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FEDERAL RESERVE BANK
OF NEW YORK
No. 1 5 8 2 1
August 30, 1935 J
C Circular
BANKING ACT OF 1935
To all Banks and Others Concerned
in the Second Federal Reserve District:
For your information we enclose a copy of the Banking Act of
1935, approved August 23,1935.
We enclose also a copy of a summary of certain provisions of
Title I, and section-by-section summary of Titles II and III, of that
Act. This is intended merely as a summary of the law and not as an
interpretation thereof or commentary thereon.
GEORGE L. HARRISON,
Governor.
[PUBLIC—No. 305—74TH CONGRESS}
[H. R. 7617]
AN ACT
To provide for the sound, effective, and uninterrupted operation of the banking
system, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may
be cited as the " Banking Act of 1935 ".
TITLE I—FEDEKAL DEPOSIT INSURANCE
SECTION 101. Section 12B of the Federal Reserve Act, as amended
(U. S. C, Supp. VII, title 12, sec. 264), is amended to read as
follows:
" SEC. 12B. (a) There is hereby created a Federal Deposit Insurance Corporation (hereinafter referred to as the ' Corporation')
which shall insure, as hereinafter provided, the deposits of all banks
which are entitled to the benefits of insurance under this section,
and which shall have the powers hereinafter granted.
"(b) The management of the Corporation shall be vested in a
board of directors consisting of three members, one of whom shall
be the Comptroller of the Currency, and two of whom shall be citizens of the United States to be appointed by the President, by and
with the advice and consent of the Senate. One of the appointive
members shall be the chairman of the board of directors of the
Corporation and not more than two of the members of such board
of directors shall be members of the same political party. Each
such appointive member shall hold office for a term of six years and
shall receive compensation at the rate of $10,000 per annum, payable monthly out of the funds of the Corporation, but the Comptroller of the Currency shall not receive additional compensation for
his services as such member. In the event of a vacancy in the office
of the Comptroller of the Currency, and pending the appointment of
his successor, or during the absence of the Comptroller from Washington, the Acting Comptroller of the Currency shall be a member of
the board of directors in the place and stead of the Comptroller.
In the event of a vacancy in the office of the chairman of the board
of directors, and pending the appointment of his successor, the
Comptroller of the Currency shall act as chairman. The Comptroller
of the Currency shall be ineligible during the time he is in office
and for two years thereafter to hold any office, position, or employment in any insured bank. The appointive members of the board of
directors shall be ineligible during the time they are in office and
for two years thereafter to hold any office, position, or employment
in any insured bank, except that this restriction shall not apply to
any appointive member who has served the full term for which he
was appointed. No member of the board of directors shall be an
officer or director of any bank, banking institution, trust company,
or Federal Keserve bank or hold stock in any bank, banking institu-
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tion, or trust company; and before entering upon his duties as a
member of the board of directors he shall certify under oath that he
has complied with this requirement and such certification shall be
filed with the secretary of the board of directors. No member of
the board of directors serving on the board of directors on the effective date shall be subject to any of the provisions of the three
preceding sentences until the expiration of his present term of office.
"(c) As used in this section—
"(1) The term ' State bank' means any bank, banking association,
trust company, savings bank, or other banking institution which is
engaged in the business of receiving deposits and which is incorporated under the laws of any State. Hawaii, Alaska, Puerto Rico, or
the Virgin Islands, or which is operated under the Code of Law for
the District of Columbia (except a national bank), and includes any
unincorporated bank the deposits of which are insured on the effective
date under the provisions of this section.
"(2)The term ' State member bank' means any State bank which
is a member of the Federal Reserve System, and the term ' State
nonmember bank ' means any State bank which is not a member of
the Federal Reserve System.
"(3) The term 'District bank' means any State bank operating
under the Code of Law for the District of Columbia.
"(4) The term 'national member bank ' means any national bank
located in any of the States of the United States, the District of
Columbia, Hawaii, Alaska, Puerto Rico, or the Virgin Islands which
is a member of the Federal Reserve System.
"(5) The term 'national nonmember bank' means any national
bank located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands
which is not a member of the Federal Reserve System.
"(6) The term 'mutual savings bank ' means a bank without capital stock transacting a savings bank business, the net earnings of
which inure wholly to the benefit of its depositors after payment of
obligations for any advances by its organizers.
"(7) The term ' savings bank ' means a bank (other than a mutual
savings bank) which transacts its ordinary banking business strictly
as a savings bank under State laws imposing special requirements
on such banks governing the manner of investing their funds and of
conducting their business: Provided, That the bank maintains, until
maturity date or until withdrawn, all deposits made with it (other
than funds held by it in a fiduciary capacity) as time savings deposits
of the specific term type or of the type where the right is reserved
to the bank to require written notice before permitting withdrawal:
Provided further, That such bank to be considered a savings bank
must elect to become subject to regulations of the Corporation with
respect to the redeposit of maturing deposits and prohibiting withdrawal of deposits by checking except in cases where such withdrawal
is permitted by law on the effective date from specifically designated
deposit accounts totaling not more than 15 per centum of the bank's
total deposits.
"(8) The term 'insured bank' means any bank the deposits of
which are insured in accordance with the provisions of this section:
and the term ' noninsured bank' means any bank the deposits oi
which are not so insured.
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"(9) The term 'new bank ' means a new national banking association organized by the Corporation to assume the insured deposits of
an insured bank closed on account of inability to meet the demands
of its depositors and otherwise to perform temporarily the functions
prescribed in this section.
"(10) The term 'receiver' includes a receiver, liquidating agent,
conservator, commission, person, or other agency charged by law with
the duty of winding up the affairs of a bank.
"(11) The term ' board of directors ' means the board of directors
of the Corporation.
"(12) The term 'deposit' means the unpaid balance of money or
its equivalent received by a bank in the usual course of business and
for which it has given or is obligated to give credit to a commercial,
checking, savings, time or thrift account, or which is evidenced by its
certificate of deposit, and trust funds held by such bank whether
retained or deposited in any department of such bank or deposited in
another bank, together with such other obligations of a bank as the
board of directors shall find and shall prescribe by its regulations to
be deposit liabilities by general usage: Provided, That any obligation of a bank which is payable only at an office of the bank located
outside the States of the United States, the District of Columbia,
Hawaii, Alaska, Puerto Kico, and the Virgin Islands, shall not be a
deposit for any of the purposes of this section or be included as a
part of total deposits or of an insured deposit: Provided further.
That any insured bank having its principal place of business in any
of the States of the United States or in the District of Columbia
which maintains a branch in Hawaii, Alaska, Puerto Rico, or the
Virgin Islands may elect to exclude from insurance under this section its deposit obligations which are payable only at such branch,
and upon so electing the insured bank with respect to such branch
shall comply with the provisions of this section applicable to the termination of insurance by nonmember banks: Provided further, That
the bank may elect to restore the insurance to such deposits at any
time its capital stock is unimpaired.
"(13) The term 'insured deposit' means the net amount due to
any deposit or deposits in an insured bank (after deducting offsets)
less any part thereof which is in excess of $5,000. Such net amount
shall be determined according to such regulations as the board of
directors may prescribe, and in determining the amount due to any
depositor there shall be added together all deposits in the bank maintained in the same capacity and the same right for his benefit either
in his own name or in the names of others, except trust funds which
shall be insured as provided in paragraph (9) of subsection (h) of
this section.
"(14) The term 'transferred deposit' means a deposit in a new
bank or other insured bank made available to a depositor by the Corporation as payment of the insured deposit of such depositor in a
closed bank, and assumed by such new bank or other insured bank.
"(15) The term ' branch' includes any branch bank, branch office,
branch agency, additional office, or any branch place of business
located in any State of the United States or in Hawaii, Alaska,
Puerto Rico, or the Virgin Islands at which deposits are received or
checks paid or money lent.
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"(16) The term 'effective date' means the date of enactment of
the Banking Act of 1935.
"(d) There is hereby authorized to be appropriated, out of any
money in the Treasury not otherwise appropriated, the sum of
$150,000,000, which shall be available for payment by the Secretary
of the Treasury for capital stock of the Corporation in an equal
amount, which shall be subscribed for by him on behalf of the United
States. Payments upon such subscription shall be subject to call in
whole or in part by the board of directors of the Corporation. Such
stock shall be in addition to the amount of capital stock required to
be subscribed for by Federal Reserve banks. Receipts for payments
by the United States for or on account of such stock shall be issued
by the Corporation to the Secretary of the Treasury and shall be
evidence of the stock ownership of the United States. Every Federal Reserve bank shall subscribe to shares of stock in the Corporation to an amount equal to one-half of the surplus of such bank on
January 1, 1933, and its subscriptions shall be accompanied by a
certified check payable to the Corporation in an amount equal to onehalf of such subscription. The remainder of such subscription shall
be subject to call from time to time by the board of directors upon
ninety days' notice. The capital stock of the Corporation shall consist of the shares subscribed for prior to the effective date. Such
stock shall be without nominal or par value, and shares issued
prior to the effective date shall be exchanged and reissued at the
rate of one share for each $100 paid into the Corporation for capital
stock. The consideration received by the Corporation for the capital
stock shall be allocated to capital and to surplus in such amounts as
the board of directors shall prescribe. Such stock shall have no
vote and shall not be entitled to the payment of dividends.
"(e) (1) Every operating State or national member bank, including a bank incorporated since March 10, 1933, licensed on or before
the effective date by the Secretary of the Treasury shall be and continue to be, without application or approval, an insured bank and
shall be subject to the provisions of this section.
"(2) After the effective date, every national member bank which
is authorized to commence or resume the business of banking, and
every State bank which is converted into a national member bank or
which becomes a member of the Federal Reserve System, shall be an
insured bank from the time it is authorized to commence or resume
business or becomes a member of the Federal Reserve System. The
certificate herein prescribed s'hall be issued to the Corporation by the
Comptroller of the Currency in the case of such national member
bank, or by the Board of Governors of the Federal Reserve System
in the case of such State member bank: Provided, That in the case of
an insured bank which is admitted to membership in the Federal Reserve System or an insured State bank which is converted into a
national member bank, such certificate shall not be required, and the
bank shall continue as an insured bank. Such certificate shall state
that the bank is authorized to transact the business of banking in the
case of a national member bank or is a member of the Federal
Reserve System in the case of a State member bank, and that consideration has been given to the factors enumerated in subsection (g)
of this section.
[PUB.
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"(f) (1) Every bank which is not a member of the Federal Reserve
System which on June 30, 1935 was or thereafter became a member
of the Temporary Federal Deposit Insurance Fund or of the Fund
For Mutuals heretofore created pursuant to the provisions of this
section, shall be and continue to be, without application or approval,
an insured bank and shall be subject to the provisions of this section:
Provided, That any State nonmember bank which was admitted to
the said Temporary Federal Deposit Insurance Fund or the Fund
For Mutuals but which did not file on or before the effective date
an October 1,1934 certified statement and make the payments thereon
required by law, shall cease to be an insured bank on August 31,
1935: Provided further, That no bank admitted to the said Temporary Federal Deposit Insurance Fund or the Fund For Mutuals
prior to the effective date shall, after August 31, 1935, be an insured
bank or have its deposits insured by the Corporation, if such bank
shall have permanently discontinued its banking operations prior to
the effective date.
"(2) Subject to the provisions of this.section, any national nonmember bank, upon application by the bank and certification by the
Comptroller of the Currency in the manner prescribed in subsection
(e) of this section, and any State nonmember bank, upon application
to and examination by the Corporation and approval by the board of
directors, may become an insured bank. Before approving the application of any such State nonmember bank, the board of directors
shall give consideration to the factors enumerated in subsection (g)
of this section and shall determine, upon the basis of a thorough
examination of such bank, that its assets in excess of its capital
requirements are adequate to enable it to meet all its liabilities to
depositors and other creditors as shown by the books of the bank.
"(g) The factors to be enumerated in the certificate required under
subsection (e) and to be considered by the board of directors under
subsection (f) shall be the following: The financial history and condition of the bank, the adequacy of its capital structure, its future
earnings prospects, the general character of its management, the convenience and needs of the community to be served by the bank, and
whether or not its corporate powers are consistent with the purposes
of this section.
"(h) (1) The assessment rate shall be one-twelfth of 1 per centum
per annum. The semiannual assessment for each insured bank shall
be in the amount of the product of one-half the annual assessment
rate multiplied by an assessment base which shall be the average for
six months of the differences at the end of each calendar day between
the total amount of liability of the bank for deposits (according to
the definition of the term ' deposit' in and pursuant to paragraph
(12) of subsection (c) of this section, without any deduction for
indebtedness of depositors) and the total of such uncollected items as
are included in such deposits and credited subject to final payment:
Provided, however, That the daily total of such uncollected items
shall be determined according to regulations prescribed by the board
of directors upon a consideration of the factors of general usage and
ordinary time of availability, and for the purposes of such deduction
no item shall be regarded as uncollected for longer periods than those
prescribed by such regulations. Each insured bank shall, as a condi-
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tion to the right to deduct any specific uncollected item in determining its assessment base, maintain such records as will readily permit
verification of the correctness of the particular deduction claimed.
The certified statements required to be filed with the Corporation
under paragraphs (2), (3), and (4) of this subsection shall be in such
form and set forth such supporting information as the board of
directors shall prescribe. The assessment payments required from
insured banks under paragraphs (2), (3), and (4) of this subsection
shall be made in such manner and at such time or times as the board
of directors shall prescribe, provided the time or times so prescribed
shall not be later than sixty days after filing the certified statement
setting forth the amount of the assessment. In the event that a separate Fund For Mutuals is established as provided in subsection (1),
the board of directors from time to time may fix a lower assessment
rate operative for such period as the board may determine which
shall be applicable to insured mutual savings banks only, and the
remainder of this paragraph shall not be applicable to such banks.
"(2) On or before the 15th day of July of each year, each insured
bank shall file with the Corporation a certified statement under oath
showing for the six months ending on the preceding June 30 the
amount of the assessment base and the amount of the semiannual
assessment due to the Corporation, determined in accordance with
paragraph (1) of this subsection. Each insured bank shall pay to
the Corporation the amount of the semiannual assessment it is
required to certify. On or before the 15th day of January of each
year after 1936 each insured bank shall file with the Corporation a
similar certified statement for the six months ending on the preceding
December 31 and shall pay to the Corporation the amount of the
semiannual assessment it is required to certify.
"(3) Each bank which becomes an insured bank according to the
provisions of subsection (e) or (f) of this section shall, on or before
the 15th day of November 1935, file with the Corporation a certified
statement under oath showing the amount of the assessment due to
the Corporation for the period ending December 31, 1935, which shall
be an amount equal to the product of one-third the annual assessment rate multiplied by the assessment base determined in accordance with paragraph (1) of this subsection, except that the assessment base shall be the average for the 31 days in the month of
October 1935, and payment shall be made to the Corporation of the
amount of the assessment so required to be certified. Each such
bank shall, on or before the 15th day of January 1936, file with the
Corporation a certified statement under oath showing the amount
of the semiannual assessment due to the Corporation for the period
ending June 30, 1936, which shall be an amount equal to the product
of one-half the annual assessment rate multiplied by the assessment
base determined in accordance with paragraph (1) of this subsection,
except that the assessment base shall be the average for the days ot
the months of October, November and December of 1935, and payment shall be made to the Corporation of the amount of the assessment so required to be certified.
"(4) Each bank which becomes an insured bank after the effective
date shall be relieved from complying with the provisions of paragraph (2) of this subsection until it has operated as an insured bank
[Pra. 306.]
I
for a full semiannual period ending on June 30 or December 31 as
the case may be. Each such bank, on or before the forty-fifth day
after its first day of operation as an insured bank, shall file with the
Corporation its first certified statement which shall be under oath
and shall show the amount of the assessment base determined in
accordance with paragraph (1) of this subsection, except that the
assessment base shall be the average for the first thirty-one calendar
days it operates as an insured bank. Each such certified statement
shall also show as the amount of the first assessment due to the Corporation the prorated portion (for the period between its first day
of operation as an insured bank and the next succeeding last day of
June or December, as the case may be) of an amount equal to the
product of one-half the annual assessment rate multiplied by the
base required to be set forth on its first certified statement. Each
bank which becomes an insured bank after the effective date which
has not operated as an insured bank for a full semiannual period
ending on June 30 or December 31, as the case may be, shall, on or
before the 15th day of the first month thereafter (except that banks
becoming insured in June or December shall have thirty-one additional days) file with the Corporation its second certified statement
under oath showing the amount of the assessment base and the amount
of the semiannual assessment due to the Corporation. Such assessment base and amount shall be determined in accordance with paragraph (1) of this subsection, except that if the bank became an
insured bank in the month of December or June the assessment base
shall be the average for the first thirty-one calendar days it operates
as an insured bank, and except that if it became an insured bank in
any other month than December or June the assessment base shall be
the average for the days between its first day of operation as an
insured bank and the next succeeding last day of June or December,
as the case may be. Each bank required to file a certified statement
under this paragraph shall pay to the Corporation the amount of the
assessment the bank is required to certify.
"(5) Each bank which shall be and continue without application
or approval an insured bank in accordance with the provisions of
subsection (e) or (f) of this section, shall, in lieu of all right to
refund (except as authorized in paragraph (3) of subsection (i)),
be credited with any balance to which such bank shall become entitled
upon the termination of the said Temporary Federal Deposit Insurance Fund or the Fund For Mutuals. The credit shall be applied
by the Corporation toward the payment of the assessment next
becoming due from such bank and upon succeeding assessments until
the credit is exhausted.
"(6) Any insured bank which fails to file any certified statement
required to be filed by it in connection with determining the amount
of any assessment payable by the bank to the Corporation may be
compelled to file such statement by mandatory injunction or other
appropriate remedy in a suit brought for such purpose by the Corporation against the bank and any officer or officers thereof in any
court of the United States of competent jurisdiction in the district
or territory in which such bank is located.
