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74 t h C ongress

1st Session

) HOUSE OP REPRESENTATIVES (
J
|

R eport

No. 1822

BAN K IN G ACT OF 1935

A u gu st

Mr.

Steag all,

17, 1935.— Ordered to be printed

from the committee of conference, submitted the
following

CONFERENCE REPORT
[To accompany H. R. 7617]

The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H. R. 7617) to
provide for the sound, effective, and uninterrupted operation of the
banking system, 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 amendment of
the Senate insert the following:
That this Act may be cited as the “ Banking Act oj 1935” .
TITLE I-F E D E R A L DEPOSIT IN SU RAN CE
Section 101. Section 12B oj the Federal Reserve Act, as amended
( U. S. C S u p p . V I I , title 12, sec. 264), is amended to read as follows:
“ Sec , 12B. (a) There is hereby created a Federal Deposit Insurance
Corporation (hereinafter referred to as the ‘ Corporation’) which shall
insure, as hereinafter provided, the deposits oj all banks which are en­
titled to the benefits oj insurance under this section, and which shall
have the powers hereinajter granted.
“ (b) The management oj the Corporation shall be vested in a board
oj directors consisting oj three members, one oj whom shall be the Comp­
troller oj the Currency, and two oj whom shall be citizens oj the United
States to be appointed by the President, by and with the advice and
consent oj the Senate. One oj the appointive members shall be the chairman oj the board oj directors oj the Corporation and not more than two
oj the members oj such board oj directors shall be members oj the same
political party. Each such appointive member shall hold office jor a
term oj six years and shall receive compensation at the rate oj $10,000 per
20366 0 — 58------ 42




2

BANKING ACT OF 1 9 3 5

annum, payable monthly out oj the funds oj the Corporation, but the
Comptroller oj the Currency shall not receive additional compensation
jor his services as such member. In the event oj a vacancy in the office
oj the Comptroller oj the Currency, and pending the appointment oj his
successor, or during the absence oj the Comptroller jrom Washington,
the Acting Comptroller oj the Currency shall be a member oj the board oj
directors in the place and stead oj the Comptroller. In the event oj a
vacancy in the office oj the chairman oj the board oj directors, and pending
the appointment oj his successor, the Comptroller oj the Currency shall
act as chairman. The Comptroller oj the Currency shall be ineligible
during the time he is in office and jor two years thereafter to hold any
office, position, or employment in any insured bank. The appointive
members oj the board oj directors shall be ineligible during the time they
are in office and jo r two years thereafter to hold any office, position, or em­
ployment in ’any insured bank, except that this restriction shall not apply
to any appointive member who has served the jull term jor which he was
appointed. No member oj the board oj directors shall be an officer or
director oj any bank, banking institution, trust company, or Federal
Reserve bank or hold stock in any bank, banking institution, or trust
company; and bejore entering upon his duties as a member oj the board
oj directors he shall certijy under oath that he has complied with this
requirement and such certification shall be jiled with the secretary oj the
board oj directors. No member of the board oj directors serving on the
board oj directors on the ejfective date shall be subject to any oj the provi­
sions oj the three preceding sentences until the expiration oj his present
term oj office.
“ (c) As used in this section—
“ CO The term 1
State bank9 means any bank, banking association>
trust company, savings bank, or other banking institution which is en­
gaged in the business oj receiving deposits and which is incorporated
under the laws oj any State, Hawaii, Alaska, Puerto Rico, or the Virgin
Islands f or which is operating under the Code oj Law jor the District oj
Columbia (except a national bank), and includes any unincorporated
bank the deposits oj yohich are insured on the effective date under the
provisions oj this section.
“ (2) The term 1State member bank9 means any State bank which is a
member oj the Federal Reserve System, and the term 1
State nonmember
bank ’ means any State bank which is not a member oj the Federal Re­
serve System.
“ (3) The term 1
District bank 9 means any State bank operating under
the Code oj Law jor the District oj Columbia.
“ (4) The term 1
national member bank9 means any national bank
located in any oj the States oj the United States, the District oj Columbia,
Hawaii, Alaska, Puerto Rico, or the Virgin Islands which is a member
oj the Federal Reserve System.
“ (6) The term ‘ national nonmember bank1 means any national bank
located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands which is
not a member oj the Federal Reserve System.
“ (6) The term i mutual savings bank9 means a bank without capital
stock transacting a savings bank business, the net earnings oj which inure
wholly to the benejit oj its depositors ajter payment oj obligations jor any
advances by its organizers.
“ (7) The term 1savings bank9 means a bank (other than a mutual
savings bank) which transacts its ordinary banking business strictly as a
savings bank under State laws imposing special requirements on such



BANKING ACT OF 193 5

3

banks governing the manner of investing their funds and of conducting
their business: Provided, That the bank maintains, until maturity date
or until withdrawn, all deposits made with it (other than funds held by it
in a fiduciary capacity) as time savings deposits of the specific term type
or of the type where the right is reserved to the bank to require written
notice before permitting withdrawal: Provided further, That such bank
to be considered a savings bank must elect to become subject to regulations
of the Corporation with respect to the redeposit of maturing deposits and
prohibiting withdrawal of deposits by checking except in cases where such
withdrawal is permitted by law on the effective date from specifically
designated deposit accounts totaling not more than 15 per centum of the
bank1 total deposits.
s
“ (8) The term ‘ insured bank1 means any bank the deposits of which
are insured in accordance with the provisions of this section; and the
term ‘ noninsured bank1 means any bank the deposits of which are not so
insured.
“ (9) The term ‘ new bank1 means a new national banking association
organized by the Corporation to assume the insured deposits of an insured
bank closed on account of inability to meet the demands of its depositors
and otherwise to perform temporarily the functions prescribed in this
section.
“ (10) The term ‘ receiver1 includes a receiver, liquidating agent,
conservator, commission, person, or other agency charged by law with
the duty of winding up the affairs of a bank.
“ (11) The term ‘ board of directors1 means the board of directors of
the Corporation.
“ (12) The term ‘ depositJ means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for which
it has given or is obligated to give credit to a commercial, checking, savings,
time or thrift account, or which is evidenced by its certificate of deposit,
and trust funds held by such bank whether retained or deposited in any
department of such bank or deposited in another bank, together with such
other obligations of a bank as the board of directors shall find and shall
prescribe by its regulations to be deposit liabilities by general usage:
Provided, That any obligation of a bank which is payable only at an
office of the bank located outside the States of the United States, the District
of Columbia, Hawaii, Alaska, Puerto Rico, and the Virgin Islands,
shall not be a deposit for any of the purposes of this section or be included
as a part of total deposits or of an insured deposit: Provided further,
That any insured bank having its principal place of business in any of the
States of the United States or in the District of Columbia which maintains
a branch in Hawaii, Alaska, Puerto Rico, or the Virgin Islands may elect
to exclude from insurance under this section its deposit obligations which
are payable only at such branch, and upon so electing the insured bank
with respect to such branch shall comply with the provisions of this section
applicable to the termination of insurance by nonmember banks: Pro­
vided further, That the bank may elect to restore the insurance to such
deposits at any time its capital stock is unimpaired.
“ (13) The term 1
insured deposit1 means the net amount due to any
depositor for deposits in an insured bank (after deducting offsets) less
any part thereof which is in excess o f $5,000. Such net amount shall
be determined according to such regulations as the board of directors may
prescribe, and in determining the amount due to any depositor there shall
be added together all deposits in the bank maintained in the same capacity




4

BAN KIN G ACT OF 1 9 3 5

and the same right fo r his benefit either in his own name or in the names
of others, except trust funds which shall be insured as 'provided in para­
graph (9) of subsection (A) of this section.
“ (14) The term ‘ transferred deposit1means a deposit in a new bank or
other insured bank made available to a depositor by the Corporation as
payment of the insured deposit of such depositor in a closed bank, and
assumed by such new bank or other insured bank.
“ (15) The term ‘ branch1 includes any branch bank, branch office,
branch agency, additional office, or any branch place of business located
in any State of the United States or in Hawaii, Alaska, Puerto Rico, or
the Virgin Islands at which deposits are received or checks paid or money
lent.
“ (16) The term ‘ effective date9 means the date of enactment of the
Banking Act of 1935.
“ (d) 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 available for payment by the Secretary of the Treasury for
capital stock of the Corporation in an equal amount, which shall be
subscribed for 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. Receipts for 'payments by the United States for or on account of
such stock shall be issued by the Corporation to the Secretary of the
Treasury and shall be evidence of the stock ownership of the United
States. Every Federal Reserve bank shall subscribe to shares of stock
in the Corporation to an amount equal to one-half of the surplus of such
bank on January 1,1938, and its subscriptions shall be accompanied 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. The capital stock of the Corporation shall consist of the shares
subscribed for prior to the effective date. Such stock shall be without
nominal or par value, and shares issued prior to the effective date shall
be exchanged and reissued at the rate of one share for each $100 paid
into the Corporation for capital stock. The consideration received by
the Corporation for the capital stock shall be allocated to capital and to
surplus in such amounts as the board of directors shall prescribe. Such
stock shall have no vote and shall not be entitled to the payment of dividends.
“ (e) (1) Every operating State or national member bank, including
a bank incorporated since March 10, 1933, licensed on or before the
effective date by the Secretary of the Treasury' shall be and continue to
be, without application or approval, an insured bank and shall be
subject to the provisions of this section.
“ (2) After the effective date, every national member bank which is
authorized to commence or resume the business of banking, and every
State bank which is converted into a national member bank or which
becomes a member of the Federal Reserve System, shall be an insured
bank from the time it is authorized to commence or resume business or
becomes a member of the Federal Reserve System. The certificate herein
prescribed shall be issued to the Corporation by the Comptroller of the
Currency in the case of such national member bank, or by the Board of
Governors of the Federal Reserve System in the case of such State member
bank: Provided, That in the case of an insured bank which is admitted




BANKING ACT OF 1 9 3 5

5

to membership in the Federal Reserve System or an insured State bank
which is converted into a national member bank, such certificate shall not
be required, and the bank shall continue as an insured bank. Such
certificate shall state that the bank is authorized to transact the business
of banking in the case of a national member bank, or is a member of the
Federal Reserve System in the case of a State member bank, and that
consideration has been given to the factors enumerated in subsection (g)
of this section.
“ (f) (.1) Every bank which is not a member of the Federal Reserve
System which on June 30, 1935 was or thereafter became a member of
the Temporary Federal Deposit Insurance Fund or of the Fund For
Mutuals heretofore created pursuant to the provisions of this section,
shall be and continue to be, without application or approval, an insured
bank and shall be subject to the provisions of this section: Provided,
That any State nonmember bank which was admitted to the said Tem­
porary Federal Deposit Insurance Fund or the Fund For Mutuals but
which did not file on or before the effective date an October 1, 1934 cer­
tified statement and make the payments thereon required by law, shall
cease to be an insured bank on August 31, 1935: Provided further,
That no bank admitted to the said Temporary Federal Deposit Insur­
ance Fund or the Fund For Mutuals prior to the effective date shall,
after August 31, 1935, be an insured bank or have its deposits insured
by the Corporation, if such bank shall have permanently discontinued its
banking, operations prior to the effective date.
“ (2) Subject to the provisions of this section, any national non­
member bank, upon application by the bank and certification by the
Comptroller of the Currency in the manner prescribed in subsection (e)
of this section, and any State nonmember bank, upon application to and
examination by the Corporation and approval by the board of directors,
may become an insured bank. Before approving the application of any
such State nonmember bank, the board of directors shall give consideration
to the factors enumerated in subsection (g) of this section and shall deter­
mine, upon the basis of a thorough examination of such bank, that its
assets in excess of its capital requirements are adequate to enable it to
meet all its liabilities to depositors and other creditors as shown by the
books of the bank.
“ (g) The. factors to be enumerated in the certificate required under
subsection (e) and to be considered by the board of directors under sub­
section (f) shall be the following: The financial history and condition of
the bank, the adequacy of its capital structure, its future earnings pros­
pects, the general character of its management, the convenience and needs
of the community to be served by the bank, and whether or not its corporate
powers are consistent with the purposes of this section.
“ (h) (T) The assessment rate shall be one-twelfth of 1 per centum per
annum. The semiannual assessment for each insured bank shall be in
the amount of the product of one-half the annual assessment rate multi­
plied by an assessment base which shall be the average for six months of
the differences at the end of each calendar day between the total amount of
liability of the bank for deposits (according to the definition of the term
1deposit1 in and pursuant to paragraph (12) of subsection (c) of this
section, without any deduction for indebtedness of depositors) and the
total of such uncollected items as are included in such deposits and credited
subject to final payment: Provided, however, That the daily total of such
uncollected items shall be determined according to regulations prescribed




6

BAN KIN G ACT OF 1 9 3 5

by the board of directors upon a consideration of the factors of general
usage and ordinary time of availability, and for the purposes of such
deduction no item shall be regarded as uncollected for longer periods than
those prescribed by such regulations. Each insured bank shall, as a
condition to the right to deduct any specific uncollected item in determining
its assessment base, maintain such records as will readily permit veri­
fication of the correctness of the particular deduction claimed. The cer­
tified statements required to be filed with the Corporation under para­
graphs (2), (3), and (4) of this subsection shall be in such form and set
forth such supporting information as the board of directors shall prescribe.
The assessment payments required from insured banks under paragraphs
(2), (3), and (4) of this subsection shall be made in such manner and
at such time or times as the board of directors shall prescribe, provided
the time or times so prescribed shall not be later than sixty days after
filing the certified statement setting forth the amount of the assessment.
In the event thqt a separate Fund For Mutuals is established as provided
in subsection (iI), the board of directors from time to time may fix a lower
assessment rate operative for such period as the board may determine
which shall be applicable to insured mutual savings banks only, and the
remainder of this paragraph shall not be applicable to such banks.
“ (2) On or before the 15th day of July of each year, each insured bank
shall file with the Corporation a certified statement under oath showing
for the six months ending on the preceding June 30 the amount of the
assessment base and the amount of the semiannual assessment due to the
Corporation, determined in accordance with paragraph (1) of this sub­
section. Each insured bank shall pay to the Corporation the amount
of the semiannual assessment it is required to certify. On or before the
15th day of January of each year after 1936 each insured bank shall file
with the Corporation a similar certified statement for the six months
ending on the preceding December 31 and shall pay to the Corporation
the amount of the semiannual assessment it is required to certify.
“ (3) Each bank which becomes an insured bank according to the pro­
visions of subsection (e) or (J) of this section shall, on or before the 15th,
day of November 1935, file with the Corporation a certified statement
under oath showing the amount of the assessment due to the Corporation
fo r the period ending December 31, 1935, which shall be an amount
equal to the product of one-third the annual assessment rate multiplied
by the assessment base determined in accordance with paragraph (.1)
of this subsection, except that the assessment base shall be the averagefor the
31 days in the month of October 1935, and payment shall be made to the
Corporation of the amount of the assessment so required to be certified.
Each such bank shall, on or before the 15th day of January 1936, file
with the Corporation a certified statement under oath showing the amount
of the semiannual assessment due to the Corporation for the period ending
June 30,1936, which shall be an amount equal to the product of one-half
the annual assessment rate multiplied by the assessment base determined
in accordance with paragraph (1) of this subsection, except that the assess­
ment base shall be the average for the days of the months of October,
November and December of 1935, and payment shall be made to the Cor­
poration of the amount of the assessment so required to be certified.
“ (4) Each bank which becomes an insured bank after the effective date
shall be relieved from complying with the provisions of paragraph (2) of
this subsection until it has operated as an insured bank for a full semi­
annual period ending on June 30 or December 31 as the case may be.




BANKING ACT OF 1 9 3 5

7

Each such bank, on or bejore the jorty-fijth day ajter its first day oj oper­
ation as an insured bank, shall jile with the Corporation its jirst certijied
statement which shall be under oath and shall show the amount oj the
assessment base determined in accordance with paragraph (1) oj this sub­
section, except that the assessment base shall be the average jor the jirst
thirty-one calendar days it operates as an insured bank. Each such cer­
tijied statement shall also show as the amount oj the jirst assessment due
to the Corporation the prorated portion (Jor the period between its jirst day
oj operation as an insured bank and the next succeeding last day oj June
or December, as the case may be) oj an amount equal to the product oj
one-halj the annual assessment rate multiplied by the base required to be
set jorth on its jirst certijied statement. Each bank which becomes an
insured bank ajter the effective date which has not operated as an insured
bank jor a jull semiannual period ending on June 30 or December 31,
as the case may be, shall, on or bejore the 15th day oj the jirst month
thereafter (except that banks becoming insured in June or December shall
have thirty-one additional days) jile with the Corporation its second cer­
tijied statement under oath showing the amount oj the assessment base
and the amount oj the semiannual assessment due to the Corporation.
Such assessment base and amount shall be determined in accordance with
paragraph (1) oj this subsection, except that ij the bank became an in­
sured bank in the month oj December or June the assessment base shall
be the average jor the jirst thirty-one calendar days it operates as an in­
sured bank, and except that ij it became an insured bank in any other
month than December or June the assessment base shall be the average jor
the days between its fi/rst day oj operation as an insured bank and the
next succeeding last day oj June or December, as the case may be. Each
bank required to jile a certijied statement under this paragraph shall pay
to the Corporation the amount oj the assessment the bank is required to
certify.
“ (5) Each bank which shall be and continue without application or
approval an insured bank in accordance with the provisions oj subsection
(e) or (j) oj this section, shall, in lieu oj all right to refund (except as
authorized in paragraph (3) oj subsection (i)), be credited with any
balance to which such bank shall become entitled upon the termination of
the said Temporary Federal Deposit Insurance Fund or the Fund For
Mutuals. The credit shall be applied by the Corporation toward the
payment oj the assessment next becoming due from such bank and upon
succeeding assessments until the credit is exhausted.
“ (6) Any insured bank which jails to jile any certijied statement
required to be jiled by it in connection with determining the amount oj
any assessment payable by the bank to the Corporation may be compelled
to jile such statement by mandatory injunction or other appropriate
remedy in a suit brought jor such purpose by the Corporation against the
barik and any officer or officers thereoj in any court oj the United States oj
competent jurisdiction in the district or territory in which such bank is
located.
“ (7) The Corporation, in a suit brought at law or in equity in any
court oj competent jurisdiction, shall be entitled to recover jrom any
insured bank the amount oj any unpaid assessment lawjully payable by
such insured bank to the Corporation, whether or not such bank shall
have filed any such certified statement and whether or not suit shall have
been brought to compel the bank to file any such statement.




