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FOR RELEASE
Monday morning papers
June 20th, 1927.

W HO IS EN TITLED TO TH E
CREDIT

FOR TH E

FEDERAL

RESERVE ACT?

AN ANSWER TO
SENATOR CARTER GLASS

7
By
S amuel U ntermyer

FOREWORD
During the past Winter, whilst the undersigned was absent from
this country on a world tour, the New York Evening Post published
a series of articles by Senator Carter Glass of Virginia, who was
Chairman of a Sub-Committee of the House of Representatives at
the time of the framing of the Federal Reserve Act. These articles
have now been embodied by him in a book entitled “ Adventures in
Constructive Finance” . The manifest purpose was to picture Senator
Glass in the role of the sole author of that historic piece of legislation
and all others as at best assistants or supernumeries.
In order to accomplish that purpose and to emphasize his im
portance in the results achieved, Senator Glass saw fit not only to
bitterly assail the integrity of Colonel House and to belittle and grossly
misrepresent the work of the undersigned, but to minimize the im
portant part played by Mr. McAdoo, to ignore the influence of Colonel
Bryan and above all to take from Senator Robert L. Owen of Okla
homa the credit to which he more than any other man is entitled of
being in effect the true author and draftsman of the present Bill, and
by far the chief and overshadowing figure of all of us who had the
good fortune to be identified with that historic accomplishment.
The accompanying letters between the undersigned and Senator
Owen (who was Chairman of the U. S. Senate Committee on Cur
rency and Finance when the Federal Reserve Act was under consid
eration and passed), and the attached exhibits, are largely selfexplanatory.
It is believed that they fully establish:
(1 ) That the Federal Reserve Act is the direct outcome of
the disclosures of the dangerous concentration of the control of
money and credits by the Pujo Investigating Committee of the
House of Representatives of the 1912-13 Congress, for which the
undersigned had the honor of acting as Counsel and investigator,
and that proved the existence of a vast Money Trust which it was
the design of the Federal Reserve Act to destroy.
(2 ) That Senator Glass is not the chief author of the Federal
Reserve Act, nor is he justly entitled to the main credit for
its enactment, but that on the contrary that credit belongs to
Senator Owen who had deeply studied the subject and equipped
himself for the difficult task over a long period of years.
(3 ) That the references of Senator Glass to the part of the
undersigned in the preparation of the so-called Treasury Bureau
Bill or in the efforts to have it substituted for the Federal Reserve
Act are fiction pure and simple from beginning to end; that the

undersigned (a) at no time knew or heard of any such Bill until
the appearance of Senator Glass’ interesting work of imagination;
(b ) that the entire record of the undersigned and his writings and
speeches on currency legislation are diametrically opposed to every
principle o f this Treasury Bureau Bill and were at all times in
support of the plan and principles of the Federal Reserve Act,
which was in line with all that he ardently and openly supported
at every stage; (c ) that he actively collaborated with Senator
Owen in the Federal Reserve Act in substantially the form as passed
and had consistently opposed everything for which the Treasury
Bureau Bill stood, the authorship and championship of which
are baselessly sought to be attributed to him by Senator Glass.
(4 ) That Senator Glass’ fable of a scheme on the part of
Colonel House and Mr. M cAdoo or anyone else to have the under
signed slipped into the White House at night to argue with the
President in favor o f the Treasury Bureau Bill should not have
imposed upon the credulity of a new-born babe and should cer
tainly not have been swallowed by Senator Glass as the under
signed had access to the White House whenever he so chose.
(5 ) That it was upon the urgent insistence of the undersigned
that Colonel William Jennings Bryan went to the President and
demanded that the fundmental policies that were finally retained
in the Federal Reserve Act, after a struggle to the death with
the powerful banking interests for (1 ) Regional Banks as against
a Central Bank; (2 ) Government money as against Bank money;
and (3 ) Government control of the system as against banking con
trol, be so retained.
(6 ) That Mr. McAdoo, so far from having advocated this socalled Treasury Bureau Bill does not appear ever to have seen
or heard of it— that at least is what he has told Senator Owen;
and that Mr. Tumulty has no record or recollection of any such
incident as that referred to by Senator Glass.
(7 ) That in his credulity and carelessness in accepting rumor
and hearsay, Senator Glass was manifestly imposed upon as was
the President, in attributing to the undersigned either the paternity,
championship or knowledge o f this Treasury Bureau Bill which he
had never seen or heard of, but that when confronted with the facts
Senator Glass has lacked the courage to confess and correct his
error. And so he has now, after due warning, deliberately chosen
to put forth over his name a work of fiction in the guise of an
historical survey of a great event in the history of our country.
That attitude seems quite consistent with the other parts of his
book in which he by indirection and implication undertakes to filch from
Senator Owen and others and to take unto himself credit for accom
plishments to which he is not entitled and which history will not
accord him. He had an honorable and creditable part in the legislation
within the limitations of his powers, but by reason of want of familiarity
with the many details connected with the complicated subject of cur
rency reform and his consequent necessity for reliance upon others, he
had a decidedly subsidiary part and if left to his own devices would

unintentionally have wrecked this Great Adventure in constructive
legislation.
Whether or not it was the revelations by the Pujo Committee of
the stranglehold of the great banks and financiers (which had stirred
the nation to its very depths, as had no other disclosures in a generation)
that made possible the Federal Reserve Act against the wild protests
and warnings of financial disaster by the leading bankers of the country,
must be left to others to say. There can however be no doubt that next
to President Wilson, Senator Owen primarily and then Mr. McAdoo
are mainly responsible for the structure of the Federal Reserve Act.
President Wilson deserves the everlasting gratitude of the Country
for the resolute manner in which he put all the power of his Admin
istration behind the Currency Reform and for his wise decisions, first
in supporting Senator Owen in giving the Government control of the
System through a Reserve Board consisting exclusively of Govern
ment officials; second, in having the money furnished the Reserve
Banks consist of United States Treasury Notes, secured by Commercial
bills with gold redemption.
S amuel U ntermyer.

G reystone, Y onkers, N. Y.
June 18t h , 1927.

May 10, 192 7.
Hon. Robert L. Owen,
Washington Investment Building,
Washington, D. C.
My dear Senator:
On my return within the past few weeks from a tour of the world
my attention is called to a book by Senator Carter Glass entitled
“ Adventures in Constructive Finance” , published by Doubleday,
Page & Co., which I have read with amazement. Not only with
respect to the offensive and untruthful statements concerning me but
as well to those concerning you and your connection with the Fed
eral Reserve Act.
When the first or second of these articles was published during
my absence (I was in Japan at the time), my son was so incensed at
their tone that he sent me a cable reading as follows:
“ In serial article in today’s Evening Post Carter Glass asserts
you sponsored currency plan which he derisively refers to as
Central-Bank-greenback scheme in opposition to Federal Reserve
Act Intimates that Wilson was urged permit you be slipped into
White House by House and McAdoo to advocate scheme.”

Having always held Senator Glass in high esteem and knowing
that these statements concerning me were all pure fiction from
beginning to end I was at a loss to understand upon what justi
fication he wrote and published these articles. I cabled my son,
in reply, as follows:
“ Glass is either dreaming or senile— probably the latter. The
story published by him in January 18th and 19th issues of the
New York Evening Post is utterly ridiculous as Senator Owen,
McAdoo and others, as well as my own public utterances at the
time, will prove. In this connection I particularly call attention to
the article written by me that appeared in the October, 1913, issue
of the North American Review, entitled “ W h y the P ending
B ill S hould Pass.” A mere reading of that article, in which I
ardently advocated the enactment of the Federal Reserve Act as
against the Central Bank idea contemplated by the Aldrich Bill
and insisted upon by the bankers, will prove conclusively to any
one who will take the trouble to read it the absurdity of the claims
that are now being advanced by Senator Glass. The Federal
Reserve Act was the direct outcome of the Pujo investigation which
exposed the then existing dangerous money concentration. Its
purpose was decentralization through regional banks utilizing Gov
ernment money and under Government control as against the de
mands of the bankers for a central bank with banking money and
under banking control. The bankers, with their usual vision, pre
dicted disaster if our Bill passed. Within two years they were
hailing it as the country’s deliverance. On learning of Glass’s

first proposed measure providing for banking money and banking
control I immediately visited Wilson with Bryan who announced
to Wilson his determination to defeat Glass’s first scheme. As a
result it never saw the light of day. Senator Owen knows the facts
and I believe has a copy of Glass’s first draft. Glass’s story about
House and me is pure fiction. I never saw House in any way in
connection with the subject. At that time Glass knew nothing
about Banking. Willis Parker drew his bill. Senator Owen and
M cAdoo deserve the chief credit for the legislation,”

which I now confirm.
It appears that when this cable was published, Senator Glass
gave out for publication an interview reading as follows:
“ Those who have followed my narrative of Federal Reserve leg
islation being printed in the New York Evening Post will know
that I have in my possession indubitable documentary proof of my
statement concerning the proposal of Colonel House to slip Mr.
Untermyer in the White House for a secret interview with Presi
dent Wilson in behalf of a substitute currency plan. It is in the
nature of a letter form Colonel House to Mr. Wilson, dated May
20, 1913, embodying textually that exact proposition.
As for Mr. Untermyer’s rash assertion that ‘Glass’s story about
House and me is pure fiction’ , and his statement that he ‘never saw
House in any way in connection with the subject’, when he gets
back from Japan he will find that I have been engaged in stripping
and not inventing fiction; and if he shall still think he ‘never saw
House’ or talked with him on the currency question, the two may
jointly debate the issue of veracity thus projected, with Professor
Charles Seymour acting as judge of the discussion. The decision
will not in the remotest degree affect the absolute verity of my
Federal Reserve narrative.
Finally, it may develop that when Mr. Untermyer returns to
America he will curse his luck in having been provoked into spend
ing a good round sum in cable tolls to revive the fact that he wrote
an article in The North American Review for October, 1913, in
favor of the Federal Reserve bill, whereas in my narrative in the
Evening Post I had already credited him with having written me
a vigorous letter to the same effect as early as August, 1913.
Neither incident alters the fact that in May, 1913, Colonel House
was trying to have Mr. Untermyer secretly slipped into the White
House to advocate a different scheme. Before Mr. Untermyer
does any more cabling he would better have a talk with Colonel
House, or at least find out what it is all about.
Allow me to say, in conclusion, that I do not relish this turning
aside to knock down chips while my Federal Reserve narrative is
in process of being printed. When publication of it is ended, if
anybody wants to assail its historical accuracy, I shall cheerfully
meet any point of controversy.”

It is my intention, at the earliest possible date, to “ set the record
straight” , and to that end I ask in common fairness both to yourself

and me that you will be good enough to furnish me with a statement
of your connection with the Federal Reserve Act and of mine— so
far as you personally knew of it.
I am familiar with your great record of public service in the d o
main of Currency Reform, both before and after you entered the
United States Senate. I happen also, as you know, to be very
familiar with the herculean task you performed in the framing of the
present Federal Reserve Act, as a result of your years of study and
months of negotiation, and other work connected with the present
law, for I was with you during many of those phases.
It is important that this matter, from the view-point of history,
shall be set straight and that the men who strove incessantly and suc
cessfully to place that great piece of legislation on the statute books
should get the credit that is their due.
Reading Senator Glass s book one would imagine that he was
the architect of that epoch-making piece of legislation— which would
be far from the fact. The tenacity with which he seeks to magnify
his altogether creditable part in that great work by belittling the
share of others like yourself and Mr. M cAdoo is most surprising and
disappointing. Still, if at the time of sending my cable from Japan
I had been advised of the full text of his articles I would not have
been so offensively outspoken in my comments although there is not
a grain of truth in his references to me. At no time did I prepare,
see or even hear of any such proposed Bill as that to which he refers.
Not until I read his book was I aware of any such suggestion. It was
diametrically opposed in principle to everything for which I con
sistently stood and fought.
I am now disposed to believe that both President Wilson and
Senator Glass were cruelly imposed upon by someone who thought
that by connecting my name with this proposed legislation he could,
by reason of my known progressive views and my connection with
the Pujo Investigation, then just concluded, effectually divert sus
picion from the real authors and advocates of the Bill. That is the
only possible explanation that occurs to me.
Please let me hear from you.
With kind regards,
Sincerely yours,
SAMUEL UNTERMYER.

SU-R

M ay 14, 1927.
S amuel U ntermyer, E squire,

120 Broadway,
New York City.
My

dear

M r. U ntermyer :

Your letter of May 10th referring to the statements published in
a book by Senator Carter Glass, entitled, “ An Adventure in Construc
tive Finance” , is received.
I note the cable sent you by your son, and your cabled reply. I
am utterly at a loss to understand how Mr. Glass could have been so
misled, unless perhaps, he overlooked the fact, that after demolishing
Col. House as a witness against himself, with my help, he could not, in
common fairness, use the annihilated Colonel as a witness to discredit
me or you either.
You express your desire of setting the record straight, and in an
swer to your request that I furnish you with a statement of my con
nection with the Federal Reserve Act and of your association with the
matter as far as I personally knew of it, I gladly comply.
I have just read the chapter in Mr. Glass’ book, Chapter 6, entitled
“ A Threatening Flank Movement— An Intrigue to Wreck the Measure
— President Wilson Puts an End to it” , in which Colonel House ap
pears to have sent and supported a bill to create a Bureau Bank in the
United States Treasury with all the elements of a central bank involving
a tremendous issue of Treasury notes to supersede outstanding green
backs and gold certificates, and seeming to contemplate a seizure of the
gold in trust behind the certificate.
George M. Reynolds, o f Chicago, is quoted as referring to this
measure as a bill sponsored by the people in the Treasury Department,
with a basis of “ fiat” money.
Mr. Glass describes Colonel House as tiptoeing on the scene as
an advocate of this “ central-bank-greenback scheme” , and pressing the
President for a personal interview for you, in order that this scheme
might be presented “ in all its alluring aspects” , “ and the Federal Reserve
Bill ditched” , etc. He states that Mr. M cAdoo insisted on this Treas
ury Bureau plan and said it had the endorsement of eminent bankers
and urged its substitution for a bill Mr. Glass favored. Mr. Glass
recites that Mr. M cAdoo told him that I thoroughly approved this
so-called Treasury Bill. Mr. Glass says he could readily believe this
because of expressions akin to it which he had heard me use.
I never heard of the bill as far as I know. M y files show no
record o f it. M y then secretary, Mr. James W . Beller, advises m^
that he never heard of it. The proposal of a central bank and fiat
money flatly contradict everything that I have believed in. I was
always consistently opposed to a central bank and to fiat money.
In reading this chapter, I think the impression would be left
on the mind of the ordinary reader that you, Mr. M cA doo, Colonel
House and myself were then engaged in an intrigue to ditch the
Bill Mr. Glass favored; that the President did not seem especially
impressed, but conceivably had given tacit permission for the ex
perimental attempt at the rival plan.

