an executive committee, whose powers and
duties and terms of office shall be determined by the
/(
by-laws of the local association, sybject, however, to the,
t'
provisions of this Act-;"to 4-4-- ei C'
ae,“.1k,
28. The local associations, the branches, and the
er
aws
by-l
have
each
shall
n
iatio
Assoc
rve
Rese
onal
Nati
which shall provide, among other things, a 'method of
filling vacancies on their respective boards of directors.
The by-laws of the local associations and of the branches
shall be subject to the approval of the National Reserve
Assoc
_ iation.
/ [The Act will provide a preliminary organization for the
I Reserve Association, to remain in effect until the permanent organization created by the foregoing sections can
be perfected.]

Suggested Plan for Monetary Legislation
FUNCTIONS OF THE LOCAL ASSOCIATIONS.

29. Any member of a local association may apply to
such association for a guaranty of the commercial paper
which it desires to rediscount at the branch of the National
Reserve Association in its district. Any such bank receiving a guaranty from a local association shall pay a
commission to the local association, to be fixed in each
case by its board of directors. The guaranty of the local
association, in the event of loss, shall be met by the members of the local association in proportion to the ratio
which their capital and surplus bears to the aggregate
capital and surplus of the members of the local association,
and the commission received for such guaranty, after the
payment of expenses and possible losses, shall be distributed among the several banks of the local association
in the same proportion. A local association shall have
authority to require security from any bank offering paper
for guaranty, or it may decline to grant the application.
30. The total amount of guaranties by a local association to the National Reserve Association shall not at any
time exceed the aggregate capital and surplus of the banks
forming the guaranteeing association.
31. Any local association may by a vote of threefourths of its members and with the approval of the
National Reserve Association, assume and exercise such
of the powers and functions of a clearing house as are not
inconsistent with the purposes of this Act. The National
Reserve Association may require any local association to
perform such services in facilitating the domestic exchanges
of the Reserve Association as the public interests may
require.
32. The local associations shall appoint examiners, who
shall have authority to examine into the condition of the
banks composing the association under such regulations
as may be adopted by the local association, with the approval of the National Reserve Association. Copies of the

National Monetary Commission
reports of these examinations shall upon request be furnished to the executive officers of the National Reserve
Association and of its branches.
33. A local association may by a vote of two-thirds of
its members suspend a bank from the privileges of membership for a failure for thirty days to maintain its reserves,
or to make the reports required by this Act, or for misrepresentation in any report or examination as to its
condition or as to the character or extent of its assets or
liabilities.
FUNCTIONS OF THE NATIONAL RESERVE ASSOCIATION.

34. All of the privileges and advantages of the National
Reserve Association shall be equitably extended to every
bank of any of the classes herein defined which shall subscribe to its proportion of the stock of the National Reserve Association and shall otherwise conform to the
requirements of this Act.
35. The Government of the United States and those
banks owning stock in the National Reserve Association
shall be the sole depositors in the National Reserve Association. All domestic transactions of the National Reserve Association shall be confined to the Government
and the subscribing banks, with the exception of the purchase or sale of Government or State securities or securities of foreign Governments or of gold coin or bullion.
36. The Government of the United States shall deposit
its cash balance with the National Reserve Association,
and thereafter all receipts of the Government shall be
deposited with the National Reserve Association, except
that when necessary the Government may designate
national banks for that purpose in cities where there is no
branch of the National Reserve Association. All disbursements by the Government shall be made through
the National Reserve Association.

Suggested Plan for Monetary Ltvislation
37. The National Reserve Association shall pay
no
interest on deposits.
38. The National Reserve Association may rediscount
for and with the indorsement of any bank havin
g a
deposit with it, notes and bills of exchange arising out
of
commercial transactions. (This language, whenever used,
is intended to apply to all notes and bills of excha
nge
issued or drawn for agricultural, industrial, or commercial
purposes, and not for carrying sto('k., bonds, or other
investment securities.)
Such notes and bills must have a maturity of not more
than 28 days, and must have been made at least 30 days
prior to the date of rediscount. The amount so rediscounted shall in no case exceed the capital of the bank
applying for the rediscount. The aggregate of such notes
and bills bearing the signature or indorsement of any one
person, cOmpany, corporation, or firm, rediscounted for
any one bank, shall at no time exceed io per cent of the
capital and surplus of said bank.
39. The National Reserve Association may also rediscount,for and with the indorsement of any bank having a
deposit with it, notes and bills of exchange arising out of
commercial transactions as hereinbefore defined, having
more than 28 days, but not exceeding 4 months, to run,
but in such cases the paper must be guaranteed by the
local association of which the bank asking for the rediscount is a member.
40. Whenever, in the opinion of the governor of the
National Reserve Association, the public interests so
require, such opinion to be concurred in by the executive
committee of the National Reserve Association and to
have the definite approval of the Secretary of the Treasury,
the National Reserve Association may discount the direct
obligation of a depositing bank, indorsed by its local association, provided that the indorsement of the local association shall be fully secured by the pledge and deposit

ission
National Monetary Comm
which shall be held by
with it of satisfactory securities,
of the National Reserve
the local association for account
l the amount loaned
Association; but in no such case shal
exceed three-fourths
by the National Reserve Association
pledged.
of the actual value of the securities so
National Reserve
41. The rates of discount which the
from time to time
Association shall have authority to fix
shall be uniform
shall be published when fixed, and
throughout the United States.
may, whenever
42. The National Reserve Association
financial conditions
its own condition and the general
a limited amount
warrant such investment, purchase to
of banks or houses
from a subscribing bank acceptances
Such acceptances
of unquestioned financial responsibility.
sactions, must
must have arisen out of commercial tran
must be of a
have not exceeding 90 days to run, and
ket as 'prime bills.
character generally known in the mar
ement of the subSuch acceptances shall bear the indors
indorsement must
scribing bank selling the same, which
be other than that of the acceptor.
may invest in
43. The National Reserve Association
obligations—that
United States bonds and in short-term
year to run—of
is, obligations having not more than one
or of any State, or
the United States or its dependencies,
of foreign governments.
l have power
44. The National Reserve Association shal
coin or bullion, to
at home and abroad to deal in gold
loans of gold coin
grant loans thereon, and to contract for
essary, acceptable
or bullion,and to give therefor, when nec
any of its holdsecurity, including the hypothecation of
ings of United States bonds.
l have power
45. The National Reserve Association shal
sell, with or withto purchase from its subscribers and to
exchange payable
out its indorsement, checks or bills of
h other foreign
in England, France, or Germany, and in suc
erve Associacountries as the board of the National Res
16

Suggested Plan for Monetary Legislation
tion may decide. These bills of exchange must
have
arisen out of commercial transactions, must have
not
exceeding 90 days to run, and must bear the
signatures
of two or more responsible parties, of which the last
one
shall be that of a subscribing bank.
46. The National Reserve Association shall have power
to open and maintain banking accounts in foreign
countries and to establish agencies in foreign countries for
the
purpose of purchasing and selling and collecting foreign
bills of exchange, and it shall have authority to buy
and
sell, with or without its indorsement, through such correspondents or agencies, checks or prime foreign bills of
exchange which have arisen out of commercial transactions, which have not exceeding 90 days to run, and
which bear the signatures of two or more responsible
parties.
DOMESTIC EXCHANGES.

47. It shall be the duty of the National Reserve Association or any of its branches, upon request, to transfer
any part of the deposit balance of any bank having an
account with it to the credit of any other bank having
an account with the National Reserve Association. If a
deposit balance is transferred from the books of one
branch to the books of another branch, it may be done,
under regulations to be prescribed by the National Reserve
Association, by mail or telegraph at rates to be fixed at
the time by the executive committee of the branch at
which the transaction originates. (See also sec. 72.)
FUNCTIONS OF NATIONAL BANKS.

48. In addition to the rights now conferred by law,
national banks shall be authorized to accept commercial
paper drawn upon them, having not more than four
monthu to run, properly secured, and arising out of commercial transactions. The amount of such acceptances
outstanding shall not exceed one-half the capital and
o

sion
National Monetary Commis

'11

shall be subject to the
surplus of the accepting bank, and
•
Revised Statutes.
restrictions of section 5200 of the
conduct business in
49. The organization of banks to
endencies of the United
foreign countries and in the dep
stock of such banks may
States shall be authorized. The
the aggregate of such
be held by national banks, but
not exceed 20 per cent
stock held by any one bank shall
of the capital of that bank.
office in the United
The bank so organized may have an
ts in the United States
States, but shall not receive deposi
for domestic business
nor compete with national banks
ss being done in fornot necessarily related to the busine
of the United States.
eign countries or in the dependencies
right, under proper
50. National banks shall be given the
ined in the Act, to
restrictions and regulations to be def
ts, and to lend,
establish separate savings departmen
n 40 per cent of
under proper restrictions, not more tha
e real estate, such
their savings deposits upon productiv
actual value of the
loans not to exceed 50 per cent of the
property.
•

RESERVES.
NG BANKS.
(A) RESERVES OF SUBSCRIBI

form to the follow5x. All subscribing banks must con
held against deposits
ing requirements as to reserves to be
ance of any subscribof various classes, but the deposit bal
ociation and any notes
ing bank in the National Reserve Ass
which it holds may
of the National Reserve Association
erve.
be counted as a part of its required res
be no change in
52. (I) Demand deposits.—There shall
by law to be held
the percentages of reserve required
ks in different
against demand deposits by national ban
tages of reserve
localities, and hereafter the same percen
ed of all subscribagainst demand deposits shall be requir
ing banks in the same localities.
18

Suggested Plan for Monetary Legislation
53. (2) Time deposits.—All time deposits and moneys
held in trust payable or maturing within 3o days shall be
subject to the same reserve requirements as are demand
deposits in the same locality.
All time deposits and moneys held in trust payable
or maturing more than 30 days from date shall be subject to the same reserve requirements as demand deposits
for the 30 days preceding their maturity, but no reserves
shall be required therefor except for this period. Such
time deposits and moneys held in trust must be represented by certificates or instruments in writing and be
payable only at a stated time not less than 30 days
from date of deposit, and must not be allowed to be withdrawn before the time specified without 30 days' notice.
54. (3) Savings deposits.—Savings deposits to be defined in the Act, shall be subject to notice of 3o days or
more and shall be covered by a reserve amounting to 40
per cent of that required of demand deposits in the same
locality.
(B) RESERVES OF NATIONAL RESERVE ASSOCIATION.