"(7) The Corporation, in a suit brought at law or in equity in any
court of competent jurisdiction, shall be entitled to recover from any
insured bank the amount of any unpaid assessment lawfully payable
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by such insured bank to the Corporation, whether or not such bank
shall have filed any such certified statement and whether or not suit
shall have been brought to compel the bank to file any such statement.
"(8) Should any national member bank or any insured national
nonmember bank fail to file any certified statement required to be
filed by such bank under any provision of this subsection, or fail to
pay any assessment required to be paid by such bank under any provision of this section, and should the bank not correct such failure
within thirty days after written notice has been given by the Corporation to an officer of the bank, citing this paragraph, and stating
that the bank has failed to file or pay as required by law, all the
rights, privileges, and franchises of the bank granted to it under the
National Bank Act or under the provisions of this Act, as amended,
shall be thereby forfeited. Whether or not the penalty provided in
this paragraph has been incurred shall be determined and adjudged
in the manner provided in the sixth paragraph of section 2 of this
Act, as amended. The remedies provided in this paragraph and in
the two preceding paragraphs shall not be construed as limiting any
other remedies against any insured bank, but shall be in addition
thereto.
"(9) Trust funds held by an insured bank in a fiduciary capacity
whether held in its trust or deposited in any other department or in
another bank shall be insured in an amount not to exceed $5,000 for
each trust estate, and when deposited by the fiduciary bank in another
insured bank such trust funds shall be similarly insured to the fiduciary bank according to the trust estates represented. Notwithstanding any other provision of this section, such insurance shall be
separate from and additional to that covering other deposits of the
owners of such trust funds or the beneficiaries of such trust estates:
Provided, That where the fiduciary bank deposits any of such trust
funds in other insured banks, the amount so held by other insured
banks on deposit shall not for the purpose of any certified statement
required under paragraph (2), (3), or (4) of this subsection be considered to be a deposit liability of the fiduciary bank, but shall be
considered to be a deposit liability of the bank in which such funds
are so deposited by such fiduciary bank. The board of directors
shall have power by regulation to prescribe the manner of reporting
and of depositing such trust funds.
"(i) (1) Any insured bank (except a national member bank or
State member bank) may, upon not less than ninety days' written
notice to the Corporation, and to the Reconstruction Finance Corporation if it owns or holds as pledgee any preferred stock, capital
notes, or debentures of such bank, terminate its status as an insured
bank. Whenever the board of directors shall find that an insured
bank or its directors or trustees have continued unsafe or unsound
practices in conducting the business of such bank, or have knowingly
or negligently permitted any of its officers or agents to violate any
provision of any law or regulation to which the insured bank is
subject, the board of directors shall first give to the Comptroller of
the Currency in the case of a national bank or a District bank, to the
authority having supervision of the bank in the case of a State bank,
or to the Board of Governors of the Federal Reserve System in the
case of a State member bank, a statement with respect to such prac-
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I?
tices or violations for the purpose of securing the correction thereof.
Unless such correction shall be made within one hundred and twenty
days or such shorter period of time as the Comptroller of the Currency, the State authority, or Board of Governors of the Federal
Reserve System, as the case may be, shall require, the board of directors, if it shall determine to proceed further, shall give to the bank
not less than thirty days' written notice of intention to terminate
the status of the bank as an insured bank, and shall fix a time and
place for a hearing before the board of directors or before a person
designated by it to conduct such hearing, at which evidence may be
produced, and upon such evidence the board of directors shall make
written findings which shall be conclusive. Unless the bank shall
appear at the hearing by a duly authorized representative, it shall
be deemed to have consented to the termination of its status as an
insured bank. If the board of directors shall find that any violation
specified in such notice has been established, the board of directors
may order that the insured status of the bank be terminated on a
date subsequent to such finding and to the expiration of the time
specified in such notice of intention. The Corporation may publish
notice of such termination and the bank shall give notice of such
termination to each of its depositors at his last address of record on
the books of the bank, in such manner and at such time as the board
of directors may find to be necessary and may order for the protection of depositors. After the termination of the insured status of
any bank under the provisions of this paragraph, the insured deposits
of each depositor in the bank on the date of such termination, less all
subsequent withdrawals from any deposits of such depositor, shall
continue for a period of two years to be insured, and the bank shall
continue to pay to the Corporation assessments as in the case of an
insured bank during such period. No additions to any such deposits
and no new deposits in such bank made after the date of such termination shall be insured by the Corporation, and the bank shall not
advertise or hold itself out as having insured deposits unless in the
same connection it shall also state with equal prominence that such
additions to deposits and new deposits made after such date are not
so insured. Such bank shall, in all other respects, be subject to the
duties and obligations of an insured bank for the period of two years
from the date of such termination, and in the event that such bank
shall be closed on account of inability to meet the demands of its
depositors within such period of two years, the Corporation shall
have the same powers and rights with respect to such bank as in
case of an insured bank.
"(2) Whenever the insured status of a State member bank shall be
terminated by action of the board of directors, the Board of Governors of the Federal Reserve System shall terminate its membership
in the Federal Reserve System in accordance with the provisions of
section 9 of this Act, and whenever the insured status of a national
member bank shall be so terminated the Comptroller of the Currency
shall appoint a receiver for the bank, which shall be the Corporation
whenever the bank shall be unable to meet the demands of its
depositors. Whenever a member bank shall cease to be a member
of the Federal Reserve System, its status as an insured bank shall,
Pub. No. 305
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without notice or other action by the board of directors, terminate on
the date the bank shall cease to be a member of the Federal Reserve
System, with like effect as if its insured status had been terminated
on said date by the board of directors after proceedings under paragraph (1) of this subsection.
"(3) If any nonmember bank which becomes an insured bank
under the provisions of paragraph (1) of subsection (f) of this section shall elect, within thirty days after the effective date, not to
continue as an insured bank, and shall within such period give written notice to the Corporation of its election, in accordance with regulations to be prescribed by the board of directors, and to the Reconstruction Finance Corporation if it owns or holds as pledgee any
preferred stock, capital notes, or debentures of such bank, it shall
cease to be an insured bank and cease to be subject to the provisions
of this section and the rights of the bank (including its right to any
refund) shall be as provided by law existing prior to the effective
date. The board of directors shall cause notice of termination of
insurance to be given to the depositors of such bank by publication
or otherwise as the board of directors may determine, and the deposits
in such bank shall continue to be insured for twenty days beyond
such thirty day period.
"(4) Whenever the liabilities of an insured bank for deposits shall
have been assumed by another insured bank or banks, the insured
status of the bank whose liabilities are so assumed shall terminate on
the date of receipt by the Corporation of satisfactory evidence of
such assumption with like effect as if its insured status had been terminated on said date by the board of directors after proceedings
under paragraph (1) of this subsection: Provided, That if the bank
whose liabilities are so assumed gives to its depositors notice of such
assumption within thirty days after such assumption takes effect, by
publication or by any reasonable means, in accordance with regulations to be prescribed by the board of directors, the insurance of its
deposits shall terminate at the end of six months from the date such
assumption takes effect, and such bank shall thereupon be relieved of
all future obligations to the Corporation, including the obligation to
pay future assessments.
"(j) Upon the date of enactment of the Banking Act of 1933, the
Corporation shall become a body corporate and as such shall have
power—
" First. To adopt and use a corporate seal.
" Second. To have succession until dissolved by an Act of Congress.
" Third. To make contracts.
" Fourth. To sue and be sued, complain and defend, in any court
of law or equity, State or Federal. All suits of a civil nature at
common law or in equity to which the Corporation shall be a party
shall be deemed to arise under the laws of the United States: Provided, That any such suit to which the Corporation is a party in its
capacity as receiver of a State bank and which involves only the
rights or obligations of depositors, creditors, stockholders and such
State bank under State law shall not be deemed to arise under the
laws of the United States. No attachment or execution shall be
issued against the Corporation or its property before final judgment
in any suit, action, or proceeding in any State, county, municipal, or
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United States court. The board of directors shall designate an agent
upon whom service of process may be made in any State, Territory,
or jurisdiction in which any insured bank is located.
"Fifth. To appoint by its board of directors such officers and
employees as are not otherwise provided for in this section, to define
their duties, fix their compensation, require bonds of them and fix
the penalty thereof, and to dismiss at pleasure such officers or
employees. Nothing in this or any other Act shall be construed to
prevent the appointment and compensation as an officer or employee
of the Corporation of any officer or employee of the United States in
any board, commission, independent establishment, or executive
department thereof.
" Sixth. To prescribe by its board of directors, bylaws not inconsistent with law, regulating the manner in which its general business
may be conducted, and the privileges granted to it by law may be
exercised and enjoyed.
" Seventh. To exercise by its board of directors, or duly authorized
officers or agents, all powers specifically granted by the provisions of
this section and such incidental powers as shall be necessary to carry
out the powers so granted.
" Eighth. To make examinations of and to require information
and reports from banks, as provided in this section.
" Ninth. To act as receiver.
" Tenth. To prescribe by its board of directors such rules and regulations as it may deem necessary to carry out the provisions of this
section.
"(k) (1) The board of directors shall administer the affairs of the
Corporation fairly and impartially and without discrimination. The
board of directors of the Corporation shall determine and prescribe
the manner in which its obligations shall be incurred and its expenses
allowed and paid. The Corporation shall be entitled to the free use
of the United States mails in the same manner as the executive
departments of the Government. The Corporation with the consent
of any Federal Reserve bank or of any board, commission, independent establishment, or executive department of the Government,
including any field service thereof, may avail itself of the use ol
information, services, and facilities thereof in carrying out the
provisions of this section.
"(2) The board of directors shall appoint examiners who shall
have power, on behalf of the Corporation, to examine any insured
State nonmember bank (except a District bank), any State nonmember bank making application to become an insured bank, and any
closed insured bank, whenever in the judgment of the board of directors an examination of the bank is necessary. Such examiners shall
have like power to examine, with the written consent of the Comptroller of the Currency, any national bank or District bank, and,
with the written consent of the Board of Governors of the Federal
Reserve System, any State member bank. Each such examiner shall
have power to make a thorough examination of all the affairs of the
bank and in doing so he shall have power to administer oaths and
to examine and take and preserve the testimony of any of the officers
and agents thereof, and shall make a full and detailed report of the
condition of the bank to the Corporation. The board of directors in
12
[PUB.
306.1
like manner shall appoint claim agents who shall have power to
investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall have power to administer
oaths and to examine under oath and take and preserve the testimony
of any persons relating to such claims. The provisions of sections 184
to 186 (both inclusive) of the Kevised Statutes (U. S. C, title 5,
sees. 94 to 96) are hereby extended to examinations and investigations
authorized by this paragraph.
"(3) Each insured State nonmember bank (except a District bank)
shall make to the Corporation reports of condition in such form and
at such times as the board of directors may require. The board of
directors may require such reports to be published in such manner,
not inconsistent with any applicable law, as it may direct. Every
such bank which fails to make or publish any such report within
such time, not less than five days, as the board of directors may
require, shall be subject to a penalty of not more than $100 for each
day of such failure recoverable by the Corporation for its use.
"(4) The Corporation shall have access to reports of examinations
made by, and reports of condition made to, the Comptroller of the
Currency or any Federal Reserve bank, may accept any report made
by or to any commission, board, or authority having supervision of
a State nonmember bank (except a District bank), and may furnish
to the Comptroller of the Currency, to any Federal Reserve bank,
and to any such commission, board, or authority, reports of examinations made on behalf of, and reports of condition made to, the
Corporation.
"(1) (1) The Temporary Federal Deposit Insurance Fund and the
Fund For Mutuals heretofore created pursuant to the provisions of
this section are hereby consolidated into a Permanent Insurance
Fund for insuring deposits, and the assets therein shall be held by the
Corporation for the uses and purposes of the Corporation: Provided,
That the obligations to and rights of the Corporation, depositors,
banks, and other persons arising out of any event or transaction
prior to the effective date shall remain unimpaired. On and after
the effective date, the Corporation shall insure the deposits of all
insured banks as provided m this section: Provided, That the insurance shall apply only to deposits of insured banks which have been
made available since March 10, 1*933, for withdrawal in the usual
course of the banking business: Provided further, That if any insured
bank shall, without the consent of the Corporation, release or modify
restrictions on or deferments of deposits which had not been made
available for withdrawal in the usual course of the banking business
on or before the effective date, such deposits shall not be insured.
The maximum amount of the insured deposit of any depositor shall
be $5,000. The Corporation, in the discretion of the board of directors, may open on its books solely for the benefit of mutual savings
banks and depositors therein a separate Fund For Mutuals. If such
Fund is opened, all assessments upon mutual savings banks shall be
paid into such Fund and the Permanent Insurance Fund of the Corporation shall cease to be liable for insurance losses sustained in
mutual savings banks: Provided, That the capital assets of the Corporation shall be so liable and all expenses oi operation of the Corporation shall be allocated between such Funds on an equitable basis.
[PUB. 306.]
13
"(2) For the purposes of this section, an insured bank shall be
deemed to have been closed on account of inability to meet the
demands of its depositors in any case in which it has been closed for
the purpose of liquidation without adequate provision being made
for payment of its depositors.
"(3) Notwithstanding any other provision of law, whenever any
insured national bank or insured District bank shall have been closed
by action of its board of directors, or by the Comptroller of the
Currency, as the case may be, on account of inability to meet the
demands of its depositors, the Comptroller of the Currency shall
appoint the Corporation receiver for such closed bank, and no other
person shall be appointed as receiver of such closed bank.
"(4) It shall be the duty of the Corporation as such receiver to
realize upon the assets of such closed bank, having due regard to the
condition of credit in the locality; to enforce the individual liability
of the stockholders and directors thereof; and to wind up the affairs
of such closed bank in conformity with the provisions of law relating
to the liquidation of closed national banks, except as herein otherwise provided. The Corporation shall retain for its own account
such portion of the amounts realized from such liquidation as it shall
be entitled to receive on account of its subrogation to the claims of
depositors, and it shall pay to depositors and other creditors the net
amounts available for distribution to them. With respect to any
such closed bank, the Corporation as such receiver shall have all the
rights, powers, and privileges now possessed by or hereafter granted
by law to a receiver of an insolvent national bank.
"(5) Whenever any insured State bank (except a District bank)
shall have been closed by action of its board of directors or by the
authority having supervision of such bank, as the case may be,
on account of inability to meet the demands of its depositors, the
Corporation shall accept appointment as receiver thereof, if such
appointment is tendered by the authority having supervision of such
bank and is authorized or permitted by State law. With respect to
any such insured State bank, the Corporation as such receiver shall
possess all the rights, powers and privileges granted by State law to
a receiver of a State
bank.
"(6) Whenever a n insured bank shall have been closed on account
of inability to meet the demands of its depositors, payment of the
insured deposits in such bank shall be made by the Corporation as
soon as possible, subject to the provisions of paragraph (7) of this
subsection, either (A) by making available to each depositor a
transferred deposit in a new bank in the same community or in
another insured bank in an amount equal to the insured deposit of
such depositor and subject to withdrawal on demand, or (B) in such
other manner as the board of directors may prescribe: Provided,
That the Corporation, in its discretion, may require proof of claims
to be filed before paying the insured deposits, and that in any case
where the Corporation is not satisfied as to the validity of a claim
for an insured deposit, it may require the final determination of a
court of competent jurisdiction before paying such claim.
"(7) In the case of a closed national bank or District bank, the
Corporation, upon the payment of any depositor as provided in paragraph (6) of this subsection, shall be subrogated to all rights of the
depositor against the closed bank to the extent of such payment.
14
[PUB.
305-1
In the case of any other closed insured bank, the Corporation shall
not make any payment to any depositor until the right of the Corporation to bo subrog^ated to the rights of such depositor on the same
basis as provided in the case of a closed national bank under this
section shall have been recognized either by express provision of
State law, by allowance of claims by the authority having supervision of such bank, by assignment of claims by depositors, or by
any other effective method. In the case of any closed insured bank,
such subrogation shall include the right on the part of the Corporation to receive the same dividends from the proceeds of the assets of
such closed bank and recoveries on account of stockholders' liability
as would have been payable to the depositor on a claim for the
insured deposit, but such depositor shall retain his claim for any
uninsured portion of his deposit: Provided, That the rights of
depositors and other creditors of any State bank shall be determined
in accordance with the applicable provisions of State law.
"(8) As soon as possible after the closing of an insured bank, the
Corporation, if it finds that it is advisable and in the interest of the
depositors of the closed bank or the public, shall organize a new
national bank to assume the insured deposits of such closed bank and
otherwise to perform temporarily the functions hereinafter provided
for. The new bank shall have its place of business in the same
community as the closed bank.
"(9) The articles of association and the organization certificate of
the new bank shall be executed by representatives designated by the
Corporation. No capital stock need be paid in by the Corporation.
The new bank shall not have a board of directors, but shall be managed by an executive officer appointed by the board of directors of
the Corporation who shall be subject to its directions. In all other
respects the new bank shall be organized in accordance with the then
existing provisions of law relating to the organization of national
banking associations. The new bank may, with the approval of the
Corporation, accept new deposits which shall be subject to withdrawal on demand and which, except where the new bank is the
only bank in the community, shall not exceed $5,000 from any depositor. The new bank, without application to or approval by the
Corporation, shall be an insured bank and shall maintain on deposit
with the Federal Reserve bank of its district reserves in the amount
required by law for member banks, but it shall not be required to
subscribe for stock of the Federal Reserve bank. Funds of the
new bank shall be kept on hand in cash, invested in obligations of
the United States, or in obligations guaranteed as to principal and
interest by the United States, or deposited with the Corporation,
with a Federal Reserve bank, or, to the extent of the insurance
coverage thereon, with an insured bank. The new bank, unless otherwise authorized by the Comptroller of the Currency, shall transact
no business except that authorized by this section and as may be
incidental to its organization. Notwithstanding any other provision
of law the new bank, its franchise, property, and income shall be
exempt from all taxation now or hereafter imposed by the United
States, by any Territory, dependency, or possession thereof, or by any
State, county, municipality, or local taxing authority.
