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73d C ongress
1st Session

) HOUSE OF REPRESENTATIVES
J

f

R eport

(

No. 254

BANKING ACT, 1933

J une 12, 1933.— Committed to the Committee of the Whole House and oudered
to be printed

Mr.

S te a g a ll,

from the committee of conference, submitted the
following

CONFERENCE REPORT
[To accompany H.R. 5661]

The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 5661) to
provide for the safer and more effective use of the assets of banks,
to regulate interbank control, to prevent the undue diversion of
funds into speculative operations, and for other purposes, having
met, after full and free conference, have agreed to recommend and
do recommend to their respective Houses as follows:
That the House recede from its disagreement to the amendment
of the Senate and agree to the same with an amendment as follows:
In lieu of the matter proposed to be inserted by the Senate amend­
ment insert:
That the short title of this Act shall be the “ Banking Act of 1988 ”
Sec . 2. As used in this Act and in any 'provision of law amended by
this Act—
(a) The terms “ banks” , “ national bank” , “ national banking
association” , “ member bank” , “ board” , “ district” , and “ reserve
bank ” shall have the meanings assigned to them in section 1 of the Federal
Reserve Act, as amended.
(b) Except where otherwise specifically provided, the term “ affiliate”
shall include any corporation, business trust, association, or other
similar organization—
(1)
Of which a member bank, directly or indirectly, owns or controls
either a majority of the voting shares or more than 50 per centum of the
number of shares voted for the election of its directors, trustees, or other
persons exercising similar functions at the preceding election, or controls
% any manner the election of a majority of its directors, trustees, or
n
Other persons exercising similar functions; or




2

B N IN A T 1933
A K G C,

(2)0fw h ich control is held, directly or indirectly, through stock owner­
ship or in any other manner, by the shareholders of a member bank who
own or control either a majority of the shares of such bank or more than
50 per centum of the number of shares voted for the election of directors
of such bank at the preceding election, or by trustees for the benefit of the
shareholders of any such bank; or
(8) Of which a majority of its directors, trustees, or other persons
exercising similar functions are directors of any one member bank.
(c)
The term uholding company affiliate” shall include any corpora­
tion, business trust, association, or other similar organization—
(1) Which owns or controls, directly or indirectly, either a majority
of the shares of capital stock of a member bank or more than 50 per centum
of the number of shares voted for the election of directors of any one bank
at the preceding election, or controls in any manner the election of a
majority of the directors of any one bank; or
(2) For the benefit of whose shareholders or members all or substantially
all the capital stock of a member bank is held by trustees.
Sec. S. (a) The fourth paragraph after paragraph “Eighth” of sec­
tion 4 of the Federal Reserve Act, as amended (U .S.U .y title 12, sec, SOI),
is amended to read as follows:
uSaid board of directors shall administer the affairs of said bankfairly
and impartially and without discrimination in favor of or against any
member bank or banks and may, subject to the provisions of law and the
orders of the Federal Reserve Board, extend to each member bank such
discounts, advancements, and accommodations as may be sdfely and
reasonably made with due regard for the claims and demands of other
member banks, the maintenance of sound credit conditions, and the
accommodation of commerce, industry, and agriculture. The Federal
Reserve Board may prescribe regulations further defining within the
limitations of this Act the conditions under which discounts, advance­
ments, and the accommodations may be extended to member banks.
Each Federal reserve bank shall keep itself informed of the general
character and amount of the loans and investments of its member banks
with a view to ascertaining whether undue use is being made of bank
credit for the speculative carrying of or trading in securities, real estate,
or commodities, or for any other purpose inconsistent with the mainte­
nance of sound credit conditions; and, in determining whether to grant or
refuse advances, rediscounts or other credit accommodations, the Federal
reserve bank shall give consideration to such information. The chair­
man of the Federal reserve bank shall report to the Federal Reserve Board
any such undue use of bank credit by any member bank, together with his
recommendation. Whenever, in the judgment of the Federal Reserve
Board, any member bank is making such undue use of bank credit, the
Board may, in its discretion, after reasonable notice and an opportunity
for a hearing, suspend such bank from the use of the credit facilities of
the Federal Reserve System and may terminate such suspension or
may renew it from time to tim e”
(b)
The paragraph of section 4 of the Federal Reserve Act, as amended
(V .S.C ., htle 12, sec. 804), which commences with the words u The
Federal Reserve Board shall classify” is amended by inserting before
the period at the end thereof a colon and the following: uProvided, That
whenever any two or more member banks within the same Federal Reserve
district are affiliated with the same holding company affiliate, partidpatirm by such member banks in any such nomination or election shall be




BANKING ACT, 1 9 3 3

3

confined to one of such banks, which may be designated for the 'purpose
by such holding company affiliate ”
Sec. 4- The first paragraph of section 7 of the Federal Reserve Act,
as amended (U.S.C., title 12, sec. 289), is amended, effective July 1,
1982, to read as follows:
uAfter all necessary expenses of a Federal Reserve bank shall have
been paid or provided fo r, the stockholders shall be entitled to receive
an annual dividend of 6 per centum on the paid-in capital stock, which
dividend shall be cumulative. After the aforesaid dividend claims have
been fully met, the net earnings shall be paid into the surplus fund of
the Federal Reserve bank.”
Sec. 5. (a) The first paragraph of section 9 of the Federal Reserve
Act, as amended ( U.S.C., title 12, sec. 821; Supp. VI, title 12, sec. 821),
is amended by inserting immediately after the words “ United States” a
comma and the following: uincluding Morris Plan banks and other
incorporated banking institutions engaged in similar business.”
(b) The second paragraph of section 9 of the Federal Reserve Act, as
amended, is amended by adding at the end thereof the following: “ Pro­
vided, however, That nothing herein contained shall prevent any State
member bank from establishing and operating branches in the United
States or any dependency or insular possession thereof or in any foreign
country, on the same terms and conditions and subject to the same limi­
tations cmd restrictions as are applicable to the establishment of branches
by national banks.”
(c) Section 9 of the Federal Reserve Act, as amended ( U.S.C.j title 12,
secs. 821-881; Supp. VI, title 12, secs. 821-882), is further amended by
adding at the end thereof the following new paragraphs:
uAny mutual savings bank having no capital stock (including any other
banking institution the capital of which consists of weekly or other time
deposits which are segregated from all other deposits and are regarded as
capital stock for the purposes of taxation and the declaration of dividends),
but having surplus and undivided profits not less than the amount of
capital required for the organization of a national bank in the same place,
may apply for and be admitted to membership in the Federal Reserve
System in the same manner and subject to the same provisions of law as
State banks and trust companies, except that any such savings bank shall
subscribe for capital stock of the Federal Reserve bank in an amount equal
to six-tenths of 1 per centum of its total deposit liabilities as shown by
the most Recent report of examination of such savings bank preceding its
admission to membership. Thereafter such subscription shall be ad­
justed semiannually on the same percentage basis in accordance with rules
and regulations prescribed by the Federal Reserve Board. I f any such
mutual savings bank applying for membership is not permitted by the
laws under which it was organized to purchase stock in a Federal reserve
bank, it shall, upon admission to the system, deposit with the Federal
reserve bank an amount equal to the amount which it would have been
required to pay in on account of a subscription to capital stock. Thereaiter such deposit shall be adjusted semiannually in the same manner as
subscriptions for stock. Such deposit shall be subject to the same con­
ditions with respect to repayment as amounts paid upon subscriptions to
capital stock by other member banks and the Federal reserve bank shall
pay interest thereon at the same rate as dividends are actually paid on
outstanding shares oi stock of such Federal reserve bank. I f the laws
under which any such savings bank was organized be amended so as to
20366 0 — 5S------ 31




4

BANKING ACT, 103 3

authorize mutual savings banks to subscribe for Federal reserve bank
stock, such savings bank shall thereupon subscribe for the appropriate
amount of stock in the Federal reserve bank, and the deposit hereinbefore
provided for in lieu of payment upon capital stock shall be applied upon
such subscription, i f the laws under which any such savings bank was
organized be not amended at the next session of the legislature following
the admission of such savings bank to memberhship so as to authorize
mutual savings banks to purchase Federal reserve bank stock, or if such
laws be so amended and such bank fail within six months thereafter to
purchase such stock, all of its rights and privileges as a member bank shall
be forfeited and its membership in the Federal Reserve System shall be
terminated in the manner prescribed elsewhere in this section with respect
to State member banks and trust companies. Each such mutual savings
bank shall comply with all the provisions of law applicable to State
member banks and trust companies, with the regulations of the Federal
Reserve Board and with the conditions of membership prescribed for such
savings bank at the time of admission to membership, except as otherwise
hereinbefore provided with respect to capital stock.
“ Each bank admitted to membership under this section shall obtain
from each of its affiliates other than member banks and furnish to the
Federal reserve bank of its district and to the Federal Reserve Board not
less than three reports during each year. Such reports shall be in such
form as the Federal Reserve Board may prescribe, shall be verified by the
oath or affirmation of the president or such other oificer as may be desig­
nated by the board of directors of such affilmte to verify such reports, and
shall disclose the information hereinafter provided for as of dates identical
with those fixed by the Federal Reserve Board for reports of the condition
o f the. affiliated member bank. Each such report of an affiliate shall be
transmitted as herein provided at the same time as the corresponding
report of the affiliated member bank, except that the Federal Reserve
Board may, in its discretion, extend such time for good cause shown.
Each such report shall contain such information as in the judgment oi
the Federal Reserve Board shall be necessary to disclose fully the relations
between such affiliate and such bank and to enable the Board to inform
itself as to the effect of such relations upon the afairs of such bank.
The reports of such affiliates shall be published by the bank under the
same conditions as govern its own condition reports.
“ Any such affiliated member bank may be required to obtain from any
such affiliate such additional reports as in the opinion of its Federal
reserve bank or the Federal Reserve Board may be necessary in order to
obtain a full and complete knowledge of the condition of the affiliated
member bank. Such additional reports shall be transmitted to the Federal
reserve bank and the Federal Reserve Board and shall be in such form as
the Federal Reserve Board may prescribe.
“ Any such affiliated member bank which fails to obtain from any of its
affiliates and furnish any report provided for by the two preceding para­
graphs of this section shall oe subject to a penalty of $100 for each day
during which such failure continues, which, by direction of the Federal
Reserve Board, may be collected, by suit or otherwise, by the Federal
reserve bank of the district in which such member bank is located. For
the purposes of this paragraph and the two preceding paragraphs of this
section, the term ‘affiliate* shall include holding company affiliates as
well as other affiliates.




BANKING ACT, 193 3

5

“ State member banks shall be subject to the same limitations and condi­
tions with respect to the purchasing, selling, underwriting, and holding
oj investment securities and stock as are applicable in the case oj national
banks under paragraph ‘ Seventh ’ oj section 51S6 oj the Revised Statutes,
as amended.
‘1
After one year jrom the date of the enactment oj the Banking Act of
1983, no certificate representing the stock oj any State member bank shall
represent the stock oj any other corporation, except a member bank or a
corporation existing on the date this paragraph takes effect engaged solely
in holding the bank premises oj such State member bank, nor shall the
ownership, sale, or transjer oj any certijicate representing the stock oj any
such bank be conditioned in any manner whatsoever upon the ownership,
sale, or transjer oj a certijicate representing the stock oj any other corpo­
ration, except a member bank.
*‘ Each State member bank affiliated with a holding company affiliate
shall obtain jrom such holding company affiliate, within such time as
the Federal Reserve Board shall prescribe, an agreement that such hold­
ing company affiliate shall be subject to the same conditions and
limitations as are applicable under section 5144 oj the Revised Statutes,
as amended, in the case of holding company affiliates oj national
banks. A copy oj each such agreement shall be jued with the Federal
Reserve Board. Upon the failure of a State member bank affiliated
with a holding company affiliate to obtain such an agreement within
the time so prescribed, the Federal Reserve Board shall require such
bank to surrender its stock in the Federal reserve bank and to forfeit
all rights and privileges of membership in the Federal Reserve System
as provided in this section. Whenever the Federal Reserve Board shall
have revoked the voting permit of any such holding company affiliate,
the Federal Reserve Board may, in its discretion, require any or all
State member banks affiliated with such holding company affiliate to
surrender their stock in the Federal reserve bank and to forfeit all rights
and privileges of membership in the Federal Reserve System as provided
in this section.
“ In connection with examinations oj State member banks, examiners
selected or approved by the Federal Reserve Board shall make such
examinations oj the affairs oj all affiliates oj such banks as shall be
necessary to disclose jully the relations between such banks and their
affiliates and the effect oj such relations upon the affairs oj such banks.
The expense oj examination oj affiliates oj any State member bank may,
in the discretion oj the Federal Reserve Board, be assessed against such
bank and, when so assessed, shall be paid by such bank. In the event
oj the rejusal to give any injormation requested in the course oj the ex­
amination oj any such affiliate, or in the event oj the rejusal to permit
such examination, or in the event oj the rejusal to pay any expense so
assessed, the Federal Reserve Board may, in its discretion, require any
or all State member banks affiliated with such affiliate to surrender their
stock in the Federal reserve bank and to jorjeit all rights and privileges
oj membership in the Federal Reserve System, as provided in this section.”
Sec. 6. (a) The second paragraph oj section 10 oj the Federal Reserve
Act, as amended ( U.S.C., title 12, sec. 242), is amended to read as
jollows:
“ The Secretary oj the Treasury and the Comptroller oj the Currency
shall be ineligible during the time they are in office and jor two years
thereajter to hold any office, position, or employment in any member