55. All demand liabilities, including deposits and circulating notes, of the National Reserve Association shall
be covered to the extent of 50 per cent by a reserve of gold
(including foreign gold coin and gold bullion) or of other
money of the United States which the national banks are
now authorized to hold as a part of their legal reserve;
provided, however, that whenever and so long as such
reserve shall fall and remain below 50 per cent the
National Reserve Association shall pay a special tax upon
the deficiency of reserve at a rate increasing in proportion
to such deficiency as follows: For each 234 per cent or
fraction thereof that the reserve falls below 50 per cent
the percentage of taxation shall increase at the rate of
I 34 per cent per annum.

National Monetary Commission
56. In computing the demand liabilities of the Association a sum equal to one-half of the amount of the United
States bonds held by the Association which have been
purchased from the national banks, and which had previously been deposited by those banks to secure their
circulating notes, shall be deducted.
REPORTS.

57. The National Reserve Association shall make a
report, showing the principal items of its balance sheet,
to the Comptroller of the Currency once a week. These
reports shall be made public. In addition, full reports
shall be made to the Comptroller of the Currency coincident with the five reports called for each year from the
national banks.
58. All reports of national-bank examiners in regard to
the condition of banks shall hereafter be made in duplicate, and one copy shall be filed with the National Reserve
Association for the confidential use of its executive officers
and branch managers.
59. All subscribing banks shall, under regulations to be
prescribed, make a report monthly,or oftener if required,
to the National Reserve Association showing the principal
items of their balance sheets.
STATE BANKS AND TRUST COMPANIES.

6o. A bank or a trust company which is incorporated
under the laws of any State may subscribe to the capital
stock of the National Reserve Association in the same
manner and under the same conditions as prescribed for
national banks, and such subscribing bank shall become
a member of a local association and have the same rights
and privileges therein as if it were a national bank;
provided61. (I) That (a) if a bank,it shall have a paid-in capital
of not less than that required for a national bank in the
20

Suggested Plan for Monetary Legislation
same location; and that (b) if a trust company, it
shall
have an unimpaired surplus of not less than 20 per
cent
of its capital, and if located in a city of 25,000 inhab
itants
or less,shall have a paid-in capital of not less than $mo,0
00,
and in a larger city a proportionately greater capita
l up
to $500,000 in a city of 500,000 inhabitants or more.
62. (2) That it shall have and agree to maintain again
st
its demand deposits a reserve of like character and propo
rtion to that required by law of a national bank in the
same
location; provided, however, that deposits which it may
have with any subscribing national bank, State bank,
or
trust company in a city designated in the national banking laws as a reserve city or a central reserve city shall
count as reserve in like manner and to the same extent as
similar deposits of a national bank with national banks in
such cities.
63. (3) That it shall have and agree to maintain
against all other classes of deposits the percentages of
reserve required by this Act.
64. (4) That it shall agree to submit to such examinations and to make such reports as are required by law and
to comply with the requirements and conditions imposed
by this Act.
NOTE ISSUES.

65. There shall be no further issue of circulating notes
beyond the amount now outstanding by any national bank.
National banks may, if they choose, maintain their
present note issue, but whenever a bank retires the whole
or any part of its existing issue it shall permanently
surrender its right to reissue the notes so retired.
66. The National Reserve Association must, for a
period of one year, offer to purchase at a price not less
than par and accrued interest the 2 per cent bonds held
by subscribing national banks and deposited to secure
their circulating notes. The National Reserve Association

National Monetary Commission
shall take over these bonds and assume responsibility for
the redemption (upon presentation) of outstanding notes
secured thereby. The National Reserve Association
shall issue, on the terms herein provided, its own notes
as fast as the outstanding notes secured by such bonds
so held shall be presented for redemption, and may issue
other notes from time to time to meet business requirements, it being the policy of the United States to retire
as rapidly as possible, consistent with the public interests,
bond-secured circulation and to substitute therefor notes
of the National Reserve Association of a character and
secured and redeemed in the manner provided for in
this Act.
67. All provisions of law requiring national banks to
hold or to transfer and deliver to the Treasurer of the
United States United States bonds other than those
required to secure outstanding circulating notes and
Government deposits shall be repealed.
68. All note issues of the National Reserve Association
must be covered to the extent of at least one-third by
gold or other lawful money, and the remaining portion
by bankable commercial paper as herein defined or obligations of the United States, but no notes shall be issued
whenever the lawful money so held shall fall below onethird of the notes outstanding.
69. Any notes of the Reserve Association in circulation
at any time in excess of $900,000,000 1 which are not
covered by an equal amount of lawful money held by the
association shall pay a special tax at the rate of i 34 per
cent per annum,and any notns in excess of $1,2oo,000,000
not so covered shall pay a special tax at the rate of 5 per
cent per annum.
70. The notes are to constitute a first lien upon all the
assets of the Natio4a1 Reserve Association, and shall be
1 The $900m00,000 and $1.2oo,000,000 are to be understood as including any national-oank
notes which may be outstanding at the time.
22

Suggested Plan for Monetary Legislation
redeemable in lawful money on presentation at the head
office of the National Reserve Association or any of its
branches.
71. The notes of the National Reserve Association shall
be received at par in payment of all taxes, excises, and
other dues to the United States, and for all salaries and
other debts and demands owing by the United States to
individuals, corporations, or associations, except obligations of the Government which are by their terms specifically payable in gold, and for all debts due from or by one
bank to another, and for all obligations due to a bank.
72. The National Reserve Association and its branches
shall at once, upon application and without charge for
transportation, forward its circulating notes to any depositing bank against its credit balance.
UNITED STATES BONDS.

73. Upon the application of the National Reserve Association the Secretary of the Treasury shall exchange the
2 per cent bonds bearing the circulation privilege purchased
from the banks for 3 per cent bonds without the circulation privilege, payable after fifty years from the date of
issue.
74. The National Reserve Association shall pay to the
Government a special franchise tax of r per cent annually during the period of its charter upon an amount
equal to the par value of such bonds transferred to it by
the subscribing banks.
75. The Reserve Association shall agree to hold the 3
per cent bonds so issued during the period of its corporate existence, provided that after five years the Secretary
of the Treasury may at his option permit the Reserve
Association ro sell not more than fifty millions of such
bonds annually and provided further that the United
States reserves the right at any time to pay any of such
23

National Monetary Commission
any of them at
bonds before maturity, or to purchase
or otherwise.
par for the trustees of the postal savings,
t will be to
[The effect of this exchange and agreemen
anently for a
enable the United States to provide perm
interest charge of
large part of the public debt at a net
x34 per cent.]
0

11
1N
B
MONO. SEC.

•

REPORTS OF SUBSCRIBING BANKS TO THE NATIONAL
RESERVE ASSOCIATION.

. All subscribing banks shall, under regulations
to be prescribed by the National Reserve Association,
make a report monthly, or oftener if required, to said
association showing the principal items of their balance
sheets.
EXAMINATIONS.
SEC. •I . The National Reserve Association may for all
subscribing banks 'accept copies of the reports of the
national-bank examiners for national banks and copies
of the reports of State-bank examiners for State banks
and trust Companies, where the furnishing of such information is not contrary to law: Provided, however, That
the standard of such examinations, both National and
State, meets the requirements of the National Reserve
Association. The National Reserve Association shall have
the right at any time to examine or cause to be examined
by its own representatives any subscribing bank. 'The
1tilaual.feempetteretierrrtrirPTraitf4TyIft-te National Reserve
Association
.aaliokpiotgailisipilkaitiftit as the directors
may consider just and equitable.

;
0j4

twx

..0•••••wwwwww11r"""---..

FURTHER NOTE ISSUES BY NATIONAL BANKS PROHIBI
TED.

EC. 4 . There shall be no further issue of circulating
_notes by any national bank beyond the amount now outstanding. National banks may, if they choose, maintain
their present note issue, but whenever a bank retires the
whole or any part of its existing issue it shall permanently
surrender its right to reissue the notes so retired.

pumenAsE

SEC:4 . The National Reserve Association must, for a
period of one Year, offer to purchase at a price not less
than par and accrued interest the two per centum bonds
held by subscribing national banks and deposited to secure
their circulating notes. The National Reserve Association
shall take over these bonds and assume responsibility for
the redemption upon presentation of outstanding notes
secured thereby. The National Reserve Association shall
isstie, on the terms herein provided, its own notes as fast
as the outstanding notes secured by such bonds so held
shall be presented for redemption and may issue further
notes from time to time to meet business requirements.

*sp..

OF TWO PERCENTUM BONDS BY NATIONA
L
RESERVE ASSOCIATION.

-d •H

L'1

1
g
Q (
1)C)

ri2

0
ra

^ 4-) "CI
C.) -0 1:11
C.)
rf.1 C) " S-4
(i)
S-4
H
4.D .r-4
:1 0
•H
0 4-1
cd
g

1'1MVISIONS REQUIRING DEPOSIT OF BONDS BY
NATIONAL
BANKS REPEALED.

r-1 -0
V
c)

All provisions of law requiring national banks
to hold or to transfer and deliver to the Treasurer of the
United States United States bonds other than those required to secure outstanding circulating notes and Government deposits are hereby repealed.

.1)
0 S-4
c: S-4
0 71 Cr-.

4-3

SEC.

•

aiN.
•r-4
(1) c.0
-4.3 0 4_3 c-*
ozi •H
*?-4 4-1 CI

(1.)
+3 'd

.F4 rci
ttl

4-)

r0
r• 4-.) 1) Q.)

f^-1 ,11

Cl)

4-3 ro +

•ri
4)

te) ,1) +3 C
O0
C) 4-)

TAX ON NOTES OF NATIONAL RESERVE ASSOCIATION.

.-• arr l'imrte . v1 rt.:, --.% ett tlima
•% r *m..-4(Th: .is. ,)ciation in circulation at any time in kcess of nine hundred
million dollars which are not covered by an equ,al.amount
of lawful money held by said association shall pay a special tax at the rate of one and one-half per centum per
annum, and any notes in excess of one billion two
hundred .milOion dollars not so covered shall pay a special tax at the rate of five per centum per annum.
4. .

CIA

ak +3
cd

CIRCULATING NOTES FIRST LIEN ON ASSETS.

The circulating notes of the National Reserve Association shall constitute a first lien upon all its
assets and shall be redeemable in lawful money on presentation at the head office of said association or any
its branches. <
SEC.