IPT7B. 805.}
15
"(10) Upon the organization of a new bank, the Corporation shall
promptly make available to it an amount equal to the estimated
insured deposits of such closed bank plus the estimated amount of
the expenses of operating the new bank, and shall determine as soon
as possible the amount due each depositor for his insured deposit
in the closed bank, and the total expenses of operation of the new
bank. Upon such determination, the amounts so estimated and made
available shall be adjusted to conform to the amounts so determined.
Earnings of the new bank shall be paid over or credited to the
Corporation in such adjustment. If any new bank, during the period
it continues its status as such, sustains any losses with respect to
which it is not effectively protected except by reason of being an
insured bank, the Corporation shall furnish to it additional funds
in the amount of such losses. The new bank shall assume as transferred deposits the payment of the insured deposits of such closed
bank to each of it x depositors. Of the amounts so made available, the
Corporation shall transfer to the new bank, in cash, such sums as may
be necessary to enable it to meet its expenses of operation and immediate cash demands on such transferred deposits, and the remainder
of such amounts shall be subject to withdrawal by the new bank on
demand.
"(11) Whenever in the judgment of the board of directors it is
desirable to do so, the Corporation shall cause capital stock of the
new bank to be offered for sale on such terms and conditions as the
board of directors shall deem advisable in an amount sufficient, in the
opinion of the board of directors, to make possible the conduct of the
business of the new bank on a sound basis, but in no event less than
that required by section 5138 of the Eevised Statutes, as amended
(U. S. C, Supp. VII, title 12, sec. 51), for the organization of a
national bank in the place where such new bank is located. The
stockholders of the closed insured bank shall be given the first opportunity to purchase any shares of common stock so offered. Upon
proof that an adequate amount of capital stock in the new bank has
been subscribed and paid for in cash, the Comptroller of the Currency shall require the articles of association and the organization
certificate to be amended to conform to the requirements for the
organization of a national bank, and thereafter, when the requirements of law with respect to the organization of a national bank have
been complied with, he shall issue to the bank a certificate of authority to commence business, and thereupon the bank shall cease to have
the status of a new bank, shall be managed by directors elected by its
own shareholders and may exercise all the powers granted by law,
and it shall be subject to all the provisions of law relating to national
banks. Such bank shall thereafter be an insured national bank, without certification to or approval by the Corporation.
"(12) If the capital stock of the new bank is not offered for sale,
or if an adequate amount of capital for such new bank is not subscribed and paid for, the board of directors may offer to transfer its
business to any insured bank in the same community which will take
over its assets, assume its liabilities, and pay to the Corporation for
such business such amount as the board of directors may deem adequate; or the board of directors in its discretion may change the
location of the new bank to the office of the Corporation or to some
other place or may at any time wind up its affairs as herein provided.
1
So in orisrinaL
16
[POT. 303.]
Unless the capital stock of the new bank is sold or its assets are taken
over and its liabilities are assumed by an insured bank as above provided within two years from the date of its organization, the Corporation shall wind up the affairs of such bank, after giving such notice,
if any, as the Comptroller of the Currency may require, and shall
certify to the Comptroller of the Currency the termination of the
new bank. Thereafter the Corporation shall be liable for the obligations of such bank and shall be the owner of its assets. The provisions of sections 5220 and 5221 of the Kevised Statutes (U. S. C, title
12, sees. 181 and 182) shall not apply to such new banks.
"(m) (1) The Corporation as receiver of a closed national bank
or District bank shall not be required to furnish bond and shall have
the right to appoint an agent or agents to assist it in its duties as
such receiver, and all fees, compensation, and expenses of liquidation
and administration thereof shall be fixed by the Corporation, subject
to the approval of the Comptroller of the Currency, and may be paid
by it out of funds coming into its possession as such receiver. The
Comptroller of the Currency is authorized and empowered to waive
and relieve the Corporation from complying with any regulations of
the Comptroller of the Currency with respect to receiverships where
in his discretion such action is deemed advisable to simplify administration.
"(2) Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment of a transferred
deposit to any person by the new bank or by an insured bank in which
a transferred deposit has been made available shall discharge the
Corporation and such new bank or other insured bank, to the same
extent that payment to such person by the closed bank would have
discharged it from liability for the insured deposit.
"(3) Except as otherwise prescribed by the board of directors,
neither the Corporation nor such new bank or other insured bank
shall be required to recognize as the owner of anv portion of a deposit
appearing on the records of the closed bank under a name other than
that of the claimant, any person whose name or interest as such owner
is not disclosed on the records of such closed bank as part owner of
said deposit, if such recognition would increase the aggregate amount
of the insured deposits in such closed bank.
"(4) The Corporation may withhold payment of such portion of
the insured deposit of any depositor in a closed bank as may be
required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such
depositor to the closed bank or its receiver, which is not offset against
a claim due from such bank, pending the determination and payment
of such liability by such depositor or any other person liable therefor.
"(5) If, after the Corporation shall have given at least three
months' notice to the depositor by mailing a copy thereof to his last
known address appearing on the records of the closed bank, any
depositor in the closed bank shall fail to claim his insured deposit
from the Corporation within eighteen months after the appointment of the receiver for the closed bank, or shall fail within such
period to claim or arrange to continue the transferred deposit with
the new bank or with the other insured bank which assumes liability
therefor, all rights of the depositor against the Corporation with
[PUB.
305.]
17
respect to the insured deposit, and against the new bank and such
other insured bank with respect to the transferred deposit, shall be
barred, and all rights of the depositor against the closed bank and its
shareholders, or the receivership estate to which the Corporation may
have become subrogated, shall thereupon revert to the depositor.
The amount of any transferred deposits not claimed within such
eighteen months' period, shall be refunded to the Corporation.
"(n) (1) Money of the Corporation not otherwise employed shall
be invested in obligations of the United States or in obligations
guaranteed as to principal and interest by the United States, except
that for temporary periods, in the discretion of the board of directors, funds of the Corporation may be deposited in any Federal
Reserve bank or with the Treasurer of the United States. When
designated for that purpose by the Secretary of the Treasury, the
Corporation shall be a depositary of public moneys, except receipts
from customs, under such regulations as may be prescribed by the
said Secretary, and may also be employed as a financial agent of
the Government. It shall perform all such reasonable duties as
depositary of public moneys and financial agent of the Government
as may be required of it.
"(2) Nothing contained in this section shall be construed to prevent the Corporation from making loans to national banks closed by
action of the Comptroller of the Currency, or by vote of their directors, or to State member banks closed by action of the appropriate
State authorities, or by vote of their directors, or from entering into
negotiations to secure the reopening of such banks.
"(3) Receivers or liquidators of insured banks closed on account of
inability to meet the demands of their depositors shall be entitled
to offer the assess of such banks for sale to the Corporation or as
security for loans from the Corporation, upon receiving permission
from the appropriate State authority in accordance with express
provisions of State law in the case of insured State banks, or from
the Comptroller of the Currency in the case of national banks or
District banks. The proceeds of every such sale or loan shall be
utilized for the same purposes and in the same manner as other funds
realized from the liquidation of the assets of such banks. The Comptroller of the Currency may, in his discretion, pay dividends on
proved claims at any time after the expiration of the period of advertisement made pursuant to section 5235 of the Revised Statutes
(U. S. C, title 12, sec. 193), and no liability shall.attach to the
Comptroller of the Currency or to the receiver of any national bank
by reason of any such payment for failure to pay dividends to a
claimant whose claim is not proved at the time of any such payment.
The Corporation, in its discretion, may make loans on the security
of or may purchase and liquidate or sell any part of the assets of
an insured bank which is now or may hereafter be closed on account
of inability to meet the demands oi its depositors, but in any case
in which the Corporation is acting as receiver of a closed insured
bank, no such loan or purchase shall be made without the approval
of a court of competent jurisdiction.
"(4) Unfil July 1, 1936, whenever in the judgment of the board of
directors such action will reduce the risk or avert a threatened loss to
the Corporation and will facilitate a merger or consolidation of an
Pub. No. 305
3
18
[PUB.
305.1
insured bank with another insured bank, or will facilitate the sale of
the assets of an open or closed insured bank to and assumption of its
liabilities by another insured bank, the Corporation may, upon such
terms and conditions as it may determine, make loans secured in
whole or in part by assets of an open or closed insured bank, which
loans may be in subordination to the rights of depositors and other
creditors, or the Corporation may purchase any such assets or may
guarantee any other insured bank against loss by reason of its
assuming the liabilities and purchasing the assets of an open or closed
insured bank. Any insured national bank or District bank, or, with
the approval of the Comptroller of the Currency, any receiver
thereof, is authorized to contract for such sales or loans and to pledge
any assets of the bank to secure such loans.
"(o) (1) The Corporation is authorized and empowered to issue
and to have outstanding its notes, debentures, bonds, or other such
obligations, in a par amount aggregating not more than three times
the amount received by the Corporation in payment of its capital
stock and in payment of the assessments upon insured banks for the
year 1936. The notes, debentures, bonds, and other such obligations
issued under this subsection shall be redeemable at the option of the
Corporation before maturity in such manner as may be stipulated in
such obligations, and shall bear such rate or rates of interest, and
shall mature at such time or times, as may be determined by the
Corporation: Provided, That the Corporation may sell on a discount
basis short-term obligations payable at maturity without interest.
The notes, debentures, bonds, and other such obligations of the Corporation may be secured by assets of the Corporation in such manner
as shall be prescribed by its board of directors. Such obligations
may be offered for sale at such price or prices as the Corporation may
determine.
"(2) The Secretary of the Treasury, in his discretion, is authorized
to purchase any obligations of the Corporation to be issued hereunder,
and for such purpose the Secretary of the Treasury is authorized to
use as a public-debt transaction the proceeds of the sale of any
securities hereafter issued under the Second Liberty Bond Act, as
amended, and the purposes for which securities may be issued under
the Second Liberty Bond Act, as amended, are extended to include
such purchases: Provided, That if the Reconstruction Finance Corporation fails for any reason to purchase any of the obligations of
the Corporation as provided in subsection (b) of section 5e of the
Reconstruction Finance Corporation Act, as amended, the Secretary
of the Treasury is authorized and directed to purchase such obligations in an amount equal to the amount of such obligations the
Reconstruction Finance Corporation so fails to purchase: Provided
further, That the Secretary of the Treasury is authorized and
directed, whenever in the judgment of the board of directors of the
Corporation additional funds are required for insurance purposes, to
purchase obligations of the Corporation in an additional amount of
not to exceed $250,000,000 par value: Provided further, That the proceeds derived from the purchase by the Secretary of the Treasury of
any such obligations shall be used by the Corporation solely in carrying out its functions with respect to such insurance. The Secretary
of the Treasury may, at any time, sell any of the obligations of the
Corporation acquired by him under this subsection. All redemp-
[PUB.
308.]
19
tions, purchases, and sales by the Secretary of the Treasury of the
obligations of the Corporation shall be treated as public-debt transactions of the United States.
"(p) All notes, debentures, bonds, or other such obligations issued
by the Corporation shall be exempt, both as to principal and interest,
from all taxation (except estate and inheritance taxes) now or hereafter imposed by the United States, by any Territory, dependency,
or possession thereof, or by any State, county, municipality, or local
taxing authority. The Corporation, including its franchise, its
capital, reserves, and surplus, and its income, shall be exempt from
all taxation now or hereafter imposed by the United States, by any
Territory, dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority, except that any real property
of tJie Corporation shall be subject to State, Territorial, county,
municipal, or local taxation to the same extent according to its value
as the other real property is taxed.
"(q) In order that the Corporation may be supplied with such
forms of notes, debentures, bonds, or other such obligations as it may
need for issuance under this Act, the Secretary of the Treasury is
authorized to prepare such forms as shall be suitable and approved
by the Corporation, to be held in the Treasury subject to delivery,
upon order of the Corporation. The engraved plate, dies, bed pieces,
and other material executed in connection therewith shall remain in
the custody of the Secretary of the Treasury. The Corporation shall
reimburse the Secretary of the Treasury for any expenses incurred
in the preparation, custody, and delivery of such notes, debentures,
bonds, or other such obligations.
"(r) The Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of
January in each year.
"(s) Whoever, for the purpose of obtaining any loan from the
Corporation, or any extension or renewal thereof, or the acceptance,
release, or substitution of security therefor, or for the purpose of
inducing the Corporation to purchase any assets, or for the purpose
of obtaining the payment of any insured deposit or transferred
deposit or the allowance, approval, or payment of any claim, or for
the purpose of influencing in any way the action of the Corporation
under this section, makes any statement, knowing 'it to be false, or
willfully overvalues any security, shall be punished by a fine of not
more than $5,000, or by imprisonment for not more than two years
or both.
"(t) Whoever (1) falsely makes, forges, or counterfeits any obligation or coupon, in imitation of or purporting to be an obligation or
coupon issued by the Corporation, or (2) passes, utters, or publishes,
or attempts to pass, utter, or publish, any false, forged, or counterfeited obligation or coupon purporting to have been issued by the
Corporation, knowing the same to be false, forged, or counterfeited,
or (3) falsely alters any obligation or coupon issued or purporting to
have been issued by the Corporation, or (4) passes, utters, or publishes, or attempts to pass, utter, or publish, as true, any falsely
altered or spurious obligation or coupon, issued or purporting to
have been issued by the Corporation, knowing the same to be falsely
altered or spurious, shall be punished by a fine of not more than
$10,000, or by imprisonment for not more than five years, or both.
20
[PUB. 306J
"(u) Whoever, being connected in any capacity with the Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies any
moneys, funds, securities, or other things of value, whether belonging to it or pledged, or otherwise entrusted to it, or (2) with intent
to defraud the Corporation or any other body, politic or corporate,
or any individual, or to deceive any officer, auditor, or examiner oi
the Corporation, makes any false entry in any book, report, or statement of or to the Corporation, or without being duly authorized
draws any order or issues, puts forth, or assigns any note, debenture,
bond, or other such obligation, or draft, bill of exchange, mortgage,
judgment, or decree thereof, shall be punished by a fine of not more
than $10,000, or by imprisonment for not more than five years, or
both.
"(v) (1) No individual, association, partnership, or corporation
shall use the words ' Federal Deposit Insurance Corporation', or a
combination of any three of these four words, as the name or a part
thereof under which he or it shall do business. No individual, association, partnership, or corporation shall advertise or otherwise represent falsely by any device whatsoever that his or its deposit liabilities
are insured or in anywise guaranteed by the Federal Deposit Insurance Corporation or by the United States or any instrumentality
thereof; and no insured bank shall advertise or otherwise represent
falsely by any device whatsoever the extent to which or the manner
in which its deposit liabilities are insured by the Federal Deposit
Insurance Corporation. Every individual, partnership, association,
or corporation violating this subsection shall be punished by a fine
of not exceeding $1,000, or by imprisonment not exceeding one year,
or both.
"(2) Every insured bank shall display at each place of business
maintained by it a sign or signs, and shall include in advertisements
relating to deposits a statement to the effect that its deposits are
insured by the Corporation. The board of directors shall prescribe
\>y regulation the forms of such signs and the manner of display and
the substance of such statements and the manner of use. For each
day an insured bank continues to violate any provision of this paragraph or any lawful provision of said regulations, it shall be subject
to a penalty of not more than $100, recoverable by the Corporation
for its use.
"(3) No insured bank shall pay any dividends on its capital stock
or interest on its capital notes or debentures (of such interest is
required to be paid only out of net profits) while it remains in
default in the payment of any assessment due to the Corporation;
and any director or officer of any insured bank who participates in
the declaration or payment of any such dividend shall, upon conviction, be fined not more than $1,000, or imprisoned not more than one
year, or both: Provided, That if such default is due to a dispute
between the insured bank and the Corporation over the amount of
such assessment, this paragraph shall not apply, if such bank shall
deposit security satisfactory to the Corporation for payment upon
final determination of the issue.
"(4) Unless, in addition to compliance with other provisions of
law, it shall have the prior written consent of the Corporation, no
insured bank shall enter into any consolidation or merger with any
noninsured bank, or assume liability to pay any deposits made in any
[PtTB. 305.]
21
noninsured bank, or transfer assets to any noninsured bank in consideration of the assumption of liability for any portion of the
deposits made in such insured bank, and no insured State nonmember bank (except a District bank) without such consent shall reduce
the amount or retire any part of its common or preferred capital
stock, or retire any part of its capital notes or debentures.
"(5) No State nonmember insured bank (except a District bank)
shall establish and operate any new branch after thirty days after
the effective date unless it shall have the prior written consent of the
Corporation, and no branch of any State nonmember insured bank
shall be moved from one location to another after thirty days after
the effective date without such consent. The factors to be considered in granting or withholding the consent of the Corporation under
this paragraph shall be those enumerated in subsection (g) of this
section.
"(6) The Corporation may require any insured bank to provide
protection and indemnity against burglary, defalcation, and other
similar insurable losses. Whenever any insured bank refuses to
comply with any such requirement the Corporation may contract
for such protection and indemnity and add the cost thereof to the
assessment otherwise payable by such bank.
"(7) Whenever any insured bank (except a national bank or a
District bank), after written notice of the recommendations of the
Corporation based on a report of examination of such bank by an
examiner of the Corporation, shall fail to comply with such recommendations within one hundred and twenty days after such notice,
the Corporation shall have the power, and is hereby authorized, to
publish only such part of such report of examination as relates to
any recommendation not complied with: Provided, That notice of
intention to make such publication shall be given to the bank at
least ninety days before such publication is made.
