Full text of Banking and Currency : Report of the Committee of Conference of the Two Houses of Congress on the Bill (H.R. 7837) to Provide for the Establishment of Federal Reserve Banks, to Furnish an Elastic Currency, to Afford Means of Rediscounting Commercial Paper, to Establish a More Effective Supervision of Banking in the United States, Sixty-Third Congress, Second Session
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BANKING AND CURRENCY REPORT OF THE COMMITTEE OF CONFERENCE OF THE TWO HOUSES OF CONGRESS ON THE BILL ( a R. 7837) TO PROVIDE FOR THE ES. TABLISHMENT OF FEDERAL RESERVE BANKS, TO FURNISH AN ELASTIC CURRENCY. TO AFFORD MEANS OF REDISCOUNTINC COMMERCIAL PAPER, TO ESTAB LISH A MORE EFFECTIVE SUPERVISION OF BANKINC IN THE UNITED STATES. AND FOR OTHER PURPOSES Sixty-third Congress, Second Session S E C O N D E D IT IO N PRINTED FOR THE USE OF THE COMMITTEE ON BANKING AND CURRENCY WASHINGTON GOVERNMENT PRINTING OFFICE 1913 2036(i 0 — 58------ 20 BANKING AND CURRENCY BILL. CONFERENCE R E P O R T ON THE B IL L (H. R . 7837) TO P R O V ID E F O R THE E STABLISH M EN T OF F E D E R A L R E S E R V E B A N K S , TO F U R N ISH A N E LA STIC CU RR E N C Y, TO A FF O R D M E AN S OF R E D IS COUNTING COMM ERCIAL P A P E R , TO E S T A B L IS H A M ORE E F FECTIVE SU P E R V ISIO N OF B A N K IN G IN THE UN ITED STA TE S. A N D FOR OTHER PU R PO SES. T he com m ittee o f conference on the disagreeing votes o f the tw o H ouses on the amendment o f the Senate to the bill (H . R. 7837) to p rovid e fo r the establishment o f Federal reserve banks, to furnish an elastic curren cy, to afford means o f rediscounting com m ercial paper, to establish a m ore effective supervision o f banking in the u n ited S tates,an d fo r other purposes, having met, after full and free co n fe r ence have agreed to recommend and do recom m end to th§ir respective H ouses as follow s: That the H ouse recede from its disagreem ent to the amendment o f the Senate and agree to the same withmn amendment as follow s: In lieu o f the amendment proposed b y the Senate insert the fo llo w - ing: Be it enacted by the Senate and House o f Representatives o f the United States o f America in Conqress assembled, That the short title of this Act shall be the “ Federal Reserve Act.” W h erever the w ord “ b a n k ” is used in this A ct, the w ord shall be held to include State bank, banking association, and trust com pa n y, e x ce p t where national banks or Federal reserve banks are specifically referred to. The terms “ national b a n k ” and “ national banking a ssociation ” used in this A ct shall be held to be syn on ym ou s and interchangeable. The term “ m em ber b a n k ” shall be held to m ean any national bank, State bank, or bank or trust com pa n y w hich has becom e a m em ber o f one o f the reserve banks createa b y this A ct. Th e term “ b o a r d ” shall be held to m ean Federal R eserve B oa rd ; the term “ d is trict” shall be held to mean Federal reserve d istrict; the term “ reserve b a n k ” shall be held to mean Federal reserve bank. FEDERAL RESERVE DISTRICTS. S e c . 2. As soon as practicable, the Secretary of the Treasury, the Secretary of Agriculture and the Comptroller of the Currency, act ing as “ The Reserve Bank Organization Committee,” shall designate not less than eight nor more than twelve cities to be known as Federal reserve cities, and shall divide the continental United States, ex cluding Alaska, into districts, each district to contain only one of such Federal reserve cities. The determination of said organization committee shall not be subject to review except by the Federal 3 4 BANKING AND CUBBENCY. R eserve B oard when organized: Provided, T h at the districts shall be apportion ed w ith due regard to the convenien ce and cu stom ary cou tte o l Dusiness and shall n ot necessarily be coterm inous w ith any State o r States. Th e districts thus created m ay be readjusted and new districts m a y from tim e to time be created b y the Federal R eserve B oard, n ot to exceed tw elve in all. Such districts shall be kn ow n as Federal reserve districts and m ay be designated b y num ber. A m a jo r ity o f the organization com m ittee shall constitu te a quoru m w ith a u th ority to act. Said organization com m ittee shall be authorized to em p loy counsel and expert aid, to take testim ony, to send for persons and papers, to adm inister oaths, and to m ake such investigation as m a y be deem ed necessary b y the said com m ittee in determ ining the reserve districts and in designating the cities within such districts where such Federal reserve banks shall be severally located. The said com m ittee shall supervise the organization in each o f . the cities designated o f a Federal reserve bank, which shall include in its title th e nam e o f the c ity in w hich it is situated, as “ Federal Reserve B an k o f C h icago.” U nder regulations to be prescribed b y the organization com m ittee, every national banking association in the U nited States is hereby required, and every eligible bank in the U n ited States and every trust com pan y w ithin the D istrict o f C olum bia, is hereby authorized to signify in writing, within six ty days after the passage o f this A ct, its acceptance o f the terms and provisions h ereof. W h en the organi zation com m ittee shall have designated the cities in w hich Federal reserve banks are to be organized, and fixed the geograph ical lim its o f the Federal reserve districts, every national banking association w ithin that district shall be required within th irty days after n otice from the organization com m ittee, to subscribe to the capital sto ck o f such Federal reserve bank in a sum equal to six per centum o f the paid-up capital s tock and surplus o f such bank, on e-sixth o f the subscription to be payable on call o f the organization com m ittee o r o f the Vedcral Reserve B oard, one-sixth within three m onths and one-sixth within six m onths thereafter, and the rem ainder o f the su b’ 1 be su bject to call when deem ed B oard, said paym ents to bo in T he shareholders o f every Federal reserve bank shall be held indi vidu ally responsible, equally and ratably, and n ot one fo r another, fo r all contracts, debts, and engagem ents o f such bank to the exten t o f the am ount o f their subscriptions to such sto ck at the par value thereof in addition to the am ount subscribed, w hether such subscrip tions have been paid up in whole or in part, under the provisions o f this A ct. A n y national bank failing to signify its acceptan ce o f the term s o f this A ct within the six ty days aforesaid, shall cease to act as a reserve agent, upon th irty days' notice, to be given within the discretion o f the said organization com m ittee or o f the Federal R eserve B oard. Should any national banking association in the U nited States now organized fail within one year after the passage o f this A ct to becom e a m em ber bank or fail to co m p ly w ith any o f the provisions o f this A c t applicable thereto, all o f the rights, privileges, and franchises o f such association granted to it under the nation al-ban k A ct, or under the provisions o f this A ct, shall bo thereby forfeited. A n y n on com BANKING AND CURRENCY. 5 pliance with or violation of this A ct shall, however, be determined and adjudged by any court of tho United States of competent juris diction in a suit brought for that purpose in the District or Territory in which such bank is located, under direction of the Federal Reserve Board, by the Comptroller of the Currency in his own name before the association shall be declared dissolved. In cases of such noncomlianco or violation, other than tho failure to become a member ank under the provisions of this Act, every director who partici pated in or assented to the same shall be held liable in his personal or individual capacity for all damages which said bank, its share holders, or any other person shall have sustained in consequence of such violation. Such dissolution shall not take away or impair any remedy against such corporation, its stockholders or officers, for any liability or penalty which shall have been previously incurred. E Should the subscriptions by banks to the stocK of said Federal reserve banks or any one or more of them be, in the judgment of the organization committee, insufficient to provide the amount of capital required therefor, then and in that event the said organization com mittee may, under conditions and regulations to be prescribed by it, offer to public subscription at par such an amount of stock in said Federal reserve banks, or any one or more of them, as said committee shall determine, subject to the same conditions as to payment and st^ck liability as provided for member banks. No individual, copartnership, or corporation other than a member bank of its district shall be permitted to subscribe for or to hold at any time more than $25,000 par value of stock in any Federal reserve bank. Such stock shall be known as public stock and may be trans ferred on the books of the Federal reserve .bank by the chairman of the board of directors of such bank. Should the total subscriptions by banks and the public to the stock of said Federal reserve banks, or any one or more of them, be, m the judgment of the organization committee, insufficient to provide the amount of'capital required therefor, then and in that event the said organization committee shall allot to the United States such an amount of said stock as said committee shall determine. Said United States stock shall be paid for at par out of any money in the Treas ury not otherwise appropriated, and shall be held by the Secietary of the Treasury and disposed of for the benefit of the Ignited States in such manner, at such times, and at such price, not less than par, as the Secretary of the Treasury shall determine. Stock not held by member banks shall not be entitled to voting power. The Federal Reserve Board is hereby empowered to adopt and promulgate rules and regulations governing the transfers of said stock. No Federal reserve bank shall commence business with a sub scribed capital less than $4,000,000. The organization of reserve districts and Federal reserve cities shall not be construed as chang ing the present status of reserve cities and central reserve cities, except in so far as this A ct changes the amount of reserves that may be carried with approved reserve agents located therein. The organization committee shall have power to appoint such assistants and incur such expenses in carrying out the provisions of this Act as 6 b a k s ih o a n d c u b b in c y . it shall deem necessary, and such expenses shall be p a ya b le b y the Treasurer o f th e U n ited States u pon v ou ch er a p p rov ed dv the Secre ta ry o f the Treasury, and the sum o f $100,000, or so m u ch th ereof as m a y b e necessary, is h ereb y appropriated, ou t o f a ny m on eys in the Treasu ry n o t otherw ise appropriated, for the p a ym en t o f such