'(0

'473 •el:

1 WHAT
..0101111.1111.11.1);

CIRCULATING

NOTES oy

NATIONAL FIP‘ZT:RVI-4`

40.

8 2 et)A•

4.)
3 1

(7\

tion in circulation at any time in c wess of nine hundred
million dollars which are not covered by an equal amount
of lawful money held by said association shall pay a special tax at the rate of one and one-half per centum per
annum, and any notes in excess of one billion two
hundred .milkon dollars not so covered shall pay a special tax at the rate of five per centum per annum.

73
4)
4-3 Co 0
•r4 03 E.

LIRCULATING NOTES FIRST LIEN ON ASSETS.

SEC.

. The circulating notes of the National Re-

serve Association shall constitute a first lien upon all its
assets and shall be redeemable in lawful money ,on presentation at the head office of said association or any
its branches. <

00,00.1.1:7;

NOTES OF NATIONAL RESERVE
ASSOCIATION ARE RECEIVABLE.

WHAT CIRCULATING

SEC. 40). The circulating notes of the National Reserve "\
Association shall be received at par in payment of all
taxes, excises, and other dues to the United States, and
for all salaries and other debts and demands owing by
the United States to individuals, firms, corporations, or
associations, except obligations of the Government which
are by their terms specifically payable in gold, and for all
debts due from or by one bank to another, and for all
obligations due to a bank.
CIRCULATING NOTES FORWARDED ON APPLICATION.

rty

SEC. The National _ Reserve Association and its
branches shall at once, upon application and without
charge for transportation, forward its circulating notes
to any depositing bank against its credit balance.
EXCU

OF 2 PER CENT -FOR 3 PER CENT BONDS.

SF.C..011. Upon ,application of the National Reserve Association the Secretary of the Treasury shall exchange
the two per centum bonds bearing the circulation privilege purchased from the banks for three per centum bonds
without the circulation privilege, payable after fifty Years
from the date of issue.
FRANCHISE TAX.

SE'.
s
)
r .' e National Reserve Association shall pay to

trr

the G 4ern nt a special franchise tax of one and one-half
per cent= annually during the period of its charter upon
an amount equal to the par value Of sue-h bonds transferred
to it 1)\- the subscribing- banks.
SALE OR REDEMPTION OF BONDS.
,wk. The ,• Reserve Association shall agree to hold
the three per centum bonds so issued during the period
4 its corporate existence: 'Provided, That after five years
the Secretary of the Treasury may at his option permit
the Reserve Association to sell not more than fifty millions of such bonds annually: And provided further, That
the I tinted States reserves the right at any time to pay
any of such bonds before maturity, or to purchase any of
them at par for the trustees of the postal sayings, or
othcrwi,e.

ioo

Urn.

4,4

Sec. 44f.

That banking corpora-

tions for carrying on the business of bankinr;

nd in Aid of the

commerce of the 7nited States or its citizns %itln foreirm
countries ,Ind to act as financial aents of the United States
ma7 hr

'ormcd b— any - number of nerson9, not lens 7'.n an7 ease

than five, who shll enter into articles of association which
shall spectf,r
corporation
ineons

rreneral terms the object for wYtch tie btnking

formed and mav contain any othor rrcvlsions not

tent with the nrovisions of this act which the

bankiny corporation may see fit to adopt for thr rorrula4- ion
and conduct of its business and affairs, lah!.ch wtid re -rulati
ons
shall he 9irrned, in 'Implicate,

rfn-sons

nitn

In form

the bankin7, cornorr4tion ,ind ono copy thereof shall be
forwarded
to the Compt4Naler of the Currency and the other to the Flocre
tary
of Stc%te, to he filed and preservfA in their offices.

Sec. APS.

That the persons unitin,- to form silch banking

corporation sl- a.11 under their hnds rriak

al or - n,)t.ztiirin nertificate

which shall specify, first, the n:ine assumed b.,' :311}: 13i,nking corpor
ation which name shall be subject to approval by the /orintroller;
genord, thr -P'Irei..-11 country or follntri:-:s or the dc.r.endreies
or colonies of foreir_ n count_
its operations of dil3cnunt
tHe place in
elal1 be located; f

.3 or of

7Tritld

qt:ttee

where

are to be carried on;
d.ei)esit
i

UnitA .)t'ctes where

home office

rt}, the amount of it r, canital stor.i-- rind

the ninber of shares into which the

the

ri ti..rtl0 B In.a 1.1

be divided;

20516
fifth, the namos and places of residence of the shareholders
the number of shares held by each of them; and, sixth,
a declaration that said certificate is made to enable euf:11
porsons
to ;.vail t1tt3,-18, 1ves of the ad- rant•_1,-,;es of th:Is
act.
Sec. ie.

no bar-11(1:1[7 corporation

be organized

under this act with a loan oupi 4 za than ttio million dollars.

Olt. That e7cry bankinc: corporation formed pursuant
to the provisions of this act shall from the date of the
execution of its oraniztion certificate be

body corporate,

but shall not be at;thorized to receive deposits in the UniteJ States nor compete with

fl.nks in the United F;tates or-

ganized either under national or State laws for domestic
buHineas not necessarily related to the busineam beinr done
in forei7,n countries or in the depQndencies/of the United
States.

Such liankinc corporations shall Mothave any power

to issue or cir,lulate notes/under any 04 the provisions of
the laws relating to natio/la:I bi
Unitod States.

Sucli baoliin

power to make accept

business within the

cc perAtions shall have full

cis of drf3, bills of exchange or

other conaercial pap
of anc ,ptance.

and matu

ng subsequent to the date

F7ery such bankinc, corporation shall have

power to purchase or sell securities of the United States or
of any Itate in the Union or of foreign golrernmonts or
subdivisions or municipalities of foreign countries.

Each

banking norporation organized hereunder shall have power to
establish and maintain for the transaction of its business
a branch or branches in foreign ocuntries, their dependencies

or the dependencies of the United States at such places and
under oudh regulations as thn board of
mine to be expedient.

derectoro may deter-,

ri.a.,joritk.,

of the members of the board of directors

of such bankin!: cor7oration &hall be citizons of the Unite
d
States.

Each direntor ehUl cwn in his own ri,71-tt at lcast
Id Wharos of the c,t1-11,t1 stock of the banking cor-

poration of lifIlir;h he is a director.
Sec. *P.
4r
poratio,! olia I b

(;)51

annual me etin[
, of o,/
-r(v
!r such b,
held at

home ofAce l

Sta.2s, and evury such bankin

!orio office 1-,00ks con tui

r,opio

banking corporation.

ki,ep at its

-1.era'hers of its 'oard of di

of tjie rei)ort9 fLrn 4 1h

to the rlomptrcllr of tTIP
under appro-Tiate had

United

Atzies of All stokholders

of svA bltnktn..- corporation ,
rectr,rs, toc:ether

°ratio:

ing cor-

1)7 it

- tr d-tail and

the rcsoHrces mid liabilities of the

Every irtch bnkth< corporation ch;d1

make ,reports to the comptroll2r cr tYe 7!urrency at the same
time as national banks make their rey.orts
utes 14.nd shall be subject to

,r.tsting stat-

caznination, 7ftcn deemed neces-

sary by the Comptroller of the Clurrency, throuch bank examiners arpointed bz the t4omptro1lr.

(

!lc

-gob•

':1.T lovetnk dninf, biJoiTlesc in the Unit rd Ito.tez

and bein!; fe oHner of stock in the ',Tationva 7eseve Association

zJbacribe to LIA: stock of zny tx;.nkin:.; ccrporation

orc,anized under
of slIch ;tn
cent of th ,

Te1d

rrcont of this act, but the aricate
arj

capital s7,o

to/hk shall not cxcced ten per
of -1-,e sub3cr1bing bank.

20516
Sec. W.

That the provisions of all laws relatini; to

national Im.nking associations

organized

as applicable an0 not inr:onsif-Itent a
thi

act sli!.0J f7o-crn an

ontrol

hereunder so far
the provi2ionn of
corPoratiolia

orrTnized 1-iprollnder.

Ito-pa-4Q,--Mottr4411.a.nd

Whereupon

letkaorvi etc •

at 4.30'-the astamiag4on ad jourried, to race t

Wednetaday-,- December 20, '19.13:, at 10.50 A. M.'

No")

•

rICk‘e
• %, N5I6

NB
10MONO.
SEC.

ara:4.0.

POWER TO DEAL IN FOREIGN EXCHANGE.
The National Reserve Association shall have
power to purchase from its subscribing banks and to sell,
with or without its indorsement, checks or bills of exchange
payable in such foreign countries as the board of the National Reserve Association may deteunine. These bills of
exchange must have arisen out of commercial transactions,
must have not exceeding ninety days to run, and must
bear the signatures of two or more responsible parties, of
which the last one shall be that of a subscribing bank.

SEC.

Sk.

POWER TO MAINTAIN BANK ACCOUNTS AND TO ESTABLISH
AGENCIES IN FOREIGN COUNTRIES.
The National Reserve Association RhalT have
power to open and maintain banking accounts in foreign
countries and to establish agencies in foreign countries for
the purpose of purchasing and selling and collecting foreign bills of exchange, and it shall have authority to buy
and sell, with or without its indorsement, through such
correspondents or agencies, checks or prime foreign bills
of exchange which have arisen out of commercial transactions, which have not exceeding ninety days to run,
and which bear the signatures of two or more responsible
parties.

SEC.

afi.

DOMESTIC EXCHANGESIt shall be the duty of the National Reserve
Association or any of its branches, upon request, to transfer any part of the deposit balance of any bank having an
account with it to the credit of any other bank having an
account with the National Reserve Association. If a deposit balance is transfei red from the books of one branch
to the books of another branch, it may be done, under
regulations to be prescribed by the National Reserve Association, by mail, telegraph, or otherwise, at rates to be
fixed at the time by the directors of the branch at which
the transaction originates, or an executive committee'
thereof.