6

BANKING ACT, 193 3

bank. The appointive members of the Federal Reserve Board shall be
ineligible during the time they are in office and for two years thereafter
to hold any office, position, or employment in any member bank, except
that this restriction shall'not apply to a member who has served the full
term for which he was appointed. Upon the expiration of the term of any
appointive member of the Federal Reserve Board in office when this para­
graph as amended takes effect, the President shall fix the term of the suc­
cessor to such member at not to exceed twelve years, as designated by the
President at the time of nomination, but in such manner as to provide
for the expiration of the term of not more than one appointive member
in any two-year period, and thereafter each appointive member shall
hold oijice for a term of twelve years from the expiration of the term of
his predecessor. Of the six persons thus appointed, one shall be design
nated by the President as governor and one as vice governor of the Federal
Reserve Board. The governor of the Federal Reserve Board, subject to
its supervision, shall be its active executive officer. Each member of
the Federal Reserve Board shall within fifteen days after notice of ap; oint­
ment make and subscribe to the oath of office.1
1
(b)
The fourth paragraph of section 10 of the Federal Reserve Act,
as amended (U.S.C., title 12 sec. 244)) is amended to read as follows:
uThe principal offices of the Board shall be in the District of Columbia.
At meetings of the Board the Secretary of the Treasury shall preside as
chairman, and, in his absence, the governor shall preside. In the
absence of both the Secretary of the Treasury and the governor the vice
governor shall preside. In the absence of the Secretary of the Treasury,
the governor, and the vice governor the Board shall elect a member to act
as chairman pro tempore. The Board shall determine and prescribe the
manner in which its obligations shall be incurred and its disbursements
and expenses allowed and paid, and may leave on deposit in the Federal
Reserve banks the proceeds of assessments levied upon them to defray its
estimated expenses and the salaries of its members and employees, whose
employment, compensation, leave, and expenses shall be governed solely
by the provisions of this A d, specific amendments thereof, and rules and
regulations of the Board not inconsistent therewith; and funds derivedfrom
such assessments shall not be construed to be Government funds or appro­
priated moneys. No member of the Federal Reserve Board shall be
an officer or director of any bank, banking institution, trust company, or
Federal Reserve bank of hold stock in any bank, banking institution, or
trust company; and before entering upon his dutiew as a member of the
Federal Reserve Board he shall certify under oath that he has compiled
with this requirement, and such certification shall be filed with the secre­
tary of the Board. Whenever a vacancy shall occur, other than by expira­
tion of term, among the six members of the Federal Reserve Board ap­
pointed by the President as above provided, a successor shall be appointed
by the President, by and with the advice and consent of the Senate, to fill
such vacancy, and when appointed he shall hold office for the unexpired
term of his predecessor
Sec. 7. Paragraph (m) of section 11 of the Federal Reserve Act, as
amended (U.S.C., title 12, sec. 248), is amended to read as follows:
“ (m) Upon the affirmative vote of not less than six of its members the
Federal Reserve Board shall have power to fix from time to time for each
Federal reserve district the percentage of individual bank capital and
surplus which may be jreyresented by loans secured by stock or bond
collateral made by member banks within such district, but no such loan




BANKING ACT,

1933

7

shall be made by any such bank to any person in an amount in excess of
10 per centum of the unimpaired capital and surplus of such bank.
Any percentage so fixed by the Federal Reserve Board shall be subject to
change from time to time upon ten days’ notice, and it shall be the duly
of the Board to establish such percentages with a view to preventing the
undue use of bank loans for the speculative carrying of securities. The
Federal Reserve Board shall have power to direct any member bank to
refrainfrom further increase of its loans secured by stock or bond collateral
for any period up to one year under penalty of suspension of all redis­
count privileges at Federal reserve banks
Sec. 8. The Federal Reserve Act, as amended, is amended by inserting
between sections 12 and IS (U.S.C., title 12, secs. 261, 262 and 842),
thereof the following new sections:
“ S e c . 12A . (a) There is hereby created a Federal Open Market
Committee (hereinafter referred to as the ‘ committee ), which shaU consist
of as many members as there are Federal reserve districts. Each Federal
reserve bank by its board of directors shall annually select one member of
said committee. The meetings of said committee shall be held at Wash­
ington, District of Columbia, at least four times each year, upon the call
of the governor of the Federal Reserve Board or at the request of any three
members of the committee, and, in the discretion of the Board, may be
attended by the members of the Board.
“ (b) No Federal reserve bank shall engage in open-market operations
under section 14 of this Act except in accordance with regulations adopted
by the Federal Reserve Board. The Board shall consider, adopt, and
transmit to the committee and to the several Federal reserve banks regu­
lations relating to the open-market transactions of such banks and the
relations of the Federal Reserve System with foreign central or other
foreign banks.
“ (c) The time, character, and volume of all purchases and sales of
paper described in section 14 of this Act as eligible for open-market
operations shall be governed with a view to accommodating commerce
and business and with regard to their bearing upon the general credit
situation of the country.
“ (d) I f any Federal reserve bank shall decide not to participate in
open-market operations recommended and approved. as provided in
paragraph (b) hereof, it shall file with the chairman of the committee
within thirty days a notice of its decision, and transmit a copy thereof
to the Federal Reserve Board.
“ Sec. 12B. (a) There is hereby created a Federal Deposit Insur­
ance Corporation (hereinafter referred to as the 6Corporation9 whose
),
duty it shall be to purchase, hold, and liquidate, as hereinafter provided,
the assets of national banks which have been closed by action of the
Comptroller of the Currency, or by vote of their directors, and the assets
of State member banks which have been closed by action of ihe appro­
priate State authorities, or by vote of their directors; and to insure, as
hereinafter provided, the deposits of all banks which are entitled to ihe
benefits of insurance under this section.
“ (b) The management of the Corporation shaU be vested in a board
of directors consisting of three members, one of whom shall be the Comp­
troller of the Currency, and two of whom shall be citizens of the United
Slates to be appointed by the President, by and with the advice and con­
sent, of the Senate. One of the appointive members shall be the chairman
of the board of directors of the Corporation and not more than two of the




8

BANKING ACT, 1 9 3 3

members o f such board of directors shall be members of the same political
party. Each such appointive member shall hold office for a term of six
years and shall receive compensation at the rate of $10,000 per annum,
payable monthly out of the funds of the Corporation, but the Comptroller
of the Currency shall not receive additional compensation for his services
as such member.
(c)
There is hereby authorized to be appropriated, out of any money in
the Treasury not otherwise appropriated, the sum of $150,000,000, which
shall be availablefor payment by the Secretary of the Treasury for capital
stock of the Corporation in an equal amount, which shall be subscribedfor
by him on behalf of the United States. Payments upon such subscription
shall be subject to call in whole or in part by the board of directors of the
Corporation. Such stock shall be in addition to the amount of capital
stock required to be subscribed for by Federal reserve banks ana member
and nonmember banks as hereinafter provided, and the United States shall
be entitled to the payment of dividends on such stock to the same extent as
member and nonmember banks are entitled to such payment on the class
A stock of the Corporation held by them. Receipts for payments by the
United States for or on account of such stock shall be issued by the Cor­
poration to the Secretary of the Treasury and shall be evidence of the stock
ownership of the United States.
“ (d) The capital stock of the Corporation shall be divided into shares
of $100 each. Certificates of stock of the Corporation shall be of two
classes— class A ana class B. Class A stock shall be held by member
and nonmember banks as hereinafter provided and they shall be entitled
to payment of dividends out of net earnings at the rate of 6 per centum
per annum on the capital stock paid in by them, which dividends shall
be cumulative, or to the extent of SO per centum of such net earnings in
any one year, whichever amount shall be the greater, but such stock shall
have no vote at meetings of stockholders. Class B stock shall be held by
Federal reserve banks only and shall not be entitled to the payment of
dividends. Every Federal reserve bank shall subscribe to shares of class
B stock in the Corporation to an amount equal to one half of the surplus
of such bank on January 1, 19SS, and its subscriptions shall be accom­
panied by a certified check payable to the Corporation in an amount equal
to one half of such subscription. The remainder of such subscription
shall be subject to call from time to time by the board of directors upon
ninety days1 notice.
“ (e) Every bank which is or which becomes a%
member of the Federal
Reserve System on or before July 1 , 1934, shall take all steps necessary
to enable it to become a class A stockholder o / the Corporation on or before
July 1, 1984; and thereafter no State bank or trust company or mutual
savings bank shall be admitted to membership in the Federal Reserve
System until it becomes a class A stockholder of the Corporation, no
national bank in the continental United States shall be granted a certifi­
cate by the Comptroller of the Currency authorizing it to commence the
business of banking until it becomes a member of the Federal Reserve
System and a class A stockholder of the Corporation, and no national
bank in the continental United States for which a receiver or conservator
has been appointed shall be permitted to resume the transaction of its
banking business until it becomes a class A stockholder of the Corpo­
ration. Every member bank shall apply to the Corporation for doss A
stock of the Corporation in an amount equal to one half of 1 per centum
of its total deposit liabilities as computed in accordance with regulations




BANKING ACT, 1 933

9

prescribed by the Federal Reserve Board; except that in the case of a
member bank organized after the date this section takes effect, the amount
of such class A stock applied for by such member bank during the first
twelve months after its organization shall equal 5 per centum of its paid-up
capital and surplus, and beginning after the expiration of such twelve
months1 period the amount of such class A stock of such member bank
shall be adjusted annually in the same manner as in the case of other
member banks. Upon receipt of such application the Corporation shall
request the Federal Reserve Board, in the case of a State member bank, or
the Comptroller of the Currency, in the case of a national bank, to certify
upon the basis of a thorough examination of such bank whether or not the
assets of the applying bank are adequate to enable it to meet all of its
liabilities to depositors and other creditors as shown by the books of the
bank; and the Federal Reserve Board or the Comptroller of the Currency
shall make such certification as soon as practicable. I f such certification
be in the affirmative, the Corporation shall grant such application and the
applying bank shall pay one half of its subscription in full and shall
thereupon become a class A stockholder of the Corporation: Provided,
That no member bank shall be required to make such payment or become
a class A stockholdert of the Corporation before July 1 , 1984. The
remainder of such subscription shall be subject to call from time to time
by the board of directors of the Corporation. I f such certification be in
the negative, the Corporation shall deny such application. I f any
national bank shall not have become a class A stockholder of the Corpora­
tion on or before July 1, 1984, the Comptroller of thk (Jurrency shatt
appoint a receiver or conservator therefor in accordance with the provisions
of existing law. Except as provided in subsection (g) of this section, if
any State member bank shall not have become a class A stockholder of the
Corporation on or before July 1, 1984, the Federal Reserve Board shall
terminate its membership in the Federal Reserve System in accordance
with the provisions of section 9 of this Act.
“ (f) Any State bank or trust company or mutual savings bank which
applies for membership in the Federal Reserve System or for conversion
into a national banking association on or after July 1, 1986, may, with
the consent of the .Corporation, obtain the benefits of this section, pend­
ing action on such application, by subscribing and paying for the same
amount of stock of the Corporation as it would be required to subscribe
and pay for upon becoming a member bank. .Thereupon the provisions
of this section applicable to member banks shall be applicable to such
State bank or trust company or mutual savings bank to the same extent
as if it were already a member bank: Provided, That if the application
of such State bank or trust company or mutual savings oank for member­
ship in the Federal Reserve System or for conversion into a national
banking association be approved and it shall not complete its member­
ship in the Federal Reserve System or its conversion into a national
banking association within a reasonable time, or if such application
shall be disapproved, then the amount paid by such State bank or trust
company or mutual savings bank on account of its subscription to the
capital stock of the Corporation shall be repaid to it and it shall no longer
be subject to the provisions or entitled to the privileges of this section.
“ (g) I f any State bank or trust company or mutual savings bank
(referred to in this subsection as 1State bank’) which is or which be­
comes a member of the Federal Reserve System is not permitted by the
laws under which it was organized to purchase stock in the Corporation,




