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752

SIXTY-FOURTH CONGRESS.

SFss . I .

Ca . 461 .

1916 .

September 7, 1916 .
CHAP . 461 .-An Act To amend certain sections of the Act entitled "Federal
[N. x .13391 .1
. reserve Act," approved December twenty-third, nineteen hundred and thirteen .
[Public. No
. 270.1

Be it enacted by the Senate and House of Representatives of the United
ants.°eAct. States of America in Congress assembled, That the Act entitled "Federal reserve Act," approved December twenty-third, nineteen hundred and thirteen, be, and is hereby, amended as follows :
Reserve Board .
May allow member
At the end of section eleven insert a new clause as follows :
banks to keep reserves
"
(m) Upon the affirmative vote of not less than five of its members
in reserve banks .
2113,
the
Federal Reserve Board shall have power, from time to time, by
amendea. 8, P.
general ruling, covering all districts alike, to permit member banks
to carry in the Federal reserve banks of their respective districts any
portion of their reserves now required by section nineteen of this Act
to be held in their own vaults ."
Reserve banks.
That section thirteen be, and is hereby, amended to read as follows :
De ositsallowedin.
.
p . 2W' "Any Federal reserve bank may receive from any of its member
amended s'
banks, and from the United States, deposits of current funds in lawful
Bills for collection money, national-bank notes, Federal reserve notes, or checks, and
added .
drafts, payable upon presentation, and also, for collection, maturing
bills ; or solely for purposes of exchange or of collection, may receive
from other Federal reserve banks deposits of current funds in lawful
money, national-bank notes, or checks upon other Federal reserve
banks, and checks and drafts, payable upon presentation within its
district, and maturing bills payable within its district.
Discount of commercialpaper .
" Upon the indorsement of any of its member banks, which shall
be deemed a waiver of demand, notice and protest by such bank as
to its own indorsement exclusively any Federal reserve bank may
Descriptiondiscount notes, drafts, and bills ofexchange arising out of actual
commercial transactions ; that is, notes, drafts, and bills of exchange
issued or drawn for agricultural, industrial, or commercial purposes,
3r the proceeds of which have been used, or are to be used, for such
purposes, the Federal Reserve Board to have the right to determine
or define the character of the paper thus eligible for discount, within
Secured paper
the meaning of this Act . Nothing in this Act contained shall be construed to prohibit such notes, drafts, and bills of exchange, secured
by staple agricultural products, or other goods, wares, or merchandise
Stock trading paper
excluded .
from being eligible for such discount ; but such definition shall not
include notes, drafts, or bills covering merely investments or issued
or drawn for the purpose of carrying or trading in stocks, bonds, or
Government secureties excepted .
other investment securities, except bonds and notes of the GovernTime g it.
ment of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at
the time of discount of not more than ninety days, exclusive of days
Proviso.
Additional_ for of grace : Provided, That notes, drafts, and bills drawn or issued for
agricultural notes, etc • agricultural purposes or based on live stock and having a maturity
not exceeding six months exclusive of days of grace, may be discounted in an amount to be limited to a percentage of the assets of
the Federal reserve bank, to be ascertained and fixed by the Federal
Reserve Board .
Rediscount restrio.
tions.
The aggregate of such notes, drafts, and bills bearing the signature or indorsement of any one borrower, whether a person, company,
"firm, or corporation, rediscounted for any one bank shall at no time
exceed ten per centum of the unimpaired capital and surplus of said
bank ; but this restriction shall not apply to the discount of bills of
exchange drawn in good faith against actually existing values .
Foreign acceptances.
"Any Federal reserve bank may discount acceptances of the kinds
hereinafter described, which have a maturity at the time of discount
of not more than three months' sight, exclusive of days of grace, and
which ape indorsed by at least one member bank .
Member banks ma y
;` Any member bank- may accept ,drafts or bills of exchange drawn
deal in foreign trade
paper .
upon it having not more than six months' sight to run, exclusive of
Feral
Amend

SIXTY-FOURTH CONGRESS.

SEES. I . C$. 461 . 1916.