8

B AN KIN G ACT OF 19 3 5

“ (8) Should any national member bank or any insured national non­
member bank fail to file any certified statement required to be filed by such
bank under any provision oj this subsection, or jail to pay any assessment
required to be paid by such bank under any provision oj this section, and
should the bank not correct such jailure within thirty days ajter written
notice has been given by the Corporation to an officer oj the bank, citing
this paragraph, and stating that the bank has jailed to file or pay as
required by law, all the rights, privileges, and jranchises oj the bank
granted to it under the National Bank Act or under the provisions oj
this Act, as amended, shall be thereby jorjeited. Whether or not the
penalty provided in this paragraph has been incurred shall be determined
and adjudged in the manner provided in the sixth paragraph oj section 2
oj this Act, as amended. The remedies provided in this paragraph and
in the two preceding paragraphs shall not be construed as limiting any
other remedies against any insured bank, but shall be in addition thereto.
“ (9) Trust junds held by an insured bank in a fiduciary capacity
whether held in its trust or deposited in any other department or in
another bank shall be insured in an amount not to exceed $5,000 jor each
trust estate, and when deposited by the fiduciary bank in another insured
bank such trust junds shall be similarly insured to the fiduciary bank
according to the trust estates represented. Notwithstanding any other
provision oj this sectiony such insurance shall be separate jrom and
additional to that covering other deposits ojsthe owners oj such trust junds
or the beneficiaries oj such trust estates: Providedf That where the fiduci­
ary bank deposits any oj such trust junds in other insured banks, th&
amount so held by other insured banks on deposit shall not jor the purpose
oj any certified statement required under paragraph (2), (8), or (4) oj
this subsection be considered to be a deposit liability oj the fiduciary bank,
but shall be considered to be a deposit liability oj the bank in which such
junds are so deposited by such fiduciary bank. The board oj directors
shall have power by regulation to prescribe the manner oj reporting and
oj depositing such trust junds.
“ (i) (1) Any insured bank (except a national member bank or State
member bank) may, upon not less than ninety days9 written notice to the
Corporation, and to the Reconstruction Finance Corporation ij it owns or
holds as pledgee any prejerred stock, capital note§, or debentures oj such
bcmk, terminate its status, as an insured bagjcr^ Whenever the board oj
directors shall find that an insured bank or its directors or trustees have
continued unsaje or unsound practices in conducting the business oj such
bank, or have knowingly or negligently permitted any oj its officers or
agents to violate any provision oj any law or regulation to which the insured
bank is subject, the board oj directors shall first give to the Comptrdller
oj the Currency in the case oj a national bank or a District bank, to the
authority having supervision oj the bank in the case oj a State bank, or
to the Board oj Governors oj the Federal Reserve System in the case oj a
State member bank, a statement with respect to such practices or violations
jo r the purpose oj securing the correction thereoj. Unless such correc­
tion shall be made within one hundred and twenty days or such shorter
period oj time as the Comptroller oj the Currency, the State authority,
or Board oj Governors oj the Federal Reserve System, as the case may
be, shall require, the board oj directors, i j it shall determine to proceed
jurther, shall give to the bank not less than thirty days’ written notice oj
intention to terminate the status oj the bank as an insured bank, and shall
fix a time and place jo r a hearing bejore the board oj directors or bejore a




BANKING ACT OF 1 9 3 5

9

person designated by it to conduct such hearing, at which evidence may be
produced, and upon such evidence the board of directors shall make
written findings which shall be conclusive. Unless the bank shall appear
at the hearing by a duly authorized representative, it shall be deemed
to have consented to the termination of its status as an insured bank. I f
the board of directors shall find that any violation specified in such notice
has been established, the board of directors may order that the insured
status of the bank be terminated on a date subsequent to such finding and
to the expiration of the time specified in such notice of intention. The
Corporation may publish notice of such termination and the bank shall
give notice of such termination to each of its depositors at his last address
of record on the books of the bank, in such manner and at such time as the
board of directors may find to be necessary and may orderfor the protection
of depositors. After the termination of the insured status of any bank
under the provisions of this paragraph, the insured deposits of each depos­
itor in the bank on the date of such termination, less all subsequent with­
drawals from any deposits of such depositor, shall continue for a period
of two years to be insured, and the bank shall continue to pay to the Cor­
poration assessments as in the case of an insured bank during such period.
No additions to any such deposits and no new deposits in such bank
made after the date of such termination shall be insured by the Corpora­
tion, and the bank shall not advertise or hold itself out as having insured
deposits unless in the same connection it shall also state with equal prom­
inence that such additions to deposits and new deposits made after
$uch date are not so insured. Such bank shall, in all other respects,
be subject to the duties and obligations of an insured bank for the period
of two years from the date of such termination, and in the event that such
bank shall be closed on account of inability to meet the demands of its
depositors within such period of two years, the Corporation shall have
the same powers' and rights with respect to such bank as in case of an
insured bank.
“ (2) Whenever the insured status of a State member bank shall be
terminated by action of the board of directors, the Board of Governors of
the Federal Reserve System shall terminate its membership in the Federal
Reserve System in accordance with the provisions of section 9 of this
Act, and whenever the insured status of a national member bank shall
be so terminated the Comptroller of the Currency shall appoint a receiver
for the bank, which shall be the Corporation whenever the bank shall be
unable to meet the demands of its depositors. Whenever a member bank
shall cease to be a member of the Federal Reserve System, its status as an
insured bank shall, without notice or other action by the board of direc­
tors, terminate on the date the bank shall cease to be a member of the
Federal Reserve System, with like effect as if its insured status had been
terminated on said date by the board of directors after proceedings under
paragraph (1) of this subsection.
“ (S) I f any nonmember bank which becomes an insured bank
under the provisions of paragraph (.1) of subsection (f) of this section
shall elect, within thirty days after the effective date, not to continue as an
insured bank, and shall within such period give written notice to the
Corporation of its election, in accordance with regulations to be pre­
scribed by the board of directors, and to the Reconstruction Finance
Corporation if it owns or holds as pledgee any preferred stock, capital
notes, or debentures of such bank, it shall cease to be an insured bank
and cease to be subject to the provisions of this section and the rights of




10

BAN KIN G ACT OF 1 9 3 5

the bank (including its right to any refund) shall be as provided by law
existing prior to the effective date. The board of directors shall cause
notice of termination of insurance to be given to the depositors of such
bank by publication or otherwise as the board of directors may determine,
and the deposits in such bank shall continue to be insured for twenty
days beyond such thirty day period.
“ (4) Whenever the liabilities of an insured bank for deposits shall
have been assumed by another insured bank or banks, the insured status
of the bank whose liabilities are so assumed shall terminate on the date
of receipt by the Corporation of satisfactory evidence of such assumption
with like effect as if its insured status had been terminated on said date
by the board of directors after proceedings under paragraph (1) of this
subsection: Provided, Thai if the bank whose liabilities are so assumed
gives to its depositors notice of such assumption within thirty days after
such assumption takes effect, by publication or by any reasonable means,
in accordance with regulations to be prescribed by the board of directors,
the insurance of its deposits shall terminate at the end. of six months from
the date such assumption takes effect, and such bank shall thereupon be
relieved of all future obligations to the Corporation, including the obliga­
tion to pay future assessments.
‘1
(j) Upon the date of enactment of the Banking Act of 1988, the Corpo­
ration 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. All suits of a civil nature at common
law or in equity to which the Corporation shall be a party shall be deemed
to arise under the laws of the United States: Provided, That any such
suit to which the Corporation is a party in its capacity as receiver of a
State bank and which involves only the rights or obligations of depositors,
creditors, stockholders and such State bank under State law shall not be
deemed to arise under the laws of the United States. No attachment or
execution shall be issued against the Corporation or its property before
final judgment in any suit, action, or proceeding in any State, county,
municipal, or United States court. The board of directors shall designate
an agent upon whom service of process may be made in any State, Terri­
tory, or jurisdiction in which any insured bank is located.
“ 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, fix
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 compensation
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 hoard 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 offi­
cers or agents, all powers specifically granted by the provisions of this sec­
tion and such incidental powers as shall be necessary to carry out the
powers so granted.




BANKING ACT OF 19 3 5

11

“ Eighth. To make examinations of and to require information and
reports jrom banks, as provided in this section.
“ Ninth. To act as receiver.
“ Tenth. To prescribe by its board oj directors such rules and regula­
tions as it may deem necessary to carry out the provisions oj this section.
“ (k) (1) The board oj directors shall administer the affairs oj the
Corporation jairly and impartially and without discrimination. The
board oj directors oj 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 jree use oj the United
States mails in the same manner as the executive departments oj the
Government. The Corporation with the consent oj any Federal Reserve
bank or oj any board, commission, independent establishment, or executive
department oj the Government, including any field service thereof, may
avail itselj oj the use oj information, services, and jacilities thereoj in
carrying out the provisions oj this section.
“ (2) The board oj directors shall appoint examiners who shall have
power, on behalj oj the Corporation, to examine any insured State non­
member bank (except a District bank), any State nonmember bank making
application to become an insured bank, and any closed insured bank,
whenever in the judgment oj the board oj directors an examination oj the
bank is necessary. Such examiners shall have like power to examine,
with the written consent oj the Comptroller oj the Currency, any national
bank or District bank, and, with the written consent oj the Board oj
Governors oj the Federal Reserve System, any State member bank. Each
such examiner shall have power to make a thorough examination oj all
the affairs oj the bank and in doing so he shall have power to administer
oaths and to examine and take and preserve the testimony oj any oj the
officers and agents thereoj, and shall make a full and detailed report of
the condition of the bank to the Corporation. The board of directors in
like manner shall appoint claim agents who shall have power to investi­
gate and examine all claims for insured deposits and transferred deposits.
Each claim agent shall have power to administer oaths and to examine
under oath and take and preserve the testimony of any persons relating
to such claims. The provisions of sections 184 to 186 (both inclusive) of
the Revised Statutes ( U. S. C., title 5, secs. 94 to 96) are hereby extended
to examinations and investigations authorized by this paragraph.
“ (8) Each insured State nonmember bank (except a District bank)
shall make to the Corporation reports of condition in such form and at
such times as the board of directors may require. The board of directors
may require such reports to be published in such manner, not incon­
sistent with any applicable law, as it may direct. Every such bank which
fails to make or publish any such report within such time, not less than
jive days, as the board of directors may require, shall be subject to a
penalty of not more than $100 for each day of such failure recoverable by
the Corporation for its use.
“ (4) The Corporation shall have access to reports of examinations
made by, and reports of condition made to, the Comptroller of the Cur­
rency or any Federal Reserve bank, may accept any report made by or to
any commission, board, or authority having supervision of a State non­
member bank (except a District bank), and may furnish to the Comp­
troller of the Currency, to any Federal Reserve bank, and to any such
commission, board, or authority, reports of examinations made on behalf
of, and reports of condition made to, the Corporaticn.




12

BANKING ACT OF 19 3 5

“ (I) (1) The Temporary Federal Deposit Insurance Fund and the
Fund For Mutuals heretofore created pursuant to the provisions of this
section are hereby consolidated into a Permanent Insurance Fund for
insuring deposits, and the assets therein shall be held by the Corporation
fo r the uses and purposes of the Corporation: Provided, That the obligations
,
to and rights of the Corporation, depositors, banks, and other persons
arising out of any event or transaction prior to the effective date shall
remain unimpaired. On and after the effective date, the Corporation shall
insure the deposits of all insured banks as provided in this section:
Provided, That the insurance shall apply only to deposits of insured
banks which have been made available since March 10, 1938, for with­
drawal in the usual course of the banking business: Provided further,
That if any insured bank shall, without the consent of the Corporation,
release or modify restrictions on or deferments of deposits which had not
been made available for withdrawal in the usual course of the banking
business on or before the effective date, such deposits shall not be insured.
The maximum amount of the insured deposit of any depositor shall be
$5,000. The Corporation, in the discretion of the board of directors, may
open on its books solely for the benefit of mutual savings banks and deposi­
tors therein a separate Fund For Mutuals. I f such Fund is opened, all
assessments upon mutual savings banks shall be paid into such Fund and
the Permanent Insurance Fund of the Corporation shall cease to be liable
for insurance losses sustained in mutual savings banks: Provided, That
the capital assets of the Corporation shall be so liable and all expenses of
operation of the Corporation shall be allocated between such Funds on an
equitable basis.
“ (2) For the purposes of this section, an insured bank shall be deemed
to have been closed on account of inability to meet the demands of its
depositors in any case in which it has been closed for the purpose of
liquidation without adequate provision being made for payment of its
depositors.
“ (3) Notwithstanding any other provision of law, whenever any
insured national bank or insured District bank 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 de­
positors, the Comptroller of the Currency shall appoint the Corporation
receiver for such closed bank, and no other person shall be appointed as
receiver of such closed bank.
“ (4) It shall be the duty of the Corporation as such receiver to realize
upon the assets of such closed bank, having due regard to the condition of
credit in the locality; to enforce the individual liability of the stockholders
and directors thereof; and to wind up the affairs of such closed bank in
conformity with the provisions of law relating to the liquidation of closed
national banks, except as herein otherwise provided. The Corporation
shall retain for its own account such portion of the amounts realized from
such liquidation as it shall be entitled to receive on account of its subro­
gation to the claims of depositors, and it shall pay to depositors and other
creditors the net amounts available for distribution to them. With
respect to any such closed bank, the Corporation as such receiver shall
have all the rights, powers, and privileges now possessed by or hereafter
granted by law to a receiver of an insolvent national bank.
“ (5) Whenever any insured State bank (except a District bank) shall
have been closed by action of its board of directors or by the authority
having supervision of such bank, as the case may be, on account of




BANKING ACT OF 1 9 3 5

13

inability to meet the demands of its depositors, the Corporation shall
accept appointment as receiver thereof, if such appointment is tendered
by the authority having supervision of such bank and is authorized or
permitted by State law. With respect to any such insured Stale bank,
the Corporation as such receiver shall possess all the rights, powers and
privileges granted by State law to a receiver of a State bank.
lt{6) Whenever an insured bank shall have been closed on account of
inability to meet the demands of its depositors, payment of the insured
deposits in such bank shall be made by the Corporation as soon as possi­
ble, subject to the provisions of paragraph (7) of this subsection, either
(A) by making available to each depositor a transferred deposit in a new
bank in the same community or in another insured bank in an amount
equal to the insured deposit of such depositor and subject to withdrawal
on demand, or (B ) in such other manner as the board of directors may
prescribe: Provided, That the Corporation, in its discretion, may require
proof of claims to be filed before paying the insured deposits, arm that in
any case where the Corporation is not satisfied as to the validity of a
claim fo r an insured deposit, it may require the final determination of a
court of competent jurisdiction before paying such claim.
“ (7) In the case of a closed national bank or District bank, the Corpo­
ration, upon the payment of any depositor as provided in paragraph (6)
of this subsection, shall be subrogated to all rights of the depositor against
the closed bank to the extent of such payment. In the case of any other
closed insured bank, the Corporation shall not make any payment to any
depositor until the right of the Corporation to be subrogated to the rights
of such depositor on the same basis as provided in the case of a closed
national bank under this section shall have been recognized either by
express provision of State law, by allowance of claims by the authority
having supervision of such bank, by assignment of claims by depositors,
or by any other effective method. In the case of any closed insured bank,
such subrogation shall include the right on the part of the Corporation to
receive the same dividends from the proceeds of the assets of such closed
bank and recoveries on account of stockholders9 liability as would have
been payable to the depositor on a claim for the insured deposit, but such
depositor shall retain his claim for any uninsured portion of his deposit:
Provided, That the rights of depositors and other creditors of any State
bank shall be determined in accordance with the applicable provisions of
State law.
“ (8) A s soon as possible after the closing of an insured bank, the Cor­
poration, if it finds that it is advisable and in the interest of the depositors
of the closed bank or the public, shall organize a new national bank to
assume the insured deposits of such closed bank and otherwise to perform
temporarily the functions hereinafter provided for. The new bank shaU
have its place of business in the same community as the closed bank.
“ (9) The articles of association and the organization certificate of the
new bank shall be executed by representatives designated by the Corpora­
tion. No capital stock need be paid in by the Corporation. The new
bank shall not have a board of directors, but shall be managed by an
executive officer appointed by the board of directors of the Corporation
who shaU be subject to its directions. In all other respects the new bank
shall be organized in accordance with the then existing provisions of law
relating to the organization of national banking associations. The new
bank may, with the approval of the Corporation, accept new deposits
which shall be subject to withdrawal on demand and which, except where




14

BANKING ACT OF 1 9 3 5

the new bank is the only bank in the community, shall not exceed $5,000
jrom any depositor. The new bank, without application to or approval
by the Corporation, shall be an insured bank and shall maintain on
deposit with the Federal Reserve bank oj. its district reserves in the amount
required by law jor member banks, but it shall not be required to subscribe
jor stock oj the Federal Reserve bank. Funds oj the new bank shall be
kept on hand in cash, invested in obligations oj the United States, or in
obligations guaranteed as to principal and interest by the United States,
or deposited with the Corporation, with a Federal Reserve bank, or, to the
extent oj the insurance coverage thereon, with an insured bank. The
new bank, unless otherwise authorized by the Comptroller oj the Cur­
rency, shall transact no business except that authorized by this section and
as may be incidental to its organization. Notwithstanding any other
provision oj law the new bank, its jranchise, property, and income shall be
exempt jrom all taxation now or hereajter imposed by the United States,
by any Territory, dependency, or possession thereoj, or by any State,
county, municipality, or local taxing authority.
“ (10) Upon the organization oj a new bank, the Corporation shall
promptly make available to it an amount equal to the estimated insured
deposits oj such closed bank plus the estimated amount oj the expenses oj
operating the new bank, and shall determine as soon as possible the amount
due each depositor jor his insured deposit in the closed bank, and the
total expenses oj operation oj the new bank. Upon such determination,
the amounts so estimated and made available shall be adjusted to con­
jorm to the amounts so determined. Earnings oj the new bank shall be
paid over or credited to the Corporation in such adjustment. I j any new
bank, during the period it continues its status as such, sustains any losses
with respect to which it is not effectively protected except by reason oj
being an insured bank, the Corporation shall jurnish to it additional
junds in the amount oj such losses. The new bank shall assume as
transjerred deposits the payment oj the insured deposits oj such closed
bank to each oj its depositors. Oj the amounts so made available, the
Corporation shall transjer to the new bank, in cash, such sums as may
be necessary to enable it to meet its expenses oj operation and immediate
cash demands on such transjerred deposits, and the remainder oj such
amounts shall be subject to withdrawal by the new bank on demand.
“ (11) Whenever in the judgment oj the board oj directors it is desira­
ble to do so, the Corporation shall cause capital stock oj the new bank to
be offered jor sale on such terms and conditions as the board o j directors
shall deem advisable in an amount sufficient, in the opinion oj the board
oj directors, to make possible the conduct oj the business oj the new bank
on a sound basis, but in no event less than that required by section 51S8
oj the Revised Statutes, as amended (U. S. C., Supp. VII, title 12, sec.
51), jor the organization oj a national bank in the place where such new
bank is located. The stockholders oj the closed injured bank shall be
given the jirst opportunity to purchase any shares oj common stock so
offered. Upon prooj that an adequate amount oj capital stock in the
new bank has been subscribed and paid jor in cash, the Comptroller oj
the Currency shall require the articles oj association and the organiza­
tion certificate to be amended to conjorm to the requirements jor the
organization oj a national bank, and thereajter, when the requirements
oj law with respect to the organization oj a national bank have been com­
plied with, he shall issue to the bank a certificate oj authority to commence
business, and thereupon the bank shall cease to have the status oj a new




