Full text of Banking Act of 1933 (Glass-Steagall Act)

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[P u b l ic — N o . 66— 73 d C o n g b e s s ]

[H R. 5661]
AN ACT
To provide for the safer and: more effective use of the assets of banks, to regulate
interbank control, to prevent the undue diversion of funds into speculative
operations, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the short
title o f this A ct shall be the “ Banking A ct o f 1933.”
Sec. 2. A s used in this A ct and in any provision o f law amended
by this A ct—
(a) The terms “ banks” , “ national b a n k ” , “ national banking
association” , “ member b a n k ” , “ b o a rd ” , “ d istrict” , and “ reserve
b a n k s h a l l have the meanings assigned to them in section 1 o f the
Federal Reserve A ct, as amended.
(b ) Except where otherwise specifically provided, the term “ affili­
a te ” shall include any corporation, business trust, association, or
other similar organization—
( 1 ) O f which a member bank, directly or indirectly, owns or
controls either a majority o f the voting shares or more than 50
per centum o f the number o f shares voted for the election o f its
directors, trustees, or other persons exercising similar functions at
the preceding election, or controls in any manner the election o f a
m ajority o f its directors, trustees, or other persons exercising similar
functions; or
(2 ) O f which control is held, directly or indirectly, through
stock ownership or in any other manner, by the shareholders ot a
member bank who own or control either a m ajority o f the shares
o f such bank or more than 50 per centum o f the number o f shares
voted for the election o f directors o f such bank at the preceding
election, or by trustees fo r the benefit o f the shareholders o f any
such bank; or
( 3 ) O f which a m ajority o f its directors, trustees, or other persons
exercising similar functions are directors o f any one member bank.
(c) The term “ holding company affiliate ” shall include any cor­
poration, business trust, association, or other similar organization—
( 1 ) W hich owns or controls, directly or indirectly, either a
m ajority o f the shares o f capital stock o f a member bank or more
than 50 per centum o f the number o f shares voted for the election
o f directors o f any one bank at the preceding election, or controls
in any manner the election o f a majority o f the directors o f any one
bank; or
(2 ) F or the benefit o f whose shareholders or members all or
substantially all the capital stock o f a member bank is held by
trustees.
2 0 3 6 0 0 — 5 8 -------- 3 3




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[ P u b . 66.]

Sec. 3. (a) The fourth paragraph after paragraph “ E ighth ” o f
section 4 o f the Federal Reserve Act, as amended (U .S.C., title 12,
sec. 301), is amended to read as follow s:
44Said board o f directors shall administer the affairs o f said bank
fairly and impartially and without discrimination in favor o f or
against any member bank or banks and may, subject to the provi­
sions o f law and the orders o f the Federal Reserve Board, extend
to each member bank such discounts, advancements, and accommoda­
tions as may be safely and reasonably made with due regard for
the claims and demands o f other member banks, the maintenance o f
sound credit conditions, and the accommodation o f commerce, indus­
try, and agriculture. The Federal Reserve Board may prescribe
regulations further defining within the limitations o f this A ct the
conditions under which discounts, advancements, and the accommo­
dations may be extended to member banks. Each Federal reserve
bank shall keep itself inform ed o f the general character and amount
o f the loans and investments o f its member banks with a view to
ascertaining whether undue use is being made o f bank credit fo r
the speculative carrying o f or trading in securities, real estate, or
commodities, or for any other purpose inconsistent with the mainte­
nance o f sound credit conditions; and, in determining whether to
grant or refuse advances, rediscounts or other credit accommodations,
the Federal reserve bank shall give consideration to such inform a­
tion. The chairman o f the Federal reserve bank shall report to
the Federal Reserve Board any such undue use o f bank credit by
any member bank, together with his recommendation. Whenever,
in the judgment o f the Federal Reserve Board, any member bank
is making such undue use o f bank credit, the Board may, in its
discretion, after reasonable notice and an opportunity for a hearing,
suspend such bank from the use o f the credit facilities o f the Federal
Reserve System and may terminate such suspension or may renew
it from time to time.”
(b )
The paragraph o f section 4 o f the Federal Reserve A ct, as
amended (U.S.C., title 12, sec. 304), which commences with the words
“ The Federal Reserve Board shall classify ” is amended by inserting
before the period at the end thereof a colon and the follow in g :
“ Provided , That whenever any two or more member banks within
the same Federal reserve district are affiliated with the same holding
company affiliate, participation by such member banks in any such
nomination or election shall be confined to one o f such banks, which
may be designated for the purpose by such holding company affiliate.”
Sec. 4. The first paragraph o f section 7 o f the Federal Reserve
A ct, as amended (U.S.C., title 12, sec. 289), is amended, effective
July 1 , 1932, to read as fo llo w s:
“ A fter all necessary expenses o f a Federal reserve bank shall have
been paid or provided for, the stockholders shall be entitled to receive
an annual dividend o f 6 per centum on the paid-in capital stock,
which dividend shall be cumulative. A fter the aforesaid dividend
claims have been fu lly met, the net earnings shall be paid into the
surplus fund o f the Federal reserve bank.”
Sec. 5. (a), The first paragraph o f section 9 o f the Federal Reserve
A ct, as amended (U.S.C., title 12, sec. 321; Sapp. V I, title 12, sec.
321), is amended by inserting immediately after the words “ United




[Pu b . 66.)

3

States ” a comma and the follow ing r “ including Morris Plan banks
and other incorporated banking institutions engaged in similar
business.”
(b ) The second paragraph o f section 9 o f the Federal Reserve A ct,
as amended, is amended by adding at the end thereof the follow ing:
“ Provided , however, That nothing herein contained shall prevent
any State member bank from establishing and operating branches in
the United States or any dependency or insular possession thereof or
in any foreign country, on the same terms and conditions and subject
to the same limitations and restrictions as are applicable to the
establishment o f branches by national banks.”
(c) Section 9 o f the Federal Reserve Act, as amended (U.S.C.,
title 12, secs. 321-331; Supp. V I, title 12, secs. 321-332), is further
amended by adding at the end thereof the follow ing new paragraphs:
“ A n y mutual savings bank having no capital stock (including any
other banking institution the capital o f which consists o f weekly or
other time deposits which are segregated from all other deposits and
are regarded as capital stock for the purposes o f taxation and the
declaration o f dividends), but having surplus and undivided profits
not less than the amount o f capital required for the organization o f a
national bank in the same place, may apply for and be admitted to
membership in the Federal Reserve System in the same manner and
subject to the same provisions o f law as State banks and trust com­
panies, except that any such savings bank shall subscribe for capital
jstock o f the Federal reserve bank in an amount equal to six-tenths o f
1 per centum o f its total deposit liabilities as shown by the most recent
report o f examination o f such savings bank preceding its admission
to membership. Thereafter such subscription shall be adjusted
semiannually on the same percentage basis in accordance with rules
and regulations prescribed by the Federal Reserve Board. I f any such
mutual savings bank applying for membership is not permitted by
the laws under which it was organized to purchase stock in a Federal
reserve bank, it shall, upon admission to the system, deposit with
the Federal reserve bank an amount equal to the amount which it
would have been required to pay in on account o f a subscription to
capital stock. Thereafter such deposit shall be adjusted semi­
annually in the same manner as subscriptions for stock. Such
deposits shall be subject to the same conditions with respect to repay­
ment as amounts paid upon subscriptions to capital stock by other
member banks and the Federal reserve bank shall pay interest
thereon at the same rate as dividends are actually paid on outstand­
ing shares o f stock o f such Federal reserve bank. I f the laws under
which any such savings bank was organized be amended so as to
authorize mutual savings banks to subscribe for Federal reserve bank
stock, such savings bank shall thereupon subscribe for the appropriate
amount o f stock in the Federal reserve bank, and the deposit here­
inbefore provided for in lieu o f payment upon capital stock shall be
applied upon such subscription. I f the laws under which any such
savings bank Was organized be not amended at the next session o f
the legislature follow ing the admission o f such savings bank to
membership so as to authorize mutual savings banks to purchase
Federal reserve bank stock, or if such laws be so amended and such
bank fail within six months thereafter to purchase such stock, all




4

[Pub . W j

o f its rights and privileges as a member bank shall be forfeited and
its membership in the Federal Reserve System shall be terminated
in the manner prescribed elsewhere in this section with respect to
State member banks and trust companies. Each such mutual savings
bank shall comply with all the provisions o f law applicable to State
member banks and trust companies, with the regulations o f the F ed­
eral Reserve Board and with the conditions o f membership prescribed
fo r such savings bank at the time o f admission to membership, except
as otherwise hereinbefore provided with respect to capital stock.
“ Each bank admitted to membership under this section shall
obtain from each o f its affiliates other than member banks and
furnish to the Federal reserve bank o f its district and to the Federal
Reserve Board not less than three reports during each year. Such
reports shall be in such form as the Federal Reserve Board may
prescribe, shall be verified by the oath or affirmation o f the president
or such other officer as may be designated by the board o f directors
o f such affiliate to verify such reports, and shall disclose the infor­
mation hereinafter provided for as o f dates identical with those
fixed by the Federal Reserve Board for reports o f the condition o f
the affiliated member bank. Each such report o f an affiliate shall
be transmitted as herein provided at the same time as the corre­
sponding report o f the affiliated member bank, except that the
Federal Reserve Board may, in its discretion, extend such time fo r
good cause shown. Each such report shall contain such information
as in the judgment o f the Federal Reserve Board shall be necessary
to disclose fully the relations between such affiliate and such bank1"
and to enable the Board to inform itself as to the effect o f such
relations upon the affairs o f such bank. The reports o f such affiliates
shall be published by the bank under the same conditions as govern
its own condition reports.
“ A n y such affiliated member bank may be required to obtain from
any such affiliate such additional reports as in the opinion o f its
Federal reserve bank or the Federal Reserve Board may be necessary
in order to obtain a full and complete knowledge o f the condition
o f the affiliated member bank. Such additional reports shall be
transmitted to the Federal reserve bank and the Federal Reserve
Board and shall be in such form as the Federal Reserve Board may
prescribe.
“ A ny such affiliated member bank which fails to obtain from any
o f its affiliates and furnish any report provided for by the two
preceding paragraphs o f this section shall be subject to a penalty o f
$100 fo r each day during which such failure continues, which, by
direction o f the Federal Reserve Board, may be collected, by suit or
otherwise, by the Federal reserve bank o f the district in which such
member bank is located. F or the purposes o f this paragraph and
the two preceding paragraphs o f this section, the term ‘ affiliate *
shall include holding company affiliates as well as other affiliates.
“ State member banks shall be subject to the same limitations and
conditions with respect to the purchasing, selling, underwriting, and
holding o f investment securities and stock as are applicable in the
case o f national banks under paragraph 4Seventh 5 o f section 5136
of the Revised Statutes, as amended.
“ A fter one year from the date o f the enactment o f the Banking
A ct o f 1933, no certificate representing the stock o f any State member




[P u b . 6&]

5

bank shall represent the stock o f any other corporation, except a
member bank or a corporation existing on the date this paragraph
takes effect engaged solely in holding the bank premises o f such State
member bank, nor shall the ownership, sale, or transfer o f any
certificate representing the stock o f any such bank be conditioned in
any manner whatsoever upon the ownership, sale, or transfer o f a
certificate representing the stock o f any other corporation, except a
member bank.
“ Each State member bank affiliated with a holding company
affiliate shall obtain from such holding company affiliate, within
such time as the Federal Reserve Board shall prescribe, an agree­
ment that such holding company affiliate shall be subject to the same
conditions and limitations as are applicable under section 5144 o f
the Revised Statutes, as amended, in the case o f holding company
affiliates o f national banks. A copy o f each such agreement shall be
filed with the Federal Reserve Board. Upon the failure o f a State
member bank affiliated with a holding company affiliate to obtain
such an agreement within the time so prescribed, the Federal Reserve
Board shall require such bank to surrender its stock in the Federal
reserve bank and to forfeit all rights and privileges o f membership
in the Federal Reserve System as provided in this section. W hen­
ever the Federal Reserve Board shall have revoked the voting permit
of any such holding company affiliate, the Federal Reserve Board
may, in its discretion, require any or all State member banks
affiliated with such holding company affiliate to surrender their
stock in the Federal •reserve bank and to forfeit all rights and
privileges o f membership in the Federal Reserve System as provided
in this section.
u In connection with examinations o f State member banks, exam­
iners selected or approved by the Federal Reserve Board shall make
such examinations o f the affairs o f all affiliates o f such banks as
shall be necessary to disclose fully the relations between such banks
and their affiliates and the effect o f such relations upon the affairs
o f such banks. The expense o f examination o f affiliates o f any State
member bank may, in the discretion o f the Federal Reserve Board,
be assessed against such bank and, when so assessed, shall be paid
by such bank. In the event o f the refusal to give any information
requested in the course o f the examination o f any such affiliate, or in
the event o f the refusal to permit such examination, or in the event
of the refusal to pay any expense so assessed, the Federal Reserve
Board may, in its discretion, require any or all State member banks
affiliated with such affiliate to surrender their sto k in the Federal
reserve bank and to forfeit all rights and privileges o f membership
in the Federal Reserve System, as provided in this section.”
Sec. 6. (a) The second paragraph o f section 10 o f the Federal
Reserve Act, as amended (U.S.C., title 12, sec. 242), is amended to
read as follow s:
“ The Secretary o f the Treasury and the Comptroller o f the Cur­
rency shall be ineligible during the time they are in office and for two
years thereafter to hold any office, position, or employment in any
member bank. The appointive members o f the Federal Reserve
Board shall be ineligible during the time they are in office and for
two years thereafter to hold any office, position, or employment in




