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73D CONGRESS
) HOUSE OF R E P R E S E N T A T I V E S
l
M Session
}
TO
AMEND
THE
FEDERAL
RESERVE
J
BEPOBT
1
N o . 1925
ACT
JUNE 4 (calendar day, J U N E 8), 1934.—Ordered t o be printed
M r . STEAGALL, f r o m t h e c o m m i t t e e of conference, s u b m i t t e d
the
following
CONFERENCE REPORT
[To accompany S. 3025]
T h e c o m m i t t e e of conference o n t h e d i s a g r e e i n g votes of t h e t w o
H o u s e s o n t h e a m e n d m e n t of t h e H o u s e t o the b i l l (S. 3025) t o
a m e n d section 12B pf the F e d e r a l R e s e r v e A c t so as t o e x t e n d f o r
1 y e a r t h e t e m p o r a r y p l a n f o r deposit insurance, a n d f o r o t h e r p u r poses, h a v i n g met, after f u l l a n d free conference, h a v e agreed t o
r e c o m m e n d a n d d o r e c o m m e n d to t h e n respective H o u s e s as f o l l o w s :
T h a t the Senate recede f r o m i t s disagreement to t h e a m e n d m e n t
of the H o u s e a n d agree to the same w i t h a n a m e n d m e n t as f o l l o w s :
I n l i e u of t h e m a t t e r p r o p o s e d to be i n s e r t e d b y the H o u s e a m e n d m e n t i n s e r t the f o l l o w i n g :
That section 12B of the Federal Reserve Act is
amended—
(1) By striking out i'July
1,1934"
wherever it appears in subsections
(e), (I), and (y), and inserting in lieu thereof "July
1, 1935";
15, 1984" where it appears in the lust
(2) By striking out "June
sentence of the third paragraph b/ subsection (y) ana inserting in lieu
thereof "October 1, 1934";
(3) By striking out "June
30, 1934" where it appears in the first
sentence of the fifth paragraph
of subsection (y), and inserting in lieu
thereof " June 30, 1935";
(4) By amending the second sentence of the fifth paragraph of subsection (y) to comprise two sentences reading as follows: "the provisions of
such siibscction (I) relating to State member banks shall be extended for
the purposes of this subsection to members of the Fund which are not
members of the Federal Eeserve System, and the provisions of such subsection (I) relating to the appointment of the Corporation
as receiver shall
be applicable to all members of the Fund.
The provisions of this subsection shall apply only to deposits of members of the Fund which have been
made available since March 10, 1933, for withdrawal
in the usual course
of the banking
business.79;
2
AMEND T H E FEDERAL RESERVE ACT
(5) By adding to the sixth paragraph of subsection (y) the following:
"The Corporation shall j)rescribe by regulations the manner of exercise of
the right of nonmember banks to withdraw from membership in the Fund
on July 1, 1934, except that no bank shall be permitted to withdraw
unless ten days prior thereto it has given written notice to the Corporation
of its election so to do. Banks which withdraw from the Fund on July 1,
1934, shall be entitled to a refund of their proportionate shave of any
estimated balance in the Fund on the same basis as if the Fund had terminated on July
1,1934";
(6) By adding to the end of the fourth paragraph of subsection (y) the
following new paragraphs:
"On and after July 1, 1934, the amount eligible for insurance under
this subsection for the purposes of the October 1, 1934 certified statement,
any entrance assessment, and, if levied, the additional assessment, shall
be the amounts not in excess of 85,000 of the deposits of each depositor.
"Each mutual savings bank, unless it becomes subject to the provisions
of the preceding paragraph in the manner hereinafter provided, shall be
excepted from the operation of the preceding paragraph and for each such
bank which is so excepted the amount eligible for insurance under this
subsection for the purposes of the October 1, 1934 certified statement, any
entrance assessment, and, if levied, the additional
assessment, shall bethe amounts not in excess of $2,500 for the deposits of each depositor.
In the event any mutual savings bank shall be closed on account of inability
to meet its deposit liabilities the Corporation shall pay not more than $2,500
on account of the net approved claim of any owner of deposits in such
bank: Provided, however, That should any mutual savings bank make
manifest to the Corporation its election to be subject to the provisions of the
preceding paragraph the Corporation may, in the discretion of the board o/
directors, permit such bank to become $o subject and the insurance 6f its
deposits to continue on the same basis and to the same extent as that of
Fund members other than mutual savings banks.