expenses. BRANCH OFFICES. Sec. 3. E a ch Federal reserve bank shall establish branch banks w ith in the Federal reserve d istrict in w hich it is loca ted and m a y d o so in the d istrict o f a ny Federal reserve bank w hich m a y have been suspended. Such branches shall be operated b y a board o f directors un der rules and regulations app roved Dy the Federal R eserve B oard. D irectors o f brancn banks snail possess the same Qualifications as directors o f the Federal reserve banks. F ou r o f saia directors shall be selected b y the reserve bank and three b y the Federal R eserve B oard , and th ey shall hold office during the pleasure, resp ectively, o f the parent ban k and the Federal R eserve B oard. T h e reserve b an k shall designate one o f the directors as m anager. FEDERAL RESERVE BANKS. Sec. 4. W h en the organization com m ittee shall h ave established Federal reserve districts as p rovid ed in section tw o o f this A c t; a certificate shall be filed w ith the C om ptroller o f the C urrency show ing the geograph ical lim its o f such districts and the Federal reserve city designated in each o f such districts. T h e C om ptroller o f the Cur ren cy shall thereupon cause to be forw arded to each nation al bank loca ted in each district, and to such oth er banks declared to be eli gible b y the organization com m ittee w hich m a y a p p ly therefor, an application blank in form to be app roved b y the organization co m m ittee, w hich blank shall con tain a resolution to be adop ted b y the board o f directors o f each bank execu tin g such app lication , author izin g a subscription to the capital s tock o f the Federal reserve bank organizing in that d istrict in a ccordance w ith the provision s o f this A c t. W h en the m inim um am ount o f ca p ita l s to ck prescribed b y this A c t fo r the organ ization o f any Federal reserve ban k shall h ave been su bscribed ana a llotted, the organization com m ittee shall designate a n y five banks o f those w hose applications have been received, to execu te a certificate o f organization, and thereupon the banks so designated shall, under their seals, m ake an organization certificate w h icn shall specifically state the nam e o f such Federal reserve ban k, th e territorial exten t o f the district ov er w hich the operation s o f su ch Federal reserve ban k are to be carried on, the c ity and State in w h ich said ban k is to be loca ted , the am ount o f capital s to ck and the num ber o f shares in to w hich the sam e is divid ed, the nam e and place o f d oin g business o f each ban k execu tin g such certificate, ana o f all banks w hich h ave subscribed to the capital s to ck o f such Federal reserve b an k and the nu m ber o f shares su bscribed b y each, and the fa c t th at the certificate is m ade to enable those banks execu tin g sam e, and all banks w hich h ave subscribed or m a y thereaf ter subscribe to the ca p ita l s to ck o f su ch Federal reserve bank, to avail them selves o f the advantages o f this A ct. BANKING AND OUBBENOY. 7 T h e said organization certificate shall be acknow ledged b efore a ju d g e o f som e cou rt o f record or n ota ry p u b lic; and shall be, together w ith the acknow ledgm ent thereof, authenticated b y the seal o f euch cou rt, o r n otary, transm itted to the C om ptroller o f the C urrency, w ho shall file, record and carefully preserve the sam e in his office. U pon the filing o f such certificate w ith the C om ptroller o f the C urrency as aforesaid, the said Federal reserve bank shall b ecom e a b o d y corporate and as such, and in the nam e designated in such organization certificate, shall have pow er— First. T o a dop t and use a corp orate seal. S econd. T o have succession fo r a period o f tw en ty years from ita organization unless it is soon er dissolved b y an A c t o f Congress, o r unless its franchise becom es forfeited b y som e viola tion o f law. T h ird. T o m ake con tracts. F ou rth . T o sue and be sued, com plain and defend, in any cou rt o f law or equity. F ifth . T o appoint b y its board o f directors, such officers and em p loyees as are n ot otherw ise p rovid ed fo r in this A c t, to define their duties, require bonds o f them and fix the p en a lty thereof, and to dis miss at pleasure such officers or em ployees. Sixth . T o prescribe b y ita board o f directors, b y-law s n o t inconsist ent with law, regulating the m anner in w hich its general business m ay be con d u cted , and the privileges granted to it b y law m ay be exercised and en joyed . Seventh. T o exercise b y its board o f directors, or duly authorized officers or agents, all powers specifically granted b y the provisions o f this A ct and such incidental powers as shall be necessary to carry on the business of banking within the lim itations prescribed b y this A ct. E ighth. U pon deposit with the Treasurer o f the U nited States o f any bonds of the U nited States in the m anner provided b y existing law relating to national banks, to receive from tne C om ptroller o f the Currency circulating notes in blank, registered and countersigned as provided b y law, equal in am ount to tne par value o f the bonds so deposited, such notes to be issued under the same con dition s and pro visions* of law as relate to the issue of circulating notes o f national banks secured b y bonds of the U nited States bearing the circulating privilege, e x cep t that the issue o f such notes shall n ot be lim ited to the capital stock of such Federal reserve bank. B u t no Federal reserve bank shall transact any business ex ce p t such as is incidental and necessarily prelim inary to its organization until it has been authorized b y the C om ptroller o f the C urrency to com m en ce business under the provisions of this A ct. E v e ry Federal reserve bank shall be con d u cted under the super vision and con trol of a board of directors. T h e board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all such duties as are prescribed b y law. Said board shall adm inister the affairs of said bank fairly and im par tially and w ithout discrim ination in fa v or o f or against any m em ber bank or banks and shall, su b ject to the provisions o f law and the orders o f the Federal R eserve B oard, extend to each m em ber bank such dis counts, advancem ents and a ccom m odations as m ay be safelv and reasonably m ade with due regard for the claim s and dem ands 01 oth er m em ber banks. 8 BANKING AND CUBBBNOY. Such board of directors shall be selected as hereinafter specified and shall consist of nine members, holding office for three years, and divided into three classes, designated as classes A, B, and C. Class A shall consist of three members, who shall be chosen by and be representative of the stock-holding banks. Class B shall consist of three members, who at the time of their election shall be actively engaged in their district in commerce, agri<culture or some other industrial pursuit^. Class C shall consist oi three members who shall be designated by the Federal Reserve Board. When the necessary subscriptions to the capital stock have been obtained for the organization of any Federal reserve bank, the Federal Reserve Board shall appoint the class C directors and shall designate one of such directors as chairman of the board to be selected, rending the designation of such chairman, the organization committee shall exercise the powers and duties apper taining to the office of chairman in the organization of such Federal reserve bank. No Senator or Representative in Congress shall be a member of the Federal Reserve Board or an officer or a director of a Federal re serve bank. No director of class B shall be an officer, director, or employee of any bank. No director of class C shall be an officer, director, employee, or stockholder of any bank. Directors of class A and class B shall be chosen in the following manner: The chairman of the board of directors of the Federal reserve bank of the district in which the bank is situated or, pending the.appoint ment of such chairman, the organization committee shall classify the member banks of the district into three general groups or divisions. Each group shall contain as nearly as may be one-third of the aggre gate number of the member banks of the district and shall consist, as nearly as may be, of banks of similar capitalization. Tho groups shall be designated by number by the chairman. At a regularly called meeting of the board of directors of each member bank in the district it snail elect by ballot a district reserve elector and shall certify his name to the chairman of the board of directors of the Federal reserve bank of the district. The chairman shall make lists of the district reserve electors thus named by banks in each of the aforesaid three groups and shall transmit one list to each elector in each group. Each member bank shall be permitted to nominate to the chair man one candidate for director of class A and one candidate for director of class B. The candidates so nominated shall be listed by the chairman, indicating by whom nominated, and a copy of said list shall, within fifteen days after its completion, be furnished by the chairman to each elector. Every elector shall, within fifteen days after the receipt of the said list, certify to the chairman his first, second, and other choices of a director oi class A and class B, respectively, upon a preferential bal lot, on a form furnished by the chairman of the board of directors of the Federal reserve bank of the district. Each elector shall make a cross opposite the name of the first, second, and other choices for a BANKING AND CURRENCY. 