753

days of grace, which grow out of transactions involving the importation or exportation of goods ; or which grow out of transactions
involving the domestic shipment of goods provided shipping
documents conveying or securing title are attached at the time of
acceptance ; or which are secured at the time of acceptance by a
warehouse receipt or other such document conveying or securing title
covering readily marketable staples . No member bank shall accept, Limit of acceptances.
whether in a foreign or domestic transaction, for any one person, company, firm, or corporation to an amount equal at any time in the
aggregate to more than ten per cent of its paid-up and unimpaired
Additional, if with
capital stock and surplus unless the bank is secured either by attached collateral.
documents or by some other actual security growing out of the same
transaction as the acceptance and no bank shall accept such bills to
an amount equal at any time in the aggregate to more than one-half
of its paid-up and unimpaired capital stock and surplus .
"Any Fedral reserve bank may make advances to its member tmdemberbay0`°0
banks on their promissory notes for a period not exceeding fifteen
days at rates to be established by such Federal reserve banks, subject Collateral required .
t o the review and determination of the Federal Reserve Board, provided such promissory notes are secured by such notes, drafts, bills
of exchange, or bankers' acceptances as are eligible for rediscount or
for purchase by Federal reserve banks under the provisions of this
Act, or by the depositor pledge of bonds or notes of the United States ." National banks .
Section fifty-two hundred and two of the Revised Statutes of the indebtedness rim.
United States is hereby amended so as to read as follows : "No itedd. s ., see, x202,
pP
national banking association shall at any time be indebted, or in any 1006, amended .
way liable, to an amount exceeding the amount of its capital stock
at such time actually paid in and remaining undiminished by losses
or otherwise, except on account of demands of the nature following : Exeepti°ns.
circulating notes .
"First. Notes of circulation.
"Second . Moneys depo0ited with or collected by the association . n~ , etc.
"Third . Bills of exchange or drafts drawn against money actually
on deposit to the credit of the association, or due thereto .
Dividends, etc .
"Fourth. Liabilities to the stockholders of the association for dividends and reserve profits .
Federal reserve iia"Fifth. Liabilities incurred under the provisions of the Federal biiities.
reserve Act .
Discounts, etc., by
"The discount and rediscount and the purchase and sale by any reserve banks r eFederal reserve bank of any bills receivable and of domestic and vol. ' 38, p. 264,
foreign bills of exchange, and of acceptances authorized by this Act, amended.
shall be subject to such restrictions, limitations, and regulations as
may be imposed by the Federal Reserve Board .
National banks .
Insurance,
"That in addition to the powers now vested by law in national allowed
i businu
banking associations organized under the laws of the United States localities.
any such association located and doing business in any place the
population of which does not exceed five thousand inhabitants, as
shown by the last preceding decennial census, may, under such rules
and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance company
authorized by the authorities of the State in which said bank is
located to do business in said State, by soliciti ng and selling insurance
and collecting premiums on policies issued by such company ; and
may receive for services so rendered such fees or commissions as may
be agreed upon between the said association and the insurance corn- estaw Oaentsforreal
pang for which it may act as agent ; and may also act as the broker
or agent for others in making or procuring loans on real estate located
within one hundred miles of the place m which said bank may be
located, receiving for such services a reasonable fee or commission :
Povided, however, That no such bank shall in any case guarantee Guaraantees forbideither the principal or interest of any such loans or assume or guar- den.
antee the payment of any premium on insurance policies issued
91800'-VOL 39--PT 1--48

754
Insurance appilca-

SIXTY-FOURTH CONGRESS. Suss. I. Cia. 461 .

1916.