10

BANKING ACT, 1 9 3 3

it shall apply to the Corporation for admission to the benefits of this
section ana, if such application be granted after appropriate certifica­
tion in accordance with this section, it shall deposit with the Corporation
an amount equal to the amount which it would have been required to
pay in on account of a subscription to capital stock of the Corporation.
Thereafter such deposit shall be adjusted in the same manner as sub­
scriptions for stock by class A stockholders. Such deposit shall be sub­
ject to the same conditions with respect to repayment as amounts paid
on subscriptions to class A stock by other member banks and the Cor­
poration shall pay interest thereon at the same rate as dividends are
actually paid on outstanding shares of class A stock. As long as such
deposit is maintained with the Corporation, such State bank shall, for
the purposes of this section, be deemed to be a class A stockholder of the
Corporation. I f the laws under which such State bank was organized
be amended so as to authorize State banks to subscribe for class A stock
of the Corporation, such State bank shall within six months thereafter
subscribe for an appropriate amount of such class A stock and the deposit
hereinafter provided for in lieu of payment upon class A stock shall be
applied upon such subscription. I f the law under which such State
bank was organized be not amended at the next session of the State
legislature following the admission of such State bank to the benefits oj
this section so as•to authorize State banks to purchase such class A
stock, or, if the law be so amended and such State bank shall fail within
six months thereafter to purchase such class A stock, the deposit pre­
viously made with the Corporation shall be returned to such State bank
and it shall no longer be entitled to the benefits of this section, unless it
shall have been closed in the meantime on account of inability to meet the
demands of its depositors.
“ ( h) The amount of the outstanding class A stock of the Corporation
held by member banks shall be annually adjusted as hereinafter provided
as of the last preceding call date as member banks increase their time
and demand deposits or as additional banks become members or subscribe
to the stock of the Corporation, and such stock may be decreased in amount
as member banks reduce their time and demand deposits or cease to be
members. Shares of the capital slock of the Corporation owned by member
banks shall not be transferred or hypothecated. When a member bank
increases its time and demand deposits it shall, at the beginning of each
calendar year, subscribe for an additional amount of capital stock of the
Corporation equal to one half of 1 per centum of such increase in deposits.
One half of the amount of such additional stock shall be paid for at the
time of the subscription therefor, and the balance shall be subject to call
by the board of directors of the Corporation. A bank organized on or
before the date this section takes effect and admitted to membership in the
Federal Reserve System at any time after the organization of the Corpora­
tion shall be required to subscribe for an amount of class A capital stock
equal to one half of 1 per centum of the time and demand deposits of the
applicant bank as of the date of such admission, paying therefor its par
value plus one half of 1 per centum a month from the period of the last
dividend on the class A stock of the Corporation. When a member bank
reduces Us time and demand deposits it shall surrender, not later than the 1st
day of January thereafter, a proportionate amount of its holdings in the cap­
ital stock of the Corporation, and when a member bank voluntarily liqui­
dates it shall surrender all its holdings of the capital stock of the Corpora­
tion and be releasedfrom its stock subscription not previously called. The




BANKING AOT, 1 933

11

shares so surrendered shall be canceled and the member bank shall receive
in 'payment therefor, under regulations to be prescribed by the Corporation,
a sum equal to its cash-paid subscriptions on the shares surrendered
and its proportionate share of dividends not to exceed one half of 1 per
centum a month, from the period of the Iasi dividend on such stock, less
any liability of such member bank to the Corporation.
(i)
I f any member or nonmember bank shall be declared insolvent, or
shall cease to be a member bank (or in the case of a nonmember bank,
shall cease to be entitled to the benefits of insurance under this section),
the stock held by it in the Corporation shall be canceled, without impair­
ment of the liability of such bank, and all cash-paid subscriptions on such
stock, with its proportionate share of dividends not to exceed, one half of 1
er centum per month from the period of last dividend on such stock shall
e first applied to all debts of the insolvent bank or the receiver thereof to
the Corporation, and the balance, if any, shall be paid to the receiver of
the insolvent bank.
“ (j) Upon the date of enactment of the Banking Act of 1983, the Cor­
poration shall become a body corporate and as such shall have power—
“ First. To adopt and use a corporate seal.
“ Second. To have succession until dissolved by an Act of Congress.
“ Third. To make contracts.
“ Fourth. To sue and be sued, complain and defend, in any court of
law or equity, State or Federal.
“ Fifth. To appoint by its board of directors such officers and employees
as are not otherwise provided for in this section, to define their duties,
Ox their compensation, require bonds of them and fix the penalty thereof,
and to dismiss at pleasure such officers or employees. Nothing in this or
any other Act shall be construed to prevent the appointment and com­
pensation as an officer or employee of the Corporation of any officer or
employee of the United States in any board, commission, independent
establishment, or executive department thereof.
“ Sixth. To prescribe by its board of directors, bylaws not inconsistent
with law, regulating the manner in which its general business may be
conducted, and the privileges granted to it by law may be exercised and
enjoyed.
“ Seventh. To exercise by its board of directors, or duly authorized
officers or agents, all powers specifically granted by the provisions of this
section and such incidental powers as shall be necessary to carry out the
powers so granted.
“ (k) The board of directors shall administer the affairs of the Corpora­
tion fairly and impartially and without discrimination. The board of
directors of the Corporation shall determine and prescribe the manner in
which its obligations shall be incurred and its expenses allowed and paid.
The Corporation shall be entitled to the free use of the United States
mails in the same manner as the executive departments of the Government.
The Corporation with the consent of any Federal reserve bank or of any
board, commission, independent establishment, or executive department
of the Government, including any field service thereof, may avail itself
of the use of information, services, and facilities thereof in carrying out
the provisions of this section.
“ (I) Effective on and after July 1, 1884 (thus affording ample time
fo r examination and preparation), unless the President shall by proc­
lamation fix an earlier date, the Corporation shall insure as hereinafter
provided the deposits of all member banks, and on and after such date

?




12

BANKING ACT, 193 3

and until July 1, 1986, of all nonmember banks, which are class A
stockholders of the Corporation. Notwithstanding any other 'provision
of law, whenever any national bank which is a class A stockholder of the
Corporation shall have been closed by action of its board of directors or
by the Comptroller of the Currency, as the case may be, on account of
inability to meet the demands of its depositors, the Comptroller of the
Currency shall appoint the Corporation receiver for such bank. As soon
as possible thereafter the Corporation shall organize a new national
bank to assume the insured deposit liabilities of such closed bank, to
receive new deposits and otherwise to perform temporarily the functions
provided for it in this paragraph. For the purposes of this subsection,
the term 1
insured deposit liability1 shall mean with respect to the owner
of any claim arising out of a deposit liability of such closed bank the
following percentages of the net amount due to such owner by such closed
bank on account of deposit liabilities: 100 per cerium of such net amount
not exceeding $10,000; and 75 per centum of the amount, if any, by
which such net amount exceeds $10,000 but does not exceed $50,000;
and 50 per centum of the amount, if any, by which such net amount
exceeds $50,000: Provided, That, in determining the amount due to
such owner for the purpose of fixing such percentage, there shall be
added together all net amounts due to such owner in the same capacity
or the same right, on account of deposits, regardless of whether such
deposits be maintained in his name or in the names of others for his
benefit. For the purposes of this subsection, the term ‘ insured deposit
liabilities1 shall mean the aggregate amount of all such insured deposit
liabilities of such closed bank. The Corporation shall determine as
expeditiously as possible the net amounts due to depositors of the closed
bank and shall make available to the new bank an amount equal to the
insured deposit liabilities of such closed bank, whereupon such new
bank shall assume the insured deposit liability of such closed bank to
each of its depositors, and the Corporation shall be subrogated to all
rights against the closed bank of the owners of such deposits and shall be
entitled to receive the same dividends from the proceeds of the assets oi
such closed bank as would have been payable to each such depositor
until such dividends shall equal the insured deposit liability to such
depositor assumed by the new bank, whereupon all further dividends
shall be payable to such depositor. Of the amount thus made available
by the Corporation to the new bank, such portion shall be paid to it in
cash as may be necessary to enable it to meet immediate cash demands
and the remainder shall be credited to it on the books of the Corporation
subject to withdrawal on demand and shall bear interest at the rate of 8
per centum per annum until withdrawn. The new bank may, with the
approval of the Corporation, accept new deposits, which, together with
all amounts made available to the new bank by the Corporation, shall be
kept on hand in cash, invested in direct obligations of the United States>
or deposited with the Corporation or with a Federal Reserve bank. Such
new bank shall maintain on deposit with the Federal Reserve bank of
its district the reserves required by law of member banks but shall not
be required to subscribe for stock of the Federal Reserve bank until its
own capital stock has been subscribed and paid for in the manner herein­
after provided. The articles of association and organization certificate
of such new bank may be executed by such representatives of the Corpora­
tion as it may designate; the new bank shall not be required to have any
directors at the time of its organization, but shall be managed by an




BANKING ACT, 1 9 3 3

13

executive officer to be designated by the Corporation; and no capital stock
need be paid in by the Corporation; but in other respects such bank shaU
be organized in accordance with the existing provisions of law relating
to the organization oj national banks; and, until the requisite amount 07
capital stockjor such bank has been subscribed and paidjor in the manner
hereinafter provided, such bank shall transact no business except that
authorized by this subsection and such business as may be incidental to
its organization. When in the judgment oj the Corporation it is desir­
able to do so, the Corporation shall offer capital stock oj the new bank
jor sale on such terms and conditions as the Corporation shaU deem
advisable, in an amount sufficient in the opinion oj the Corporation to
make possible the conduct oj the business oj the new bank on a sound
basis, out in no event less than that required by section 51S8 oj the Revised
Statutes, as amended (U.S.C., title 12, sec. SI), jor the organization oj
a national bank in the place where such new bank is located, giving the
stockholders oj the closed bank the jirst opportunity to purchase such
stock. Upon prooj that an adequate amount of capital stock oj the new
bank has been subscribed and paid for in cash oy subscribers satisjactory
to the Comptroller oj the Currency, ns shall issue to such bank a certificate
of authority to commence business and thereajter it shall be managed by
directors elected by its own shareholders and may exercise all oj the
powers granted by law to national banking associations. I j an adequate
amount oj capital jor such new bank is not subscribed and paid in, the
Corporation may offer to transfer its business to any other banking
institution in the same place which will take over its assets, assume its
liabilities, and f ay to the Corporation for such business such amount
as the Corporation may deem adequate. Unless the capital stock oj the
new bank is sold or its assets acquired and its liabilities assumed by
another banking institution, in the manner herein prescribed, within
two years jrom the date oj its organization, the Corporation shall place
the new bank in voluntary liquidation and wind up its affairs. The
Corporation shall open on its books a deposit insurance account and, as
soon as possible ajter taking possession oj any closed national bank, (he
Corporation shall make an estimate oj the amount which will be available
jrom all sources jor application in satisjaction oj the portion of the
claims oj depositors to which it has been subrogated ana shall debit to
such deposit insurance account the excess, ij any, oj the amount made
available by the Corporation to ihe new bank for depositors over and
above the amount oj such estimate. It shaU be the duty oj the Corporation
to realize upon the assets oj such closed bank, having due regard to the
condition oj credit in the district in which such closed bank is located;
to enforce the individual liability oj the stockholders and directors thereof;
and to wind up the affairs oj such closed bank in conjormity with the
provisions oj law relating to the liquidation oj closed national banks,
except as herein otherwise provided, retaining jor its own account such
portion oj the amount realizedjrom such liquidation as it shaU be entitled
to receive on account oj its subrogation to the claims oj depositors and
paying to depositors and other creditors the amount available for distri­
bution to them, ajter deducting therejrom their share oj the costs oj the
liquidation oj the closed bank. I j the total amount realized by the
Corporation on account oj its subrogation to the claims oj depositors be
less than the amount oj the estimate hereinabove provided jor, the deposit
insurance account shall be charged with the deficiency and, ij the total
amount so realized shall exceed the amount oj such estimate, such account