9 director of class A and for a director of class B, but shall not vote more than one choice for any one candidate. Any candidate having a majority of all votes cast in the column of first choice shall be declared elected. If no candidate have a majority of all the votes in the first column, then there shall be added together the votes cast by the electors for such candidates in the second column and the votes cast for the several candidates in the first column. If any candidate then have a majority of the electors vot ing, by adding together the first and second choices, he shall be de clared elected. Ii no candidate have a majority of electors voting when the first and second choices shall have been added, then the votes cast in the third column for other choices shall be added to gether in like manner, and the candidate then having the highest number of votes shall be declared elected. An immediate report of election shall be declared. Class C directors shall be appointed by the Federal Reserve Board. They shall have been for at least two years residents of the district for which they are appointed, one of whom shall be designated by said board as chairman of the board of directors of the Federal reserve bank and as “ Federal reserve agent.” He shall be a person of tested banking experience; and in addition to his duties as chairman of the board of directors of the Federal reserve bank he shall be required to maintain under regulations to be established by the Federal Reserve Board a local office of said board on the premises of the Federal reserve bank. He shall make regular reports to the Federal Reserve Board, and shall act as its official representative for the performance of the functions conferred upon it by this Act He shall receive an annual compensation to be fixed by the Federal Reserve Board and paid monthly by the Federal reserve bank to which he # designated One of is the directors of class C, who shall be a person of tested banking experience, shall be appointed by the Federal Reserve Board as di^uty chairman and deputy Federal reserve agent to exercise the powers of the chairman of the board and Federal reserve agent in case of absence or disability of h principal. iis Directors of Federal reserve banks shall receive, in addition to any compensation otherwise provided, a reasonable allow ance for neces sary expenses in attending meetings of their respective boards, which amount shall be paid by the respective Federal reserve banks Any compensation that may be provided by boards of directors of Federal reserve banks for directors, officers or employees shall be subject to the approval of the Federal Reserve Board. The Reserve Bank Organization Committee may, in organizing Federal reserve banks, call such meetings of bank directors in the sev eral districts as may be necessary to carry out the purposes of this Act, and may exercise the functions herein conferred upon the chair man of the board of directors of each Federal reserve bank pending the complete organization of such bank. At the first meeting of the full board of directors of each Federal reserve bank.it shall oe the duty of the directors of classes A, B and C, respectively, to designate one of the members of each class whose term of office shall expire in one year from the first of January nearest to date of such meeting, on*' whose term of office shall expire 10 BANKING AND CURRENCY. at the end of two years from said date, and one whose term of office shall expire at the end of three years from said date. Thereafter every director of a Federal reserve bank chosen as hereinbefore pro vided shall hold office for a term of three years. Vacancies that may occur in the several classes of directors of Federal reserve banks may be filled in the manner provided for the original selection of such directors, such appointees to ljold office for the unexpired terms of their predecessors. stock i s s u e s ; in c r e a s e and decrease of c a p it a l . Sec. 5. The capital stock of each Federal reserve bank shall be divided into shares of $100 each. The outstanding capital stock shall be increased from time to time as member banks increase their capital stock and surplus or as additional banks become members, and may be decreased as member banks reduce their capital stock or surplus or cease to be members. Shares of the. capital stock of Federal reserve banks owned by member banks shall not be trans ferred or hypothecated. When a member bank increases its capi tal stock or surplus, it shall thereupon subscribe for an additional amount of capital stock of the Federal reserve bank of its district equal to six per centum of the said increase, one-half of said sub scription to be paid in the manner hereinbefore provided for original subscription, and one-half subject to call of tne Federal Reserve Board. A bank applying for stock in a Federal reserve bank at any time after the organization thereof must subscribe for an amount of the capital stock of the Federal reserve bank equal to six per centum of the paid-up capital stock and surplus of said applican t Dank, pay ing therefor its par value plus one-naif of one per centum a month from the period of the last dividend. When the capital stock of any Federal reserve bank sh&ll have been increased eitner on account of the increase of capital stock of member banks or on account of the increase in the number of member banks, the board of directors shall cause to be executed a certificate to the Comptroller of the Currency showing the increase in capital stock, the amount paid in, and by whom paid. When a memoer bank reduces its capital stock it shall surrender a proportionate amount of its holdings in the capital of said Federal reserve bank, and when a member bank voluntarily liquidates jt shall surrender all of its holdings of the capital stock of said Federal reserve bank and be released from its stock subscription not previously called. In either case the shares sur rendered shall be canceled and the member bank shall receive in payment therefor, under regulations to be prescribed by the Federal Reserve Board, a sum equal to its cash-paid subscriptions on the shares surrendered and one-half of one per centum a month from the period of the last dividend, not to exceed the book value thereof, less any liability of such member bank to the Federal reserve bank. S ec. 6. I f a n yi m em ber bank shall be declared in solven t and a receiver appoin ted therefor, the stock held b y it in said Federal reserve banlc shall be canceled, w ith ou t im pairm ent o f its lia bility, and all cash-paid subscriptions on said stock, with on e-h alf o f one per cen tu m per m on th from the period o f last dividend, n o t to exceed the b o o k value thereof, shall be first applied to all debts o f the insol ven t m em ber bank to the Federal reserve bank, and the balance, if B N IN A D O B E O . A K G N UBNY 11 any, shall be paid to tjie receiver of the insolvent bank. Whenever the capital stock of a Federal reserve bank is reduced, either on account of a reduction in capital stock of any member bank or of the liquidation or insolvency of such bank, the board of directors shall cause to be executed a certificate to the Comptroller of the Currency showing such reduction of capital stock ana the amount repaid to such bank. DIVISION OF EARNINGS. Sec. 7. After all necessary expenses of a Federal reserve bank have been paid or provided for, tne stockholders shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock, which dividend shall be cumulative. After the aforesaid dividend claims have been fully met, all the net earnings shall be paid to the United States as a franchise tax, except that one-half of such net earnings shall be paid into a surplus fund until it shall amount to forty per centum of the paid-in capital stock of such bank. The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secre tary of the Treasuiy. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied. * Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate. Sec. 8. Section fifty-one hundred and fifty-four, United States Jtevised Statutes, is hereby amended to read as follows: Any bank incorporated by special law of any State or of the United States or organized under the general laws of any State or of the United States and having an unimpaired capital sufficient to entitle it to become a national banking association under the pro visions of the existing laws may, by the vote of the shareholders owning not less than fifty-one per centum of the capital stock of such bank or banking association, with the approval of the Comp troller of the Currency be converted into a national banking associ ation, with any name approved by the Comptroller of the Currency: Provided, however, That said conversion shall not be in contravention of the State law. In such case the articles of association and organi zation certificate may be executed by a majority of the directors of the bank or banking institution, and the certificate shall declare that the owners of fifty-one per centum of the capital stock have author ized the directors to make such certificate and to change or convert the bank or banking institution into a national association. A ma jority of the directors,* after executing the articles of association and the organization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a national association. The shares of any such bank may continue to be for the same amount each as they 12 BANKING AND CUBBBNOY. were before the conversion, and the directors may continue to be directors of the association until others are elected or appointed in accordance with the provisions of the statutes of the United States. When the comptroller has given to such bank or banking association a certificate that the provisions of this Act have been complied with, such bank or banking association, and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be subject to tho same duties, liabilities, and regulations, in all re spects, as shall have been proscribed by the Federal Roservo Act and by the national banking Act for associations originally organized as national banking associations. STATE BANKS AS MEMBERS. S e c . 9. Any bank incorporated by special law of any State, or organized under the general laws of any State or of the United States, may make application to the reservo bank organization committee, pending organization, and thoreafter to the Federal Reserve Board for the right to subscribe to the stock of the Federal reservo bank organized or to be organized within tho Federal reserve district whore the applicant is located. The organization committee or the Federal Reserve Board, under such rules and regulations as it may prescribe, subject to the provisions of this section, may permit tne applying bank to become a stockholder in the Federal reserve bank of the district in which the applying bank is located. Whenever the organization committee or the Federal Reserve Board shall permit the applying bank to become a stockholder in the Federal reserve bank of tiie district, stock shall be issued and paid for under the rules and regulations in this Act provided for national banks which become stockholders in Federal reserve banks. The organization committee or the Federal Reserve Board shall establish by-laws for the general government of its conduct in acting upon applications made by the State banks and banking associations and trust companies lor stock ownership in Federal reserve banks. Such by-laws shall require applying banks not organized under Federal law to comply with the reserve and capital requirements and to submit to tho examination and regulations prescribed by the organization committee or by the Federal Reserve Board. No ap plying bank shall be admitted to membership in a Federal reserve bank unless it possesses a paid-up unimpaired capital sufficient to entitle it to become a national banking association in the place where it is situated, under the provisions of the national banking Act. Any bank becoming a membor of a Federal reserve bank under the provisions of this section shall, in addition to the regulations and restrictions hereinbefore provided, be required to conform to the provisions of law imposed on the national banks respecting the limitation of liability which may be incurred by any person, firm, or corporation to such banks, the prohibition against making purchase of or loans on stock of such banks, and the withdrawal or impairment of capital, or the payment of unearned dividends, and to such rules and regulations as the Federal Reserve Board may, in pursuance thereof, prescribe. Such banks, and the officers, agents, and employees thereof, shall also be subject to the provisions of and to the penalties prescribed by sections fifty-one hundred and ninety-eight, fifty-two hundred, BANKING AND CUBBENCY. 