RESERVES OF SUBSCRIBING BANKS.
All subscribing banks must conform to the
following requirements as to reserves to be held against
deposits of various classes, but the deposit balance of any
subscribing bank in the National Reserve Association and
any notes of 0) National Reserve Aissociation which it
oir.may be counted as part of its required reserve:
First. On demand deposits: National banks in different. localities shall maintain the same percentages of
reserve against demand deposits as is now required by
law, awl the same percentages of reserve against demand
deposits shall be required of all other subscribing banks
t-rtif-ar-any
14
in the mme
part of tlie-legal-r*gerve of-441-mitUseribitig-bauks-naay be
kept on-1epot .we the Natiefial-koserve-ihnociation
airitrintfiffre-67
Second. On time deposits: All time deposits and
moneys held in trust payable or maturing within thirty
days shall be subject to the same reserve requirements
as demand deposits in the same locality. All time
deposits and moneys held in trust payable or maturing
more than thirty days from date shall he subject to the
same reserve requirements as demand deposits for the
thirty days preceding their maturity, hut no reserves

SEC.

OM
ilog '

asrw.486-

earits'itn%reit.
Second. On time deposits: All time deposits and
moneys held in trust payable or maturing within thirty
days shall be subject to the same reserve requirements
as demand deposits in the same locality. All time
deposits and moneys held in trust payable or maturing
more than thirty days from date shall be subject to the
same reserve requirements as demand deposits for the
thirty days preceding their maturity, hut no reserves
shall be required therefor except for this period. Such
time deposits and moneys held in trust must be repre,
sented by certificates or instruments in writing and be
payable only at a stated time not less than thirty days
from date of deposit, and must not he allowed to be withdrawn before the time specified without thirty days'
notice.
Third. On savings deposits: Sayings deposits, as defined in this act, shall be subject to notice of withdrawal
of not less than thirty days and shall be covered by a
reserve amounting to forty per centum of that required
against demand deposits in the same locality.
RESERVE OF THE NATIONAL RESERVE ASSOCIATION.

All demand liabilities, including deposits and
circulating notes, of the National Reserve Association
shall be covered to the extent of fifty per centum by a
reserve of gold (including foreign gold coin and gold bulor other money of the United States which the
it
Silitootllion)
ationat banks are now authorized to hold as a part of
t eir legal reserve: Provided.ehearove,-, That whenever and
so long as such reserve shall fall and remain below fifty
per centum the National Reserve Association shall pay a
special tax upon the deficiency of reserve at a rate increasing in proportion to such deficiency as follows: For each
two and one-half per centum or fraction thereof that the
reserve falls below fifty per centum a tax shall be levied
at the rate of one and one-half per centum per annum.
d),..All note issues, of the National Reserve Association
must he covered t-414'extent 4)1 • at least- trne-ttrird by
gold or other lawful money, andtlte-r-emaiuir.tiea by
bankable commercial paper as herein defined or obligations of the United States, Stvt-etto-Itetoosi.-.Aittrii-4/t—iftiot4441-,er-freirt-nite14-4+44-44elfrm-kateaulaolgewm-4.44*-6witte-mfm,-4,
4.4-tiatie.4iateti.uutoottiamliiiistlI n computing the demand liabilities of the association
sum equal to one-half of the amount of the United
States bonds held by the association which have been
purchased from the national banks, and which had pretheir
viously been deposited by those banks to secure
circulating notes, shall be deducted.
SET.

REPORTS OF CONDITION 01: THE NATIONAL RESERVE
ASSOCIATION.
e Association shall make
ir. The National Reservitems
of its balance sheet,

SEC. 4

a report, showing the principal
These
to the Comptroller of the Currency once a week.
s
reports shall be made public. In addition, full report
shall be made to the Comptroller of the Currency coincithe
dent with the live reports called for each year from
national banks.

•

Sec.

The rational Reserve association may

purchase, Lo16 &lid convey real estate for the following furises
and for no otters:
First.

such as shall be necessary for the im-

mediate EtccoaLoclation in the trEins&ction of the busiress
either of the heed office or of ti_e branches.
second,

;Luch as shall be 1:,ortgaed to it in good

faith by way of security for debts previously contracted.
Thin'.

such t.s shall be conveyed to it in satis-

faction of debts previously contracted in the course
of its dealings.
Fourth.

'31.1ch

a..3

it shall 'au-chase at sales under

judgnents, decrees, or mortgages held by the association, or shall purcrIrse to soc;re debts due to it.
But the Yationt,1 Reserve .sociation s:tiall not
hold the ppssession et any real estate under mortgage
or the title tLd

ossession of an7 real estate

iircht4sed

to secure any debts due to it for a longer period than
five years.

tsC\k9
20516

911\M

MONO. SEC.

elA

GOVERNMENT OF THE UNITED STATES AND BANKS OWNI
NG
STOCK TO BE
DEPOSITORS.

.1•0.1..
•
•
AAJIVW.,"

. The Government of the7United States and
banks owning stock in the National Reserve
Association
shall be the only depositors in said associatio
n. All
domestic transactions of the National Reserve
Association
shall be confined to the Government and the
subscribing
banks, with the exception of the purchase or
sale of Government or State securities or securities of forei
gn governments or of gold coin or bullion.

1141444141".......""
Mt71
6
1

NATIONAL RESERVE AFSOCIATION FISCAL AGENT OF
THE
GOVERNMENT.

4,00

6,..i „L.-)

SEC.
le Government of the United Stays shall
z
de osit its general funds with t44646141mot
• ettligiiegerre Association, and thereafter all receipts of 01
Government
shall he deposited with
Association,
All disbursements by tlA Government shall
be made
• •
through
Association. 44,1 ,
t4 A
/

INTEREST ON DEPOSITS.
fk.

The National Reserve Association shall pay
no
interest on deposits.

REnrscotTNT# OF BILLS OF EXCHANGE ARISING
OUT OF
COMMERCIAL TRANSACTIONS FOR SUBSCRIBING BANK
S.
.-----SEC-AT The National Reserve Association may
redis
count for and with the indorsement of any bank
having
a deposit with it, notes and bills of exchange arisi
ng out
of commercial transactions; that is, only notes and
bills
of exchange issued or drawn for agricultural,
industrial,
or commercial purposes, and not including notes
or bills
issued or drawn for the purpose of carrying stock
s, bonds,
or other investment securities.
Such notes and bills must have a maturity of not
more
than twenty-eight days, and must have been
made at
least thirty days prior to the date of rediscount
. The
amount so rediscounted shall in no case exceed the
capital ,of the bank applying for the rediscount. The
aggregate of such notes and bills bearing the signature
or indorsement of any one person, company, firm, or
corporation, rediscounted for any one bank, shall at no
time
exceed ten per centum of the unimpaired capit
al and
surplus of said hank.

REDISCOUNTS FOR SUBSCRIBING BANKS OF NOTES AND
BILLS OF EXCHANGE GUARANTEED BY THE LOCAL
ASS()CI
The National Reserve Association may also
rediscount, for and with the indorsement of any
bank
having a deposit with it, notes and bills of exch
ange
arising out of commercial transactions as hereinbefo
re
defined, having more than twenty-eight. slays, but not
exceeding four months, to run', but in such cases the paper
must be guaranteed by the local association of which the
bank asking for the rediscount is a member.

DISCOUNT OF DIRECT OBLIGAtION OF DEPOSITING BANK
INDORSED BY LOCAL ASSOCIATION.

5-Th*

Whenever, in the opinion of the governor of
al Reserve Association, the public interests so
require,t‘i°1.1
such
opinion to be
stilENca.
-d in by the executive

AIL

exceeding four months, to run, hut in such cases the paper
must be guaranteed by the local association of which the
bank asking for the rediscount is a member.

DISCOUNT OF DIRECT OBLIGAtION OF DEPOSITING BANK
INDORSED BY LOCAL ASSOCIATION.
y
k

Whenever, in the opinion of the governor of
the National Reserve Association, the public interests so
require, such opinion to be concurred in by the executiye
committee of the National Reserve Association and to
have the definite approval of the Secretar
e Treasury, the National Reserve Association ay discount the
direct obligation of a depositing bank, indorsed by its
local association, provided that the indorsement of the
local association shall be fully secured by the pledge and
deposit with it of satisfactory securities, which shall be
held by the local association for account of the National
Reserve Association; but in no such case shall the amount
loaned by the National Reserve Association exceed threefourths of the actual value of the securities so pledged.

',pp/Mb

RATESTOF DISCOUNT.

The National Reserve Association shall have
SEC.
authority to fix the rates of discount from time to time,
which when so fixed shall be published, and shall be uniform throughout the Unisted States.

C
SA)
PURCHASE OF ACCEPTANCES BY THE NATIONAL REs
ASSOCIATION.
SEC:74. The National Reserve Association may, whenever its own condition and the general financial conditions
warrant such investment, purchase from a subscribing
bank acceptances of banks or acceptors of unquestioned
financial responsibility. Such acceptances must have
arisen out of commercial transactions, must have not
exceeding ninety days to run, and must be of a character
generally known in the market as prime bills. Such
acceptances shall bear thelindorsement of the subscribing
bank selling the same, which indorsement must be other
than that of the acceptor.
hiPArovrieope.

•

„

INVESTMENT IN GOVERNMENT AND STATE BONDS.
SEC.)le The National Reserve Association may invest

Ni•

1?\

in United States bonds, also in short-term obligaiions
having not more than one year to run of the United
States or its dependencies, or of any State, or of foreign
governments.

POWER TO DEAL IN GOLD COIN OR BULLION.
SEc. ItiPr. The National Reserve Association shall have
power, both at hothe and abroad, to deal in gold coin or
bullion, to makelloans thereon, and to contract for loans
of gold coin or bullion, giving therefor, when necessary,
acceptable security, including the hypothecation of any
of its holdings of Vnited States bonds.