" The Corporation,
in the discretion of the board of directors, may
open on its books solely for the benefit of mutual savings banks an additional Temporary Federal Deposit Insurance Fund {hereinafter referred
to as the 'Fund For Mutual')
which, if opened, shaU*become operative
on or after July 1,1934, but prior to August 1,1934, and shall continue
to July 1, 1935. If the Fund For Mutuals is opened on the books of the*
Corporation, each mutual savings bank which is or becomes entitled to
the benefits of insurance during the period of its operation shall be a
member thereof and shall not be a Fund member. All assessments on
each mutual savings bank, including payments heretofore made to the
Corporation
less an equitable deduction for liabilities
and expenses of
the Fund incurred prior to the opening of the Fund For Mutuals,
if
opened shall be transferred or paid, as the case may be, to the Fund For
Mutuals.
All provisions of this section applicable to the Fund and not
inconsistent with this paragraph shall be applicable to the Fund
For
Mutuals if opened, except that as to any period the two are in operation
the Fund shall not be subject to the liabilities of the Fund For
Mutuals
and the Fund For Mutuals
shall not be, subject to the liabilities of the
Fund.
Each mutual savings bank admitted to the Fund shall bear its
equitable share of the liabilities of the Fund for the period it is a member
thereof, including
expenses of operation and allovAng for
anticipated
recoveries.
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A M E N D T H E FEDERAL RESERVE ACT
(7) By striking out the period at the end oj the first sentence of the
fifth paragraph of subsection (y) and inserting in lieu thereof a comma
and the following: u if the member closed on or before June 30,1934, and
not more than $5,000 if closed on or after July 1, 1934";
(8) By (a) striking out " July 1, 1936" in the first sentence of subsection (I) and inserting in lieu thereof "July
1, 1937", (b) striking
out the words " July 1} 1936" in the seventh paragraph of subsection (y)
and inserting in lieu thereof " July 1, 1937", and (c) adding after the
seventh paragraph of subsection (y) the following new paragraph:
" Until July 1, 1987-, any State bank may obtain the benefits of this
section on and after the date the Fund is terminated upon the conditions
with regard to examination,
certification,
and approval governing the
admission of State banks to the Fund and upon purchasing such class A
stock or making such a deposit as is prescribed in the preceding
paragraph
for former Fund
members"
(9) By adding at the end of the first paragraph of subsection (v) the
following new paragraph:
main"Every insured bank shall display at each place of business
tained by it a sign or signs to the 'effect that its deposits are insured by
the Federal Deposit Insurance
Corporation.
The Corporation
shall
prescribe by regulation the form of such sign and the manner of its display.
Such regulation may impose a maximum penalty of $100 for
each day an insured bank continues to violate any lawful provisions of
said regulation "; and
(10) By amending the first sentence of the second paragraph
of subsection (y) by inserting within the parentheses and immediately
after
the words "District
of Columbia"
the words "and the Territories
of
Hawaii
and
Alaska".
SEC. 2. The first paragraph
of section 9 of the Federal Reserve Act,
as amended (U.S.C., title 12, sec. 321), is amended by adding after the
second sentence thereof a new sentence to read as follows:
"For the purposes of membership of any such bank the terms 1 capital9 and
'capital
stock9 shall include the amount of outstanding capital notes and debentures legally issued by the applying
bank and purchased by the Reconstruction Finance
Corporation"
SEC. 3. (a) The Reconstruction Finance Corporation
Act, as amended, is amended by adding before section 6 thereof the following
new
section:
U
SEC. 51. (a) The Corporation
is authorized
and empowered
to
make loans upon or purchase the assets of any bank, savings bank, or
trust company, which has been closed on or after December 31, 1929,
and prior to January
1, 1934 and the affairs of which have not been
fully liquidated or wound wp, upon such terms and conditions as the
Corporation
may by regidations prescribe.