18 fifty-two hundred and one, and fifty-two hundred and eight, and fifty-two hundred and nine of the Revised Statutes. The member banks shall also be required to make reports of the conditions and of the payments of dividends to the comptroller, as provided in sections fifty-two hundred and eleven and fifty-two hundred and twelve of the Revised Statutes, and shall be subject to the penalties prescribed by section fifty-two hundred and thirteen for the failure to make such report. If at any time it shall appear to the Federal Reserve Board that a member bank has failed to comply with the provisions of this section or the regulations of the Federal Reserve Board, it shall be within the power of the said board, after hearing, to require such bank to sur render its stock in the Federal reserve bank; upon such surrender the Federal reserve bank shall pay the cash-paid subscriptions to the said stock with interest at the rate of one-half of one per centum per month, computed from the last dividend, if earned, not to exceed the book value thereof, less any liability to said Federal reserve bank, except the subscription liability not previously called, which shall be canceled, and said Federal reserve bank shall, upon notice from the Federal Reserve Board, bo required to suspend said bank from further privileges of membership, and shall within thirty days of such notice cancel and retire its stock and make payrqpnt therefor in the manner herein provided. The Federal Reserve Board may restore membership upon due proof of compliance with the conditions imposed by this section. FEDERAL RESERVE BOARD. Sec. 10. A Federal Reserve Board is hereby created which shall consist of seven members, including the Secretary of the Treasury and the Comptroller of the Currency, who shall be members ex officio, and five members appointed by the President of the United States, by and with the advice and consent of the Senate. In selecting the five appointive members of the Federal Reserve Board, not more than one of whom shall be selected from any one Federal reserve district, the President shall have due regard to a fair representation of the different commercial, industrial and eogranhical divisions of the country. The five members of the ’ederal Reserve Board appointed by the President and confirmed as aforesaid shall devote tlieir entire time to the business of the Federal Reserve Board and shall each receive an annual salary of $12,000, payable monthly together with actual necessary traveling expenses, and the Comptroller of the Currency, as ex officio member of the Federal Reserve Board, shall, in addition to the salary now paid him as Comptroller of the Currency, receive the sum of $7,000 annually for his services as a member of said Board. The members of said board, the Secretary of the Treasury, the Assistant Secretaries of the Treasury, and the Comptroller of 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. Of the five members thus appointed oy the President at least two shall be persons experienced in banking or finance. One shall be designated by the President to serve for two, one for four, one for six, one for eight, and^me for ten years, and thereafter each member so appointed shalr serve for a term of ten years unless f 14 BANKING AND CURRENCY. sooner removed for cause by the President. Of the five persons thus appointed, one shall be designated by the President as governor and one as vice governor of the Federal Reserve Board. The governor of the Federal Reserve Board, subject to its supervision, shall be the active executive officer. The Secretary of the Treasury may assign offices in the Department of the Treasury for the use of the Federal Reserve Board. Each member of the Federal Reserve Board shall within fifteen days after notice of appointment make and subscribe to the oath of office. The Federal Reserve Board shall have power to levy semiannually upon the Federal reserve banks, in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeed ing the levying of such assessment, together with any deficit carried forward from the preceding half year. The first meeting of the Federal Reserve Board shall be held in Washington, District of Columbia, as soon as may be after the passage of this Act, at a date to be fixed by* the Reserve Bank Organization Committee. The Secretary of the Treasury shall be ex officio chair man of the Federal Reserve Board. - No member of the Federal Reserve Board shall be an officer or director of any bank, banking institution, trust company, or Federal reserve bank nor hold stock in any bank, banking institution, or trust company; and before entering upon his duties as a member of the Federal Reserve Board he shall certify under oath to the Secretary of the Treasury that he has complied with this requirement. Whenever a vacancy shall occur, otner than by expiration of term, among the five members of the Federal Reserve Board appointed by the President, as above provided, a successor shall be appointed by the President,*with the advice and consent of the Senate, to fill such vacancy, and when appointed he shall hold office for the unexpired term of the member whose place he is selected to fill. The President shall have power to fill all vacancies that may hap pen on the Federal Reserve Board during the recess of the Senate, by granting commissions which shall expire thirty dkys after the next session of the Senate convenes. Nothing in this Act contained shall be construed as taking away any powers heretofore* vested by law in the Secretary of the Treasury whicn relate to the supervision, management, and control of the Treasury Department and bureaus under such department, and wher ever any power vested by this Act in the Federal Reserve Board or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of tne Secretary. The Federal Reserve Board shall annually make a full report of its operations to the Speaker of the House of Representatives, who shall cause the same to be printed for the information of the Congress. Section three hundred and twenty-four of the Revised Statutes of the United States shall be amended so as to read as follows: There shall be in the Department of the Treasury a bureau charged with the execution of all laws passed by Congress relating to the issue and regulation of national currency secured by United States bonds and. under the general supervision of the Federal Reserve Board, of all BANKING AND CUR'RENCY. 15 Federal reserve notes, the chief officer of which bureau shall be called the Comptroller of the Currency and shall perform his duties under the general directions of the Secretary of the Treasury. Sec. 11. The Federal Reserve Board shall be authorized and em powered: (a) To examine at its discretion the accounts, books and affairs of each Federal reserve bank and of each member bank and to require such statements and reports as it may deem necessary. The said board shall publish once each week a statement showing the condi tion of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such statements shall show in detail the assets and liabilities of the Federal reserve banks, single and com bined, and shall furnish full information regarding the character of the money held as reserve and the amount, nature and maturities of the paper and other investments owned or held by Federal reserve (b) To permit, or, on the affirmative vote of at least five members of the Reserve Board, to require Federal reserve banks to rediscount the discounted paper of other Federal reserve banks at rates of in terest to be fixed bv the Federal Reserve Board. (c) To suspend lor a period not exceeding thirty days, and from time to time to renew such suspension for periods not exceeding fifteen days, any reserve requirement specified in this Act: Provided, That it shall establish a graduated tax upon the amounts by which the reserve requirements of this Act may be permitted to fall below the level hereinafter specified: And provided further, That when the gold reserve held against Federal reserve notes falls below forty per centum, the Federal Reserve Board shall establish a graduated tax of not more than one per centum per annum upon such deficiency until the reserves fall to thirty-two and one-hall per centum, ana when said reserve falls below thirty-two and one-half per centum per annum, a tax at the rate increasingly of not less than one and one-half per centum per annum upon each two and one-half per centum or fraction thereof that such reserve falls below thirty-two and onehalf per centum. The tax shall be paid by the reserve bank, but the reserve bank shall add an amount equal to said tax to the rates of interest and discount fixed by the Federal Reserve Board. (d) To supervise and regulate through the bureau under the charge of the Comptroller of the Currency the issue and retirement of Federal reserve notes, and to prescribe rules and regulations under which such notes may be delivered by the comptroller to the Federal reserve agents applying therefor. (e) To add to the number of cities classified as reserve and central reserve cities under existing law in which national banking associa tions are subject to the reserve requirements set forth in section twenty of this Act; or to reclassify existing reserve and central reserve cities or to terminate their designation as such. ( f ) To suspend or remove any officer or director of any Federal reserve bank, the cause of such removal to be forthwith communi cated in writing by the Federal Reserve Board to the removed officer or director and to said bank. (g) To require the writing off of doubtful or worthless assets upon the books and balance sheets of Federal reserve banks. 16 BANKING AND GU BU NCY. (h) To suspend, for the violation of any of the provisions of this Act, the operations of any Federal reserve bank, to take possession thereof, administer the same during the period of suspension, and, when deemed advisable, to liquidate or reorganize such bank. (i) To require bonds of Federal reserve agents, to make regulations for the safeguarding of all collateral, bonds, Federal reserve notes, money or property of any kind deposited in the hands of such agents, and said board shall perform the duties, functions, or services specified in this Act, and make all rules ancl regulations necessary to enable said board effectively to perform the same. (l) To exercise general supervision over said Federal reserve banks. (k) To grant by special permit to national banks applying therefor, when not m contravention of State or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe. (1) To employ such attorneys, experts, assistants, clerks, or other employees as may be deemed necessary to conduct the business of the board. All salaries and fees shall t> fixed in advance by said o board and shall be paid in the same manner as the salaries 6f the members of said board. All such attorneys, experts, assistants, clerks, and other employees shall be appointed without regard to the provisions of the Act of January sixteenth, eighteen hundred and eighty-three (volume twenty-two, United States Statutes at Large, page four hundred and three), and amendments thereto, or any ride or regulation made in pursuance thereof.: Provided, That nothing herein shall prevent the President from placing said employes in the classi fied service. FEDERAL ADVISORY COUNCIL. S e c . 