6

[ P u b . 66.]

any member bank, except that this restriction shall not apply; to a
member who has served the full term fo r which he was appointed.
U pon the expiration o f the term o f any appointive member o f the
Federal Reserve Board in office when this paragraph as amended
takes effect, the President shall fix the term o f the successor to such
member at not to exceed twelve years, as designated by the President
at the time o f nomination, but in such manner as to provide for the
expiration o f the term o f not more than one appointive member in
any two-year period, and thereafter each appointive member shall
hold office for a term o f twelve years from the expiration o f the term
o f his predecessor. O f the six persons thus appointed, one shall be
designated by the President as governor and one as vice governor o f
the Federal Reserve Board. The governor o f the Federal Reserve
Board, subject to its supervision, shall be its active executive officer.
Each member o f the Federal Reserve Board shall within fifteen days
after notice o f appointment make and subscribe to the oath o f office.”
(b )
The fourth paragraph o f section 10 o f the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 244), is amended to read as
follo w s:
“ The principal offices o f the Board shall be in the District o f
Columbia. A t meetings o f the Board the Secretary o f the Treasury
shall preside as chairman, and, in his absence, the governor shall
preside. In the absence o f both the Secretary o f the Treasury and
the governor the vice governor shall preside. In the absence o f the
Secretary o f the Treasury, the governor, and the vice governor the
Board shall elect a member to act as chairman pro tempore. The
Board shall determine and prescribe the manner in which its obli­
gations shall be incurred and its disbursements and expenses allowed
and paid, and may leave on deposit in the Federal Reserve banks the
proceeds o f assessments levied upon them to defray its estimated
expenses and the salaries o f its members and employees, whose
employment, compensation, leave, and expenses shall be governed
solely by the provisions o f this A ct, specific amendments thereof, and
rules and regulations o f the Board not inconsistent therewith; and
funds derived from such assessments shall not be construed to be
Government funds or appropriated moneys. No member o f the F ed­
eral Reserve Board shall be an officer or director o f any bank, bank­
ing institution, trust company, or Federal Reserve bank or hold stock
in any bank, banking institution, or trust company; and before
entering upon his duties as a member o f the Federal Reserve Board
he shall certify under oath that he has complied with this require­
ment, and such certification shall be filed with the secretary o f the
Board. Whenever a vacancy shall occur, other than by expiration
o f term, among the six members o f the Federal Reserve Board
appointed by the President as above provided, a successor shall be
appointed by the President, by and with the advice and consent o f
the Senate, to fill such vacancy, and when appointed he shall hold
office for the unexpired term o f his predecessor.”
Sec. 7. Paragraph (m ) o f section 11 o f the Federal Reserve A ct, as
amended (U.S.C., title 12, sec. 248), is amended to read as follow s:
“ (m ) Upon the affirmative vote o f not less than six o f its mem­
bers the Federal Reserve Board shall have power to fix from time
to time fo r each Federal reserve district the percentage o f indi­




[Pub . 66.1

7

vidual bank capital and surplus which may be represented by loans
secured by stock or bond collateral made by member banks within
such district, but no such loan shall be made by any such bank to
any person in an amount in excess o f 10 per centum o f the unim­
paired capital and surplus o f such bank. A ny percentage so fixed
by the Federal Reserve Board shall be subject to change from time
to time upon ten days’ notice, and it shall be the duty o f the Board
to establish such percentages with a view to preventing the undue
use o f bank loans for the speculative carrying o f securities. The
Federal Reserve Board sliall have power to direct any member bank
to refrain from further increase o f its loans secured by stock or
bond collateral for any period up to one year under penalty o f
suspension o f all rediscount privileges at Federal reserve banks.”
Sec. 8. The Federal Reserve A ct, as amended, is amended by insert­
ing between sections 12 and 13 (UJ8.C., title 12, secs. 261, 262, and
342), thereof the follow ing new sections:

“ Sec. 12A. (a) There is hereby created a Federal Open Market
Committee (hereinafter referred to as the ‘ committee5), which
shall consist of as many members as there are Federal reserve dis­
tricts. Each Federal reserve bank by its board of directors shall
annually select one member of said committee. The meetings of
said committee shall be held at Washington, District of Columbia,
at least four times each year, upon the call of the governor of the
Federal Reserve Board or at the request of any three members of
the committee, and, in the discretion of the Board, may be attended
by the members of the Board.
“ (b) No Federal reserve bank shall engage in open-market opera­
tions under section 14 o f this A ct except in accordance with regu­
lations adopted by the Federal Reserve Board. The Board shall
consider, adopt, and transmit to the committee and to the several
Federal reserve banks regulations relating to the open-market trans­
actions o f such banks and the relations o f the Federal Reserve System
with foreign central or other foreign banks.
“ (c) The time, character, and volume o f all purchases and sales
o f paper described in section 14 o f this A ct as eligible for openmarket operations shall be governed with a view to accommodating
commerce and business and with regard to their bearing upon the
general credit situation o f the country.
“ (d) I f any Federal reserve bank shall decide not to participate
in open-market operations recommended and approved as provided
in paragraph (b) hereof, it shall file with the chairman o f the
committee within thirty days a notice o f its decision, and transmit
a copy thereof to the Federal Reserve Board.

“ Sec. 12B. (a) There is hereby created a Federal Deposit Insur­
ance Corporation (hereinafter referred to as the ‘ Corporation’ ),
whose duty it shall be to purchase, hold, and liquidate, as hereinafter
provided, the assets of national banks which have been closed by
action of the Comptroller of the Currency, or by vote of their direc­
tors, and the assets of State member banks which have been closed
by action of the appropriate State authorities, or by vote of their
directors; and to insure, as hereinafter provided, the deposits of all
banks which are entitled to the benefits of insurance under this
section.




8

{P u b . 68.]

“ (b) The management o f the Corporation shall be vested in a
board o f directors consisting o f three m em ber, one o f whom shall
be the Comptroller o f the Currency, and two o f whom shall be
citizens o f the United States to be appointed by the President, by
and with the advice and consent o f the Senate. One o f the appoin­
tive members shall be the chairman o f the board o f directors o f the
Corporation and not more than two o f the members o f such board
o f directors shall be members o f the same political party. Each
such appointive member shall hold office for a term o f six years and
shall receive compensation at the rate o f $10,000 per annum, payable
monthly out o f the funds o f the Corporation, but the Comptroller
o f the Currency shall not receive additional compensation fo r his
services as such member.
“ (c) There is hereby authorized to be appropriated, out o f any
money in the Treasury not otherwise appropriated, the sum o f
$150,000,000, which shall be available for payment by the Secretary
o f the Treasury for capital stock o f the Corporation in an equal
amount, which shall be subscribed for by him on behalf o f the United
States. Payments upon such subscription shall be subject to call in
whole or in part by the board o f directors o f the Corporation. Such
stock shall be in addition to the amount o f capital stock required to
be subscribed fo r by Federal reserve banks and member and nonmem­
ber banks as hereinafter provided, and the United States shall be
entitled to the payment o f dividends on such stock to the same extent
as member and nonmember banks are entitled to such payment on the
class A stock o f the Corporation held by them. Receipts for pay­
ments by the United States for or on account o f such stock shall be
issued by the Corporation to the Secretary o f the Treasury and shall
be evidence o f the stock.ownership o f the United States.
“ ( d) The capital stock o f the Corporation shall be divided into
shares o f $100 each. Certificates o f stock o f the Corporation shall
be o f two classes— class A and class B. Class A stock shall be held
by member and nonmember banks as hereinafter provided and they
shall be entitled to payment o f dividends out o f net earnings at the
rate o f 6 per centum per annum on the capital stock paid in by them,
which dividends shall be cumulative, or to the extent o f 30 per centum
o f such net earnings in any one year, whichever amount shall be the
greater, but such, stock shall have no vote at meetings o f stockholders.
Class B stock shall be held by Federal reserve banks only and shall
not be entitled to the payment o f dividends. Every Federal reserve
bank shall subscribe to shares o f class B stock in tne Corporation to
an amount equal to one half o f the surplus o f such bank on January
1,1933, and its subscriptions shall be accompanied by a certified check
payable to the Corporation in an amount equal to one half o f such
subscription. The remainder o f such subscription shall be subject to
call from time to time by the board o f directors upon ninety days’
notice.
“ (e) Every bank which is or which becomes a member o f the F ed­
eral Reserve System on or before July 1 , 1934, shall take all steps
necessary to enable it to become a class A stockholder o f the Corpora­
tion on or before July 1 , 1934; and thereafter no State bank or
trust company or mutual savings bank shall be admitted to mem­
bership in the Federal Reserve System until it becomes a class A




[ P u b , 66.]

9

stockholder o f the Corporation, no national bank in the continental
United States shall be granted a certificate by the Comptroller o f
the Currency authorizing it to commence the business o f banking
until it becomes a member o f the Federal Reserve System and a
class A stockholder o f the Corporation, and no national bank in
the continental United States for which a receiver or conservator
has been appointed shall be permitted to resume the transaction
of its banking business until it becomes a class A stockholder o f the
Corporation. Every member bank shall apply to the Corporation
for class A stock o f the Corporation in an amount equal to one half
of 1 per centum o f its total deposit liabilities as computed in accord­
ance with regulations prescribed by the Federal Reserve B oard;
except that in the case o f a member bank organized after the date this
section takes effect, the amount o f such class A stock applied for by
such member bank during the first twelve months after its organiza­
tion shall equal 5 per centum o f its paid-up capital and surplus, and
beginning after the expiration o f such twelve months’ period the
amount o f such class A stock o f such member bank shall be adjusted
annually in the same manner as in the case o f other member banks.
Upon receipt o f such application the Corporation shall request the
Federal Reserve Board, in the case o f a State member bank, or the
Comptroller o f the Currency, in the case o f a national bank, to cer­
tify upon the basis o f a thorough examination o f such bank whether
or not the assets o f the applying bank are adequate to enable it to
meet all o f its liabilities to depositors and other creditors as shown
by the books o f the bank; and the Federal Reserve Board or the
Comptroller o f the Currency shall make such certification as soon as
practicable. I f such certification be in the affirmative, the Corpora­
tion shall grant such application and the applying bank shall pay one
half o f its subscription in full and shall thereupon become a class A
stockholder o f the Corporation: Provided , That no member bank
shall be required to make such payment or become a class A stock­
holder o f the Corporation before July 1 , 1934. The remainder o f
such subscription shall be subject to call from time to time by the
board o f directors o f the Corporation. I f such certification be in the
negative, the Corporation shall deny such application. I f any
national bank shall not have become a class A stockholder o f the
Corporation on or before July 1 , 1934, the Comptroller o f the Cur­
rency shall appoint a receiver or conservator therefor in accordance
with the provisions o f existing law. Except as provided in subsec­
tion (g ) o f this section, i f any State member bank shall not have
become a class A stockholder o f the Corporation on or before July 1 ,
1934, the Federal Reserve Board shall terminate its membership in
the Federal Reserve System in accordance with the provisions o f
section 9 o f this Act.
46 ( f ) A n y State bank or trust company or mutual savings bank
which applies for membership in the Federal Reserve System or for
conversion into a national banking association on or after July 1 ,
1936, may, with the consent o f the Corporation, obtain the benefits
of this section, pending action on such application, by subscribing
and paying for the same amount o f stock o f the Corporation as it
would be required to subscribe and pay for upon becoming a member