14

BANKING ACT, 193 3

shall be credited with such excess. With respect to such closed national
banks, the Corporation shall have all the rightsKpowers, and privileges
now possessed by or hereafter given receivers of insolvent national banks
and shall be subject to the obligations and penalties not inconsistent with
the provisions of this paragraph to which such receivers are now or may
hereafter become subject.
“ Whenever any State member bank which is a class A stockholder of
the Corporation shill have been closed by action of its board of directors
or by the appropriate State authority, as the case may be, on account of
inability to meet the demands of its depositors, the Corporation shall
accept appointment as receiver thereof, ij such appointment be tendered
by the appropriate State authority and be authorized or permitted by
IState law. Thereupon, the Corporation shall organize a new national
bank, in accordance with the provisions of this subsection, to assume the
insured deposit liabilities of such closed State member bank, to receive
new deposits and otherwise to perform temporarily the functions pro­
vided for in this subsection. 'U'pon satisfactory recognition of the right
of the Corporation to receive dividends on the same basis as in the case
of a closed national bank under this subsection, such recognition being
accorded by State law, by allowance of claims by the appropriate State
authority, by assignment of claims by depositors, or by any other effective
method, the Corporation shall make avauable to such new national bank,
in the manner prescribed by this subsection, an amount equal to the
insured deposit liabilities of such closed State member bank; and the
Corporation and such new national bank shall perform all of the func­
tions and duties and shall have all the rights and privileges with respect
to such State member bank and the depositors thereof which are pre­
scribed by this subsection with respect to closed national banks holding
doss A stock in the Corporation: Provided, That the rights of depositors
and other creditors of such State member bank shall be determined in
accordance with the applicable provisions of State law: And provided
further, That, with respect to. such. State member bank, the Corporation
shall possess the powers arid pHMegesprovided by State law with respect
to a receiver of such State member bank, except insofar as the same
are in conflict with the provisions of this subsection.
“ Whenever any State member bank which is a doss A stockholder of
the Corporation shall have been closed by action of its board of directors
or by the appropriate State authority, as the case may be, on account
of inability to meet the demands of its depositors, and tne applicable
State law does not permit the appointment of the Corporation as receiver
of such bank, the Corporation shall organize a new national bank, in
accordance with the provisions of this subsection, to assume the insured
deposit liabilities of such closed. State member bank, to receive new
deposits, and otherwise to perform temporarily the functions provided
for in this subsection. Uj)on satisfactory recognition of the right of the
Corporation to receive dividends on the same basis as in the case of a
closed national bank under this subsection, such recognition being
accorded by State law, by allowance of claims by the appropriate State
authority, by assignment of claims by depositors, or by any other effec­
tive method, the Corporation shall make available to such new bank, in
accordance with the provisions of this subsection, the amount of insured
deposit liabilities as to which such recognition has been accorded; and
such new bank shall assume such insured deposit liabilities and shall
in other respects comply with the provisions of this subsection respect-




BANKING ACT, 1 9 3 3

15

ing new banks organized to assume insured deposit liabilities of closed
national banks. Insofar as possible in view of the applicable provisions
of State laW the Corporation shall proceed with respect to the receiver
y
of such closed bank and with respect to the new bank organized to assume
its insured deposit liabilities in the manner prescribed by this subsec­
tion with respect to closed national banks and new banks organized to
assume their insured deposit liabilities; except that the Corporation shall
have none of the powers, duties, or responsibilities of a receiver with
respect to the winding up of the affairs of such closed State member
Bank. The Corporation, in its discretion, however, may purchase and
liquidate any or all of the assets of such bank.
“ Whenever the net debit balance of the deposit insurance account of the
Corporation shall equal or exceed one fourth of 1 per centum of the total
deposit liabilities of all class A stockholders as of the date of the Inst pre­
ceding call report, the Corporation shall levy upon such stockholders an
assessment equal to one fourth of 1 per centum of their total deposit
liabilities and shall credit the amount collected from such assessment to
such deposit insurance account. No bank which is a holder of class A
stock shall pay any dividends until all assessments levied upon it by the
Corporation shall have been paid in full; and any director or officer of
any such bank who participates in the declaration or payment of any such
dividend may, upon conviction, be fined not more than $1,000, or impris­
oned for not more than one year, or both.
u The term ‘ receiver’ as used An this section shall mean a receiver,
liquidating agent, or conservator of a national bank, and a receiver,
liquidating agent, conservator, commission, person, or other agency
charged by State law with the responsibility and the duty of winding up
the affairs of an insolvent State member bank.
“ For the purposes of this section only, the term ‘ national bank1 shall
include all national banking associations and all banks, banking associa­
tions, trust companies, savings banks, and other banking institutions
located in the District of Columbia which are members of the Federal
Reserve System; and the term ‘ State member bank1 shall include all
State banks, banking associations, trust companies, savings banks, and
other banking institutions organized under the laws of any State, which
are members of the Federal Reserve System.
“ In any determination of the insured deposit liabilities of any closed
bank or of the total deposit liabilities of any bank which is a holder of
class A stock of the Corporation, for the purposes of this section, there
shall be excluded the amounts of ail deposits of such bank which are pay­
able only at an office thereof located in a foreign country.
“ The Corporation may make such rules, regulations, and contracts as
it may deem necessary in order to carry out the provisions of this section.
“ Money of the Corporation not otherwise employed shall be invested
in securities of the Government of the United States, except that for
temporary periods, in the discretion of the board of directors, funds of
the Corporation may be deposited in any Federal reserve bank or with
the Treasurer of the United States. When designated for that purpose
by the Secretary of the Treasury, the Corporation shall be a depositary
of public moneys, except receipts from customs, under such regulations
as may be prescribed by the said Secretary, and may also be employed
as a financial agent of the Government. It shall perform all such
reasonable duties as depositary of public moneys and financial agent of
the Government as may be required of it.




16

BANKING ACT, 1933

“ (m) Nothing herein contained shall be construed to prevent the
Corporation jrom making loans to national banks closed by action oj
the Comptroller oj the Currency, or by vote oj their directors, or to State
member banks closed by action oj the appropriate State authorities, or
by vote oj their directors, or jrom entering into negotiations to secure the
reopeningoj such banks.
“ (n) Receivers or liquidators oj member banks which are now or may
hereajter become insolvent or suspended shall be entitled to offer the assets
of such banks jor sale to the Corporation or as security jor loans jrom the
Corporation, upon receiving permission jrom the appropriate State
authority in accordance with express provisions oj State law in the case
oj State member banks, or jrom the Comptroller oj the Currency in the
case oj national banks. The proceeds o* every such sale or loan shall be
utilized jor the same purposes and in the same manner as other junds
realizedjrom the liquidation oj the assets oj such banks. The Comptroller
oj the Currency may, in his discretion, pay dividends on proved claims
at any time ajter the expiration oj the period oj advertisement made pur­
suant to section 5285 oj the Revised Statutes ( U.S.C. ♦ title 12, sec. 198),
and no liability shall attach to the Comptroller oj the Currency or to the
receiver oj any national bank by reason oj any such payment jor jailure
to pay dividends to a claimant whose claim is not proved at the time oj
any such payment.
“ (o) The Corporation is authorized and empowered to issue and to
have outstanding at any one time in an amount aggregating not more
than three times the amount oj its capital, its notes, debentures, bonds, or
other such obligations, to be redeemable at the option oj the Corporation
bejore maturity in such manner as may be stipulated in such obligations,
and to bear such rate or rates oj interest, ana to mature at such time or
times as may be determined by the Corporation: Provided, That the Corpo­
ration may sell on a discount basis short-term obligations payable at
maturitywithovt irtterest. The notes, debentures, bonds, and other such
obligations oj the .Corporation may be secured by assets of the Corporation
in such manner as shall be prescribed by its board o f directors, Such
obligations may be offered jor sale at such price or prices as the Corpo­
ration may determine.
“ (p) All notes, debentures, bonds, or other such obligations issued by
the Corporation shall be exempt, both as to principal and interest, jrom
alltaxation (except estate and inheritance taxes) now or hereajter impose4
by the United States, by any Territory, dependency, or possession thereof,
or by any State, county, municipality, or local taxing authority. The
Corporation, including its jranchise, its capitalf reserves, and surplus,
ana its income, shall be exempt jrom all taxation now or hereajter im­
posed t>y the United States, by any Territory, dependency, or possession
thereoj, or b y any State, county, municipality, or local taxing authority,
except that any real property oj the Corporation shall be subject to State,
Territorial, county, municipal or local taxation to the same extent accord­
ing to its value as other real, property is taxed.
“ (q) In order that the Corporation may be supplied with such jorms
oj notesy debentures, bonds, or other such obligations as it may need jor
issuance und^er this AcU the Secretary of the Treasury is authorized to pre­
pare suchjorrmasshaube suitable and approved by the Corporation to be
Aeld in the Treasury subject to delivery, upon order oj the Corporation,
The engraved plates, dies, bed pieces, and other material executed in con*
neciion therewith shall remain in the custody oj the Secretary oj the




BANKING ACT,

1933

17

Treasury. The Corporation shall reimburse the Secretary of the Treas­
ury jor any expenses incurred in the preparation, custody, and delivery
oj such notes, debentures, bonds, or other such obligations.
“ (r) The Corporation shall annually make a report oj its operations
to the Congress as soon as practicable after the 1st day of January in
each year.
“ (s) Whoever, jor the purpose oj obtaining any loan jrom the Corporation, or any extension or renewal thereoj, or the acceptance, release,
or substitution oj security therefor, or jor the purpose oj inducing the
Corporation to purchase any assets, or jor the purpose oj injluencing
in any way the action oj the Corporation under this section, makes any
statement, knowing it to be jalse, or willjully overvalues any security,
shall be punished by a fine of not more than $5,000, or by imprisonment
for not more than two years, or both.
“ (t) Whoever (1) falsely makes, forges, or counterfeits any obligation
or coupon, in imitation of or purporting to be an obligation or coupon
issued by the Corporation, or (2) passes, utters, or publishes, or attempts
to pass, utter, or publish, any false, forged, or counterfeited obligation
or coupon purporting to have been issued by the Corporation, knowing
the same to be false, forged, or counterfeited, or (3) falsely alters any
obligation or coupon issued or purporting to have been issued by the
Corporation, or (4) passes, utters, or publishes, or attempts to pass,
utter, or publish, as true, any falsely altered or spurious obligation
or coupon, issued or purporting to have been issued, by the Corporation,
knowing the same to be falsely altered or spurious, shall be punished by a
fine of not more than $10,000, or by imprisonment for not more than
five years, or both.
“ (u) Whoever, being connected in any capacity with the Corporation,
(1) embezzles, abstracts, purloins, or willfully misapplies any moneys,
funds, securities, or other things of value, whether belonging to it or
pledged, or otherwise intrusted to it, or (2) with intent to defraud the
Corporation or any other body, politic or corporate, or any individual,
or to deceive any officer, auditor, or examiner oj the Corporation, make%
any jalse entry in any book, report, or statement oj or to the Corporation,
or without being duly authorized draws any order or issues, puts forth,
or assigns any note; debenture, bond, or other such obligation, or draft,
bill oj exchange, mortgage, judgment, or decree thereof, shall be punished
by a fine of not more than $10,000, or by imprisonment for not more than
five years, or both.
“ (v) No individual, association, partnership, or corporation shall use
the words iFederal Deposit Insurance Corporation^, or a combination
or any three of these four words, as the name or a part thereof under
which he or it shall do business. No individual, association, partner­
ship, or corporation shall advertise or otherwise represent falsely by
any device whatsoever that his or its deposit liabilities are insured or in
anywise guaranteed by the Federal Deposit Insurance Corporation, or
by the Government of the United States, or by any instrumentality thereof;
and no class A stockholder of the Federal Deposit Insurance Corporation
shall advertise or otherwise represent falsely by any device whatsoever
the extent to which or the manner in which its deposit liabilities are insured
by the Federal Deposit Insurance Corporation. Every individual,
partnership, association, or corporation violating this subsection shall
be punished by a fine of not exceeding $1,000, or by imprisonment not
exceeding one year, or both.