Mr. Glass narrates that on his protest against the House bill
the President gave his decision against it, and Mr. M cA doo
graciously acquiesced.
The imputation that I ever at any time favored a central bank,
or that I ever at any time favored fiat money or greenbacks or
unsecured bank notes for money has no foundation whatever, and
from what I knew of your views, it is inconceivable to me that you
could have done so.
M y own connection with the banking acts of the United States
began in 1890 when I sought and obtained an amendment to the
National Bank A ct extending its provisions to the Indian terri
tory. I thereupon organized the first national bank in Indian ter
ritory, the largest bank in then Eastern Oklahoma. I was president
of it ten years, have been a director of it for thirty-seven years,
have directed its policies; conducting its policies successfully
through several panics. It has never failed to pay its dividends
with perfect regularity, and is a model now. I had had practical
banking experience for over twenty years before entering the1
Senate.
I studied the principles of banking with the direct object of
mastering them. I demanded a plank in the Democratic platform
at Chicago in 1896 for emergency currency, and was assisted by
Honorable Charles S. Thomas of Colorado, William J. Bryan and Allan
Thurman.
In 1898 I went to Europe and visited the Governor of the Bank of
England, the Governor and Directors of the Bank of France, and the
officials of the Reichbank of Berlin, and studied their methods for
stabilizing credit and preventing panics.
In 1899 I wrote a series of articles explaining how these principles
worked out by these European banks could be applied to the National
Bank system in the United States.
Some of these articles, published in 1899, can be seen in the Con
gressional Record of February 25th, 1908 (p. 2453) advocating an
elastic currency adequately secured by collateral.
On February 6th, 1900, (Cong. Rec. 1534) Hon. Jas. K. Jones,
then Democratic leader of the U. S. Senate, offered an amendment to
the Aldrich bill proposing an emergency currency, adequately secured,
with automatic contraction provisions to prevent inflation. These notes
were U. S. Treasury notes. I drew the amendment.
On February 25, 1908, (Cong. Rec. 2429) within about two months
after my admission to the United States Senate, I put into the Record
a letter of Hon. Jas. K. Jones, acknowledging my authorship of this
amendment, a copy of the amendment itself, and the article written in
1899 above referred to.
On this day in a three hour speech (Cong. Rec. 2427), I discussed
the Aldrich bill for currency associations then pending and made many
constructive suggestions. For example,
1st: That the volume of such emergency elastic currency should not
be limited except by the actual requirements of our commerce, (p. 2435)
This was accomplished by the Federal Reserve Act.

2nd: That this currency should not be National Bank notes but
United States Treasury notes based upon collateral security and the
credit of the banks, and supported by the taxing power of the people of
the United States. This was accomplished by the Federal Reserve Act.
3rd: The retirement of the bond secured National Bank notes and
the issuance in lieu thereof Treasury notes above referred to payable
in gold (p. 2436). This plan was written into the Federal Reserve Act.
4th: The issuance of Treasury notes (p. 2436) as such elastic cur
rency using gold as cover o f the new currency together with the other
securities. This has been accomplished in the Federal Reserve Act.
5th: The Readjustment of Cash Reserves (p. 2444) so that they
would be real reserves and actually available. This was done in the
Federal Reserve Act.
6th: I stated at that time the fundamental principles which should
govern the Statutes on Banking and that the objects of vital importance
to be attained w ere:
“ The prevention of panic,
the protection of our commerce,
the stability of business conditions,
and the maintenance in active operation
of the productive energies of the Nation.”
7th: I pointed out that the vital defect of the Vreeland Aldrich
Bill was in putting the currency system in the control of the banks and
making the currency difficult of access and expensive. These errors
were all corrected in the Federal Reserve Act.
The Vreeland Aldrich Act, upon my demand made on the floor
of the U. S. Senate, March 25th, 1908, p. 3874, and accepted by Sen
ator Aldrich provided for the National Monetary Commission. The
Commission sat for four years, collected a library of 2500 volumes,
made a report of 33 volumes, and brought in a bill in 1912 proposing
to repeat many of the errors I had pointed out, such as Bank control,
bank notes for currency, a central bank, etc. and to which I was un
alterably opposed.
The objections I had pointed out February 25th, 1908 (pp. 2433
and 2435) on the issuance of currency, that the limitations of Sections
1 and 3 and 5 o f the Vreeland Aldrich Act were unwise, proved to be
very real indeed, and on Friday, July 31, 1914, when the European
War broke out, I drew and offered an amendment suspending limita
tions imposed. On Wednesday, August 4th, both Houses had agreed
on the bill and in the meantime over $300,000,000 of Emergency Cur
rency was shipped to New York and a dangerous war panic prevented
by the suspension of the limitations of Sections 1, 3 and 5 against which
I had protested February 25th, 1908.
In this action Mr. Glass and Mr. M cAdoo cooperated and Frank A.
Vanderlip and Charles C. Glover were very active advocates.
When the National Monetary Commission drew up its bill in 1912
to establish a central bank under bank control with bank notes for
money, a propaganda was put on to secure public approval. The Demo
crats resisted this plan and opposed the so-called “ Money Trust” .
The House of Representatives under Resolutions 405, 429 and
504 authorized an investigation (Sixty-second Cong., 2nd Sess.) to

ascertain the facts to enable the Congress to determine what legisla
tion was needed. On May 16th, 1912, the sub-committee of which
Mr. Pujo, of Louisiana, then Chairman of the Committee on Banking
and Currency, was chairman, met to consider the subject of the
“ money trust” .
You conducted this inquiry, and in my judgment you were the
best qualified man in America to do it.
The hearings continued to February 26, 1913. The Record makes
2226 pages and your report on the “ Money Trust” made a profound
impression on Congress and on the country. It did you great credit
and contributed in the most important way to crystalize public opinion
in support of the Wilson Administration in passing the Federal Reserve
A c t I certainly felt grateful to you for this valuable and patriotic
service, and for that reason, knowing your progressive and liberal
views, I sought your advice frequently in working on the Currency
Bill. You were certainly generous in the extreme. At your home you
made various engagements for me to meet severally Frank A. Vanderlip, A. Barton Hepburn, Paul Warburg and others whose intimate views
I desired in framing the Federal Reserve Act.
When the Democratic Senate met in March 1913, I took part in
organizing the more progressive Democrats in order to select a more
sympathetic chairman of the Democratic Conference and thus control
the Committee on Committees, of which I became a member.
The Committee on Committees on my request divided the Finance
Committee and gave its jurisdiction on Banking and Currency to a new
Committee called “ The Committee on Banking and Currency” . My
associates selected me as its chairman on the sole ground of qualifica
tions, already established on the floor of the Senate, and in spite of
my representing a new state of comparatively small population and
wealth.
I had entered the Senate with this end in view and in the hope
I might be o f real service to my country in improving the Banking
Laws whose deficiencies as a practical banker I had had many concrete
reasons to keenly appreciate.
Immediately, and to the exclusion of everything else, I devoted
myself to this Bill and gave it my entire time until it was signed Decem
ber 23, 1913.
I framed a Bill in March and April and had a Committee print
made o f it the 27th of May, 1913 (copy enclosed) providing in Sec
tion 2 for eight reserve banks, with corporate powers, capital to be
provided by national banks as member banks, with six directors rep
resenting the member banks and three directors appointed by the
President on the suggestion of a Governing Board. The banks were
distributed from Boston to San Francisco and from Chicago to New
Orleans.
Section 6 provided for a Board of Governors o f seven persons,
including the Secretary of the Treasury and Comptroller of the Cur
rency but all o f them government officials, with general supervisory
power over the Reserve System.
Section 13 provided for a note circulation consisting of U. S.
Treasury notes issued to the Reserve Bank, redeemable on demand in
gold and secured by a first lien “ upon all the assets” of the Reserve

Bank and further protected by “ Prime commercial paper as collateral
security” for the return of such notes to the U. S. Treasury. “ Prime
commercial paper” was defined in Article 1 as “ a commercial bill, pay
able within four months, signed by at least two persons, either of whom
shall be good for such bill and one of whom shall be a member bank,
such commercial bill to be based upon an actual commercial transaction
and not to be based upon a permanent investment.”
These principles of sections 2, 6 and 13 for regional banks, a
government controlled Board and Treasury notes secured by collateral
became the law.
When this draft was written I was chairman of the U. S. Senate
Committee on Banking and Currency and had the Committee prints
made about May first, 1913, for the use of the Committee members and
to submit to various citizens qualified to make useful suggestions. I
had no reason to change my views on these fundamental principles and
did not do so.
About June first, 1913, W . Parker Willis, of New York, brought
to my residence at Leroy Place, in Washington, D. C., the draft made
by him under the direction o f Mr. Carter Glass, then, or about to be
made, chairman o f the Banking and Currency Committee of the House
of Representatives.
Mr. Glass did not become Chairman o f the Banking Committee
until June 3, 1913, seven days after the Government Printing Office
had printed my bill.
I was advised that this bill had been submitted to President Wilson
and Secretary McAdoo and that it met their general approval in
principle. When I examined the Willis draft I was disturbed to find
that while the bill provided for twenty reserve cities and twenty reserve
banks it put them all under one controlling directory of forty-three
members, forty of whom were to be elected by the Directors of the
twenty Federal Reserve Banks and only three ex-officio members rep
resenting the United States, thus putting the effective control of the
Credit System in the hands o f a central banking board o f private
persons. (Section 10).
An Executive Board was proposed to consist of nine members,
three practical bankers, three named for long terms by the President
and three ex-officio members, the Secretary of the Treasury, the Comp
troller of the Currency and the Secretary of Agriculture.
The Executive Committee to be under the by-laws and subject to
two-third vote of the full board. (Section 11).
I did not regard this plan as a compliance with the Democratic
National Platform which had declared against “ the establishment of
a central bank” and I insisted on the plan I had drawn of a Board
consisting exclusively of government officials. Being unable to induce
Mr. Glass to concur with my views, we submitted the matter to Mr.
Wilson at the White House in June 1913. W e had a conference of
about two hours in the Cabinet Room and Mr. Wilson decided to
support my views. The bankers violently protested and Mr. Glass gives
an account of their protest in his book “ An Adventure in Constructive
Finance” , in Chapter 7, entitled “ The Bankers Excluded” .
The Willis draft, also Section 23, provided that the Federal Re
serve notes should be bank notes instead of Treasury notes and pro

posed “ Said notes shall be in all respects similar to existing National
Bank notes except that they shall not bear any legend or superscription
indicating that they are secured by United States or other bonds” , and
these notes were to be printed and delivered to any National Reserve
Bank in an amount not to exceed “ a sum equal in the aggregate to
double the face value of the capital stock of such bank.”
This provision was not acceptable to me because:
1st: Making the money of the country mere bank notes did not
make it sufficiently secure.
2nd: It gave the National banks control of the money of the
country.
3rd: It expanded their power over the Credit System.
4th: It put an unnecessary restriction on the issue.
5th: They were not secured by commercial bills or collateral.
6th: It was contrary to democratic doctrine and the Party Plat
forms.
The platform of 1908, for example, declared that the “ Currency
should be issued and controlled by the federal government and loaned
on adequate security to National and State banks.”
My own draft had followed the National Platform and what I
conceived to be the better policy. You will recall how tenaciously I
defended this position in a six hour conference with Paul Warburg at
Greystone in your presence where he took the opposing positions.
I immediately called on Wm. J. Bryan at Calumet Place and ob
tained his cooperation to correct this grave error on the currency of the
Willis draft. He assisted me and Joseph P. Tumulty, then Secretary
to the President, cooperated and my views prevailed.
These fundamentals being reconciled, Mr. Glass and myself on
June 26th, 1913, introduced identical bills as a basis for discussion in
Congress.
On September 17, 1913, the House passed the bill.
On Tuesday, September 2nd, 1913, as chairman, I called the Bank
ing and Currency Committee o f the Senate to begin hearings on the
Senate Bill, concluding the hearings on October 27, 1913, taking testi
mony of 3100 pages. I presided at these hearings.
On October 25th, 1913, the hearings before the Senate Committee
which consisted of 7 Democrats and 5 Republicans, closed and were
followed by various executive sessions which demonstrated that it was
impossible to obtain a committee report in the usual manner, because
Mr. Hitchcock of Nebraska, joined the Republicans against his Demo
cratic colleagues, dividing the Committee in 6 and 6. I then endeavored
to get the six Democratic members together but was only able to obtain
the sympathetic cooperation of three of them, two of them not fully
approving my views.
These three authorized me however, to frame the bill, which I did,
with constant collaboration with them. When we had finished this task,’
the other two Democratic members consented to join the four members
referred to and I made various concessions in order to get a bill which
we could present to the Democratic conference, reserving the right,
however, to bring up in conference any point upon which we had dis
agreed. Thereupon, the Democratic members of the Senate, excepting