10

[P u b . 66.}

bank. Thereupon the provisions o f this section applicable to member
banks shall be applicable to such State bank or trust company or
mutual savings bank to the same extent as if it were already a
member bank: Provided, That if the application o f such State bank
or trust company or mutual savings bank for membership in the
Federal Reserve System or for conversion into a national banking
association be approved and it shall not complete its membership in
the Federal Reserve System or its conversion into a national banking
association within a reasonable time, or if such application shall be
disapproved, then the amount paid by such State bank or trust
company or mutual savings bank on account o f its subscription to the
capital stock o f the Corporation shall be repaid to it and it shall no
longer be subject to the provisions or entitled to the privileges o f this
section.
“ (g ) I f any State bank or trust company, or mutual savings bank
(referred to in this subsection as ‘ State bank ’ ) which is or which
becomes a member o f the Federal Reserve System is not permitted by
the laws under which it was organized to purchase stock in the
Corporation, it shall apply to the Corporation for admission to the
benefits o f this section and, i f such application be granted after
appropriate certification in accordance with this section, it shall
deposit with the Corporation an amount equal to the amount which
it would have been required to pay in on account o f a subscription
to capital stock o f the Corporation. Thereafter such deposit shall
be adjusted in the same manner as subscriptions for stock by
class A stockholders. Such deposit shall be subject to the same
conditions with respect to repayment as amounts paid on subscrip­
tions to class A stock by other member banks and the Corporation
shall pay interest thereon at the same rate as dividends are actually
paid on outstanding shares o f class A stock. As long as such
deposit is maintained with the Corporation, such State bank shall,
fo r the purposes o f this section, be deemed to be a class A stockholder
o f the Corporation. I f the laws under which such State bank was
organized be amended so as to authorize State banks to subscribe
fo r class A stock o f the Corporation, such State bank shall within
six months thereafter subscribe for an appropriate amount o f such
class A stock and the deposit hereinafter provided for in lieu o f
payment upon class A stock shall be applied upon such subscription.
I f the law under which such State bank was organized be not
amended at the next session o f the State legislature follow ing the
admission o f such State bank to the benefits o f this section so as to
authorize State banks to purchase such class A stock, or, if the law
be so amended and such State bank shall fail within six months
thereafter to purchase such class A stock, the deposit previously made
with the Corporation shall be returned to such State bank and it
shall no longer be entitled to the benefits o f this section, unless it
shall have been closed in the meantime on account o f inability to
meet the demands o f its depositors.
“ (h ) The amount o f the outstanding class A stock o f the Corpo­
ration held by member banks shall be annually adjusted as here­
inafter provided as o f the last preceding call date as member banks
increase their time and demand deposits or as additional banks
become members or subscribe to the stock o f the Corporation, and




fPTJB. 66.1

11

such stock may be decreased in amount as member banks reduce
their time and demand deposits or cease to be members. Shares o f
the capital stock o f the Corporation owned by member banks shall
not be transferred or hypothecated. When a member bank increases
its time and demand deposits it shall, at the beginning o f each
calendar year, subscribe for an additional amount o f capital stock o f
the Corporation equal to one half o f 1 per centum o f such increase
in deposits. One half o f the amount o f such additional stock shall
be paid for at the time o f the subscription therefor, and the bal­
ance shall be subject to call by the board o f directors of the Corpora­
tion. A bank organized on or before the date this section takes
effect and admitted to membership in the Federal Reserve System
at any time after the organization o f the Corporation shall be
required to subscribe for an amount o f class A capital stock equal
to one half o f 1 per centum o f the time and demand deposits o f the
applicant bank as o f the date o f such admission, paying therefor
its par value plus one half o f ,1 per centum a month from the period
o f the last dividend on the class A stock o f the Corporation. W hen
a member bank reduces its time and demand deposits it shall sur­
render, not later than the 1st day o f January thereafter, a propor­
tionate amount o f its holdings in the capital stock o f the Corpora­
tion, and when a member bank voluntarily liquidates it shall
surrender all its holdings o f the capital stock o f the Corporation
and be released from its stock subscription not previously called.
The shares so surrendered shall be canceled and the member bank
shall receive in payment therefor, under regulations to be pre­
scribed by the Corporation, a sum equal to its cash-paid subscriptions
on the shares surrendered and its proportionate share o f dividends
not ta exceed one half o f 1 per centum a month, from the period o f
the last dividend on such stock, less any liability o f such member
bank to the Corporation.
“ (i) I f any member or nonmember bank shall be declared insolvent,
or shall cease to be a member bank (or in the case o f a nonmember
bank, shall cease to be entitled to the benefits o f insurance under this
section), the stock held by it in the Corporation shall be canceled,
without impairment o f the liability o f such bank, and all cash-paid
subscriptions on such stock, with its proportionate share o f dividends
not to exceed one half o f 1 per centum per month from the period o f
last dividend on such stock shall be first applied to all debts of the
insolvent bank or the receiver thereof to the Corporation, and the
balance, if any, shall be paid to the receiver of the insolvent bank.
“ ( j) Upon the date o f enactment o f the Banking A ct o f 1933, the
Corporation shall become a body corporate and as such shall have
power—
“ First. T o adopt and use a corporate seal.
“ Second. To have succession until dissolved by an A ct of
Congress.
“ Third. T o make contracts.
“ Fourth. T o sue and be sued, complain and defend, in any court
o f law or equity, State or Federal.
“ F ifth. T o appoint by its board o f directors such officers and
employees as are not otherwise provided for in this section, to define
their duties, fix their compensation, require bonds o f them and fix




12

[Pub. 66.1

the penalty thereof, and to dismiss at pleasure such officers or em­
ployees. Nothing in this or any other A ct shall be construed to
prevent the appointment and compensation as an officer or employee
o f the Corporation o f any officer or employee o f the United States
in any board, commission, independent establishment, or executive
department thereof.
“ Sixth. T o prescribe by its board o f directors, bylaws not in­
consistent 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. T o exercise by its board o f directors, or duly authorized
officers or agents, all powers specifically granted by the provisions
o f this section and such incidental powers as shall be necessary to
carry out the powers so granted.
“ (k) The board o f directors shall administer the affairs o f the
Corporation fairly and impartially and without discrimination. The
board o f directors o f the Corporation shall determine and prescribe
the manner in which its obligations shall be incurred and its ex­
penses allowed and paid. The Corporation shall be entitled to the
free use o f the United States mails in the same manner as the
executive departments o f the Government. The Corporation with
the consent o f any Federal reserve bank or o f any board, commis­
sion, independent establishment, or executive department o f the G ov­
ernment, including any field service thereof, may avail itself o f the
use o f information, services, and facilities thereof in carrying out
the provisions o f this section.
“ (1) Effective on and after July 1 , 1934 (thus affording ample
time for examination and preparation), unless the President shall by
proclamation fix an earlier date, the Corporation shall insure as
hereinafter provided the deposits o f all member banks, and on and
after such date and until July 1 , 1936, o f all nonmember banks,
which are class A stockholders o f the Corporation. Notwith­
standing any other provision o f law, whenever any national bank
which is a class A stockholder o f the Corporation shall have been
closed by action o f its board o f directors or bv the Comptroller o f
the Currency, as the case may be, on account or inability to meet the
demands o f its depositors, the Comptroller o f the Currency shall
appoint the Corporation receiver for such bank. As soon as possi­
ble thereafter the Corporation shall organize a new national bank
to assume the insured deposit liabilities o f such closed bank, to
receive new deposits and otherwise to perform temporarily the func­
tions provided fo r it in this paragraph. F or the purposes o f this
subsection, the term ‘ insured deposit liability ’ shall mean with
respect to the owner o f any claim arising out o f a deposit liability
o f such closed bank the follow ing percentages o f the net amount
due to such owner by such closed bank on account o f deposit lia­
bilities : 100 per centum o f such net amount not exceeding $10,000;
and 75 per centum o f the amount, if any, by which such net amount
exceeds $10,000 but does not exceed $50,000; and 50 per centum o f
the amount, i f any, by which such net amount exceeds $50,000:
Provided , That, in determining the amount due to such owner for
the purpose o f fixing such percentage, there shall be added together
all net amounts due to such owner in the same capacity or the same
right, on account o f deposits, regardless o f whether such deposits




[Pub. 66.J

13

be maintained in bis name or in the names o f others for his benefit.
F or the purposes o f this subsection, the term c insured deposit lia­
bilities ’ shall mean the aggregate amount o f all such insured deposit
liabilities o f such closed bank. The Corporation shall determine as
expeditiously as possible the net amounts due to depositors o f the
closed bank and shall make available to the new bank an amount
equal to the insured deposit liabilities o f such closed bank, where­
upon such new bank shall assume the insured deposit liability o f such
closed bank to each o f its depositors, and the Corporation shall be
subrogated to all rights against the closed bank o f the owners of
such deposits and shall be entitled to receive the same dividends from
the proceeds o f the assets o f such closed bank as would have been
payable to each such depositor until such dividends shall equal the
insured deposit liability to such depositor assumed by the new bank,
whereupon all further dividends shall be payable to such depositor.
O f the amount thus made available by the Corporation to the new
bank, such portion shall be paid to it in cash as may be necessary to
enable it to meet immediate cash demands and the remainder shall
be credited to it on the books o f the Corporation subject to with­
drawal on demand and shall bear interest at the rate o f 3 per centum
per annum until withdrawn. The new bank may, with the
approval o f the Corporation, accept new deposits, which, together
with all amounts made available to the new bank by the Corporation,
shall be kept on hand in cash, invested in direct obligations of the
United States, or deposited with the Corporation or with a Federal
reserve bank. Such new bank shall maintain on deposit with the
Federal reserve bank o f its district the reserves required by law o f
member banks but shall not be required to subscribe for stock o f the
Federal reserve bank until its own capital stock has been subscribed
and paid for in the manner hereinafter provided. The articles o f
association and organization certificate o f such new bank may be
executed by such representatives o f the Corporation as it may desig­
nate ; the new bank shall not be required to have any directors at
the time o f its organization, but shall be managed by an executive
officer to be designated by the Corporation; and no capital stock need
be paid in by the C orporation; but in other respects such bank shall
be organized in accordance with the existing provisions o f law relat­
ing to the organization o f national banks; and, until the requisite
amount o f capital stock for such bank has been subscribed and paid
fo r in the manner hereinafter provided, such bank shall transact
no business except that authorized by this subsection and such busi­
ness as may be incidental to its organization. When in the judg­
ment o f the Corporation it is desirable to do so, the Corporation shall
offer capital stock o f the new bank for sale on such terms and condi­
tions as the Corporation shall deem advisable, in an amount suffi­
cient in the opinion o f the Corporation to make possible the conduct
o f the business o f the new bank on a sound basis, but in no event less
than that required by section 5138 o f the Revised Statutes, as amended
(U.S.C., title 12, sec. 51), for the organization o f a national bank in
the place where such new bank is located, giving the stockholders o f
the closed bank the first opportunity to purchase such stock. Upon
proof that an adequate amount o f capital stock o f the new bank has
been subscribed and paid for in cash by subscribers satisfactory to the
Comptroller o f the Currency, he shall issue to such bank a certificate




14

IPtfB. 66.1

o f authority to commence business and thereafter it shall be managed
by directors elected by its own shareholders and may exercise all o f the
powers granted by law to national banking associations. I f an ade­
quate amount o f capital for such new bank is not subscribed and paid
in, the Corporation may offer to transfer its business to any other
banking institution in tne same place which will take over its assets,
assume its liabilities, and pay to the Corporation for such business
such amount as the Corporation may deem adequate. Unless the
capital stock o f the new bank is sold or its assets acquired and its
liabilities assumed by another banking institution, in the manner
herein prescribed, within two years from the date o f its organization,
the Corporation shall place the new bank in voluntary liquidation
and wind up its affairs. The Corporation shall open on its books a
deposit insurance account and, as soon as possible after taking pos­
session o f any closed national bank, the Corporation shall make an
estimate o f the amount which will be available from all sources for
application in satisfaction o f the portion o f the claims o f depositors
to which it has been subrogated and shall debit to such deposit insur­
ance account the excess, if any, o f the amount made available by the
Corporation to the new bank for depositors over and above the
amount o f such estimate. It shall be the duty o f the Corporation
to realize upon the assets o f such closed bank; having due regard
to the condition o f credit in the district in which such closed bank
is located; to enforce the individual liability o f the stockholders
and directors thereof; and to wind up the affairs o f such closed
bank in conform ity with the provisions o f law relating to the
liquidation o f closed national banks, except as herein otherwise
provided, retaining fo r its own account such portion o f the amount
realized from such liquidation as it shall be entitled to receive on
account o f its subrogation to the claims o f depositors and paying
to depositors and other creditors the amount available fo r distribu­
tion to them, after deducting therefrom their share o f the costs o f the
liquidation o f the closed bank. I f the total amount realized by the
Corporation on account o f its subrogation to the claims o f depositors
be less than the amount o f the estimate hereinabove provided for, the
deposit insurance account shall be charged with the deficiency and,
i f the total amount so realized shall exceed the amount o f such esti­
mate, such account shall be credited with such excess. W ith respect
to such closed national banks, the Corporation shall have all the
rights, powers, and privileges now possessed by or hereafter given
receivers o f insolvent national banks and shall be subject to the
obligations and penalties not inconsistent with the provisions o f this
paragraph to which such receivers are now or may hereafter become
subject.
“ Whenever any State member bank which is a class A stockholder
o f the Corporation shall have been closed by action o f its board o f
directors or bv the appropriate State authority, as the case may be,
on account o f inability to meet the demands o f its depositors, the
Corporation shall accept appointment as receiver thereof, if such
appointment be tendered by the appropriate State authority and be
authorized or permitted by State law. Thereupon the Corporation
shall organize a new national bank, in accordance with the provisions
o f this subsection, to assume the insured deposit liabilities o f such
closed State member bank, to receive new deposits and otherwise to




[P u b . 66.]