"(8) The board of directors shall by regulation prohibit the payment of interest on demand deposits in insured nonmember banks and
for such purpose it may define the term ' demand deposits '; but such
exceptions from this prohibition shall be made as are now or may
hereafter be prescribed with respect to deposits payable on demand
in member banks by section 19 of this Act, as amended, or by regulation of the Board of Governors of the Federal Reserve System. The
board of directors shall from time to time limit by regulation the
rates of interest or dividends which may be paid by insured nonmember banks on time and savings deposits, but such regulations
shall be consistent with the contractual obligations of such banks to
their depositors. For the purpose of fixing such rates of interest or
dividends, the board of directors shall by regulation prescribe
different rates for such payment on time and savings deposits having
different maturities, or subject to different conditions respecting withdrawal or repayment, or subject to different conditions by reason of
different locations, or according to the varying discount rates of
member banks in the several Federal Reserve districts. The board
of directors shall by regulation define what constitutes time and
savings deposits in an insured nonmember bank. Such regulations
shall prohibit any insured nonmember bank from paying any time
deposit before its maturity except upon such conditions and in
22
[PUB.
305.]
accordance with such rules and regulations as may be prescribed by
the board of directors, and from waiving any requirement of notice
before payment of any savings deposit except as to all savings
deposits having the same requirement. For each violation of any
provision of this paragraph or any lawful provision of such regulations relating to the payment of interest or dividends on deposits or
to withdrawal of deposits, the offending bank shall be subject to a
penalty or x not more than $100, recoverable by the Corporation for
i t s USG
"(wj The provisions of sections 112, 113, 114, 115, 116, and 117 of
the Criminal Code of the United States (U. S. C, title 18, ch. 5, sees.
202 to 207, inclusive), insofar as applicable, are extended to apply to
contracts or agreements with the Corporation under this section,
which for the purposes hereof shall be held to include loans, advances,
extensions, and renewals thereof, and acceptances, releases, and substitutions of security therefor, purchases or sales of assets, and all
contracts and agreements pertaining to the same.
"(x) The Secret Service Division of the Treasury Department is
authorized to detect, arrest, and deliver into the custody of the United
States marshal having jurisdiction any person committing any of
the offenses punishable under this section.
" (y) (1) No State bank which during the calendar year 1941 or any
succeeding calendar year shall have average deposits of $1,000,000
or more shall be an insured bank or continue to have any part of its
deposits insured after July 1 of the year following any such calendar
year during which it shall have had such amount of average deposits,
unless such bank shall be a member of the Federal Reserve System:
Provided, That for the purposes of this paragraph the term ' State
bank' shall not include a savings bank, a mutual savings bank, a
Morris Plan bank or other incorporated banking institution engaged
only in a business similar to that transacted by Morris Plan banks,
a State trust company doing no commercial banking business, or a
bank located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands.
"(2) It is not the purpose of this section to discriminate, in any
manner, against State nonmember, and in favor of, national or
member banks; but the purpose is to provide all banks with the
same opportunity to obtain and enjoy the benefits of this section.
No bank shall be discriminated against because its capital stock is less
than the amount required for eligibility for admission into the
Federal Reserve System.
"(z) The provisions of this section limiting the insurance of the
deposits of any depositor to a maximum less than the full amount
shall be independent and separable from each and all of the provisions
of this section."
TITLE II—AMENDMENTS TO THE FEDERAL RESERVE
ACT
SECTION 201. Paragraph " Fifth" of section 4 of the Federal
Reserve Act, as amended, is amended, effective March 1, 1936, to read
as follows:
" Fifth. To appoint by its board of directors a president, vice
presidents, and such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds for them
1
So in original.
[PUB.
805.]
23
and fix the penalty thereof, and to dismiss at pleasure such officers or
employees. The president shall be the chief executive officer of the
bank and shall be appointed by the board of directors, with the
approval of the Board of Governors of the Federal Eeserve System,
for a term of five years; and all other executive officers and all
employees of the bank shall be directly responsible to him. The first
vice president of the bank shall be appointed in the same manner and
for the same term as the president, and shall, in the absence or disability of the president or during a vacancy in the office of president,
serve as chief executive officer of the bank. Whenever a vacancy
shall occur in the office of the president or the first vice president, it
shall be filled in the manner provided for original appointments;
and the person so appointed shall hold office until the expiration of
the term of his predecessor."
SEC. 202. Section 9 of the Federal Reserve Act, as amended, is
amended by inserting after the tenth paragraph thereof the following
new paragraph:
" In order to facilitate the admission to membership in the Federal
Eeserve System of any State bank which is required under subsection
(y) of section 12B of this Act to become a member of the Federal
Reserve System in order to be an insured bank or continue to have
any part of its deposits insured under such section 12B, the Board
of Governors of the Federal Reserve System may waive in whole or
in part the requirements of this section relating to the admission of
such bank to membership: Provided, That, if such bank is admitted
with a capital less than that required for the organization of a
national bank in the same place and its capital and surplus are not,
in the judgment of the Board of Governors of the Federal Reserve
System, adequate in relation to its liabilities to depositors and other
creditors, the said Board may, in its discretion, require such bank to
increase its capital and surplus to such amount as the Board may
deem necessary within such period prescribed by the Board as in its
judgment shall be reasonable in view of all the circumstances: Provided, however, That no such bank shall be required to increase its
capital to an amount in excess of that required for the organization
of a national bank in the same place."
SEC. 203. (a) Hereafter the Federal Reserve Board shall be known
as the " Board of Governors of the Federal Reserve System ", and
the governor and the vice governor of the Federal Reserve Board
shall be known as the " chairman " and the " vice chairman ", respectively, of the Board of Governors of the Federal Reserve System.
(b) The first two paragraphs of section 10 of the Federal Reserve
Act, as amended, are amended to read as follows:
" SEC. 10. The Board of Governors of the Federal Reserve System
(hereinafter referred to as the ' Board') shall be composed of seven
members, to be appointed by the President, by and with the advice
and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter
provided, but each appointive member of the Federal Reserve Board
in office on such date shall continue to serve as a member of the Board
until February 1, 1936, and the Secretary of the Treasury and the
Comptroller of the Currency shall continue to serve as members of
the Board until February 1, 1936. In selecting the members of the
24
[PUB.
806.]
Board, not more than one of whom shall be selected from any one
Federal Reserve district, the President shall have due regard to a
fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. The
members of the Board shall devote their entire time to the business of
the Board and shall each receive an annual salary of $15,000, payable
monthly, together with actual necessary traveling expenses.
" The members of the Board shall be ineligible during the time
they are in office and for two years thereafter to hold any office,
position, or employment in any member bank, except that this
restriction shall not apply to a member who has served the full term
for which he was appointed. Upon the expiration of the term of
any appointive member of the Federal Reserve Board in office on the
date of enactment of the Banking Act of 1935, the President shall
fix the term of the successor to such member at not to exceed fourteen
years, as designated by the President at the time of nomination, but
in such manner as to provide for the expiration of the term of not
more than one member in any two-year period, and thereafter each
member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause
by the President. Of the persons thus appointed? one shall be designated by the President as chairman and one as vice chairman of the
Board, to serve as such for a term of four years. The chairman of
the Board, subject to its supervision, shall be its active executive
officer. Each member of the Board shall within fifteen days after
notice of appointment make and subscribe to the oath of office. Upon
the expiration of their terms of office, members of the Board shall
continue to serve until their successors are appointed and have qualified. Any person appointed as a member of the Board after the
date of enactment of the Banking Act of 1935 shall not be eligible
for reappointment as such member after he shall have served a full
term of fourteen years."
(c) The fourth paragraph of section 10 of the Federal Reserve
Act, as amended, is amended by striking out the second, third, and
fourth sentences thereof and inserting in lieu thereof the following:
"At meetings of the Board the chairman shall preside, and, in his
absence, the vice chairman shall preside. In the absence of the chairman and the vice chairman, the Board shall elect a member to act as
chairman pro tempore."
(d) Section 10 of the Federal Reserve Act, as amended, is further
amended by adding at the end thereof the following new paragraph:
" The Board of Governors of the Federal Reserve System shall
keep a complete record of the action taken by the Board and by the
Federal Open Market Committee upon all questions of policy relating to open-market operations and shall record therein the votes
taken in connection with the determination of open-market policies
and the reasons underlying the action of the Board and the Committee in each instance. The Board shall keep a similar record with
respect to all questions of policy determined by the Board, and shall
include in its annual report to the Congress a full account of the
action so taken during the preceding year with respect to openmarket policies and operations and with respect to the policies determined by it and shall include in such report a copy of the records
required to be kept under the provisions of this paragraph."
[PtTB. 805.1
25
SEC. 204. Section 10 (b) of the Federal Reserve Act, as amended,
is amended to read as follows:
" SEC. 10 (b). Any Federal Reserve bank, under rules and regulations prescribed by the Board of Governors of the Federal Reserve
System, may make advances to any member bank on its time or
demand notes having maturities of not more than four months and
which are secured to the satisfaction of such Federal Reserve bank.
Each such note shall bear interest at a rate not less than one-half of
1 per centum per annum higher than the highest discount rate in
effect at such Federal Reserve bank on the date of such note."
SEC. 205. Section 12A of the Federal Reserve Act, as amended, is
amended, effective March 1, 1936, to read as follows:
"SEC. 12A. (a) There is hereby created a Federal Open Market
Committee (hereinafter referred to as the ' Committee '), which
shall consist of the members of the Board of Governors of the Federal Reserve System and five representatives of the Federal Reserve
banks to be selected as hereinafter provided. Such representatives
of the Federal Reserve banks shall be elected annually as follows:
One by the boards of directors of the Federal Reserve Banks of
Boston and New York? one by the boards of directors of the Federal
Reserve Banks of Philadelphia and Cleveland, one by the boards
of directors of the Federal Reserve Banks of Chicago and Saint
Louis, one by the boards of directors of the Federal Reserve Banks
of Richmond, Atlanta, and Dallas, and one by the boards of directors of the Federal Reserve Banks of Minneapolis, Kansas City,
and San Francisco. An alternate to serve in the absence of each
such representative shall be elected annually in the same manner.
The meetings of said Committee shall be held at Washington, District of Columbia, at least four times each year upon the call of
the chairman of the Board of Governors of the Federal Reserve
System or at the request of any three members of the Committee.
"(b) No Federal Reserve bank shall engage or decline to engage
in open-market operations under section 14 of this Act except in
accordance with the direction of and regulations adopted by the
Committee. The Committee shall consider, adopt, and transmit to
the several Federal Reserve banks, regulations relating to the openmarket transactions of such banks.
"(c) The time, character, and volume of all purchases and sales
of paper described in section 14 of this Act as eligible for openmarket operations shall be governed with a view to accommodating
commerce and business and with regard to their bearing upon the
general credit situation of the country."
SEC. 206. (a) Subsection (b) of section 14 of the Federal Reserve
Act, as amended, is amended by inserting before the semicolon at
the end thereof a colon and the following: Provided, That any
bonds, notes, or other obligations which are direct obligations of
the United States or which are fully guaranteed by the United
States as to principal and interest may be bought and sold without
regard to maturities but only in the open market".
(b) Subsection (d) of section 14 of the Federal Reserve Act, as
amended, is amended by adding at the end thereof the following:
" but each such bank shall establish such rates every fourteen days,
or oftener if deemed necessary by the Board; ".
26
IPXTB. 805.1
SEC. 207. The sixth paragraph of section 19 of the Federal Reserve
Act, as amended, is amended to read as follows:
" Notwithstanding the other provisions of this section, the Board
of Governors of the Federal Reserve System, upon the affirmative
vote of not less than four of its members, in order to prevent
injurious credit expansion or contraction, may by regulation change
the requirements as to reserves to be maintained against demand
or time deposits or both by member banks in reserve and central
reserve cities or by member banks not in reserve or central reserve
cities or by all member banks; but the amount of the reserves
required to be maintained by any such member bank as a result
of any such change shall not be less than the amount of the reserves
required by law to be maintained by such bank on the date of
enactment of the Banking Act of 1935 nor more than twice such
amount."
SEC. 208. The first paragraph of section 24 of the Federal Reserve
Act, as amended, is amended to read as follows:
'* SEC. 24. Any national banking association may make real-estate
loans secured by first liens upon improved real estate, including
improved farm land and improved business and residential properties. A loan secured by real estate within the meaning of this section
shall be in the form of an obligation or obligations secured by mortgage, trust deed, or other such instrument upon real estate, and any
national banking association may purchase any obligation so secured
when the entire amount of such obligation is sold to the association.
The amount of any such loan hereafter made shall not exceed 50 per
centum of the appraised value of the real estate offered as security
and no such loan shall be made for a longer term than five years;
except that (1) any such loan may be made in an amount not to
exceed 60 per centum of the appraised value of the real estate offered
as security and for a term not longer than ten years if the loan is
secured by an amortized mortgage, deed of trust, or other such instrument under the terms of which the installment payments are sufficient
to amortize 40 per centum or more of the principal of the loan within
a period of not more than ten years, and (2) the foregoing limitations and restrictions shall not prevent the renewal or extension of
loans heretofore made and shall not apply to real-estate loans which
are insured under the provisions of Title I I of the National Housing
Act. No such association shall make such loans in an aggregate sum
in excess of the amount of the capital stock of such association paid
in and unimpaired plus the amount of its unimpaired surplus fund,
or in excess of 60 per centum of the amount of its time and savings
deposits, whichever is the greater. Any such association may continue hereafter as heretofore to receive time and savings deposits and
to pay interest on the same, but the rate of interest which such association may pay upon such time deposits or upon savings or other
deposits shall not exceed the maximum rate authorized by law to be
paid upon such deposits by State banks or trust companies organized
under the laws of the State in which such association is located."
SEC. 209. Section 326 of the Revised Statutes is amended to read as
follows:
" SEC. 325. The Comptroller of the Currency shall be appointed by
the President, by and with the advice and consent of the Senate, and
[ P U B . 305.J
27
shall hold his office for a term of five years unless sooner removed by
the President, upon reasons to be communicated by him to the Senate ; and he shall receive a salary at the rate of $15,000 a year."
TITLE III—TECHNICAL AMENDMENTS TO THE
BANKING LAWS
SECTION 301. Subsection (c) of section 2 of the Banking Act of
1933, as amended, is amended by adding at the end thereof the
following paragraph:
" Notwithstanding the foregoing, the term ' holding company
affiliate' shall not include (except for the purposes of section 23A of
the Federal Reserve Act, as amended) any corporation all of the
stock of which is owned by the United States, or any organization
which is determined by the Board of Governors of the Federal
Reserve System not to be engaged, directly or indirectly, as a business
in holding the stock of, or managing or controlling, banks, banking
associations, savings banks, or trust companies."
SEC. 302. The first paragraph of section 20 of the Banking Act of
1933, as amended, is amended by inserting before the period at the
end thereof a colon and the following: "Provided, That nothing in
this paragraph shall apply to any such organization which shall have
been placed in formal liquidation and which shall transact no business except such as may be incidental to the liquidation of its affairs ".
SEC. 303. (a) Paragraph (1) of subsection (a) of section 21 of the
Banking Act of 1933, as amended, is amended by inserting before
the semicolon at the end thereof a colon and the following: " Provided, That the provisions of this paragraph shall not prohibit
national banks or State banks or trust companies (whether or not
members of the Federal Reserve System) or other financial institutions or private bankers from dealing in, underwriting, purchasing,
and selling investment securities to the extent permitted to national
banking associations by the provisions of section 5136 of the Revised
Statutes, as amended (U. S. C, title 12, sec. 24; Supp. VII, title 12,
sec. 24): Provided further, That nothing in this paragraph shall
be construed as affecting in any way such right as any bank, banking
association, savings bank, trust company, or other banking institution, may otherwise possess to sell, without recourse or agreement to
repurchase, obligations evidencing loans on real estate ".
(b) Paragraph (2) of subsection (a) of such section 21 is amended
to read as follows:
"(2) For any person, firm, corporation, association, business trust,
or other similar organization to engage, to any extent whatever with
others than his or its officers, agents or employees, in the business of
receiving deposits subject to check or to repayment upon presentation of a pass book, certificate of deposit, or other evidence of debt, or
upon request of the depositor, unless such person, firm, corporation,
association, business trust, or other similar organization (A) shall
be incorporated under, and authorized to engage in such business by,
the laws of the United States or of any State, Territory, or District,
or (B) shall be permitted by any State, Territory, or District to
engage in such business and shall be subjected by the law of such
State, Territory, or District to examination and regulation, or (C)
shall submit to periodic examination by the banking authority of the
28
[POT. 805.]
State, Territory, or District where such business is carried on and
shall make and publish periodic reports of its condition, exhibiting
in detail its resources and liabilities, such examination and reports
to be made and published at the same times and in the same manner
and under the same conditions as required by the law of such State,
Territory, or District in the case of incorporated banking institutions engaged in such business in the same locality."
SEC. 304. Section 22 of the Banking Act of 1933, as amended, is
amended by adding at the end thereof the following sentences:
" Such additional liability shall cease on July 1, 1937, with respect to
all shares issued by any association which shall be transacting the
business of banking on July 1, 1937: Provided, That not less than
six months prior to such date, such association shall have caused
notice of such prospective termination of liability to be published in
a newspaper published in the city, town, or county in which such
association is located, and if no newspaper is published in such city,
town, or county, then in a newspaper of general circulation therein.
If the association fail to give such notice as and when above provided, a termination of such additional liability may thereafter be
accomplished as of the date six monthx subsequent to publication, in
the manner above provided."
SEC. 305. Paragraph (c) of section 5155 of the Revised Statutes,
as amended (U. S. C., Supp. VII, title 12, sec. 36), is amended (1)
by inserting after the first sentence thereof the following new sentence : " In any State in which State banks are permitted by statute
law to maintain branches within county or greater limits, if no bank
is located and doing business in the place where the proposed agency
is to be located, any national banking association situated in such
State may, with the approval of the Comptroller of the Currency,
establish and operate, without regard to the capital requirements of
this section, a seasonal agency in any resort community within the
limits of the county in which the main office of such association is
located, for the purpose of receiving and paying out deposits, issuing
and cashing checks and drafts, and doing business incident thereto:
Provided, That any permit issued under this sentence shall be
revoked upon the opening of a State or national bank in such community."; and (2) by striking out the first word in the last sentence
of such paragraph (c) and inserting in lieu thereof the following:
" Except as provided in the immediately preceding sentence, no ".