Senator Hitchcock, met daily and for three weeks I defended the bill
in conferences frequently extending all day. The result was a bill with
which I was completely satisfied, and which was acceptable to the Demo
cratic conference and was put through the Senate of the United States
as a Democratic Party measure.
The original bill upon which Mr. Glass and myself tentatively
agreed and introduced June 26th, passed the House with some modifi
cations, but the changes in the Senate were so numerous when we had
finished this work, that I moved to strike out the House bill and sub
stitute the Senate bill which I had prepared and worked out in the
Democratic conference.
Senator Hitchcock who took the pains to examine into it, said on
November 25th, 1913 (Congressional Record p. 6783) that only 40%
of the House bill remained. I think this is quite unimportant as the
fundamental principles upon which Senator Glass and myself had agreed
on June 26th remained in the bill, except that I recall I insisted on hav
ing the United States Treasury retain its independence in making de
posits.
On December 19, 1913, my substitute for the House bill was agreed
to, yeas 54, nays 34. I found it expedient to have nine conferees ap
pointed on behalf of the Senate in order that I could control as a party
matter the conferees. This I did by having four out of the six Demo
crats, in active sympathy with me, and having the conference report
treated as a Democratic party measure in which we did not permit the
Republican members to divide the Democrats and thus block or change
the legislation. This explains why the conference report was signed
only by Democrats.
On December 20th the House appointed its three conferees. The
conference report was agreed to in the House by 298 to 60, and in the
Senate at 2:30 P. M. on December 23rd 1913 by 43 yeas and 25 nays.
The House conferees struck out two items I thought of special
value, one on domestic acceptances which was written into the bill
subsequently September 7th, 1916, and one providing for exchange of
Reserve notes for gold. This latter provision was subsequently accepted
by Congress and proved useful.
That same afternoon, December 23rd, the President signed the
bill and presented me with one of the gold pens with which he signed
the bill and a letter of appreciation for my services in which he was
gracious enough to say:
“ The whole country owes you a debt of gratitude and ad
miration. It has been a pleasure to have been associated with
you in so great a piece of constructive legislation.”
I was presented with a copy of the act on vellum, identical in
form with the bill which the President signed, and containing the
signatures of the officers of the United States Senate and of the
House of Representatives and of the President, also a full set of
the first Federal Reserve notes properly framed.
I thought Mr. M cA doo entitled to great credit in the matter.
The action of President W ilson in making it an Administration
measure throwing his full strength behnd it, settling disputes be
tween parties to the legislation was splendid and vital to success.

I wrote a reminiscence of my personal connection with the
Federal Reserve A ct in 1919, after it had proved its worth, a copy
of which I enclose. Y ou will find in this little book that I gladly
gave Mr. Glass full credit for his services as Chairman of the House
Committee, and that I also recognized the work done by the Com
mittee members of both the House and the Senate and of the great
bankers, business men and counselors who helped perfect this measure.
It would be extremely distasteful to me to engage in any con
troversy with Mr. Glass as to who rendered the greater service. He
did his utmost to be of service and so did I. Under the circum
stances, since it was your wonderful work in conducting the Pujo
investigation that exposed the money trust, and since I personally
framed and had printed, as Chairman of the Committee on Bank
ing and Currency of the United States Senate, the Federal Reserve
Bill, whose fundamental principles were afterwards written into
the act, and did this before Mr. Willis ever presented his first draft
which I rejected, and zvhich was never printed, it seems somewhat
ungracious for m y life-time friend, Mr. Glass, to portray me as ap
proving an intrigue to wreck the measure, or to belittle, in any way,
either you or me, in his narrative. I still retain in a vault the orig
inal Willis Bill with Mr. Glass’ notes on it, in his own handwriting,
as a part of my voluminous records of this interesting legislative
experience.
Mr. W illis did a perfectly natural thing in follow ing the Na
tional Monetary Commission bill in making his preliminary draft and
Mr. Glass did a natural thing in supporting his expert, for whom
he had great respect, in yielding something to the bankers’ views
in order to reconcile them to enter the New System. W e were all
feeling our way with a patriotic end in view.
There is enough credit in the whole performance to do honor
to all the leading participants without questioning the loyalty or
in any way discrediting any who tried to help.
I sympathized, however, with Mr. Glass’ displeasure with
Colonel House’s very unfair references to him and gave him a letter
which he used in his book to discredit Colonel House, as a witness
against him. Naturally, I do not relish this witness then being
used by him to discredit me, or to discredit you.
I know o f my own knowledge that your views were substan
tially the same as mine, and the photograph of Mr. Wilson’s memo
randum referring to “ Mr. Untermyer’s paper” is not in the least
convincing to me that the paper referred to in any way contradicts
what I personally know of your attitude. Y our patriotic services
in this matter were very extraordinary and deserve the admiration
of the country.

Yours very respectfully,
R obt. L. O w e n .

May 19, 1927
Hon. Robert L. Owen
Washington Investment Building
Washington, D. C.
My dear Senator,
I am greatly indebted to you for the masterly exposition of
the history of your commanding part in the framing and the struggle
for the enactment of the historic Federal Reserve Act and for your
all-too-generous recognition of my share in that epoch-making legis
lation of Currency Reform, which enabled our country successfully
to jump the financial hurdles and pitfalls of the World War, and
has been largely responsible for the marvelous expansion and stabil
ity that we have ever since enjoyed.
As you rightly say
“ There is enough credit in the whole performance to do
“ honor to all the leading participants without questioning the
“ loyalty or in any way discrediting any who tried to help.”
One might have wished that Senator Glass, for the sake of his
own reputation, would have approached the writing of his book
from that point of view.
As I review the facts, it was largely your firm and patriotic
stand, in which I modestly co-operated to the extent of my limited
opportunities, that circumvented the efforts and propaganda of the
“ Money Trust” to foist upon Senator Glass and Congress the Willis
draft, misguidedly sponsored by Senator Glass, which provided ( 1)
that the money of the country should be bank notes instead of
Government money, which it happily now is; (2 ) that the National
Banks should have control of our money; (3 ) that the domination
of the system be entrusted to the tender mercies of the banks and
bankers; (4 ) that the power of the banks over the credit system be
expanded, and in short, it placed the banks instead of the Govern
ment in the saddle.
I doubt whether the people of the country realize the full ex
tent of their debt of gratitude to you for your part in killing aborn
ing that vicious piece of legislation.
In this connection, due credit should also be given to the
memory of our dear friend, William Jennings Bryan, who was an
important factor in bringing about the defeat of that scheme. He
warned President Wilson that if the features of the bill drafted by
Mr. Willis for Senator Glass, and urged upon the President, to which
you refer, were introduced, he would use all his influence (he was
then Secretary of State and his influence was great) with the mem
bers of Congress and throughout the country to accomplish its de
feat. This is not conjecture or hearsay. 1 know it, for it was upon
my urgent request that he went with me to the White House, as the
result of a special “ hurry-call” visit made by me to Washington for
the purpose, upon being informed by telephone of what was im

pending. You recall that the Bill, of which you have a copy with
the original notes of Senator Glass upon it, never saw the light of
day. That, and your objection, were the reasons.
How Senator Glass could have been so gullible as to permit
himself to be imposed upon to the extent of believing that you or
I would or could, in the face of our records to the contrary, tolerate
or fail to oppose, much less champion or support the so-called
Treasury Bureau Bank scheme, to which he refers, is past under
standing. That he should have allowed himself to be so deceived
does far greater credit to his credulity than to his judgment. He
admits having read your and my articles in the October 1913 North
American Review, in which we vigorously combated every proposal
now said to have been embodied in this so-called Bureau Bank Bill,
of which I am supposed to have been the author, but which I have
never yet seen and of the existence of which I never even heard until
Senator Glass wrote his interesting work of fiction.
It is not unlikely that whoever sought to impose this product of
the “ Money Trust” on President Wilson thought he could best dis
guise and mislead the President as to its source by imputing it to me
because of the known antagonism to me as the author of their woes
and because of my exposure of the “ Money Trust” in the investiga
tion that was responsible for the Currency legislation. It was an ex
ceedingly stupid piece of misrepresentation that was bound to have
been disclosed if the Bill had ever reached the light of day.
The sole purpose of the Money Trust investigation was to ex
pose the centralization of the control of money and credit and to cor
rect it by de-centralizing such control through a regional system, with
Government money and under Government domination.
The President was apparently for the moment deceived, but
Senator Glass, writing 14 years later what he believed to be history,
should have taken the ordinary precaution expected of the historian
of verifying his hearsay information, which he could readily have
done. If his work is discredited, he has only himself to blame. As
an old newspaper man, he should have known enough to differen
tiate between the looseness that necessarily characterizes newspaper
gossip and the accuracy required in writing history.
It is unnecessary to enlarge upon Senator Glass’ s inaccuracies
and unbelievable unfairness in dealing with and trying to belittle
your dominating part in order to magnify his own importance, for
your dignified, analytical and illuminating letter demonstrates how
preeminently you are qualified to take care of yourself.
For my own part, I am satisfied to close the discussion by again
emphatically denying ( 1) that I ever discussed Currency legislation
with Colonel House, either directly or indirectly by word, corre
spondence or otherwise or had any occasion to know or suspect that
he was interested therein; or (2 ) that there was any basis or excuse
for the letter said to have been written by Colonel House to the
President which was a pure myth insofar as I am concerned; or (3 )
that I ever saw, knew or heard of the so-called Treasury Bill to which
Senator Glass refers or of any such suggested legislation; or (4 )

had ever been concerned in, supported or encouraged any project
other than the Bill which culminated in the Federal Reserve Act.
Does it not seem queer that Senator Glass, after again and again
discrediting and denouncing Colonel House (who apparently used
my name with the President without authority or excuse and thus
apparently misled Senator Glass, and for whom I accordingly hold
no brief) and assailing Colonel House’ s integrity and credulity at
every point, should turn about and use Colonel House’ s statements
in his letter to President Wilson as evidence to discredit me as he
elsewhere does the same thing to discredit or belittle your efforts.
I rest upon my consistent known record on this subject, often
publicly expressed, as conclusively disproving the childish story
which Senator Glass apparently swallowed hook, line and sinker,
presumably because it suited his insatiable ego to permit himself to
be taken in by it and upon it to build his “ house of cards’ ’ .
Strangely enough, Senator Glass, you and 1 who were brought
together in this business, were all born and raised in the little town
of Lynchburg, Va., where Senator Glass has continued to live, and
this controversy is therefore doubly unpleasant to me as I know it
is to you. But I could see no way with justice to myself or to you
or others that I could avoid it.
I last heard from Senator Glass (it was through the news
papers) in answer to my cable from Japan. He then promised the
country that upon my return he would confront me with “ documen
tary evidence” and that “ when publication of it (his articles in the
Post) is ended, if anybody wants to assail its historical accuracy, I
shall cheerfully meet any point of controversy ”. Here I am and
here is Senator Owen challenging the historical accuracy of his nar
rative and demanding he either make good or retract and apologize.
It remains to be seen whether he will have the courage and manhood
to do the latter.
With thanks and best wishes,

Sincerely yours,
SAMUEL UNTERMYER.

[This is the Willis draft referred to in Sen. Owen’s letter that was rejected
and never printed. Sen. Owen has the draft with Sen. Glass’s original notes.]
63RD CO NG RESS
F IR S T SE SSIO N .

H. R.
In the House of Representatives

1913
Mr. Glass o f Virginia introduced the following bill which was referred to the
Banking and Currency Committee and ordered to be printed.

A BILL
T o provide an elastic currency, furnish means o f rediscounting commercial
paper, protect the creditors o f National Banking Associations, and establish
a more effective supervision o f banking in the United States.
Be in enacted by the Senate and House o f Representatives o f the United States
o f America in Congress assembled.
S ection 1. That the act o f May 30, 1908, entitled “An A ct to amend the
National Banking L aw ,” be and the same is hereby repealed.
S ection 2. That within sixty days after the passage o f this act, the Secre
tary o f the Treasury, the Com ptroller o f the Currency and the A ttorneyGeneral o f the United States acting as a “ Reserve Bank Organization C om
m ittee” shall prepare and publish a list o f twenty reserve cities chosen from
those now authorized by law and shall divide the continental United States
into twenty districts, each district to contain one o f the said reserve cities;
Provided, That the districts shall be apportioned with due regard to the
convenience and customary course o f business and not necessarily in harmony
with the area o f the several States. The districts may be readjusted and new
districts may from time to time be created by the Board hereinafter created,
acting upon a joint application made by not less than ten National Banks
situated within one o f the existing districts. The districts thus constituted
shall be known as “ National Reserve D istricts” and shall be designated by
number according to the pleasure o f the Reserve Bank Organization C om
mittee hereinafter referred to as the Organization Committee. The said
Organization Committee shall, in accordance with regulations to be estab
lished by themselves proceed to organize in each o f the reserve cities afore
said a National Reserve Bank. Such National Reserve Banks shall be known
by the number and district to which they belon g ;— as “ National Reserve
Bank; First D istrict” — and so forth. Every National Bank located within
a given district shall be required to subscribe to the capital o f the National
Reserve Bank o f that district a sum equal to 20 per centum o f its own paid
up and unimpaired capital, one half o f such subscription to be paid in under
the terms and conditions prescribed by the National Banking A ct with ref
erence to subscriptions to the stock o f National Banking Associations. The
remainder o f the subscriptions or any part thereof shall becom e a liability of
the subscribers, subject to call and payment thereof whenever necessary to
meet the obligations o f the National Reserve Bank under such terms and
in accordance with such regulations as the Board o f Directors o f said National
Reserve Bank may prescribed: Provided, That no National Reserve Bank
shall be organized with a paid up and unimpaired capital at the time o f be
ginning business less in amount than $5,000,000. The Organization Com mittee hereinbefore provided for shall have pow er to appoint such assistants
and incur such expenses in carrying out the provisions o f this act as it shall