If in connection with the
reorganization,
stabilization,
or liquidation
of any such bank, assets
have been trusteed or are otherwise held for the benefit of depositors or
depositors and others., the authority, subject to regulations, as provided
in the .preceding sentence shall be extended for the purpose of authorizing the Corporation
to purchase or make loans on such assets held for
the benefit of such depositors or depositors and others.
This
authority
shall also extend to any such institution
that has reopened without payment of deposits in full.
In making any purchase of or loan on the
assets of any closed bank, the Corporation
shall appraise such assets in
anticipation
of an orderly liquidation
over a period of years, rather
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A M E N D T H E FEDERAL RESERVE ACT
than on the basis offorced selling values in a period of business depression.
This authority shall also extend to assets of the character made
eligible by this section as security for loans without regard to whether the
Corporation
has heretofore made loans thereon.
" ( 6 ) The Corporation
shall purchase at par value such debentures or
other obligations of the Federal Deposit Insurance
Corporation
as are
authorized to be issued under subsection (o) of section 12B of the Federal Reserve Act, as amended, upon request of the board of directors of
the Federal Deposit Insurance
Corporation,
whenever in the judgment
of said board additional funds
are required for insurance
purposes:
Provided,
That the Corporation
shall not purchase or hold at any time
said debentures or other obligations in excess of 8250,000 flOO par value:
Provided further,
That the proceeds derived from the purchase by the
Corporation
of any such debentures or other such obligations
shall be
used by the Federal Deposit Insurance
Corporation
solely in
carrying
out its functions
with respect to such
insurance.
"(c)
The amount of notes, bonds, debentures, and other such obligations which the Corporation
is authorized
and empowered to issshe
and to have outstanding at any one time under existing law is hereby
increased by $250,000,000.^
SEC. 4> So much of section 31 of the Banking
Act of 1933 as relates
to stock ownership by directors, trustees or members of similar
governing bodies of member banks of the Federal Reserve System, is hereby
repealed.
A n d the House agree to the same.
H E N R Y B . STEAGALL,
T . A L A N GOLDSBOROUGH,
ROBERT LUCE,
Managers
on the part of the House.
DUNCAN U . FLETCHER,
C A R T E R GLASS,
ROBERT J. BULKLEY,
J O H N G . TOWNSEND, J r . ,
F . C . WALCOTT,
Managers on the part of the Senate.
STATEMENT
OF T H E
M A N A G E R S ON T H E P A R T OF T H E
HOUSE
Tlie managers on the part of the House at the conference on the
disagreeing votes of the two Houses on the bill (S. 3025) to amend
section 12B of the Federal Reserve Act, so as to extend for 1 year
the temporary plan for deposit insurance, and' for other purposes,
submit the following statement in explanation of the effect of the
action agreed upon by the conference and recommended in the
accompanying conference report:
The House amendment strikes out all of the Senate bill after tlie
enacting clause. The Senate recedes from its disagreement to the
amendment of the House, with an amendment which is a substitute
for both the Senate bill and the House amendment. The differences
between the House amendment and the substitute agreed upon by
the conferees are noted in the following outline, except for incidental
changes made necessary by reason of the agreement reached by,the
conferees, and minor and clarifying changes.
The House amendment (sec. 1 (5)) added a new sentence to the
sixth paragraph of subsection (y) of section 12B of the Federal Reserve
Act giving to the Federal Deposit Insurance Corporation the power
to prescribe by regulations the manner of exercise of the right of nonmember banks to withdraw from membership in the Temporary
Federal Deposit Insurance Fund on July 1, 1934, but provided
specifically that no bank should be permitted to withdraw unless 20
days' notice of such withdrawal prior to such date was given by the
bank to each of its depositors and to the Corporation. The substitute
(sec. 1 (5)) adopts the provision of the House amendment except that
the requirement of 20 days is reduced to 10 clays owing to the nearness
of the date for withdrawal, and eliminates the requirement of written
notice to each of the depositors of the bank, due to the obvious difficulty which large sayings banks would meet in complying with such
requirement. In this connection it should be noted that the substitute (sec. 1 (9)) retains tlie provision for the protection of depositors
contained in the House amendment which requires members of the
fund to display at their places of business a sign or signs to the effect
that their deposits are insured by tlie Federal Deposit Insurance Corporation.