15

perform temporarily the functions provided for in this subsection.
Upon satisfactory recognition o f the right o f the Corporation to
receive dividends on the same basis as in the case o f a closed national
bank under this subsection, such recognition being accorded by State
law, by allowance o f claims by the appropriate State authority, by
assignment o f claims by depositors, or by any other effective method,
the Corporation shall make available to such new national bank, in
the manner prescribed by this subsection, an amount equal to the
insured deposit liabilities o f such closed State member bank; and the
Corporation and such new national bank shall perform all o f the
functions and duties and shall have all the rights and privileges with
respect to such State member bank and the depositors thereof which
are prescribed by this subsection with respect to closed national banks
holding class A stock in the Corporation: Provided , That the rights
o f depositors and other creditors o f such State member bank shall be
determined in accordance with the applicable provisions o f State
l a w : And provided further, That, with respect to such State member
bank, the Corporation shall possess the powers and privileges pro­
vided by State law with respect to a receiver o f such State member
bank, except in so far as the same are in conflict with the provisions
of this subsection.
“ Whenever any State member bank which is a class A stockholder
o f the Corporation shall have been closed by action o f its board o f
directors or by the appropriate State authority, as the case may be,
on account ox inability to meet the demands o f its depositors, and
the applicable State law does not permit the appointment o f the
Corporation as receiver o f such bank, the Corporation shall organize
a new national bank, in accordance with the provisions of this sub­
section, to assume the insured deposit liabilities o f such closed State
member bank, to receive new deposits, and otherwise to perform tem­
porarily the functions provided for in this subsection. Upon satis­
factory recognition o f the right o f the Corporation to receive divi­
dends on the same basis as in the case o f a closed national bank under
this subsection, such recognition being accorded by State law, by
allowance o f claims by the appropriate State authority, by assign­
ment o f claims by depositors, or by any other effective method, the
Corporation shall make available to such new bank, in accordance
with the provisions o f this subsection, the amount o f insured deposit
liabilities as to which such recognition has been accorded; and such
new bank shall assume such insured deposit liabilities and shall in
other respects comply with the provisions o f this subsection respect­
ing new banks organized to assume insured deposit liabilities of
closed national banks. In so far as possible in view o f the applicable
provisions o f State law, the Corporation shall proceed with respect
to the receiver o f such closed bank and with respect to the new bank
organized to assume its insured deposit liabilities in the manner
prescribed by this subsection with respect to closed national banks
and new banks organized to assume their insured deposit liabilities;
except that the Corporation shall have none o f the powers, duties,
or responsibilities o f a receiver with respect to the winding up o f
the affairs o f such closed State member bank. The Corporation, in
its discretion, however, may purchase and liquidate any or all of the
assets o f such bank.




16

[P ub . 66.J

“ Whenever the net debit balance o f the deposit insurance account
o f the Corporation shall equal or exceed one fourth o f 1 per centum
o f the total deposit liabilities o f all class A stockholders as o f the
date o f the last preceding call report, the Corporation shall levy
upon such stockholders^ an assessment equal to one fourth o f 1 per
centum o f their total deposit liabilities and shall credit the amount
collected from such assessment to such deposit insurance account.
No bank which is a holder o f class A stock shall pay any dividends
until all assessments levied upon it by the Corporation shall have
been paid in f u l l ; and any director or officer o f any such bank who
participates in the declaration or payment o f any such dividend may,
upon conviction, be fined not more than $1 ,000, or imprisoned for not
more than one year, or both.
“ The term 4receiver 5 as used in this section shall mean a receiver,
liquidating agent, or conservator o f a national bank, and a receiver,
liquidating agent, conservator, commission, person, or other agency
charged by State law with the responsibility and the duty o f winding
up the affairs o f an insolvent State member bank.
“ F or the purposes o f this section only, the term 4national b a n k ’
shall include all national banking associations and all banks, banking
associations, trust companies, savings banks, and other banking insti­
tutions located in the District o f Columbia which are members of
the Federal Reserve System; and the term ‘ State member b a n k 5
shall include all State banks, banking associations, trust companies,
savings banks, and other banking institutions organized under the
laws o f any State, which are members o f the Federal Reserve System.
“ In any determination o f the insured deposit liabilities o f any
closed bank or o f the total deposit liabilities o f any bank which is
a holder o f class A stock o f the Corporation, or a member o f the
Fund provided fo r in subsection ( y ) , for the purposes o f this
section, there shall be excluded the amounts o f all deposits o f such
bank which are payable only at an office thereof located in a foreign
country.
“ The Corporation may make such rules, regulations, and contracts
as it may deem necessary in order to carry out the provisions o f this
section.
“ Money o f the Corporation not otherwise employed shall be
invested in securities o f the Government o f the United States,
except that for temporary periods, in the discretion o f the board
o f directors, funds o f the Corporation may be deposited in any
Federal reserve bank or with the Treasurer o f the United States.
When designated for that purpose by the Secretary o f the Treasury,
the Corporation shall be a depositary o f public moneys, except
receipts fyom customs, under such regulations as may be prescribed
by the said Secretary, and may also be employed as a financial agent
of the Government. It shall perform all such reasonable duties as
depositary o f public moneys and financial agent o f the Government
as may be required o f it.
“ (m) Nothing herein contained shall be construed to prevent the
Corporation from making loans to national banks closed by action
o f the Comptroller o f the Currency, or by vote o f their directors,
or to State member banks closed by action o f the appropriate State




[Pub . 66.]

17

authorities, or by vote o f their directors, or from entering into nego­
tiations to secure the reopening o f such banks.
“ (n) Receivers or liquidators o f member banks which are now
or may hereafter become insolvent or suspended shall be entitled
to offer the assets o f 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 pro*
visions o f State law in the case o f State member banks, or from the
Comptroller o f the Currency in the case o f national banks. The
proceeds o f every such sale or loan shall be utilized for the same
purposes and in the same manner as other funds realized from the
liquidation o f the assets o f such banks. The Comptroller o f the
Currency may, in his discretion, pay dividends on proved claims at
any time after the expiration o f the period o f advertisement made
pursuant to section 5235 o f the Revised Statutes (U.S.C., title 12,
sec. 193), and no liability shall attach to the Comptroller o f the
Currency or to the receiver o f any national bank by reason o f any
such payment for failure to pay dividends to a claimant whose claim
is not proved at the time o f any such payment.
“ (o) The Corporation is authorized and empowered to issue and
to have outstanding at any one time in an amount aggregating not
more than three times the amount o f its capital, its notes, debentures,
bonds, or other such obligations, to be redeemable at the option o f the
Corporation before maturity in such manner as may be stipulated in
such obligations, and to bear such rate or rates o f interest, and to
mature at such time or times as may be determined by the Cor­
poration: 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 o f the Cor­
poration may be secured by assets o f the Corporation in such manner
as shall be prescribed by its board o f directors. Such obligations
may be offered for sale at such price or prices as the Corporation
may determine.
u (p ) A ll 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 here­
after 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 capi­
tal, reserves, and surplus, and its income, shall be exempt 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 prop­
erty o f the Corporation shall be subject to State, Territorial, county,
municipal or local taxation to the same extent according to its value
as other real property is taxed.
“ (q) In order that the Corporation may be supplied with such
forms o f 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 o f the Corporation. The engraved plates, dies, bed pieces, and
20,360 0 — 5 8 -------- 34




18

[P u b . 66.J

other material executed in connection therewith shall remain in the
custody o f the Secretary o f the Treasury. The Corporation shall
reimburse the Secretary o f the Treasury for any expenses incurred
in the preparation, custody, and delivery o f such notes, debentures,
bonds, or other such obligations.
“ (r ) The Corporation shall annually make a report o f its opera­
tions to (he Congress as soon as practicable after the 1 st day o f
January in each year.
“ (s) Whoever, for the purpose o f obtaining any loan from the
Corporation, or any extension or renewal thereof, or the acceptance,
release, or substitution o f security therefor, or for the purpose o f
inducing the Corporation to purchase any assets, or for the purpose o f
influencing in any way the action o f the Corporation under this sec­
tion, makes any statement, knowing it to be false, or w illfully over­
values any security, shall be punished by a fine o f not more than
$5,000, or by imprisonment for not more than two years, or both.
“ (t) Whoever ( 1 ) falsely makes, forges, or counterfeits any obli­
gation or coupon, in imitation o f or purporting to be an obligation
or coupon issued by the Corporation, or (2 ) passes, utters, or pub­
lishes, 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 coun­
terfeited, or (3) falsely alters any obligation or coupon issued or
purporting to have been issued by the Corporation, or (4) passes,
utters, or publishes, or attempts to pass, utter, or publish, as true,
any falsely altered or spurious obligation or coupon, issued or pur­
porting to have been issued by the Corporation, knowing the same
to be falsely altered or spurious, shall be punished by a fine o f 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 Corpo­
ration, ( 1 ) embezzles, abstracts, purloins, or w illfully misapplies
any moneys, funds, securities, or other things o f value, whether
belonging to it or pledged, or otherwise intrusted to it, or ( 2 ) with
intent to defraud the Corporation or any other body, politic or
corporate, or any individual, or to deceive any officer, auditor, or
examiner o f the Corporation, makes any false entry in any book,
report, or statement o f or to the Corporation, or without being duly
authorized draws any order or issues, puts forth, or assigns any
note, debenture, bond, or other such obligation, or draft, bill o f
exchange, mortgage, judgment, or decree thereof, shall be punished
by a fine o f not more than $10,000, or by imprisonment for not
more than five years, or both.
“ (v ) No individual, association, partnership, or corporation shall
use the words 4Federal Deposit Insurance Corporation ’, or a com­
bination or any three o f these four words, as the name or a pai*t
thereof under which he or it shall do business. No individual, asso­
ciation, partnership, or corporation shall advertise or otherwise
represent falsely by any device whatsoever that his or its deposit
liabilities are insured or ixi anywise guaranteed by the Federal
Deposit Insurance Corporation, or by the Government o f the United
States, or by any instrumentality thereof; and no class A stock­
holder o f the Federal Deposit Insurance Corporation shall




[P u b . 66.]