SEC. 306. Section 4 of the Act entitled An Act to amend section
12B of the Federal Reserve Act so as to extend for one year the
temporary plan for deposit insurance, and for other purposes",
approved June 16,1934 (48 Stat. 969), is amended to read as follows:
SEC. 4. So much of section 31 of the Banking Act of 1933, as
amended, as relates to stock ownership by directors, trustees, or
members of similar governing bodies of any national banking association, or of any State bank or trust company which is a member of
the Federal Reserve System, is hereby repealed."
SEC. 307. Effective January 1, 1936, section 32 of the Banking Act
of 1933, as amended, is amended to read as follows:
" SEC. 32. No officer, director, or employee of any corporation or
unincorporated association, no partner or employee of any partnership, and no individual, primarily engaged in the issue, flotation,
underwriting, public sale, or distribution, at wholesale or retail, or
1
So in original.
[PUB.
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29
through syndicate participation, of stocks, bonds, or other similar
securities, shall serve the same time as an officer, director? or employee
of any member bank except in limited classes of cases m which the
Board of Governors of the Federal Reserve System may allow such
service by general regulations when in the judgment of the said
Board it would not unduly influence the investment policies of such
member bank or the advice it gives its customers regarding
investments."
SEC. 308. (a) The second sentence of paragraph Seventh of section
5136 of the Revised Statutes, as amended (U. S. C, Supp. VII, title
12, sec. 24), is amended to read as follows: " The business of dealing
in securities and stock by the association shall be limited to purchasing and selling such securities and stock without recourse, solely upon
the order, and for the account of, customers, and in no case for its
own account, and the association shall not underwrite any issue of
securities or stock: Provided, That the association may purchase for
its own account investment securities under such limitations and
restrictions as the Comptroller of the Currency may by regulation
prescribe. In no event shall the total amount of the investment
securities of any one obligor or maker, held by the association for its
own account, exceed at any time 10 per centum of its capital stock
actually paid in and unimpaired and 10 per centum of its unimpaired
surplus fund, except that this limitation shall not require any association to dispose of any securities lawfully held by it on the date of
enactment of the Banking Act of 1935."
(b) The fourth sentence of such paragraph Seventh is amended to
read as follows: " Except as hereinafter provided or otherwise permitted by law, nothing herein contained shall authorize the purchase
by the association for its own account of any shares of stock of any
corporation."
(c) The last sentence of such paragraph Seventh is amended by
inserting before the colon after the words "Home Owners' Loan
Corporation " a comma and the following: " or obligations which are
insured by the Federal Housing Administrator pursuant to section
207 of the National Housing Act, if the debentures to be issued in
payment of such insured obligations are guaranteed as to principal
and interest by the United States ".
SEC. 309. Section 5138 of the Revised Statutes, as amended,
(V. S. C, Supp. VII, title 12, sec. 51), is amended by adding the
following sentences at the end thereof: " No such association shall
hereafter be authorized to commence the business of banking until it
shall have a paid-in surplus equal to 20 per centum of its capital:
Provided, That the Comptroller of the Currency may waive this
requirement as to a State bank converting into a national banking
association, but each such State bank which is converted into a
national banking association shall, before the declaration of a dividend on its shares of common stock, carry not less than one-half part
of its net profits of the preceding half year to its surplus fund until
it shall have a surplus equal to 20 per centum of its capital: Provided,
That for the purposes of this section any amounts paid into a fund
for the retirement of any preferred stock of any such converted State
bank out of its net earnings for such half-year period shall be deemed
to be an addition to its surplus fund if, upon the retirement of such
preferred stock, the amount so paid into such retirement fund for
SO
[PUB.
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such period may then properly be carried to surplus. In any such
case the converted State bank shall be obligated to transfer to surplus
the amount so paid into such retirement fund for such period on
account of the preferred stock as such stock is retired."
SEC. 310. (a) The last paragraph of section 5139 of the Revised
Statutes, as amended (U. S. C, Supp. VII, title 12, sec. 52), is
amended to read as follows:
"After the date of the enactment of the Banking Act of 1935, no
certificate evidencing the stock of any such association shall bear any
statement purporting to represent the stock of any other corporation,
except a member bank or a corporation engaged on June 16, 1934 in
holding the bank premises of such association, nor shall the ownership, sale, or transfer of any certificate representing the stock of any
such association be conditioned in any manner whatsoever upon the
ownership, sale, or transfer of a certificate representing the stock of
any other corporation, except a member bank or a corporation
engaged on June 16, 1934 in holding the bank premises of such association : Provided, That this section shall not operate to prevent the
ownership, sale, or transfer of stock of any other corporation being
conditioned upon the ownership, sale, or transfer of a certificate
representing stock of a national banking association."
(b) The nineteenth paragraph of section 9 of the Federal Reserve
Act, as amended, is amended to read as follows:
"After the date of the enactment of the Banking Act of 1935, no
certificate evidencing the stock of any State member bank shall bear
any statement purporting to represent the stock of any other corporation, except a member bank or a corporation engaged on June
16,1934 in holding the bank premises of such member bank, nor shall
the ownership, sale, or transfer of any certificate representing the
stock of any State member bank be conditioned in any manner whatsoever upon the ownership, sale, or transfer of a certificate representing the stock of any other corporation, except a member bank or a
corporation engaged on June 16, 1934 in holding the bank premises
of such member bank: Provided, That this section shall not operate
to prevent the ownership, sale, or transfer of stock of any other corporation being conditioned upon the ownership, sale, or transfer of a
certificate representing stock of a State member bank."
SEC. 311. (a) The first paragraph of section 5144 of the Revised
Statutes, as amended (U. S. C, Supp. VII, title 12, sec. 61), is
amended to read as follows:
" SEC. 5144. In all elections of directors, each shareholder shall
have the right to vote the number of shares owned by him for as
many persons as there are directors to be elected, or to cumulate such
shares and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he
shall think fit; and in deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each
share of stock held by him; except that (1) this shall not be construed as limiting the voting rights of holders of preferred stock
under the terms and provisions of articles of association, or amendments thereto, adopted pursuant to the provisions of section 302 (a)
of the Emergency Banking and Bank Conservation Act, approved
[PTTB. 305.]
31
March 9, 1933, as amended, (2) in the election of directors, shares of
its own stock held by a national bank as sole trustee, whether registered in its own name as such trustee or in the name of its nominee,
shall not be voted by the registered owner unless under the terms
of the trust the manner in which such shares shall be voted may be
determined by a donor or beneficiary of the trust and unless such
donor or beneficiary actually directs how such shares shall be voted,
(3) shares of its own stock held by a national bank and one or more
persons as trustees may be voted by such other person or persons, as
trustees, in the same manner as if he or they were the sole trustee,
and (4) shares controlled by any holding company affiliate of a
national bank shall not be voted unless such holding company affiliate shall have first obtained a voting permit as hereinafter provided,
which permit is in force at the time such shares are voted, but such
holding company affiliate may, without obtaining such permit, vote
in favor of placing the association in voluntary liquidation or taking
any other action pertaining to the voluntary liquidation of such
association. Shareholders may vote by proxies duly authorized in
writing; but no officer, clerk, teller, or bookkeeper of such bank shall
act as proxy: and no shareholder whose liability is past due and
unpaid shall be allowed to vote. Whenever shares of stock cannot
be voted by reason of being held by the bank as sole trustee, such
shares shall be excluded in determining whether matters voted upon
by the shareholders were adopted by the requisite percentage of
shares."
(b) The first sentence of the third paragraph of such section 5144
is amended to read: "Any such holding company affiliate may make
application to the Board of Governors of the Federal Reserve System for a voting permit entitling it to vote the stock controlled by it
at any or all meetings of shareholders of such bank or authorizing
the trustee or trustees holding the stock for its benefit or for the
benefit of its shareholders so to vote the same."
(c) Section 5144 of the Revised Statutes, as amended, is further
amended by adding at the end of subsection (c) thereof the following: " and the provisions of this subsection, instead of subsection (b),
shall apply to all holding company affiliates with respect to any
shares of bank stock owned or controlled by them as to which there
is no statutory liability imposed upon the holders of such bank
stock; ".
SEC. 312. Section 5154 of the Revised Statutes, as amended (U. S.
C, title 12, sec. 35), is amended by adding at the end thereof the
following paragraph:
" The Comptroller of the Currency may, in his discretion and
subject to such conditions as he may prescribe, permit such converting bank to retain and carry at a value determined by the Comptroller such of the assets of such converting bank as do not conform
to the legal requirements relative to assets acquired and held by
national banking associations."
SEC. 313. Section 5162 of the Revised Statutes (U. S. C. title 12,
sec. 170) is amended by adding at the end thereof the following
paragraph:
" The Comptroller of the Currency may designate one or more
persons to countersign in his name and on his behalf such assignments or transfers of bonds as require his countersignature."
32
[PUB.
305.]
SEC. 314. Section 5197 of the Revised Statutes, as amended (U. S.
C, Supp. VII, title 12, sec. 85), is amended by inserting after the
second sentence thereof the following new sentence: " The maximum
amount of interest or discount to be charged at a branch of an association located outside of the States of the United States and the District of Columbia shall be at the rate allowed by the laws of the
country, territory, dependency, province, dominion, insular possession, or other political subdivision where the branch is located."
SEC. 315. Section 5199 of the Revised Statutes (U. S. C, title 12,
sec. 60), is amended to read as follows:
" SEC. 5199. The directors of any association may, semiannually,
declare a dividend of so much of the net profits of the association as
they shall judge expedient; but each association shall, before the declaration of a dividend on its shares of common stock, carrying not
less than one-tenth part of its net profits of the preceding half year
to its surplus fund until the same shall equal the amount of its common capital: Provided, That for the purposes of this section, any
amounts paid into a fund for the retirement of any preferred stock
of any such association out of its net earnings for such half-year
period shall be deemed to be an addition to its surplus fund if, upon
the retirement of such preferred stock, the amount so paid into such
retirement fund for such period may then properly be carried to surplus. In-any such case the association shall be obligated to transfer
to surplus the amounts so paid into such retirement fund for such
period on account of the preferred stock as such stock is retired."
SEC. 316. Section 5209 of the Revised Statutes (U. S. C, title 12,
sec. 592), is hereby amended by inserting after the words " known as
the Federal Reserve Act", the words or of any national banking
association, or of any insured bank as defined in subsection (c) of
section 12B of the Federal Reserve Act"; and by inserting after the
words " such Federal Reserve bank or member bank ", wherever they
appear in such section, the words " or such national banking association or insured bank "; and by inserting after the words " or the
Comptroller of the Currency ", the words " or the Federal Deposit
Insurance Corporation,".
SEC. 317. Section 5220 of the Revised Statutes (U. S. C, title 12,
sec. 181), is amended by adding at the end thereof the following
paragraph:
" The shareholders shall designate one or more persons to act as
liquidating agent or committee, who shall conduct the liquidation in
accordance with law and under the supervision of the board of directors, who shall require a suitable bond to be given by said agent or
committee. The liquidating agent or committee shall render annual
reports to the Comptroller of the Currency on the 31st day of December of each year showing the progress of said liquidation until the
same is completed. The liquidating agent or committee shall also
make an annual report to a meeting of the shareholders to be held on
the date fixed in the articles of association for the annual meeting,
at which meeting the shareholders may, if they see fit, by a vote representing a majority of the entire stock of the bank, remove the
liquidating agent or committee and appoint one or more others in
place thereof. A special meeting of the shareholders may be called
at any time in the same manner as if the bank continued an active
bank and at said meeting the shareholders may, by vote of the
[PUB. 805.J
33
majority of the stock, remove the liquidating agent or committee.
The Comptroller of the Currency is authorized to have an examination made at any time into the affairs of the liquidating bank until
the claims of all creditors have been satisfied, and the expense of
making such examinations shall be assessed against such bank in the
same manner as in the case of examinations made pursuant to section
6240 of the Revised Statutes, as amended (U. S. C, title 12, sees. 484,
485; Supp. VII, title 12, sees. 481-483)."
SEC. 318. Section 5243 of the Revised Statutes (U. S. C., title 12,
sec. 583) is amended by striking out the semicolon therein and all
that precedes it and substituting the following:
" SEC. 5243. The use of the word ' national', the word ' Federal'
or the words ' United States', separately, in any combination thereof,
or in combination with other words or syllables, as part of the name
or title used by any person, corporation, firm, partnership, business
trust, association or other business entity, doing the business of
bankers, brokerSj or trust or savings institutions is prohibited except
where such institution is organized under the laws of the United
States, or is otherwise permitted by the laws of the United States to
use such name or title, or is lawfully using such name or title on the
date when this section, as amended, takes effect; ".
SEO. 319. (&) Section 5 of the Federal Reserve Act, as amended,
is amended by striking out the last three sentences thereof and
inserting in lieu thereof the following: "When a member bank
reduces its capital stock or surplus it shall surrender a proportionate
amount of its holdings in the capital stock of said Federal Reserve
bank. Any member bank which holds capital stock of a Federal
Reserve bank in excess of the amount required on the basis of 6 per
centum of its paid-up capital stock and surplus shall surrender such
excess stock. When a member bank voluntarily liquidates it shall
surrender all of its holdings of the capital stock of said Federal
Reserve bank and be released from its stock subscription not previously called. In any such case the shares surrendered shall be
canceled and the member bank shall receive in payment therefor,
under regulations to be prescribed by the Board of Governors of the
Federal Reserve System, a sum equal to its cash-paid subscriptions
on the shares surrendered and one-half of 1 per centum a month
from the period of the last dividend, not to exceed the book value
thereof, less any liability of such member bank to the Federal Reserve
bank."
(b) Section 6 of the Federal Reserve Act, as amended, is amended
by striking out the last paragraph thereof.
SEC. 320. The fifth paragraph of section 9 of the Federal Reserve
Actj as amended, is amended by adding at the end thereof the following sentence: " Such reports of condition shall be in such form
and shall contain such information as the Board of Governors of
the Federal Reserve System may require and shall be published by
the reporting banks in such manner and in accordance with sucn
regulations as the said Board may prescribe."
SEC. 321. (a) The first sentence of paragraph (m) of section 11
of the Federal Reserve Act, as amended, is amended by inserting
before the period at the end thereof a colon and the following:
" Provided, That with respect to loans represented by obligations in
the form of notes secured by not less than a like amount of bonds
34
[Pro. 305J
or notes of the United States issued since April 24, 1917, certificates
of indebtedness of the United States, Treasury bills of the United
States, or obligations fully guaranteed both as to principal and
interest by the United States, such limitation of 10 per centum on
loans to any person shall not apply, but State member banks shall
be subject to the same limitations and conditions as are applicable
in the case of national banks under paragraph (8) of section 5200
of the Revised Statutes, as amended (U. S. C., Supp. VII, title 12,
sec. 84)".
(b) Paragraph (8) of section 5200 of the Revised Statutes, as
amended (U. S. C, Supp. VII, title 12, sec. 84), is amended by inserting after the comma following the words " certificates of indebtedness
of the United States", the words " Treasury bills of the United
States, or obligations fully guaranteed both as to principal and
interest by the United States .
SEC. 322. The third paragraph of section 13 of the Federal Reserve
Act, as amended, is amended by changing the words " indorsed and
otherwise secured to the satisfaction of the Federal Reserve bank "
in that paragraph to read " indorsed or otherwise secured to the
satisfaction of the Federal Reserve bank ".
SEC. 323. Subsection (e) of section 13b of the Federal Reserve
Act, as amended, is amended by striking out " upon the date this
section takes effect", and inserting in lieu thereof " on and after
June 19, 1934 "; and by striking out " the par value of the holdings
of each Federal Reserve bank of Federal Deposit Insurance Corporation stock ", and inserting in lieu thereof " the amount paid by
each Federal Reserve bank for stock of the Federal Deposit
Insurance Corporation ".
SEO. 324. (a) The first paragraph of section 19 of the Federal
Reserve Act, as amended, is amended to read as follows:
" SEC. 19. The Board of Governors of the Federal Reserve System is authorized, for the purposes of this section, to define the
terms ' demand deposits ', ' gross demand deposits ', ' deposits payable on demand', ' time deposits', ' savings deposits', and ' trust
funds', to determine what shall be deemed to be a payment of
interest, and to prescribe such rules and regulations as it may deem
necessary to effectuate the purposes of this section and prevent
evasions thereof: Provided, That, within the meaning of the provisions of this section regarding the reserves required of member
banks, the term ' time deposits shall include ' savings deposits '."
(b) The tenth paragraph of such section 19 is amended to read
as follows:
" In estimating the reserve balances required by this Act, member
banks may deduct from the amount of their gross demand deposits
the amounts of balances due from other banks (except Federal
Reserve banks and foreign banks) and cash items in process of
collection payable immediately upon presentation in the United
States, within the meaning of these terms as defined by the Board
of Governors of the Federal Reserve System."
(c) The last two paragraphs of such section 19 are amended to
read as follows:
" No member bank shall, directly or indirectly, by any device
whatsoever, pay any interest on any deposit which is payable on
demand: Provided, That nothing herein contained shall be con
[PUB.
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35
"
strued as prohibiting the payment of interest in accordance with
the terms of any certificate of deposit or other contract entered into
in good faith which is in force on the date on which the bank
becomes subject to the provisions of this paragraph; but no such
certificate of deposit or other contract shall be renewed or extended
unless it shall be modified to conform to this paragraph, and every
member bank shall take such action as may be necessary to conform to this paragraph as soon as possible consistently with its
contractual obligations: Provided further, That this paragraph shall
not apply to any deposit of such bank which is payable only at an
office thereof located outside of the States of the United States and
the District of Columbia: Provided further, That until the expiration of two years after the date of enactment of the Banking Act
of 1935 this paragraph shall not apply (1) to any deposit made
by a savings bank as defined in section 12B of this Act, as amended,
or by a mutual savings bank, or (2) to any deposit of public funds
made by or on behalf of any State, county, school district, or other
subdivision or municipality, or to any deposit of trust funds if the
payment of interest with respect to such deposit of public funds or
of trust funds is required by State law. So much of existing law
as requires the payment of interest with respect to any funds deposited by the United States, by any Territory, District, or possession
thereof (including the Philippine Islands), or by any public instrumentality, agency, or officer of the foregoing, as is inconsistent with
the provisions of this section as amended, is hereby repealed.