8 NB

MONO. S

Sec

The earnings of the Nation
al Reserve Associati
on shall
be disposed of in the fol
lowing manner:

EARNINGS AND DIV

1111k

SEC. 20. The earnings of the Na

After the payment of all
expenses and taxes the
sharaholders shall
be entitled to receive
annually a minimum divide
nd of four per centum
on the paid in capital,
which dividend shall be
cumulative. Further
0L4-4Cri 0_4
, I LL 4 ,
(
41 ,
net earnings shall
bio-p04.416-4.ato a contingent fund/\,1(
which shall be maintained at an amount equal
to one per centum op the
paid in capital, and
shall not exceed in any
event two million dollar
s and shall be used to
meet any possible losses
. Such fund shall upon
-the final dissolution
of the National Reserve
Association go to the Uni
ted States and shall
not under any circum
stances be included in the
book value of the stock
,
t•
-q
or go to the sharehold
ers. ef-amer additional
earnings oftwismif shall
be paid into the surplu
s fund of the National
Reserve Association unt
il
t.h.e.t fund shall amount
to twenty per centum of
the paid in capitals
one
fourth shall be paid to
the United States asp
osismemmeiss franchise tax
(1410
and one-fourth to the
shareholders posimeisee the
shareholdere dividend
,
9hall amount to five per
cc t
per ann4m on paid in cap
tal,
4
,
1„: t
e"'
-"
)
.4
4.
d
but one-half of the add
itional earnings
shall be added to the
surplus fund and one-half
shall be paid to the
United States as a pstr
itio4-41ips franchise tax.
After the surplus fun
d
of the National Reserv
e Association amounts to
twenty per centum of
the
paid in capital all exc
ess earnings shall go
to the United States.'--'

14.1t,

•

n shall be distributed in the fol
ter the payment of all expens
holde shall be entitled to rece
cent um
the paid-in capital, wh.
shall bc
mulative. Further
divided. one- If to go to the surpl
Reserve Asso iation until said f
twenty per ce urn of the paid-in c
to the Unite
tates., and one-fo
but when the shareholders' divi en
per centum per annum ork. p• id-in
ceive no additional dividend
Aft
ceive five per centumon th pal
shall then be divided, o -half to
fund of the National
serve Assoc
go to the United
ates. After
ceive five per cent
per annum o
the surplus fund of the National
amounts to tw .ty per centum of
one-half of di( 2t earnings shall go
and one-half o the contingent fund
maintaine t an amount equal to o
paid-in c ital, hut not to exceed i
lion dol i rs, and shall be used to
fund
all upon the final dissolut
Rese e Association go to the Uni
not under any circumstances be
v, . . of the stock, or go to the shar
and so long as the contingent fun
tat< all excess earnings shall go to

CORPORATE

POWERS

OF THE N
ASSOCIATION.

duly nuiling and
laujatit,41-.41&..arttaies44401*-(sert
Reserve Association shall become
executi
and as such and by that name shall h
%went. To adopt and use a corporati
Second. To have succession for a
from the date of itirrIrgerriirertionAciA.
Tliird. To make contracts.
Fourth. To sue and be sued, coin
any court of law and equity, as full)
Fifth. To elect or appoint director
manner hcrcinbefore provided, defii
quirc bonds of them, and fix the pen
Sixth. To prescribe by its board
not inconsistent with this act, regul,
which its property shall be trcnsferr
ness conducted, and the privileges
exorcised and enjoyed.
Sti.ort+44, To 'exercise loy its board
4
.
; authcrized officers or agents, subjec
and privileges conferred by this act.
art.Upon

;

Ple0

GUARANTIES OF LOCAL AS

Any member of a local as
to such association for a guaranty
paper which it desires to rediscount
SEC. ae

8 NB

MONO. SEC.
EARNINGS AND DIVIDENDS.

al Reserve Association shall

SEC. 20. The earnings of the National ReserVe Ass cia-

d taxes the shareholders shall
dividend of four per centum
11 be cumulative. Fur4her
4jja
t fundehich shall be mainm op. the paid in capital, and
dollars and shall be used to
upon the final dissolution
the United States and shall
the book value of the stock
piJk
nal earnings olimissilf shall
//14
nal Reserve Association until
of the paid in capitals

ono

• peripmemeir franchise toot
the shareholders' dividend

at4;p44.40 As,40,

n- paid in capitali t11M11
0.f of the additional earning
s
half shall.. be paid to the
z.

After the surplus fund

o twenty per centum of ths
o to the United States, -'2

ilt

lipn shall be distributed in the following manner.
ter the payment of all expenses and taxes t shareholde shall be entitled to receive annuall four per
cent=
the paid-in capital, which mini m dividend
shall be
mulative. Further net ear ings shall be
divided, one- if to go to the surplus ft d of the National
Reserve Asso iation until said fu
shall amount to
twenty per ce urn of the paid-in c sital, one-fourth to go
to the UnitedJStates, and one-fo th to the shareholders,
but when the shareholders' divi ends shall amount to five
per centum per annum ofl,. p d-in capital they shall receive no additional dividend
Alter the shareholders receive five per centuin on th pal n capital the net earnings
shall then be divided, o -half to
added to the surplus
fund of the National
serve Associ on and one-half to
go to the United
ates. After the hareholders receive five per cent
per annum on paid- capital and
the surplus fund of the National Reserve .sociation
amounts to tw ty per centum of the paid•in
pital,
one-half of thP et earnings shall go to the United
tes
and one-half o the contingent fund, which fund shall
rnaintaine t an amount equal to one per centum of the
paid-in c ital, but not to exceed in any event two million dol rs, and shall be used to meet losses; and such
fund
all upon the final dissolution of the National
Rese c Association go to the United States, and shall
not under any circumstances be included in the book
e of the stock, or go to the shareholders. Whenever
and so long as the contingent fund shall remain unimed all excess earnings shall go to the United States.

CORPORATE POWERS OF THE NATIONAL RESERVE
ASSOCIATION.

Sc. at. Upon duly making and filing
saulation-wmt_aireielti- certificate he National
Reserve Association shall become
he
i.913..cd..ite-itsoiteioustiooti-kmatifteopte a body corporate
cxect,..21
.
and as such and by that name shall have power—
.irst. To adopt and use a corporate seal.
Second. To have succession for a period of fifty years
from the date of it-s-irerreerrirmtiion ole.4.4 tt..2.4t....1
Third. To make contracts.
Fourth. To sue and be sued, -complain and defend, in
any court of law and equity, as fully as natural persons.
Fifth. To elect or appoint directors and officers in the
manner hereinbefore provided, define their duties, require bonds of them, and fix the penalty thereof.
Sixth. To prescribe by its board of directOrs by-laws
not inconsistent with this act, regulating the manner in
which its property shall he trcnsferred, its general business conducted, and the privileges granted to it by law
exercised and enjoyed./
Sevtiett41-.. To exercise by its board of directors or dulyA
authcrized officers or agents, subject to law, all powerAilk
and privileges conferred by this act.
rik0 GUARANTIES OF LOCA,I., ASSOCIATION.

SEC. ale Any member of a local association may apply
to such association for a guaranty of the commercial
paper which it desires to rediscount at the branch of +1,0

••••111

Pervieniskv.

-44.-40-61

iTo
040
•Liti

1.0-04441

:
exercised and enjoyed.
.e
Sett4h. To 'exercise by its board of directors or duly
authcrized officers or agents, subject to law, all powers
and privileges conferred by this act.
•.w

„

1#0 GUARANTIES

OF LOCAL ASSOCIATION.

SEC. ale Any member of a local association may apply
to such association for a guaranty of' the commercial
paper which it desires to rediscount at the branch of the
National Reserve Association in its district. Any such
bank receiving a guaranty from a local association shall
pay a commission to the local association, to be fixed in
each case by its board of directors. The guaranty of the
local association, in the event of loss, shall be met by the
members of the local association in proportion to the ratio
which their capital and surplus bears to the aggregate
capital and surplus of the members of the local association, and the commission received for such guaranty,
after the payment oNtxpenses and possible losses, shall
be distributed among the several banks of the local association in the same proportion. A local association shall
have authority to require security from any bank offering
paper for guaranty, or it may decline to grant the application. The total amount of guaranties by a local association to the National Reserve Association shall not at
ally time exceed the aggregate capital and surplus of the
banks forming the guaranteeing association.
CLEARING HOUSE.
SEc..A. Any local association may by a vote of threefourths of its members and with the approval of the
National Reserve Association, assume and exercise such
of the powers and functions of a clearing house as are not
inconsistent with the purposes of this act. The National
Reserve Association may require any local association to
perform such services in facilitating the domestic exchanges of the Reserve Association as the public interests
may require.
susPENsioN.:,:itx.
.L. A4aeria.ataiiesiatiem may la!
!,646.waitriereipimmiptJaitmis
a.i.wasenvisiers suspend a bank from the privileges of membership for a failure for thirty days to maintain its reserves,
or to make the reports required by this act, or for misrepresentation in any report or examination as to its
cpndition or as to the character or extent of its assets or
liabilities.

BANKS.
.*
' SEC. . All of the privileges and advantages of the
National Reserve Association shall be equitably extended
to every bank of any of the classes herein defined which
shall subscribe to its proportion of the, capital .of the
National Reserve Association and shall otherwise conform
to the requirements of this act.
PRIVILEGES OF SUBSCRIBING

0•111.

•

lo^

.To
fm,;4.

100
,
4 444'
t
4.1141

at4,11 44to /4".'P
41
4.14"111111,01matioammwv.''
"w.'"

20 PER CENT.
#(113

NB
7 MONO.
SEC.

EXEMPTION FRoM
••••

SEC.

. 111

LoCAL AND STATE TAXATION.

National

Reserve

Association

and its
branches and the local associations shall be exempt from
local and State taxation except in respect to taxes upon
real es;ate.

OF THE NATIONAL RESERVE
ASSOCIATION.

EXEt"TIVE commITTEE

SEC.

The directors of the National Reserve Association shall annually elect from their number an executive
committee and such other committees as the by-laws of
the National Reserve Association may provide. The executive committee shall consist of nine members, of which
the governor of the National Reserve Association shall be
ex officio chairman and the two deputies and the Comptroller of the Currency ex officio members, but not more
than one of the elected members shall be chosen from any
one district.
The executive committee shall have all the authority
which is vested in the board of directors, except such as
may be specifically delegated by the board to other committees or to the executive officers, or such as may be
specifically

or retained by the board.

tro".4,

fsea-4444444....
'
1TTY.

AjjaileT

SEC. Alt

There shall be asi..ausialuauwittee elected

annually by the board of directors from among their numOft,

ber, excluding the members of the executive committee,
of which the Secretary of the Treasury shall be ex officio
chairman. It shall be the duty of this molovnitiate;f6
a

fx•erit4 of the National Reserve Association and
ittl7Thr--,

of the branches and to make a public
of such ,

rerint

of the result

t least once a year.

EXECUTIVE-0
- FFIC-E.liS

BRANCHES.

SEC.4*

Hach branch shall have a manager and a deputy manager appointed from the district by the governor
of the National Reserve Association with the approval of
the executive committee and subject to removal at any

ot9.!

•
4

time

by the same authority.