19

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. E very
individual, partnership, association, or corporation violating this
subsection shall be punished by a fine o f not exceeding $1 ,000, or
by imprisonment not exceeding one year, or both.
“ (w) The provisions o f sections 112 , 113, 114, 115, 116, and 117
o f tne Criminal Code o f the United States (U.S.C., title 18, ch. 5,
secs. 202 to 207, inclusive), in so far as applicable, are extended to
apply to contracts or agreements with the Corporation under this
section, which fo r the purposes hereof shall be held to include loans,
advances, extensions, and renewals thereof, and acceptances, releases,
and substitutions o f security therefor, purchases or sales o f assets,
and all contracts and agreements pertaining to the same.
“ (x) The Secret Service Division o f the Treasury Department is
authorized to detect, arrest, and deliver into the custody o f the
United States marshal having jurisdiction any person committing
any o f the offenses punishable under this section.
“ (y) The Corporation shall open on its books a Temporary Federal
Deposit Insurance Fund (hereinafter referred to as the ‘ F u n d 5),
which shall become operative on January 1 , 1934, unless the Presi­
dent shall by proclamation fix an earlier date, and it shall be the
duty o f the Corporation to insure deposits as hereinafter provided
until July 1 , 1934.
“ Each member bank licensed before January 1,1934, by the Secre­
tary o f the Treasury pursuant to the authority vested in him by the
Executive order o f the President issued March 10, 1933, shall, on or
before January 1,1934, become a member o f the F und; each member
bank so licensed after such date, and each State bank trust company or
mutual savings bank (referred to in this subsection as 4State bank
which term shall also include all banking institutions located in
the District o f Columbia) which becomes a member o f the Federal
Reserve System on or after such date, shall, upon being so licensed
or so admitted to membership, become a member o f the F und; and
any State bank which is not a member o f the Federal Reserve
System, with the approval o f the authority having supervision o f
such State bank and certification to the Corporation by such author­
ity that such State bank is in solvent condition, shall, after exam­
ination by, and with the approval of, the Corporation, be entitled
to become a member o f the Fund and to the privileges jpf this sub­
section upon agreeing to com ply with the requirements thereof and
upon paying to the Corporation an amount equal to the amount that
would be required o f it under this subsection if it were a member
bank. The Corporation is authorized to prescribe rules and regu­
lations for the further examination o f such State bank, and to fix
the compensation o f examiners employed to make examinations o f
State banks.
“ Each member o f the Fund shall file with the Corporation on or
before the date o f its admission a certified statement under oath
showing, as o f the fifteenth day o f the month preceding the month
in which it was so admitted, the number o f its depositors and the
total amount o f its deposits which are eligible for insurance under
this subsection, and shall pay to the Corporation an amount equal




20

(P ub . 60.]

to one-half o f 1 per centum o f the total amount o f the deposits so
certified. One-half o f such payment shall he paid in full at the
time o f the admission o f such member to the Fund, and the remainder
o f such payment shall be subject to call from time to time by the
board o f directors o f the Corporation. W ithin a reasonable timG
fixed by the Corporation each such member shall file a similar
statement showing, as o f June 15, 1934, the number o f its depositors
and the total amount o f its deposits which are eligible for such
insurance and shall pay to the Corporation in the same manner an
amount equal to one-half o f 1 per centum o f the increase, i f any,
in the total amount o f such deposits since the date covered by the
statement filed upon its admission to membership in the fund.
a I f at any time prior to July 1 , 1934, the Corporation requires
additional funds with which to meet its obligations under this
subsection, each member o f the Fund shall be subject to one addi­
tional assessment only in an amount not exceeding the total amount
theretofore paid to the Corporation by such member.
“ I f any member o f the Fund shall be closed on or before June 30,
1934, on account o f inability to meet its deposit liabilities, the C orpo­
ration shall proceed in accordance with the provisions o f subsection
( 1) o f this section to pay the insured deposit liabilities o f such mem­
ber; except that the Corporation shall pay not more than $2,500
on account o f the net approved claim o f the owner o f any deposit.
The provisions o f such subsection (1) relating to State member banks
shall be extended fo r the purposes o f this subsection to members o f
the Fund which are not members o f the Federal Reserve System;
and the provisions o f this subsection shall apply only to deposits
o f members o f the Fund which have been made available since
March 10, 1933, fo r withdrawal in the usual course o f the banking
business.
u Before July 1 , 1934, the Corporation shall make an estimate o f
the balance, i f any, which will remain in the Fund after providing
for all liabilities o f the Fund, including expenses o f operation
thereof under this subsection and allowing for anticipated recoveries.
The Corporation shall refund such estimated balance, on such basis
as the Corporation shall find to be equitable, to the members o f the
Fund other than those which have been closed prior to July 1 , 1934.
“ Each State bank which is a member o f the Fund, in order to
obtain the benefits o f this section after July 1 , 1934, shall, on or
before such date, subscribe and pay fo r the same amount o f class A
stock o f the Corporation as it would be required to subscribe and
pay for upon becoming a member bank, or i f such State bank is
not permitted by the laws under which it was organized to pur­
chase such stock, it shall deposit with the Corporation an amount
equal to the amount it would have been required to pay in on account
o f a subscription to such stock; and thereafter such State bank shall
be entitled to such benefits until July 1 , 1936.
“ It is not the purpose o f this section to discriminate, in any
manner, 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 o f this section. No
bank shall be discriminated against because its capital stock is less




[Pub . 60 }

21

than the amount required for eligibility for admission into the
Federal Reserve System.”
Sec. 9. The eighth paragraph o f section 13 o f the Federal Reserve
Act, as amended (U.S.C., title 12, sec. 347; Supp. V I, title 12, sec.
347), is amended to read as follow s:
“ A ny Federal reserve bank may make advances for periods not
exceeding fifteen days to its member banks on their promissory
notes secured by the deposit or pledge o f bonds, notes, certificates o f
indebtedness, or Treasury bills o f the United States, or by the
deposit or pledge o f debentures or other such obligations o f Federal
intermediate credit banks which are eligible for purchase by Fed­
eral reserve banks under section 13 (a) o f this A c t; and any
Federal reserve bank may make advances fo r periods not exceeding
ninety days to its member banks on their promissory notes secured
by such notes, drafts, bills o f exchange, or bankers’ acceptances as are
eligible for rediscount or for purchase by Federal reserve banks under
the provisions o f this Act. A ll such advances shall be made at rates
to be established by such Federal reserve banks, such rates to be sub­
ject to the review and determination o f the Federal Reserve Board.
I f any member bank to which any such advance has been made
shall, during the life or continuance o f such advance, and despite
an official warning o f the reserve bank o f the district or o f the
Federal Reserve Board to the contrary, increase its outstanding
loans secured by collateral in the form o f stocks, bonds, debentures,
or other such obligations, or loans made to members o f any organized
stock exchange, investment house, or dealer in securities, upon any
obligation, note, or bill, secured or unsecured, fo r the purpose o f
purchasing ana/or carrying stocks, bonds, or other investment
securities (except obligations o f the United States) such advance
shall be deemed immediately due and payable, and such member
bank shall be ineligible as a borrower at the reserve bank o f the
district under the provisions o f this paragraph fo r such period as
the Federal Reserve Board shall determine: Provided , That no
temporary carrying or clearance loans made solely for the purpose
o f facilitating the purchase or delivery o f securities offered for
public subscription shall be included in the loans referred to in
this paragraph.”
Sec. 10. Section 14 o f the Federal Reserve A ct, as amended (U . S. C.f
title 12, secs. 353-358), is amended by adding at the end thereof the
follow ing new paragraph:
“ (g) The Federal Reserve Board shall exercise special supervision
over all relationships and transactions o f any kind entered into by
any Federal reserve bank with any foreign bank or banker, or with
any group o f foreign banks or bankers, and all such relationships
and transactions shall be subject to such regulations, conditions, and
limitations as the Board may prescribe. No officer or other represen­
tative o f any Federal reserve bank shall conduct negotiations o f
any kind with the officers or representatives o f any foreign bank
or banker without first obtaining the permission o f the Federal
Reserve Board. The Federal Reserve Board shall have the right, in
its discretion, to be represented in any conference or negotiations by
such representative or representatives as the Board may designate.
A full report o f all conferences or negotiations, and all understand­




22

[Pu b . 66.1

ings or agreements arrived at or transactions agreed upon, and all
other material facts appertaining to such conferences or negotiations,
shall be filed with the Federal Reserve Board in writing hy a duly
authorized officer o f each Federal reserve bank which shall have
participated in such conferences or negotiations.”
Sec. 1 1 . (a) Section 19 o f the Federal Reserve Act, as amended
(U .S.C., title 12, secs. 142, 374, 461-466; Supp. V I, title 12, sec. 462a),
is amended by inserting after the sixth paragraph thereof the follow ­
ing new paragraph:
“ No member bank shall act as the medium or agent o f any non­
banking corporation, partnership, association, business trust, or indi­
vidual in making loans on the security o f stocks, bonds, and other
investment securities to brokers or dealers in stocks, bonds, and other
investment securities. Every violation o f this provision by any
member bank shall be punishable by a fine o f not more than $100
per day during the continuance o i such violation; and such fine
may be collected, by suit or otherwise, by the Federal reserve bank
o f the district in which such member bank: is located.”
(b ) Such section 19 o f the Federal Reserve Act, as amended, is
further amended by adding at the end thereof the follow ing new
paragraphs:
“ No member bank shall, directly or indirectly by any device what­
soever, pay any interest on any deposit which is payable on dem and:
Provided , That nothing herein contained shall be construed as pro­
hibiting the payment ot interest in accordance with the terms o f any
certificate o f deposit or other contract heretofore entered into in
good faith which is in force on the date o f the enactment o f this
paragraph; but no such certificate o f deposit or other contract shall
be renewed or extended unless it shall be modified to conform to this
paragraph, and every member bank shall take such action as may be
necessary to conform to this paragraph as soon as possible consist­
ently with its contractual obligations: Provided , however, That this
paragraph shall not apply to any deposit o f such bank which is
payable only a£ an office thereof located in a foreign country, and
shall not apply to any deposit made by a mutual savings bank, nor
to any deposit o f public funds made by or on behalf o f any State,
county, school district, or other subdivision or municipality, with
respect to which payment o f interest is required under State law.
“ The Federal Reserve Board shall from time to time limit by
regulation the rate of: interest which may be paid by member banks
on time deposits, and may prescribe different rates for such pay­
ment on time and savings deposits having different maturities or
subject to different conditions respecting withdrawal or repay­
ment or subject to different conditions by reason o f different loca­
tions. No member bank shall pay any time deposit before its ma­
turity, or waive any requirement o f notice before payment o f any
savings deposit except as to all savings deposits having the same
requirement.”
(c ) Section 8 o f the A ct entitled “ A n A ct to establish postal
savings depositories for depositing savings at interest with the
security o f the Government for repayment thereof, and for other
purposes ” , approved June 25, 1910, as amended (U.S.C., title 39,
sec. 758), is amended by striking out the first sentence thereof and




{P ub . 66.]

23

inserting in lieu thereof the follow in g: “ A ny depositor may with­
draw the whole or any part o f the funds deposited to his or her
credit with the accrued interest only on notice given sixty days in
advance and under such regulations as the Postmaster General
may prescribe; but withdrawal o f any part o f such funds may be
made upon demand, but no interest shall be paid on any funds so
withdrawn except interest accrued to the date o f enactment o f the
Banking A ct o f 1933: Provided , That Postal Savings depositories
may deposit funds in member banks on time under regulations to be
prescribed by the Postmaster General.”
(d )
The second sentence o f section 9 o f the A ct entitled “ A n A ct to
establish postal savings depositories for depositing savings at interest
with the security o f the Government for repayment thereof, and for
other purposes ” , approved June 25, 1910, as amended (U.S.C., title
39, sec. 759), is amended by striking out the period at the end thereof
and inserting in lieu thereof a colon and the follow in g: “ Provided ,
That no such security shall be required in case o f such part o f the
deposits as are insured under section 12B o f the Federal Reserve Act,
as amended.”
Sec. 12. Section 22 o f the Federal Reserve Act, as amended (U.S.C.,
title 12, secs. 375, 376, 503, 593-595; Supp. V I, title 12, sec. 593), is
further amended by adding at the end thereof the follow ing new
paragraph:
“ (g) No executive officer o f any member bank shall borrow from
or otherwise become indebted to any member bank o f which he is
an executive officer, and no member bank shall make any loan or
extend credit in any other manner to any o f its own executive officers:
Provided , That loans heretofore made to any such officer may be
renewed or extended not more than two years from the date this
paragraph takes effect, i f in accord with sound banking practice.
I f any executive officer o f any member bank borrow from or if
he be or become indebted to any bank other than a member bank
o f which he is an executive officer, he shall make a written report to
the chairman o f the board o f directors o f the member bank o f which
he is an executive officer, stating the date and amount o f such loan
or indebtedness, the security therefor, and the purpose for which
the proceeds have been or are to be used. A ny executive officer of
any member bank violating the provisions o f this paragraph shall
be deemed guilty o f a misdemeanor and shall be imprisoned not
exceeding one year, or fined not more than $5,000, or both ; and any
member bank violating the provisions o f this paragraph shall be
fined not more than $10,000, and may be fined a further sum equal
to the amount so loaned or credit so extended.”
Sec. 13. The Federal Reserve Act, as amended, is amended by
inserting between sections 23 and 24 thereof (U.S.C., title 12, secs.
64 and 371; Supp. V I, title 12, sec. 371) the following new section:

“ Sec. 23A. No member bank shall (1) make any loan or any
extension of credit to, or purchase securities under repurchase agree­
ment from, any of its affiliates, or (2) invest any of its funds in the
capital stock, bonds, debentures, or other such obligations of any
such affiliate, or (3) accept the capital stock, bonds, debentures, or
other such obligations of any such affiliate as collateral security for
advances made to any person, partnership, association, or corpora­




24

[Pub . 66.]