18

BANKING ACT, 19 3 3

“ (w) The 'provisions of sections 112, 118, 114, 115,
and 117 of
the Criminal Code of the United States ( U.S.C.,
18, eft. 5, secs.
202 to 207, inclusive), in so far as applicable, are extended to apply to
contracts or agreements with the Corporation under this section, which
for the purposes hereof shall be held to include loans, advances, ^ten­
sions, and renewals thereof, and acceptances, releases, and substitutions
of security therefor, purchases or sales of assets, and all contracts and
agreements pertaining to the same.
“ (x) The Secret Service Division of the Treasury Department is
authorized to detect, arrest, and deliver into the custody of the United
States marshal having jurisdiction any person committing any of the
offenses punishable under this section.
“ (y) The Corporation shall open on its books a Temporary Federal
Deposit Insurance Fund {hereafter referred to as the ‘ Fund1 which
),
shall become operative on January 1, 1984, unless the President shall
by proclamation fix an earlier date, and it shall be the duty of the Corpo­
ration to insure deposits as hereinafter provided until July 1,1984.
uEach member bank licensed before January 1, 1984, by the Secretary
of the Treasury pursuant to the authority vested in him by the Executive
order of the President issued March 10, 1988, shall, on or before Janu­
ary 1,1984, become a member of the Fund; each member bank so licensed
after such date, and each State bank trust company or mutual savings
bank (;referred to in this subsection as *State bank1 which becomes a
)
member of the Federal Reserve System on or after such date, shall, upon
being so licensed or §o admitted to membership, become a member of the
Fund; and any State bank which is not a member of the Federal Reserve
System, with the approval of the State authority having supervision of
such State bank and certification to the Corporation by such authority
that such State bank is in solvent condition, shall, after examination by,
mid with the approval of, the Corporation, be entitled to become a mem­
ber of the Fund and to the privileges of this subsection upon agreeing to
comply with the requirements thereof and upon paying to the Corpora­
tion an amount equal to the amount that would be required of it under
this subsection if it were a member bank. The Corporation is author­
,
ized to prescribe rules and regulations for the further examination of
such State bank, and to fix the compensation of examiners employed to
make examinations of State banks.
“ Each member of the Fund shall file with the Corporation on or before
the date of its admission a certified statement under oath showing, as of
the fifteenth day of the month preceding the month in which it was so
admitted, the number of its depositors and the total amount of its deposits
which are eligible for insurance under this subsection, and shall pay to
the Corporation an amount equal to one-half of 1 per centum of the total
amount of the deposits so certified. One-half of such payment shall be
paid in full at the time of the admission of such member to the Fund,
and the remainder of such payment shall be subject to call from time to
time by the board of directors of the Corporation. Within a reasonable
time fixed by the Corporation each such member, shall file a similar state­
ment showing, as of June 15, 1984, the number of its depositors and the
total amount of its deposits which are eligible for such insurance and shall
pay to the Corporation in the same manner an amount equal to one-half
of 1 per centum of the increase, if any, in the total amount of such de­
posits since the date covered by the statement filed upon its admission to
membership in the Fund,.




BANKING ACT, 193 3

19

“ I f at any time prior to July 1, 1934, the Corporation requires addi­
tional funds with which to meet its obligations under this subsection, each
member of the Fund shall be subject to one additional assessment only in
an amount not exceeding the total amount theretofore paid to the Corpora­
tion by such member.
“ I f any member of the Fund shall be closed on or before June 30,
1934, on account of inability to meet its deposit liabilities, the Corpora­
tion shall proceed in accordance with the provisions of subsection (I) of
this section to pay the insured deposit liabilities of such member; except
that the Corporation shall pay not more than $2,500 on account of the
net approved claim of the owner of any deposit. The provisions of such
subsection (I) relating to State member banks shall be extended for the
purposes of this subsection to members of the Fund which are not members
of the Federal Reserve System; and the provisions of this subsection shall
apply only to deposits of members of the Fund which have been made
available since March 10, 1933 for withdrawal in the usual course of the
banking business.
“ Before July 1, 1934> the Corporation shall make an estimate of the
balance, if any, which will remain in the Fund after providing for all
liabilities of the Fund, including expenses of operation thereof under
this subsection and allowing for anticipated recoveries. The Corporation
shall refund such estimated balance, on such basis as the Corpora­
tion shall find to be equitable, to the members of the Fund other than
those which have been closed prior to July 1, 1934.
“ Each State bank which is a member of the Fund, in order to obtain
the benefits of this section after July 1, 1934, shall, on or before such date,
subscribe and pay for the same amount of class A stock of the Corporation
as it would be required to subscribe and pay for upon becoming a member
bank, or if such State bank is not permitted by the laws under which it
ums organized to purchase such stock, it shall deposit with the Corpora­
tion an amount equal to the amount it would have been required to pay in
on account of a subscription to such stock; and thereafter such State bank
shall be entitled to such benefits until July 1, 1936.
“ It is not the purpose of this section to discriminate, in any mannerf
against State nonmember, and in favor of, national or member banks;
but the purpose is to provide all banks with the same opportunity to
obtain and enjoy the benefits of this title. No bank shall be discriminated
against because its capital stock is less than the amount required for
eligibility for admission into the Federal Reserve System
Sec. 9. The eighth paragraph o~ section 13 of the Federal Reserve
f
Act, as amended (U.S.C., title 12, sec. 347; Supp. VI, title 12, sec.
347), is amended to read as follows :
“ Any Federal reserve bank may make advances for periods not exceed­
ing fifteen days to its member banks on their promissory notes secured
by the deposit or pledge of bonds, notes, certificates of indebtedness, or
Treasury bills of the United States, or by the deposit or pledge of de­
bentures or other such obligations of Federal intermediate credit banks
which are eligible for purchase by Federal reserve banks under section
13 (a) of this Act; and any Federal reserve bank may make advances
for periods not exceeding ninety days to its member banks on their
promissory notes secured by such notes, drafts, bills of exchange, or
bankers’ acceptances as are eligible for rediscount or for purchase by
Federal reserve banks under the provisions of this Act. AU such ad­
vances shall be made at rates to be established by such Federal reserve
2086C) O— 58------ 82




20

BANKING ACT, 193 3

hanks, suck rates to be subject to the review and determination oj the
Federal Reserve Board. I f any member bank to which any such
advance, has been made shall, during the life or continuance of such
advance, and despite an official warning of the reserve bank of the
district or of the Federal Reserve Board to the contrary, increase its
outstanding loans secured by collateral in the form of stocks, bonds,
debentures, or other such obligations, or loans made to members of
any organized stock exchange, investment house, or dealer in securi­
ties, upon any obligation, note, or billy secured or unsecured, for the
purpose of purchasing andjor carrying stocks, bonds, or other investment securities (except obligations of the United States) such advance
shall be deemed immediately due and payable, and such member bank
shall be ineligible as a borrower at the reserve bank of the district under
the provisions of this paragraph for such period as the Federal Reserve
Board shall determine: Provided, That no temporary carrying or clear­
ance loans made solely for the purpose of facilitating the purchase or
delivery of securities offered for public subscription shall be included in
the loans referred to in this paragraph ”
Sec. 10. Section 1 of the Federal Reserve Act, as amended (U. S. C.y
4
title 12y secs. 853-858)} is amended by adding at the end thereof the
following new paragraph:
“ (g) The Federal Reserve Board shall exercise special supervision
over all relationships and transactions of any kind entered into by any
Federal reserve bank with any foreign bank or banker, or with any group
of foreign banks or bankers, and all such relationships and transactions
shall be subject to such regulations, conditions, and limitations as the
Board may prescribe. No officer or other representative of any Federal
reserve bank shall conduct negotiations of any kind with the officers or
representatives of any foreign bank -or banker without first obtaining
the permission of the Federal Reserve Board. The Federal Reserve
Board shall have the right, in its discretion to be represented in any
conference or negotiations by such representative or representatives as the
Board may designate. A full report of all conferences or negotiations,
and all understandings or agreements arrived at or transactions agreed
upony and all other material facts appertaining to such conferences
or negotiations, shall be filed with the Federal*Reserve Board in writing
by a duly authorized officer of each Federal reserve bank which shall
have participated in such conferences or negotiations ”
Sec. 11. (a) Section 19 of the Federal Reserve Act, as amended
(U.S.C., title 12, secs. 142, 874> 461-466; supp. VI, title 12, sec. 462a),
is amended by inserting after the sixth paragraph thereof the following
new paragraph:
“ No member bank shall act as the medium or agent of any nonbanking
corporation, partnership, association, business trust, or individual in
making loans on the security of stocks, bonds, and other investment
securities to brokers or dealers in stocks, bonds, and other investment
securities. Every violation of this provision by any member bank shall
be punishable by a fine of not more than $100 per day during the con­
tinuance of such violation; and such fine may be collected{ by suit or other­
wise, by the Federal reserve bank of the district in which such member
bank is located.
(b)
Such section 19 of the Federal Reserve Act, as amended, is further
amended by adding at the end thereof the f ollowing new paragraphs:
“ No member bank shall, directly or indirectly by any device what­
soever, pay any interest on any deposit which is payable on demand:




BANKING ACT,

193 3

21

Provided, That nothing herein contained shall be construed as prohibiting
the payment oj interest in accordance with the terms oj any certificate
of deposit or other contract heretofore entered into in good jaith which
is in jorce on the date oj the enactment of this paragraph; but no such
certificate oj deposit or-other contract shall be renewed or extended unless
it shall be modified to conjorm to this paragraph, and every member
bank shall take such action as may be necessary to conjorm to this para­
graph as soon as possible consistently with its contractual obligations:
Provided, however, That this paragraph shall not apply to any deposit
oj such bank which is payable ordy at an office thereof located in ajoreign
country, and shall not apply to any deposit made by a mutual savings
bank, nor to^ m y^ ep osifof puU
by or on behalf oj any
State, county, school district, or other subdivision or municipality, with
rt^& Y to which payment oj interest is required under State law,„ .
“ The Federal Reserve Board shall from time to timelimit by regulation
the rate oj interest which may be paid by member banks on time deposits,
and may prescribe different rates jor such payment on time and savings
deposits having different maturities or subject to different conditions
respecting withdrawal or repayment or subject to different conditions
by reason oj different locations. No member bank shall pay any time
deposit bejore its maturity, or waive any requirement oj notice bejore
payment oj any savings deposit except as to all savings deposits having
the same requirement ”
(c) Section 8 of the Act entitled “ An Act to establish postal savings
depositories jor depositing savings at interest with the security oj the
Government for repayment thereof, and jor other purposes” , approved
June 25, 1910, as amended (U.S.C., title 89, sec. 758), is amended by
striking out the jirst sentence thereof and inserting in lieu thereoj the
jollowing: “ Any depositor may withdraw the whole or any part oj the
funds deposited to his or her credit with the accrued interest only on
notice given sixty days in advance and under such regulations as the
Postmaster General may prescribe; but withdrawal oj any part oj such
funds may be made upon demand, but no interest shall be paid on any
funds so withdrawn except interest accrued to the date of enactment oj
the Banking Act oj 1938: Provided, That Postal Savings depositories
may deposit junds in member banks on time under regulations to be
prescribed by the Postmaster General.”
(d) The second sentence oj section 9 oj the Act entitled 1An Act to
1
establish postal savings depositories jor depositing savings at interest
with the security oj the Government jor repayment thereoj, and jor other
purposes” , approved June 25, 1910, as amended (U.S.C., title 39, sec.
759), is amended by striking out the period at the end thereoj and insert­
ing in lieu thereoj a colon and the jollowing: “ Provided, That no such
security shall be required in case oj such part oj the deposits as are
insured under section 12B oj the Federal Reserve Act, as amended.”
Sec. 12. Section 22 oj the Federal Reserve Act, as amended ( U.S.C.,
title 12, secs. 875, 876, 503, 593-595; Supp. VI, title 12, sec. 598), is
jurther amended by adding at the end thereoj the jollowing new para­
graph:
“ (g) No executive officer oj any member bank shall borrow jrom or
otherwise become indebted to any member bank oj which he is an execu­
tive officer, and no member bank shall make any loan or extend credit in
any other manner to any oj its own executive officers: Provided, That
loam heretofore made to any such officer may be renewed or extended not




22

BANKING ACT, 1 9 3 3

more than two years jrom the date this 'paragraph takes effect, if in
accord with sound banking practice. I f any executive officer of any
member bank borrow from or if he be or become indebted to any bank
other than a member bank of which he is an executive officer, he shall
make a written report to the chairman of the board of directors of the
member bank of which he is an executive officer, stating the date and
amount of such loan or indebtedness, the security therefor, and the
purpose for which the proceeds have been or are to be used. Any execu­
tive officer of any member bank violating the provisions of this paragraph
shall be deemed guilty of a misdemeanor and shall be imprisoned not
exceeding one year, or fined not more than $5,000, or both; and any
member bank violating the provisions of this paragraph shall be fined
not more than $10,000, and may be fined a further sum equal to the
amount so loaned or credit so extended ”
Sec. IS. The Federal Reserve Act, as amended, is amended by inserting between sections 28 and 24 thereof (U.S.C., title 12, secs. 64 and 871;
Supp. VI, title 12, sec. 871) the following new section:
“ Sec. 28A. N o member bank shall (1) make any loan or any exten­
sion of credit to, or purchase securities under repurchase agreement from,
any of its affiliates, or (2) invest any of its funds in the capital stock,
bonds, debentures, or other such obligations of any such affiliate, or (8)
accept the capital stock, bonds, debentures, or other such obligations of any
such affiliate as collateral security for advances made to any person, part­
nership, association, or corporation, if, in the case of any such affiliate,
the aggregate amount of such loans, extensions of credit, repurchase agree­
ments, investments, and advances against such collateral security will
exceed 10 per centum of the capital stock and surplus of such member
bank, or if, in the case of all such affiliates, the aggregate amount of such
loans, extensions of credits repurchase agreements, investments, and ad­
vances against such collateral security will exceed 20 per centum of the
capital stock and surplus of such member bank.