deem necessary; and such expenses shall be payable by the Treasury o f the
United States upon voucher approved by the Secretary o f the Treasury, not
to exceed in the aggregate $50,000.
S ection 3. That the capital stock o f each National Reserve Bank shall be
divided into shares o f $100. The outstanding capital stock may be increased
from time to time as subscribing banks increase their capital or as additional
banks becom e subscribers, or may be decreased as subscribing banks reduce
their capital or leave the organization by liquidation. Each National Reserve
Bank may establish branch offices at a point within the National Reserve
district in which it is located approved by the Federal Reserve Board, after
selection by the Board o f Directors o f said banking corporation; Provided,
That the total number o f such branches shall not exceed one for each $500,000
o f the capital stock o f said National Reserve Bank.
S ection 4. That upon duly making and filing with the Comptroller o f the
currency a certificate in the form required and described in sections 5134,
5135, and 5136, R. S-, U. S., the National Banking Associations uniting to
form a National Reserve Bank shall becom e a bod y corporate and as such
and in the name designated in the organization certificate shall have power to
perform all those acts and to enjoy all those privileges and to exercise all
those pow ers described in section 5136 Revised Statutes; save insofar as the
same shall be limited or extended as the case may be, by the provisions of
this act.
Every National Reserve Bank shall be organized and conducted under
the oversight and control o f a Board o f D irectors, whose powers shall be the
same as those conferred upon the boards o f directors o f National Banking
Associations under existing law, except insofar as expressly provided to the
contrary in this act. Such Board o f D irectors shall be constituted and elected
as hereinafter specified and shall consist o f fifteen m em bers holding office
for five years and divided into three classes designated as Class A, B and C.
Class A shall consist o f five mem bers w ho shall be chosen by and be
representative o f the stockholding banks.
Class B shall consist o f five members w ho shall be chosen by and be
representative o f the stockholders o f the National Banks holding shares in
the National Reserve Bank.
Class C shall consist o f five members four o f w hom shall be chosen by
the directors o f classes A and B with approval o f the Federal Reserve Board
hereinafter created and one o f w hom shall be designated by the Federal
Reserve Board. Directors o f class C shall be regarded as representative
o f general public interest.
Directors o f class A shall be chosen in the follow ing manner:
It shall be the duty o f the Chairman o f the Board o f Directors o f the
National Reserve Bank o f the district in which each such bank is situated to
classify the banks o f the said district who are stockholders in the said National
Reserve Bank into five general groups or divisions. Each such group shall
contain as nearly as may be one fifth o f the aggregate banking capital o f the
banks holding stock in the National Reserve Bank o f the said district and shall
consist o f banks belonging as nearly as may be to the same general classes o f
capitalization. The said groups shall be designated by number at the pleasure
o f the Chairman o f the National Reserve Bank.
At a regularly called directors’ meeting o f each National bank in the National
Reserve district aforesaid; the Board o f Directors o f such National Bank shall
elect by ballot one o f its own members as a District Reserve Elector and shall
certify his name to the Chairman o f the Board o f Directors o f the National
Reserve Bank o f the district. The said chairman shall establish complete lists
o f the District Reserve Electors, class A, thus named by banks in each o f the
aforesaid five groups and shall transmit one complete list to each such elector
in each group. Every elector shall within fifteen days o f the receipt o f the
said list, select and_ certify to the said Chairman from among the names on the
list pertaining to his group, transmitted to him by the Chairman, one name as
representing his choice for National Reserve Director, class A. The name re
ceiving the greatest number o f votes, not less than a majority, shall be desig
nated by said chairman as National Reserve Director, for the group to which
he belongs. In case no candidate shall receive a majority o f all votes cast in

any district, the chairman aforesaid shall establish an eligible list, including the
three names receiving the greatest number o f votes on the first ballot, and shall
transmit said list to the electors in each o f the groups o f banks established by
him. Each elector shall at once select and certify to the said chairman from
among the three names submitted to him his choice for National Reserve
Director class A, and the name receiving the greatest number o f such votes
shall be designated by the chairman as National Reserve Director class A.
Directors o f class B shall be chosen in the following manner:
A t an annual election o f officers o f each National Bank the stockholders o f
said bank, if there be a vacancy among directors o f class B in the group to
which said bank may belong, shall choose one o f their own number who shall
not be either an officer or director o f any bank as a District Reserve Elector
class B. The name o f said District Reserve Elector shall be certified to the
chairman o f the board o f directors o f the National Reserve Bank o f the district
in which such National bank is located. It shall thereupon be the duty o f said
chairman to establish lists and to secure the selection o f one director representing
each o f the five groups into which the banks o f the district are divided from
among the District Reserve Electors o f class B, after the manner hereinbefore
prescribed for the choice o f directors o f class A.
Directors o f class C shall be chosen in the following manner:
On the first day o f July in each year when there shall be a vacancy among
directors o f class C, the directors o f classes A and B o f each National Reserve
Bank shall, at a meeting called for that purpose select one or more additional
directors not to exceed four in number. Such additional directors shall be resi
dents o f the National Reserve district in which they are chosen and shall be
fairly representative o f the agricultural, industrial, and commercial interest o f
said district. None o f such directors shall be during his term o f office an officer or
director o f any other bank or banking corporation. Eight votes shall be necessary
to the choice o f each such director and before he shall be declared elected he
shall be certified to the Secretary o f the Trasury who with the advice and
consent o f the Federal Reserve Board hereinafter created may accept or reject
any or all such directors o f Class C.
A fifth director belonging to Class C shall be chosen directly by the Federal
Reserve Board hereinafter created, under such regulations as it may prescribe.
The said director shall be chairman o f the Board o f Directors o f the National
Reserve Bank o f the district to which he is appointed and shall be designated
as “ Federal Reserve Agent” . In addition to his duties as chairman o f the
board o f directors o f the National Reserve Bank o f the district to which he is
appointed, he shall be required to maintain under regulations to be established
by the Federal Reserve Board, a local office o f said Board which shall be sit
uated on the premises o f the National Reserve Bank o f the District. He shall
make regular reports to the Federal Reserve Board, and shall act as its official
representative for the performance o f the functions conferred upon it by this
act. He shall be paid an annual compensation to be fixed by the Federal Reserve
Board and to be paid him monthly by the National Reserve Bank to which he is
designated.
The Reserve Organization Committee hereinbefore created may in organizing
National Reserve banks for the first time, call such meetings of bank directors
or stockholders in the several districts as may be necessary to carry out the
purposes o f this act and may exercise the functions herein conferred upon the
chairman o f the board o f directors o f each National Reserve Bank, pending
the complete organization o f such bank.
A t the first meeting o f the full board o f directors o f each National Reserve
Bank subsequent to the organization o f such bank it shall be the duty o f each
o f the three classes o f directors hereinbefore created to designate by such method
as shall be prescribed by the Federal Reserve Board one o f its members whose
term o f office shall expire at the end o f one year from the first o f January
nearest the date o f such meeting, one whose term o f office shall expire at the
end o f two years from said date, one whose term o f office shall expire at the
end o f three years from said date, onewhose term o f office shall expire at the
end o f four years from said date, and one whose term o f office shall
expire
at the end o f five years from said date. Thereafter every director o f a Na
tional Reserve Bank chosen as hereinbefore provided shall hold office for a term
o f five years. Provided, that the chairman o f the board o f directors o f each

National Reserve Bank, designated by the Federal Reserve Board as herein
before described shall be removable at the pleasure o f the said board without
notice, and his successors shall hold office during the unexpired term o f the
director in whose place he was appointed.
S ection 5. That shares o f the capital stock o f National Reserve Banks
shall not be transferable, and under no circumstances shall they be hypothecated,
nor shall they be owned otherwise than by subscribing banks, nor shall they be
owned by any bank other than in the proportion herein provided. In case a
subscribing bank increases its capital, it shall thereupon subscribe for an addi
tional amount o f capital o f the National Reserve Bank equal to twenty per
centum o f the Bank’s increase o f capital, paying therefor its then book value
as shown by the last published statement o f said bank. A bank applying for
stock in a National Reserve Bank at any time after the formation o f the latter
must subscribe for an amount o f the capital o f said Reserve Bank equal to
twenty per centum o f the capital o f said subscribing bank, paying therefor its
then book value as shown by the last published statement o f said Reserve Bank.
When the capital o f any National Reserve Bank has been increased either on
account o f the increase o f capital o f the banks holding stock therein or on
account o f the increase in the number o f stockholding banks, the board o f direc
tors shall make and execute a certificate showing said increase in capital, the
amount paid in and by whom paid. This certificate shall be filed in the office
o f the Comptroller o f the Currency. In case a subscribing bank reduces its
capital it shall surrender a proportionate amount o f its holdings in the capital
o f said National Reserve Bank, and if a bank goes into voluntary liquidation
it shall surrender all o f its holdings o f the capital o f said National Reserve Bank.
In either case the shares surrendered shall be cancelled and the bank shall receive
in payment therefor a sum equal to their then book value as shown by the last
published statement o f said National Reserve Bank.
S ection 6. That if any shareholder o f a National Reserve Bank shall
become insolvent and a receiver be appointed, the stock held by it in said Na
tional Reserve Bank shall be cancelled, and the balance after paying all debts
due by such insolvent bank to said National Reserve Bank shall be paid to the
receiver o f the insolvent bank. Whenever the capital stock o f a National Re
serve Bank is reduced, either on account o f a reduction in capital o f the banks
holding its stock or o f the liquidation or insolvency o f any such bank holding
stock therein, the board o f directors shall make and execute a certificate showing
such reduction o f capital stock and the amount repaid to each bank. This cer
tificate shall be filed in the office o f the Comptroller o f the Currency.
S ection 7. That any National Banking Association heretofore organized
may at any time within one year from the passage o f this Act, and with the
approval o f the Comptroller o f the Currency, be granted, as herein provided,
all the rights, and be subject to all the liabilities, o f National Banking Associa
tions organized subsequent to the passage o f this A c t; Provided, That such
action on the part o f such Associations shall be authorized by the consent in
writing o f shareholders owning not less than two-thirds o f the capital stock o f
the Association. Any National Bank Association now organized which shall
not, within one year after the passage o f this act, become a National Banking
Association under the provisions hereinbefore stated, and which shall not
place in the hands o f the Treasurer o f the United States the sums by law
provided for the redemption o f its circulating notes, or which shall fail to
comply with any other provision o f this act shall be dissolved; but such dis
solution shall not take away or impair any remedy against such corporation,
its stockholders or officers, for any liability or penalty which shall have previously
been incurred.
S ection 8. That any bank or banking association incorporated by special
law o f any State, or organized under the general laws o f any State, and having
a paid up unimpaired capital sufficient to entitle it to become a National banking
association under the provisions o f this act, may, by the consent in writing o f
the shareholders owning not less than two-thirds o f the capital stock o f such
bank or banking association, and with the approval o f the Comptroller o f the
Currency, become a National banking association under its former name or
by any name approved by the Comptroller. The directors thereof may continue

to be the directors o f the association so organized until others are elected or
appointed in accordance with the provisions o f the law. When the Comptroller
has given to such bank or banking association a certificate that the provisions
o f 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 the same duties, liabilities, and regulations, in all respects,
as shall have been prescribed for associations originally organized as National
Banking associations under this act.
S ection 9. That it shall be lawful for any National Banking association
having a capital o f not less than $1,000,000 to establish branches under such
rules and regulations as may be prescribed by the Comptroller o f the Currency,
with the approval o f the Secretary o f the Treasury; Provided, That the number
o f such branches shall not exceed one for each $500,000 o f capital stock issued
by the parent institution.
S ection 10. That there shall be created a Federal Reserve Board. That
said Board shall consist o f three classes o f members, hereinafter designated
as classes A, B and C.
Class A shall consist o f National Reserve Representatives equal in number
to the number o f National Reserve Banks, and including one member represent
ing each such bank.
Class B shall consist o f National Reserve Delegates equal in number to
the number o f National Reserve districts, and including one member from
each such district.
Class C shall consist o f Government Reserve Officers, three in number, and
including the Secretary o f the Treasury, the Comptroller o f the Currency and
the Attorney-General o f the United States.
National Reserve Representatives (class A ) shall be selected by ballot by
the directors o f National Reserve Banks, one to each bank, who shall himself
be a member o f the directorate o f said National Reserve Bank. The Chairman
o f the Board o f Directors o f each National Reserve Bank shall be ineligible
for election as a member o f the Federal Reserve Board.

It is proposed to alter this by providing that the Federal Reserve Board
shall be selected by the directors o f the National Reserve Banks.