tion, if, in the case o f any such affiliate, the aggregate amount o f
such loans, extensions o f credit, repurchase agreements, investments,
and advances against such collateral security will exceed 10 per
centum o f the capital stock and surplus o f such member bank, or
if, in the case o f all such affiliates, the aggregate amount o f such
loans, extensions o f credits, repurchase agreements, investments, and
advances against such collateral security will exceed 20 per centum
o f the capital stock and surplus o f such member bank.
“ W ithin the foregoing limitations, each loan or extension o f credit
o f any kind or character to an affiliate shall be secured by collateral
in the form o f stocks, bonds, debentures, or other such obligations
having a market value at the time o f making the loan or extension
o f credit o f at least 20 per centum more than the amount o f the
loan or extension o f credit, or o f at least 10 per centum more than
the amount o f the loan or extension o f credit i f it is secured by
obligations o f any State, or o f any political subdivision or agency
th e re o f: Provided, That the provisions o f this paragraph shall not
apply to loans or extensions o f credit secured by obligations o f the
united States Government, the Federal intermediate credit banks,
the Federal land banks, the Federal Home Loan Banks, or the Home
Owners’ Loan Corporation, or by such notes, drafts, bills o f exchange,
or bankers’ acceptances as are eligible fo r rediscount or for purchase
by Federal reserve banks. A loan or extension o f credit to a
director officer, clerk, or other employee or any representative o f
any such affiliate shall be deemed a loan to the affiliate to the extent
that the proceeds o f such loan are used for the benefit of, or trans­
ferred to, the affiliate.
“ F or the purposes o f this section the term ‘ affiliate ’ shall include
holding company affiliates as well as other affiliates, and the pro­
visions o f this section shall not apply to any affiliate ( 1 ) engaged
solely in holding the bank premises o f the member bank with which
it is affiliated, (2) engaged solely in conducting a safe-deposit busi­
ness or the business o f an agricultural credit corporation or livestock
loan company, (3) in the capital stock o f which a national banking
association is authorized to invest pursuant to section 25 o f the
Federal Reserve A ct, as amended, (4) organized under section
25 (a ) o f the Federal Reserve A ct, as amended, or (5) engaged
solely in holding obligations o f the United States Government, the
Federal intermediate credit banks, the Federal land banks, the Fed­
eral Home Loan Banks, or the Home Owners’ Loan Corporation;
but as to any such affiliate, member banks shall continue to be subject
to other provisions o f law applicable to loans by such banks and
investments by such banks in stocks, bonds, debentures, or other such
obligations.”
Sec. 14. The Federal Reserve A ct, as amended, is amended by
inserting between section 24 and section 25 thereof (U.S.C.. title 12,
secs. 371 and 601-605; Supp. V I, title 12, sec. 371) the follow ing
new section:
“ Sec. 24A. Hereafter no national bank, without the approval
o f the Comptroller o f the Currency, and no State member bank,
without the approval o f the Federal Reserve Board, shall (1) invest
in bank premises, or in the stock, bonds, debentures, or other such
obligations o f any corporation holding the premises o f such bank




IPUB. 66.]

25

or ( 2) make loans to or upon the security o f the stock o f any such
corporation, if the aggregate o f all such investments and loans will
exceed the amount o f the capital stock o f such bank.”
Sec. 15. The Federal Reserve A ct, as amended, is further amended
by inserting after section 25 (a) thereof (U.S.C., title 12, sec.
611-631) the follow ing new section:
“ Sec. 25. (b ) Notwithstanding any other provision o f law all suits
o f a civil nature at common law or in equity to which any corporation
organized under the laws o f the United States shall be a party, aris­
ing out o f transactions involving international or foreign banking, or
banking in a dependency or insular possession o f the United States,
or out o f other international or foreign financial operations, either
directly or through the agency, ownership, or control o f branches or
local institutions in dependencies or insular possessions o f the United
States or in foreign countries, shall be deemed to arise under the laws
o f the United States, and the district courts o f the United States
shall have original jurisdiction o f all such suits; and any defendant
in any such suit may, at any time before the trial thereof, remove
such suits from a State court into the district court o f the United
States fo r the proper district by following the procedure for the
removal o f causes otherwise provided by law. Such removal shall
not cause undue delay in the trial o f such case and a case so removed
shall have a place on the calendar o f the United States court to
which it is removed relative to that which it held on the State court
from which it was removed.
“ Notwithstanding any other provision o f law, all suits o f a civil
nature at common law or in equity to which any Federal Reserve
bank shall be a party shall be deemed to arise under the laws o f the
United States, and the district courts o f the United States shall have
original jurisdiction o f all such suits; and any Federal Reserve bank
which is a defendant in any such suit may, at any time before the
trial thereof, remove such suit from a State court into the district
court o f the United States for the proper district by following the
procedure for the removal o f causes otherwise provided by law. No
attachment or execution shall be issued against any Federal Reserve
bank or its property before final judgment in any suit, action, or
proceeding in any State, county, municipal, or United States court.”
Sec. 16. Paragraph “ Seventh ” o f section 5136 o f the Revised
Statutes, as amended (U.S.C., title 12, sec. 24; Supp. V I, title 12, sec.
24), is amended to read as follow s:
“ Seventh. To exercise by its board o f directors or duly authorized
officers or agents, subject to law, all such incidental powers as shall be
necessary to carry on the business o f banking; by discounting and
negotiating promissory notes, drafts, bills o f exchange, and other
evidences o f debt; by receiving deposits; by buying and selling
exchange, coin, and bullion; by loaning money on personal security;
and by obtaining, issuing, and circulating notes according to the
provisions o f this title. The business of dealing in investment securi­
ties by the association shall be limited to purchasing and selling such
securities without recourse, solely upon the order, and for the account
of, customers, and in no case for its own account, and the association
shall not underwrite any issue o f securities: Provided , That the asso­
ciation may purchase for its own account investment securities under




26

[Pub. 66.1

such limitations and restrictions as the Comptroller o f the Currency
may by regulation prescribe, but in no event ( 1 ) shall the total
amount o f any issue o f investment securities o f any one obligor or
maker purchased after this section as amended takes effect and held
by the association for its own account exceed at any time 10 per centum
o f the total amount o f such issue outstanding, but this limitation shall
not apply to any such issue the total amount o f which does not exceed
$100,000 and does not exceed 50 per centum o f the capital o f the asso­
ciation, nor ( 2) shall the total amount o f the investment securities o f
any one obligor or maker purchased after this section as amended
takes effect and held by the association for its own account exceed at
any time 15 per centum o f the amount o f the capital stock o f the
association actually paid in and unimpaired and 25 per centum o f its
unimpaired surplus fund. A s used in this section the term c invest­
ment securities5 shall mean marketable obligations evidencing indebt­
edness o f any person, copartnership, association, or corporation in the
form o f bonds, notes and/or debentures commonly known as invest­
ment securities under such further definition o f the term 1investment
securities5 as may by regulation be prescribed by the Comptroller o f
the Currency. Except as hereinafter provided or otherwise per­
mitted by law, nothing herein contained shall authorize the purchase
by the association o f any shares o f stock o f any corporation. The
limitations and restrictions herein contained as to dealing in, under­
writing and purchasing fo r its own account, investment securities
shall not apply to obligations o f the United States, or general obliga­
tions o f any State or o f any political subdivision thereof, or obliga­
tions issued under authority o f the Federal Farm Loan A ct, as
amended, or issued by the Federal Home Loan Banks or the Home
Owners’ Loan C orporation: Provided , That in carrying on the busi­
ness commonly known as the safe-deposit business the association
shall not invest in the capital stock o f a corporation organized under
the law o f any State to conduct a safe-deposit business in an amount
in excess o f 15 per centum o f the capital stock o f the association
actually paid in and unimpaired and 15 per centum o f its unimpaired
surplus.”
The restrictions o f this section as to dealing in investment securi­
ties shall take effect one year after the date o f the approval o f
this Act.
Sec. 17. (a) Section 5138 o f the Revised Statutes, as amended
(U.S.C., title 12, sec. 51; Supp. V I, title 12, sec. 51), is amended to
read as follow s :
“ Sec. 5138. A fter this section as amended takes effect, no national
banking association shall be organized with a less capital than
$100,000, except that such associations with a capital o f not less than
$50,000 may be organized in any place the population o f which does
not exceed six thousand inhabitants. No such association shall be
organized in a city the population o f which exceeds fifty thousand
persons with a capital o f less than $200,000, except that in the out­
lying districts o f such a city where the State laws permit the organi­
zation o f State banks with a capital o f $100,000 or less, national
banking associations now organized or hereafter organized may, with
the approval o f the Comptroller o f the Currency, have a capital o f
not less than $100,000.”




[P u b . 66.]

27

(b ) The tenth paragraph o f section 9 o f the Federal Reserve A ct,
as amended (U.S.C,, title 12, sec. 329), is amended to read as follow s:
“ No applying bank shall be admitted to membership in a Federal
reserve banfi unless it possesses a paid-up unimpaired capital suffi­
cient to entitle it to become a national banking association in the
place where it is situated under the provisions o f the National
Bank A ct, as amended: Provided , That this paragraph shall not
apply to State banks and trust companies organized prior to the
date this paragraph as amended takes effect ana situated in a place
the population o f which does not exceed three thousand inhabitants
and having a capital o f not less than $25,000, nor to any State bank
or trust company which is so situated and which, while it is entitled
to the benefits o f insurance under section 12B o i this A ct, increases
its capital to not less than $25^000.”
Sec. 18. Section 5139 o f the Revised Statutes, as amended (U.S.C.,
title 12, sec. 52; Supp. V I, title 12, sec. 52), is amended by adding at
the end thereof the follow ing new paragraph:
“ A fter one year from the date o f the enactment o f the Banking A ct
o f 1933, no certificate representing the stock o f any such association
shall represent the stock o f any other corporation, except a member
bank or a corporation existing on the date this paragraph takes effect
engaged solely in holding the bank premises o i such association, nor
shall the ownership, sale, or transfer o f any certificate representing
the stock o f any such association be conditioned in any manner
whatsoever upon the ownership, sale, or transfer o f a certificate rep­
resenting the stock o f any other corporation, except a member bank.”
Sec. 19. Section 5144 o f the Revised Statutes, as amended (U.S.C.,
title 12, sec. 61), is amended to read as follow s:
“ Sec. 5144. In all elections o f directors, each shareholder shall
have the right to vote the number o f shares owned by him for as
many persons as there are directors to be elected, or to cumulate
such shares and give one candidate as many votes as the number o f
directors multiplied by the number o f his shares shall equal, or to
distribute them on the same principle among as many candidates as
he shall think fit; and in deciding all other questions at meetings o f
shareholders, each shareholder shall be entitled to one vote on each
share o f stock held by him ; except ( 1 ) that shares o f its own stock
held by a national bank as sole trustee shall not be voted, and shares
o f 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 i f he or they were the sole trustee, and
(2) shares controlled by any holding company affiliate o f a national
bank shall not be voted unless such holding company affiliate shall
have first obtained a voting permit as hereinafter provided, which
permit is in force at the time such shares are voted. Shareholders
may vote by proxies duly authorized in w riting; but no officer, clerk,
teller, or bookkeeper o f such bank shall act as p ro x y ; and no share­
holder whose liability is past due and unpaid shall be allowed to vote.
“ For the purposes o f this section shares shall be deemed to be
controlled by a holding company affiliate if they are owned or con­
trolled directly or indirectly by such holding company affiliate, or
held by any trustee fo r the benefit o f the shareholders or members
thereof.