BANKING ACT OF 1 9 3 5

15

bank, shall be managed by directors elected by its own shareholders and
may exercise all the powers granted by law, and it shall be subject to all
the provisions oj law relating to national banks. Such bank shall there­
after be an insured national bank, without certification to or approval
by the Corporation.
“ (12) I j the capital stock oj the new bank is not offered jor sale, or ij
an adequate amount oj capital jor such new bank is not subscribed and
paid for, the board oj directors may offer to transjer its business to any
insured bank in the same community which will take over its assets,
assume its liabilities, and pay to the Corporation jor such business such
amount as the board oj directors may deem adequate; or the board oj
directors in its discretion may change the location oj the new bank to
the office oj the Corporation or to some other place or may at any time
wind up its affairs as herein provided. Unless the capital stock oj the
new bank is sold or its assets are taken over and its liabilities are assumed
by an insured bank as above provided within two years jrom the date oj
its organization, the Corporation shall wind up the affairs oj such bank,
ajter giving such notice, ij any, as the Comptroller oj the Currency may
require, and shall certijy to the Comptroller oj the Currency the termina­
tion oj the new bank. Thereajter the Corporation shall be liable jor the
obligations oj such bank and shall be the owner oj its assets. The pro­
visions oj sections 5220 and 5221 oj the Revised Statutes (U. S. C., title
12, secs. 181 and 182) shall not apply to such new banks.
“ (m) (1) The Corporation as receiver oj a closed national bank or
District bank shall not be required to jurnish bond and shall have the
right to appoint an agent or agents to assist it in its duties as such
receiver, and all jees, compensation, and expenses oj liquidation and
administration thereof shall be fixed by the Corporation, subject to the
approval oj the Comptroller oj the Currency, and may be paid by it out
oj junds coming into its possession as such receiver. The Comp­
troller oj the Currency is authorized and empowered to waive and relieve
the Corporation jrom complying with any regulations oj the Comptroller
oj the Currency with respect to receiverships where in his discretion such
action is deemed advisable to simplijy administration.
“ (2) Payment oj an insured deposit to any person by the Corporation
shall discharge the Corporation, and payment oj a transjerred deposit
to any person by the new bank or by an insured bank in which a transjerred
deposit has been made available shall discharge the Corporation and such
new bank or other insured bank, to the same extent that payment to such
person by the closed bank would have discharged it jrom liability jor the
insured deposit.
“ (3) Except as otherwise prescribed by the board oj directors, neither
the Corporation nor such new bank or other insured bank shall be required
to recognize as the owner oj any portion oj a deposit appearing on the
records oj the closed bank under a name other than that oj the claimant,
any person whose name or interest as such owner is not disclosed on the
records oj such closed bank as part owner oj said deposit, ij such recog­
nition would increase the aggregate amount oj the insured deposits in
such closed bank.
“ (4) The Corporation may withhold payment oj such portion oj the
insured deposit oj any depositor in a closed bank as may be required to
provide jor the payment oj any liability oj such depositor as a stockholder
oj the closed bank, or oj any liability oj such depositor to the closed bank
or its receiver, which is not offset against a claim due from such bank,




16

BAN KIN G ACT OF 1 9 3 5

pending the determination and payment of such liability by such depositor
or any other person liable therefor.
u(5) I f , after the Corporation shall have given at least three months}
notice to the depositor by mailing a copy thereof to his last known address
appearing on the records of the closed bank, any depositor in the closed
bank shall fail to claim his insured deposit from the Corporation within
eighteen months after the appointment of the receiverfor the closed bank, or
shallfail within such period to claim or arrange to continue the transferred
deposit with the new bank or with the other insured bank which assumes
liability therefor, all rights of the depositor against the Corporation with
respect to the insured deposit, and against the new bank and such other
insured bank with respect to the transferred deposit, shall be barred, and
all rights of the depositor against the closed bank and its shareholders,
or the receivership estate to which the Corporation may have become sub­
rogated, shall thereupon revert to the depositor. The amount of any
transferred deposits not claimed within such eighteen months1period, shall
be refunded to the Corporation.
“ In) (1) Money of the Corporation not otherwise employed shall be
invested in obligations of the United States or in obligations guaranteed
as to principal and interest by the United States, except that for temporary
periods, in the discretion of the board of directors, funds of the Corpora­
tion 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 deposi­
tary of public moneys and financial agent of the Government as may be
required of it.
“ (2) Nothing contained in this section shall be construed to prevent
the Corporation from making loans to national banks closed by action
of the Comptroller of the Currency, or by vote of their directors, or to State
member banks closed by action of the appropriate State authorities, or
by vote of their directors, or from entering into negotiations to secure
the reopening of such banks.
“ (3) Receivers or liquidators of insured banks closed on account of
inability to meet the demands of their depositors shall be entitled to offer
the assets of such banks for sale to the Corporation or as security for loans
from the Corporation, upon receiving permission from the appropriate
State authority in accordance with express provisions of State law in the
case of insured State banks, or from the Comptroller of the Currency in
the case of national banks or District banks. The proceeds of every such
sale or loan shall be utilized for the same purposes and in the same manner
as other funds realized from the liquidation of the assets of such banks.
The Comptroller of the Currency may, in his discretion, pay dividends on
proved claims at any time after the expiration of the period of advertise­
ment made pursuant to section 5235 of the Revised Statutes (U. S. C.,
title 12, sec. 193), and no liability shall attach to the Comptroller of the
Currency or to the receiver of any national bank by reason of any such
payment for failure to pay dividends to a claimant whose claim is not
proved at the time of any such payment. The Corporation, in its dis­
cretion, may make loans on the security of or may purchase and liquidate
or sell any part of the assets of an insured bank which is now or may
hereafter be closed on account of inability to meet the demands of its




BANKING ACT OF 1 9 3 5

17

depositors, but in any case in which the Corporation is acting as receiver
oj a closed insured bank, no such loan or purchase shall be made without
the approval oj a court oj competent jurisdiction.
“ Of) Until July 1, 1936, whemver in the judgment oj the board oj
directors such action will reduce the risk or avert a threatened loss to the
Corporation and will jacilitate a merger or consolidation oj an insured
bank with another insured bank, or will jacilitate the sale oj the assets
oj an open or closed insured bank to and assumption oj its liabilities
by another insured bank, the Corporation may, upon such terms and
conditions as it may determine, make loans secured in whole or in part
by assets oj an open or closed insured bank, which loans may be in
subordination to the rights oj depositors and other creditors, or the Cor­
poration may purchase any such assets or may guarantee any other
insured bank against loss by reason oj its assuming the liabilities and
purchasing the assets oj an open or closed insured bank. Any insured
national bank or District bank, or, with the approval oj the Comptroller
oj the Currency, any receiver thereof, is authorized to contract jor such
sales Q loans and to pledge any assets oj the bank to secure such loans.
r
“ (o) (1) The Corporation is authorized and empowered to issue and to
have outstanding its notes, debentures, bonds, or other such obligations, in a
par amount aggregating not more than three times the amount received
by the Corporation in payment oj its capital stock and in payment oj the
assessments upon insured banks jor the year 1936. The notes, deben­
tures, bonds, and other such obligations issued under this subsection shall
be redeemable at the option oj the Corporation bejore maturity in such
manner as may be stipulated in such obligations, and shall bear such
rate ox rates oj interest, and shall mature at such time or times, as may be
determined by the Corporation: Provided, That the Corporation may sell
on a discount basis short-term obligations payable at maturity without
interest. The notes, debentures, bonds, and other such obligations oj the
Corporation may be secured by assets oj the Corporation in such manner
as shall be prescribed by its board oj directors. Such obligations may be
offered jor sale at such price or prices as the Corporation may determine.
“ (2) The Secretary oj the Treasury, in his discretion, is authorized
to purchase any obligations oj the Corporation to be issued hereunder,
and jo r such purpose the Secretary oj the Treasury is authorized to use
as a public-debt transaction the proceeds oj the sale oj any securities hereajter issued under the Second Liberty Bond Act, as amended, and the
purposes jo r which securities may be issued under the Second Liberty
Bond Act, as amended, are extended to include such purchases: Provided,
That ij the Reconstruction Finance Corporation jails jor any reason to
purchase any oj the obligations oj the Corporation as provided in sub­
section (b) oj section 5e oj the Reconstruction Finance Corporation Act,
as amended, the Secretary oj the Treasury is authorized and directed to
purchase such obligations in an amount equal to' the amount oj such
obligations the Reconstruction Finance Corporation so jails to purchase:
Provided jurther, That the Secretary oj the Treasury is authorized and
directed, whenever in the judgment oj the board oj directors oj the Cor­
poration additional junds are required jor insurance purposes, to pur­
chase obligations oj the Corporation in an additional amount oj not to
exceed $250,000,000 par value: Provided jurther, That the proceeds
derived jrom the purchase by the Secretary oj the Treasury oj any such
obligations shall be used by the Corporation solely in carrying out its
20366 0 — 58------ 43




18

B AN KIN G ACT OF 1 9 3 5

junctions with respect to such insurance. The Secretary of the Treasury
may, at any time, sell any of the obligations of the Corporation acquired
by him under this subsection. All redemptions, purchases, and sales
by the Secretary of the Treasury of the obligations of the Corporation
shall be treated as public-debt transactions of the United States.
u(p) All notes, debentures, bonds, or other such obligations issued by
the Corporation shall be exempt, both as to principal and interest, from
all taxation {except estate and inheritance taxes) now or hereafter imposed
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 franchise, its capital, reserves, and sur­
plus, and its income, shall be excempt from all taxation now or hereafter
imposed by the United States, by any Territory, dependency, or possession
thereof, or by any State, county, municipality, or local taxing authority,
except that any real property of 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 forms
of notes, debentures, bonds, or other such obligations as it may need for
issuance under this Act, the Secretary of the Treasury is authorized to
prepare such forms as shall be suitable and approved by the Corporation,
to be held in the Treasury subject to delivery, upon order of the Corpora­
tion. The engraved plates, dies, bed pieces, and other material executed
in connection therewith shall remain in the custody of the Secretary of the
Treasury. The Corporation shall reimburse the Secretary of the Treasury
for any expenses incurred in the preparation, custody, arid delivery of such
notes, debentures, bonds, or other such obligations.
“ (r) The Corporation shall annually make a report of its operations
to the Congress as soon as practicable after the 1st day of January in each
year.
“ (s) Whoever, for the purpose of obtaining any loan from the Cor­
poration, or any extension or renewal thereof, or the acceptance, release,
or substitution of security therefor, or for the purpose of inducing the
Corporation to purchase any assets, or for the purpose of obtaining the
payment of any insured deposit or transferred deposit or the allowance,
approval, or payment of any claim, or for the purpose of influencing in
any way the action of the Corporation under this section, makes any
statement, knowing it to be false, or willfully overvalues any security,
shall be punished by a fine of not more than $5,000, or by imprisonment
fo r 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 (I) 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 obliga­
tion or coupon issued or purporting to have been issued by the Corpora­
tion, 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,



BANKING ACT OF 1 9 3 5

19

funds, securities, or other things of value, whether belonging to it or
pledged, or otherwise entrusted 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 of the Corporation, makes
any false entry in any book, report, or statement of or to the Corporationf
or without being duly authorized draws any order or issues, jrate forth,
or assigns any note, debenture, & Z or other such obligation, or dra#,
07w ,
o/ 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.
“ (a) (I) iVo individual, association, partnership, or corporation shall
use the words ‘ Federal Deposit Insurance Corporation9 or a combination
,
of any three of these four words, as the name or a part thereof under
which he or it shall do business. iVo individual, association, partnershipr
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
United States or any instrumentality thereof; and no insured bank 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, part­
nership, 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.
“ (2) Every insured bank shall display at each place of business main­
tained by it a sign or signs, and shall include in advertisements relating
to deposits a statement to the effect that its deposits are insured by the
Corporation. The board of directors shall prescribe by regulation the
forms of such signs and the manner of display and the substance of such
statements and the manner of use. For each day an insured bank con­
tinues to violate any provision of this paragraph or any lawful provision
of said regulations, it shall be subject to a penalty of not more than $100r
recoverable by the Corporation for its use.
“ (3) No insured bank shall pay any dividends on its capi al stock or
interest on its capital notes or debentures (if such interest is required to
be paid only out of net profits) while it remains in default in the payment
of any assessment due to the Corporation; and any director or officer o f
any insured bank who participates in the declaration or payment of any
such dividend shall, upon conviction, be fined not more than $1,000, or
imprisoned not more than one year, or both: Provided, That if such default
is due to a dispute between the insured bank and the Corporation over
the amount of such assessment, this paragraph shall not apply, if such
bank shall deposit security satisfactory to the Corporation for payment
upon final determination of the issue.
“ (4) Unless, in addition to compliance with other provisions of lawr
it shall have the prior written consent of the Corporation, no insured bank
shall enter into any consolidation or merger with any nonin ured banky
or assume liability o pay any deposits made in any noninsured bank, or
transfer assets to any noninsured bank in consideration of the assumption
of liability for any portion of the deposits made in such insured bankr
and no insured State nonmember bank {except a District bank) without
such consent shall reduce the amount or retire any part of its common
or preferred capital stock, or retire any part of its capital notes or
debentures.




20

BAN KIN G ACT OF 19 3 5

“ (5) No State nonmember insured bank ( except a District bank) shall
<
establish and operate any new branch after thirty days after the effective
date unless it shall have the prior written consent of the Corporation, and
no branch of any State nonmember insured bank shall be moved from
one location to another after thirty days af e the effective date wi hout
such consent. The factors to be considered in gran ing or withholding
the consent of the Corporation under th s paragraph shall be those enu­
merated in subsection (g) of this section.
“ (6) The Corporation may require any insured bank to provide pro­
tection and indemnity against burglary, defalcation, and other similar
insurable losses. Whenever any insured bank refuses to comply with
any such requirement the Corporation may contract for such protection
and indemnity and add the cost thereof to the assessment otherwise pay­
able by such bank.
“ (7) Whenever any insured bank (except a national bank or a Dis­
trict bank), after written notice of the recommendations of the Corporation
based on a report of examination of such bank by an examiner of the
Corporation, shall fail to comply with such recommendations within one
hundred and twenty days after such notice, the Corporation shall have
the power, and is hereby authorized, to publish only such part of such
report of examination as relates to any recommendation not complied
with: Provided, That notice of intention to make such publication shall
be given to the bank at least ninety days before such publication is made.
“ (8) The board of directors shall by regulation prohibit the payment
of interest on demand deposits in insured nonmember banks and for
such purpose it may define the term ‘ demand deposits but such excep­
tions from this prohibition shall be made as are now or may hereafter
be prescribed with respect to deposits payable on demand in member
banks by section 19 of this Act, as amended, or by regulation of the Board
of Governors of the Federal Reserve System. The board of directors
shall from time to time limit by regulation the rates of interest or divi­
dends which may be paid by insured nonmember banks on time and
savings deposits, but such regulations shall be consistent with the con­
tractual obligations of such banks to their depositors. For the purpose
of fixing such rates of interest or dividends, the board of directors shall
by regulation prescribe different rates for such payment on time and
savings deposits having different maturities, or subject to different con­
ditions respecting withdrawal or repayment, or subject to different
conditions by reason of different locations, or according to the varying
discount rates of member banks in the several Federal Reserve districts.
The board of directors shall by regulation define what constitutes time
and savings deposits in an insured nonmember bank. Such regulations
shall prohibit any insured nonmember bank from paying any time
deposit before its maturity except upon such conditions and in accordance
with such rules and regulations as may be prescribed by the board of
directors, and from waiving any requirement of notice before payment
of any savings deposit except as to all savings deposits having the same
requirement. For each violation of any provision of this paragraph or
any lawful provision of such regulations relating to the payment of
interest or dividends on deposits or to withdrawal of deposits, the offend­
ing bank shall be subject to a penalty or not more than $100, recoverable
by the Corporation for its use.
“ (w) The provisions of sections 112, 113, 114, 115, 116, and 117 of
the Criminal Code of the United States (U. S. C., title 18, ch. 5, secs.




BANKING ACT OF 1 9 3 5

21

202 to 207, inclusive), insofar 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, extensions,
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) GO No State bank which during the calendar year 19^1 or any
succeeding calendar year shall have average deposits of $1,000,000 or more
shall be an insured bank or continue to have any part of its deposits insured
after July 1 of the year following any such calendar year during which it
shall have had such amount of average deposits, unless such bank shall be a
member of the Federal Reserve System: Provided, That for the purposes of
this paragraph the term State bank’ shall not include a savifigs bank,
a mutual savings bank, a Morris Plan bank or other incorporated banking
institution engaged only in a business similar to that transacted by Morris
Plan banks, a State trust company doing no commercial banking business,
or a bank located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands.
“ (2) It is not the purpose of this section to discriminate, in any man­
ner, 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 section. 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.
“ (z) The provisions of this section limiting the insurance oj the deposits
of any depositor to a maximum less than the full amount shall be inde­
pendent and separable from each and all of the provisions of this section
TITLE I I — AM E N D M E N TS TO THE FEDERAL RESERVE
ACT
S e c tio n 201. Paragraph “ Fifth” of section 4 of the Federal Reserve
Act, as amended, is amended, effective March 1, 1936, to read as follows:
“ Fifth. To appoint by its board of directors a president, vice presi­
dents, and such officers and employees as are not otherwise provided for in
this Act, to define their duties, require bonds for them and fix the penalty
thereof, and to dismiss at pleasure such officers or employees. The presi-?
dent shall be the chief executive officer of the bank arid shall be appointed
by the board of directors, with the approval of the Board of Governors of
the Federal Reserve System, for a term of five years; and all other execu­
tive officers and all employees of the bank shall be directly responsible to
him. The first vice president of the bank shall be appointed in the same
manner andfor the same term as the president, and shall, in the absence or
disability of the president or during a vacancy in the office of president,
serve as chief executive officer of the bank. Whenever a vacancy shall
occur in the office of the president or the first vice president, it shall be
filled in the manner provided for original appointments; and the per­
son so appointed shall hold office until the expiration of the term of his
predecessor
S e c . 202. Section 9 of the Federal Reserve Act, as amended, is
amended by inserting after the tenth paragraph thereof the following new
paragraph:




22

BAN KIN G ACT OF 1 9 3 5

“ In order to facilitate the admission to membership in the Federal
Reserve System oj any State bank which is required under subsection (y)
oj section 12B oj this Act to become a member oj the Federal Reserve
System in order to be an insured bank or continue to have any part oj its
deposits insured under such section 12B, the Board oj Governors oj the
Federal Reserve System may waive in v'hole or in part the requirements oj
this section relating to the admission oj such bank to membership:
Provided, That, ij such bank is admitted with a capital less than that
required jo r the organization oj a national bank in the same place and
its capital and surplus are not, in the judgment oj the Board oj Governors
o j the Federal Reserve System, adequate in relation to its liabilities to
depositors and other creditors, the said Board may, in its discretion,
require such bank to increase its capital and surplus to such amount as
the Board may deem necessary within such period prescribed by the
Board as in its judgment shall be reasonable in view oj all the circum­
stances: Provided, however, That no such bank shall be required to
increase its capital to an amount in excess ojthat requiredjor the organiza­
tion oj a national bank in the same place .”
Sec . 208. (a) Hereajter the Federal Reserve Board shall be known as
the “ Board oj Governors oj the Federal Reserve System ” , and the governor
and the vice governor oj the Federal Reserve Board shall be known as the
“ chairman” and the “ vice chairman” , respectively, oj the Board oj
Governors oj the Federal Reserve System.
(b)
The jirst two paragraphs oj section 10 oj the Federal Reserve Act,
as amended, are amended to read asjollows:
“ Sec. 10. The Board oj Governors oj the Federal Reserve System
{hereinajter rejerred to as the 1
Board1 shall be composed oj seven mem­
)
bers, to be appointed by the President, by and with the advice and consent
o f the Senate, ajier the date oj enactment oj the Banking Act oj 1985,
fo r terms oj jourteen years except as hereinajter provided, but each ap­
pointive member oj the Federal Reserve Board in office on such date shall
continue to serve as a member oj the Board until February 1, 1986, and
the Secretary oj the Treasury and the Comptroller oj the Currency shall
continue to serve as members oj the Board until February 1, 1936. In
selecting the members oj the Board, not more than one oj whom shall be
selected jrom any one Federal Reserve district, the President shall have
due regard to ajair representation oj thejinancial, agricultural, industrial,
and commercial interests, and geographical divisions oj the country. The
members oj the Board shall devote their entire time to the business oj the
Board and shall each receive an annual salary oj $15,000, payable
monthly, together with actual necessary traveling expenses.
“ The members oj the Board 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 bank, except that this restriction shall not
apply to a member who has served thejull termjor which he was appointed.
Upon the expiration oj the term oj any appointive member oj the Federal
Reserve Board in office on the date oj enactment oj the Banking Act oj
1985, the President shall jix the term oj the successor to such member at
'not to exceed jourteen years, as designated by the President at the time oj
nomination, but in such manner as to provide jor the expiration oj the
term oj not more than one member in any two-year period, and thereajter
each member shall hold office jor a term oj jourteen years jrom the expi­
ration oj the term oj his predecessor, unless sooner removed jor cause by
the President. Oj the persons thus appointed, one shall be designated by