The powers and duties ad

of the manager and deputy manager and
of the various' committees of the branches shall be prescribed by the by-laws of the National Reserve Association.
lenotlib.aLserAike

EXECUTIVE OFFICERS OF LOCAL ASSOCIATIONS.
SEC. à. The directors of each local association shall
annually elect from their number a president, a vice president, and an executive committee, whose powers and
duties sed-tevate-ei-effiee shall be determined by the bylaws of the local association, subject, however, to the
provisions of this act.
LISTS OF

. The National Reserve Association shall cause
at all times, at the head office of the associakept
to be
tion, a full and correct list: of the names of the banks
owning stock in the association and the ntimber of shares
held by each. Such list shall be subjewct to the inspection
of all the shareholders and creditors of the association, and
a copy thereof on the first Monday of July of each year,
verified by the oath of the governor or deputy. governor,
shall be transmitted to the Comptroller of the Currency

SEC.

•

.1.

SHAREHOLDERS.

with the kipere tary of State a certificate siebilweggellioNswilkodiemod 440/...441
dollars and they shall further
the paymaeof one hundred million
file with the Comptroller of the Currency a certificate showing the
title and loc4t1on of each bank w"ich has subscribed to the capital
stock of the National Reserve Association, the number of shares subscribed by each and the amount paid thereon.

20 PER .CENT.

NB
6
MONUTYPF1
ORGANIZATION PAPERS or THE NATIONAL RESERVE
CIATION.
When the board of directors of the National
Reserve Association is duly organized it shall call upon
the subscribing banks for a payment of fifty per centum
on the o mount of their subscriptions to the capital stock
of the association. When one hundred millions of dollars
of such capital have been paid in the board of ilitirettns
re--€emtN
—
1 wiaallivi'aligiThall at once proceed to execute and file,4+41--ti
2"
-•
•
-ti.W......Caru.11CV articles_ jaf,...amsortatimi -.awl an

SEC.

ARTICLES OF ASSOCIATION OF THE NATIONAL RESERVE
ASSOCIATION.
SEC. I 1. The articles-Tii-Association shall specify in general terms the object for whi i.fe National Reserve Association is fornied and shall,eb am n such other provisions,
not inconsistent with law, a the association 'nay see fit
its business and the conduct/
to adopt for the regulation
of its affairs. These arti es shell be signed in duplica
by at least three-fourth of the directors of the Nati al
Reserve Association, •ne copy being retained b the •
with
.ociation and the other fil
National Reserve
the Comptroller of he Currency. These articl may be
amended at any me by the vote of three-fo ths of the
board of direct s, a copy of the amendme to be filed
with the Corn roller of the Currency.

ORGANIZATI

CERTIFICATE OF THE
ASSOCIATION.

TIONAL RESERVE

SEC. i . The organization certi ate shall be executed
by the a 'rectors of the National eserve Association and
shall secificallv state:
Fi t. The title of said ass lation.
S cond. That its head o"ce shall be locatul at Washin on, in the District of olumbia.
fhird. The amount o capital stock and the number of
sl ares into which the sine is to be divided.
Fourth. The title nd location of each bank holding
stock in said assoc tion and the number of shares held
ount paid thereon, whictrniust-iiriock
by each and the
cRse be less tha fifty per centurn of the amount Di.4-he
capital stock s scribed for by said bank.
Fifth. The act that the certificate is made to enable
such associ Lon to avail itself of the advantates of this
act.
The or anization certificate shall be sioried by at least
three-fo rths of the directors of the National Reserve
Associ tion and acknowledged before a judge of a co
and
.F14 re ord or a notary public, and siall be so execut
ac owledged in duplicate, autkenticated by t seal of
such court or notary, one copy to be retaiid for the
files of the association and one copy forwarded to the
Comptroller of the Currency.
RESERVE ASSOCIA•
OWNERSHIP OF STOCK IN THE NATIONAL
TION, INCREASE AND REDUCTION OF CAPITAL.

.
.
of the National Reserve
capit
the
of
Sric. . Shares
Association shall not be transferable, and under no cirthe
cumstances shall they be etrWiced otherwise than by
bank
subscribing banks, nor may they be owned by any
In case
other than in the proportion herein provided.
pon
thereu
bni-oe ;tiereases its capital it shall

Comptroller of the Currency.
RVE ASSOCIA•
THE NATIONAL RESE
IN
K
OC
ST
OF
P
HI
RS
NE
OW
REDUCTION OF CAPITAL.
TION, INCREASE AND

1\of the National Reserve
Siic. i . Shares of the capit;
nsferable, and under no cirtra
be
not
ll
sha
on
ati
oci
Ass
ed otherwise than by the
cumstances shall they be wir
nk
they be owned by any ba
subscribing banks, nor may
e
n herein provided. In cas
other than in the proportio
capital it shall thereupon
a subscribing bank increases its
amount of the capital of the
subscribe for an additional
equal to twenty per centum
National Reserve Association
l, paying therefor its then
of the bank's increase of capita
of
last published statement
book value as shown by the
applying for membership in
said association. A bank
ation at any time after its
the National Reserve Associ
an amount of the capital
formation must subscribe for
nty per centum of the
of said association equal to twe
k, paving therefor its then
capital of said subscribing ban
t published statement of
book value as shown by the las
capital of the National
said association. When the
reased either on account
Reserve Association has been inc
banks in said association
of the increase of capital of the
in the membership of said
or on account of the increase
ors shall make and execute
association, the board of direct
se in capital, the amount
a certificate showing said increa
his certificate shall be
paid in and by whom paid.

...

ei
/..,

Si
I
tl
\
\‘

filed in the office of the Comp
In case a subscribing bank
troller of the Curre
render a proportionate
reduces its capital it shall sur
capital of said association,
amount of its holdings in the
untary liquidation it shall
and if a bank goes into vol
the capital of said associasurrender all of its holdings of
shall be canceled and the
tion. The shares surrendered
therefor a sum equal to
bank shall receive in payment
own by the last published
their then book value as sh
statement of said association.
al Reserve Association
If any member of the Nation
receiver be appointed, the
shall become insolvent and a
ation shall be canceled and
stock held by it in the associ
ts due by such insolvent
the balance, after paying all deb
debts being hereby declared
bank to the association (such
be paid to the receiver
-irst lien upon tlitAstock),shall
'insolvent bank.
of the.
of the National Reserve
Whenever the capital stock
on account of the reduction
Association is reduced, either
association or the liquidation
the
of
s
er
mb
me
of
l
ita
cap
in
ll
, the board of directors sha
or insolvency of any member
of
te showing such reduction
make and execute a certifica
s
nt repaid to each bank. Thi
capital stock and the amou
uri
eWaidgarLiimackw—a4o4ge-e4.46-4:a
certificate s1io44-49e..teelai
94 shall he filed in the office
ciLlieemiti-spit-flOWL.y.44644i42,04
rency.
of the Comptroller of the Cur

20 PER CENT.

5 NB'

MONO. SEC.

116,fiaa

Association. One-third of the directors
shall be elected by
the same voting representatives or prox
y holders, but each
voting representative at this election
shall have a number
of votes equal to the number of shar
es ,in the National
Reserve Association held by all the bank
s composing the
local association which he represents.
The remaining one-s
sixth of the directors shall be chosen
by the directors
already elected and shall fairly represen
t the industrial,
commercial, agricultural, and other inter
ests ,of the district and shall not be officers or; While
•serving, directors of
banks, trust compares, insurance
companies, or other
financial institutions. The manager of
the branch shall be
ex-officio a member of the board of dire
ctors of the branch
Liao shall be chairman of the board.
Each 6i.-ecLor wilen appointed or elected
s;iall take an
ov.Ht ti•f' he will, so fnr as the duty devo
lves upon him,
dil! itl:• a J honestly administer the affai
rs of such assoeiaLic.n and w:11 not knowingly violate or
willingly permit
to be vi..iaLed any of the provins of
this act.
All tie me..-iirs of the board of director
s. of the branch
execpt the ex officio member shall at the
first meeting of
the board be divided into three classes.
One-third of the
directors shall hold office until the first Tues
day in March,
immediately following the election; one-thir
d of the directors shall hold office for an additional
period of one year
after the first Tuesday in March imme
diately following
the'elcction ; the remaining one-third of the
directors shall
hold office for an additional period of two
years after the
first Tucs:lay in March imnit
.1v following the election.
All elections shall be held on the first Tues
day in March
of each year, and after the first election
all directors shall
be elected for a term of three years.
The board of directors of the branch shall
have authority to make by-laws, not inconsistent with
law, subject to
the approval 'Of the National Reserve Associat
ion.
taRreTuRs OF Tiic NATIONAL RESERVE ASSO

CIATION.

SEC.

mt. National Reserve .Association shall have a

board of directors, to be chosen in the following mann
er:
First. Fifteen directors shall be elected, one
by the
board of directors of each branch of the National
Reserve
Association. In case the number of districts
shall be
increased hereafter, each additional district shall
be entitled to elect an additional director.
Second. Fifteen directors shall be elected, one
by the
board of directors of each branch of the National
Reserve
Association, who shall fairly represent the indus
trial, commercial, agricultural, and other interests of the
country,
and who shall not be officers airsbassifis nor, while serv
ing,
directors of banks, trust companies, insurance comp
anies,
ort-4ether financial institutions. In case the number
of districts shall he increased hereafter, each additional
district
shall be entitled to elect an additional director of this
class.
Third. Nine diree,tors shall be elected by voting representatives of.the various *strict*, each of whom shall cast
a number of votes equal to the number of shares in the
National Reserve Association held by the banks in the
district which he represents. Not more than one of these
directors shall be chosen from one district.
Fourth. There shall be seven ex officio members of the
board, namely: The governor of the National Reserve
Association, who shall be chairtmln of the board, two
deputy governors of the National Reserve Association, the
Secretary of the Treasury, the Secretary of Agriculture,
be elected by the board of directors and may 134.he Secretary of Commerce and Labor, and the Compemoved for cause a
filled b roller of the Currency.
bittriabserite atm go
1s inabilit All the members of the board, except the ex officio
the board.
senior in point of service sha embers, shall at the first meeting of the board be divided
o act, the deputy who is
( into three classes. One-third of the directors shall hold
office until the first Tuesday in April immediately following the election; one-third of the directors shall hold office