through its agency by its principal : And provided furtBr, That the
bank shall not guarantee the truth of any statement made by an
Acceptances of forapplication
for insurance .
p
eign paper for dollar assured in filing his
exchange .
"Any member bank may accept drafts or bills of exchange drawn
By member banks .
upon it having not more than tree months' s~'ght to run, exclusive
of days of grace, drawn under regulations to be prescribed by the
Federal Reserve Board by banks or bankers in foreign countries or
dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange as required by the usages of trade
m the respective countries, dependencies, or insular possessions .
By reserve banks.
Such drafts or bills may be acquired by Federal reserve banks in
such amounts and subject to such regulations, restrictions, and limias may be prescribed by the Federal Reserve Board : Provided,
Ru~ii°n °n a c per:
ceptaneesfromoneper : however, That no member bank shall accept such drafts or bills of
.
son
exchange referred to this paragraph for any one bank to an amount
exceeding in the aggregate ten per centum of the paid-up and unimpaired capital and surplus of the accepting bank unless the draft or
With collateral.
bill of exchange is accompanied by documents conveying or securing
title or by some other adequate security : Provided further, That no
Maximum.
member bank shall accept such drafts or bills in an amount exceed
in& at any time the aggreate of one-half of its paid-up and unimpaired capital and surplus . '
open market open That subsection (e) of section fourteen, be, and is hereby, amended
ttons .
to read as follows :
Reserve banks.
" ( e) To establish accounts with other Federal reserve banks for
Accounts and agenoies of, m foreign ceun- exchange purposes and, with the consent of the Federal Reserve
tries.
vol . ss, p. 285, Board, to open and maintain accounts in foreign countries, appoint
amended.
Correspondents, and establish agencies in such countries wheresoever
it may deem best for the purpose of purchasing, selling, and collecting bills of exchange, and to buy and sell, with or without its indorsement, through such correspondents or agencies bills of exchange
arising out of actual commercial transactions which have not more
than ninety days to run, exclusive of days of grace, and which bear
°orAr ondents "" 9 " the signature o two or more responsible parties, and, with the consent
of the Federal Reserve Board, to open and maintain banking accounts
for such foreign correspondents or agencies ."
rederalreservenotes.
That the second paragraph of section sixteen be, and is hereby,
amended to read as follows :
by
"Ay Federal reserve bank may make application to the local
reeVolppe. caba38,tton pfor,
. ass, Federal reserve agent for such amount of the Federal reserve notes
amended.
hereinbefore provided for as it may require . Such application shall
> tel.
be accompanied with a tender to the local Federal reserve agent of
collateral in amount equal to the sum of the Federal reserve notes
thus applied for and issued pursuant to such application . The colClasses of paper exlateral security thus offered shall be notes, drafts, bills of exchange,
tended.
or acceptances rediscounted under the provisions of section thirteen
vo 38, P52sa .
of this Act, or bills of exchange indorsed by a member bank of any
Federal reserve district and purchased under the provisions of section
fourteen of this Act, or bankers' acceptances purchased under the
Daily witless of issues and withdrawals . provisions of said section fourteen . The Federal reserve agent shall
each day notify the Federal Reserve Board of all issues and withdrawals of Federal reserve notes to and by the Federal reserve bank
Additional security. to which he is accredited. The said Federal Reserve Board may at
any time call upon a Federal reserve bank for additional security to
protect the Federal reserve notes issued to it ."
Real estate loans .
That section twenty-four be, and is hereby, amended to read as
Vol. 38, p . 273,
follows :
amended.
By national banks
"SEC . 24 . Any national banking association not situated in a
not in central reserve
cities.
central reserve city may make loans secured by improved and unOn farm lands,
encumbered farm land situated within its Federal reserve district or
within a radius of one hundred miles of the place in which such bank
dens.

SIXTY-FOURTH CONGRESS.

SEss. I . Cn. 461 .

1916 .

755

is located, irrespective of district lines, and may also make loans other real estate,
secured by improved and unencumbered real estate located within
one hundred miles of the place in which such bank is located, irre.- Time and value Ifm .
spective of district lines ; but no loan made upon the security of such ;fathoms.
farm land shall be made for a longer time than five years, an no loan
made upon the security of such real estate as distinguished from farm
land shall be made for a longer time than one year nor shall the
amount of any such loan, whether upon such farm land or upon
such real estate, exceed fifty per centum of the actual value of the P e r m i a s I b I e
property offered as security. Any such bank may make such loans, amounts.
whether secured by such farm land or such real estate, in an aggregate sum equal to twenty-five per centum of its ca ital and surplus
or to one-t~d of its time deposits and such banks may continue
hereafter as heretofore to receive time deposits and to pay interest
on the same .
"The Federal Reserve Board shall have power from time to time t;! 'on of r 1rieto add to the list of cities in which national banks shall not be permitted to make loans secured upon real estate in the manner described in this section ."
Foreign branches of
That section twenty-five be, and is hereby, amended to read as maffomalbanks0
Vol . 38, P. 278,
follows :
%mended
"Sne . 25. Any national banking association possessi n r a capital Appiicatons'
and surplus of $1,000,000 or more may file application wiht the Federal Reserve Board for permission to exercise, upon such conditions
and under such regulations as may be prescribed by the said board,
either or both of the following powers :
"First . To establish branches in foreign countries or dependencies object of branches
or insular possessions of the United States for the furtherance of the
foreign commerce of the United States, and to act if required to do so
as fiscal agents of the United States .
"Second. To invest an amount not exceeding in the aggregate ten bay engaged othet
per centum of its paid-in capital stock and surplus in the stock of eign business.
one or more banks or corporations chartered or incorporated under
the laws of the United States or of any State thereof, and principally
engaged in international or foreign banking, or banking in a dependency or insular possession of the United States either directly or
through the agency, ownership, or control of local institutions in
foreign countries, or in such dependencies or insular possessions .
in appum
"Such application shall specify the name and capital of the banking u ~
association
n filing it, the powers applied for, and the place or places
where the banking operations proposed are to be carried on . The BM authority of
Federal Reserve Board shall have power to approve or to reject such
application in whole or in part if for any reason the granting of such
application is deemed inexpedient, and shall also have power from
time to time to increase or decrease the number of paces where
such banking operations may be carried on .
"Every national banking association operating foreign branches
ollr
shall be required to furnish information concerning the condition of fur~nishre o4
such branches to the Comptroller of the Currency upon demand, and To Reserve Boardevery member bank investing in the capital stock of banks or corporations described under subparagraph two of the first paragraph
of this section shall be required to furnish information concerning
the condition of such banks or corporations to the Federal Reserve
Board upon demand, and the Federal Reserve Board may order special examinations of the said branches, banks, or corporations at such
time or times as it may deem best .
"Before any national bank shall be permitted to purchase stock cRat` tock ~ o$
in any such corporation the said corporation shall enter into an agree- banks.
ment or undertaking with the Federal Reserve Board to rest ct its
operations or conduct its business in such manner or under such
lim itations and restrictions as the said board may l3rescribe for the