12 . There is hereby created a Federal Advisory Council, which shall consist of as many members as there are Federal reserve districts. Each Federal reserve bank by its board of directors shall annually select from its own Federal reserve district one member of said council, who shall receive such compensation and allowances as may be fixed by his board of directors subject to the approval of the Federal Reserve Board. The meetings of said advisory council shall be held at Washington, District of Columbia, at least four times each year, and oftener if called by the Federal Reserve Board. The council may in addition to the meetings above provided for hold such other meetings in Washington, District of Columbia, or elsewhere, as it may deem necessary, may select its own officers and adopt its own methods of procedure, and a majority of its members shall constitute a quorum for the transaction of business. Vacancies in the council shall be filled by the respective reserve banks, and member® selected to fill vacancies, shall serve for the unexpired term. The Federal Advisory Council shall have power j by itself or tiirougn its officers, (1) to confer directly with the Federal keserve Board on general business conditions; (2) to make oral or written representa tions concerning matters within the jurisdiction of said board: (o) to call for information and to make recommendations in regard to discount rates, rediscount business, note issues, reserve conditions m the various districts, the purchase and sale of gold or securities by reserve banks, open-market operations by said banks, and the general affairs of the reserve banking system. BANKING AND CURRENCY. 17 POWERS OF FEDERAL RESERYE BAN K*. Sfcc. 13. Any Federal reserve bank may receive from an}' of its member banks, and from the United States, deposits of current, funds in lawful money, national-bank notes, Federal reserve notes, or chceks and drafts upon solvent member banks, payable upon presen tation; or, solely for exchange purposes, may receive from other Federal reserve banks deposits of current funds in lawful money, national-bank notes, or cnecks and drafts upon solvent member or other Federal reserve banks, payable upon presentation. Upon the indorsement of any of its member banks, with a waiver of demand, notice and protest by such bank, any Federal reserve bank may discount notes, drafts, and bills of exchange arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial purposes, or the proceeds of which have been used, or are to be used, for such purposes, the Federal Reserve Board to have the right to determine or define the character of the paper thus eligible for discount, within the meaning of this Act. Nothing in this Act contained shall be construed to prohibit such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise from being eligible for such discount; but such definition shall not include notes, drafts, or bills covering merely investments or issued or drawn for the purpose of carrying or traaing in stocks, bonds, or other investment securities, except bonds and notes of the Govern ment of the United States. Notes, drafts, and bills admitted to dis count under the terms of this paragraph must have a maturity at the time of discount of not more than ninety days: Provided, That notes, drafts, and bills drawn or issued for agricultural purposes or based on live stock and having a maturity not exceeding six months may bo discounted in an amount to be limited to a percentage of the capital of the Federal reserve bank, to be ascertained and fixed by the Federal Reserve Board. Any Federal rcteerve bank may discount acceptances which are basea on the importation or exportation of goods and which have a maturity at time of discount of not more than three months, and indorsed by at least one member bank. The amount of acceptances so discounted shall at no time exceed one-half the paid-up capital stock and surplus of tho bank for which the redis counts are made. The a g g r e g a te o f s u c h n o te s a n d b ills b e a rin g th e sig n a tu r e o r in d o r s e m e n t o f a n y o n e p e r s o n , c o m p a n y , fir m , o r c o r p o r a tio n red is c o u n te d fo r a n y o n e b an K s h a ll a t n o tim e e x c e e d ten p e r c e n t u m o f th e u n im p a ir e d c a p ita l a n d su r p lu s o f sa id b a n k ; b u t th is r e str ic tio n sh a ll n o t a p p ly to me d is c o u n t o f b ills o f e x c h a n g e d r a w n in g o o d fa ith a g a in s t a c t u a lly e x is tin g v a lu e s . Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation or exportation of goods having not more than six months sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half its paid-up capital stock and surplus. Section fifty-two hundred and two of the Revised Statutes of the United States is hereby amended so as to read as follows: No national 20366 O— 58------ 21 18 1IANKIKQ AND OUKKENOY. banking association shall at any time bo indebted, or in any way liable, to an amount exceeding the amount of its capital stock at sucn time actually paid in and remaining undiminished W losses or other wise, except on account of demands of the nature following: F irst. N otes o f circu lation. Second . M oneys deposited w ith or collected b y the association. Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. Fourth. Liabilities to the stockholders of the association for dividends and reserve profits. Fifth. Liabilities incurred under the provisions of the Federal Reserve Act. The rediscount by any Federal reserve bank of any bills receivable and of domestic and foreign bills of exchange, ana of acceptances authorized by this Act, shall be subject to such restrictions, limita tions, and regulations as may be imposed by the Federal Reserve Board. OPEN-MARKET OPERATIONS. # Sec. 14. Any Federal reserve bank may, under rules and regula tions prescribed by the Federal Reserve Board, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers’ acceptances ana bills of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorse ment of a member bank. Every Federal reserve bank shall have power: (a) To deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or |pld certificates, and to contract for loans of gold coin or bullion, giv ing therefor, when necessary, acceptable security, including the nypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold; (b) To buy and sell, at home or abroad, bonds and notes of the United States, and bills, notes, revenue bonds; and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, includ ing irrigation, drainage and reclamation districts, such purchases to be made in accordance with rules and regulations proscribed by the Federal Reserve Board; (c) To purchase from member banks and to sell, with or without its indorsement, bills of exchange arising out of commercial transactions, as hereinbefore defined; (d) To establish from time to time, subject to review and determi nation of the Federal Reserve Board, rates of discount to bo charged by the Federal reserve bank for each class of paper, which shall be fixed with a view of accommodating commerce and business; (e) To establish accounts with other Federal reserve banks for exchange purposes and, with the consent of the Federal Reserve Board, to open and maintain banking accounts in foreign countries, appoint correspondents, and establish agencies in such countries wheresoever it may deem best for the purpose of purchasing, selling, and collecting bills of exchange, and to Duy and sell with or without its BANKING AND GUBBBNOY. 19 indorsement^ through such correspondents or agencies, bills of exchange arising out of actual commercial transactions which havd not more than mnety days to run and which bear the signature of two or more responsible parties. GOVERNMENT DEPOSITS. S e c . 15. The moneys held in the general fund of the Treasury, except the five per centum fund for the redemption of outstanding national-bank notes and the funds provided in this Act for the redemp tion of Federal reserve notes may, upon the direction of the Secretary of the Treasury, be deposited in Federal reserve banks, which banks, when required Dy the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits. No public funds of the Philippine Islands, or of the postal savings, or any Government funds, shall f>e deposited in the continental Unitea States in any bank not belonging U the system established by this Act: ) Provided, however, That nothing in this Act shall be construed to deny the right of the Secretary of the Treasury to use member banks as depositories. NOTE is s u e s . Sec. 16. Federal reserve notes, to be issued at the discretion of the Federal Reserve Board for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in gold on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or in gold or lawful money at any Federal reserve bank. Any Federal reserve bank may make application to the local Federal reserve*agent for such amount of the Federal reserve notes hereinbefore provided for as it may require/ Such application shall be accompanied with a tender to the local Federal reserve agent of collateral in amount equal to the sum of the Federal reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes and bills, accepted for rediscount under the provisions of section thirteen of this Act, and the Federal reserve agent shall each day notify the Federal Reserve Board of all issues and withdrawals of Federal reserve notes to and by the Federal reserve bank to which he is accredited. The said Federal Reserve Board may at any time call upon a Federal reserve bank for addi tional security to protect the Federal reserve notes issued to it. Every Fedoral reserve bank shall maintain reserves in gold or lawful money of not -less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum against its Federal reserve notes in actual circulation, and not onset by gold or lawful money deposited with the Federal reserve agent. Notes so paid out shall bear upon their faces a distinctive letter and serial number, which snail be assigned 20 BANKING AND CUBBENCY. by the Federal Reserve Board to each Federal reserve bank. When ever Federal reserve notes issued tlirough one Federal reserve bank shall be received bv another Federal reserve bank