,

“ Within the foregoing limitations, each loan or extension of credit
of any kind or character to an affiliate shall be secured by collateral in
the form of stocks, bonds, debentures, or other such obligations having
a market value at the time of making the loan or extension of credit of
at least 20 per centum more than the amount of the loan or extension
of credit, or of at least 10 per centum more than the amount of the loan
or extension of credit if it is secured by obligations of any State, or of
any political subdivision or agency thereof: Provided, That the provi­
sions of this paragraph shall not apply to loans or extensions of credit
secured by obligations of the United States Government, the Federal
intermediate credit banks, the Federal land banks, the Federal Home
Loan Banks, of the Home Owners' Loan Corporation, or by such notes,
drafts, bills of exchange, or bankers1 acceptances as are eligible for
rediscount or for purchase by Federal Reserve banks. A loan or exten­
sion of credit to a director officer, clerk, or other employee or any repre­
sentative of any such affiliate shall be deemed a loan to the affiliate to
the extent that the proceeds of such loan are used for the benefit of, or
transferred to, the affiliate.
“ For the purposes of this section the term ‘affiliate1 shall include
holding company affiliates as well as other affiliates, and the provisions
of this section shall not apply to any affiliate (1) engaged solely in holding
the bank premises of the member bank with which it is affiliated} (2)
engaged solely in conducting a sale-deposit business or the business of




BANKING ACT, 193B

23

an agricultural credit corporation or livestock loan company, (8) in
the capital stock of which a national banking association is authorized
to invest pursuant to section 25 of the Federal Reserve Act, as .amended,
(4) organized under section 25 (a) of the Federal Reserve Act, as amended,
or (5) engaged solely in holding obligations of the United States Govern­
ment, the Federal intermediate credit banks, the Federal land banks,
the Federal Home Loan Banks, or the Home Owners1Loan Corporation;
but as to any such affiliate, member banks shall continue to be subject to
other provisions of law applicable to loans by such banks and investments
by such banks in stocks, bonds; debentures, or other such obligations. ”
Sec. 14. The Federal Reserve Act, as amended, is amended by inserting
between section 24 and section 25 thereof ( U.S.C., title 12, secs. 871 and
601-605; Supp. VI, title 12, sec. 871) the following new section:
u Sec. 24A. Hereafter no national bank, without the approval of the
Comptroller of the Currency, and no State member bank, without the
approval of the Federal Reserve Board, shall (1) invest in bank premises,
or in the stock, bonds, debentures, or other such obligations of any corpo­
ration holding the premises of such bank or (2) make loans to or upon the
security of the stock of any such corporation, if the aggregate of all such
investments and loans will exceed the amount of the capital stock of such
bank”
Sec. 15. The Federal Reserve Act, as amended, is further amended by
inserting after section 25 (a) thereof (U.S.C., title 12, sec. 611-681) the
following new section:
u S e c . 25. (b) Notwithstanding any other provision of law all suits
of a civil nature at common law or in equity to which any corporation
under the laws of the United States shall be a party, arising out of trans­
actions involving international or foreign banking, or banking in a
dependency or insular possession of the United States, or out of other
international or foreign financial operations, either directly or through
the agency, ownership, or control of branches or local institutions in
dependencies or insular possessions of the United States or in foreign
countries, shall be deemed to arise under the laws of the United States,
and the district courts of the United States shall have original jurisdiction
of all such suits; and any defendant in any such suit may, at any time
before the trial thereof, remove such suits from a State court into the district
court of the United States for the proper district by following the pro­
cedure for the removal of causes otherwise provided by law. Such
removal shall not cause undue delay in the trial of such case and a case
so removed shall have a place on the calendar of the United States court
to which it is removed relative to that which it held on the State court from
which it was removed.
“ Notwithstanding any other provision of law, all suits of a civil nature
at common law or in equity to which any Federal Reserve bank shall be a
party shall be deemed to arise under the laws of the United States, and
the district courts of the United States shall have original jurisdiction
of all such suits; and any Federal Reserve bank which is a defendant
in any such suit may, at any time before the trial thereof, remove such
suit from a State court into the district court of the United States for the
proper district by following the procedure for the removal of causes other­
wise provided by law. No attachment or execution shall be issued against
any Federal Reserve bank or its property before final judgment in any
suit, action, or proceeding in any State, county, municipal, or United
States court ”




24

BANKING ACT, 19 3 3

Sec. 16. Paragraph “ Seventh” of section 5186 of the Revised Statutes,
as amended ( U.S.C., title 12, sec. 24; supp. VI, title 12, sec. 2 ), is
4
amended to read as follows:
“ Seventh. To exercise by its board of directors or duly authorized
officers or agents, subject to law, all such incidental powers as shall be
necessary to carry on the business of banking; by discounting and nego­
tiating promissory notes, drafts, bills of exchange, and other evidences of
debt; by receiving deposits; by buying and selling exchange, coin, and
bullion; by loaning money on personal security; and by obtaining, issuing,
and circulating notes according to the provisions of this title. The busi­
ness of dealing in investment securities by the association shall be limited
to purchasing and selling such securities without recourse, solely upon the
order, and for the account of, customers, and in no case for its own
account, and the association shall not underwrite any issue of securities:
Provided, That the association may purchase for its own account invest­
ment securities under such limitations and restrictions as the Comp­
troller of the Currency may by regulation prescribe, but in no event (1)
shall the total amount of any issue of investment securities of any one
obligor or maker purchased after this section as amended takes effect
and held by the association for its own account exceed at any time 10
per centum of the total amount of such issue outstanding, but this limita­
tion shall not apply to any such issue the total amount of which does not
exceed $100,000 and does not exceed 50 per centum of the capital of the
association, nor (2) shall the total amount of the investment securities of
any one obligor or maker purchased after this section as amended takes
effect and held by the association for its own account exceed at any time
15 per centum of the amount of the capital stock of the association actually
paid in and unimpaired and 25 per centum of its unimpaired surplus
fund. As used in this section the term 1
investment securities' shall
mean marketable obligations evidencing indebtedness of any person,
copartnership, association, or corporation in the form of bonds, notes
andjor debentures commonly known as investment securities under such
further definition of the term 1
investment securities1as may by regulation
be prescribed by the Comptroller of the Currency. Except as hereinafter
provided or otherwise permitted by law, nothing herein contained shall
authorize the purchase by the association of any shares of stock of any
corporation. Ihe limitations and restrictions herein contained as to
dealing in, underwriting and purchasing for its own account, investment
securities shall not apply to obligations of the United States, or general
obligations of any State or of any political subdivision thereof, or obliga­
tions issued under authority of the Federal Farm Loan Act, as amended
or issued by the Federal Home Loan Banks or the Home Owners1 Loan
Corporation: Provided, That in carrying on the business commonly
known as the safe-deposit business the association shall not invest in
the capital stock of a corporation organized under the law of any State
to conduct a safe-deposit business in an amount in excess of 15 per
centum of the capital stock of the association actually paid in and unim­
paired and 15 per centum of its unimpaired surplus ”
The restrictions of this section as to dealing in investment securities
shall take effect one year after the date of the approval of this Act„
Sec. 17. (a) Section 5188 of the Revised Statutes, as amended
(U.S.C., title 12, sec. 51; Supp. VI, title 12, sec. 51), is amended to
read as follows:




B A N K IN G ACT, 1 9 3 3

25

“ S e c . 5138. After this section as amended takes effect, no national
hanking association shall he organized with a less capital than $100,000,
except that such associations with a capital of not less than $50,000 may
be organized in any place the population of which does not exceed six
thousand inhabitants. No such association shall be organized in a
city the population of which exceeds fifty thousand persons with a capital
of less than $200,000, except that in the outlying districts of such a city
where the State laws permit the organization of State banks with a capital
of $100,000 or less, national banking associations now organized or here­
after organized may, with the approval of the Comptroller of the Currency,
have a capital of not less than $100,000.”
(b)
The tenth paragraph of section 9 of the Federal Reserve Act, as
amended ( U.S.C., title 12, sec. 829), is amended to read as follows:
“ No applying bank shall be admitted to membership in a Federal
reserve bank unless it possesses a paid-up unimpaired capital sufficient
to entitle it to become a national banking association in the place where
it is situated under the provisions of the National Bank Act, as amended:
Provided, That this paragraph shall not apply to State banks and trust
companies organized prior to the date this paragraph as amended takes
effect and situated in a place the population of which does not exceed
three thousand inhabitants and having a capital of not less than $25,000,
nor to any State bank or trust company which is so situated and which,
while it is entitled to the benefits of insurance under section 12B of this,
Act, increases its capital to not less than $25,000 ”
Sec. 18. Section 5139 of the Revised Statutes, as amended (U.S.C.,
title 12, sec. 52; Supp. VI, title 12, sec. 52), is amended by adding at
the end thereof the following new paragraph:
“ After one year from the date of the enactment of the Banking Act of
1933, no certificate representing the stock of any such association shall
represent the stock of any other corporation, except a member bank or a
corporation existing on the date this paragraph takes effect engaged solely
in holding the bank premises of such association, nor shall the ownership *
sale, or transfer of any certificate representing the stock of any such
association be conditioned in any manner whatsoever upon the ownership,
sale, or transfer of a certificate representing the stock of any other corpora­
tion■ except a member bank.7
,
7
Sec. 19. Section 5144 °f the Revised Statutes, as amended (U.S.C.,
title 12, sec. 61), is amended to read as follows:
“ S e c . 5144• In & elections of directors, each shareholder shall have
U
the right to vote the number of shares owned by him for as many persons
as there are directors to be elected, or to cumulate such shares and give
one candidate as many votes as the number of directors multiplied by the
number of his shares shall equal, or to distribute them on the same prin­
ciple among as many candidates as he shall think fit; and in deciding
all other questions at meetings of shareholders, each shareholder shall be
entitled to one vote on each share of stock held by him; except (1) that
shares of its own stock held by a national bank as sole trustee shall not
be voted, and shares of its own stock held by a national bank and one or
more persons as trustees may be voted by such other person or persons,
as trustees, in the same manner as if he or they were the sole trustee, and
(2) shares controlled by any holding company affiliate of a national bank
shall not be voted unless such holding company affiliate shall have first
obtained a voting permit as hereinafter provided, which permit is in
force at the time such shares are voted. Shareholders may vote by proxies>