BAN KIN G ACT OF 1 9 3 5

23

the President as chairman and one as vice chairman oj the Board, to
serve as such j or a term of jour years. The chairman oj the Board,
subject to its supervision, shall be its active executive officer. Each
member oj the Board shall within jijteen days ajter notice oj appoint­
ment make and subscribe to the oath oj office. Upon the expiration oj
their terms oj office, members oj the Board shall continue to serve until
their successors are appointed and have qualified. Any person appointed
as a member oj the Board ajter the date oj enactment oj the Banking Act
oj 1935 shall not be eligible j or reappointment as such member ajter he
shall have served ajull term oj jourteen years ”
(c) The jourth paragraph oj section 10 oj the Federal Reserve Act,
as amended, is amended by striking out the second, third, and jourth
sentences thereof and inserting in lieu thereoj the following: “ At meetings
oj the Board the chairman shall preside, and, in his absence, the vice
chairman shall preside. In the absence of the chairman and the vice
chairman, the Board shall elect a member to act as chairman pro tem­
po r e ”
(d) Section 10 of the Federal Reserve Act, as amended, is further
amended by adding at the end thereof the following new paragraph:
“ The Board of Governors of the Federal Reserve System shall keep a
complete record of the action taken by the Board and by the Federal Open
Market Committee upon all questions of policy relating to open-market
operations and shall record therein the votes taken in connection with the
determination of open-market policies and the reasons underlying the
action of the Board and the Committee in each instance. The Board shall
keep a similar record with respect to all questions of policy determined by
the Board, and shall include in its annual report to the Congress a full
account of the action so taken during the preceding year with respect to
open-market policies and operations and with respect to the policies
determined by it and shall include in such report a copy of the records
required to be kept under the provisions of this paragraph ”
Sec . 20^. Section 10 (b) of the Federal Reserve Act, as amended, is
amended to read as follows:
“ S ec. 10 (b). Any Federal Reserve bank, under rules and regulations
prescribed by the Board of Governors of the Federal Reserve System,
may make advances to any member bank on its time or demand notes
having maturities of not more than four months and which are secured
to the satisfaction of such Federal Reserve bank. Each such note shall
bear interest at a rale not less than one-half of 1 per centum per annum
higher than the highest discount rate in effect at such Federal Reserve
bank on the date of such note.”
S ec. 205. Section 12A of the Federal Reserve Act, as amended, is
amended, effective March 1, 1936, to read as follows:
“ Sec. 12A. (a) There is hereby created a Federal Open Market Com­
mittee (hereinafter referred to as the 'Committee'), which shall consist of
the members of the Board of Governors of the Federal Reserve System and
Jive representatives oj the Federal Reserve banks to be selected as hereinajter provided. Such representatives of the Federal Reserve banks shall
be elected annually as jollows: One oy the boards oj directors oj the
Federal Reserve Banks oj Boston and New York, one by the boards of
directors oj the Federal Reserve Banks oj Philadelvhia and Cleveland,
one by the boards oj directors oj the Federal Reserve Banks q f Chicago
and Saint Louis^ one
the boards o f directors oj the Federal Reserve
Banks oj Richmond, Atlanta, and Dallas, and one by the boards oj




24

banking act of

1935

directors of the Federal Reserve Banks of Minneapolis, Kansas City,
and San Francisco. An alternate to serve in the absence of each such
representative shall be elected annually in the same manner. The meetings
of said Committee shall be held at Washington, District of Columbia, at
least four times each year upon the call of the chairman of the Board of
Governors of the Federal Reserve System or at the request of any three
members of the Committee.
“ (b) No Federal Reserve bank shall engage or decline to engage in
open-market operations under section 14 of this Act except in accordance
with the direction of and regulations adopted by the Committee. The
Committee shall consider, adopt, and transmit to the several Federal
Reserve banks, regulations relating to the open-market transactions of
such 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 ”
S e c . 206. (a) Subsection (b) of section 14 of the Federal Reserve Act,
as amended, is amended by inserting before the semicolon at the end thereof
a colon and the following: Provided, That any bonds, notes, or other obli­
gations which are direct obligations of the United States or which are fully
guaranteed by the United States as to principal and interest may be
bought and sold without regard to maturities but only in the open market
(b)
Subsection (d) of section 14 of the Federal Reserve Act, as amended,
is amended by adding at the end thereof the following: “ but each such
bank shall establish such rates every fourteen days, or oftener if deemed
necessary by the Board;1
1
S e c . 207. The sixth paragraph of section 19 of the Federal Reserve
Act, as amended, is amended to read as follows:
“ Notwithstanding the other provisions of this section, the Board of
Governors of the Federal Reserve System, upon the affirmative vote of not
less than four of its members, in order to prevent injurious credit expan­
sion or contraction, may by regulation change the requirements as to
reserves to be maintained against demand or time deposits or both by
member banks in reserve arid central reserve cities or by member banks
not in reserve or central reserve cities or by all. member banks; but the
amount of the reserves required to be maintained by any such member
bank as a result of any such change shall not be less than the amount of
the reserves required by law to be maintained by such bank on the date
of enactment of the Banking Act of 1935 nor more than twice such
amount. ”
S e c . 208. The first paragraph of section 24 of the Federal Reserve
Act, as amended, is amended to read as follows:
“ S e c . 24. Any national banking association may make real-estate
loans secured by first liens upon improved real estate, including improved
farm land and improved business and residential properties. A loan
secured by real estate within the meaning of this section shall be in the
form of an obligation or obligations secured by mortgage, trust deed, or
other such instrument upon real estate, and any national banking associa­
tion may purchase any obligation so secured when the entire amount of
such obligation is sold to the association. The amount of any such loan
hereafter made shall not exceed 50 per centum of the appraised value of
the real estate offered as security and no such loan shall be madefor a longer




BANKING ACT OF 1 9 3 5

25

term than jive years; except that (1) any such loan may be made in an
amount not to exceed 60 per centum o f the appraised value oj the real
estate offered as security andjor a term riot longer than ten years ij the loan
is secured by an amortized mortgage, deed oj trust, or other such instru­
ment under the terms oj which the installment payments are sufficient to
amortize Jfi per centum or more oj the principal oj the loan within a
period oj not more than ten years, and (2) thejoregoing limitations and
restrictions shall not prevent the renewal or extension oj loans heretofore
made and shall not apply to real-estate loans which are insured under the
provisions-oj Title I I oj the National Housing Act. No such association
shall make such loans in an aggregate sum in excess oj the amount oj the
capital stock oj such association paid in and unimpaired plus the amount
oj its unimpaired surplusfund, or in excess oj 60 per centum oj the amount
oj its time and savings deposits, whichever is the greater. / A n y such asso­
ciation may continue hereafter as heretofore to receive time and savings
deposits arid to pay interest on the same, but the rate of interest which such
association may pay upon such time deposits or upon savings or other
deposits shall not exceed the maximum rate authorized by law to be paid
upon such deposits by State banks or trust companies organized under the
laws of the State in which such association is located ”
S e c . 209. Section 825 of the Revised Statutes is amended to read as
follows:
“ Smc. 825. The Comptroller of the Currency shall be appointed by
the President, by and with the advice and consent of the Senate, and shall
hold his office for a term of five years unless sooner removed by the Presi­
dent, upon reasons to be communicated by him to the Senate; and he shall
receive a salary at the rate of $15,000 a year.”
TITLE I I I — TECHNICAL AMENDMENTS TO THE
BANKING LAWS
S e c t io n 801. Subsection (c) of section 2 of the Banking Act of 1983,
as amended, is amended by adding at the end thereof the following
paragraph:
“ Notwithstanding the foregoing, the term ‘ holding company affiliate9
shall not include (except for the purposes of section 23A of the Federal
Reserve Act, as amended) any corporation all of the stock of which is
owned by the United States, or any organization which is determined by
the Board of Governors of the Federal Reserve System not to be engaged,
directly or indirectly, as a business in holding the stock of, or managing
or controlling, banks, banking associations, savings banks, or trust
companies.”
S e c . 302. The first paragraph of section 20 oj the Banking A d oj
1938, as amended, is amended by inserting bejore the period at the end
thereoj a colon and the jollowing: “ Provided, That nothing in this
paragraph shall apply to any such organization which shall have been
placed in formal liquidation and which shall transact no business except
such as may be incidental to the liquidation oj its affairs ” .
S e c . 308. (a) Paragraph (1) oj subsection (a) oj section 21 oj the
Banking Act oj 1988, as amended, is amended by inserting bejore the
semicolon at the end thereoj a colon and the jollowing: “ Provided, That
the provisions oj this paragraph shall not prohibit national banks or State
banks or trust companies (whether or not members oj the. Federal Reserve
System) or otherfinancial institutions or private bankers jrom dealing in,




26

BANKING ACT OF 1 9 3 5

underwriting, purchasing, anrf selling investment securities to the extent
permitted to national banking associations by the provisions oj section
5186 oj the Revised Statutes, as amended (II. S. C., title 12, sec. 24;
Supp. V II, title 12, sec. 24): Provided jurther, That nothing in this
paragraph shall be construed as affecting in any way such right as any
bank, banking association, savings bank, trust company, or other banking
institution, m / otherwise possess to sell, without recourse or agreement to
<M
repurchase, obligations evidencing loans on real estate
(6) Paragraph (2) oj subsection (a) oj such section 21 is amended to
read as jollows:
“ (2YFor any person, jirm, corporation, association, business trust,
or other similar organization to engage, to any extent whatever with
others than his or its officers, agents or employees, in the business oj
receiving deposits subject to check or to repayment upon presentation oj
a pass book, certijicate oj deposit, or other evidence oj debt, or upon request
oj the depositor, unless such person, jirm, corporation, association,
business trust, or other similar organization (A) shall be incorporated
under, and authorized to engage in such business by, the laws oj the
United States or oj any State, Territory, or District, or (B) shall be per­
mitted by any State, Territory, or District to engage in such business and
shall be subjected by the law oj such State, Territory, or District to
examination and regulation, or (C) shall submit to periodic examination
by the banking authority oj the State, Territory, or District where such
business is carried on and shall make and publish periodic reports oj
its condition, exhibiting in detail its resources and liabilities, such exami­
nation and reports to be made and published at the same times and in
the same manner and under the same conditions as required by the law
oj such State, Territory, or District in the case oj incorporated banking
institutions engaged in such business in the same locality ”
S ec. 804• Section 22 oj the Banking Act oj 1988, as amended, is
amended by adding at the end thereoj the jollowing sentences: “ Such
additional liability shall cease on July 1, 1987, with respect to all shares
issued by any association which shall be transacting the business oj
banking on July 1, 1987: Provided, That not less than six months prior
to such date, such association shall have caused notice oj such prospective
termination oj liability to be published in a newspaper published in the
city, town, or county in which such association is located, and ij no news­
paper is published in such city, town, or county, then in a newspaper oj
general circulation therein. I j the association jail to give such notice
as and when above provided, a termination oj such additional liability
may thereajter be accomplished as oj the date six months subsequent to
publication, in the manner above provided.”
Sec. 805. Paragraph (c) oj section 5155 oj the Revised Statutes, as
amended (U. S. C., Supp. VII, title 12, sec. 86), is amended ( 1) by in­
serting ajter thejirst sentence thereoj the jollowing new sentence: “ In any
State in which State banks are permitted by statute law to maintain
branches within county or greater limits, ij no bank is located and doing
business in the place where the proposed agency is to be located, any
national banking association situated in such State may, with the ap­
proval oj the Comptroller oj the Currency, establish and operate, without
regard to the capital requirements oj this section, a seasonal agency in
any resort community within the limits oj the county in which the main
office oj such association is located, jor the purpose oj receiving and paying
out deposits, issuing and cashing checks and drajts, and doing business




BAN KIN G ACT

O
F

19 3 5

27

incident thereto: Provided, That any 'permit issued under this sentence
shall be revoked upon the opening of a State or national bank in such
community ” ; and (2) by striking out the first word in the last sentence
of such paragraph (c) and inserting in lieu thereof the following: “ Ex­
cept as provided in the immediately preceding sentence, no” .
Sec. 306. Section 4 of the Act entitled “ An Act to amend section 12B
of the Federal Reserve Act so as to extendfor one year the temporary plan
for deposit insurance, and for other purposes” , approved June 16, 1934
(48 Stat. 969), is amended to read as follows:
“Sec. 4- So much of section 31 of the Banking Act of 1933, as amended,
as relates to stock ownership by directors, trustees, or members of similar
governing bodies of any national banking association, or of any State
bank or trust company which is a member of the Federal Reserve System,
is hereby repealed ”
Sec. 307. Effective January 1, 1936, section 32 of the Banking Act
of .1933, as amended, is amended to read as follows:
“Sec. 32. No officer, director, or employee of any corporation or un­
incorporated association, no partner or employee of any partnership, and
no individual, primarily engaged in the issue, flotation, underwritingf
public sale, or distribution, at wholesale or retail, or through syndicate
participation, of stocks, bonds, or other similar securities, shall serve
the same time as an officer, director, or employee of any member bank
except in limited classes of cases in which the Board of Governors of the
Federal Reserve System may allow such service by general regulations
when in the judgment of the said Board it would not unduly influence
the investment policies of such member bank or the advice it gives its cus­
tomers regarding investments .”
Sec. 308. (a) The second sentence of paragraph Seventh of section
5136 of the Revised Statutes, as amended (U. S. C., Supp. VII, title 12,
sec. 24), is amended to read as follows: “ The business of dealing in
securities and stock by the association shall be limited to purchasing and
selling such securities and stock without recourse, solely upon the order,
aTidfor the account of, customers, and in no case for its own account, and
the association shall not underwrite any issue of securities or stock:
Provided, That the association may purchase for its own account invest­
ment securities under such limitations and restrictions as the Comptroller
of the Currency may by regulation prescribe. In no event shall the total
amount of the investment securities of any one obligor or maker, held by
the association for its own account, exceed at any time 10 per centum of its
capital stock actually paid in and unimpaired and 10 per centum of its
unimpaired surplus fund, except that this»limitation shall not require
any association to dispose of any securities lawfully held by it on the
date of enactment of the Banking Act of 1935.”
(b) The fourth sentence of such paragraph Seventh is amended to read
as follows: “ Except as hereinafter provided or otherwise permitted by
law, nothing herein contained shall authorize the purchase by the asso­
ciation for its own account of any shares of stock of any corporation”
(c) The*last sentence of such paragraph Seventh is amended by insert­
ing before the colon after the words “ Home Owners1Loan Corporation”
a comma and the following: “ or obligations which are insured by the
Federal Housing Administrator pursuant to section 207 of the National
Housing Act, if the debentures to be issued in payment of such insured
obligations are guaranteed as to principal and interest by the United
States” .




28

BAN KIN G ACT OF 1 9 3 5

Sec. 809 Section 5138 oj the Revised Statutes, as amended (U. S. C.,
Supp. V II, title 12, sec 51), is amended by adding the jollowing sen­
tences at the end thereoj: “ No such association shall hereajter be author­
ized to commence the business oj banking until it shall have a paid-in
surplus equal to 20 per centum oj its capital: Provided, That the Comp­
troller oj the Currency may waive this requirement as to a State bank
converting into a national banking association, but each such State
bank which is converted into a national banking association shall, bejore
the declaration oj a dividend on its shares oj common stock, carry not less
than one-halj part oj its net projits oj the preceding halj year to its surplus
jund until it shall have a surplus equal to 20 per centum oj its capital:
Provided, That jor the purposes oj this section any amounts paid into
a jund jor the retirement oj any prejerred stock oj any such converted
State bank out oj its net earnings jor such halj-year period shall be
deemed to be an addition to its surplusjund ij, upon the retirement oj such
prejerred stock, the amount so paid into such retirement jund jor such
period may then properly be carried to surplus. In any such case the
converted State bank shall be obligated to transjer to surplus the amount so
paid into such retirement jund jor such period on account oj the prejerred
stock as such stock is retired
Sec. 810. (a) The last paragraph oj section 5189 oj the Revised
Statutes, as amended ( U. S. C., Supp. VII, title 12, sec. 52), is amended
to read as jollows:
“ Ajter the date oj the enactment oj the Banking Act oj 1935, no
certificate evidencing the stock oj any such association shall bear any
statement purporting to represent the stock oj any other corporation,
except a member bank or a corporation engaged on June 16, 19%4 in
holding the bank premises oj such association, nor shall the ownership,
sale, or transjer oj any certijicate representing the stock oj any such associ­
ation be conditioned in any manner whatsoveer upon the ownership, sale,
or transjer oj a certijicate representing the stock oj any other corporation,
except a member bank or a corporation engaged on June 16, 1984 in
holding the bank premises oj such association: Provided, That this section
shall not operate to prevent the ownership, sale, or transjer oj stock oj any
other corporation being conditioned upon the ownership, sale, or transjer
oj a certijicate representing stock oj a national banking association
(6) The nineteenth paragraph oj section 9 oj the Federal Reserve Act,
as amended, is amended to read as jollows:
“ Ajter the date oj the enactment oj the Banking Act oj 1985, no certiji­
cate evidencing the stock oj any State member bank shall bear any state­
ment purporting to represent the stock oj any other corporation, except a
member bank or a corporation engaged on June 16, 1934 in holding the
bank premises oj such member bank, nor shall the ownership, sale, or
transjer oj any certificate representing the stock oj any State member bank
he conditioned in any manner whatsoever upon the ownership, sale, or
transjer oj a certificate representing the stock oj any other corporation,
except a member bank or a corporation engaged on June 16, 1984 in
holding the bank premises oj such member bank: Provided, That this
section shall not operate to prevent the ownership, sale, or transjer oj
stock oj any other corporation being conditioned upon the ownership,
sale, or transjer oj a certijicate representing stock oj a State member bank ”
STec. 311. (a) The jirst paragraph oj section 5144 °j the Revised
Statutes, as amended ( U. S. C., Supp. VII, title 12, sec. 61), is amended
to read as jollows:




BAN KIN G ACT OF 1 9 3 5

29

“ S e c . 5144 I n all elections of directors, each shareholder shall have
the right to vote the number oj shares owned by him jor 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 oj directors multiplied by
the number oj his shares shall equal, or to distribute them on the same
principle among as many candidates as he shall thinkjit; and in deciding
all other questions at meetings oj shareholders, each shareholder shall be
entitled to one vote on each share oj stock held by him; except that (1)
this shall not be construed as limiting the voting rights oj holders oj
prejerred stock under the terms and provisions oj articles oj association,
or amendments thereto, adopted pursuant to the provisions oj section 802
(a) oj the Emergency Banking and Bank Conservation Act, approved
March 9 , 1933, as amended, (2) in the election oj directors, shares oj its
own stock held by a national bank as sole trustee, whether registered in its
own name as such trustee or in the name oj its nominee, shall not be
voted by the registered owner unless under the terms oj the trust the man­
ner in which such shares shall be voted may be determined by a donor or
benejiciary oj the trust and unless such donor or benejiciary actually
directs how such shares shall be voted, {3) shares oj 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 ij he or they
were the sole trustee. and (4) shares controlled by any holding company
affiliate oj a national bank shall not be voted unless such holding company
affiliate shall have jirst obtained a voting permit as hereinajter provided,
which permit is injorce at the time such shares are voted, but such holding
compamy affiliate may, without obtaining such permit, vote in javor oj
placing the association in voluntary liquidation or taking any other
action pertaining to the voluntary liquidation oj such association. Share­
holders may vote by proxies duly authorized in writing; but no officer,
clerk, teller, or bookkeeper oj such bank shall act as proxy; and no share­
holder whose liability is past due and unpaid shall be allowed to vote.
Whenever shares oj stock cannot be voted by reason of being held by the
bank as sole trustee, such shares shall be excluded in determining whether
matters voted upon by the shareholders were adopted by the requisite
percentage of shares ”
(6)
The first sentence of the third paragraph of such section 5144 is
amended to read: “ Any such holding company affiliate may make appli­
cation to the Board of Governors of the Federal Reserve Systemfor a voting
permit entitling it to vote the stock controlled by it at any or all meetings of
shareholders of such bank or authorizing the trustee or turstees holding
the stock for its benefit or for the benefit of its shareholders so to vote the
same.n
(c)
Section 5144 of the Revised Statutes, as amended, is further
amended by adding at the end of subsection (c) thereof the following:
“ and the provisions of this subsection, instead of subsection (b), shall
apply to all holding company affiliates with respect to any shares of bank
stock owned or controlled by them as to which there is no statutory liability
imposed upon the holders of such bank stock;” .
S e c . 312. Section 5154 of the Revised Statutes, as amended (U. S. C.,
title 12, sec. 35), is amended by adding at the end thereof the following
paragraph:
“ The Comptroller of the Currency may, in his discretion and subject
to such conditions as he may prescribe, permit such converting bank to
retain and carry at a value determined by the Comptroller such of the
•




30

BAN KIN G ACT OF 1 9 3 5

assets oj such converting bank as do not conform to the legal requirements
relative to assets acquired and held by national banking associations .”
Seci. 313. Section 5162 oj the Revised Statutes ( U. S. C., title 12, sec.
170) is amended by adding at the end thereoj the jollowing paragraph:
“ The Comptroller oj the Currency may designate one or more persons
to countersign in his name and on his behalj such assignments or transjers
oj bonds as require his countersignature.”
Sec. 314. Section 5197 ojthe Revised Statutes, as amended ( V . S. C.,
Supp. V II , title 12f sec. 85), is amended by inserting ajter the second
sentence thereoj the jollowing new sentence: “ The maximum amount oj
interest or discount to be charged at a branch oj an association located
outside oj the States oj the United States and the District oj Columbia
shall be at the rate allowed by the laws ojthe country, territory, dependency,
province, dominion, insular possession, or other political subdivision
where the branch is located.”
Sec. 315. Section 5199 oj the Revised Statutes (U. S. C., title 12,
sec. 60), is amended to read as jollows:
“ S e c . 5199. The directors oj any association may, semiannually,
declare a dividend oj so much oj the net projits oj the association as they
shall judge expedient; but each association shall, bejore the declaration oj a
dividend on its shares oj common stock, carry not less than one4enth
part oj its net projits oj the preceding halj year to its surplus jund until
ihe same shall equal the amount oj its common capital: Provided, Thatjor
ihe purposes oj this section, any amounts paid into a jund jor the retire­
ment oj any prejerred stock oj any such association out oj its net earnings
jo r such halj-year period shall be deemed to be an addition to its surplus
jund ij, upon the retirement oj such prejerred stock, the amount so paid
into such retirement jund jor such period may then properly be carried to
surplus. In any such case the association shall be obligated to transjer
to surplus the amounts so paid into such retirement jund jor such period
on account oj the prejerred stock as such stock is retired.”
S e c . 316. Section 5209 oj the Revised Statutes ( U. S. C., title 12, sec.
>592), is hereby amended by inserting ajter the words “ known as the
Federal Reserve A ct” , the words “ or oj any national banking association,
or oj any insured bank as dejined in subsection (c) oj section 12B oj the
Federal Reserve A ct” ; and by inserting ajter the words “ such Federal
Reserve bank or member bank” , wherever they appear in such section, the
words “ or such national banking association or insured bank” ; and by
inserting ajter the words “ or the Comptroller oj the Currency” , the words
u or the Federal Deposit Insurance Corporation,” .
Sec. 317. Section 5220 oj the Revised Statutes (U. S. C., title 12, sec.
181), is amended by adding at the end thereoj the jollowing paragraph:
“ Ihe shareholders shall designate one or more persons to act as
liquidating agent or committee, who shall conduct the liquidation in
accordance with law and under the supervision oj the board oj directors,
who shall require a suitable bond to be given by said agent or committee.
The liquidating agent or committee shall render annual reports to the
Comptroller oj the Currency on the 31st day oj December oj each year
showing the progress oj said liquidation until the same is completed.
The liquidating agent or committee shall also make an annual report to
& meeting oj the shareholders to be held on the datejixed in the articles oj
association jor the annual meeting, at which meeting the shareholders
may, ij they see jit, by a vote representing a majority oj the entire stock
o j the bank, remove the liquidating agent or committee and appoint one




BAN KIN G ACT OF 1 9 3 5

31

or more others in place thereof. A special meeting of the shareholders
may be called at any time in the same manner as if the bank continued
an active bank and at said meeting the shareholders may, by vote of the
majority of the stock, remove the liquidating agent or committee. , The
Comptroller of the Currency is authorized to have an examination made
at any time into the affairs of the liquidating bank until the claims of all
creditors have been satisfied, and the expense of making such examina­
tions shall be assessed against such bank in the same manner as in the
case of examinations made pursuant to section 5240 of the Revised
Statutes, as amended ( U. S. C t it le 12, secs. 484, 485; Supp. V II ,
title 12, secs. 481~48S).y
y
S e c . 318. Section 5243 of the Revised Statutes ( T . S. C., title 12, sec.
J
583) is amended by striking out the semicolon therein and all that precedes
it and substituting the following:
uSec. 5243. The use of the word ‘national’, the word ‘ Federal’ or the
words ‘ United States’, separately, in any combination thereof, or in
combination with other words or syllables, as part of the name or title used
by any person, corporation, firm, partnership, business trust, association
or other business entity, doing the business of bankers, brokers, or trust or
savings institutions is prohibited except where such institution is organ­
ized under the laws of the United States, or is otherwise permitted by the
laws of the United States to use such name or title, or is lawfully using
such name or title on the date when this section, as amended, takes effect;” .
S e c . 319. (a) Section 5 of the Federal Reserve Act, as amended, is
amended by striking out the last three sentences thereof and inserting in
lieu thereof the following: “ When a member bank reduces its capital stock
or surplus it shall surrender a proportionate amount of its holdings in the
capital stock of said Federal Reserve bank. Any member bank which
holds capital stock of a Federal Reserve bank in excess of the amount
required on the basis of 6 per centum of its paid-up capital stock and sur­
plus shall. surrender such excess stock. When a member bank volun­
tarily liquidates it shall surrender all of its holdings of the capital
stock of said Federal Reserve bank and be released from its stock
subscription not previously called. In any such case the shares sur­
rendered shall be canceled and the member bank shall receive in pay­
ment therefor, under regulations to be prescribed by the Board of Gov­
ernors of the Federal Reserve System, a sum equal to its cash-paid sub­
scriptions on the shares surrendered and one-hatf of 1 per centum a month
from the period of the last dividend, not to exceed the book value thereof,
less any liability of such member bank to the Federal Reserve bank”
(b)
Section 6 of the Federal Reserve Act, as amended, is amended by
striking out the last paragraph thereof.
S e c . 320. The fifth paragraph of section 9 of the Federal Reserve
Act, as amended, is amended by adding at the end thereof the following
sentence: “ Such reports of condition shall be in such form and shall
contain such information as the Board of Governors of the Federal Reserve
System may require and shall be published by the reporting banks in
such manner and in accordance with such regulations as the said Board
may prescribe.”
S e c . 321. (a) The first sentence of paragraph (:m) of section 11 of the
Federal Reserve Act, as amended, is amended by inserting before the
period at the end thereof a colon and the following: “ Provided, That
with respect to loans represented by obligations in the form of notes
secured by not less than a like amount of bonds or notes of the United




32

BANKING ACT OF 1 9 3 5

States issued since April 24, 1917, certificates qf indebtedness oj the
United States, Treasury bills of the United States, or obligations fully
guaranteed both as to principal and interest by the United States, such
limitation of 10 per centum on loans to any person shall not apply,
but State member banks shall be subject to the same limitations and
conditions as are applicable in the ohse oj national banks under para­
graph (8) of section 5200 of the Revised Statutes, as amended ( U. S. C
Supp. VII, title 12, sec. 8%)” .
(b) Paragraph (8) of section 5200 of the Revised Statutes, as amended
(U. S. C., Supp. V II, title 12, sec. 84), is amended by inserting after the
comma following the words “ certificates of indebtedness of the United
States” , the words “ Treasury bills of the United States, or obligations
fully guaranteed both as to principal and interest by the United States,” .
Sec. 822. The third paragraph of section 18 of the Federal Reserve
Act, as amended, is amended by changing the words “ indorsed and other­
wise secured to the satisfaction of the Federal Reserve bank” in that para­
graph to read “ indorsed or otherwise secured to the satisfaction of the
Federal Reserve bank” .
S e c . 828. Subsection (e) of section 18b of the Federal Reserve Act, as
amended, is amended by striking out “ upon the date this section takes
effect” , and inserting in lieu thereof “ on and after June 19, 1 9 8 4 and
by striking out “ the par value of the holdings of each Federal Reserve
bank of Federal Deposit Insurance Corporation stock” , and inserting in
lieu thereof “ the amount paid by each Federal Reserve bank for stock of
the Federal Deposit Insurance Corporation” ..
S e c . 824. (a) The first paragraph of section 19 of the Federal Reserve
Act, as amended, is amended to read as follows:
“ Sec. 19. The Board of Governors of the Federal Reserve System is
authorized, for the purposes of this section, to define the terms ‘ demand
deposits’, (gross demand deposits1 ‘ deposits payable on demand’, ‘ time
,
deposits’, 1
savings deposits’, and 1
trust funds’, to determine what shall
be deemed to be a payment of interest, and to prescribe such rules and regu­
lations as it may deem necessary to effectuate the purposes of this section
and prevent evasions thereof: Provided, That, within the meaning of the
provisions of this section regarding the reserves required of member banks,
the term ‘ time deposits’ shaU include ‘ savings deposits’.”
(b) The tenth paragraph of such section 19 is amended to read as
follows:
“ In estimating the reserve balances required by this Act, member banks
may deduct from the amount of their gross demand deposits the amounts
of balances duefrom other banks (except Federal Reserve banks andforeign,
banks) and cash items in process of collection payable immediately upon
presentation in the United States, within the meaning of these terms as
defined by the Board of Governors of the Federal Reserve System.”
(c) The last two paragraphs of such section 19 are amended to read as
follows:
“ No member bank shall, directly or indirectly, by any device what­
soever, pay any interest on any deposit which is payable on demand:
Provided, That nothing herein contained shall be construed as pro­
hibiting the payment of interest in accordance with the terms of any
certificate of deposit or other contract entered into in good faith which is
in force on the date on which the bank becomes subject to the provisions of
this paragraph; but no such certificate of deposit or other contract shall be
renewed or extended unless it shall be modified to conform to this para-




B N IN A T
AK G C

OF 1 9 3 5

33

graph, and every member bank shall take such action as may be necessary
to conform to this paragraph as soon as possible consistently with its
contractual obligations: Provided jurther, That this paragraph shall
not apply to any deposit oj such bank which is payable only at an office
thereoj located outside oj the States oj the United States and the District
oj Columbia: Provided jurther, That until the expiration oj two years
ajter the date oj enactment oj the Banking Act oj 1985 this paragraph shall
not apply (1) to any deposit made by a savings bank as defined in section
12B oj this Act, as amended, or by a mutual savings bank, or (2) to any
deposit oj public funds made by or on behalf oj any State, county, school
district, or other subdivision or municipality, or to any deposit oj trust
junds ij the payment oj interest with respect to such deposit oj public
junds or oj trust junds is required by State law. So much oj existing law
as requires the payment oj interest with respect to any junds deposited
by the United States, by any Territory, District, or possession thereoj
(including the Philippine Islands), or by any public instrumentality,
agency, or officer oj the joregoing, as is inconsistent with the provisions
oj this section as amended, is hereby repealed.
1 The Board oj Governors oj the Federal Reserve System shall jrom
1
time to time limit by regulation the rate oj interest which may be paid by
member banks on time and savings deposits, and shall 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 loca­
tions, or according to the varying discount rates oj member banks in the
several Federal Reserve districts. No member bank shall pay any time
deposit before its maturity except upon such conditions and in accordance
with such rules and regulations as may be prescribed by the said Board,
or waive any requirement oj notice bejore payment oj any savings deposit
except as to all savings deposits having the same requirement: Provided,
That the provisions oj this paragraph shall not apply to any deposit
which is payable only at an office oj a member bank located outside oj the
States oj the United States and the District oj Columbia ”
(d)
Such section 19 is amended by adding at the end thereoj the follow*
ing new paragraph:
“ Notwithstanding the provisions oj the First Liberty Bond Act, as
amended, the Second Liberty Bond Act, as amended, and the Third
Liberty Bond Act, as amended, member banks shall be required to main­
tain the same reserves against deposits of public moneys by the United
States as they are required by this section to maintain against other
deposits”
S e c . 825. Section 21 oj the Federal Reserve Act, as amended, is
amended by adding at the end thereoj the jollowing paragraph:
“ Whenever member banks are required to obtain reports from affiliates,
or whenever affiliates oj member banks are required to submit to exami­
nation, the Board oj Governors oj the Federal Reserve System or the
Comptroller oj the Currency, as the case may be, may waive such re­
quirements with respect to any such report or examination oj any affiliate
ij in the judgment oj the said Board or Comptroller, respectively, such
report or examination is not necessary to disclose fully the relations
between such affiliate and such bank and the effect thereoj upon the
affairs oj such bank ”
20366 0 — 58------ 44




34

banking act of

1935

S e c . 826. (a) Subsection (a) of section 22 of the Federal Reserve
Act, as amended, is amended by inserting in the first paragraph thereof
after “ No member bank” the following: “ and no insured bank as de­
fined in subsection (c) of section 12B of this Act” ; by inserting before
the period at the end of the first sentence of such paragraph “ or assistant
examiner, who examines or has authority to examine such bank” ; and
by inserting after “ any member bank” in the second paragraph thereof
“ or insured bank” ; by inserting before the period at the end thereof
“ or Federal Deposit Insurance corporation examiner” ; and by adding
at the end of such subsection a new paragraph, as follows:
“ The provisions of this subsection shall apply to all public examiners
and assistant examiners who examine member banks of the Federal
Reserve System or insured banks, whether appointed by the Comptroller
of the Currency, by the Board of Governors of the Federal Reserve System,
by a Federal Reserve agent, by a Federal Reserve bank, or by the Federal
Deposit Insurance Corporation, or appointed or elected under the laws
of any State; but shall not apply to private examiners or assistant
examiners employed ordy by a clearing-house association or by the
directors of a bank.”
(b) Subsection (6) of such section 22 is amended by inserting therein
after “ no national bank examiner” the following: “ and no Federal
Deposit Insurance Corporation examiner” ; and by inserting after “ mem­
ber bank” the following: “ or insured bank” ; and by inserting after
“from the Comptroller of the Currency,” the following: “ as to a national
bank, the Board of Governors of the Federal Reserve System as to a State
member bank, or the Federal Deposit Insurance Corporation as to any
other insured bank” .
(c) Subsection (g) of such section 22 is amended to read as follows:
“ (g) No executive officer of any member bank shall borrow from or
otherwise become indebted to any member bank of which he is an execu­
tive officer, and no member bank shall make any loan or extend credit in
any other manner to any of its own executive officers: Provided, That
loans made to any such officer prior to June 16, 1988, may be renewed
or extended for periods expiring not more than five years from such date
where the board of directors of the member bank shall have satisfied
themselves that such extension or renewal is in the best interest of the
bank and that the officer indebted has made reasonable effort to reduce
his obligation, these findings to be evidenced by resolution of the board
of directors spread upon the minute book of the bank: Provided furtherf
That with the prior approval of a majority of the entire board of directors,
any member bank may extend credit to any executive officer thereof, and
such officer may become indebted thereto, in an amount not exceeding
$2,500. 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
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. Borrowing by, or loaning to, a partnership in which one or more
executive officers of a member bank are partners having either individually
or together a majority interest in said partnership, shall be considered
within the prohibition of this subsection. Nothing contained in this
subsection shall prohibit any executive officer of a member bank from
endorsing or guaranteeing for the protection of such bank any loan or




BAN KIN G ACT OF 1 9 3 5

35

other asset which shall have been 'previously acquired by such bank in
good faith or from incurring any indebtedness to such bank for the
purpose of protecting such bank against loss or givingfinancial assistance
to it. The Board of Governors of the Federal Reserve System is authorized
to define the term ‘ executive officer ’, to determine what shall be deemed to
be a borrowing, indebtedness, loan, or extension of credit, for the purposes
of this subsection, and to prescribe such rules and regulations as it may
deem necessary to effectuate the provisions of this subsection in accord­
ance with its purposes and to prevent evasions of such provisions. Any
executive officer of a member bank accepting a loan or extension of credit
which is in violation of the provisions of this subsection shall be subject
to removal from office in the manner prescribed in section 80 of the Bank­
ing Act of 19SS: Provided, Thai for each day that a loan or extension of
credit made in violation of this subsection exists, it shall be deemed to be
a continuation of such violation within the meaning of said section 8 0 ”
Sec. 827. The third paragraph of section 28A of the Federal Reserve
Act, as amended, is amended to read as follows:
“ For the purpose 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 on June 16,
1984, in holding the bank premises, of the member bank with which it is
affiliated or in maintaining and operating properties acquiredfor banking
purposes prior to such date; (2) engaged solely in conducting a safedeposit business or the business of an agricultural credit corporation or
livestock loan company; (3) in the capital stock of which a national
banking association is authorized to invest pursuant to section 25 of this
Act, as amended, or a subsidiary of such affiliate, all the stock of which
(except qualifying shares of directors in an amount not to exceed 10 per
centum) is owned by such affiliate; (4) organized under section 25 (a) of
this Act, as amended, or a subsidiary of such affiliate, all the stock of
which (except qualifying shares of directors in an amount not to exceed
10 per centum) is owned by such affiliate; (5) engaged solely in holding
obligations of the United States or obligations fully guaranteed by the
United States as to principal and interest, the Federal intermediate credit
banks, the Federal land banks, the Federal Home Loan Banks, or the
Home Owners9 Loan Corporation; (6) where the affiliate relationship
has arisen out of a bonafide debt contracted prior to the date of the creation
of such relationship; or (7) where the affiliate relationship exists by
reason of the ownership or control of any voting shares thereof by a member
bank as executor, administrator, trustee, receiver, agent, depositary, or in
any other fiduciary capacity, except where such shares are held for the
benefit of all or a majority of the stockholders of such member bank; 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. The
provisions of this section shall likewise not apply to indebtedness of any
affiliate for unpaid balances due a bank on assets purchased from such
bank or to loans secured by, or extensions of credit against, obligations of
the United States or obligations fully guaranteed by the United States as
to principal and interest”
S e c . 828. Section 24 of the Federal Reserve Act, as amended, is
amended by adding at the end thereof the following new paragraph:
“ Loans made to established industrial or commercial businesses (a)
which are in whole or in part discounted or purchased or loaned against
as security by a Federal Reserve bank under the provisions of section 18b