; n 1 rwrirorl rIf r.nr.
for nnt/In

••••• ow& •

,••• ..•••.. •a."•••••t•

•.•

•••• •••••0••• •••••••••

a number of votes equal to the number of shares in the
National Reserve Association held by the banks in the
district which he represents. Not more than one of these
directors shall be chosen from one district.
Fourth. There shall be seven ex officio members of the
board, namely: The governor of the National Reserve
Association, who shall be chairman of the board, two
deputy governors of the National Reserve Association, the
Secretary of the Treasury, the Secretary of Agriculture, ,
shall bE 'elected by the board of directors and may bihe Secretary of Commerce and Labor, and the Comp-.
removed for caus.e at,..affOlis*Hingittnezpiaces filled b)i-roller of the Currency.
the board.
tile-gave/1mM
—
ks inability All the members of the board, except the ex officio.
to act, the deputy who is senior in point of service shallreinbers, shall at the first meeting of the board be divided
. tr—
into three classes. One-third of the directors shall hold
( office until the first Tuesday in April immediately following the election; one-third of the directors shall hold office
for an additional period of one year after the first Tuesday
in April immediately following the election; the remaining
one-third of the directors shall hold office for an addititnal
period of two years after the first Tuesday in April immediately following the election. All elections.shall be held
on .the first Tuesday in April of each year, and after the
first election all directors shall be elected for a term of
three years.
Each director shall take an oath that he will,, so far as
the duty devolves upon him, diligently and honestly administer the affairs of such association and will not
knowingly violate or willingly permit to be violated any
of the provisions of this act.
The board of directors of the National Reserve Association shall have authority to make by-lalvs, not inconsistent with law, which shall prescribe the manner in
which the business shall be conducted and the privileges
granted to it by law exercised and enjoyed.
"""som••••

es. The executive officers of the National Reserve Association shall consist of a governor,two deputy governors,
a secretary, and such subprdinate officers as may be provided by the by-laws.

APPOINTMENT OF OFFICERS OF THE NATIONAL RESERVE
ASSOCIATION.

.)p. he governor of the National Reserve Xssocia.
SEc
tion shall be selected by the President of the United
States from a list of not less than three submitted to him
by the board of directors of said association. The person
so selected shall tinereupon be appointed by the said
board as governor of the National Reserve Association
----"`for a term of ten years, subject to removal for cause
by a two-thirds vote of the board. There shall be two
deputy governors, to be elected by the board, for a term
of seven years, subject to removal for cause by a majority
vote of the board. The two deputie3 first elected sha
serve for terms of four years and seven years, respectively.
In the absence of, the governor or his inability to act the
deputy who. is senior in point of service shall act as
governor. The board of directors shall have authority to
appoint such other officers as, may be provided for by, the
articles of association or the by-lans.

•

tO PER CENT.

4 NB

IONOTYPE SECTION

The t4inbers of the local association shall join in
articles of'pssociation, haviog been first authorized to do
so by resoktion of the boaid of directors of each of the
member baOks. These articles shall provide that the
board of dirkctors of the local association shall be authorized to discunt or rediscount paper for any member
thereof and to offer such _gaper for rediscount with the
branch of tl
National Reserve Association for that
district, the galtror profit accruing to the local association
from saki- Irantactions to be distributed from time to
tin -'after the payment of all expenses, among the several
(
Wanks of the local association in proportion to the ratio
, which their capital and Surplus bears to the aggregate
capital and surplus of the Inc finers of the local association.
In the event that the exiienses shall exceed the earnings
or that any losses shall Occur upon any of the paper so
rediscounted, the sevieral banks composing the local association shall bear said expenses anVoirJesi proportion
to the ratio to which their c
al and sur9is bears to
the aggregate capital
surplus of the.,*mbers of the
local associ
nd the directors oyche local associations shall be authorized by the ales of association to
levy an assessment for these purposes. The total amount
of rediscounts by a total association with the National
Reserve Association she not at any time exceed the
aggregate capital arlki. surplus of the banks forming such
local association.,•'these articles, which must be approved
by the board of directors of the National Reserve Association, syl be executed ifl,,...kriplicate, anfl one copy,
together/With the certiActllopy of the resorutions of the
boardylof dire
. authorizing the subscribing banks.
to si
, shall be filed with the National Reserve
Association, one copy shall be filed with the branch association, and one cbpy shall be retained by the local
association.
Upon thirty days' notice in writing to each. member
bank the articles of association of the local association
may be amended by a vote of three-fourths of the member banks by arid with the approval of the National
Reserve Association and in like manner as to vote and
approval the local association may assume arid exercise
such of the powers and functions of a clearing house as
are not inconsistent with the purposes of this act. The
National Reserve Associhtion may require any local asscciation to perform such services in facilitating the domestic exchanges bf the.National Reserve Association as the
public interests May i-equ' ire.
A local association may, by a vote of two-thirds of the
members, suspend a bank from the privilege of membership for a failure for thirty days to maintain its reserves,
or to make.the reporik..rsquired—by- this act, or for misrepresentation in any report or examination, as to is
condition, Or as to the character or extent of its assets
or liabilities, or for failure or for refusal for thirty days
to comply with any of the provisions of this act. A
suspension from a local association shall operate as a
suspension from the privileges of the National \Reserve
Association.

ELECTION OF DIRECTORS BY LOCAL ASSOCIATIONS.
SEC.

local association shall have a i:b0d of
directhi* t
ntringarrio be determined by the -Rix-laws
. to— of. the local associatiw.• Three-fifths of that number
shall
beelected by ballot cast by the representatiNt of
the banks that are memhers of the local association-, each
bank having one representative and each representative
Each

representation in any report 01 eXtli11194,44WL, itLb 4.4J Lb
condition, br as to the charactet or extent of its assets
or liabilities, or for failure or for refusal for thirty days
to comply with any of the provisions of this act. A
suspensioti from a local association shall opeiVe as a
suspension from the privileges of the National 'Reserve
Association.
ELECTION OF DIRECTORS BY LOCAL ASSOCIATIONS.

SEC. )f. Eli local association shall haVe a i;b0d of
direct*' ifiE 5ntlinglirfo be determined by the tr-laws
of the local associatikn.. Three-fifths of that • number
be elected by ball& cast by the representativts
shall
te.. - of
the banks that are members of the local association, each
bank having one representative and each representative
'ode Vote for each of the positions to be filled without
reference to the number of shares which the bank holds
in the National Reserve Association. Two-fifths of the
whole number of directors of the local association shall be
elected by these same representatives of the several banks
that are members of the association, hut in voting for
representative • shall he
these additional directors
,
. • each
entitled to as many votes as the bank which e represents
holds shares in the National Reserve Association. In
neither case shall voting by proxieQ2e allowed. The
authorized representatives of a bank, as herein provided,
must be either the president, vice president, or cashier of
the bank he represents.
Each director when appointed or elected shall take an
oath that he will, so far as the duty devolves upon him,
diligently and honestly administer the affairch
association and will not knowingly violatb• or willingly
permit to be violated any of the provisions of thislnact.
The directors originally elected shall hold office until
the second Tuesday in February immediately following
their election, and thereafter the directors shall be elected
annually on that date and shall hold office for the term of
one year.
The board of directors of the local association shall have
authority to make by-laws, not inconsistent with law,
Natiorial
subject to the a"prpval of the directoKof the
et.,- •
,
Reserve Association.
1

ELECTION OF DIRECTORS BY BRANCH ASSOCIATIONS.
rue •
Each of the branches of the National Reserve
SEC.
••
Association shall haVe a board of directors, the number, not
less than twelve', to be fixed by the by-laws of the branch.
These directors shall be elected in the following manner:
The boards of each local association shall elect by ballot
a voting representative or proxy holder. One-half of the
directors of the branch shall be elected by the vote of such
representatives, each representative having one vote for
each of the positions to be lined, without reference to the
nu mber ofrshares which 'OR': bank composing the association which he represents holds in the National Reserve

•
•

IP*

AiKR
20 PER CENT.

•

3
NB
moNoT Y PE SECTION
Second. That it shall have and agree to maintain
against its demand deposits a reserve of like character
and proportion to that required lw law of a national bank
in the same location: Provided, however, That deposits
which it may have with any subscribing national bank,
State bank, or trust company in a city designated in t he
national banking laws as a reserve city or a central reserve
city shall count as reserve in like manner and to t he same
extent as similar deposits of a national bank with nati(mal
banks in such cities.
Third. That it shall have and agree to maintain against
all other classes of deposits the percentages of reserve
required by this act.
Fourth. That it shall agree to submit to such examinations and to make such reports as are required by law and
to comply with the requirements and conditions imposed
by this act and regulations made in conformity therewith.
The words "subscribing banks" when used hereafter
in this act shall be understood to refer to such national
banks, and banks or trust companies chartered by the
laws of any State of the United States or of the District of
Columbia, as shall comply with the requirements for
membership hereinbefore defined.
ORG A NIZATION CONOIITTE
The Secretary of the Treasury, the Secretary of
Commerce and Labor, and the Comptroller of the Currency are hereby designated a committee to effect the
preliminary organization of the National Reserve Association, and the necessary expenses of said cominittee
shall be paiel out of a4bw4ineeot
the Treasury n(44.wivw...apppapLiataal, upon vouchers approved by the NOSWIti..
members of said committee, and the Treasury shall be
reimbursed by the National Reserve Association to the full
amount paid out therefor.
Within sixty days after the passage of this act said committee shall provide for the opening of books for subscriptions to the capital stock of said National Res2rve Association .in suck t4aves a* the said commit tee n lay designate.
Before the subscription of arty bank to the capital stock of
the National Reserve Association shall be accepted, said
bank shall file with the organization committee or ,with
the National Reserve Association a certified copy of a res•
olution adopted lw the board of directors of said bank
accepting all the provisions and liabilities imposed by this
act and authorizing the president or cashier of said bank
to subscribe for said stock.
LOCATION OF BRANCHES AN t) DIVISION OF THE COUNTRY
INTO DISTRICTS.
SEC. A. When the subscriptions to the capital stock of
the National Reserve Association shall amount to the sum
of two huudred millions of dollars the organization committee hereinbefore provided shall forthwith proceed to
select fifteen cities in the United States for the location of
the branches of said National Reserve Association: Provided, That one branch shall be located in the New England
States, including the States of Maine, New Hampshire,
Vermont, Massachusetts, Rhode Island, and Connecticut;
two branches in the Eastern States, including the States of
New York, New Jersey, Pennsylvania, and Delaware; four
branches in the Southern States, including the States of
Maryland, Virginia, West Virginia, North Carolina, South
Carolina, Georgia, Florida, Nlabana, Mississippi, Louisiana, Texas, Arkansas, Kentucky, Tennessee, and also
the District of Columbia; four branches in the Middle
••