26

BANKING ACT, 19 3 3

duly authorized in writing; but no officer, clerk, teller, or bookkeeper of
such bank shall act as proxy; and no shareholder whose liability is past
due and- unpaid shall be allowed to vote.
“ For the purposes of this section shares shall be deemed to be controlled
by a holding company affiliate if they are owned or controlled directly or
indirectly by such holding company affiliate, or held by any trustee fox
the benefit of the shareholders or members thereof.
“ Any such holding company affiliate may make a/pplication to the
Federal Reserve Board for a voting permit entitling it to cast one vote at
all elections of directors and in deciding all questions at meetings of
shareholders of such bank on each share of stock controlled by it or authoriz­
ing the trustee or trustees holding the stock for its benefit or for the benefit
of its shareholders so to vote the same. The Federal Reserve Board may,
in its discretion, grant or withhold such permit as the public interest may
require. In acting upon such application, the Board shall consider the
financial condition of the applicant, the general character of its manage­
ment, and the probable effect of the granting of such permit upon the
affairs of such bank, but no such permit shall be granted except upon the
following conditions:
“ (a) Every such holding company affiliate shall, in making the applica­
tion Jor such permit, agree (1) to receive, on dates identical with those
fixed for the examination of banks with which it is affiliated, examiners
duly authorized to examine such banks, who shall make such examina­
tions of such holding company affiliate as shall be necessary to disclose
fully the relations bet ween such banks and such holding company affiliate
and the effect of such relations upon the affairs of such banks, such
examinations to be at the expense of the holding company affiliate so
examined; (2) that the reports of such examiners shall contain such
information as shall be necessary to disclose fully the relations betvjeen
such affiliate and such banks and the effect of such relations upon the
affairs of such banks; (8) that such examiners may examine each bank
owned or controlled by the holding company affiliate, both individually
and in conjunction with other banks owned or controlled by such holding
company affiliate; and (4) that publication of individual or consolidated
statements of condition of such banks may be required;
“ (b) After five years after the enactment of the Banking Act of 1983,
every such holding company affiliate (1) shall possess, and shall continue
to possess during the life of such permit, free and clear of any lien,
pledge, or hypothecation of any nature, readily marketable assets other
than bank stock in an amount not less than 12 per centum of the aggregate
par value of all bank stocks controlled by such holding company affiliate,
which amount shall be increased by not less than 2 per centum per annum
of such aggregate par value until such assets shall amount to 25 per
centum of the aggregate par value of such bank stocks; and (2) shall
reinvest in readily marketable assets other than bank stock all net earnings
over and above 6 per centum per annum on the book value of its own
shares outstanding until such assets shall amount to such 25 per centum
of the aggregate par value of all bank stocks controlled by it;
“ (c) Notwithstanding the foregoing provisions of this section, after
five years after the enactment of the Banking Act of 1933, (1) any such
holding company affiliate the shareholders or members of which shall be
individually and severally liable in proportion to the number of shares
of such holding company affiliate held by them respectively, in addition
to amounts invested therein, for all statutory liability imposed on such




BANKING ACT, 193 3

27

holding company affiliate by reason of its control of shares of stock of
banks, shall be required only to establish and maintain out oj net earnings
over and above 6 per centum per annum on the book value of its own
shares outstanding a reserve of readily marketable assets in an amount of
not less than 12 per centum of the aggregate par value of bank stocks con­
trolled by it, and (2) the assets required by this section to be possessed by
such holding company affiliate may be used by it for replacement of
capital in banks affiliated with it and for losses incurred in such banks,
but any deficiency in such assets resulting from such use shall be made
up within such period as the Federal Reserve Board may by regulation
prescribe;
“ (d) Every officer, director, agent, and employee of every such holding
company affiliate shall be subject to the same penalties for false entries in
any book, report, or statement of such holding company affiliate as are
applicable to officers, directors, agents, and employees of member banks
under section 5209 of the Revised Statutes, as amended ( U.S.C., title 12,
sec. 592); and
“ (e) Every such holding company affiliate shall, in its application for
■such voting permit, (1) show that it does not own, control, or have any
interest in, and is not participating in the management or direction of,
any corporation, business trust, association, or other similar organiza­
tion formed for the purpose of, or engaged principally in, the issue,
-flotation, underwriting, public sale, or distribution, at wholesale ~or retail
or through syndicate participation, of stocks, bonds, debentures, notes, or
other securities of any sort (hereinafter referred to as‘ securities company ’);
(2) agree that during the period that the permit remains in force it will
not acquire any ownership, control, or interest in any such securities
company or participate in the management or direction thereof; (8) agree
that if, at the time of filing the application for such permit, it owns, con­
trols, or has an interest in, or is participating in the management or
direction o f any such securities company, it will, within five years after
the filing of such application, divest itself of its ownership, control, and
interest in such securities company and will cease participating in ihe
management or direction thereof, and will not thereafter, during the period
that the permit remains in force, acquire any further ownership, control,
or interest in any such securities company or participate in the manage­
ment or direction thereof; and (4) agree that thenceforth it will declare
dividends only out of actual net earnings.
“ I f at any time it shall appear to the Federal Reserve Board that any
holding company affiliate has violated any of the provisions of the Bank­
ing Act of 1988 or of any agreement made pursuant to this section, the
Federal Reserve Board may, in its discretion, revoke any such VQting
permit after giving sixty days’ notice by registered mail of its intention
to the holding company affiliate and affording it an opportunity to be
heard. Whenever the Federal Reserve Board shall have revoked any such
voting permit, no national bank whose stock is controlled by the holding
company affiliate whose permit is so revoked shall receive deposits of
public moneys of the United States, nor shall any such national bank
pay any further dividend to such holding company affiliate upon any
shares of such bank controlled by such holding company affiliate.
“ Whenever the Federal Reserve Board shall have revoked any voting
permit as hereinbefore provided, the rights, privileges, and franchises of
any or all national banks the stock of which is controlled by such holding
company affiliate shall, in the discretion of the, Federal Reserve Board,




28

BANKING ACT, 1933

be subject to forfeiture in accordance with section 2 of the Federal Reserve
Act, as amended ”
Sec. 20. After one year from the date of the enactment of this Act, no
member bank shall be affiliated in any manner described in section 2 (b)
hereof with any corporation, association, business trust, or other similar
organization engaged principally in the issue, flotation, underwriting,
public sale, or distribution at wholesale or retail or through syndicate
participation of stocks, bonds, debentures, notes, or other securities.

For every violation of this section the member bank involved shall be
subject to a penalty not exceeding $1,000 per day for each day during
which such violation continues. Such penalty may be assessed by the
Federal Reserve Board, in its discretion, and, when so assessed, may be
collected by the Federal reserve bank by suit or otherwise.
I f any such violation shall continue for six calendar months after the
member bank shall have been warned by the Federal Reserve Board to
discontinue the same, (a) in the case of a national bank, all the rights,
privileges, andfranchises granted to it under the National Bank Act may
be forfeited in the manner prescribed in section 2 of the Federal Reserve
Act, as amended (U.S.C., title 12, secs. 141 222-225, 281-286, and
,
602), or, (b) in the case of a State member hank, all of its rights and
privileges of membership in the Federal Reserve System may be forfeited
in the manner prescribed in section 9 of the Federal Reserve Act, as
amended (U.S.C., title 12, secs. 821-882).
Sec. 21. (a) After the expiration of one year after the date of enact­
ment of this Act it shall be unlawful—

(1) For any person, firm, corporation, association, business trust, or
other similar organization, engaged in the business of issuing, under­
writing, selling, or distributing, at wholesale or retail, or through syndicate
participation, stocks, bonds, debentures, notes, or other securities, to
engage at the same time to any extent whenever in the business of receiving
deposits subject to check or to repayment upon presentation of a passbook,
certificate of deposit, or other evidence of debt, or upon request of the depos­
itor; or
(2) For any person, firm, corporation, association, business trust, or
other similar organization, other than a financial institution or private
banker subject to examination and regulation under State or Federal
law, to engage to any extent whatever in the business of receiving deposits
subject to check or to repayment upon presentation of a passbook, cer­
tificate of deposit, or other evidence of debt, or upon request of the depositor,
unless such person, firm, corporation, association, business trust, or
other similar organization shall submit to periodic examination by the
Comptroller of the Currency or by the Federal Reserve bank of the dis­
trict and shall make and publish periodic reports of its condition, ex­
hibiting in detail its resources and liabilities, such examination and
reports to be made and published at the same times and in the same
manner and with like effect and penalties as are now provided by law in
respect of national bankinq associations transactinq business in the same
locality.
(b)
Whoever shall willfully violate any of the provisions of this section
shall upon conviction be fined not more than $5,000 or imprisoned not
more than five years, or both, and any officer, director, employee, or
agent of any person, firm, corporation, association, business trust, or
other similar organization who knowingly participates in any such vio­
lation shall be punished by a like fine or imprisonment or both.




BANKING ACT, 1933

29

Sec, $2. The additional liability imposed upon shareholders in
national banking associations by the provisions of section 5151 of the
Revised Statutes, as amended, and section 28 of the Federal Reserve
Act, as amended (U.S.C., title 12, secs. 68 and 64), shall not apply with
respect to shares in any such association issued after the date of enact­
ment of this Act.
S ec. 23. Paragraph (c) of section 5155 of the Revised Statutes, as
amended (U.S.C., title 12, sec. 86), is amended to read as follows:
“ (c)Ql national banking association may, with the approval of the
Comptroller of the Currency, establish and operate new branches: (I)
Within the limits of the city, town or village in which said association is
situated, if such establishment and operation are at the time expressly
authorized to State banks by the law of the State in question; and (2) at
any point within the State in which said association is situated, if such
establishment and operation are at the time authorized to State banks by
the statute law of the State in question by language specifically granting
such authority affirmatively and not merely by implication or recognition,
and subject to the restrictions as to location imposed by the law of the
State on State banksTjNo such association shall establish a branch
outside of the city, toum, or village in which it is situated unless it has a
paid-in and unimpaired capital stock of not less than $500,000: Pro­
vided, That in States with a population of less than one million, and
which have no cities located therein with a population exceeding one
hundred thousand, the capital shall be not less than $250,000: Provided,
That in States with a population of less than one-half million, and which
have no cities located therein with a population exceeding fifty thousand,
the capital shall not be less than $100,000.”
Paragraph (d) of section 5155 of the Revised Statutes, as amended
(U.S.C., title 12, sec. 86), is amended to read as follows:
“ (d) The aggregate capital of every national banking association and
its branches shall at no time be less than the aggregate minimum capital
required by lawfor the establishment of an equal number of national bank­
ing associations situated in the various places where such association and
its branches are situated
S ec . 24. (a) Sections 1 and 3 of the Act entitled “ An Act to provide
for the consolidation of national banking associations1, approved Novem­
1
ber 7, 1918, as amended (U.S.C., title 12, secs. 38, 34, and 84a), are
amended by striking out the words “ county, city, town, or village1 where1
.1ever they occur in each such section, and inserting in lieu thereof the words
“ State, county, city, town, or village.1
1
(b)
Section 8 of such Act of November 7, 1918, as amended, is further
amended by striking out the second sentence thereof and inserting in lieu
thereof the following: “ The capital stock of such consolidated association
shall not be less than that required under existing lawfor the organization
of a national banking association in the place in which such consolidated
association is located. Upon such a consolidation, or upon a consolida­
tion of two or more national banking associations under section 1 of this
A ct, the corporate existence of each of the constituent banks and national
banking associations participating in such consolidation shall be merged
into and continued in the consolidated national banking association and
the consolidated association shall be deemed to be the same corporation as
each of the constituent institutions. All the rights, franchises, and inter­
ests of each of such constituent banks and national banking associations
in and to every species of property, real, personal, and mixed, and choses




30

BANKING ACT, 19 3 3

in action thereto belonging, shall be deemed to be transferred to and vested
in such consolidated national banking association without any deed or
other transfer; and such consolidated national banking association, by
virtue of such consolidation and without any order or other action on the
part of any court or otherwise, shall hold and enjoy the same and all
rights of property, franchises, and interests, including appointments
designations, and nominations and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver, committee of estates of lunatics and in every other
fiduciary capacity, m the same manner and to the same extent as such
rights, franchises, and interests were held or enjoyed by any such constit­
uent institution at the time of such consolidation: Provided, however,
That where any such constituent institution at the time of such consolida­
tion was acting under appointment of any court as trustee, executorr
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, committee of estates of lunatics or in any otherfiduciary capacity,
the consolidated national banking association shall be subject to removal
by a court of competent jurisdiction in the same manner and to the same
extent as was such constituent corporation prior to the consolidation, and
nothing herein contained shall be construed to impair in any manner the
right of any court to remove such a consolidated national banking associa­
tion and to appoint in lieu thereof a substitute trustee, executor, or other
fiduciary, except that such right shall not be exercised in such a manner
as to discriminate against national banking associations, nor shall any
such consolidated association be removed solely because of the fact that it
is a national banking association ”
Sec. 25. The first two sentences of section 5197 of the Revised Statutes
(U.S.C., title 12, sec. 85) are amended to read as follows:
“ Any association may take, receive, reserve, and charge on any loan
or discount made, or upon any notes, bills of exchange, or other evidences
of debt, interest at the rate allowed by the laws of the State, Territory, or
District where the bank is located, or at a rate of 1 per centum in excess
of the discount rate on ninety-day commercial paper in effect at the Federal
Reserve bank in the Federal Reserve district where the bank is located,
whichever may be the greater, and no more, except that where by the laws
of any State a different rate is limited for banks organized under State
laws, the rate so limited shall be allowed for associations organized or
existing in any such State under this title. When no rate is fixed by the
laws of the State, or Territory, or District, the bank may take, receive,
reserve, or chai'ge a rate not exceeding 7 per centum, or 1 per centum in
excess of the discount rate on ninety-day commercial paper in effect at
the Federal Reserve bank in the Federal Reserve district where the bank
is located, whichever may be the greater, and such interest may be taken
in advance, reckoning the days for which the note, bill, or other evidence
of debt has to run ”
S ec. 26. (a) The second sentence of the first paragraph of section
5200 of the Revised Statutes, as amended (U.S.C., title 12, sec. 84; Supp.
VI, title 12, sec. 84), is amended by inserting before the period at the
end thereof the following: uand shall include in the case of obligations
of a corporation all obligations of all subsidiaries thereof in which such
corporation owns or controls a majority interest .”
(b) The amendment made by this section shall not apply to such
obligations of subsidiaries held by such association on the date this sec­
tion takes effect.