they shall be promptly returned for credit or redemption to the Federal reserve bank through wliich they were originally issued. No Federal reserve bank shall pay out notes issued through another under penalty of a tax of ten per centum upon the face value of notes so paid out. Notes resented for redemption at the Treasury of the United States shall e paid out of the redemption fund and returned to the Federal reserve banks through which they were originally issued, and there upon such Federal reserve bank shall, upon demand of the Secretary of the Treasury, reimburse such^ redemption fund in lawful money or, if such Fedoral reserve notes have been redeemed by the Treasurer in gold or gold certificates, then such funds shall be reimbursed to the extent aeemed necessary bv the Secretary of the Treasury in gold or gold certificates, and such Federal reserve bank shall, so long as any of its Federal reserve notes remain outstanding, maintain with the Treasurer in gold an amount sufficient in the judgment of the Secretary to provide for all redemptions to be made by tne Treasurer. Federal reserve notes received by the Treasury, otherwise than for redemption, may be exchanged for gold out of the redemption fund hereinafter provided and returned to the reserve bank through which they were originally issued, or they may be returned to such bank for tho credit of the United States. Federal reserve notes unfit for circulation shall be returned by the Federal reserve agents to the Comptroller of the Currency for cancellation and destruction. The Federal Reserve Board shall require each Federal reserve bank to maintain on deposit in the Treasury of the United States a sum in gold sufficient in the judgment of the Secretary of the Treasury for the redemption of the Federal reserve notes issued to such bank, but in no event less than five per centum: but such de posit of gold shall be counted and included as part of the forty per centum reserve hereinbefore required. The board shall have the right, acting through the Federal reserve agent, to grant in whole or in part or to reject entirely the application of any Federal reserve bank for Federal reserve notes; but to the extent that such application may be granted the Federal Reserve Board shall, through its local Federal reserve agent, supplv Federal leserve notes to tne bank so applying, and such bank shall be charged with the amount of such notes and shall pay such rate of interest on said amount as may be established by the Federal Reserve Board, and the amount oi such Federal reserve notes so issued to any such bank shall, upon delivery, together with such notes of such Federal reserve bank as may be issued under section eighteen of this Act upon security of United States two per centum Government bonds, become a first and paramount lien on all the assets of such bank. Any Federal reserve bank may at any time reduce its liability for outstanding Federal reserve notes by depositing, with the Federal reserve agent, its Federal reserve notes, gold, gold certificates, or lawful money of the United States. Federal reserve notes so depos ited shall not be reissued, except upon compliance with the conditions of an original issue. The Federal reserve agent shall hold such gold, gold certificates, or lawful money available exclusively for exchange for the outstanding E BANKING AND CUBBENCY. ftl Federal reserve notes when offered by the reserve bank of which he iB a director. Upon the reauest of the Secretary of the Treasury the Federal Reserve Board snail require the Federal reserve agent to transmit so much of said gold to the Treasury of the United States as may be required for the exclusive purpose of the redemption of such notes. Any Federal reserve bank may at its discretion withdraw collateral deposited with the local Federal reserve agent for the protection of its Federal reserve notes deposited with it and shall at the same time substitute therefor other like collateral of equal amount with the approval of the Federal reserve agent under regulations to be pre scribed by the Federal Reserve Board. In order to furnish suitable notes for circulation as Federal reserve notes, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom and numbered such quantities of such notes of the denominations of $5, $10, $20, $50. $100, as may be required to supply the Federal reserve banks. Such notes shall be in form and tenor as directed by the Secretary of the Treasury under the provisions of this Act and shall bear the distinctive numbers of the several Federal reserve banks through which they are issued. When such notes have been prepared, they shall be deposited in the Treasury, or in -the subtreasury or mint of the United States nearest the place of business of eacli Federal reserve bank and shall be held for the use of such bank subject to the order of the Comp troller of the Currency for their delivery, as provided by this Act. The plates and dies to be procured by the Comptroller of the Cur rency lor the printing of such circulating notes shall remain under his control and direction, and the expenses necessarily incurred in executing the laws relating to the procuring of such notes, and all other expenses ii\cidental to their issue and retirement, shall be paid by the Federal reserve banks, and the Federal Reserve Board shall include in its estimate of expenses levied against the Feieral reserve banks a sufficient amount to cover the expenses herein provided for. The examination of plates, dies, bed pieces, and so forth, and regulations relating to such examination of plates, dies, and so forth, of national-bank notes provided for in section fifty-one hundred and seventy-four Revised Statutes, is herbey extended to include notes herein provided for. Any appropriation heretofore made out of the general funds of the Treasury for engraving plates and dies, the purchase of distinc tive paper, or to cover any other expense in connection with the printing of national-bank notes or notes provided for by the Act of May thirtieth, nineteen hundred and eight, and any distinctive paper that may be on hapd at the time of the passage of this Act may be used in the discretion of the Secretary for the purposes of this Act, and should the appropriations heretofore made be insufficient to meet the requirements of this Act in addition to circulating notes provided for by existing law, the Secretary is hereby authorized to use so much of any funds in the Treasury not otherwise appropriated for the purpose of furnishing the notes aforesaid: Provided, howeverf That nothing in this section contained shall be construed as exempt- 22 HANKING AND OURRENOY. ing national banks or Federal reserve banks from their liability to reimburse the United States for any expenses incurred in printing and issuing circulating notes. Every Federal reserve bank shall receive on deposit at par from mem ber banks or from Federal reserve banks checks and drafts drawn upon any of its depositors, and when remitted by a Federal reserve bank, checks and drafts drawn by any depositor in any other Federal reserve bank or member bank upon funds to the credit of said deposi tor in said reserve bank or member bank. Nothing herein contained shall be construed as prohibiting a member bank from charging its actual expense incurred in collecting and remitting funds, or for exchange sold to its patrons. The Federal Reserve B oard shall, by rule, fix the charges to be collected by the member banks from its patrons whose checks are cleared through the Federal reserve bank and the charge which may be imposed ior the service of clearing or collection rendered by the Federal reserve bank. The Federal Reserve Board shall make and promulgate from time to time regulations governing the transfer of funds and charges therefor among Federal reserve banks and their branches, and may at its discretion exercise the functions of a clearing house for sucn Federal reserve banks., or may designate a Federal reserve bank to exercise such functions, and may also require each such bank to exercise the functions of a clearing house for its member banks. Sec. 17. So much of the provisions of section fifty-one hundred and fifty-nine of the Revised Statutes of the United States, and section four of the Act of June twentieth, eighteen hundred and seventy-four, and section eight of the Act of July twelfth, eighteen hundred and eighty-two, and of any other provisions of existing statutes as require that before any national banking association shall be authorized to commence banking business it shall transfer and deliver to the Treasurer of the United States a stated amount of United States registered bonds is hereby repealed. REFUNDING BONDS. S e c . 18. A fter tw o years from the passage o f this A ct, and at any tim e during a period o f tw en ty years thereafter, any m em ber bank desiring to retire the w hole or any part o f its circulating notes, m a y file w ith the Treasurer o f the U nited States an application to sell fo r its account, at par and accrued interest, U nited States b ond s secur in g circulation to be retired. T he Treasurer shall, at the end o f each quarterly period, furnish the Federal R eserve B oard w ith a list o f such applications, and the Federal R eserve B oard m ay, in its discretion, require the Federal reserve banks to purchase such bonds from the banks w hose appli cations have been filed w ith the Treasurer at least ten days b efore the end o f any quarterly period at w hich the Federal R eserve B oard m ay direct the purchase to be m ade: Provided, T h a t Federal reserve banks shall n ot be perm itted to purchase an am ou nt to exceed $25,000,000 o f such bonds in any one year, and w hich am ount shall include bonds acquired under section fou r o f this A c t b y the Federal reserve bank. Providedfurther, T hat the Federal R eserve B oard shall allot to each Federal reserve bank such p rop ortion o f such bonds as the BANKING AND OUBBBNO*. 