36

BANKING ACT OF 193 5

of this Act, (6) for any part of which a commitment shall have been made
by a Federal Reserve bank under the provisions of said section, (c) in the
making of which a Federal Reserve bank participates under the provisions
of said section, or (d) in which the Reconstruction Finance Corporation
cooperates or purchases a participation under the provisions of section
Sd of the Reconstruction Finance Corporation Act, shall not be subject
to the restrictions or limitations of this section upon loans secured by
rml estate”
S e c . 829. Section 25 of the Federal Reserve Act, as amended, is further
amended by striking out the last paragraph of such section; the paragraph
of section 25 (a) of the Federal Reserve Act, as amended, which com­
mences with the words “A majority of the shares of the.capital stock of
any such corporation ” is amended by striking out all of said paragraph
except the first sentence thereof; and the Act entitled “ An Act to supple­
ment existing laws against unlawful restraints and monopolies, aim for
other purposes” (88 Stat. 730), approved October 15, 191%, as amended,
is further amended (a) by striking out section 8A thereof and (b) by
substitutingfor thefirst three paragraphs of section 8 thereof thefollowing:
“ S e c . 8. No private banker or director, officer, or employee of any
member bank of the Federal Reserve System or any branch thereof shall
be at the same time a director, officer, or employee of any other bank,
banking association, savings bank, or trust company organized under the
Notional Bank Act or organized under the laws of any State or of the
Jffalrfct of Columbia, or any branch thereof, except that the Board of
G&tef'nors of the Federal Reserve System may by regulation permit such
service as a director, officer, or employee of not more than one other such
institution or branch thereof; but the foregoing prohibition shall not
apply in the case of any one or more of the following or any branch
thereof:
“ (1) A bank, banking association, savings bank, or trust company,
more than 90 per centum of the stock of which is owned directly or in­
directly by the United States or by any corporation of which the United
States directly or indirectly owns more than 90 per centum of the stock.
“ (2) A bank, banking association, savings bank, or trust company
which has been placed formally in liquidation or which is in the hands of
a receiver, conservator, or other official exercising similar functions.
“ (3) A corporation principally engaged in international or foreign
banking or banking in a dependency or insular possession of the United
States which has entered into an agreement with the Board of Governors
of the Federal Reserve System pursuant to section 25 of the Federal
neserve Act.
“ (4) A bank, banking association, savings bank, or trust company,
more than 50 per centum of the common stock of which is owned directly
or indirectly by persons who own directly or indirectly more than 50 per
centum of the common stock of such member bank.
“ (5) A bank, banking association, savings bank, or trust company riot
located and having no branch in the same city, town, or village as that in
which such member bank or any branch thereof is located, or in any city,
town, or village contiguous or adjacent thereto.
“ (6) A bank, banking association, savings bank, or trust company
not engaged in a class or classes of business in which such member bank
is engaged.
“ (7) A mutual savings bank having no capital stock.
“ Until February 1, 1939, nothing in this section shall prohibit any
director, officer, or employee of any member bank of the Federal Reserve



BANKING ACT OF 193 5

37

System, or any branch thereof, who is lawfully serving at the same time
as a 'private banker or as a director, officer, or employee of any other bank,
banking association, savings bank, or trust company, or any branch
thereof, on the date of enactment of the Banking Act of 1985, from con­
tinuing such service.
“ The Board of Governors of the Federal Reserve System is authorized
and directed to enforce compliance with this section, and to prescribe such
rules and regulations as it deems necessary for that purpose ”
S e c . 330. (a) Section 1 of the Act of November 7, 1918, as amended
(U, S. C., title 12, sec. 38; Supp. V II, title 12, sec. 88), is amended by
striking out the second proviso down to and including the words “ to be
ascertained” and inserting in lieu thereof the following: “ And provided
further, That if such consolidation shall be voted for at said meetings by
the necessary majorities of the shareholders of each of the associations
proposing to consolidate, any shareholder of any of the associations so
consolidated, who has voted against such consolidation at the meeting of
the association of which he is a shareholder or has given notice in writing
at or prior to such meeting to the presiding officer that he dissents from the
plan of consolidation, shall be entitled to receive the value of the shares so
held by him if and when said consolidation shall be approved by the
Comptroller of the Currency, such value to be ascertained as of the date
of the Comptroller’s approval
(b)
Such section 1 is further amended by adding at the end thereof the
following paragraphs:
“ Publication of notice and notification by registered mail of the meeting
provided for in the foregoing paragraph may be waived by unanimous
action of the shareholders of the respective associations. Where a dissent­
ing shareholder has given notice as above provided to the association of
which he is a shareholder of his dissent from the plan of consolidation,
and the directors thereoffail for more than thirty days thereafter to appoint
an appraiser of the value of his shares, said shareholder may request the
Comptroller of the Currency to appoint such appraiser to act on the
appraisal committee for and on behalf of such association.
“ I f shares, when sold at public auction in accordance with this section,
realize a price greater than their final appraised value, the excess in such
sale price shall be paid to the shareholder. The consolidated association
shall be liable for all liabilities of the respective consolidating associations.
In the event one of the appraisers fails to agree with the others as to the
value of said shares, then the valuation of the remaining appraisers shall
govern”
S e c . 831. (a) Section 8 of the Act of November 7, 1918, as amended
(U. S. C., Supp. V II, title 12, sec. 84 (a)), is amended by striking out
the first sentence following the proviso down to and including the words
“ to be ascertained” and inserting in lieu thereof the following: “ I f such
consolidation shall be votedfor at said meetings by the necessary majorities
of the shareholders of the association and of the State or other bank pro­
posing to consolidate, and thereafter the consolidation shall be approved
by the Comptroller of the Currency, any shareholder of either the associa­
tion or the State or other bank so consolidated, who has voted against such
consolidation at the meeting of the association of which he is a stock­
holder, or has given notice in writing at or prior to such meeting to the
presiding officer that he dissents from the plan of consolidation, shall be
entitled to receive the value of the shares so held by him if and when said




38

BANKING ACT OF 1935

consolidation shall be approved by the Comptroller oj the Currency, such
value to be ascertained as oj the date oj the Comptroller’s approval”
(b)
Such section 8 is jurther amended by adding at the end thereof the
following paragraph:
“ Where a dissenting shareholder has given notice as provided in this
section to the bank of which he is a shareholder of his dissent from the
plan oj consolidation, and the directors thereoj jaU jor more than thirty
days thereajter to appoint an appraiser oj the value oj his shares, said
shareholder may request the Comptroller of the Currency to appoint such
appraiser to act on the appraisal committee jor and on behalj oj such
bank. In the event one oj the appraisers jails to agree with the others
as to the value oj said shares, then the valuation ojthe remaining appraisers
shall govern ”
Sec. 882. The Act entitled 1 An Act to prohibit offering for sale as
1
Federal jarm-loan bonds any securities not issued under the terms of
the Farm Loan Act, to limit the use of the words *Federal’, 1United States ’,
or ‘ reserve \ or a combination oj such words, to prohibit jalse advertising,
and jor other purposes” , approved May 24,1926 (U. S. CS u p p . V II,
title 12, secs. 584-588), is amended by inserting in section 2 thereoj after
1 the words ‘ United Stales9” , the following: “ the words ‘ Deposit Insur­
1
a n c e a n d by inserting in said section after the words “ the laws of the
United States” , the following: “ nor to any new bank organized by the
Federal Deposit Insurance Corporation as provided in section 12B oj
the Federal Reserve Act, as amended, ” ; and by striking out the period at
the end oj section 4 and inserting the jollowing: u or the Federal Deposit
Insurance Corporation.”
S e c . 888. The Act entitled “ An Act to provide punishment for certain
offenses committed against banks organized or operating under laws oj
the Uniled States or any member ojthe Federal Reserve System ” , approved
May 18, 1984 (48 Stal. 788), is amended by striking out the period after
“ United States” in th&first section thereof and inserting the jollowing:
“ and any insured bank as defined in subsection (c) oj section 12B oj the
Federal Reserve Act, as amended. ”
S e c . 884 Section 5148 oj the Revised Statutes, as amended, is hereby
amended by striking out everything jollowing the words “ Comptroller oj
the Currency” , where such words last appear in such section, and sub­
stituting the jollowing: “ and no shareholder shall be entitled to any
distribution oj cash or other assets by reason oj any reduction oj the
common capital oj any association unless such distribution shall have
been approved by the Comptroller oj the Currency and by the affirmative
vote oj at least two-thirds oj the shares oj each class oj stock outstanding,
voting as classes.”
Sec. 885. Section 5189 oj the Revised Statutes, as amended, is
amended by adding at the end oj the first paragraph the jollowing new
paragraph:
“ Certificates hereafter issued representing shares oj stock oj the associa­
tion shall state (1) the name and Location oj the association, (2) the name
oj the holder oj record of the stock represented therby, (S) the number and
class oj shares which the certificate represents, and (4) ij the association
shall issue stock oj more than one class, the respective rights, prejerences,
privileges, voting rights, powers, restrictions, limitations, and qualifica­
tions oj each class oj stock issued shall be stated in jull or in summary
upon the jront or back oj the certificates or shall be incorporated by a
•




BANKING ACT OF

1935

39

reference to the articles of association set forth on the front of the certifi­
cates. Every certificate shall be signed by the president ana the cashier
of the association, or by such other officers as the bylaws of the association
shall provide, and shall be sealed with the seal of the association ”
Sec. 886, The last sentence of section 801 of the Emergency Banking
and Bank Conservation Act, approved March 9, 1988, as amended, is
amended to read as follows: “ No issue of preferred stock shall be valid
until the par value of all stock so issued shall be paid in and notice thereof,
duly acknowledged before a notary public by the president, vice president,
or cashier of said association, has been transmitted to the Comptroller
of the Currency and his certificate obtained specifying the amount of such
issue of preferred stock and his approval thereof and that the amount
has been duly paid in as a part of the capital of such association; which
certificate shall be deemed to be conclusive evidence that such preferred
stock has been duly and validly issued
S e c . 887. The additional liability imposed by section 4 of the Act of
March 4, 1988, as amended (D. C. Code, Supp. I , title 5, sec. 800a),
upon the shareholders of savings banks, savings companies, and banking
institutions and the additional liability imposed by section 784 of the
Act of March 8,1901 (D. C. Code, title 5, sec. 861), upon the shareholders
of trust companies, shall cease to apply on July 1, 1987, with resped to
such savings banks, savings companies, banking institutions, and trust
companies which shall be transacting business on such date: Provided,
That not less than six months prior to such date, the savings bank,
savings company, banking institution, or trust company, desiring to
take advantage hereof, shall have caused notice of such prospective
termination of liability to be published in a newspaper published in
the District of Columbia and having general circulation therein. In
the event of failure to give such notice as and when above provided, a
termination of such additional liability may thereafter be accomplished
as of the date six months subsequent to publication in the manner
above provided. Each such savings bank, savings company, banking
institution, and trust company shall, before the declaration of a dividend
on its shares of common stock, carry not less than one-tenth part of its
net profits of the preceding half year to its surplus fund until the same
shall equal the amount of its common stock: Provided, That for the
purposes of this section, any amounts paid into a fund for the retire­
ment of any preferred stock or debentures of any such savings bank,
savings company, banking institution, or trust company, out of its net
earnings for such half-year period shall be deemed to be an addition
to its surplus if, upon the retirement of such preferred stock or debentures,
the amount so paid into such retirement fund for such period may then
properly be carried to surplus. In any such case the savings bank,
savings company, banking institution, or trust company shall be obli­
gated to transfer to surplus the amount so paid into such retirement
fund for such period on account of the preferred stock or debentures as
such stock or debentures are retired.
S e c . 888. The second paragraph of section 9 of the Federal Reserve
Act, as amended, is amended by striking out the period at the end thereof
and adding thereto the following: tl except that the approval of the Board
of Governors of the Federal Reserve System, instead of the Comptroller
of the Currency, shall be obtained before any State member bank may
hereafter establish any branch and before any State bank hereafter admitted




40

BANKING AOT OF 193 5

to membership may retain any branch established after February 25,
1927, beyond the limits oj the city, town, or village in which the parent
bank is situated.”
Sec. 839. Section 5234 of the Revised Statutes, as amended (U. S. <7.,
title 12} sec. 192), is amended by striking out the period after the words
“ money so deposited ” at the end of the next to the last sentence of such
section and inserting in lieu of such period a colon and the following:
“ Provided, That no security in theform of deposit of United States bonds,
or otherwise j shall be required in the case of such parts of the deposits
as are insured under section 12B of the Federal Reserve Act, as amended.”
S e c . 340. Section 61 of the Act entitled “ An Act to establish a uniform
system of bankruptcy throughout the United States” , approved July 1,
1898, as amended, is amended by inserting before the period at the end
thereof a colon and the following: “ Provided, That no security inform of a
bond or otherwise shall be required in the case of such part of the deposits
as are insured under section 12B of the Federal Reserve Act, as amended” .
S e c . 341. Section 8 of the Act entitled “ An Act to establish postal
savings depositories for depositing savings at interest with the security
of the Government for repayment thereof, and for other purposes” ,
approved June 25, 1910, as amended (U. S. C., title 39, sec. 758; Supp.
V II, title 39, sec. 758), is amended by striking out the first sentence
thereof and inserting in lieu thereof the following: “ Notwithstanding
any other provision of law, (1) each deposit in a postal savings depository
office shall be a savings depositf and interest thereon shall be allowed and
entered to the credit of the depositor once for each quarter beginning with
thefirst day of the monthfollowing the date of such deposit, but no interest
shall be allowed to any such depositor with respect to the whole or any
part of the funds to his or her credit for any period of less than three
months; (2) no interest shall be paid on any such deposit at a rate in
excess of that which may lawfully be paid on savings deposits under
regulations prescribed by the Board of Governors of the Federal Reserve
System pursuant to the Federal Reserve Act, as amended, for member
banks of the Federal Reserve System located in or nearest to the place
where such depository office is situated; and (3) postal savings depositories
may deposit funds on time in member banks of the Federal Reserve System
subject to the provisions of the Federal Reserve Act, as amended, and the
regulations of the Board of Governors of the Federal Reserve System,
with respect to the payment of time deposits and interest thereon.”
S e c . 342. The last sentence of the third paragraph of subsection (k)
of section 11 of the Federal Reserve Act, as amended (£7. S. C., title 12,
sec. 248(k)), is amended to read as follows: “ The State banking author­
ities may have access to reports of examination made by the Comptroller
of the Currency insofar as such reports relate to the trust department of
such bank, but nothing in this Act shall be construed as authorizing the
State banking authorities to examine the books, records, and assets of such
bank.”
S e c . 343. The first sentence after the third proviso of section 5240 of
the Revised Statutes, as amended (U. S. C., Supp. V II, title 12, secs.
481 and 482), is amended by striking out the word “ is ” after the words
“ whose compensation” and inserting in lieu thereof a comma and the
following: “ including retirement annuities to be fixed by the Comptroller
of the Currency, is and shall be” ; and such section 5240 isfurther amended




BANKING ACT OF 193 5

41

by striking out “ The Federal Reserve Board, upon the recommendation of
the Comptroller of the Currency,” and inserting in lieu thereof “ The
Comptroller of the Currency
Sec. 344- (a) Section 1 of the National Housing Act is amended by
adding at the end thereof thefollowing new sentence: 1 The Administrator
1
shall, in carrying out the provisions of this title and titles I I and III, be
authorized, in his official capacity, to sue and be sued in any court of
competent jurisdiction, State or Federal ”
(6)
The first sentence of section 2 of the National Housing Act, as
amended, is further amended by striking out the wards “ including the
the installation of equipment and machinery ” and inserting in lieu
thereof the words “ and the purchase and installation of equipment and
machinery on real property
(c) Subsection (a) of section 203 of the National Housing Act is
amended by inserting the words “ property and” before the word “projects”
in clause (1) of such subsection.
(d) The last sentence of section 207 of the National Housing Act is
amended by inserting the words uproperty or ” before the word “ project ”
Sec. 845. If any part of the capital of a national bank, State member
bank, or bank applying for membership in the Federal Reserve System
consists of preferred stock\ the determination of whether or not the capital
of such bank is impaired and the amount of such impairment shall be
based upon the par value of its stock even though the amount which the
holders of such preferred stock shall be entitled to receive in the event of
retirement or liquidation shall be in excess of the par value of such pre­
ferred stock. I f any such bank or trust company shall have outstanding
any cWpitul notes or debentures of the type which the Reconstruction
Finance Corporation is authorized to purchase pursuant to the provisions
of section 804 of the Emergency Banking and Bank Conservation Act,
approved March 9, 1988, as amended, the capital of such bank may be
deemed to be unimpaired if the sound value of its assets is not less than
its total liabilities, including capital stock, but excluding such capital
notes or debentures and any obligations of the bank expressly subordi­
nated thereto. Notwithstanding any other provision of law, the holders
of preferred stock issued by a national banking association pursuant to the
provisions of the Emergency Banking and Bank Conservation Act,
approved March 9, 1983, as amended, shall be entitled to receive such
cumulative dividends at a rate not exceeding six per centum per annum
on the purchase price received by the association for such stock and, in
the event of the retirement of such stock, to receive such retirement price,
not in excess of such purchase price plus all accumulated dividends, as
may be provided in the articles of association with the approval of the
Comptroller of the Currency. I f the association is placed in voluntary
liquidation, or if a conservator or a receiver is appointed therefor, tw
payment shall be made to the holders of common stock until the holders
of preferred stock shall have been paid in full such amount as may be
provided in the articles of association with the approval of the Comp­
troller of the Currency, not in excess of such purchase price of such
preferred stock plus all accumulated dividends.
Sec. 346. I f any provision of this Act, or the application thereof to
any person or circumstances, is held invalid, the remainder of the Act,




42

b a n k i n g a c t o f 1935

and the application of such provision to other persons and circumstances,
shall not be affected thereby.
And the Senate agree to the same.
H e n r y B. S t e a g a l l ,
T. A lan G old sbo ro u g h ,
J ohn B. H o l l ist e r ,
Managers on the part of the House.




C a r t e r G la ss ,
D u n can U. F le t c h e r ,
R o b e r t J. B u l k l e y ,
J ohn G. T o w n se n d , Jr.,
W m . G. M cA doo ,
P eter N orbeck,

Managers on the part of the Senate.

STATEMENT OF THE MANAGERS ON THE PART OF THE HOUSE

The managers on the part of the House at the conference on the
disagreeing votes of the two Houses on the amendment of the Senate
to the bill (H. R. 7617) to provide for the sound, effective, and unin­
terrupted operation of the banking system, and for other purposes,
submit the following statement in explanation of the effect of the
action agreed upon and recommended in the accompanying conference
report:
TITLE I— FEDERAL DEPOSIT INSURANCE

The provisions of title I of the House bill, which amended various
subsections of section 12B of the Federal Reserve Act (relating to the
subject of Federal deposit insurance), did not differ in many respects
from those contained in title I of the Senate amendment. However,
the Senate amendment rewrote such section 12B so as to include the
provisions of existing lawwhichwere not affected by the specific amend­
ments made by title I of the House bill in order that all the provisions
of the amended section might be found in one place when the amended
section takes effect. The conference agreement retains the form of
the Senate amendment, and the material differences in substance
between its provisions and those of the House bill, and the conference
action with respect thereto, are indicated below. Certain formal and
clarifying amendments of a minor nature have also been made in other
parts of Title I which are not specifically mentioned.
The House bill contained a provision which was omitted in the
Senate amendment authorizing a Deputy Comptroller of the Cur­
rency to serve as a member of the board of directors of the Federal
Deposit Insurance Corporation in the absence of the Comptroller.
The conference agreement provides that the Acting Comptroller of
the Currency may serve as a member of the board of directors of the
Corporation during the absence of the Comptroller from Washington
as well as in the case of a vacancy in the office of the Comptroller as
was provided for by both the House bill and the Senate amendment.
The Senate amendment extended the benefits of deposit insurance
to banks in Puerto Rico and the Virgin Islands. There was no corre­
sponding provision in the House bill. The conference agreement
retains the provision of the Senate amendment.
The House bill prohibited insured savings banks from withdrawing
deposits by checking except from specific accounts totaling not more
than 15 percent of the bank’s total deposits. The Senate amendment
limited this exception to cases where such withdrawal is permitted by
law on the date of enactment of the Act. The conference agreement
retains the provision of the Senate amendment.
The Senate amendment permitted any insured bank with a branch
in Hawaii, Alaska, Puerto Rico, or the Virgin Islands to exclude from
insurance deposits payable only at such branch. There was no cor­
responding provision in the House bill. The conference agreement
retains the provision of the Senate amendment.