The House amendment (sec. 1 (6)) contained a provision placing
mutual savings banks in a separate category as to insurance under
the temporary plan, their deposits to be insured only to the extent of
$2,500 unless they make definite application to the Corporation to
continue on the same basis and to the same extent as other fund members. The substitute (sec. 1 (6)) retains this provision, but amplifies
the underlying principle thereof by conferring upon the Corporation
discretionary power to open on its books an additional temporary
fund to be known as the "fund for mutuals", of which, if opened, all
mutual savings banks which are or become entitled to the benefits
of insurance shall be members. If opened, the fund for mutuals is to
become operative on or after July 1, 1934, but before August 1, 1934,
5
2
AMEND T H E FEDERAL RESERVE ACT
and is to continue until July 1, 1935; and during its operation no
mutual savings bank is to be a fund member.
The House amendment (sec. 1 (8)) amended subsection (1), and
the seventh paragraph of subsection (y), of section 12B by removing
therefrom the limitation (July 1, 1936) as to the insurance of deposits
in State banks not members of the Federal Reserve System, and
added a new paragraph to subsection (y) expressly permitting such
nonmember banks to obtain the benefits of insurance after the temporary fund is terminated "upon the conditions with regard to examination, certification, and approval governing the admission of State
banks to the fund and upon purchasing such class A stock or making
such deposit as is prescribed" for former fund members. The' substitute (sec. 1(8)) modifies these provisions of the House amendment
so as to postpone the termination of insurance of such nonmember
banks until July 1, 1937, and to permit nonmember banks to obtain
the benefits of the permanent insurance after the fund is terminated
(July 1, 1935) until July 1, 1937.
The House amendment (sec. 1 (9) and (10)) provided for an increase
in the amount of notes, debentures, bonds or other such obligations
which the corporation is authorized to have outstanding under subsection (o) of section 12B from three times the amount of its capital
to five times the amounts of its "subscribed capital"; and further
provided for the guarantee by the United States of the principal
and interest of such of the obligations of the corporation as the corporation, with the approval of the Secretary of the Treasury, might
determine. The substitute eliminates these provisions, but includes
(sec. 3 (b)) a direction to the Reconstruction Finance Corporation to
purchase the obligations of the Federal Deposit Insurance Corporation, upon request of the board of directors of the Insurance Corporation whenever the latter is in need of additional funds for insurance
purposes, to the extent of $250,000,000; and it is also provided that
the proceeds from such purchase shall be used by the Insurance Corporation solely for insurance purposes. The borrowing power of.
the Reconstruction Finance Corporation under existing law is
increased (sec. 3 (c)) by 8250,000,000.
The House amendment (sec. 4 (a)) conferred upon the Federal
Deposit Insurance Corporation the power to make loans upon or
purchase the assets of any bank, savings bank, or tAist company,
which was closed on or after December 31,1929, and prior to January
1, 1934, and the affairs of whioh have not been fully liquidated or
wound up, the appraisal of assets for such purposes to be made " i n
anticipation of an orderly liquidation over a period of years rather
than on the basis of forced selling values i n a period of business dep r e s s i o n . T h e substitute (sec. 3 (a)) places this power in the Reconstruction Finance Corporation (retaining, however, the same
standards for the exercise thereof as are contained i n the House
amendment).
The House amendment (sec. 4 (b)) amended subsection (1) of section 12B with respect to the division, as between the depositors of
the bank and the Corporation, of the amounts realized upon the
liquidation by the Corporation of the assets of an insured bank which
has been closed. This amendment would change the existing law
which provides that the Corporation shall take all such dividends,
until it has reimbursed itself to the full amount of the insured liability
2
A M E N D T H E FEDERAL RESERVE ACT
of each depositor and shall then pay any further dividends to each
depositor on the basis of the bank's deposit liability to him, so as to
provide that in case the amount of the bank's deposit liability to any
depositor exceeds die amount of the insured deposit liability, the
Corporation and the depositor "shall share ratably in the dividends
insofar as the same are based upon deposit liability to such depositor
according to the ratio that the insured liability to such depositor
bears to the total amount of the net approved claim of such depositor."
The substitute eliminates this provision.
H E N R Y B . STEAGALL,
T . A L A N GOLDSBOROUGH,
ROBERT LUCE,
Managers
on the part of the House.
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