"The Board of Governors of the Federal Keserve System shall
from time to time limit by regulation the rate of interest which
may be paid by member banks on time and savings deposits, and
shall prescribe different rates for such payment on time and savings
deposits having different maturities, or subject to different conditions respecting withdrawal or repayment, or subject to different
conditions by reason of different locations, or according to the varying discount rates of member banks in the several Federal Reserve
districts. No member bank shall pay any time deposit before its
maturity except upon such conditions and in accordance with such
rules and regulations as may be prescribed by the said Board, or
waive any requirement of notice before payment of any savings
deposit except as to all savings deposits having the same requirement: Provided* That the provisions of this paragraph shall not
apply to any deposit which is payable only at an office of a member Dank located outside of the States of the United States and
the District of Columbia."
(d) Such section 19 is amended by adding at the end thereof the
following new paragraph:
" Notwithstanding the provisions of the First Liberty Bond Act, as
amended, the Second Liberty Bond Act, as amended, and the Third
Liberty Bond Act, as amended, member banks shall be required to
maintain the same reserves against deposits of public moneys by the
United States as they are required by this section to maintain against
other deposits."
SEC. 325. Section 21 of the Federal Reserve Act, as amended, is
amended by adding at the end thereof the following paragraph:
"Whenever member banks are required to obtain reports from
affiliates, or whenever affiliates of member banks are required to sub
36
[PUB.
305.]
mit to examination, the Board of Governors of the Federal Reserve
System or the Comptroller of the Currency, as the case may be, may
waive such requirements with respect to any such report or examination of any affiliate if in the judgment of the said Board or
Comptroller, respectively, such report or examination is not necessary
to disclose fully the relations between such affiliate and such bank
and the effect thereof upon the affairs of such bank."
SEC. 326. (a) Subsection (a) of section 22 of the Federal Reserve
Act, as amended, is amended by inserting in the first paragraph
thereof after " No member bank " the following: " and no insured
bank as defined in subsection (c) of section 12B of this Act"; by
inserting before the period at the end of the first sentence of such
paragraph " or assistant examiner, who examines or has authority to
examine such bank "; and by inserting after " any member bank "
in the second paragraph thereof " or insured bank "; by inserting
before the period at the end thereof " or Federal Deposit Insurance
Corporation examiner "; and by adding at the end of such subsection
a new paragraph, as follows:
" The provisions of this subsection shall apply to all public examiners and assistant examiners who examine member banks of the
Federal Reserve System or insured banks, whether appointed by the
Comptroller of the Currency, by the Board of Governors of the
Federal Reserve System, by a Federal Reserve agent, by a Federal
Reserve bank, or by the Federal Deposit Insurance Corporation, or
appointed or elected under the laws of any State; but shall not apply
to private examiners or assistant examiners employed only by a
clearing-house association or by the directors of a bank."
(b) Subsection (b) of such section 22 is amended by inserting
therein after " no national bank examiner " the following: " and no
Federal Deposit Insurance Corporation examiner "; and by inserting
after " member bank " the following: " or insured bank "; and by
inserting after " from the Comptroller of the Currency," the following : " as to a national bank, the Board of Governors of the Federal
Reserve System as to a State member bank, or the Federal Deposit
Insurance Corporation as to any other insured bank,".
(c) Subsection (g) of such section 22 is amended to read as
follows:
"(g) No executive officer of any member bank shall borrow from
or otherwise become indebted to any member bank of which he is an
executive officer, and no member bank shall make any loan or extend
credit in any other manner to any of its own executive officers: Provided, That loans made to any such officer prior to June 16,1933, may
be renewed or extended for periods expiring not more than five years
from such date where the board of directors of the member Ibank
ghall have satisfied themselves that such extension or renewal is in
the best interest of the bank and that the officer indebted has made
reasonable effort to reduce his obligation, these findings to be evidenced by resolution of the board of directors spread upon the
minute book of the bank: Provided further, That with the prior
approval of a majority of the entire board of directors, any member
bank may extend credit to any executive officer thereof, and such
officer may become indebted thereto, in an amount not exceeding
$2,500. If any executive officer of any member bank borrow from or
if he be or become indebted to any bank other than a member bank
[PUB.
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37
of which he is an executive officer, he shall make a written report to
the board of directors of the member bank of which he is an executive
officer, stating the date and amount of such loan or indebtedness, the
security therefor, and the purpose for which the proceeds have been
or are to be used. Borrowing by, or loaning 'to, a partnership in
which one or more executive officers of a member bank are partners
having either individually or together a majority interest in said
partnership, shall be considered within the prohibition of this subsection. ^Nothing contained in this subsection shall prohibit any
executive officer of a member bank from endorsing or guaranteeing
for the protection of such bank any loan or other asset which shall
have been previously acquired by such bank in good faith or from
incurring any indebtedness to such bank for the purpose of protecting such bank against loss or giving financial assistance to it. The
Board of Governors of the Federal Reserve System is authorized to
define the term ' executive officer ', to determine what shall be deemed
to be a borrowing, indebtedness, loan, or extension of credit, for the
purposes of this subsection, and to prescribe such rules and regulations as it may deem necessary to effectuate the provisions of this subsection in accordance with its purposes and to prevent evasions of
such provisions. Any executive officer of a member bank accepting
a loan or extension of credit which is in violation of the provisions
of this subsection shall be subject to removal from office in the manner prescribed in section 30 of the Banking Act of 1933: Provided,
That for each day that a loan or extension of credit made in violation
of this subsection exists, it shall be deemed to be a continuation of
such violation within the meaning of said section 30."
SEC. 327. The third paragraph of section 23A of the Federal
Reserve Act, as amended, is amended to read as follows:
" For the purpose of this section, the term ' affiliate ' shall include
holding-company affiliates as well as other affiliates and the provisions of this section shall not apply to any affiliate (1) engaged on
June 16,1934, in holding the bank premises of the member bank with
which it is affiliated or in maintaining and operating properties
acquired for banking purposes prior to such date; (2) engaged solely
in conducting a safe-deposit business or the business of an agricultural credit corporation or livestock loan company; (3) in the capital
stock of which a national banking association is authorized to invest
pursuant to section 25 of this Act? as amended, or a subsidiary of
such affiliate, all the stock of which (except qualifying shares of
directors in an amount not to exceed 10 per centum) is owned by such
affiliate; (4) organized under section 25 (a) of this Act, as amended,
or a subsidiary of such affiliate, all the stock of which (except qualifying shares of directors in an amount not to exceed 10 per centum)
is owned by such affiliate; (5) engaged solely in holding obligations
of the United States or obligations fully guaranteed by the United
States as to principal and interest, the Federal intermediate credit
banks, the Federal land banks, the Federal Home Loan Banks, or the
Home Owners' Loan Corporation; (6) where the affiliate relationship
has arisen out of a bona fide debt contracted prior to the date of the
creation of such relationship; or (7) where the affiliate relationship
exists by reason of the ownership or control of any voting shares
thereof by a member bank as executor, administrator, trustee, receiver,
38
[PUB. 305J
agent, depositary, or in any other fiduciary capacity, except where
such shares are held for the benefit of all or a majority of the stockholders of such member bank; but as to any such affiliate, member
banks shall continue to be subject to other provisions of law applicable to loans by such banks and investments by such banks in stocks,
bonds, debentures, or other such obligations. The provisions of this
section shall likewise not apply to indebtedness of any affiliate for
unpaid balances due a bank on assets purchased from such bank or
to loans secured by, or extensions of credit against, obligations of
the United States or obligations fully guaranteed by the United
States as to principal and interest."
SEC. 328. Section 24 of the Federal Reserve Act, as amended, is
amended by adding at the end thereof the following new paragraph:
" Loans made to established industrial or commercial businesses (a)
which are in whole or in part discounted or purchased or loaned
against as security by a Federal Eeserve bank under the provisions
of section 13b of this Act, (b) for any part of which a commitment
shall have been made by a Federal Reserve bank under the provisions
of said section, (c) in the making of which a Federal Reserve bank
participates under the provisions of said section, or (d) in which the
Reconstruction Finance Corporation cooperates or purchases a participation under the provisions of section 5d of the Reconstruction
Finance Corporation Act, shall not be subject to the restrictions or
limitations of this section upon loans secured by real estate."
SEC. 329. Section 25 of the Federal Reserve Act, as amended, is
further amended by striking out the last paragraph of such section;
the paragraph of section 25 (a) of the Federal Reserve Act, as
amended, which commences with the words "A majority of the shares
of the capital stock of any such corporation " is amended by striking
out all of said paragraph except the first sentence thereof; and the
Act entitled "An Act to supplement existing laws against unlawful
restraints and monopolies, and for other purposes" (38 Stat. 730),
approved October 15, 1914, as amended, is further amended (a) by
striking out section 8A thereof and (b) by substituting for the first
three paragraphs of section 8 thereof the following:
" SEC. 8. No private banker or director, officer, or employee of any
member bank of the Federal Reserve System or any branch thereof
shall be at the same time a director, officer, or employee of any other
bank, banking association, savings bank, or trust company organized
under the National Bank Act or organized under the laws of any
State or of the District of Columbia, or any branch thereof, except
that the Board of Governors of the Federal Reserve System may by
regulation permit such service as a director, officer, or employee of not
more than one other such institution or branch thereof; but the foregoing prohibition shall not apply in the case of any one or more
of the following or any branch thereof:
"(1) A bank, banking association, savings bank, or trust company,
more than 90 per centum of the stock of which is owned directly or
indirectly by the United States or by any corporation of which the
United States directly or indirectly owns more than 90 per centum
of the stock.
"(2) A bank, banking association, savings bank, or trust company
which has been placed formally in liquidation or which is in the
[PUB.
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39
hands of a receiver, conservator, or other official exercising similar
functions.
"(3) A corporation, principally engaged in international or foreign
banking or banking in a dependency or insular possession of the
United States which has entered into an agreement with the Board
of Governors of the Federal Reserve System pursuant to section 25
of the Federal Reserve Act.
"(4) A bank, banking association, savings bank, or trust company,
more than 50 per centum of the common stock of which is owned
directly or indirectly by persons who own directly or indirectly
more than 50 per centum of the common stock of such member bank.
"(5) A bank, banking association, savings bank, or trust company
not located and having no branch in the same city, town, or village
as that in which such member bank or any branch thereof is located,
or in any city, town, or village contiguous or adjacent thereto.
"(6) A bank, banking association, savings bank, or trust company
not engaged in a class or classes of business in which such member
bank is engaged.
"(7) A mutual savings bank having no capital stock.
" Until February 1, 1939, nothing in this section shall prohibit any
director, officer, or employee of any member bank of the Federal
Reserve System, or any branch thereof, who is lawfully serving at
the same time as a private banker or as a director, officer, or employee
of any other bank, banking association, savings bank, or trust company, or any branch thereof, on the date of enactment of the Banking
Act of 1935, from continuing such service.
" The Board of Governors of the Federal Reserve System is
authorized and directed to enforce compliance with this section, and
to prescribe such rules and regulations as it deems necessary for that
purpose."
SEC. 330. (a) Section 1 of the Act of November 7,1918, as amended
(U. S. C., title 12, sec. 33; Supp. VII, title 12, sec. 33), is amended
by striking out the second proviso down to and including the words
" to be ascertained " and inserting in lieu thereof the following:
"And provided further, That if such consolidation shall be voted for
at said meetings by the necessary majorities of the shareholders of
each of the associations proposing to consolidate, any shareholder of
any of the associations so consolidated, who has voted against such
consolidation at the meeting of the association of which he is a
shareholder or has given notice in writing at or prior to such meeting
to the presiding officer that he dissents from the plan of consolidation, shall be entitled to receive the value of the shares so held by him
if and when said consolidation shall be approved by the Comptroller
of the Currency, such value to be ascertained as of the date of the
Comptroller's approval ".
(b) Such section 1 is further amended by adding at the end thereof
the following paragraphs:
" Publication of notice and notification by registered mail of the
meeting provided for in the foregoing paragraph may be waived by
unanimous action of the shareholders of the respective associations.
Where a dissenting shareholder has given notice as above provided
to the association of which he is a shareholder of his dissent from the
plan of consolidation, and the directors thereof fail for more than
40
[PUB.
305.]
thirty days thereafter to appoint an appraiser of the value of his
shares, said shareholder may request the Comptroller of the Currency to appoint such appraiser to act on the appraisal committee
for and on behalf of such association.
" If shares, when sold at public auction in accordance with this
section^ realize a price greater than their final appraised value, the
excess in such sale price shall be paid to the shareholder. The consolidated association shall be liable for all liabilities of the respective consolidating associations. In the event one of the appraisers
fails to agree with the others as to the value of said shares, then the
valuation of the remaining appraisers shall govern."
SEC. 331. (a) Section 3 of the Act of November 7,1918, as amended
(U. S. G, Supp. VII, title 12, sec. 34 (a)), is amended by striking
out the first sentence following the proviso down to and including the
words " to be ascertained " and inserting in lieu thereof the following : " If such consolidation shall be voted for at said meetings by
the necessary majorities of the shareholders of the association and
of the State or other bank proposing to consolidate, and thereafter
the consolidation shall be approved by the Comptroller of the Currency, any shareholder of either the association or the State or other
bank so consolidated, who has voted against such consolidation at
the meeting of the association of which he is a stockholder, or has
given notice in writing at or prior to such meeting to the presiding
officer that he dissents from the plan of consolidation, shall be entitled
to receive the value of the shares so held by him if and when said
consolidation shall be approved by the Comptroller of the Currency,
such value to be ascertained as of the date of the Comptroller's
approval."
(b) Such section 3 is further amended by adding at the end thereof
the following paragraph:
" Where a dissenting shareholder has given notice as provided in
this section to the bank of which he is a shareholder of his dissent
from the plan of consolidation, and the directors thereof fail for more
than thirty days thereafter to appoint an appraiser of the value of his
shares, said shareholder may request the Comptroller of the Currency
to appoint such appraiser to act on the appraisal committee for and
on behalf of such bank. In the event one of the appraisers fails to
agree with the others as to the value of said shares, then the valuation
of the remaining appraisers shall govern."
SEC. 332. The Act entitled "An Act to prohibit offering for sale as
Federal farm-loan bonds any securities not issued under the terms of
the Farm Loan Act, to limit the use of the words ' Federal',' United
States', or ' reserve', or a combination of such words, to prohibit
false advertising, and for other purposes ", approved May 24, 1926
(U. S. C, Supp. VII, title 12, sees. 584-588), is amended by inserting
in section 2 thereof after " the words ' United States'", the following: "the words 'Deposit Insurance'"; and by inserting in said
section after the words " the laws of the United States ", the following : " nor to any new bank organized by the Federal Deposit Insurance Corporation as provided in section 12B of the Federal Reserve
Act, as amended,"; and by striking out the period at the end of
section 4 and inserting the following: " or the Federal Deposit
Insurance Corporation."
[POT. 305.]
41
SEC. 333. The Act entitled "An Act to provide punishment for
certain offenses committed against banks organized or operating
under laws of the United States or any member of the Federal
Eeserve System ", approved May 18, 1934 (48 Stat. 783), is amended
by striking out the period after " United States " in the first section
thereof and inserting the following: " and any insured bank as
defined in subsection (c) of section 12B of the Federal Reserve Act,
as amended."
SEC. 334. Section 5143 of the Revised Statutes, as amended, is
hereby amended by striking out everything following the words
" Comptroller of the Currency ", where such words last appear in
such section, and substituting the following: " and no shareholder
shall be entitled to any distribution of cash or other assets by reason
of any reduction of the common capital of any association unless such
distribution shall have been approved by the Comptroller of the Currency and by the affirmative vote of at least two-thirds of the shares
of each class of stock outstanding, voting as classes."
SEC. 335. Section 5139 of the Revised Statutes, as amended, is
amended by adding at the end of the first paragraph the following
new paragraph:
" Certificates hereafter issued representing shares of stock of the
association shall state (1) the name and location of the association,
(2) the name of the holder of record of the stock represented thereby,
(3) the number and class of shares which the certificate represents,
and (4) if the association shall issue stock of more than one class,
the respective rights, preferences, privileges, voting rights, powers,
restrictions, limitations, and qualifications of each class of stock
issued shall be stated in full or in summary upon the front or back
of the certificates or shall be incorporated by a reference to the
articles of association set forth on the front of the certificates. Every
certificate shall be signed by the president and the cashier of the
association, or by such other officers as the bylaws of the association
shall provide, and shall be sealed with the seal of the association."
SEC. 336. The last sentence of section 301 of the Emergency Banking and Bank Conservation Act, approved March 9,1933, as amended,
is amended to read as follows: " No issue of preferred stock shall be
valid until the par value of all stock so issued shall be paid in and
notice thereof, duly acknowledged before a notary public by the
president, vice president, or cashier of said association, has been
transmitted to the Comptroller of the Currency and his certificate
obtained specifying the amount of such issue of preferred stock and
his approval thereof and that the amount has been duly paid in as a
part of the capital of such association; which certificate shall be
deemed to be conclusive evidence that such preferred stock has been
duly and validly issued."