28 capital and surplus of such bank shall bear to the aggregate capital and surplus of all the Federal reserve banks. Upon notice from the Treasurer of the amount of bonds so sold for its account, each member bank shall duly assign and transfer, in writing, such bonds to the Federal reserve bank purchasing the same, and such Federal reserve bank shall, thereupon, deposit lawful money with the Treasurer of the United States for the purchase price of such bonds, and the Treasurer shall pay to the member bank selling such bonds any balance due aftei deducting a sufficient sum to redeem its outstanding notes secured by such bonds, which notes shall be canceled and permanently retired when redeemed. The Federal reserve banks purchasing such bonds shall be per mitted to take out an amount of circulating notes equal to the par value of such bonds. Upon the deposit with the Treasurer of the United States of bonds so purchased, or any bonds with the circulating privilege acquired under section four of this Act, any Federal reserve bank making such deposit in the manner provided by existing law, shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of thelwmds so deposited. Such notes shall be the obligations of the Federal reserve bank procuring the same, and shall be in form prescribed by the Secretary of the Treas ury, and to the same tenor and effect as national-bank notes now provided by law. They shall be issued and redeemed under the same terms and conditions as national-bank notes except that they shall not be limited to the amount of the capital stock of the Federal reserve bank issuing them. Upon application of any Federal reserve bank, approved by the Federal Reserve Board, the Secretary of tho Treasury may issue, in exchange for United States two per centum gold bonds bearing the cir culation privilege, but against which no circulation is outstanding, one-year gold notes of the United States without the circulation privilege, to an amount not to exceed one half of the two per centum D onds so tendered for exchange, and thirty-year three per centum gold bonds without the circulation privilege for the remamdor of the two per centum bonds so tendered: Provided, That at tho time of such exchange the Federal reserve bank obtaining such one-year gold notes shall enter into an obligation with the Secretary of tho Treas ury binding itself to purchase from the United States for gold at the maturity 01 such one-year notes, an amount equal to those delivered in exchange for such bonds, if so requested by, the Secretary, and at each maturity of one-year notes so purchased by such Federal reserve bank, to purchase from tho United States such an amount of one year notes as the Secretary may tender to such bank, not to exceod' the amount issued to such bank in the first instance, in exchange for the two per centum Unitod States gold bonds; said obligation to pur chase at maturity such notes shall continuo in forco for a period not to exceed thirty years. For the purpose of making the exchange herein provided for, the Secretary of the Treasury is authorized to issue at par Treasury notes in coupon or registered form as he may prescribe in denominations of one hundred dollars, or any multiple thereof, bearing interest at the rate of three per centum per annum, payable quarterly, such 24 BANKING AND CURRENCY. Treasury notes to be payable not more than one year from the date of their issue in gold coin of the present standard value, and to be exempt as to principal and interest from the payment of all taxes and duties of the United States except as provided by this Act, as well as from taxes in any form by or under State, municipal, or local authorities. And for the same purpose, the Secretary is authorized and empowered to issue United States gold bonds at par, bearing three per centum interest payable thirty years from date of issue, such bonds to be of the same general tenor and effect and to be issued under the same general terms and conditions as the United States three per centum bonds without the circulation privilege now issued and outstanding. Upon application of any Federal reserve bank, approved by the Federal Reserve Board, the Secretary may issue at par such "three per centum bonds ip exchange for the one-year gold notes herein provided for. BANK RESERVES. Sec. 19. Demand deposits within tho moaning of this Act shall compriso all deposits payable within thirty days, and timo deposits shall comprise all deposits payable after thirty days, and ail savings accounts and certificates of deposit which are subject to not loss than thirty days’ notice boforo payment. When tho Secretary of tho Treasury shall have officially announced, in such manner as ho may elect, tho establishment of a Fodoral reserve bank in any district, every subscribing member bank shall establish and maintain reserves as follows: (a) A bank not in a reservo or control reserve city os now or here after defined, shall hold and maintain reserves equal to twelve per centum of tho aggregate amount of its demand deposits and five per centum of its time deposits, as follows: In its vaults for a period of thirty-six months after said date five-twelfths thereof and permanently thereafter four-twelfths. In the Federal reserve hank of its district, for a period of twelve months after said date, two-twelfths, and for each succeeding six months an additional one-twelfth, until five-twelfths have been so deposited, which shall be the amount permanently required. For a period of thirty-six months after said date tho balance of the reserves may be held in its own vaults, or in the Federal reserve bank, or in national banks in reserve or central reserve cities as now defined by law. After said thirty-six months’ period said reserves, other than those hereinbefore required to ho held in the vaults of the member bank and in the Federal reserve bank, shall be held in tho vaults of the member bank or in the Federal reserve bank, or in both, at the option of the member bank. (b) A bank in a reserve city, as now or hereafter defined, shall hold and maintain reserves equal to fifteen per centum of the aggregate amount of its demand deposits and five per centum of its time deposits, as follows: # In its vaults for a period of thirty-six months after said date six-fifteenths thereof, and permanently thereafter five-fifteenths. In tho Federal reserve bank of its district for a period of twelve months after the date aforesaid at least three-fifteenths, and for each succeeding six months an additional one-fifteenth, until six-fifteenths BANKING AND CUBBENCY. 25 have been so deposited, which shall be the amount permanently reauired. For a period of thirty-six months after said date the balance of the reserves may be held in its own vaults, or in the Federal reserve bank, or in national banks in reserve or central reserve cities as now defined by law. After said thirty-six months’ period all of said reserves, except those hereinbefore reauired to be held permanently in the vaults of the member bank ana in the Federal reserve bank, shall be held in its vaults or in the Federal reserve bank, or in both, at the option of the member bank. (c) A bank in a central reserve city, as now or hereafter defined, shall hold and maintain a reserve equal to eighteen per centum of the aggregate amount of its demand deposits and five per centum of its time deposits, as follows: In its vaults six-eighteenths thereof. In the Federal reserve bank seven-eighteenths. The balance of said reserves shall be held in its own vaults or in the Federal reserve bank, at its option. Any Federal reserve bank may receive from the member banks as reserves, not exceeding one-half of each installment, eligible paper as described in section fourteen properly indorsed and acceptable to the said reserve bank. If a State bank or trust company is required by the law of its State to keep its reserves either in its own vaults or with another State bank or trust company, such reserve deposits so kept in such State bank or trust company shall be construed, within the meaning of this sec tion, as if they were reserve deposits in a national bank in a reserve ob central reserve citv for a period of three years after the Secretary of the Treasury shall have officially announced the establishment of a Federal reserve bank in the district in which such State bank or trust company is situate. Except as thus provided, no member bank shall keep on deposit with any nonmember bank a sum in excess of ten per centum of its own paid-up capital and surplus. No member bank shall act as the medium or agent of a nonmcmber bank in applying for or receiving discounts from a Federal reserve bank under tne provisions of this Act except by permission of the Federal Reserve Board. The reserve carried by a member bank with a Federal reserve bank may, under the regulations and subject to such penalties as may be prescribed by the Federal Reserve Board, be checked against and withdrawn by such member bank for tlie purpose of meeting existing liabilities: Provided, however, That no bank shall at any time make new loans or shall pay any dividends unless and until the total reserve reauired by law is fully restored. In estimating the reserves required by this Act, the net balance of amounts due to and from other banks shall be taken as the basis for ascertaining the deposits against which reserves shall be determined. Balances in reserve banks due to member banks shall, to the extent herein provided, bo counted as reserves. National banks located in Alaska or outside the continental United States may remain nonmember banks, and shall in that event maintain reserves and comply with all the conditions now provided by law regulating them; or said banks, except in the Philippine 8ft b a n k in g a n d o u b b s n o t . Inlands, may, with the consent of the Reserve Board, become member banks of any one of the reserve districts, and shall, in that event, take stock, maintain reserves, and be subject to all the other provisions of this Act. S b o . 20. So much of sections two and three of the Act of June twentieth, eighteen hundred and seventy-four, entitled “ An Act fixing the amount of United States notes, providing for a redistribu tion of the national-bank currency, and for other purposes,” as pro vides that the fund deposited by any national banking association with the Treasurer of the United States for the redemption of its notes shall be counted as a part of its lawful reserve as provided in the Act aforesaid is hereby repealed. And from and after the pasfea&e of this Act such fund of five per centum shall in no case be counted by any national banking association as a part of its lawful reserve. BANK EXAMINATIONS. S e c . 21. Section fifty-two hundred and forty, United States Re vised Statutes, is amended to read as follows: The Comptroller of the Currency, with the approval of the Secre tary of the Treasury, shall appoint examiners who shall examine every member bank at least twice in each calendar year and oftener if considered necessary :: Provided, however. That the Federal Reserve Board may authorize examination by the State authorities to be accepted in the case of State banks and trust companies and may at any time direct the holding of a special examination of State banks or trust companies that are stockholders in any Federal reserve bank. The examiner making the examination of any national bank, or of any other member banK, shall have power to make a thorough examination of all the affairs of the bank and in doing so he shall have power to administer oaths and to examine any ot the officers and agents thereof under oath and shall make.a full and detailed report of the condition of said bank to the Comptroller of the Cur rency. The Federal Reserve Board, upon the recommendation of the Comptroller of the Currency, shall fix the salaries of all bank exam iners and make report thereof to Congress. The expense of the examinations herein provided for shall be assessed by the Comptroller of the Currency upon the banks examined in proportion to assets or resources held by the banks upon the dates of examination of the various banks. In addition to the examinations made and conducted by the Comptroller of the Currency, every Federal reserve bank may. with the approval of the Federal reserve agent or the Federal Reserve Board, provide for special examination of member banks within its district. The expense of such examinations shall be borne by the bank exam ined. Such examinations shall be so conducted as to inform the Federal reserve bank of the condition of its member banks and of the lines of credit which are being extended by them. Every Federal reserve bank shall at all times furnish to the Federal Reserve Boaid such information as may be demanded concerning the condition of any member bank within the district of the said Federal reserve bank. No bank shall be subject to any visitatorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by Congress, or by BANKING AND CUBBENCY. 