SIXTY-FOURTH CONGRESS. SEss. I. Css . 4 6 1 , 463 . 1916.

756

place or places wherein such business is to be conducted . If at any
time the Federal Reserve Board shall ascertain that the regulations
prescribed by it are not being complied with, said board is hereby
authorized and empowered to institute an investigation of the matter
and to send for persons and papers, subpoena witnesses, and administer oaths in order to satisfy itself as to the actual nature of the transfornjsposaf
. of interest actions referred to. Should such investigation result in establishing
cOmp nce•
the failure of the corporation in question, or of the national bank
or banks which may be stockholders therein, to comply with the
regulations laid down by the said Federal Reserve Board, such
national banks may be required to dispose of stock holdings in the
said corporation upon reasonable notice .
se~atfon of soii Every such national banking association shall cond ,ict the accounts of each foreign branch independently of the accounts of other
foreign branches established by it and of its home office, and shall
at the end of each fiscal period transfer to its general ledger the
profit or loss accrued at each branch as a separate item .
ebe banks
she " .Any director or other officer, agent, or employee of any memlasuchbanb .
ber bank may, with the approval of the Federal Reserve Board, be
a director or other officer, agent, or employee of any such bank or
corporation above mentioned in the capital stock of which such
member bank shall have invested as hereinbefore provided, without
Vol . 38, p. 732.
being subject to the provisions of section eight of the Act approved
October fifteenth, nineteen hundred and fourteen, entitled An Act
to supplement existing laws a~ainst unlawful restraints and monopolies, and for other purposes . "
Approved, September 7, 1916 .
investfeationwhether
r~tlow are compifed 1 1th.

September
R.1676a

116

(Public, No . 271.]

CRAP. 463 .-An Act To increase the revenue, and for other purposes .
Be it enacted by me Senate and House of Representatives of the United
States of America in Congress assembled,

Revenue Act, 1916.
Income tax.
On individuals.
Two per cent levied
on ii

a p'

lss6

Nonresident aliens,
from united states
sources.

Additional
ao if excoodiug

xates.

TITLE I.-INCOME TAX.
PART I .-Ox

INDrvmuALs .

Sac . 1 . (a) That there shall be levied, assessed, collected, and paid
annually upon the entire net income received in the preceding calendar
year from all sources by every individual, a citizen or resident of the
United States a tax of two per centum upon such income and a
like tax shall e levied, assessed, collected, and paid annual~y upon
the entire net income received in the preceding calendar year from
all sources within the United States by every individual, a nonresident
alien, including interest on bonds, notes, or other interest-bearing
obligations of residents, corporate or otherwise .
(b) In addition to the income tax imposed by subdivision (a) of
this section (herein referred to as the normal tax) there shall be levied,
assessed, collected, and paid upon the total net income of every
individual, or, in the case of a nonresident alien, the total net income
received from all sources within the United States, an additional
income tax (herein referred to as the additional tax) of one per
centum per annum upon the amount by which such total net income
exceeds $20,000 and does not exceed $40,000, two per centum per
annum upon the amount by which such total net income exceeds
$40,000 and does not exceed $60,000, three per centum per annum
upon the amount by which such total net income exceeds $60,000
and does not exceed $80,000, four per centum per annum upon the
amount by which such total net income exceeds $80,000 • and does