43

44

BANKING ACT OF 193 5

The House bill permitted the board of directors of the Federal
Deposit Insurance Corporation to further define terms used in con­
nection with the definition of the word “ deposit.” The Senate amend­
ment omitted this provision, and the conference agreement also
omits it.
The House bill permitted nonmember banks to terminate their
insured status on June 30, 1935, but this was extended to August 31,
1935, by the Senate amendment since the Temporary Federal Deposit
Insurance Fund was extended to that date by S. J. Res. No. 152,
approved June 28, 1935. The conference agreement permits such
banks to terminate their insured status within 30 days after the
effective date by giving written notice to the Corporation. In such
event, the directors of the Corporation are required to give notice to
the depositors, and the insurance of the deposits continues for 20
days beyond such 30-day period.
The House bill provided that the factors to be considered by the
Federal Deposit Insurance Corporation in connection with the
admission of banks to the benefits of deposit insurance should be
their financial condition and adequacy of capital structure. The
Senate amendment added to these factors, the financial history of
the banks, their future earning prospects, the general character of
their management, the convenience and needs of the community, and
whether or not their corporate powers were consistent with the act.
The conference agreement retains the provisions of the Senate
amendment.
The House bill provided for assessments upon insured banks at the
rate of one-eighth of 1 percent upon their average deposit liability as
determined on 1 day of each of 3 or more months preceding July and
January of each year. Payments were required to be made semi­
annually. The Senate amendment provided for assessments at the
rate of one-twelfth of 1 percent on the average deposit liability of
insured banks over a 6 months’ period and payments were also to be
made semiannually. The Senate amendment added a provision
under which assessments would be terminated when the assets of the
Corporation exceeded $500,000,000, with an automatic restoration of
assessments when the excess was reduced to $425,000,000. The
conference agreement retains the assessment rate and base provided
for in the Senate amendment, eliminates the provision relating to the
termination of assessments, and provides for adjusting the first
assessment according to the period remaining between the effective
date of the act and the first of next year.
The Senate amendment provided for the termination of the insured
status of member banks when their membership in the Federal Reserve
System was terminated. There was no corresponding provision in the
House bill. The conference agreement retains the Senate amend­
ment.
The House bill provided that insured banks “ may” be subject to
a penalty of $100 for each day they fail to make or publish reports or
to display signs indicating that their deposits are insured. The Senate
amendment provided that in such cases a penalty “ shall” be imposed
but the amount was fixed at “ not more than $100.” The conference
agreement retains the provisions of the Senate amendment.
The Senate amendment provided for limiting the insurance coverage
to deposits which have been made available since March 10, 1933, for




BANKING ACT OF 1 9 3 5

45

withdrawal in the.usual course of the banking business, and prohibited
insurance of deposits which had not been so made available for with­
drawal by the date of enactment of the act and with respect to which
the insured bank had released or modified restrictions or deferments
without the consent of the Corporation. There was no similar pro­
vision in the House bill, but the temporary insurance was so limited
under the existing law. The conference agreement retains the pro­
vision of the Senate amendment.
The House bill provided for the guarantee by the United States of
obligations issued by the Corporation. This provision was omitted
in the Senate amendment, and the conference agreement also omits it.
The House bill authorized the Secretary of the Treasury to pur­
chase the guaranteed obligations of the Corporation. The Senate
amendment authorized the Secretary to purchase any of the obliga­
tions of the Corporation and provided that if the Reconstruction
Finance Corporation failed for any reason to purchase such obliga­
tions as required by section 5e of the Reconstruction Finance Cor­
poration Act, the Secretary should purchase such obligations in an
amount equal to the amount the Reconstruction Finance Corporation
so failed to purchase. The conference agreement retains the pro­
visions of the Senate amendment and adds a provision requiring the
Secretary of the Treasury to purchase an additional $250,000,000 of
the obligations of the Corporation.
The House bill also authorized the Secretary of the Treasury to
market the guaranteed obligations of the Federal Deposit Insurance
Corporation. This provision was omitted in the Senate amendment.
The conference agreement also omits it.
The Senate amendment restored the penalty of existing law appli­
cable to directors of insured banks who participated in the declaration
of dividends while their banks were in default in the payment of
assessments to the Corporation. This provision was not included in
the House bill. The conference agreement retains this provision.
The Senate amendment prohibited State nonmember insured
banks from establishing and operating new branches, and from moving
branches from one location to another, after 30 days after the date
of enactment of the act, without the consent of the Corporation.
There was no corresponding provision in the House bill. The con­
ference agreement retains the provision of the Senate amendment.
The House bill authorized the board of directors of the Corporation
to limit by regulation the rates of interest or dividends payable by
insured nonmember banks on deposits other than demand deposits,
and directed the board to prohibit the payment of interest on demand
deposits except to the extent that exceptions are prescribed under
section 19 of the Federal Reserve Act, or by regulation of the Federal
Reserve Board, in the case of demand deposits in member banks.
The board of directors was authorized to define demand and savings
deposits and in fixing rates it was empowered but not directed to
classify deposits according to maturities, conditions respecting re­
ceipt, withdrawal, or repayment, and to classify banks according to
locations or kinds of banking business chiefly done as the board might
deem necessary in the public interest. The board was also authorized
to prescribe different rates for different classes of deposits or different
classes of banks provided the different rates were reasonable when the
bases for the classifications were considered. Payment of deposits




46

BANKING ACT OF 19 3 5

prior to maturity was to be prohibited by regulations of the board
of directors as well as the waiving of any notice requirement with
respect to withdrawal of deposits, but the prohibitions with respect
to such withdrawals were not to apply to savings banks and excep­
tions might be made when by reason of special circumstances such
prohibitions would cause unnecessary hardship to depositors. For
each violation of any of these provisions or of the Corporation’s
regulations the offending bank was subject to a penalty of $100.
The Senate amendment subjected insured State nonmember banks
(other than savings banks, mutual savings banks, and Morris Plan
banks) to the provisions of the Federal Reserve Act and regulations
thereunder relating to the withdrawal and payment of deposits, and
the payment of interest thereon, which are applicable to insured mem­
ber banks. For each violation the offending bank was to be subject
to a penalty of “ not more than” $100. The conference agreement
provides that the regulation of these matters in the case of insured
State nonmember banks is to be left to the board of directors of the
Corporation, as in the House bill, rather than to the Board of Gov­
ernors of the Federal Reserve System as would have T> e the case
cen
under the Senate amendment. The board is directed to consider
the same factors in fixing rates as are applicable when the Board of
Governors acts under section 19 of the Federal Reserve Act with re­
spect to member banks, and the board is authorized to define what
constitutes demand time, and savings deposits in insured nonmember
banks. The provisions with respect to the payment of deposits before
maturity and the waiving of notice requirements before payment of
savings deposits are also made to correspond to the provisions of such
section 19. The penalty provision corresponds to that in the Senate
amendment.
The Senate amendment included a provision not contained in the
House bill which required every State bank organized after the date
of enactment of the act, and every State bank which has average
deposits of $1,000,000 or more during 1936 or any subsequent calen­
dar year, to become a member of the Federal Reserve System in order
to get the benefit of insurance after July 1, 1937. Exceptions were
made, however, in the case of savings banks, mutual savings banks,
Morris Plan banks, State trust companies doing no commercial
business, and banks in Hawaii, Alaska, Puerto Rico, and the Virgin
Islands. The conference agreement limits the requirement of the
Senate amendment to State nonmember banks having average de­
posits of $1,000,000 or more and extends to July 1, 1942 the date
upon which such banks are required to become members of the Fed­
eral Reserve System. The effect of the provision agreed to is to
liberalize the provisions of existing law so that more than 6,500 State
nonmember banks having average deposits of less than $1,000,000
will not be required to join the Federal Reserve System in order to
continue their insured status.
The Senate amendment included a separability provision especially
applicable to the provisions relating to the maximum limitation
upon the amount of insurance payable to each depositor. There
was no corresponding provision in the House bill. The conference
agreement retains this provision.




BANKING ACT OF 193 5

47

TITLE II----AMENDMENTS TO THE FEDERAL RESERVE ACT

Section 201 of the House bill amended section 4 of the Federal
Reserve Act so as to combine the offices of chairman of the board of
directors and Governor of the Federal Reserve banks and to provide
for the appointment of the Governor to be made annually by the
directors of each bank subject to approval every 3 years by the
Federal Reserve Board. The Governor would be the chief executive
officer of the bank, chairman of its board of directors and a class C
director. The Vice Governor would be Governor in his absence.
It was also provided that the offices of Federal Reserve agent and
assistant Federal Reserve agent would be abolished and that all duties
prescribed by law for the Federal Reserve agent would be performed
by the Governor of the bank or such person as he might designate.
This section of the bill was not included in the Senate amendment,
The conference agreement omits this section.
Section 201 of the Senate amendment amended the provisions of
section 4 of the Federal Reserve Act relating to appointment of officers
and employees of the Federal Reserve banks so as to provide for the
appointment of a president and vice president for each such bank.
It was provided that the president shall be the chief executive officer
of the bank and shall be appointed by the board of directors with the
approval of the Board of Governors of the Federal Reserve System
(which under section 202 of the Senate amendment is the new name
for the Federal Reserve Board) for a term of 5 years, and all other
executive officers and all employees of the bank are to be directly
responsible to him. The vice president of the bank is to be appointed
in the same manner and for the same term as the president and is to
serve as chief executive officer of the bank in the absence or disability
of the president or during a vacancy in the office of president. \IVhenever a vacancy occurs in either office it is to be filled in the same manner
as provided for in the case of original appointments and the person so
appointed is to hold office until the expiration of the term of his
predecessor. This provision was not included in the House bill. The
conference agreement allows for the appointment-of more than one
vice president for each bank and provides that the first vice president
shall be appointed in the same manner as the president. It is also
provided that the section shall take effect March 1, 1936.
Section 202 of the House bill contained a provision authorizing the
Federal Reserve Board to waive in whole or in part the requirements
of section 9 of the Federal Reserve Act relating to admission to
membership of any nonmember bank which at the time of its appli­
cation for membership is insured by the Federal Deposit Insurance
Corporation under section 12B of the Federal Reserve Act. The
conference agreement restores the provision of section 202 of the
House bill but limits its application to State banks which are required
under subsection (y) of section 12B to become members of the Federal
Reserve System in order to have their deposits insured after July 1,
1942*
Section 203 of the House bill changed the qualifications of members
of the Federal Reserve Board by striking out the requirement of exist­
ing law that in selecting such members the President shall have due
regard to a fair representation of the financial, agricultural, industrial,
and commercial interests and geographical divisions of the country,




48

BANKING ACT OF 19 3 5

and substituting a requirement that they should be well qualified by
education or experience, or both, to participate in the formulation of
national economic and monetary policies. The requirement of exist­
ing law that not more than one member of the Board should be selected
from any one Federal Reserve district, was preserved for all appoin­
tive members of the Board except the governor. It was also provided
that the governor and vice governor of the Board should serve as such
until the further order of the President, and that if the governor's
designation as such be terminated he might continue to serve as a
member of the Board for the remainder of his term. This section of
the bill was eliminated from the Senate amendment in view of the
changes in the organization and membership of the Board provided
for in section 202. The conference agreement also eliminates this
section.
Section 202 of the Senate amendment provided for changing the
name of the Federal Reserve Board to the Board of Governors of
the Federal Reserve System, and for changing the name of the
governor and vice governor of the Federal Reserve Board to chairman
and vice chairman, respectively. It was provided that the Board of
Governors of the Federal Reserve System shall be composed of seven
members to be appointed by the President, by and with the advice
and consent of the Senate, after the date of enactment of the act,
for terms of 14 years, but that the present appointive members of the
Federal Reserve Board and the Secretary of the Treasury and the
Comptroller of the Currency may continue to serve as such members
for not longer than 90 days after such date. The provision of existing
law with respect to qualifications of members of the new Board were
retained, namely, that the President shall have due regard for a fair
representation of the financial, agricultural, industrial, and commer­
cial interests, and geographical divisions of the country, and a further
requirement was added that at least two of such members shall be
persons of tested banking experience. The annual salary of members
of the Board was fixed at $15,000, and it was provided that not more
than four of the members of the Board shall be members of the same
political party. The successors to the present members of the Board
were to be appointed in such manner that the term of not more than
one member will expire in any 2-year period, and their successors will
hold office for & term of 14 years, unless sooner removed for cause by
the President. The President was also to designate the chairman and
vice chairman of the Board to serye as such for terms of 4 years.
It was also provided that any person appointed as a member of the
Board after the date of enactment of the act shall not be eligible for
reappointment as such member after he shall have served a full term
of 14 years. A provision was also included in this section providing
that the Board of Governors of the Federal Reserve System shall keep
a complete record of the action taken by the Board and the Federal
Open Market Committee upon ^ 1 questions of policy relating to
1
open-market operations, together with the votes taken and the
reasons underlying the action of the Board and the Committee in
each instance. Similar records were required to be kept by the Board
with respect to all questions of policy determined by it, and a copy
of such records was to be included in the annual report of the Board
to the Congress. The conference agreement modifies the provisions
of the Senate amendment by eliminating the requirement that two




BANKING ACT OF 19 3 5

49

members of the Board shall be persons of tested banking experience
and also the provision relating to the political affiliations of the mem­
bers of the Board. The date upon which the change in the organiza­
tion of the Board is to take effect is extended to February 1, 1936.
Section 203 of the Senate amendment reenacted and made perma­
nent law the provisions of section 10b of the Federal Reserve Act which
expired on March 3, 1935, and under which any member bank that
had no eligible and acceptable assets to enable it to obtain adequate
credit accommodations through rediscounting at a Federal Reserve
bank, or any other method provided by the Federal Reserve Act
(other than that provided by sec. 10 (a)), might apply to the Federal
Reserve bank, under rules and regulations prescribed by the Board,
for advances on its time or demand notes secured to the satisfaction
of the bank. The provision that each such note shall bear interest at
a rate not less than 1 percent per annum higher than the highest dis­
count rate in effect at the Federal Reserve bank on the date of the
note, was also retained, but the limitation of existing law that such
advances may be made only “ in exceptional and exigent circum­
stances” was eliminated. There was no corresponding provision in
the House bill but section 206 provided that upon the endorsement of
any member bank, subject to such regulations as to maturities and
other matters as the Federal Reserve Board might prescribe, any
Federal Reserve bank might discount any commercial, agricultural,
or industrial paper and make advances to such member bank on its
promissory notes secured by any sound assets of the bank. This
section was eliminated from the Senate amendment. The conference
agreement eliminates from the Senate amendment the provision
requiring the exhausting of eligible and acceptable assets before
securing advances, changes the 1-percent rate to one-half of 1 per­
cent, and adds a provision that the notes of the member banks shall
have maturities of not more than 4 months.
Section 204 of the House bill authorized the Federal Reserve Board
to assign to designated members of the Board or its representatives
under rules and regulations prescribed by the Board the performance
of specific duties and functions, not including, however, the deter­
mination of any national or System policies, or any power to make
rules and regulations, or any power which is required to be exercised
by specified members of the Board. (There was also a provision in
this section stating that it shall be the duty of the Board to exercise
its powers “ in such manner as to promote conditions conducive to
business stability and to mitigate by its influence unstabilizing fluc­
tuations in the general level of production, trade, prices, and employ­
ment, so far as may be possible within the scope of monetary action
and credit administration. ” These provisiQjiajyjexaomitted from the
Senate amendment. The conference agreijm^t^also omits them.
SecliOT"205“of'theHouse'HIl provided for an (JpenMarket Advisory
Committee, consisting of five representatives of the Federal Reserve
banks, to take the place of the Federal Open Market Committee
provided for in existing law. The Advisory Committee was authorized
to consult and advise with and make recommendations to the Federal
Reserve Board. It had no vote in determining open-market policies,
but the Board was required to consult the Committee before making
any changes on its own initiative in open-market policies, in rates of
203 6 6 O— 58------ 45




50

BANKING

act

OF 1 9 3 5

interest and discount to be charged by Federal Reserve banks, or in
the reserve balances required to be maintained by member banks. It
was also provided that all transactions of the Federal Reserve banks
under section 14 of the Federal Reserve Act should be subject to such
regulations, limitations, and restrictions as the Federal Reserve Board
might prescribe. In lieu of this section, the Senate amendment
in section 204 amended existing law so as to provide for a Federal
Open Market Committee, consisting of the members of the Board of
Governors of the Federal Reserve System, and five representatives of
the Federal Reserve banks to be selected annually. Four of such
representatives were to be elected by the boards of directors of the
Federal Reserve banks by regions; that is to say, 1 to represent the
Boston, New York, and Philadelphia banks; 1 to represent the Cleve­
land, Chicago, and St. Louis banks; 1 to represent the Richmond,
Atlanta, and Dallas banks; and 1 to represent the Minneapolis,
Kansas City, and San Francisco banks. The fifth representative,
who was to be chosen from the country at large, was to be elected
annually by the presidents of the 12 Federal Reserve banks. An
alternate to serve in the absence of each such representative was to
be elected annually in the same manner. It was also provided that
no Federal Reserve bank shall engage or decline to engage in openmarket operations under section 14 of the Federal Reserve Act except
in accordance with regulations adopted by the Committee and that
the Committee should make regulations relating to the open-market
transactions of the Federal Reserve banks and the relations of the
Federal Reserve System with foreign central or other foreign banks.
The provision of existing law which allowed a Federal Reserve bank to
decline to participate in open-market operations recommended and
approved by the Committee, upon filing a notice of its decision within
30 days, was eliminated, but the provision of existing law was retained
which states that the time, character, and volume of all purchases
and sales of paper described in section 14 of the Federal Reserve
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. The
conference agreement retains the provisions of the Senate amendment
in substance as section 205 but instead of providing for a repitesentative-at-large of the banks, it provides for 5 representatives to be
elected as follows: 1 by the board of directors of the Boston and
New York banks; 1 by the board of directors of the Philadelphia and
Cleveland banks; 1 by the board of directors of the Chicago and
St. Louis banks; 1 by the board of directors of the Richmond, Atlanta,
and Dallas banks; and 1 by the board of directors of the Kansas
City, Minneapolis and San Francisco banks. The conference agree­
ment also eliminates the power of the Committee to make regulations
with respect to the relations of the Federal Reserve System with
foreign central or other foreign banks since this would be in conflict
with the general authority over such matters which is granted to the
Federal Reserve Board under existing law. This provision becomes
effective March 1, 1936.
Section 207 of the House bill amended section 14 of the Federal
Reserve Act so as to make eligible for purchase by Federal Reserve
banks, without regard to maturities, direct obligations of the United
States or obligations which are fully guaranteed by the United States