National Reserve Delegates (class B ) shall be chosen from among the stock
holders o f the National Banks organized in the several National Reserve districts
in the following manner: A t a regularly called stockholders’ meeting it shall
be the duty o f said stockholders voting under the regulations prescribed for
the choice o f bank officers to elect one o f their own number as a candidate for
appointment as “ National Reserve Delegate.” The name o f the National Reserve Delegate so chosen shall be certified to the Comptroller o f the Currency
by the President o f the Bank whose stockholders have elected said Delegate. It
shall be the duty o f the Comptroller to establish a complete list o f all candidates
for National Reserve Delegate so chosen within each National Reserve district
and to forward a copy o f the same to each National Bank stockholder in said
district. Each such stockholder receiving such list shall select from the list thus
established one candidate for National Reserve Delegate and shall indicate his
choice to the Comptroller in manner as the latter may require. The name re
ceiving the greatest number o f votes after the manner aforesaid shall be desig
nated by the Comptroller as National Reserve Delegate for the district in which
he is chosen, unless the said number shall be less than a majority o f all votes
cast. I f no candidate shall receive a majority o f all votes cast at such election it
shall be the duty o f the Comptroller aforesaid to establish an eligible list con
sisting o f the five names receiving the largest number o f votes on the first ballot
and to forward a copy o f the same to each National bank stockholder in said
district. Each such stockholder receiving such list o f five names shall select
from the list one candidate for National Reserve Delegate and shall indicate
his choice to the Comptroller in such manner as the latter may require. The
name receiving the greatest number o f votes, not less than a majority, after the
manner aforesaid shall be designated by the Comptroller as National Reserve

Delegate for the district in which he is chosen. I f no such candidate shall receive
a majority o f votes the Secretary o f the Treasury shall nominate from among
the five candidates one who shall act as National Reserve Delegate for the en
suing term and he shall be so designated by the Com ptroller; Provided, That no
bank stockholder in selecting a National Reserve Delegate from the list estab
lished by the Comptroller shall cast more than one ballot; and provided further
that no person who at the time is an officer or director o f a National bank shall
be eligible to the office o f National Reserve Delegate. Subsequent acceptance
o f office as officer or director o f a National Bank shall automatically cancel the
appointment o f a National Reserve Delegate.
Every member o f the Federal Reserve Board shall receive a salary o f $2,500
per annum.
Each member o f the Federal Reserve Board shall be chosen for a term o f
six years or for the unexpired portion o f such term, Provided, That the first
members o f the Federal Reserve Board in classes A and B shall hold office for
a term o f six years dating from the first o f January next succeeding the election
at which they are chosen, except as hereinafter otherwise provided, and all mem
bers o f the Federal Reserve Board belonging to classes A and B, first chosen
under this act shall take office immediately upon their election and shall continue
to hold the same until the first o f January next succeeding such election and
thereafter as herein provided.
Upon assembling for the first time the members o f the Federal Reserve
Board belonging to classes A and B shall separate into two groups under such
regulations as the Board may lay down for effecting the said grouping. One
such group shall hold office for three years, dating from the first o f January
next succeeding the election o f members, the other for six years next succeeding
such election. Each group shall include one half the total number o f members
o f the two classes, drawn in equal numbers from each. Thereafter every member
o f the said Board belonging to classes A and B shall hold office for a term o f
six years. Vacancies in classes A and B shall be filled as they may occur, in
the manner prescribed for the original choice o f members belonging to the class
in which such vacancies may occur.
S ection 11. That the first meeting o f the Federal Reserve Board shall be
held on July 1, 1913 and upon convening for the first time, the Federal Reserve
Board shall separate by classes. Class A meeting separately, shall choose from
among its own number by ballot two members who shall be known as Federal
Reserve Officers. Class B shall in like manner select from among its own num
ber two Federal Reserve Officers. The four Federal Reserve Officers thus
chosen shall, with the ex officio members constituting class C o f the Federal
Reserve Board, constitute an executive committee o f the Federal Reserve Board
o f seven members, and shall be known as the Federal Reserve Committee. The
Secretary o f the Treasury shall be ex officio Chairman o f the Federal Reserve
Board and Chairman o f the Federal Reserve Committee. He shall designate at
his pleasure, one o f the four Federal Reserve Officers chosen by classes A and B
o f the Federal Reserve Board as President o f said Board; and shall designate
two others from among the aforesaid four as first and second Vice-Presidents.
The remaining member included in the four Federal Reserve Officers aforesaid
shall be designated as Secretary o f the Federal Reserve Board. The powers
and duties o f the President, Vice-Presidents and Secretary shall be established
in by law to be adopted by the Federal Reserve Board. A fter being thus desig
nated by the Secretary o f the Treasury Federal Reserve Officers shall continue
to hold office in the positions to which they are designated until the expiration
o f their terms as members o f the Federal Reserve Board, current at the time
when they were so designated.

It is proposed to alter this so as to provide that the Executive Board shall
contain 9 members—3 practical bankers; 3 members named for long terms by the
President and 3 ex officio members, Sect’y Treasury, Comptroller o f Currency
and Sect’y Agriculture.
C. G.
The powers and functions hereinafter conferred upon the Federal Reserve
Board may be exercised by the Executive Committee o f said Board in accordance

with by laws to be established by said Board. But said Committee must fully
report its action on each and every matter o f business falling within its jurisdic
tion to a general meeting o f said Board to be convened not less frequently than
once each month. And every member o f said Board may at his discretion at
tend meetings o f the Executive Committee, although he shall have no vote at
such meetings.
Any member o f the Federal Reserve Board may at the monthly meeting
hereinbefore specified propose a motion reversing or modifying any action of
the Executive Committee already taken, and such motion shall be voted upon
promptly under rules o f procedure to be adopted by said Board; Provided, that
no such motion shall be binding upon the Executive Committee or shall be deemed
to cancel or reverse its action unless it receives two-thirds o f all votes cast at
the meeting o f the Federal Reserve Board at which it shall be proposed.
S ection 12. That on the nomination o f the President o f the Federal Reserve
Board, the Executive Committee shall appoint all officers and employes o f the
Board, except those otherwise provided for in this act, determine their remunera
tion, tenure o f office, and duties.
The Executive Committee shall have full control, subject to the Board, o f
the detailed management o f said Board. For this purpose it shall meet regularly
once a week at the office o f the Board or at such other places as may be desig
nated by the Chairman o f the Board. Special meetings may be called by the
Chairman or by any three members.
The Federal Reserve Board shall appoint a Board o f Examiners consisting
o f three members, to report at any time upon the conditions o f credit, the kind
o f business done, and the proper conduct o f the discounts at each National Re
serve Bank or o f any individual bank; and said Board may authorize the em
ployment o f suitable assistance, if needed, for this work o f examination.
The Secretary o f the Treasury as Chairman o f the Federal Reserve Board
and Chairman o f the Executive Committee shall be responsible for the discipline
o f the Executive Staff o f the Board, determine the duties o f the various persons
concerned, secure the preparation o f the reports to be made to the Executive
Committee and the members o f the Board, and perform all other duties per
taining to his office. All o f his acts shall be subject to the review o f the Execu
tive Committee and its decision in all matters pertaining to his duties shall be
final unless reversed by the Board. In the absence or illness o f the Secretary
o f the Treasury, his duties shall devolve upon the Comptroller o f the Currency
acting as Vice-Chairman.
The expenses o f the Federal Reserve Board shall be paid by the National
Reserve Banks out o f their gross receipts in such a manner and at such times as
the Board shall direct. Each Reserve Bank shall pay such a portion o f said
expenses as its capital and surplus bear to the aggregate capital and surplus o f
all.
A t all meetings o f the Board a quorum shall consist o f two-thirds its total
number o f members. A majority o f those present shall be required to pass any
resolution. Each member shall be reimbursed for his reasonable travelling and
other necessary expenses for attendance on each meeting, on vouchers approved
by the Executive Committee.
S ection 13. That the Federal Reserve Board hereinbefore established shall
be authorized and empowered
(a ) T o examine once each month the accounts and books o f each Na
tional Reserve Bank.
(b ) T o determine the apportionment o f Federal deposits among the Na
tional Reserve Banks.
(c ) T o require a National Reserve Bank to rediscount the paper o f any
other National Reserve Bank.
(d ) T o ascertain once each month the character o f the paper held by each
National Reserve Bank and to require at its discretion the suspension of
further issues for a designated period.
(e ) T o establish each week or as much oftener as required a rate o f dis
count which shall be mandatory upon each National Reserve Bank and for
each class o f paper; provided, that said rate o f discount need not be uniform
for all Reserve Banks

( f ) T o suspend for a period not exceeding thirty days (and to renew
such suspension for periods o f not to exceed fifteen days) any and every
reserve requirement specified in this act.
S ection 14. That any National Reserve Bank may receive from any bank
or banking institution or trust company duly organized under Federal or State
law deposits o f current funds in lawful money, national bank notes, Federal
reserve notes or checks, drafts and other claims upon solvent banks domestic
and foreign.
Upon the endorsement o f any bank having a deposit with it any National
Reserve Bank may discount notes and bills o f exchange arising out o f commer
cial transactions; that is notes and bills o f exchange issued or drawn for agri
cultural, industrial or commercial purposes, and not including notes or bills
issued or drawn for the purpose o f carrying stocks, bonds or other investment
securities. Such notes and bills must have a maturity of not more than thirty
days.
Upon the endorsement o f any bank having a deposit with it, any National
Reserve Bank may discount paper o f the classes hereinbefore described having
a maturity o f more than sixty and not more than 120 days, provided that its
own cash reserve exceeds 50 per cent o f its total outstanding demand liabilities
and provided further that not more than 50 per centum o f the total paper so
discounted for any depositing bank shall have a maturity o f more than sixty
days.
Upon the endorsement o f any bank having a deposit with it, any National
Reserve Bank may discount acceptances o f depositing banks which are based on
the exportation or importation o f goods or on travellers credits and which
mature in not more than 90 days and bear the signature o f at least one bank in
addition to that o f the acceptor. The amount so re-discounted shall at no time
exceed the capital o f the bank for which the rediscounts are made. The aggre
gate o f such notes and bills bearing the signature or endorsement o f any one
person, company, firm or corporation, rediscounted for any one bank, shall at
no time exceed ten per centum o f the unimpaired capital and surplus o f said
bank.
Any National Bank may at its discretion accept drafts or bills o f exchange
drawn upon it having not more than four months to run and growing out o f
transactions involving the importation or exportation o f goods or the issue o f
travellers letters o f credit. Provided that no bank shall accept such bills to an
amount equal in the aggregate to more than one half the face value o f its paid
up and unimpaired capital.
S ection 15. Whenever in the opinion o f the Federal Reserve Committee
upon application jointly and directly made to the Secretary o f the Treasury by
not less than ten National Banks in one district the public interest so requires,
the Federal Reserve Committee may authorize the Reserve Bank o f the Dis
trict to discount the direct obligations o f depositing banks secured by the pledge
and deposit with it o f satisfactory securities; but in no case shall the amount
so loaned by a National Reserve Bank exceed three-fourths o f the actual value
o f the securities so pledged, or one half the amount o f its own paid up and
unimpaired capital.
S ection 16. That every National Reserve Bank shall have power, both
at home and abroad, to deal in gold coin or bullion, to make loans thereon, and
to contract for loans o f gold coin or bullion, giving therefor, when necessary,
acceptable security, including the hypothecation o f its holdings if any o f United
States bonds.
S ection 17. That any National Reserve Bank may invest in United States
bonds; also in obligations having not more than one year to run, o f the United
States or its dependencies, or o f any State, or o f foreign governments.
S ection 18. That every National Reserve Bank shall have power to pur
chase from depositing banks and to sell with or without its endorsement, checks,
or bills o f exchange, arising out o f commercial transactions as hereinbefore
defined, payable in such foreign countries as the Board o f Directors o f such
National Reserve Bank may determine. These bills o f exchange must have not
exceeding ninety days to run and must bear the signature o f two or more re
sponsible parties, o f which the last one shall be that o f a subscribing bank.

S ection 19. That any National Reserve Bank may with the consent o f
the Federal Reserve Board open and maintain banking accounts in foreign coun
tries and establish agencies in such countries wheresoever it may deem best for
the purpose o f purchasing, selling and collecting foreign bills o f exchange, and
it shall have authority to buy and sell with or without its endorsement through
such correspondents or agencies, checks or prime foreign bills o f exchange
arising out o f commercial transactions, which have not exceeding ninety days
to run, and which bear the signature o f two or more responsible parties.
S ection 20. That the Government o f the United States and banks deposit
ing in the National Reserve Banks formed under this act as hereinafter indi
cated shall be the only depositors in said Reserve Banks. All domestic trans
actions o f the National Reserve Banks shall be confined to the Government and
the depositing banks, with the exception o f the purchase or sale o f Government
or State securities or securities o f foreign governments or o f gold coin or
bullion.
S ection 21. That all moneys now held in the general fund o f the Treasury
shall within six months from the passage o f this act be deposited in National
Reserve Banks; and thereafter the revenues o f the Government shall be reg
ularly deposited in such banks and disbursements shall be made by check drawn
against such deposits. It shall be the duty o f the Federal Reserve Board herein
established to apportion the funds o f the Government among the said National
Reserve Banks and to fix from month to month a rate o f interest which shall be
regularly paid by the banks holding such deposits; Provided, that no National
Reserve Bank shall be required to receive Government deposits when in the
judgment o f its directors the condition o f business does not warrant the pay
ment o f the rate o f interest fixed by the Federal Reserve Board.
S ection 22. That no National Reserve Bank shall pay interest on deposits;
except those o f the Government o f the United States; and no National Banking
Association shall pay interest on funds o f other banks deposited with it.
S ection 23. That any National Reserve Bank may at its discretion, subject to
the provisions o f this act, make application to the Federal Reserve Board for Fed
eral Reserve notes. Said notes shall be in all respects similar to existing Na
tional bank notes except that they shall not bear any legend or superscription
indicating that they are secured by United States or other bonds. But no Na
tional Reserve Bank shall receive in the aggregate notes exceeding a sum equal
to the face value o f the capital stock o f such Bank plus the stockholders’ indi
vidual liability, or in the aggregate a sum double the face value o f the capital
stock o f such bank. Upon receiving an application for notes from any National
Reserve Bank, the Federal Reserve Board shall immediately issue said notes to
the Bank making said application. Any National Reserve Bank desiring to re
duce its circulation may do so, upon the same conditions now prescribed for the
retirement o f National bank notes; Provided, that nothing in the statutes o f the
United States shall prevent a National Reserve Bank from retiring its out
standing notes as rapidly as its officers and directors may deem best.
It shall be the duty o f every National Reserve Bank to receive on deposit
at par the notes o f every other National Reserve Bank and o f every National
Banking Association. Every National Reserve Bank shall provide for the re
demption o f its own notes on demand in gold at least one point in every reserve
district throughtout the United States. The method of such redemption and the
provisions under which it shall be carried on shall be subject to control by the
Federal Reserve Board, and it shall be the duty o f said Board to establish such
rules and regulations that all notes issued by National Reserve Banks shall be
maintained convertible into gold at par without exchange through the United
States.
S ection 24. That no National Banking Association shall be entitled to
receive from the Comptroller o f the Currency, or to issue, circulating notes in
excess o f the total amount o f such notes which such bank may have outstand
ing at the passage o f this act. Provided that no National Banking Association
which may in future reduce its outstanding circulating notes in the manner pre
scribed by law shall hereafter be entitled to receive from the Comptroller o f