27 either House thereof or by any committee of Congress or of either House dulv authorized. The Federal Reserve Board shall, at least once each year, order an examination of each Federal reserve bank, and upon joint applica tion of ten member banks the Federal Reserve Board shall order a special examination and report of the condition of any Federal reserve bank. S e c . 22. No member bank or any officer, director, or employee thereof shall hereafter make any loan or grant any gratuity to any bank examiner. Any bank officer, director, or employee violat ing this provision shall be deemed guilty of a misdemeanor and shall be imprisoned not exceeding one year or fined not more than $5,000, or botn; and may be fined a further sum equal to the money so loaned or gratuity given. Any examiner accepting a loan or gratuity from any bank examined by him or from an officer, director, or employee thereof shall be deemed guilty of a misdemeanor and shall be imprisoned not exceeding one year or fined not more than $5,000, or both; and may be fined a further sum equal to the money so loaned or gratuity given; and shall forever thereafter be disqualified from holding office as a national-bank examiner. No national-bank examiner shall perform any other service for compensation while holding such office for any bank or officer, director, or employee thereof. Other than the usual salary or director’s fee paid to any officer, director, or employee of a member bank and other than a reasonable fee paid by said bank to such officer, director, or employee for services rendered to such bank, no officer, director, employee, or attorney of a member bank shall be a beneficiary of or receive, directly or indirectly, any fee, commission, gift, or other consideration for or in connection with any transaction or business of the bank. No examiner, public or private, shall disclose the names of borrowers or the collateral for loans of a member bank to other than the proper officers of such bank without first having obtained the express permission in writing from the Comptroller of the Currency, or from tne board of directors of such bank, except when ordered to do so by a court of competent jurisdiction, or by direction of the Congress of the United States, or of either House thereof, or any committee of Congress or of either House duly authorized. Any person violating any provision of this section shall be punished by a fine of not exceeding $5,000 or by imprisonment not exceeding one year, or both. Except as provided in existing laws, this provision shall not take effect until sixty days after the passage of this Act. S e c . 23. The stockholders of every national banking association shall be held individually responsible for all contracts, debts, and engagements of such association, each to the amount of his stock therein, at the par value thereof in addition to the amount invested in such stock. The stockholders in any national banking association who shall have transferred their shares or registered the transfer thereof within sixty days next before the date of the failure of such association to meet its obligations, or with knowledge of such im pending failure, shall be liable to the same extent as if they had made no such transfer, to the extent that the subsequent transferee fails to meet such liability; but this provision shall not be construed to affect in any way any recourse which such shareholders might other wise have against those in whose names such shares are registered at the time of such failure. #8 aunuxa LOANS and cubjrsncy. on farm lands. Sec. 24. Any national banking association not situated in a central reserve city may make loans secured by improved and unen cumbered farm land, situated within its Federal reserve district, but no such loan shall be made for a longer time than five years, nor for an amount exceeding fifty per centum of the actual value of the property offered as security. Any such bank may make such loans in an aggregate sum equal to twenty-five per centum of its capital and surplus or to one-tnird of its time deposits and such banks may continue hereafter as heretofore to receive time deposits and to pay interest on the same. The Federal Reserve Board shall have power from time to time to «dd to the list of cities In which national banks shall not be permitted tomake loans secured upon real estate in the manner described in this section, f o r e ig n branch es. Sec. 25. Any national banking association possessing a capital and surplus of $1,000,000 or more may file application with the Federal Reserve Board; upon such conditions and under such regulations as may be prescribed by the said board, for the purpose of securing •autnoritv to establish branches in foreign countries or dependencies of the United States for the furtherance of the foreign commerce of the United States, and to act, if required to do so, as fiscal agents of the United States. Such application shall specify, in addition to the name and capital of the banking association filing it, the place or places where the banking operations proposed are to be carried on, ami the amount of capital set aside for the conduct of its foreign business. The Federal Reserve Board shall have power to approve or to reject such application if, in its judgment, the amount of cap ital proposed to be set aside for the conduct of foreign business is inadequate, or if for other reasons the granting of such application is deemed inexpedient*. Every national banking association which shall receive authority to establish foreign branches shall be required at all times to furnish information concerning tho condition of such branches to the Comp troller of tho Currency upon domand, and the Federal Reserve Board may order spocial exammations of tho said foreign branches at such time or times as it may deem best. Every such national banking as sociation shall conduct the accounts of each foreign branch inde pendently of the accounts of other foreign branches established by it andf of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or loss accruing at each branch as a separate item. S e c . 26. All provisions of law inconsistent with or superseded by any of the provisions of this Act are to that extent and to that extent only hereby repealed: Provided, Nothing in this Act contained shall be con strued to repeal the parity provision or provisions contained in an Act approved March fourteenth, nineteen hundred entitled “ An Act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to xefund the public debt, and for other purposes,” and the Secretary of BANKING AND CUBBENCY. 29 the Treasury may for the purpose of maintaining such parity and to strengthen the gold reserve, borrow gold on the security of United States bonds authorized by section two of the Act last referred to or for one-year gold notes Bearing interest at a rate of not to exceed three per centum per annum, or sell the same if necessaiy to obtain gold. When the funds of the Treasury on hand justify, he may purchase and retire such outstanding bonds and notes. S e c . 27. The provisions of the Act of May thirtieth, nineteen hundred and eignt, authorizing national currency associations, the issue of additional national-bank circulation, and creating a National Monetary Commission, which expires by limitation under the terms of such Act on the thirtieth day of June, nineteen hundred and four teen, are hereby extended to June thirtieth, nineteenth hundred and fifteen, and sections fifty-one hundred *and fifty-three, fifty-one hundred and seventy-two, fifty-one hundred and ninety-one, and fifty-two hundred and fourteen of the Revised Statutes of the United States, which were amended by the Act of May thirtieth, nineteen hundred and eight, are hereby reenacted to read as such sections read prior to May thirtieth, nineteen hundred and eight, subject to such amendments or modifications as are prescribed in this Act: Provided, however, That section nine of the Act first referred to in this section is hereby amended so as to change the tax rates fixed in said Act by making the portion applicable thereto read as follows: National banking associations having circulating notes secured otherwise than by bonds of the United States, shall pay for the first three months a tax at the rate of three per centum per annum upon the average amount of such of their notes in circulation as are based upon the deposit of such securities, and afterwards an additional tax rate of one-naif of one per centum per annum for each month until a tax of six per centum per atinum is reached, and thereafter such tax of six per centum per annum upon the average amount of such notes. S e c . 28. Section fifty-one hundred and forty-three of the Revised Statutes is hereby amended and reenacted to read as follows: Any association formed under this title may, by the vote of shareholders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the forma tion of associations; but no such reduction shall be allowable which will reduce the capital of the association below the amount required for its outstanding circulation, nor shall any reduction be made until the amount of the proposed reduction has been reported to the Comp troller of the Currency and such reduction has been approved by the said Comptroller of tfie Currency and by the Federal Reserve Board, or by the organization committee pending the organization of the Federal Reserve Board. S e c . 29. If any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of competent juris diction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of this Act, but shall be confined in its operation to the clause, sentence, paragraph, or part thereof directly involved in the controversy in which such judgment shall have been rendered. 30 BANKING} AND CUBBENCY. Sec. 30. The right to amend, alter, or repeal this Act is hereby expressly reserved. Managers on the part of the Managers on the part of the House: Senate: C a b t e b G l a ss , CHABLE8 A. E o r b l t . R obt. L. O w en, J. A. O ’G o r h a n , J a s. A. R e e d , A tlee P om erene, J. F. S h a f r o t h , H e n r y F. H o l l i s . o