BANKING ACT OF 193 5

51

as to principal and interest. This provision was modified by section
205 of the Senate amendment so as to provide that direct obligations
of the United States and such guaranteed obligations may be pur­
chased only in the open market. The conference agreement retains
the provisions of the Senate amendment as section 208.
Section 205 of the Senate amendment also amended existing law
with respect to rates of discount to be established by the Federal
Reserve banks by providing that such rates shall be established every
14 days, or oftener if deemed necessary by the Board of Governors of
the Federal Reserve System. There was no corresponding provision
in the House bill. The conference agreement retains the provisions
of the Senate amendment as section 206.
Section 208 of ti e House bill amended section 16 of the Federal
Reserve Act so as to repeal the requirements that Federal Reserve
notes be secured at all times by the specific pledge of collateral, and
it also eliminated the provision of existing law prohibiting a Federal
Reserve bank from paying out the notes of any such bank and made
certain technical changes with respect to issue, redemption, and retire­
ment of Federal Reserve notes. It was provided that such notes
should be obligations of the United States and legal tender for all
purposes, should be secured by a first and paramount lien on all the
assets of the issuing bank, and should be issued and retired under such
rules and regulations as the Federal Reserve Board might prescribe.
This provision of the bill was not included in the Senate amendment.
The conference agreement omits this provision.
Section 209 of the House bill authorized the Federal Reserve Board,
in order to prevent injurious credit expansion or contraction, to
change by regulation the requirements as to reserves to be main­
tained against demand or time deposits or both by member banks in
reserve and central reserve cities or by member banks not in reserve
or central reserve cities or by all member banks. This provision was
modified by section 206 of the Senate amendment so as to provide
that the power to change the requirements as to reserves be condi­
tioned upon an affirmative vote of not less than five members of the
Board of Governors of the Federal Reserve System, and a limitation
was added that the amount of the statutory reserves required to be
maintained under existing law may not be decreased, nor increased
to more than twice such amount. The conference agreement modifies
the Senate amendment so as to require the affirmative vote of not
more than four members of the Board.
Section 210 of the House bill amended section 24 of the Federal
Reserve Act so as to provide that the conditions under which realestate loans might be made by national banks would be prescribed
by regulations of the Federal Reserve Board, with the limitations
that the amount of any such loan hereafter made should not exceed 60
percent of the appraised value of the real estate at the time the loan
is made and that the aggregate amount of such loans by any such bank
should not exceed the capital and surplus of the bank, or 60 percent of
its time and savings deposits, whichever is the greater. Section 207 of
the Senate amendment retained the limitation of existing law that
real-estate loans by national banks should be limited to those upon
properties situated within the Federal Reserve district of such bank
or within a radius of 100 miles of the place in which the bank is located,
irrespective of district lines, and it also retained the requirement that




52

BANKING ACT OF 193 5

a real-estate loan should be in the form of an obligation secured by a
mortgage or similar instrument when the entire amount of the obliga­
tion was made or sold to the bank. It was further provided that any
such loan hereafter made should not exceed 50 percent of the appraised
value of the real estate offered as security and that no such loan should
be made for a longer term than 5 years, except that any such loan might
be made in an amount not to exceed 60 percent of the appraised value
of the real estate and for a term not longer than 10 years if the loan was
secured by an amortized mortgage under the terms of which the install­
ment payments were sufficient to amortize 50 percent or more of the
principal of the loan within a period of not more than 10 years.
Renewals or extensions of loans heretofore made and real-estate loans
which are insured under the provisions of title II of the National Hous­
ing Act were exempted under both the House and Senate provisions.
The provisions authorizing the Federal Reserve Board to prescribe
the conditions under which such loans might be made were eliminated
in the Senate amendment, but the provision of the House bill with
respect to the aggregate amount of real-estate loans which might be
made by any such bank was retained in the Senate amendment. The
conference agreement retains the provisions of section 207 of the Senate
amendment, except that the territorial limitation upon loans is
eliminated and the requirement as to the form of the loans when the
entire amount of the obligations securing them are made or sold to
the banks is modified so as to permit more than one such bank to
participate in making real estate loans but to permit any such bank
to purchase obligations secured by mortgages only when the entire
amount of the obligations are sold to the bank. The amortization
requirement is also reduced from 50 to 40 percent. A provision of
existing law is also restored relating to the receipt of time and savings
deposits by such banks and the payment of interest thereon.
Section 208 of the Senate amendment provided for fixing the salary
of the Comptroller of the Currency at $12,000 a year and removed the
provision of existing law which provides that his appointment be
made upon the recommendation of the Secretary of the Treasury.
There was no corresponding provision in the House bill. The
conference agreement retains the Senate provision but fixes the salary
of the Comptroller at $15,000 to correspond to the salaries provided
for members of the Board of Governors of the Federal Reserve
System.
TITLE III— TECHNICAL AMENDMENTS TO THE BANKING LAWS

In this title many of the sections are identical both in form and in
substance in the House bill and in the Senate amendment. Other
sections of the Senate amendment, which are the same in substance as
the corresponding sections of the House bill, contain formal and clari­
fying changes which are retained in the conference agreement. Many
of the alterations thus made are the result of changing the name of the
Federal Reserve Board to the Board of Governors of the Federal
Reserve System. Certain clerical and typographical errors are also
corrected. The sections in these two general groups are not specifi­
cally referred to but those in which there are material differences
between the House and Senate provisions and which contain matter




BANKING ACT OF 1935

53

not included in the House bill, together with the conference action
with respect thereto, are indicated below.
Section 303 (b) of the House bill repealed section 21 (a) (2) of the
Banking Act of 1933 which prohibits any person or organization not
subject to examination and regulation under State or Federal law
from engaging in the business of receiving deposits unless such person
or organization submits to the examination by the Comptroller of
the Currency or by a Federal Reserve bank. Instead of repealing
this paragraph, the Senate amendment amended it so as to prohibit
any person or organization from engaging in the business of receiving
deposits with others than his or its own officers, agents, or employees
unless such personor organization is incorporated under and authorized
to engage in such business by Federal or State law, or is permitted to
engage in such business by any State, Territory, or District and is
subject under the laws thereof to examination and regulation, or submits to examination by the banking authorities of the State, Territory,
or District where the business is conducted and makes and publishes
periodic reports of condition under the same conditions as required by
local law of an incorporated banking institution. The conference
agreement retains the provision of t.hflJSfinata.amendment,
Section 308 (a) of the Senate amendment contained a provision
which was not included in the House bill amending paragraph seventh
of section 5136 of the Revised Statutes so as to permit national banks
under regulations by the Comptroller of the Currency and with other
restrictions to underwrite and sell bonds, debentures, and notes.
The conference agreement eliminates this provision.
Section 30$ (c) of the Senate amendm^^
for including
within the group of securities that may be dealt in by member banks
free from the restrictions of section 5136 of the Revised Statutes,
obligations insured by the Federal Housing Administrator if deben­
tures guaranteed by the United States as to principal and interest are
to be issued in payment of such insured obligations. There was no
corresponding provision in the House bill. The conference agree­
ment retains the provision of the Senate amendment.
Section 309 of the House bill amended section 5138 of the Revised
Statutes to require a newly organized national bank to have a paid-in
surplus equal to 20 percent of its capital, thus expressly providing by
law a condition which has long been imposed by the Comptroller of
the Currency. This requirement may be waived by the Comptroller
as to a State bank converting into a national bank. An additional
condition not included in the House bill was added by the Senate
amendment to the effect that any such converting State bank shall
carry not less than one-half of its net profits for the preceding half
year to its surplus fund before declaring dividends, until its surplus
equals 20 percent of its capital. Further provision was also made for
giving any such bank credit as surplus for amounts paid into a pre­
ferred stock retirement fund. The conference agreement retains the
provision of the Senate amendment.
Section 310 (a) of the Senate amendment amended the provisions
of section 5139 of the Revised Statutes which provide that stock
certificates of national banks may not represent the stock of any other
corporation except a member bank or a corporation engaged solely in
holding the bank premises of the association, so as to provide that such




64

BANKING ACT OF 193 5

certificate may not bear any statement purporting to represent the
stock of any other corporation, except a member bank or a corporation
engaged on June 16, 1934, in holding the bank premises. This
amendment differs from the provision in the House bill in that it
exempts corporations engaged in holding the bank premises on June
16, 1934, whereas the House provision limited the exception to a cor­
poration primarily engaged in holding such premises. The confer­
ence agreement retains the provisions of the Senate amendment.
Section 310 (b) of the Senate amendment added a provision not
incorporated in the House bill which amends section 9 of the Federal
Reserve Act and makes the same changes in the law relative to stock
certificates of State member banks as was made by section 310 (a)
T
as to stock certificates of national banks. The conference agreement
retains the provisions of the Senate amendment.
Section 311 (c) of the Senate amendment was not included in the
House bill. It amends section 5144 of the Revised Statutes by
relieving a holding company affiliate, to the extent that the shares of
bank stock owned by it are not subject to statutory liability, from the
requirements of subsection (b) of section 5144 which requires a hold­
ing company affiliate to maintain and possess readily marketable
assets other than bank stock in an amount not less than 12 percent
of the aggregate par value of all such stock controlled by the affiliate,
and requires it to increase such amount by 2 percent per annum until
such amount equals 25 percent of the par value of such bank stock.
In lieu of the foregoing requirement, any such holding company
affiliate, to the extent that the shares of bank stock held by it are not
subject to statutory liability, is only required to maintain a reserve
out of net earnings above 6 percent of such readily marketable assets
in an amount equal to 12 percent of the par value of bank stocks con­
trolled by it. The conference agreement retains the provisions of
the Senate amendment.
Section 315 of the House bill amended section 5199 of the Revised
Statutes to provide that national banks shall carry not less than
one-tenth part of their net profits of the preceding half year to surplus
before the declaration of a dividend until the surplus is built up to
equal the amount of the common capital. The Senate amendment
added a provision which was not contained in the House bill which
would allow a national bank to treat as an addition to its surplus fund
amounts paid into its preferred-stock retirement fund. The confer­
ence agreement retains the provision of the Senate amendment.
Section 316 extends the criminal provisions of section 5209 of the
Revised Statutes as to embezzlement, false entries, etc., so as to apply
to officers, directors, and employees of insured nonmember banks.
The conference agreement adds a provision to make certain that non­
member national banks in the Territories are included within the
terms of the section whether or not they are insured.
Section 321 (a) of the Senate amendment amended section 11 (m)
of the Federal Reserve Act to extend to State member banks the
provisions applicable to national banks which enlarge the maximum
imitation on loans to one individual from 10 percent of the bank's
unimpaired capital and surplus to 25 percent thereof where such loans
are secured by bonds, notes, certificates, or Treasury bills of the
United States, or secured by obligations fully guaranteed as to
principal and interest by the United States. The provisions with

[




BANKING ACT OF 193 5

55

respect to such guaranteed obligations were not included in the House
bill. The conference agreement retains the provisions of the Senate
amendment.
Section 321 (b) of the Senate amendment amended paragraph 8 of
section 5200 of the Revised Statutes so as to provide a maximum
limit of 25 percent instead of 10 percent of the bank’s capital and
surplus on loans secured by various obligations of the United States.
The amendment adds to such obligations, Treasury bills of the
United States and obligations fully guaranteed both as to principal
and interest by the United States. The provisions with respect to
such guaranteed obligations were not included in the- House bill.
The conference agreement retains the provisions of the Senate
amendment.
Section 324 (c) of the Senate amendment amended section 19 of
the Federal Reserve Act to add to the classes of deposits exempted
from the prohibition against the payment of interest on demand
deposits, deposit contracts existing when a bank joins the Federal
Reserve System. It was also provided that deposits payable out­
side the States of the UnitedHStates and the District of Columbia shall
likewise be exempt, rather than “ those payable in foreign countries”
as is provided in the existing law. A provision not included in the
House bill prohibited payment of interest after the expiration of 2
years from the date of enactment of the act, on demand deposits
made by savings banks as defined in section 12B of the Federal
Reserve Act, as amended, and by mutual savings banks, demand
deposits of public funds made by or on behalf of any State, county,
school district, or any subdivision or municipality, and demand
deposits of trust funds, upon which interest is required to be paid by
State law. The House provision, permitting payment of interest on
demand deposits made by any such savings bank or mutual savings
bank, by the United States or any Territory, district, or possession
thereof, including the Philippine Islands, or any public instrumen­
tality or agency thereof with respect to which interest is required by
law, or by any State, etc., and on demand deposits of trust funds,
was eliminated. A new provision was also added repealing so much
of existing law as requires payment of interest on deposits of public
funds made by the United States, etc. In conformity with the House
provision, the Senate amendment made more flexible the power of
the Board of Governors of the Federal Reserve System to classify
time and savings deposits and prescribe the rates of interest to be paid
thereon. The absolute prohibition against payment of time deposits
before maturity may be relaxed under conditions to be prescribed by
the Board, and deposits payable only at offices of member banks
located outside of the United States and the District of Columbia are
exempted from the restrictions on interest rates and the prohibitions
on payment before maturity. The conference agreement retains the
provisions of the Senate amendment.
Section 327 of the House bill amended section 23A of the Federal
Reserve Act which limits loans to affiliates, and loans on and invest­
ments in securities of affiliates, and prescribed certain conditions by
way of collateral requirements to such loans. It also enumerated
certain types of affiliates which are to be exempt from such conditions
and requirements. The Senate amendment made a change in the




56

BANKING ACT OF 193 5

provision exempting an affiliate engaged “ primarily” in holding
bank premises so that the exemption would apply only to an affiliate
engaged “ on June 16, 1934” in holding such premises. The confer­
ence agreement retains the provision of the Senate amendment. 1
Section 329 of the Senate amendment repealed section 8A m. the
Clayton Act relating to interlocking relationships between banks and
institutions making loans secured by stock or bond collateral, and
repealed the provisions of sections 25 and 25 (a) of the Federal Re­
serve Act which relate to interlocking relationships. The first three
paragraphs of section 8 of the Clayton Act were also amended, but
the provision in the Senate amendment was materially different from
that in the House bill. The House bill prohibited any director, offi­
cer, or employee of a member bank from being at the same time a
private banker or a director, officer, or employee of another banking
institution (other than a mutual savings bank) except in limited classes
of cases in which the Federal Reserve Board might allow such service
by general regulation when in its judgment such classes of institutions
were not in substantial competition. The provision in the Senate
amendment prohibited a director, officer, or employee of a member
bank or branch thereof from being at the same time a private banker,
or a director, officer, or employee of more than one other bank or
trust company or branch thereof, except in the following cases:
(1) Where such other bank is more than 90 percent controlled by
the United States or a corporation in which the United States owns
more than 90 percent of the stock.
(2) Where such other bank has been placed in liquidation or is in
the hands of a receiver or conservator.
(3) Where such other bank is principally engaged in international
or foreign banking in a possession of the United States and has entered
into an agreement with the Board of Governors of the Federal
Reserve System as provided by section 25 of the Federal Reserve Act.
(4) A bank more than 50 percent of the common stock of which is
owned by persons owning more than 50 percent of the common stock
of a member bank.
(5) A bank not located and having no branch in the same place in
which a member bank or a branch thereof is located or in a place
contiguous thereto.
(6) A bank not engaged in a class of business in which a member
bank is engaged.
(7) A mutual savings bank having no capital stock.
A further provision not contained in the House bill suspended the
operation of the amendment until February 1, 1939, insofar as it
affects interlocking relationships of any director, officer, or employee
of a member bank or branch thereof lawfully existing on the date the
act takes effect.
The conference agreement amends section 8 of the Clayton Act so
as to provide that no private banker or director, officer, or employee
of any member bank or any branch thereof shall be at the same time
a director, officer, or employee of any other bank or branch thereof,
except that the Board of Governors of the Federal Reserve System
may by regulation permit such service as a director, officer, or em­
ployee of not more than one other such institution or branch thereof.
The prohibitions are not to apply, however, to the cases excepted
under the provisions of the Senate amendment, and the remaining
provisions of the Senate amendment are also retained.



BANKING AOT OF 193 5

57

Section 337 of the House bill provided for terminating the liability
of shareholders of banks and trust companies in the District of Colum­
bia on July 1,1937, under the same conditions as are applicable under
section 304 of the bill in the case of national banks. Each such
nstitution is required to carry one-tenth part of its net profits of the
preceding half year to surpjus before declaring a dividend and to
continue to do so until the surplus equals the amount of its common
stock, and under the Senate amendment it is allowed to treat as
surplus any amounts paid into a fund for retiring its preferred stock
or debentures. The conference agreement retains the provisions of
the Senate amendment.
Section 341 of the House bill which amended the provisions of
section 8 of the Postal Savings Depository Act of June 25, 1910,
relating to the withdrawal of and interest on postal savings deposits,
was eliminated by the Senate amendment. Under this provision of
the House bill any depositor was allowed to withdraw the whole or
any part of his deposit with accrued interest after giving 60 days'
written notice but subject to regulations of the Postmaster General.
It was further provided that in the absence of such notice withdrawal
would be permitted only on condition that not less than 3 months'
interest be deducted. Provisions were also included requiring that
the interest rate paid on any such deposit should not exceed that
which might lawfully be paid on savings deposits in member banks
located in or nearest to the place wltere the depository office is located
fend authorizing such depositories to deposit funds on time in member
Danks subject to the provisions of the Federal Reserve Act with
respect to payment and interest. The conference agreement restores
the last two provisions referred to, and provides that postal savings
deposits shall be savings deposits, that interest shall be allowed and
credited quarterly, and that no interest shall be allowed to any
depositor for any period of less than 3 months.
Section 341 of the Senate amendment amended section 11 (k) of
the Federal Reserve Act to provide that State banking authorities
may have access to the reports of examination of trust departments
of national banks made by the Comptroller of the Currency. This
provision was not included in the House bill. The conference agree­
ment retains this provision as section 342.
Section 342 of the Senate amendment amended section 5240 of the
Revised Statutes, relating to payment of compensation of employees
of the Office of thie Comptroller of the Currency by means of assess­
ments on banks, so as to include the payment of retirement annuities
for such employees. There was no corresponding provision in the
House bill. The conference agreement retains it as section 343.
Section 343 of the Senate amendment, which was not included in
the House bill, amends the National Housing Act in several respects.
Subsection (a) authorizes the Federal Housing Administrator, in
carrying out the provisions of titles I, II, and III of such act, to sue
and be sued in any court of competent jurisdiction, State or Federal.
Subsection (b) is intended merely to clarify and not to extend the
provisions of existing law relating to insured loans for financing
alterations, repairs, and improvements on real property so that the
purchase and installation of equipment and machinery on real prop­
erty may be included. Subsections (c) and (d) also clarify existing
law with respect to mortgage insurance in connection with low-cost




58

BANKING ACT OF 1935

housing projects and property. The conference agreement retains the
provisions of the Senate amendment as section 344.
Section 344 of the Senate amendment added a provision which was
not contained in the House bill relating to preferred stock, capital
notes, and debentures of member banks of the Federal Reserve System
and the consideration to be given to such securities in determiningwhether the capital stock of any such bank is impaired. It was also
provided that the dividends on preferred stock of national banks shall
not exceed 6 percent of the original purchase price of such stock, and
that in the event of the retirement of such stock or the liquidation of
the bank the holders of the stock shall be entitled to receive not more
than the original purchase price plus accumulative dividends. The
conference agreement retains the provisions of the Senate amendment
with clarifying amendments.
Section 345 of the Senate amendment contains the usual provision
relating to separability in the event any part of the act should be held
unconstitutional. There was no corresponding provision in the House
bill. The conference agreement retains it.




H enry B . Steagall,
T. A la n G o ld sbo ro u g h ,
J ohn B. H o l l ist e r ,

Managers on the part oj the House.

o

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