SEC. 337. The additional liability imposed by section 4 of the Act
of March 4,1933, as amended (D. C. Code, Supp. I, title 5, sec. 300a),
upon the shareholders of savings banks, savings companies, and
banking institutions and the additional liability imposed by section
734 of the Act of March 3, 1901 (D. C. Code, title 5, sec. 361), upon
the shareholders of trust companies, shall cease to apply on July 1,
1937, with respect to such savings banks, savings companies, banking
institutions, and trust companies which shall be transacting business
42
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on such date: Provided, That not less than six months prior to such
date, the savings bank, savings company, banking institution, or
trust company, desiring to take advantage hereof, shall have caused
notice of such prospective termination of liability to be published in
a newspaper published in the District of Columbia and having general circulation therein. In the event of failure to give such notice as
and when above provided, a termination of such additional liability
may thereafter be accomplished as of the date six months subsequent
to publication in the manner above provided. Each such savings
bank, savings company, banking institution, and trust company shall,
before the declaration of a dividend on its shares of common stock,
carry not less than one-tenth part of its net profits of the preceding
half year to its surplus fund until the same shall equal the amount
of its common stock: Provided, That for the purposes of this section,
any amounts paid into a fund for the retirement of any preferred
stock or debentures of any such savings bank, savings company, banking institution, or trust company, out of its net earnings for such
half-year period shall be deemed to be an addition to its surplus if,
upon the retirement of such preferred stock or debentures, the amount
so paid into such retirement fund for such period may then properly
be carried to surplus. In any such case the savings bank, savings
company, banking institution, or trust company shall be obligated
to transfer to surplus the amount so paid into such retirement fund
for such period on account of the preferred stock or debentures as
such stock or debentures are retired.
SEC. 338. The second paragraph of section 9 of the Federal Reserve
Act, as amended, is amended by striking out the period at the end
thereof and adding thereto the following: " except that the approval
of the Board of Governors of the Federal Reserve System, instead
of the Comptroller of the Currency, shall be obtained before any
State member bank may hereafter establish any branch and before
any State bank hereafter admitted to membership may retain any
branch established after February 25, 1927, beyond the limits of the
city, town, or village in which the parent bank is situated."
SEC. 339. Section 5234 of the Revised Statutes, as amended (U. S.
C, title 12, sec. 192), is amended by striking out the period after
the words money so deposited " at the end of the next to the last
sentence of such section and inserting in lieu of such period a colon
and the following: "Provided, That no security in the form of
deposit of United States bonds, or otherwise, shall be required in
the case of such parts of the deposits as are insured under section
12B of the Federal Reserve Act, as amended."
SEC. 340. Section 61 of the Act entitled "An Act to establish a
uniform system of bankruptcy throughout the United States",
approved July 1, 1898, as amended, is amended by inserting before
the period at the end thereof a colon and the following: " Provided,
That no security in form of a bond or otherwise shall be required in
the case of such part of the deposits as are insured under section 12B
of the Federal Reserve Act, as amended ".
SEC. 341. Section 8 of the Act entitled "An Act to establish postal
savings depositories for depositing savings at interest with the security of the Government for repayment thereof, and for other purposes ", approved June 25, 1910, as amended (U. S. C, title 39, sec.
[PUB. 305.J
4:3
758; Supp. VII, title 39, sec. 758), is amended by striking out the
first sentence thereof and inserting in lieu thereof the following:
" Notwithstanding any other provision of law, (1) each deposit
in a postal savings depository office shall be a savings deposit, and
interest thereon shall be allowed and entered to the credit of the
depositor once for each quarter beginning with the first day of the
month following the date of such deposit, but no interest shall be
allowed to any such depositor with respect to the whole or any part
of the funds to his or her credit for any period of less than three
months; (2) no interest shall be paid on any such deposit at a rate
in excess of that which may lawfully be paid on savings deposits
under regulations prescribed by the Board of Governors of the Federal Reserve System pursuant to the Federal Reserve Act, as
amended, for member banks of the Federal Reserve System located
in or nearest to the place where such depository office is situated;
and (3) postal savings depositories may deposit funds on time in
member banks of the Federal Reserve System subject to the provisions of the Federal Reserve Act, as amended, and the regulations
of the Board of Governors of the Federal Reserve System, with
respect to the payment of time deposits and interest thereon."
SEC. 342. The last sentence of the third paragraph of subsection
(k) of section 11 of the Federal Reserve Act, as amended (U. S. C,
title 12, sec. 248 (k)), is amended to read as follows: " The State
banking authorities may have access to reports of examination
made by the Comptroller of the Currency insofar as such reports
relate to the trust department of such bank, but nothing in this
Act shall be construed as authorizing the State banking authorities
to examine the books, records, and assets of such bank."
SEC. 343. The first sentence after the third proviso of section 5240
of the Revised Statutes, as amended (U. S. C., Supp. VH ? title 12,
sees. 481 and 482), is amended by striking out the word " i s " after
the words " whose compensation " and inserting in lieu thereof a
comma and the following: " including retirement annuities to be
fixed by the Comptroller of the Currency, is and shall be"; and
such section 5240 is further amended by striking out " The Federal
Reserve Board, upon the recommendation of the Comptroller of
the Currency," and inserting in lieu thereof " The Comptroller of
the Currency ".
SEC. 344. (a) Section 1 of the National Housing Act is amended
by adding at the end thereof the following new sentence: " The
Administrator shall, in carrying out the provisions of this title and
titles II and III, be authorized, in his official capacity, to sue and be
sued in any court of competent jurisdiction, State or Federal."
(b) The first sentence of section 2 of the National Housing Act,
as amended, is further amended by striking out the words " including the installation of equipment and machinery " and inserting in
lieu thereof the words " and the purchase and installation of equipment and machinery on real property ".
(c) Subsection (a) of section 203 of the National Housing Act is
amended by inserting the words " property and " before the word
" projects " in clause (1) of such subsection.
(d) The last sentence of section 207 of the National Housing Act
is amended by inserting the words " property or " before the word
" project".
44
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SEC. 345. If any part of the capital of a national bank. State
member bank, or bank applying for membership in the Federal
Reserve System consists of preferred stock, the determination of
whether or not the capital of such bank is impaired and the amount
of such impairment shall be based upon the par value of its stock
even though the amount which the holders ot such preferred stock
shall be entitled to receive in the event of retirement or liquidation
shall be in excess of the par value of such preferred stock. If any
such bank or trust company shall have outstanding any capital
notes or debentures of the type which the Reconstruction Finance
Corporation is authorized to purchase pursuant to the provisions
of section 304 of the Emergency Banking and Bank Conservation
Act, approved March 9, 1933, as amended, the capital of such bank
may be deemed to be unimpaired if the sound value of its assets is
not less than its total liabilities, including capital stock, but excluding such capital notes or debentures and any obligations of the bank
expressly subordinated thereto. Notwithstanding any other provision of law, the holders of preferred stock issued by a national
banking association pursuant to the provisions of the Emergency
Banking and Bank Conservation Act, approved March 9, 1933, as
amended, shall be entitled to receive such cumulative dividends
at a rate not exceeding six per centum per annum on the purchase
price received by the association for such stock and^ in the event
of the retirement of such stock, to receive such retirement price,
not in excess of such purchase price plus all accumulated dividends,
as may be provided in the articles of association with the approval
of the Comptroller of the Currency. If the association is placed
in voluntary liquidation, or if a conservator or a receiver is
appointed therefor, no payment shall be made to the holders of
common stock until the holders of preferred stock shall have been
paid in full such amount as may be provided in the articles of
association with the approval of the Comptroller of the Currency,
not in excess of such purchase price of such preferred stock plus
all accumulated dividends.
SEC. 346. If any provision of this Act, or the application thereof
to any person or circumstances, is held invalid, the remainder of
the Act, and the application of such provision to other persons and
circumstances, shall not be affected thereby.
Approved, August 23, 1935.
The Banking Act of 1935
(Approved August 23, 1935.)
SUMMARY OF CERTAIN PROVISIONS OF TITLE I,
AND SEGTION-BY-SECTION SUMMARY OF
TITLES II AND III.
THE BANKING ACT OF 1935
(Approved August 23, 1935.)
Summary of Certain Provisions of Title I, and
Section-By-Section Summary of Titles II and III.
TABLE OF CONTENTS
TITLE I. FEDERAL DEPOSIT INSURANCE AMENDMENTS
(Only certain provisions summarized)
Page
1.
2.
Payment of Deposits and Interest Thereon by Insured Nonmember
Banks
'.....
Insurance of Nonmember Banks
5
5
TITLE II. FEDERAL RESERVE AMENDMENTS
SEC. 201
SEC. 202
SEC. 203(a)
SECS. 203(b)and 203 (c)
President and Vice Presidents of Federal Reserve Bank. . . .
Requirements for Admission to Federal Reserve System...
Names of Board, Governor and Vice Governor Changed . . .
Organization of Board
Salaries and Reappointment of Board Members
Chairman and Vice Chairman of Board
SEC. 203(d)
Record of Action by Board and Open Market Committee. .
SEC. 204
Advances to Member Banks
SEC. 205
Open Market Operations
SEC. 206(a)
Government Obligations and Government Guaranteed
Obligations
SEC. 206(b)
Discount Rates of Reserve Banks
SEC. 207
Reserve Requirements of Member Banks
SEC. 208
Real-estate Loans by National Banks
SEC. 209
Salary and Appointment of Comptroller of the Currency...
TITLE III. TECHNICAL AMENDMENTS TO THE BANKING LAWS
6
6
6
6
7
7
7
7
7
SEC. 301
SEC. 302
9
SEC. 303(a)
SEC. 303 (b)
"Accidental Holding Company Affiliates" Eliminated
Divorcement of Securities Companies in Liquidation not
Required
Section 21 of Banking Act Clarified; Inapplicable to Banks
Selling Mortgages
Receipt of Deposits by Persons Not Subject to State or
Federal Regulation
8
8
8
8
9
9
9
9
Page
SEC. 304
SEC. 305
SEC. 306
SEC. 307
SECS. 308(a)
and 308(b)
SEC. 308(c)
SEC. 309
SEC. 310(a)
SEC. 310(b)
SEC. 311(a)
SEC. 311(b)
SEC. 311(c)
SEC. 312
SEC. 313
SEC. 314
SEC. 315
SEC. 316
SEC. 317
SEC. 318
SECS. 319(a)
and 319(b)
SEC. 320
SECS. 321 (a)
and321(b)
SEC. 322
Double Liability on National Bank Stock Terminated
Seasonal Agencies of National Banks
Directors of Nonmember National Banks Relieved of Stock
Ownership Requirement
Interlocking Relationships Between Member Banks and
Securities Companies
Change in Amount of Investment Securities of One Obligor
That May be Held By Member Bank
Purchase of Stocks for Account of Customers
Obligations Insured Under Section 207 of National Housing Act
Surplus Required for Organization of National Banks
Separation of National Bank Stock Certificates from those
of Other Corporations
Separation of State Member Bank Stock Certificates from
those of Other Corporations
Voting Rights of National Bank Preferred Stock
Voting Permit Unnecessary for Liquidation
Shares of Own Stock Held by National Bank as Sole
Trustee
Limited Voting Permits and Cumulative Voting Clarified. .
Assets Required of Holding Company Affiliates as to Bank
Stock Not Subject to Statutory Liability
Retention of Ineligible Assets by Converting Banks
Comptroller May Delegate Countersigning
Interest Rates Charged by National Bank Branches Outside United States
Accumulation of Surplus by National Bank
Criminal Provisions Re Embezzlements, False Entries,
Etc., Extended to Insured Banks and Nonmember National Banks
Voluntary Liquidation of National Banks
Prohibition of Use of Words "National", "Federal", and
"United States"
Reduction in Federal Reserve Bank Stock to Conform to
Reduction in Member Bank's Surplus
Certification to Comptroller of the Currency upon Change
in Capital Stock of Federal Reserve Bank
Publication of Condition Reports of State Member Banks..
Limitation on Loans by Member Banks on Government
Obligations
Indorsement or Other Security Sufficient for Reserve Bank
Discounts for Individuals
10
10
10
10
11
11
11
11
11
11
12
12
12
12
12
12
13
13
13
13
13
13
13
14
14
14
14
SEC. 323
SEC. 324(a)
SEC. 324(b)
SEC. 324(c)
SEC.
SEC.
SEC.
SEC.
324(d)
325
326(a)
326(b)
SEC. 326(c)
SEC. 327
SEC. 328
SEC. 329
SECS. 330(a)
and 330(b)
SECS. 331 (a)
and 331(b)
SEC. 332
SEC. 333
SEC. 334
SEC. 335
SEC. 336
SEC. 337
SEC. 338
SEC. 339
SEC. 340
SEC. 341
SEC. 342
SEC. 343
SEC. 344
SEC. 345
SEC. 346
Changes in Wording of Section 13b of Federal Reserve Act
Definition of Various Classes of Deposits by Board of
Governors of Federal Reserve System
Deduction of "Amounts Due From Banks" in Computing
Reserves
Payment of Deposits and Interest Thereon by Member
Banks
Reserves Required on Government Deposits
Waiver of Reports or Examinations of Affiliates
Criminal Provisions Clarified, Extended to Insured Banks.
Federal Deposit Insurance Corporation Examiners Subjected to Criminal Provisions
Borrowings by Executive Officers of Member Banks—
Elimination of Criminal Penalty
Restrictions on Loans to Affiliates Relaxed
"Working Capital" Loans Relieved of Real Estate Restrictions
Interlocking Bank Directorates
14
National Bank Consolidations
18
Consolidation of State and National Banks
Limitation on Use of Words "Deposit Insurance"
Robbery of Insured Bank Punished
Reduction in Stock of National Bank
Information on National Bank Stock Certificates
Issuance of Preferred Stock by National Bank
Double Liability on District of Columbia Bank Stock
Terminated
Branches of State Member Banks
Security for National Bank Receivership Funds Deposited
in Insured Bank
Security for Bankruptcy Funds Deposited in Insured Bank
Interest on Postal Savings Deposits
Access of State Banking Authorities to Examination Reports of National Bank Trust Departments
Retirement Annuities of Employees in Office of Comptroller of the Currency
Amendments to National Housing Act
Impairment of Preferred Stock and Capital Notes or
Debentures
Separability Provision
18
18
18
18
18
18
14
15
15
15
15
15
16
16
16
17
17
19
19
19
19
19
19
20
20
20
20
THE BANKING ACT OF 1935
(Approved August 23, 1935.)
SUMMAEY OF CERTAIN PROVISIONS OF TITLE I, AND
SECTION-BY-SECTION SUMMARY OF TITLES I I AND I I I
This is intended merely as a brief statement
of the apparent effect of certain provisions of the
Act, and is not intended as a legal interpretation
of the language or as a comment thereon.
TITLE I—FEDERAL DEPOSIT INSURANCE AMENDMENTS
(There are summarized below only certain provisions of Title I, especially concerning
the Federal Reserve System, i.e., the provisions relating to the payment of deposits and
interest thereon by insured nonmember banks, and those relating to the insurance of nonmember banks).
1. Payment of Deposits and Interest Thereon by Insured Nonmember Banks.
Subsection (v)(8) of section 12B of the Federal Reserve Act, as amended by the Banking
Act of 1935, contains a new provision which directs the board of directors of the Federal
Deposit Insurance Corporation to prohibit by regulation the " payment of interest on demand
deposits in insured nonmember banks". For that purpose the directors may define the term
1
'demand deposits", but such exceptions must be made to the prohibition as are now or may
hereafter be made for member banks by section 19 of the Federal Reserve Act or regulations
thereunder.
The Federal Deposit Insurance Corporation Directors also "shall from time to time
limit by regulation the rates of interest or dividends which may be paid by insured nonmember
banks on time and savings deposits". The Directors shall "define what constitutes time and
savings deposits in an insured nonmember bank" and they shall "prescribe different rates
for such payment on time and savings deposits having different maturities, or subject to
different conditions respecting withdrawal or repayment, or subject to different conditions
by reason of different locations, or according to the varying discount rates of member banks
in the several Federal Reserve districts". The regulations shall prohibit the payment of any
time deposit before maturity except upon conditions prescribed by the Directors, and shall
prohibit the waiving of any requirement of notice before payment of a savings deposit except
as to all savings deposits having the same requirement.
A penalty of $100, recoverable by the Corporation, is provided for violation.
2. Insurance of Nonmember Banks.
Subsection (f) (2) of section 12B of the Federal Reserve Act, as amended by the Banking
Act, permits any State nonmember or national nonmember bank to become an insured bank,
"subject to the provisions of this section".
Subsection (i)(2) terminates the insured status of a member bank when it ceases to be a
member bank; but for two years thereafter the bank remains liable for assessments and retains
the insurance on insured deposits held by it when it ceased to be a member bank, less subsequent
withdrawals.
Subsection (y)(l) provides, in lieu of the former provisions of subsections (1) and (y)
which would have terminated the insurance of all nonmember banks on July 1, 1937, that no
State bank which during the calendar year 1941 or any succeeding calendar year has average
deposits of $1,000,000 or more shall be an insured bank or have any part of its deposits insured
after July 1 following the calendar year in which it had such deposits; but the restriction does
not apply to a savings, mutual savings, Morris plan, or other bank doing no commercial banking
business, or to a bank located in Hawaii, Alaska, Puerto Rico, or the Virgin Islands.
TITLE II—FEDERAL RESERVE AMENDMENTS
SECTION 201
President and Vice Presidents of Federal Reserve Bank.
Paragraph "Fifth" of section 4 of the Federal Reserve Act is amended, effective March
1, 1936, to provide specifically for a "president" and "vice presidents" at each Federal
Reserve bank. The president will be the chief executive officer of the bank and will be appointed
by the board of directors, with the approval of the Board in Washington, for a five-year term;
and all other executive officers and all employees of the bank will be directly responsible to
him. The first vice president will be appointed in the same manner and for the same term as
the president, and will serve as chief executive officer of the bank in the absence or disability
of the president or during a vacancy in that office. Vacancies in the office of president or first
vice president will befilledin the same manner as original appointments, and for the remainder
of the term of the predecessors.
SECTION 202
Requirements for Admission to Federal Reserve System.