28

[Pub. 66.1

“ A n y such holding company affiliate may make application to the
Federal Reserve Board fo r a voting permit entitling it to cast one
vote at all elections o f directors and in deciding all questions at
meetings o f shareholders o f such bank on each share o f stock con­
trolled by it or authorizing the trustee or trustees holding the stock
for its benefit or for the benefit o f its shareholders so to vote the same.
The Federal Reserve Board may, in its discretion, grant or with­
hold such permit as the public interest may require. In acting upon
such application, the Board shall consider the financial condition of
the applicant, the general character o f its management, and the prob­
able effect o f the granting o f such permit upon the affairs o f such
bank, but no such permit shall be granted except upon the follow ing
conditions:
44 (a) Every such holding company affiliate shall, in making the
application for such permit, agree ( 1 ) to receive, on dates identical
with those fixed for the examination o f banks with which it is
affiliated, examiners duly authorized to examine such banks, who
shall make such examinations o f such holding company affiliate as
shall be necessary to disclose fully the relations between such banks
and such holding company affiliate and the effect o f such relations
upon the affairs o f such banks, such examinations to be at the
expense o f the holding company affiliate so examined; (2 ) that the
reports o f such examiners shall contain such information as shall be
necessary to disclose fully the relations between such affiliate and
such banks and the effect o f such relations upon the affairs o f such
banks; (3) that such examiners may examine each bank owned or
controlled by the holding company affiliate, both individually and in
conjunction with other banks owned or controlled by such holding
company affiliate; and (4) that publication o f individual or con­
solidated statements o f condition o f such banks may be required;
44 (b ) A fter five years after the enactment o f the Banking A ct
o f 1933, every such holding company affiliate (1) shall possess, and
shall continue to possess during the life o f such permit, free and
clear o f any lien, pledge, or hypothecation o f any nature, readily
marketable assets other than bank stock in an amount not less than
12 per centum o f the aggregate par value o f all bank stocks con­
trolled by such holding company affiliate, which amount shall be
increased by not less than 2 per centum per annum o f such aggregate
par value until such assets shall amount to 25 per centum o f the
aggregate par value o f such bank stocks; and (2 ) shall reinvest in
readily marketable assets other than bank stock all net earnings
over and above 6 per centum per annum on the book value o f its
own shares outstanding until such assets shall amount to such £5
per centum o f the aggregate par value o f all bank stocks controlled
by it;
44 (c) Notwithstanding the foregoing provisions o f this section,
after five years after the enactment o f the Banking A ct o f 1933, ( 1 )
any such holding company affiliate the shareholders or members o f
which shall be individually and severally liable in proportion to the
number o f shares o f such holding company affiliate held by them
respectively, in addition to amounts invested therein, for all statutory
liability imposed on such holding company affiliate by reason o f its
control o f shares o f stock o f banks, shall be required only to




(P ub . 66.]

29

establish and maintain out o f net earnings over and above 6 per
centum per annum on the book value o f its own shares outstanding
a reserve o f readily marketable assets in an amount o f not less than
12 per centum o f the aggregate par value o f bank stocks controlled
by it, and (2) the assets required by this section to be possessed by
such holding company affiliate may be used by it for replacement o f
capital in banks affiliated with it and fo r losses incurred in such
banks, but any deficiency in such assets resulting from such use shall
be made up within such period as the Federal Reserve Board may
by regulation prescribe;
“ (d ) Every officer, director, agent, and employee o f every such
holding company affiliate shall be subject to the same penalties for
false entries in any book, report, or statement o f such holding com­
pany affiliate as are applicable to officers, directors, agents, and
employees o f member banks under section 5209 o f the Revised
Statutes, as amended (U.S.C., title 12, sec. 592); and
“ (e) Every such holding company affiliate shall, in its application
for such voting permit, ( 1 ) show that it does not own, control, or
have any interest in, and is not participating in the management or
direction of, any corporation, business trust, association, or other
similar organization formed for the purpose of, or engaged prin­
cipally in, the issue, flotation, underwriting, public sale, or
distribution, at wholesale or retail or through syndicate participa­
tion, o f stocks, bonds, debentures, notes, or other securities o f any
sort (hereinafter referred to as c securities company ’ ) ; (2) agree
that during the period that the permit remains in force it will not
acquire any ownership, control, or interest in any such securities
company or participate in the management or direction thereof;
(3) agree that if, at the time o f filing the application for such permit,
it owns, controls, or has an interest in, or is participating in the
management or direction of, any such securities company, it will,
within five years after the filing o f such application, divest itself
o f its ownership, control, and interest in such securities company
and will cease participating in the management or direction thereof,
and will not thereafter, during the period that the permit remains
in force, acquire any further ownership, control, or interest in any
such securities company or participate in the management or direc­
tion thereof ; and (4) agree that thenceforth it will declare dividends
only out o f actual net earnings.
“ I f at any time it shall appear to the Federal Reserve Board that
any holding company affiliate has violated any o f the provisions of
the Banking A ct o f 1933 or o f any agreement made pursuant to this
section, the Federal Reserve Board may, in its discretion, revoke any
such voting permit after giving sixty days’ notice by registered mail
o f its intention to the holding company affiliate and affording it an
opportunity to be heard. Whenever the Federal Reserve Board shall
have revoked any such voting permit, no national bank whose stock
is controlled by the holding company affiliate whose permit is so
revoked shall receive deposits o f public moneys o f the United States,
nor shall any such national bank pay any further dividend to such
holding company affiliate upon any shares o f such bank controlled
by such holding company affiliate.




30

(P ub . 66.1

“ Whenever the Federal Reserve Board shall have revoked any
voting permit as hereinbefore provided, the rights, privileges, ana
franchises o f any or all national banks the stock o f which is con­
trolled by such holding company affiliate shall, in the discretion o f
the Federal Reserve Board, be subject to forfeiture in accordance
with section 2 o f the Federal Reserve A ct, as amended.”
Sec. 20. A fter one year from the date o f the enactment o f this Act,
no member bank shall be affiliated in any manner described in sec­
tion 2 (b) hereof with any corporation, association, business trust, or
other similar organization engaged principally in the issue, flotation,
underwriting, public sale, or distribution at wholesale or retail or
through syndicate participation o f stocks, bonds, debentures, notes,
or other securities.
F or every violation o f this section the member bank involved shall
be subject to a penalty not exceeding $1,000 per day for each day
during which such violation continues. Such penalty may be assessed
by the Federal Reserve Board, in its discretion, and, when so
assessed, may be collected by the Federal reserve bank by suit or
otherwise.
I f any such violation shall continue fo r six calendar months after
the member bank shall have been warned by the Federal Reserve
Board to discontinue the same, (a) in the case o f a national bank, all
the rights, privileges, and franchises granted to it under the National
Bank A ct may be forfeited in the manner prescribed in section 2 o f
the Federal Reserve A ct, as amended (U.S.C., title 12, secs. 141, 222225, 281-286, and 502), or, (b ) in the case o f a State member bank,
all o f its rignts and privileges o f membership in the Federal Reserve
System may be forfeited in the manner prescribed in section 9 o f the
Federal Reserve A ct, as amended (U.S.C., title 12, secs. 321-332).
Sec. 2 1. (a ) A fter the expiration o f one year after the date o f
enactment o f this A ct it shall be unlawful—
( 1 ) F or any person, firm, corporation, association, business trust,
or other similar organization, engaged in the business o f issuing,
underwriting, selling, or distributing, at wholesale or retail, or
through syndicate participation, stocks, bonds, debentures, notes, or
other securities, to engage at the same time to any extent whatever
in the business o f receiving deposits subject to check or to repayment
upon presentation o f a passbook, certificate o f deposit, or other
evidence o f debt, or upon request o f the depositor; or
(2 ) F or any person, firm, corporation, association, business trust,
or other similar organization, other than a financial institution or
private banker subject to examination and regulation under State
or Federal law, to engage to any extent whatever in the business o f
receiving deposits subject to check or to repayment upon presentation
o f a passbook, certificate o f deposit, or other evidence o f debt, or upon
request o f the depositor, unless such person, firm, corporation, asso­
ciation, business trust, or other similar organization shall submit
to periodic examination by the Comptroller o f the Currency or by
the Federal reserve bank o f the district and shall make and publish
periodic reports o f its condition, exhibiting in detail its resources
and liabilities, such examination and reports to be made and pub­
lished at the same times and in the same manner and with like effect




[Pub . 06.J

31

and penalties as are now provided by law in respect o f national
banking associations transacting business in the same locality.
(b) Whoever shall w illfully violate any o f the provisions o f this
section shall upon conviction be fined not more than $5,00.0 or impris­
oned not more than five years, or both, and any officer, director,
employee, or agent o f any person, firm, corporation, association,
business trust, or other similar organization who knowingly par­
ticipates in any such violation shall be punished by a like fine or
imprisonment or both.
Sec. 22. The additional liability imposed upon shareholders in
national banking associations by the provisions o f section 5151 o f the
Revised Statutes, as amended, and section 23 o f the Federal Reserve
Act, as amended (U.S.C., title 12, secs. 63 and 64), shall not apply
with respect to shares in any such association issued after the date
o f enactment o f this Act.
Sec. 23. Paragraph (c) o f section 5155 o f the Revised Statutes, as
amended (U.S.C., title 12, sec. 36), is amended to read as follow s:
“ (c) A national banking association may, with the approval o f the
Comptroller o f the Currency, establish and operate new branches:
(1) W ithin the limits o f the city, town or village in which said
association is situated, if such establishment and operation are at the
time expressly authorized to State banks by the law o f the State in
question; and ( 2) at any point within the State in which said associa­
tion is situated, if such establishment and operation are at the time
authorized to State banks by the statute law o f the State in question
by language specifically granting such authority affirmatively and
not merely by implication or recognition, and subject to the restric­
tions as to location imposed by the law o f the State on State banks.
No such association shall establish a branch outside o f the city, town,
or village in which it is situated unless it has a paid-in and unim­
paired capital stock o f not less than $500,000: Provided , That in
States with a population o f less than one million, and which have no
cities located therein with a population exceeding one hundred
thousand, the capital shall be not less than $250,000: Provided , That
in States with a population o f less than one-half million, and which
have no cities located therein with a population exceeding fifty
thousand, the capital shall not be less than $100,000.”
Paragraph (d ) o f section 5155 o f the Revised Statutes, as amended
(U.S.C., title 12, sec. 36), is amended to read as follow s:
“ (d) The aggregate capital o f every national banking association
and its branches shall at no time be less than the aggregate minimum
capital required by law for the establishment o f an equal number
o f national banking associations situated in the various places where
such association and its branches are situated.”
Sec. 24. (a) Sections 1 and 3 o f the A ct entitled “ A n A ct to pro­
vide for the consolidation o f national banking associations ” , ap­
proved November 7, 1918, as amended (U.S.C., title 12, secs. 33, 34,
and 34a), are amended by striking out the words “ county, city, town,
or village ” wherever they occur in each such section, and inserting
in lieu thereof the words “ State, county, city, town, or village.”
(b) Section 3 o f such A ct o f November 7, 1918, as amended, is
further amended by striking out the second sentence thereof and
inserting in lieu thereof the fo llo w in g : “ The capital stock o f such




32

[P u b . 66.]

consolidated association shall not be less than that reqjuired under
existing law fo r the organization o f a national banking association
in the place in which such consolidated association is located.
Upon such a consolidation, or upon a consolidation o f two or
more national banking associations under section 1 o f this A ct, the
corporate existence o f each o f the constituent banks and national
banking associations participating in such consolidation shall be
merged into and continued in the consolidated national banking
association and the consolidated association shall be deemed to be
the same corporation as each o f the constituent institutions. A ll the
rights, franchises, and interests o f each o f such constituent banks
and national banking associations in and to every species o f prop­
erty, real, personal, and mixed, and choses in action thereto belonging,
shall be deemed to be transferred to and vested in such consolidated
national banking association without any deed or other transfer; and
such consolidated national banking association, by virtue o f such
consolidation and without any order or other action on the part o f
any court or otherwise, shall hold and enjoy the same and all rights
o f property, franchises, and interests, including appointments, desig­
nations, and nominations and all other rights and interests as trustee,
executor, administrator, registrar o f stocks and bonds, guardian o f
estates, assignee, receiver, committee o f estates o f lunatics and in
every other fiduciary capacity, in the same manner and to the same
extent as such rights, franchises, and interests were held or enjoyed
by any such constituent institution at the time o f such consolidation:
Provided , however, That where any such constituent institution at the
time o f such consolidation was acting under appointment o f any court
as trustee, executor, administrator, registrar o f stocks and bonds,
guardian o f estates, assignee, receiver, committee o f estates o f lunatics
or in any other fiduciary capacity, the consolidated national banking
association shall be subject to removal by a court o f competent juris­
diction in the same manner and to the same extent as was such
constituent corporation prior to the consolidation, and nothing herein
contained shall be construed to impair in any manner the right o f
any court to remove such a consolidated national banking association
and to appoint in lieu thereof a substitute trustee, executor, or other
fiduciary, except that such right shall not be exercised in such a
manner as to discriminate against national banking associations, nor
shall any such consolidated association be removed solely because
o f the fact that it is a national banking association.” r
Sec. 25. The first two sentences o f section 5197 o f the Revised
Statutes (U.S.C., title 12, sec. 85) are amended to read as follow s:
“ A ny association may take, receive, reserve, and charge on any
loan or discount made, or upon any notes, bills o f exchange, or other
evidences o f debt, interest at the rate allowed by the laws o f the State,
Territory, or District where the bank is located, or at a rate o f 1
per centum in excess o f the discount rate on ninety-day commercial
paper in effect at the Federal reserve bank in the Federal reserve
district where the bank is located, whichever may be the greater, and
no more, except that where by the laws o f any State a different rate
is limited fo r banks organized under State laws, the rate so limited
shall be allowed for associations organized or existing in any such
State under this title. W hen no rate is fixed by the laws o f the




[Pub . 66.]