't;

caLiWactl

---i?Im_wiation snail amoun
t to tne ,
411T1
of two hultdred millions of dollars the
organization committee hereinbefore provided shall forthwith
proceed to
select fifteen cities in the United States for
the location of
the branches of said National Reserve
Association: Provided, That one branch shall be located in the
New England
States, including the States of Maine, New
Hampshire,
Vermont, Massachusetts, Rhode Island, and
Connecticut;
two branches in the Eastern States, includ
ing the States of
New York, New .fersev, Pennsylvania, and
Delaware; four
branches in the Southern States, including the
States of
Maryland, Virginia, West Virginia, North Caroli
na, South
Carolina, Georgia, Florida, Alabama, Mississippi,
Louisiana, Texas, Arkansas, Kentucky, Tennessee,
and also
the District of Columbia; four branches in the
Middle
Western States, including the States of Ohio, Indiana,
Illinois, Michigan, Wisconsin, Minnesota, Iowa, and
Missouri; four branches in the Western and Pacific
States, including the States of North Dakota, South
Dakota, Nebraska, Kansas, Montana, Wyoming, Colorado,
New Mexico, Oklahoma, Washington, Oregon, California,
Idaho, Utah, Nevada, and Arizona.
When the cities in which the branches are to be located Ic
have been selected the organization committee shall forthwith divide the entire country into fifteen distr
:
.
, with k)74
one branch of the National Reserv ....A.coettation in each
tAT
•-istrict* <
The districts may be readjusted eln time to ti
and
new districts and new branches ma be created by the
directors of the National Reserve Association.
L‘l.:3l 1 V V

ouGANIzATIoN
EC.

LOCAL AssociAnoNs.

ct shall
1. All subscribing banks jarithth a Qfdistri
the organ-

F4-hitr
‘4)'
A:••Ce'll

,
tlee-

The banks uniting to
dents or vice presidents,

priI

1-04
A
Ur4iva
tehr't/'''

Jul

.%IL"
4

ct
. 0
.
4,0ArV

ffr

ization committee or The National Reserve Association,
into local associations of not less than ten banks, with an
aggregate capital and surplus of at least five millions of
dollars, for the purposes hereinafter prescribed: Provided,
-914044-44e--feroied
ita--teffr-eityrcitsi that the territory comprised in each
association shall be contiguousi Provided further, That the
territoryITICrudTd in i helocal associations comprising a
district shall be so apportioned that every bank in said
district shall be located within the boundaries of some
local association: A nd provided further, That every subscribing bank shall become a member only of the local
association of the territory in which it is situated.
------The local associations in each district may be readjusted
from time to time and new associations may be created
by the directors (.4-4144: Lt-44.ueli
114.14—cof- the National Reserve AL,,ociation.

execute a certificate in t
assoatation, thb names of
of business, its territori
organized.

004 CA

One copy of th

V",0A4

assandoriAmos4 one copy shal
tion and one copy shall be
Association of the distric
Upon the filing of such ce
shall become a body corpor
may sue and be sued and ex
purposes mentioned in this

I amount to inc sum
e organization cornrthwith proceed to
es for the location of
e Association: Proin the New England
e, New Hampshire,
d, and Connecticut;
eluding the States of
and Delaware; four
hiding the States of
orth Carolina, South
, Mississippi, Louislennessee, and also
ches in the Middle
• of Ohio, Indiana,
nesota, Iowa, and
estern and Pacific
rth Dakota, South
'Wyoming, Colorado,
, Oregon, California,
lies are to he located
ommittee shall forth, with
fifteen distr
each
in
ton
a
••,'" .

sc0)4
and 4/- __,---------m time to ti
e created by the
•
sociation.
SOCIATIONS.

q)^ e

The banks uniting to form such association shall by their presidents or vice presidents, under authority from the board of directors,

n a district shall
f the organReserve Association,
n ten banks, with an
least five millions of
rescribed: Moulded,
414+41-44e-fermed
comprised in each
ided further, That the
•iations comprising a
t every bank in said
boundaries of some
her, That every suber only of the local
it is situated.
ict may be readjusted
ions may be created
he
Association.

execute a certificate in triplicate setting forth the name of the
assoatation, thb names of the banks composing it, its principal place
of business, its territorial limits and the purposes for which it is

organized.

il4 CodiA44-..
441ari
enu1ridmA

One

copy of this certificate shall b

oa-

tha 1 4cal

one copy shall oe filed with the National Reserve Associa-

4 ,1

tiori and one copy shall be filed with the branch of the National Reserve
Association of the district in which the local association is included.
Upon the filing of such certificates the associated banks thurein named
shall become a body corporate and by the name so designated maxappssicsd
may sue and be sued and exercise the powers of a bo,iy corporate for the
purposes mentioned in this act.
'F

't•
•
is••••

•

go'
I”'
r\
-&--vt-

20 PER CENT.

B
N
2
MONO. SEC.
A BILL
To incorporate the National Reserve Association of the
United States. OLUAL
•ation.
and
t. C...11orter. Cain
•apital th be stiblosfibed by cacti bank,
Nl(ttA,)er nimit
f'N 1)111
(to
an
3. („leittfett
ricts.
V int(
the cliN, sion of
oi
0
0
0
_
'
etattm4.
sli.,asso
or*
nizAntion
nee nf direct rittk local
'hranL
tcet n 0! direetors
2.

DirectVroof'thc National Roe
\ppo14t03,e116,0f Anvers of

dation.

rgauiiztti iirs oU
ti(At,
alit)
A icles)o!f
pn.
ssociatA
nal Reser
Or nizaeion Zscr •fietitte 0
e
Increas
:
Ass(
tuna] IZeservc
Own sluiof sc iithe
atal.
and (14tion
empt 111,rom Y al 4iipd Stat axation:\

itive
Co
i v.,
titi.vi_ttliti

ntnittee of the N#1
• lace.
/
ers or branclici.

utive (llli

la! fiesc
k•

.
(

,of'
i4)caflitseiation(i.;
,

I,'st of sit ire' ul ter.

, i
ka, ,

cuARTER, cAprrm,, AND Luc.vrioN.
Representatives
Be it enacted by the Senate and House
of the United States of America in C gress assembled, That
of the United States be,
the National Reserve Associa
and It is hereby, created and established for a term
liftv Years from the date of the
•uu.ccrtificat, with an a.itialriyt-d capital etinal in
amount to twenty per centutn of the paid-in and unimpaired capital of all banks eligible for membership in said
National Reserve Association. Before the said association shall be authorized to ccminence business two hundred million dollars of the capital stock shall be subscribed and one hundred million dollars of the capital
stock shall be paid in cash. The capital stock of said
association shall be divided into shares of one hundred
dollars each. The capital stock may be increased from
time to time as subscribing banks increase their capital
or as additional banks become subscribers or may be
decreased as subscribing banks reduce their capital or
leave the association by liquidation. The head office of
the National Reserve Association shall be located in
Washington, in the District of Columbia.
,
440.
jOt;

MEMBERSHIP.

511/

sjcL.ut...„0

All national banks, and all banks (.0 trust coinSec.
panics chartered by the laws of any State of the United
the
States or of the District if Columbia, complying with
e
Reserv
requirements for membership in the said National
its
Association, hereinafter set forth, may subscribe to
the
capital to an amount equal to twenty per centum of
paid -in and unimpaired capital of the subscribing bank,
and not more nor less; and each of such subscribing banks
shall become a member of a local association as hereinafter
provided. Fifty per centum of the subscriptions to the
capital of the National Reserve Association shall be fully
paid in; the balance of the subscriptions will remain a
liability of the subscribers, subject to call and payment
thereof whenever necessary to meet the obligations of the
in
National Reserve Association tinder such terms and
directors
accordance with such regulations as the board of
of the National Reserve Association may prescribe.

p. nig with tii
States or of the District ot L0lUmina, com
National Reserve
requirements for membership in the said
cribe to its
Association, hereinafter set forth, may subs
centum of the
capital to an amount equal to twenty per
cribing bank,
paid-in and unimpaired capital of the subs
cribing banks
and not more nor less; and each of such subs
as hereinafter
shall become a member of a local association
criptions to the
provided. Fifty per centum of the subs
shall be fully
capital of the National Reserve Association
s will remain a
paid in; the balance of the subscription
and payment
liability of the subscribers, subject to call
obligations of the
thereof whenever necessary to meet the
h terms and in
National Reserve Association under suc
board of directors
accordance with such regulations as the
prescribe.
of the National Reserve Association may
rporated under
ik bank or trust company vhiLik.44-i6 inco
411440f 4--a-local
the laws of any State may/lage.44144C-A. 411€4
ati-tiete-44144.44.44-priviiegelrittrereiet ;

•.

ZLL
la-144
,

provided:

5
401
•

CiP3

a paid-in and
First. That (a) if a bank, it shall have
required for a
unimpaired capital of not less than that
that (b) if a trust
national bank in the same place; and
d surplus of not less
company, it shall have an unimpaire
tal, and if located in
than twenty per centum of its capi
.thousand inhabitants
a place having a population of itiAg
mpaired capital of not
or less shall have a paid -in and uni
thousand dollars; if located in a city
less than
ndinhabitants
having a population of more than iiiisa
usand inhabitants,
and not more than two-lauwir.e.d tho
capital of not less
shall have a paid-in and unimpaired
if located in a city
than 4AigiA. hundred thousand dollars;
-u-sand
tomer4mirreireorflio
having a population of more than
-iminekTet thousand
inhabitants and not more than amme
unimpaired capital
inhabitants shall have a paid-in and
dollars; if located
of not less than IpliWkip* hundred thousand
- II ..city having a population of more than tiazeedmmeked
than four hundred
thousand inhabitants and not more
in and unimpaired
thousand inhabitants shall have a paid
thousand dollars;
capital of not less than four hundred
on of more than
if located in a city having a populati
l have a paid-in
four hundred thousand inhabitants shal
than five hundred
and unimpaired capital of not less
thousand dollars.

ifyiL

52
tot.r
t

trulo

ts,

4;:

Full text of Nelson W. Aldrich Papers : Monetary Commission : Miscellany, Reel 55, Box 79, Folder 1

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