the Currency, or to issue, circulating notes in excess o f the sum to which its
outstanding notes shall have been reduced by such withdrawals.
S ection 25. That so much o f the provisions o f section 5159 o f the Re
vised Statutes o f the United States and section 4 o f the Act o f June 20th, 1874,
and section 8 o f the A ct o f July 12th, 1882, as provide that before any National
Banking Association shall be authorized to commence banking business it shall
transfer and deliver to the Treasurer o f the United States, United States reg
istered bonds, to an amount, where the capital is $150,000 or less, not less than
one-fourth o f its capital stock, and $50,000 where the capital is in excess o f
$150,000, be and the same is hereby repealed.
S ection 26. Upon application, the Secretary o f the Treasury shall exchange
the two per centum bonds o f the United States bearing the circulation privilege,
theretofore deposited by any National Banking Association with the Treasurer
o f the United as security for circulating notes, for three per centum bonds o f
the United States without the circulation privilege, payable after twenty years
from date o f issue. When and in proportion as the outstanding two per centum
bonds deposited by them with the Treasurer shall be thus exchanged or re
funded, the power o f National Banks to issue circulating notes secured by
United States bonds shall cease and be determined. Every National Bank may
continue to apply for and receive from the Comptroller o f the Currency cir
culating notes under the conditions provided by this act, but no National Bank
shall be permitted to issue circulating notes o f any description or to issue or to
make use o f any substitute for such circulating notes in the form o f Clearing
House certificates, cashier’s check, or other obligation not specifically provided
for under this act; Provided, That no National Bank shall in any one year
present two per centum bonds for exchange in the manner hereinbefore pro
vided to an amount exceeding ten per centum o f the total amount o f bonds de
posited with the Treasurer by said Bank at the time o f the passage o f this act;
Provided further that at the expiration o f ten years from the passage o f this act
every holder o f United States two per centum bonds shall receive in exchange
three per centum bonds o f like denomination payable twenty years from date
of issue. Each National Reserve Bank may receive from the Federal Reserve
Board and issue at its own discretion subject to the provisions o f this act, in
addition to the notes provided for by Sec. 23 o f this act, a sum in notes equal
to the par value two per centum bonds o f the United States surrendered by its
own stockholding banks to the Treasurer o f the United States in exchange for
three per centum bonds.
S ection 27. That within sixty days from and after the date when the
Secretary o f the Treasury shall have officially announced, in such manner as he
may select, to National Banks situated in the several National Reserve dis
tricts, the fact that a National Reserve Bank has been established in the district
within which they are situated, every such National Banking Association
wherever situated within the said district shall establish with the National Re
serve Bank o f the district a credit balance on the books o f the latter institution
equal to not less than five per centum o f the total outstanding demand liabilities
o f the National Bank establishing the same. Such balance may at any time be
increased but shall at no time be allowed to fall below a figure equal to the
five per cent o f total outstanding demand liabilities aforesaid. From and after
a date twelve months subsequent to the expiration o f the sixty days after the
organization o f the National Reserve Bank o f the district as aforesaid, it shall
be the duty o f every National Banking Association wherever situated within the
National Reserve district to which it belongs to establish with the National
Reserve Bank o f the district an additional balance equal to not less than five
per centum o f the total outstanding demand liabilities o f the National Bank
establishing the same. Thereafter it shall be the duty o f every such National
Banking Association to maintain a credit balance on the books o f the National
Reserve Bank o f the district within which it is situated which shall at all times
be at least equal to ten per centum o f the total outstanding demand liabilities
of the National Bank establishing and maintaining the same.
From and after the passage o f this act it shall be the duty o f every National
Banking Association wherever situated to maintain constantly on hand in its
own vaults a sum in lawful money equal to not less than five per centum o f its
total outstanding demand liabilities.

From and after the passage o f this act for a period o f thirteen months it
shall be the duty o f every National Banking Association situated outside o f a
Reserve City or Central Reserve City, in addition to the requirements herein
before set forth to maintain at all times either:
(a ) An additional credit balance on the books o f the National Reserve
Bank o f the district equal to five per centum o f the total outstanding de
mand liabilities o f the National Banking Association establishing the same;
or
(b ) An additional credit balance on the books o f another National Bank
ing Association situated in a Reserve City or Central Reserve City equal
to five per centum o f the total outstanding demand liabilities o f the National
Bank Association establishing the same; or
( c ) A sum constantly on hand in its own vaults, in lawful money, equal
to not less than five per centum o f its total outstanding demand liabilities.
From and after the passage o f this act, it shall be the duty o f every National
Banking Association situated in a Reserve City but not in a Central Reserve
City, in addition to the requirements hereinbefore set forth for all National
Banks, to maintain at all times either:
(a ) An additional credit balance on the books o f the National Reserve
Bank o f the district equal to ten per centum o f the total outstanding de
mand liabilities o f the National Banking Association establishing the same;
or
(b ) An additional credit balance on the books o f another National Bank
ing Association situated in a Central Reserve City equal to ten per centum
o f the total outstanding demand liabilities o f the National Banking A sso
ciation establishing the sam e; or
(c ) A sum constantly on hand in its own vaults in lawful money equal
to not less than ten per centum o f its total outstanding demand liabilities;
Provided, That from and after a date twelve months subsequent to the
date upon which National Banking Associations situated in Reserve Cities
shall have first opened an account and established a credit balance with the
National Reserve Bank o f the district in which they are situated, thev shall
be required to maintain in addition to the ten per cent balance on the books
o f the National Reserve Bank hereinbefore required and in addition to the
sum o f five per cent o f outstanding liabilities in cash in their own vaults, a
sum not exceeding five per cent o f such total outstanding liabilities either
in their own vaults or as a credit balance on the books o f the National
Reserve Association or as a credit balance on the books o f a National
Banking Association situated in a Central Reserve City, and shall be sub
ject to no other requirement.
From and after the passage o f this act and until a date twelve months sub
sequent to the date upon which National Banking Associations in Central Re
serve Cities shall have first opened an account and established a credit balance
with the National Reserve Bank o f the district in which they are located, they
shall be required to maintain in addition to the requirements hereinbefore set
forth either:
(a ) An additional credit balance on the books o f the National Reserve
Bank o f the district equal to fifteen per centum o f the total outstanding
demand liabilities o f the National Banking Association establishing the
same; or
(b ) A sum constantly on hand in their own vaults in lawful money
equal to not less than fifteen per centum o f their total outstanding demand
liabilities.
Subsequent to the date hereinbefore specified every National Banking Asso
ciation situated in a Central Reserve City shall have at all times on hand in its
own vaults a sum equal to five per centum o f its total outstanding demand lia
bilities or shall maintain on the books o f the National Reserve Bank o f the
district a credit balance equal to five per cent o f its total outstanding demand
liabilities, such sum or balance to be in addition to the requirements hereinbefore
set forth for all National Banking Associations; Provided, That nothing in this
act contained shall prevent a National Banking Association from increasing its

balance either with the National Reserve Bank o f its district or with other
National Banks beyond the minimum limits specified in this section. Provided,
That no National Banking Association or National Reserve Bank shall count
or report any o f its own notes or o f the notes o f any other National Bank or
o f any National Reserve Bank as a part o f its cash assets.
That so much o f sections 5191 and 5192 Revised Statutes and so much o f
Sec. 2 o f the act o f June 20, 1874, relating to the maintenance o f reserves in
Central Reserve cities, and so much o f the said acts as requires or dispenses
with the maintenance o f specified reserves against liabilities, as is inconsistent
with this section shall be and the same is hereby repealed.
S ection 28. That so much o f section 3 o f the Act o f June 20th, 1874,
entitled “ An A ct fixing the amount o f United States notes, providing for a
redistribution o f the National Bank Currency, and for other purposes,” as
provides that the fund deposited by any National Banking Association with
the Treasurer o f the United States for the redemption o f its notes shall
be counted as a part o f its lawful reserve as provided in the act aforesaid
be, and the same is hereby repealed. A nd from and after the passage o f
this act, such fund o f five per centum shall in no case be counted by any
National Banking Association as a part o f its lawful reserve.
S ection 29. That no National Reserve Bank shall discount for, or pur
chase from , any state or private bank or trust company, or from any bank
ing institution w hatsoever incorporated or authorized to transact business
in the United States or in any state or territory therein, any o f the kinds
o f paper hereinbefore described and specified except upon the follow ing
conditions to w it:
Every state or private bank or trust com pany or other banking institu
tion form ed or incorporated under state or national law shall at the time
it presents paper for rediscount to the National Reserve Bank o f the district
in which it is located have an open deposit account equal in amount to that
required by section 24 o f this act to be maintained by a similarly situated
National Bank and shall thereafter maintain such balance.
Every such
bank shall submit to such inspection and shall make and render such reports
as may be required by the Federal Reserve Board under the terms o f this
act o f similarly located National Banks.
A n y National Reserve Bank may at any time refuse to discount or
purchase paper o f the kinds herein described, for a bank belonging to any
one o f the classes herein described, because o f the failure o f such institu
tion to com ply with the requirements o f this section; Provided, that upon
ascertaining that such institution no longer com plies with the requirements
o f this section it shall at once certify such fact to the Chairman o f the
Federal Reserve Committee.
S ection 30. That every National Reserve Bank shall at all times have on
hand in its own vaults in gold or the equivalent thereof a sum equal to
not less than 25 per centum o f its outstanding circulating notes. It shall
at all times have on hand in its own vaults live com m ercial paper having
not more than 30 days to run to an amount equal to 50 per centum o f its
outstanding demand liabilities which shall at the same time be not less than
75 per centum o f its outstanding circulating notes.
S ection 31. That the Federal Reserve Board shall as often as it deems
best, and in any case not less frequently than once each month, order an
examination o f National Banking Associations in reserve cities. Such ex
amination shall show in detail the total amount o f loans made by each bank
on demand, on time and the different classes o f collateral held to protect
the various loans. And the Federal Reserve Board shall have pow er when
in its judgm ent the result o f such examination requires, to order that for
a period o f thirty days next follow ing the demand deposits carried by other
banks with any one or more o f the associations so specially examined shall
not be counted as a part o f the required reserve o f the depositing institution.
S ection 32. That every National Reserve Bank shall pay, on or before
the last day of every month, to the Treasurer o f the United States a duty

imposed at the rate o f tw o per centum per annum upon the average dailyamount o f its circulating notes outstanding in excess o f 100 per centum o f
its capital stock, and not in excess o f 150 per centum o f such capital stock,
and a duty im posed at the rate o f six percentum per annum upon the
average daily amount o f such notes outstanding in excess o f 150 per centum
o f its capital stock. Circulating notes o f any National Reserve Bank shall
be deemed and held to be outstanding whenever they shall have been supplied
by the Federal Reserve Board to such bank, in blank, registered and
countersigned according to law, and shall not have been returned to the
Board for cancellation or covered by an equal amount o f lawful m oney
deposited with the Treasurer o f the United States for the retirement o f
such notes.
S ection 33. That in order to enable the said Treasurer to assess the duties
imposed by the preceding section, the Chairman o f the Federal Reserve
Committee shall, within five days from the first day o f each calendar
month, make a return to the Treasurer o f the United States, in such form
as he may prescribe, o f the average daily amount o f circulating notes o f
each National Reserve Bank outstanding during the calendar month next
preceding.
And every National Reserve Bank shall be notified by said
Treasurer o f the United States within ten days from the first day o f each
calendar month o f the amount o f the duties upon its circulating notes due
from it to the United States, under this act, and every such Association
shall, before the last day o f such calendar month, pay to the said Treasurer
in lawful m oney the full amount o f such tax; and whenever any Association
fails to pay the duties imposed by this Act, the sum due may be collected
in the manner provided for the collection o f taxes; and while such default
continues no further amount o f circulating notes shall be issued to such
defaulting Reserve Bank.

S ection 34. That every National Banking Association shall pay into the
Treasury of the United States each half year, in the months o f January and
July, on or before the thirteenth day thereof, a duty o f one-eighth o f one
per centum upon the value o f its franchise as measured by the aggregate
amount o f its capital, surplus, and undivided profits, upon the last day o f
the calendar month next preceding. Sections 5213, 5215, and 5216 and 5217
o f the Revised Statutes o f the United States are hereby repealed. But
nothing in this section contained shall be so construed as in anv manner to
release any National Banking Association from any liability for taxes or
penalties incurred prior to the passage o f this Act.
S ection 35. That from and after the passage o f this act the stockholders
o f every National Banking Association shall be held individually responsible
for all contracts, debts, and engagem ents o f such Association, each to the
amount o f his stock therein, at the par value thereof in addition to the
amount invested in such stock. The stockholders in any National Banking
A ssociation w ho shall have transferred their shares, or registered the
transfer thereof, within sixty days next before the date o f the failure o f
such Association to meet its obligations, shall be liable to the same extent
as if they had made no such transfer; but this provision shall not be con
strued to affect in any w ay any resources which such shareholders might
otherwise have against those in w hose names such shares are registered
at the time o f such failure.
S ection 36. That section 324 o f the Revised Statutes o f the United States
be amended so as to read as follow s: “ There shall be in the Department
o f the Treasury a Bureau charged, except as in this act otherwise provided,
with the execution o f all laws passed by Congress relating to the issue and
regulation o f currency issued by National Banking Associations, the chief
officer o f which Bureau shall be called the Com ptroller o f the Currency,
and shall perform his duties under the general direction o f the Secretary
o f the Treasury, acting as the Chairman o f the Federal Reserve Board.”
S ection 37. That the examination o f the affairs o f every National Bank
ing Association authorized by existing law, shall take place at least twice
in each calendar year, and as much oftener as the Com ptroller o f the