33

State, or Territory, or District, the bank may take, receive, reserve,
or charge a rate not exceeding 7 per centum, or 1 per centum in excess
o f the discount rate on ninety-day commercial paper in effect at the
Federal reserve bank in the Federal reserve district where the bank
is located, whichever may be the greater, and such interest may be
taken in advance, reckoning the days for which the note, bill, or other
evidence o f debt has to run.”
Sec. 26. (a ) The second sentence o f the first paragraph o f section
5200 o f the Revised Statutes, as amended (U.S.C., title 12, sec. 84;
Supp. V I, title 12, sec. 84), is amended by inserting before the period
at the end thereof the fo llo w in g : “ and shall include in the case o f
obligations o f a corporation all obligations o f all subsidiaries thereof
in which such corporation owns or controls a majority interest.”
(b ) The amendment made by this section shall not apply to such
obligations o f subsidiaries held by such association on the date this
section takes effect.
Sec. 27. Section 5211 o f the Revised Statutes, as amended (U.S.C.,
title 12, sec. 161; Supp. V I, title 12, sec. 161), is amended by adding
at the end thereof the follow ing new paragraph:
“ Each national banking association shall obtain from each o f its
affiliates other than member banks and furnish to the Comptroller o f
the Currency not less than three reports during each year, in such
form as the Comptroller may prescribe, verified by the oath or affir­
mation o f the president or such other officer as may be designated by
the board o f directors o f such affiliate to verify such reports, dis­
closing the inform ation hereinafter provided for as o f dates identical
with those for which the Comptroller shall during such year require
the reports o f the condition o f the association. F or the purpose o f
this section the term ‘ affiliate’ shall include holding company affil­
iates as well as other affiliates. Each such report o f an affiliate shall
be transmitted to the Comptroller at the same time as the correspond­
ing report o f the association, except that the Comptroller may, in his
discretion, extend such time for good cause shown. Each such report
shall contain such inform ation as in the judgment o f the Comptroller
o f the Currency shall be necessary to disclose fully the relations
between such affiliate and such bank and to enable the Comptroller
to inform himself as to the effect o f such relations upon the affairs o f
such bank. The reports o f such affiliates shall be published by the
association under the same conditions as govern its own condition re­
ports. The Comptroller shall also have power to call for additional
reports with respect to any such affiliate whenever in his judgment
the same are necessary in order to obtain a full and complete knowl­
edge o f the conditions o f the association with which it is affiliated.
Such additional reports shall be transmitted to the Comptroller o f
the Currency in such form as he may prescribe. A ny such affiliated
bank which fails to obtain and furnish any report required under
this section shall be subject to a penalty o f $100 for each day during
which such failure continues.”
Sec. 28. (a) The first paragraph o f section 5240 o f the Revised
Statutes, as amended (U.S.C., title 12, sec. 481), is amended by
inserting before the period at the end thereof a colon and the fo l­
lowing proviso: “ Provided, That in making the examination o f any
national bank the examiners shall include such an examination o f
2 0 3 6 6 0 — 5 8 -------- 3 5




34

[P u b . 66.]

the affairs o f all its affiliates other than member banks as shall be
necessary to disclose fully the relations between such bank and such
affiliates and the effect o f such relations upon the affairs o f such
bank; and in the event o f the refusal to give any inform ation
required in the course o f the examination o f any such affiliate, or in
the event o f the refusal to permit such examination, all the rights,
privileges, and franchises o f the bank shall be subject to forfeiture
m accordance with section 2 o f the Federal Reserve A ct, as amended
(U.S.C., title 12, secs. 141, 222-225, 281-286, and 502). The Comp­
troller o f the Currency shall have power, and he is hereby author­
ized, to publish the report o f his examination o f any national banking
association or affiliate which shall not within one hundred and twenty
days after notification o f the recommendations or suggestions o f the
Comptroller, based on said examination, have complied with the same
to his satisfaction. Ninety days’ notice prior to such publicity shall
be given to the bank or affiliate.”
( d)
Section 5240 o f the Revised Statutes, as amended (U .S.C., title
12, sec. 481), is further amended by adding after the first paragraph
thereof the follow ing new paragraph:
“ The examiner making the examination o f any affiliate o f a
national bank shall have power to make a thorough examination o f
all the affairs o f the affiliate, and in doing so he shall have power
to administer oaths and to examine any o f the officers, directors,
employees, and agents thereof under oath and to make a report o f
his findings to the Comptroller o f the Currency. The expense o f
examinations o f such affiliates may be assessed by the Comptroller
o f the Currency upon the affiliates examined in proportion to assets
or resources held by the affiliates upon the dates o f examination o f
the various affiliates. I f any such affiliate shall refuse to pay such
expenses or shall fail to do so within sixty days after the date o f
such assessment, then such expenses may be assessed against the
affiliated national bank and, when so assessed, shall be paid by such
national ban k: Provided, hoxoever, That, i f the affiliation is with two
or more national banks, such expenses may be assessed against, and
collected from, any or all o f such national banks in such proportions
as the Comptroller o f the Currency may prescribe. The examiners
and assistant examiners making the examinations o f national bank­
ing associations and affiliates thereof herein provided for and the
chief examiners, reviewing examiners and other persons whose serv­
ices may be required in connection with such examinations or the
reports thereof, shall be employed by the Comptroller o f the Cur­
rency with the approval o f the Secretary o f the Treasury; the
employment and compensation o f examiners, chief examiners, review­
ing examiners, assistant examiners, and o f the other employees o f the
office o f the Comptroller o f the Currency whose compensation is paid
from assessments on banks or affiliates thereof shall be without regard
to the provisions o f other laws applicable to officers or employees o f
the United States. The funds derived from such assessments may be
deposited by the Comptroller o f the Currency in accordance with the
provisions o f section 5234 o f the Revised Statutes (U.S.C., title 12,
sec. 192) and shall not be construed to be Government funds or
appropriated monies; and the Comptroller o f the Currency is
authorized and empowered to prescribe regulations governing the




[P u b . 66.]

35

computation and assessment o f the expenses o f examinations herein
provided for and the collection o f such assessments from the banks
and/or affiliates examined. I f any affiliate o f a national bank shall
refuse to permit an examiner to make an examination o f the affiliate
or shall refuse to give any information required in the course o f any
such examination, the national bank with which it is affiliated shall
be subject to a penalty o f not more than $100 for each day that any
such refusal shall continue. Such penalty may be assessed by the
Comptroller o f the Currency and collected in the same manner as
expenses o f examinations.”
Sec. 29. In any case in which, in the opinion o f the Comptroller
o f the Currency, it would be to the advantage o f the depositors and
unsecured creditors o f any national banking association whose busi­
ness has been closed, for such association to resume business upon the
retention by the association, for a reasonable period to be prescribed
by the Comptroller, o f all or any part o f its deposits, the Comp­
troller is authorized, in his discretion, to permit the association to
resume business if depositors and unsecured creditors o f the associa­
tion representing at least 75 per centum o f its total deposit and
unsecured credit liabilities consent in writing to such retention o f
deposits. Nothing in this section shall be construed to affect in any
manner any powers o f the Comptroller under the provisions o f law
in force on the date o f enactment o f this A ct with respect to the
reorganization o f national banking associations.
Sec. *30. Whenever, in the opinion o f the Comptroller o f the Cur­
rency, any director or officer o f a national bank, or o f a bank or
trust company doing business in the District o f Columbia, or when­
ever, in the opinion o f a Federal reserve agent, any director or officer
o f a State member bank in his district shall have continued to vio­
late any law relating to such bank or trust company or shall have
continued unsafe or unsound practices in conducting the business
o f such bank or trust company, after having been warned by the
Comptroller o f the Currency or the Federal reserve agent, as the
case may be, to discontinue such violations o f law or such unsafe
or unsound practices, the Comptroller o f the Currency or the Federal
reserve agent, as the case may be, may certify the facts to the Fed­
eral Reserve Board. In any such case the Federal Reserve Board
may cause notice to be served upon such director or officer to appear
before such Board to show cause why he should not be removed
from office. A copy o f such order shall be sent to each director o f
the bank affected, by registered mail. I f after granting the accused
director or officer a reasonable opportunity to be heard, the Federal
Reserve Board finds that he has continued to violate any law relating
to such bank or trust company or has continued unsafe or unsound
practices in conducting the business o f such bank or trust company
after having been warned by the Comptroller o f the Currency or
the Federal reserve agent to discontinue such violation o f law or
such unsafe or unsound practices, the Federal Reserve Board, in its
discretion, may order that such director or officer be removed from
office. A copy o f such order shall be served upon such director or
officer. A copy o f such order shall also be served upon the bank o f
which he is a director or officer, whereupon such director or officer
shall cease to be a director or officer o f such bank: Provided , That




36

[P u b . 66.]

such order and the findings o f fact upon which it is based, shall not
be made public or disclosed to anyone except the director or officer
involved and the directors o f the bank involved, otherwise than in
connection with proceedings for a violation o f this section. A n y
such director or officer removed from office as herein provided who
thereafter participates in any manner in the management o f such
bank shall be fined not more than $5,000, or imprisoned for not more
than five years, or both, in the discretion o f the court.
Sec. 31. A fter one year from the date o f enactment o f this A ct,
notwithstanding any other provision o f law, the board o f directors,
board o f trustees, or other similar governing body o f every national
banking association and o f every State bank or trust company which
is a member o f the Federal Reserve System shall consist o f not less
than five nor more than twenty-five members; and every director,
trustee, or other member o f such governing body shall be the bona
fide owner in his own right o f shares o f stock o f such banking asso­
ciation, State bank or trust company having a par value in the
aggregate o f not less than $2,500, unless the capital o f the bank
shall not exceed $50,000, in which case he must own in his own right
shares having a par value in the aggregate o f not less than $1,500,
or unless the capital o f the bank shall not exceed $25,000, in which
case he must own in his own right shares having a par value in the
aggregate o f not less than $1,000. I f any national banking associa­
tion violates the provisions o f this section and continues such viola­
tion after thirty days’ notice from the Comptroller o f the Currency,
the said Comptroller may appoint a receiver or conservator therefor,
in accordance with the provisions o f existing law. I f any State bank
or trust company which is a member o f the Federal Reserve System
violates the provisions o f this section and continues such violation
after thirty days’ notice from the Federal Reserve Board, it shall be
subject to the forfeiture o f its membership in the Federal Reserve
System in accordance with the provisions o f section 9 o f the Federal
Reserve Act, as amended.
Sec. 32. From and after January 1, 1934, no officer or director
o f any member bank shall be an officer, director, or manager o f any
corporation, partnership, or unincorporated association engaged pri­
marily in the business o f purchasing, selling, or negotiating securi­
ties, and no member bank shall perform the functions o f a corre­
spondent bank on behalf o f any such individual, partnership,
corporation, or unincorporated association and no such individual,
partnership, corporation, or unincorporated association shall perform
the functions ox a correspondent fo r any member bank or nold on
deposit any funds on behalf o f any member bank, unless in any
such case there is a permit therefor issued by the Federal Reserve
B o a rd ; and the Board is authorized to issue such permit i f in its
judgment it is not incompatible with the public interest, and to
revoke any such permit whenever it finds after reasonable notice
axid opportunity to be heard, that the public interest requires such
revocation.
Sec. 33. The A ct entitled “ A n A ct to supplement existing laws
against unlawful restraints and monopolies, and for other purposes ” ,
approved October 15, 1914, as amended (U.S.C., title 15, sec. 19), is




{Pub. 08.]

37

hereby amended by adding after section 8 thereof the follow ing new
section:
“ Sec. 8A . That from and after the 1st day o f January 1934, no
director, officer, or employee o f any bank, banking association, or
trust company, organized or operating under the laws of the United
States shall be at the same time a director, officer, or employee o f a
corporation (other than a mutual savings bank) or a member o f a
>artnership organized fo r any purpose whatsoever which shall make
oans secured by stock or bond collateral to any individual, associa­
tion, partnership, or corporation other than its own subsidiaries.”
Sec. 34. The right to alter, amend, or repeal this A ct is hereby
expressly reserved. I f any provision o f this A ct, or the application
thereof to any person or circumstances, is held invalid, the remainder
o f the A ct, and the application o f such provision to other persons
or circumstances, shall not be affected thereby.
Approved, June 16, 1933, 11.45 a.m.

f