Full text of Federal Reserve Bank of New York Circulars : 1199. Act to Provide for Direct Loans by Federal Reserve Banks to State Banks and Trust Companies, in Certain Cases, and for Other Purposes

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FEDERAL RESERVE BANK
OF NEW YORK

(Circular No. 1199)
( March 30, 1953 )
Act t o Provide for Direct Loans by Federal Reserve Banks t o State Banks
and Trust Companies, in Certain Cases, and for Other Purposes

To All Banking Institutions in the
Second Federal Reserve D i s t r i c t :
For your information and supplementing our Circular No. 1171, dated
March 9, 1933, in which vre quoted the text, as transmitted to us by wire, of the
Act of Congress approved March 9, 1933, entitled "An Act to provide r e l i e f in
the existing national emergency in banking and for other purposes,"

we enclose

with t h i s circular a copy of an Act of Congress approved March 24, 1933, ent i t l e d "An Act to provide for direct loans by Federal reserve banks to State
banks and trust companies, in certain cases, and for other purposes."




George L, Harrison,
Governor.

[PUBLIC—No. 4—73D CONGRESS]
[H. R. 3757]
AN ACT
To provide for direct loans by Federal reserve banks to State banks and trust
companies in certain cases, and for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That Title IV of
the Act entitled "An Act to provide relief in the existing national
emergency in banking, and for other purposes," approved March
9, 1933, is amended by adding at the end thereof the following new
section:
" SEC. 404. During the existing emergency in banking, or until
this section shall be declared no longer operative by proclamation
of the President, but in no event beyond the period of one year
from the date this section takes effect, any State bank or trust
company not a member of the Federal reserve system may apply
to the Federal reserve bank in the district in which it is located and
said Federal reserve bank, in its discretion and after inspection
and approval of the collateral and a thorough examination of the
applying bank or trust company, may make direct loans to such
State bank or trust company under the terms provided in section
10 (b) of the Federal Reserve Act, as amended by section 402 of
this Act: Provided, That loans may be made to any applying
nonmember State bank or trust company upon eligible security.
All applications for such loans shall be accompanied by the written
approval of the State banking department or commission of the
State from which the State bank or trust company has received
its charter and a statement from the said State banking department
or commission that in its judgment said State bank or trust company
is in a sound condition. The notes representing such loans shall be
eligible as security for circulating notes issued under the provisions
of the sixth paragraph of section 18 of the Federal Reserve Act, as
amended by section 401 of this Act, to the same extent as notes,
drafts, bills of exchange, or bankers' acceptances acquired under
the provisions of the Federal Reserve Act. During the time that
such bank or trust company is indebted in any way to a Federal
Reserve bank it shall be required to comply in all respects to the
provisions of the Federal Reserve Act applicable to member State
banks and the regulations of the Federal Reserve Board issued
thereunder: Provided, That in lieu of subscribing to stock in the
Federal reserve bank it shall maintain the reserve balance required
by section 19 of the Federal Reserve Act during the existence of
such indebtedness. As used in this section and in section 304, the
term ' State bank or trust company' shall include a bank or trust
company organized under the laws of any State, Territory, or
possession of the United States, or the Canal Zone.'
SEC. 2. (a) Section 304 of such Act of March 9, 1933, is amended
by adding after the first sentence thereof the following new sen-




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tences: "Nothing in this section shall be construed to authorize the
Reconstruction Finance Corporation to subscribe for preferred stock
in any State bank or trust company if under the laws of the State
in which said State bank or trust company is located the holders of
such preferred stock are not exempt from double liability. In any
case in which under the laws of the State in which it is located a
State bank or trust company is not permitted to issue preferred
stock exempt from double liability, or if such laws permit such issue
of preferred stock only by unanimous consent of stockholders, the
Reconstruction Finance Corporation is authorized, for the purposes
of this section, to purchase the legally issued capital notes or debentures of such State bank or trust company."
(b) The second sentence of said section 304 is amended to read as
follows: u The Reconstruction Finance Corporation may, with the
approval of the Secretary of the Treasury, and under such rules and
regulations as he may prescribe, sell in the open market the whole
or any part of the preferred stock, capital notes, or debentures of
any national banking association, State bank or trust company
acquired by the corporation pursuant to this section."
Such section 304 is further amended by adding at the end thereof
the
following new sentence: (c) "As used in this section, the term
1
State bank or trust company' shall include other banking corporations engaged in the business of industrial banking and under the
supervision of State banking departments or of the Comptroller of
the Currency."
Approved March 24th, 1933