Currency shall consider necessary in order to furnish a full and com plete
knowledge o f its condition; and the person making such examination shall
have power to call together a quorum o f the directors of such Association,
w ho shall, under oath, state to such examiner the character and circum
stances o f such o f its loans and discounts as he may designate; and from
and after the passage o f this act all bank examiners shall receive fixed
salaries, the amount w hereof shall be determined by the Secretary o f the
Treasury and shall be annually reported to Congress. But the expense o f
the examinations herein provided for shall be assessed by the Com ptroller
o f the Currency upon the Association examined. The Com ptroller o f the
Currency shall so arrange the duties o f National Bank examiners that no
tw o successive examinations o f any Association shall be made by the same
examiner.
In addition to the examination made and conducted by the Com ptroller
o f the Currency, every National Reserve Bank shall with the approval o f
the Federal Reserve Board arrange for periodical examinations o f the banks
within its district. Such examinations shall be so conducted as to inform
the National Reserve Bank under whose auspices it is conducted o f the
condition o f its m em ber or stockholding banks and o f the lines o f credit
which are being granted by them. Every National Reserve Bank shall at
all times be bound to furnish to the Federal Reserve Board such inform a
tion as may be demanded by the latter concerning the condition o f any
National Bank organized within the district in which the said National
Reserve Bank is located, and it shall have power at all times to order
special examinations without notice o f the condition o f its member o f stock
holding banks.
S ection 38. That no Association shall hereafter make any loans or grant
any gratuity to any examiner o f such Association. Any Association offending
against this provision shall be deemed guilty o f a misdemeanor, and shall be
fined not more than $1,000 and a further sum equal to the money so loaned or
guaranty given; and the officer or officers o f such Association making such loan
or granting such gratuity shall be likewise deemed guilty o f a misdemeanor, and
shall be fined not to exceed $500. Any examiner accepting a loan or gratuity
from any Association examined by him shall be deemed guilty o f a misdemeanor,
and shall be fined not more than $500, and a further sum equal to the money
so loaned or gratuity given.
S ection 39. That any National Banking Association not situated in a
Reserve City o f Central Reserve City may make loans secured by improved and
unencumbered farm land, and so much o f section
, Revised Statutes, as
prohibits the making o f such loans by banks so situated shall be and the same
is hereby repealed, provided, that no such loan shall be made to an amount
exceeding 50 per centum o f the actual value o f the property offered as security,
and such properties shall be situated within the National Reserve district in
which the said bank is located; and provided further that the aggregate amount
o f such loans made by any one bank shall not exceed a sum equal to 25 per cent
o f the capital and surplus, unimpaired, o f such bank.
S ection 40. That the Comptroller o f the Currency, in addition to the
reports provided for by existing law, shall have authority to call for such other
reports, regular or special, as he may deem advisable; and such reports shall
be rendered in such form as the Comptroller may prescribe; and each Association
making such report shall cause a copy thereof to be conspicuously displayed in a
public place in its banking house for the period o f thirty days from the date o f
such report; but nothing herein contained shall be construed to require the publi
cation o f such additional reports by each Association in the manner prescribed
for other reports now rendered.
S ection 41. That banking corporations for carrying on the business o f
banking in foreign countries and in aid o f the Commerce o f the United States
with foreign countries and to act when required as fiscal agents o f the United
States in such countries may be formed by any number o f persons, not less in
any case than five, who shall enter into articles o f association which shall specify
in general terms the object for which the banking corporation is formed, and
may contain any other provisions not inconsistent with the provisions o f this

section which the banking corporation may see fit to adopt for the regulation
and conduct o f its business and affairs, which said regulations shall be signed,
in duplicate, by the persons uniting to form the banking corporation, and one
copy thereof shall be forwarded to the Comptroller o f the Currency and the
other to the Secretary o f State, to be filed and preserved in their offices.
That the persons uniting to form such banking corporation shall, under their
hands, make an organization certificate which shall specify, first, the name as
sumed by such banking corporation, which name shall be subject to approval
by the Com ptroller; second, the foreign country or countries or the dependencies
o f the United States where its banking operations are to be carried on ; third,
the place in the United States where its home office shall be located; fourth,
the amount o f its capital stock and the number o f shares into which the same
shall be divided; fifth, the names and places o f residence o f the shareholders
and the number o f shares held by each o f them; and sixth, a declaration that
said certificate is made to enable such persons to avail themselves o f the advan
tages o f this section.
That no banking corporation shall be organized under the provisions o f this
section with a less capital than two million dollars, which shall be fully paid in
before the banking corporation shall be authorized to commence business, and
the fact o f said payment shall be certified by the Comptroller o f the Currency,
and a copy o f his certificate to this effect shall be filed with the Secretary o f
State; Provided, That the capital stock o f any such bank may be increased at
any time by a vote o f two-thirds o f its shareholders, with the approval o f the
Comptroller o f the Currency, and that the capital stock o f any such bank which
exceeds two million dollars may be reduced at any time to the sum o f two
million dollars by the vote o f the shareholders owning two-thirds o f the capital.
That every banking corporation formed pursuant to the provisions o f this
section shall for a period o f twenty years from the date o f the execution o f
its organization certificate be a body corporate, but shall not be authorized to
receive the deposits in the United States nor transact any domestic business not
necessarily related to the business being done in foreign countries or in the de
pendencies o f the United States. Such banking corporations shall have authority
to make acceptances, buy and sell bills o f exchange or other commercial paper
relating to foreign business, and to purchase and sell securities, including securi
ties o f the United States or o f any State in the Union. Each banking corpora
tion organized under the provisions o f this section shall have power to establish
and maintain for the transaction o f its business a branch or branches in foreign
countries, their dependencies, or the dependencies o f the United States at such
places and under such regulations as its board o f directors may deem expedient.
A majority o f the shares o f the capital stock o f such banking corporation
shall be held and owned by citizens o f the United States or corporations char
tered under the laws o f the United States or o f any State o f the Union, and a
majority o f the members o f the board o f directors o f such banking corporations
shall be citizens o f the United States. Each director shall own in his own right
at least one hundred shares o f the capital stock o f the banking corporation o f
which he is a director.
Whenever the Comptroller shall become satisfied o f the insolvency o f any
such banking corporation he may appoint a receiver, who shall proceed to close
up such corporation in the same manner in which he would close a national bank,
the disposition o f the assets o f the branches to be subject to any special provi
sions o f the laws o f the country under whose jurisdiction such assets are located.
The annual meeting o f every such banking corporation shall be held at its
home office in the United States, and every such banking corporation shall keep
at its home office books containing the names o f all stockholders o f such banking
corporation and members o f its board o f directors, together with copies o f the
reports furnished by it to the Comptroller o f the Currency exhibiting in detail
and under appropriate heads the resources and liabilities o f the banking corpora
tion. Every such banking corporation shall make reports to the Comptroller o f
the Currency at such times as he may require, and shall be subject to examina
tions when deemed necessary by the Comptroller o f the Currency through ex
aminers appointed by him; the compensation o f such examinations to be fixed
by the Comptroller o f the Currency.

Any such banking corporation may go into liquidation and be closed by the
vote o f its shareholders owning two-thirds o f its stock.
Any bank doing business in the United States being the owner o f stock in
any National Reserve Bank may subscribe to the stock o f any banking corpora
tion organized under the provisions o f this section, but the aggregate o f such
stock held by any one bank shall not exceed ten per centum o f the capital stock
o f the subscribing bank.
S ection 42. That nothing contained in this Act shall be construed to alter
or affect any vested rights o f property or contract, or any penalty incurred
before the taking effect o f this Act or any part o f it, and all provisions o f law
inconsistent with or superseded by any o f the provisions o f this Act be and the
same are hereby repealed.

(CONFIDENTIAL—COMMITTEE PRINT.)
63D CONGRESS,
1ST SE SSIO N .

In the Senate of the United States
May
Mr.

,1913.

introduced the following bill; which was read twice
and referred to the Committee on Banking and Currency.

A BILL
T o establish associations o f national and other banks and trust companies,
to be known as reserve banks, under the supervision o f a National Currency
Board, to mobilize reserves, to provide additional circulation when required
for national commerce, and for other purposes.
Be it enacted by the Senate and House o f Representatives o f the United
States o f America in Congress assembled.
D E F IN IT IO N S .
That the term “ reserve bank,” as used in this Act, means a reserve bank
incorporated in accordance with the terms h e re o f;
“ Member bank” means one o f the subscribing banks o f a reserve bank;
“ Reserve district” means one o f the districts within which a reserve bank
is located under the authority o f this A c t;
“ Prime commercial paper” means a commercial bill, payable within four
months, signed by at least two persons, either o f whom shall be good for such
bill and one o f whom shall be a member bank, such commercial bill to be based
upon an actual commercial transaction and not to be based upon a permanent
investment;
“ Treasury gold note” means a note issued by the United States Treasury,
based on the credit o f the United States and printed in the form to be pre
scribed by the National Currency Board, payable on demand at any reserve bank
or at the Treasury o f the United States;
“ The National Currency Board” shall mean the board o f governors o f the
national currency, as described in this Act.
S ection 2. That the New England Reserve Bank, the Eastern Reserve
Bank, the Southeastern Reserve Bank, the Southern Reserve Bank, the Central
States Reserve Bank, the Rocky Mountain Reserve Bank, the Southwestern Re
serve Bank, and the Pacific Reserve Bank be, and are hereby, created and estab
lished for a term o f thirty years from the date o f filing with the Comptroller
o f the Currency a certificate o f paid-in capital stock as hereinafter provided.
The head office o f the New England Reserve Bank shall be located in Boston,
o f the Eastern Reserve Bank in New York, o f the Southeastern Reserve Bank
in Atlanta, o f the Southern Reserve Bank in New Orleans, o f the Central States
Reserve Bank in Chicago, o f the Southwestern Reserve Bank in Kansas City,
o f the Rocky Mountain Reserve Bank in Denver, and o f the Pacific Reserve
Bank in San Francisco.

T E R M S O F SU B S C R IP T IO N S .
That within six months from the date o f the passage o f this
Act every national bank shall subscribe to the capital o f the reserve bank o f its
district, to an amount equal to twenty per centum o f the paid-in and unimpaired
and surplus capital o f the subscribing bank, and not more nor less.
S ection 3.

Fifty per centum o f the subscriptions to the capital stock o f the reserve
bank shall be fully paid in within six months at the time and places fixed by
the National Currency Board, and the remainder o f the subscriptions, or any
part thereof, shall become a liability o f the subscribers, subject to call and pay
ment thereof, whenever necessary to meet the obligations o f the reserve bank,
under such terms and in accordance with such regulations as the board o f
directors o f the reserve bank may prescribe.
Any bank or trust company incorporated under the laws o f any State or
o f the District o f Columbia may subscribe to the capital o f the reserve bank o f
its district according to the same terms and proportions as a national bank if it
complies with the following conditions:
First. That (a ) it shall have a paid-in and unimpaired capital o f not less
than that required for a national bank in the same locality; and, (b ) if a trust
company, it shall have an unimpaired capital and surplus o f fifty per centum
more than the amount o f capital required for a national bank in the same locality.
Second. Keep a like reserve as required o f the national banks in their
own vaults and with the reserve bank.
Third. Agree to proper examinations as may be required by the National
Currency Board.
Fourth. That it shall agree to comply with all other requirements and
conditions imposed by this A ct and regulations made in conformity therewith.
N o member bank shall serve as an intermediary by which any bank or
trust company, not a stockholder o f a reserve bank, shall receive the benefits
arising under the provisions o f this Act.
N o member bank shall pay interest upon the funds o f other banks or trust
companies deposited with it.
T H E O R G A N IZ A T IO N C O M M ITTE E .
S ection 4.

That the Secretary o f the Treasury, the Attorney General, and
the Comptroller o f the Currency are hereby designated a committee to effect
the organization o f the reserve banks. They shall divide the entire country into
eight districts, which shall be apportioned with due regard to the convenient
and customary course o f business and not necessarily along State lines, and
within sixty days after the passage o f this Act they shall provide for the opening
o f books for subscriptions to the capital stock o f the reserve banks. The neces
sary expenses o f this committee shall be paid out o f the Treasury upon vouchers
approved by the members o f said committee, and the Treasury shall be reim
bursed by the reserve banks to the full amount paid out therefor.
The subscribing banks uniting to form a reserve bank shall make and file
with the Comptroller o f the Currency an organization certificate in the form
and manner described in sections fifty-one hundred and thirty-four, fifty-one
hundred and thirty-five^ and fifty-one hundred and thirty-six, Revised Statutes
o f the United States, signed by their authorized representatives, and they shall
then become a body corporate, and, as such, shall have power to perform all
those acts, enjoy all those privileges, and exercise all those powers described in
section fifty-one hundred and thirty-six, Revised Statutes, save in so far as the
same shall be limited or extended by the provisions o f this Act.
T H E B O A R D S A N D O FFIC E R S O F T H E R E S E R V E BA N K S.
S ection 5.

That each reserve bank shall be organized and conducted under
the oversight and control o f a board o f directors, whose powers shall be the
same as those conferred upon the boards o f directors o f national banking asso
ciations under existing law, except as otherwise provided in this Act. Such
boards shall consist o f nine members holding office for six years, to be chosen
in the follow ing manner :
Six directors shall be elected by the several subscribing banks, each bank
having one unit o f voting power for each million or fraction thereof o f its
capital. Each unit o f voting power shall have as many votes as there are direc
tors to be elected, and these votes may be given in favor o f any or all o f the
candidates for election. Three directors shall be appointed by the President o f
the United States from a list furnished by the National Currency Board to be
hereafter provided for, and shall fairly represent the agricultural, commercial,
manufacturing, and other interests o f the district.