BANKING ACT, 193 3

31

S ec. 27. Section 5211 of the Revised Statutes, as amended (U.S.C.,
title 12, sec. 161; Supp. VI, title 12, sec. 161), is amended by adding
at the end thereof the following new paragraph:
“ Each national banking association shall obtain from each of its
affiliates other than member banks and furnish to the Comptroller of
the Currency not less than three reports during each year, in such form
as the Comptroller may prescribe, verified by the oath or affirmation of
the president or such other officer as may be designated by the board of
directors of such affiliate to verify such reports, disclosing the informa­
tion hereinafter provided for as of dates identical with those for which
the Comptroller shall during such year require the reports of the condi­
tion of the association. For the purpose of this section the term caffiliate’
shall include holding company affiliates as well as other affiliates. Each
such report of an affiliate shall J transmitted to the Comptroller at the
fe
same time as the corresponding report of the association, except that the
Comptroller may, in his discretion, extend such time for good cause
shown. Each such report shall contain such information as in the
judgment of the Comptroller of the Currency shall be necessary to dis­
close fully the relations between such affiliate and such bank and to
enable the Comptroller to inform himself as to the effect of such relations
upon the affairs of such bank. The reports of such affiliates shall be
published by the association under the same conditions as govern its
own condition reports. The Comptroller shall also have power to call
for additional reports with respect to any such affiliate whenever in his
judgment the same are necessary in order to obtain a full and complete
knowledge of the conditions of the association with which it is affiliated.
Such additional reports shall be transmitted to the Comptroller of the
Currency in such form as he may prescribe. Any such affiliated bank
which fails to obtain and furnish any report required under this section
shall be subject to a penalty of $100 for each day during which such
failure continues ”
Sec. 28, (a) The first paragraph of section 5240 of the Revised
Statutes, as amended (U.S.C., title 12, sec. 481 ), is amended by inserting
before the period at the end thereof a colon and the following proviso:
“ Provided, That in making the examination of any national bank the
examiners shall include such an examination of the affairs of all its
affiliates other than member banks as shall be necessary to disclose fully
the relations between such bank and such affiliates and the effect of such
relations upon the affairs of such bank; and in the event of the refusal to
give any information required in the course of the examination of any
such affiliate, or in the event of the refusal to permit such examination,
all the rights, privileges, and franchises of the bank shall be subject to
forfeiture in accordance with section 2 of the Federal Reserve Act, as
amended (U.S.C., title 12, secs. 141, 222-225, 281-286, and 502).
The Comptroller of the Currency shall have power, and he is hereby
authorized, to publish the report of his examination of any national
banking association or affiliate which shall not within one hundred and
twenty days after notification of the recommendations or suggestions of the
Comptroller, based on said examination, have complied with the same to
his satisfaction. Ninety days1 notice prior to such publicity shall be
given to the bank or affiliate.”
(b)
Section 5240 of the Revised Statutes, as amended (U.S.C., title 12,
sec. 481), is further amended by adding after the first paragraph thereof
the following new paragraph:




32

BANKING ACT, 19 3 3

“ The examiner making the examination of any affiliate of a national
bank shall have power to make a thorough examination of all the afairs
of the affiliate, and in doing so he shall have power to administer oaths
and to examine any of the officers, directors, employees, and agents
thereof under oath and to make a report of his findings to the Comptroller
of the Currency. The expense of examinations of such affiliates may be
assessed by the Comptroller of the Currency upon the affiliates examined
in proportion to assets or resources held by the affiliates upon the dates
of examination of the various affiliates. If any such affiliate shall refuse
to pay such expenses or shall fail to do so within sixty days after the date
of such assessment, then such expenses may be assessed against the
affiliated, national bank and, when so assessed, shall be paid by such
national bank: Provided, however, That, if the affiliation is with two or
*
more national banks, such expenses may be assessed against, and col­
lected from, any or all of such national banks in such proportions as the
Comptroller of the Currency may prescribe. The examiners and assistant
examiners making the examinations of national banking associations and
affiliates thereof herein provided for and the chief examiners, reviewing
examiners and other persons whose sefvices may be required in connection
with such examinations or the reports thereof, shall be employed by the
Comptroller of the Currency .with the approval of the Secretary of the
Treasury; the employment and compensation of examiners, chief exami­
ners, reviewing examiners, assistant examiners, and of the other employees
of the office of the Comptroller of the Currency whose compensation is paid
from assessments on banks or affiliates thereof shall be without regard to
the provisions of other laws applicable to officers or employees of the
United States. The funds derived from such assessments may be
deposited by the Comptroller of the Currency in accordance with the pro­
visions of section 5234 of the Revised Statutes ( U.S.C., title 12, sec. 192)
and shall not be construed to be Government funds or appropriated
monies; and the Comptroller of the Currency is authorized and em­
powered to prescribe regulations governing the computation and assess­
ment of the expenses of examinations herein provided for and the collec­
tion of such assessments from the banks and/or affiliates examined.
If any affiliate of a national bank shall refuse to permit an examiner to
make an examination of the affiliate or shall refuse to give any information
required in the course of any such examination, the national bank with
which it is affiliated shall be subject to a penalty of not more than $100
for each day that any such refusal shall continue. Such penalty may be
assessed by the Comptroller of the Currency and collected in the same
manner as expenses of examinations ”
Sec . 29. In any case in which, in the opinion of the Comptroller of
the Currency, it would be to the advantage of the depositors and unsecured
creditors of any national banking association whose business has been
closed, for such association to resume business upon the retention by the
association, for a reasonable period to be prescribed by the Comptroller,
of all or any part of its deposits, the Comptroller is authorized, in his
discretion, to permit the association to resume business if depositors and
unsecured creditors of the association representing at least 75 per centum
of its total deposit and unsecured credit liabilities consent in writing to
such retention of deposits. Nothing in this section shall be construed
to affect in any manner any powers of the Comptroller under the provisions
of law in force on the date of enactment of this Act with respect to the
reorganization of national banking associations.




BANKING ACT, 193 3

33

Sec. SO. Whenever, in the opinion oj the Comptroller oj the Currency,
any director or officer oj a national bank, or oj a bank or trust company
doing business in the District oj Columbia, or whenever, in the opinion
oj a Federal Reserve agent, any director or officer oj a State member
bank in his district shall have continued to violate any law relating to
such bank or trust company or shall have continued unsaje or unsound
practices in conducting the business oj such bank or trust company, ajter
having been warned by the Comptroller oj the Currency or the Federal
Reserve agent, as the case may be, to discontinue such violations ojlaw
or such unsaje or unsound practices, the Comptroller oj the Currency or
the Federal Reserve agent, as the case may be, may certijy thejacts to the Fed­
eral Reserve Board. In any such case the Federal Reserve Board may cause
notice to be served upon such director or officer to appear bejore such Board
to show cause why he should not be removed jrom office. A copy oj such
order shall be sent to each director oj the bank affected, by registered mail.
I j ajter granting the accused director or officer a reasonable opportunity
to be heard, the Federal Reserve Board finds that he has continued to
violate any law relating to such bank or trust company or has continued
unsaje or unsound practices in conducting the business of such bank or
trust company ajter having been warned by the Comptroller oj the Currency or the Federal Reserve agent to discontinue such violation oj law
or such unsaje or unsound practices, the Federal Reserve Board, in its
discretion, may order that such director or officer be removed jrom office.
A copy oj such order shall be served upon such director or officer. A
copy oj such order shall also be served upon the bank oj which he is a director
or officer, whereupon such director or officer shall cease to be a director
or officer oj such bank: Provided, That such order and the findings oj
fact upon which it is based shall not be made public or disclosed to anyone
except the director or officer involved and the directors oj the bank involved,
otherwise than in connection with proceedings jor a violation oj this
section. Any such director or officer removed jrom office as herein pro­
vided who thereajter participates in any manner in the management of
such bank shall befined not more than $5,000, or imprisonedjor not more
than five years, or both, in the discretion oj the court.
S ec. 81. Ajter one year jrom the date oj enactment oj this Act, not­
withstanding any other provision oj law, the board oj directors, board oj
trustees, or other similar governing body oj every national banking asso­
ciation and oj every State bank or trust company which is a member oj
the Federal Reserve System shall consist of not less thanfive nor more than
twentyfive members; and every director, trustee, or other member of
such governing body shall be the bona fide owner in his own right o/
shares of stock of such banking association, State bank or trust company
having a par value in the aggregate of not less than $2,500, unless ihe
capital of the bank shall not exceed $50,000, in which case he must own
in his own right shares having a par value in the aggregate of not less
than $1,500, or unless the capital of the bank shall not exceed $25,000,
in which case he must own in his own right shares having a par value in
the aggregate of not less than $1,000. If any national banking associa­
tion violates the provisions oj this section and continues such violation
ajter thirty days1 notice jrom the Comptroller oj the Currency, the said
Comptroller may appoint a receiver or conservator therejor, in accordance
with the provisions oj existing law. I j any State bank or trust company
which is a member oj the Federal Reserve System violates the provisions




34

BANKING ACT, 193 3

of this section and continues such violation after thirty days ’ notice from
the Federal Reserve Board, it shall be subject to the forfeiture of its
membership in the Federal Reserve System in accordance with the 'pro­
visions of section 9 of the Federal Reserve Act, as amended.
S e c . 82. From and after January 1, 1934> no officer or director of
any member bank shall be an officer, director, or manager of any corpora­
tion, partnership, or unincorporated association engaged primarily in
the business of purchasing, selling, or negotiating securities, and no
member bank shall perform the functions of a correspondent bank on
behalf of any such individual, partnership, corporation, or unincorpo­
rated association, and no such individual, partnership, corporation, or
unincorporated association shall perfrom the functions of a correspond­
ent for any member bank or hold on deposit any funds on behalf of any
member bank, unless in any such case there is a permit therefor issued
by the Federal Reserve Board; and the Board is authorized to issue such
permit if in its judgment it is not incompatible with the public interest,
and to revoke any such permit whenever it finds after reasonable notice
and opportunity to be heard, that the public interest requires such
revocation.
Sec. 88. The Act entitled “ An Act to supplement existing laws
against unlawful restraints and monopolies, and for other purposes” ,
approved October 15, 1914, as amended (U.S.C., title 15, sec. 19), is
hereby amended by adding after section 8 thereof the following new
section:
“ Sec. 8A. That from and after the 1st day of January 1984, no
director, officer, or employee of any bank, banking association, or trust
company, organized or operating under the laws of the United States
shall be at the same time a director, officer, or employee of a corporation
,
(other than a mutual savings bank) or a member of a partnership
organized for any purpose whatsoever which shall make loans secured
by stock or bond collateral to any individual, association, partnership,
or corporation other than its own subsidiaries. ”
S ec. 84• The right to alter, amend, or repeal this Act is hereby ex­
pressly reserved. If any provision of this Act, or the application thereof
to any person or circumstances, is held invalid, the remainder of the Act,
and the application of such provision to other persons or circumstances,
shall not oe affected thereby.
And the Senate agree to the same.




H enry B. S te a g a ll
T . A lan G oldsborou gh

R o b e rt Luce

Managers of the part of the House.
C a rte r G lass
R o b e rt J. B u lk le y
W . G. M cA doo

Managers on the part of the Senate.

O


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102