The manager o f the reserve bank shall be elected by the board o f directors
o f the bank and shall thereafter be ex officio presiding officer o f that board, but
shall have no vote unless the board be equally divided. Unitl the organization
o f the National Currency Board and the appointments o f its representatives
upon the board o f a reserve bank the elected members o f such board shall have
full power to act.
N o director o f a reserve bank shall be, while serving, an officer or a director
o f any bank or trust company.
A t the first meeting o f the full board o f directors o f each reserve bank the
members o f the board shall be divided into three classes, whose terms o f office
shall expire at intervals o f two, four, and six years, respectively, estimated from
the first day o f January, nineteen hundred and fourteen. T w o o f the directors
chosen by the member banks and one o f the directors appointed by the Presi
dent shall belong to each class. Thereafter all directors chosen as hereinbefore
provided shall be chosen fo r terms o f six years.
B O A R D OF G O V E R N O R S OF T H E N A T IO N A L CU RREN CY.
That there shall be created a board o f governors o f the national
currency, to consist o f seven members, including the Secretary o f the Treasury,
the Secretary o f Agriculture, and the Comptroller o f the Currency, ex officio,
and four governors, to be appointed by the President o f the United States, and
to serve subject to his will, one o f whom shall be distinguished for his practical
knowledge o f the commerce o f the United States, one for his practical knowledge
o f the manufacturing business, one for his practical knowledge o f transportation,
and one who shall be distinguished for his knowledge o f banking and credit.
The Secretary o f the Treasury shall be ex officio chairman, but the board o f
governors may select its own chairman pro tempore. All expenses o f the board,
including the cost o f necessary offices and the salaries o f its members, shall be
apportioned among and paid by the reserve banks in proportion to their capital.
The salaries o f the members o f the board shall be determined by a majority o f
the reserve banks, each bank having one vote, and no salary shall be reduced
during the term o f an appointment.
The National Currency Board shall have authority to make by-laws not
inconsistent with law, which shall prescribe the manner in which the duties o f
the board shall be fulfilled and the privileges granted to it by law exercised and
enjoyed.
S ection 6.

C A P IT A L O F T H E R E S E R V E BA N K S.
That each reserve bank shall have an authorized capital equal
in amount to twenty per centum o f the paid-in and unimpaired capital and
surplus o f all banks eligible for membership in the said reserve bank. Such
reserve bank shall be authorized to commence business upon the approval o f the
National Currency Board and a certificate o f the Comptroller o f the Currency.
The capital stock o f the reserve bank shall be divided into shares o f $100
each. These shares shall not be transferable, and under no circumstances shall
they be hypothecated, nor shall they be owned otherwise than by member banks,
nor shall they be owned by any such bank other than in the proportions herein
provided. In case a member bank increases its capital it shall thereupon subscribe
for an additional amount o f the capital o f its reserve bank, equal to twenty per
centum o f the member bank’s increase o f capital, paying therefor the then book
value as shown by the last published statement o f said reserve bank.
A bank applying for membership in a reserve bank at any time after its
formation must subscribe for an amount o f the capital o f said reserve bank
equal to twenty per centum o f the capital and surplus o f the subscribing bank,
paying therefor its then book value as shown by the last published statement.
In case a member bank reduces its capital it shall surrender a proportionate
amount o f its holdings in the capital o f said reserve bank, and if a member bank
goes into voluntary liquidation it shall surrender all o f its holdings o f the capital
o f said reserve bank. In either case the shares surrendered shall be canceled,
and the member bank shall receive in payment therefor from the reserve bank
a sum equal to the then book value o f the reserve bank as shown by its last
published statement, and the capital o f the reserve bank shall be reduced corre
spondingly.
.
I f any member bank shall become insolvent and a receiver be appointed, the
S ection 7.

stock held by it in said reserve bank shall be canceled, the insolvent bank credited
with the value thereof, and the balance, after paying all debts due by such in
solvent bank to said reserve bank (such debts being hereby declared to be a
first lien upon the paid-in capital stock held by such mem ber), shall be paid to
the receiver o f the insolvent bank.
Except as hereinbefore provided, no member bank may withdraw from
membership in a reserve bank until after one year’s notice o f such intention to
withdraw, and in such case the member bank shall receive from the reserve bank
a sum equal to the book value o f its stock on the date o f withdrawal.
A certificate o f all increases and decreases o f the capital o f each reserve
bank shall be immediately filed with the Comptroller o f the Currency. Each
reserve bank shall cause to be kept at all times a full and correct list o f the
names o f the banks owning its stock and the number o f shares held by each.
Such list shall be subject to inspection o f all the shareholders o f the Reserve
bank, and a copy thereof shall be transmitted on the first o f July o f each year
to the Comptroller o f the Currency and at any other time required by the
Comptroller o f the Currency.
E A R N IN G S OF T H E R E S E R V E B A N K S.
S ection 8.

That the earnings o f each reserve bank shall be disposed o f in
the follow ing manner: A fter the payment o f all expenses, including the ex
penses o f the National Currency Board, the shareholders shall be entitled to
receive an annual dividend o f five per centum on the paid-in capital, which
dividend shall be cumulative. Further annual net earnings shall be paid into
the surplus fund o f the reserve bank until that fund shall amount to twenty
per centum o f the paid-in capital, and thereafter all earnings in excess o f five
per centum per annum shall be paid to the United States.
The reserve bank shall be exempt from local and State taxation, except in
respect to taxes upon real estate and from all Federal taxes except such as are
provided by this Act.
F U N C T IO N S O F T H E R E S E R V E BA N K S.
S ection 9.

That the reserve banks shall be the fiscal agents o f the United
States. All moneys now held in the general fund o f the Treasury shall, within
six months from the passage o f this Act, be deposited in the reserve banks, and
thereafter the revenues o f the Government shall be deposited in such banks and
disbursements shall be made by check drawn against such deposits. It shall be
the duty o f the National Currency Board herein established to apportion the
funds and revenues o f the Government among the several reserve banks.
The Government o f the United States, reserve banks owning stock in a
reserve bank, and the officers o f the United States shall be the only depositors
in such banks. All domestic transactions o f the reserve banks shall be confined
to the Government, the officers o f the United States, member banks and other
reserve banks, with the exception o f the purchase or sale o f Government or
State securities or securities o f foreign governments, or o f gold coin or bullion.
N o reserve bank shall pay interest on deposits.
A reserve bank may discount, purchase, and sell notes, bills o f exchange,
and acceptances issued or drawn for agricultural, industrial, or commercial pur
poses, provided, first, that they have no more than three months to run, and,
second, that they bear the indorsement o f one or more o f its member banks.
The amount so discounted for any subscriber shall at no time exceed the capital
and surplus o f the subscribing bank. The aggregate o f such notes, bills, and
acceptances made by any one person, company, firm, or corporation discounted
for any one bank shall at no time exceed ten per centum o f the unimpaired
capital and surplus o f said banks.
A reserve bank may discount and purchase notes, bills, and acceptances o f
the character above described from another reserve bank, provided that they
bear the indorsement o f said reserve bank.
A reserve bank may, with the specific approval o f the National Currency
Board, discount the direct obligation o f one o f its member banks: Provided,
That the application is secured by the pledge and deposit with it o f satisfactory
securities, which shall be held by the reserve bank. In no case shall the amount
loaned by the reserve bank exceed three-fourths o f the value o f the security so

pledged, and in case the value o f such security should depreciate, the reserve
bank may require additional collateral to the extent o f such depreciation.
A reserve bank may invest in United States bonds, also in obligations having
not more than one year to run o f the United States or its dependencies, or of
any State, or o f foreign governments.
A reserve bank may, with the consent o f the National Currency Board,
open and maintain banking accounts in foreign countries and establish agencies
in such countries for the purpose o f purchasing, selling, and collecting foreign
bills o f exchange and foreign government obligations o f the kinds named in
this Act, and it shall have authority to buy and sell, with or without its indorse
ment, checks or bills o f exchange, payable in foreign countries, arising out o f
commercial transactions which have not exceeding ninety days to run and which
bear the signature o f two or more responsible parties.
A reserve bank may purchase, acquire, hold, and convey real estate for the
same purposes and under the same restrictions as are described in section fiftyone hundred and thirty-seven, Revised Statutes o f the United States, for the
national banks.
The reserve banks shall have power to lend to and borrow from each other,
to deal in gold coin or bullion, to make loans thereon, and to contract for loans
o f gold coin or bullion, giving therefor, when necessary, acceptable security.
A reserve bank shall, upon request, transfer any part o f the deposit balance
o f any depositor to the credit o f any other depositor in any reserve bank. The
regulations under which such transfer shall be made and the transfer charges
shall be fixed by the National Currency Board.
F U N C T IO N S O F T H E B O A R D O F G O V E R N O R S O F T H E
N A T IO N A L C U RRE N CY .
S ection 10. That the National Currency Board shall be authorized and
empowered—
First. T o exercise general supervision over the reserve banks and to ex
amine at will the accounts and books o f national banks and o f all reserve banks.
Second. T o determine the apportionment o f Treasury deposits and revenues
among the national reserve banks.
Third. T o readjust the boundaries o f the districts o f the reserve banks and
to authorize the establishment o f agencies within these districts whenever in
their opinion the business o f the country requires.
Fourth. T o provide regulations and to establish charges for the transfer o f
deposits from accounts kept with one reserve bank to accounts kept with another.
Fifth. T o supervise the issue o f national currency as provided by this Act.
Sixth. T o suspend for a period not exceeding thirty days (and to renew
such suspension for a period not to exceed fifteen days) any and every reserve
requirement specified in this Act.

R E S E R V E S O F M E M B E R BAN KS.
That within two years from the date when the Secretary o f
the Treasury shall have officially announced that a reserve bank has been
established within a given district, and as rapidly as practicable, every
m em ber bank within the said district shall establish and thereafter main
tain a reserve of cash in its ow n vaults, or o f balance with the reserve bank,
equal to not less than fifteen per centum o f its total outstanding demand
liabilities, and o f this reserve no less than one-half shall be kept as a
balance with the reserve bank. A ll liabilities maturing within thirty days
shall be construed to be demand liabilities within the meaning o f this Act.
A ll A cts or parts o f A cts requiring the maintenance o f other reserves in
national banks against demand liabilities are hereby repealed.
S ection 11.

R E S E R V E S O F T H E R E S E R V E BAN KS.
S ection 12.

That all demand liabilities o f a reserve bank shall be covered
to the extent o f fifty per centum by a reserve o f gold (including gold bullion
and foreign gold coin) or other legal tender m oney o f the United States:
Provided, That W henever and so long as such reserve shall fall and remain
below fifty per centum the reserve bank shall pay for the first month or
fraction thereof a special tax at the rate o f five per centum per annum

upon the deficiency o f the reserve, and thereafter an additional tax o f one
per centum per annum for each month until a tax of ten per centum per
annum is reached, and thereafter such tax o f ten per cent per annum upon
the average amount o f such notes.
W henever and so long as such a
deficiency in the reserve exists the minimum discount rate with the reserve
banks shall be maintained at not less than the rate o f the tax.
N O T E C IR C U L A T IO N .
That the Comptroller o f the Currency is hereby authorized,
with the approval and under regulations to be prescribed by the National
Currency Board, to issue United States Treasury gold notes to the reserve
banks, said notes to be redeemable in gold on presentation at any reserve
bank, or at the office o f the Treasurer o f the United States. The United
States shall have a paramount lien upon all o f the assets o f the reserve bank
to which said notes are issued to the extent o f such notes retained by said
reserve bank, and until such notes or an equal amount o f lawful m oney are
returned to the Treasury o f the United States. A ny reserve bank receiving
such notes shall be required to redeem them on demand, in gold, and shall
set apart in its own vaults prime commercial paper as collateral security for
the return o f such notes, or an equivalent in lawful m oney, to the Treasurer
o f the United States.
Such Treasury gold notes shall be issued in a form to be prescribed by
the National Currency Board.
A reserve bank to which such Treasury gold notes are issued shall
pay during the first four months during which such notes are held and
retained at the rate o f three per centum per annum for the use o f such notes,
and at the rate o f one per centum per annum for each additional month
or fraction thereof until a tax o f ten per centum per annum is reached,
and thereafter a tax o f ten per centum per annum upon the average amount
o f such notes until they are returned to the Treasury.
S ection 13.

M EMORANDUM .
N O T E .— The security o f these notes is first, a first lien on the assets
o f the reserve bank; second, prime com m ercial paper o f like amount
collateral in the hands o f the bank; third, the credit o f the United States.
T h e banks will have abundant gold in their hands to keep these notes
at par. A ny person desiring gold can easily get gold on the thousands
of millions o f outstanding gold certificates. These notes for commercial
purposes intended to be used as a means o f discounting prime commercial
paper and furnishing a prom pt and open market for prime com m ercial
paper w ould be distributed to the local banks desiring currency for
m oving the crops, etc.
The United States Government might, if it were deemed worth while
at all, acquire a small gold deposit to cover any o f these notes offered
for redemption in gold at the Treasury.
The Subtreasury should be abolished and the Governm ent deposits
placed with the reserve banks. The currency board should have authority
to require the reserve banks to keep an open account with the Treasurer
o f the United States and each o f them.
R E P O R T S A N D E X A M IN A T IO N S .
That the reserve banks shall make reports showing the prin
cipal items o f their balance sheets to the Com ptroller o f the Currency once
a week, which reports shall be made public. In addition, full reports shall
be made to the Com ptroller o f the Currency by the reserve bank and coinci
dent with the five reports called for each year from the national banks.
The National Currency Board shall, as often as deemed necessary or
proper, directly or through representatives, examine the affairs o f the reserve
banks.
All m em ber banks shall, under regulations to be prescribed by the
National Currency Board, report monthly, or oftener, if required, to their
reserve banks, show ing the principal items o f their balance sheets.
It shall be the duty o f a reserve bank to examine the condition o f all
S ection 14.

m em ber banks at such times and under such regulations as the National
Currency Board may determine. The reserve bank may, however, accept
for this purpose copies o f the reports o f the national-bank examiners o f
mem ber national banks and also copies o f the reports o f State bank examiners
for m em ber State banks and trust companies in States where the furnishing
o f such inform ation is not contrary to law.
A reserve bank may make such payments to national and State ex
aminers for such services required o f them as the directors may consider
just and equitable. All reports o f national-bank examiners in regard to the
condition o f banks shall hereafter be made in duplicate, and one copy shall
be filed with the appropriate reserve bank for the confidential use o f its
executive officers. The reports o f all examinations conducted by or for the
reserve banks shall be held strictly confidential and for the exclusive use
o f the executive officers o f the reserve bank.

Full text of Who Is Entitled to the Credit for the Federal Reserve Act? An Answer to Senator Glass by Samuel Untermyer, Box 1, Folder 4, Item 3

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