A new paragraph is added to section 9 of the Federal Reserve Act so that in order to
facilitate the admission to membership of any State bank which is required under subsection
(y) of section 12B to become a member bank in order to be an insured bank (see Title I above
re insurance of nonmember banks), the Board may waive in whole or in part the requirements
of section 9 relating to the admission of such bank to membership. If such a bank is admitted
with capital less than that required for the organization of a national bank in the same place
and its capital and surplus are not, in the Board's judgment, adequate in relation to the bank's
liabilities to depositors and other creditors, the Board may require such bank to increase its
capital and surplus to such amount as the Board may deem necessary within such period as
the Board may deem reasonable; but no such bank may be required to increase its capital
beyond that required for the organization of a national bank in the same place.
SECTION 203(a)
Names of Board, Governor, and Vice Governor Changed.
A separate provision not specifically amending the Federal Reserve Act provides that
hereafter the Federal Reserve Board shall be known as the "Board of Governors of the
Federal Reserve System" and that the governor and vice governor shall be known as the
"chairman" and "vice chairman", respectively.
SECTIONS 203(b) and 203(c)
Organization of Board.
Section 10 of the Federal Reserve Act is amended to provide that the Board of Governors
of the Federal Reserve System shall be composed of seven members appointed by the President with the advice and consent of the Senate. The Secretary of the Treasury, the Comptroller
of the Currency, and the present six appointive members continue to serve as members of
the Board until February 1,1936; and the term of each successor will be fixed by the President
at not more than fourteen years, so that not more than one term will expire in any two year
period. Thereafter, instead of serving a twelve year term, each member will hold office for a
term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. The existing prohibition against more than one board
member being from the same Federal Reserve district is retained, and the President is still
directed, in selecting the Board members, to "have due regard to a fair representation of the
financial, agricultural, industrial, and commercial interests, and geographical divisions of the
country". Upon the expiration of their terms of office, members of the Board will continue
to serve until their successors are appointed and have qualified.
Salaries and Reappointment of Board Members.
The Act increases Board members' salaries from $12,000 a year to $15,000; and adds a
new provision that a person appointed after enactment of the Act shall not be eligible for
reapp ointment after he has served a full term of fourteen years.
Chairman and Vice Chairman of Board.
One of the members of the Board '' shall be designated by the President as Chairman and
one as Vice Chairman of the Board, to serve as such for a term of four years". The Chairman of the Board, subject to its supervision, shall be its active executive officer.
SECTION 203(d)
Record of Action by Board and Open Market Committee.
At the end of Section 10 of the Federal Eeserve Act a new paragraph is added requiring
the Board to keep a complete record of action taken, and the reasons underlying such action,
by it and by the Federal Open Market Committee on all questions of open market operations
and all other questions of policy, and to include in its annual report a full account of all such
action together with a copy of the records required to be kept.
SECTION 204
Advances to Member Banks.
Section 10(b) of the Federal Eeserve Act which, prior to its expiration on March 3, 1935,
authorized any Federal Eeserve bank, under rules and regulations prescribed by the Board,
to make advances to any member bank on its time or demand notes secured to the satisfaction
of such Federal Eeserve bank is reenacted as permanent law and amended in certain respects.
The requirement that such advances be made only "in exceptional and exigent circumstances"
and when the member bank cannot obtain adequate credit accommodations under other provisions of the Federal Eeserve Act is eliminated; and the requirement that such note must bear
interest at a rate not less than one per cent per annum higher than the highest discount rate
in effect at such Federal Eeserve bank on the date of such note is changed to a requirement
that it be at least one-half per cent per annum higher. A provision is added requiring the
notes of the member bank to have maturities of not more than four months.
SECTION 205
Open Market Operations.
Section 12A of the Federal Eeserve Act is amended, effective March 1, 1936, so that
instead of the Federal Open Market Committee consisting of one representative from each
Federal Eeserve district, it will consist of the seven members of the Board of Governors of
the Federal Eeserve System and five annually-elected representatives of the Federal Eeserve banks. One of the five reserve bank representatives will be elected by the directors
of the Federal Eeserve banks of Boston and New York; one by the directors of the Federal
Eeserve banks of Philadelphia and Cleveland; one by the directors of the Federal Eeserve
banks of Chicago and St. Louis; one by the directors of the Federal Eeserve banks of Eichmond, Atlanta and Dallas; and one by the directors of the Federal Eeserve banks of Minneapolis, Kansas City and San Francisco. An alternate for each representative will be elected
in the same manner as the representative. The existing provision for meetings being held at
"Washington at least four times a year upon the call of the Chairman (formerly called the
Governor) of the Board, or at the request of any three members of the Committee, is retained.
The Committee will " consider, adopt, and transmit to the several Federal Eeserve banks,
regulations relating to the open market transactions of such banks". Not only will Federal
Eeserve banks be forbidden to engage in open market operations except in accordance with
such regulations, but they also will be forbidden to "decline to engage" in such operations
except in accordance with the direction of and regulations adopted by the Committee. The
old procedure is eliminated whereby open market policies were proposed by the Committee,
submitted to the Board for approval or disapproval, and then, if approved, forwarded to the
Reserve banks who might, by giving thirty days' notice, refuse to participate in such operations.
The provision in subsection (c) of section 12A that open market operations "shall be
governed with a view to accommodating commerce and business and with regard to their
bearing upon the general credit situation of the country", is retained. Though the provision
relating to the Board's power to regulate relations of the Federal Reserve System with foreign
central or other foreign banks is eliminated, this apparently has little effect since the power
to control such relations remains in the Board under section 14(g) of the Federal Reserve Act.
SECTION 206(a)
Government Obligations and Government Guaranteed Obligations.
Section 14(b) of the Federal Reserve Act is amended to provide that obligations of the
United States and those fully guaranteed as to principal and interest by the United States
may be bought and sold without regard to maturities, but only in the open market.
SECTION 206(b)
Discount Rates of Reserve Banks.
Section 14(d) of the Federal Reserve Act which provides that Federal Reserve banks may
from time to time establish discount rates, subject to review and determination of the Board,
is amended to require that '' each such bank shall establish such rates every fourteen days, or
oftener if deemed necessary by the Board".
SECTION 207
T>
T>
J.
£
TUT
7
Tt
7
Reserve Requirements of Member Banks.
Section 19 of the Federal Reserve Act is amended to permit the Board to change the
reserve requirements of member banks "in order to prevent injurious credit expansion or
contraction"; and to eliminate the necessity for first having a declaration, upon the affirmative
vote of five Board members and the approval of the President, that "an emergency exists by
reason of credit expansion". The changes may be made for member banks located in reserve
and central reserve cities, for member banks not in reserve or central reserve cities, or for all
member banks; but the affirmative vote of not less than four Board members is required for
such a change, and the reserves required of a member bank as a result of such a change may
not be less than the present requirements nor more than twice such requirements.
SECTION 208
Real-estate Loans by National Banks.
Section 24 of the Federal Reserve Act, relating to real-estate loans by national banks, is
amended to eliminate the requirement that the real estate upon which such loans are made
must be located in the bank's Federal Reserve district or within 100 miles of the place in which
the bank is located. Apparently the requirement that the bank take the entire amount of the
obligation is eliminated with respect to loans made by the bank but is retained as to such
obligations purchased by the bank. The limitation to 50 per cent of the actual value of the
property is changed to 50 per cent of the appraised value; and in addition to retaining the
exemption of mortgages insured under Title II of the National Housing Act from the five-year
limitation on maturities and 50 per cent limitation on appraised values, the amendment permits amortized loans to be made in amounts not exceeding 60 per cent of the appraised value
of the real estate and for terms not longer than ten years if installment payments are sufficient
to amortize at least 40 per cent of the principal within ten years.
8
The permissible aggregate of real estate loans of a national bank is changed from 25
per cent of the bank's paid-in and unimpaired capital and surplus or 50 per cent of its savings
deposits, whichever is greater, to 100 per cent of its paid-in and unimpaired capital and surplus or 60 per cent of its time and savings deposits, whichever is greater.
SECTION 209
Salary and Appointment of Comptroller of the Currency.
Section 325 of the Revised Statutes is amended to increase the Comptroller of the Currency's salary as Comptroller from $5,000 a year to $15,000 a year, thus replacing that portion of his salary which he formerly received as a member of the Federal Reserve Board and
also increasing his salary to the same extent that Board members' salaries are increased. The
provision that his appointment be made upon the recommendation of the Secretary of the
Treasury also is eliminated.
TITLE III—TECHNICAL AMENDMENTS
SECTION 301
"Accidental Holding Company Affiliates" Eliminated.
Section 2(c) of the Banking Act of 1933 is amended to eliminate from the definition of
"holding company affiliates," (except for the purposes of section 23A of the Federal Reserve
Act which deals with loans by member bank to such affiliates or on the securities of such
affiliates) and hence from all other provisions regarding such affiliates, any corporation all
the stock of which is owned by the United States or any "organization which is determined
by the Board of Governors of the Federal Reserve System not to be engaged, directly or
indirectly, as a business in holding the stock of, or managing or controlling, banks, banking
associations, savings banks, or trust companies".
SECTION 302
Divorcement of Securities Companies in Liquidation Not Required.
Section 20 of the Banking Act of 1933 is amended to make it clear, in conformity with a
previous ruling of the Board, that member banks need not divorce securities affiliates which
have been placed in formal liquidation.
SECTION 303(a)
Section 21 of Banking Act Clarified; Inapplicable to Banks Selling Mortgages.
Section 21 (a) (1) of the Banking Act of 1933 is amended to make it clear that it does not
prohibit any financial institution or private banker from engaging in the securities business
to the limited extent permitted to national banks under section 5136 of the Revised Statutes.
(Section 5136 limits national banks, in dealing and under writing, to United States Government obligations, general obligations of States or subdivisions, obligations issued under the
Federal Farm Loan Act or by the Federal Home Loan Banks or the Home Owners Loan
Corporation, and certain obligations insured under section 207 of the National Housing Act).
It also is made clear that section 21 (a) (1) does not prohibit a bank from selling without
recourse or agreement to repurchase, obligations evidencing loans on real estate.
SECTION 303(b)
Receipt of Deposits by Persons not Subject to State or Federal Regulation.
Section 21(a)(2) of the Banking Act of 1933, which prohibited any person not subject to
examination and regulation under State or Federal law from engaging in the business of
9
receiving deposits unless such person submit to examination by the Comptroller of the Currency or the Federal Eeserve Bank of the district, is amended so as to prohibit any person
from engaging in such business with other than his or its own officers, agents, or employees,
unless such person (1) is incorporated under and authorized to engage in such business by
Federal or local law; or (2) is permitted by local law to engage in such business and is subject
under such law to examination and regulation; or (3) submits to periodic examination by the
banking authorities of the locality where the business is conducted and makes and publishes
periodic reports of condition under the same conditions as required by local law in the case
of incorporated banking institutions.
SECTION 304
Double Liability on National Bank Stock Terminated.
Section 22 of the Banking Act of 1933, which ended double liability on national bank stock
issued after June 16, 1933, is amended to permit termination on July 1, 1937, of the double
liability on previously issued stock in national banks operating on that latter date. The bank
must publish notice of such termination six months before July 1, 1937 in order to terminate
such liability on that date, or it can terminate such liability after that date by publishing such
notice six months prior to the termination.
SECTION 305
Seasonal Agencies of National Banks.
Section 5155 of the Revised Statutes is amended to permit a national bank in a State which
by statute permits State banks to maintain branches within county or greater limits, to establish, with the approval of the Comptroller of the Currency, without regard to the capital
requirements of the section, a "seasonal agency in any resort community" in the same county
as the main office of such bank. However, the privilege applies only if no other bank is doing
business in the place where the agency is to be located, and any permit for such an agency
must be revoked upon the opening of a State or national bank in such community.
SECTION 306
Directors of Nonmember National Banks Relieved of Stock Ownership Requirement.
Section 4 of the Act of June 16, 1934, which relieved directors of member banks from the
stock ownership requirement of section 31 of the Banking Act of 1933, is amended to eliminate
such requirement also as to nonmember national banks, such as those in Alaska and Hawaii.
SECTION 307
Interlocking Relationships Between Member Banks and Securities Companies.
Section 32 of the Banking Act of 1933 is rewritten, effective January 1, 1936, to make the
prohibitions against interlocking relationships between member banks and securities companies extend to the employees of both such organizations in addition to their officers and
directors; and individuals engaged in the securities business are subjected to the same prohibitions as officers of companies and members of partnerships so engaged.
Permission of the Board for such interlocking relationships will be given "in limited
classes of cases" and by "general regulations" rather than by individual permit. Such relationships may be permitted when they "would not unduly influence the investment policies
of such member bank or the advice it gives its customers regarding investments'', rather than
when they would be "not incompatible with the public interest".
The description of the securities businesses in question is changed from those "engaged
primarily in the business of purchasing, selling, or negotiating securities" to those "primarily
engaged in the issue, flotation, underwriting, public sale, or distribution, at wholesale or retail,
or through syndicate participation, of stocks, bonds, or other similar securities". The pro10
hibition against correspondent relationships between member banks and securities companies
is eliminated.
SECTIONS 308(a) and 308(b)
Change in Amount of Investment Securities of One Obligor That May Be Held By Member
Bank.
Section 5136 of the Revised Statutes is amended to eliminate the existing prohibition
against a member bank purchasing and holding more than 10 per cent of a particular issue
of investment securities, but the total obligations of one obligor which may be purchased and
held by a member bank is reduced from 15 per cent of the bank's paid in and unimpaired
capital and 25 per cent of its unimpaired surplus, to 10 per cent of each, though banks are not
required to dispose of securities lawfully held on the date of enactment of the bill.
Purchase of Stocks for Account of Customers.
It would be made clear, in conformity with previous rulings of the Comptroller of the
Currency and the Board, that national and other member banks may purchase and sell stocks
for the account of their customers but not for their own accounts.
SECTION 308(c)
Obligations Insured Under Section 207 of National Housing Act.
Section 5136 of the Revised Statutes is amended to include within the group of securities
that may be dealt in by member banks free from the restrictions of that section, obligations
insured under section 207 of the National Housing Act, if the debentures to be issued in payment of such insured obligations are guaranteed as to principal and interest by the United
States.
SECTION 309
Surplus Required for Organization of National Banks.
Section 5138 of the Revised Statutes is amended to require for the organization of a new
national bank, a paid in surplus of 20 per cent of its capital; and although the Comptroller of
the Currency is permitted to waive this requirement as to a converting State bank, such a
converting bank is required, before the declaration of a dividend on its common stock, to carry
at least one-half of its net profits for the preceding half year to its surplus fund until its surplus equals 20 per cent of its capital. Provision also is made for treating as a part of the
surplus fund amounts paid into a fund for the retirement of preferred stock.
SECTION 310(a)
Separation of National Bank Stock Certificates From Those of Other Corporations.
The requirement of section 5139 of the Revised Statutes that stock certificates of national
banks may not "represent the stock" of any other corporation, except a member bank or a
corporation existing on the date the paragraph took effect "engaged solely in holding the
bank premises of such association", is changed so that such certificates merely may not "bear
any statement purporting to represent the stock" of any other corporation, except a member
bank or a corporation "engaged on June 16, 1934 in holding the bank premises". A similar
change is made in the exceptions to the prohibition against the transfer of national bank shares
being conditioned upon the transfer of shares of other corporations. A provision also is added
to the effect that the section shall not operate to prevent the transfer of stock of another
corporation being conditioned upon the transfer of a national bank stock certificate.
SECTION 310(b)
Separation of State Member Bank Stock Certificates From Those of Other Corporations.
The provisions of section 9 of the Federal Reserve Act regarding the separation of State
member bank stock certificates from those of other corporations are amended to make the
same changes as those indicated above in the case of national bank stock certificates.
11
SECTION 311(a)
Voting Rights of National Bank Preferred Stock.
Section 5144 of the Revised Statutes is amended to make it clear that it does not limit the
voting rights of holders of preferred stock of a national bank under provisions of articles
of association or amendments thereto adopted pursuant to sec. 302(a) of the EmergencyBanking Act of March 9, 1933, as amended.
Voting Permit Unnecessary for Liquidation.
Section 5144 of the Revised Statutes is amended to eliminate the necessity for a voting permit in cases where shares of a member bank held by a holding company affiliate are to be
voted merely in favor of placing the bank in voluntary liquidation or taking any other action
pertaining to voluntary liquidation of the bank.
Shares of Own Stock Held by National Bank as Sole Trustee.
The prohibition in section 5144 against a national bank voting its own stock when held
by it as sole trustee, is relaxed to apply only in the election of directors; and even in the election of directors such stock may be voted if the donor or beneficiary of the trust, under authority of the trust, directs how the stock is to be voted. A provision is added to the effect that
whenever shares cannot be voted on account of the prohibition mentioned above, they shall be
excluded in determining whether matters voted upon by the shareholders were adopted by
the requisite percentage of shares.
SECTION 311(b)
Limited Voting Permits and Cumulative Voting Clarified.
Section 5144 of the Revised Statutes is amended to make it clear that holding company
affiliates which have obtained a voting permit are entitled to the right of cumulative votinggiven other shareholders by the section, and also to make it clear that the Board of Governors
of the Federal Reserve System may issue limited voting permits and is not confined to issuing
general voting permits. Both these changes conform with previous rulings of the Board.
SECTION 311 (c)
Assets Required of Holding Company Affiliates as to Bank Stock Not Subject to Statutory
Liability.
Section 5144(c) of the Revised Statutes is amended to relieve a holding company affiliate,
to the extent that the bank stock owned by it is not subject to statutory liability, from the provisions of section 5144(b) which require a holding company affiliate after June 16, 1938, (1)
to possess and maintain readily marketable assets other than bank stock in an amount not
less than 12 per cent of the aggregate par value of all such stock controlled by it and to increase
such amount by 2 per cent per annum of such par value until such assets amount to 25 per
cent of the par value of such bank stock; and (2) to reinvest in readily marketable assets
other than bank stock all net earnings over 6 per cent per annum on the book value of its own
shares until such assets amount to 25 per cent of the aggregate par value of all bank stock
controlled by it. In lieu of these requirements, a holding company affiliate, to the extent that
the shares of bank stock held by it are not subject to statutory liability, is subjected to the
provisions of section 5144(c) which require the holding company affiliate after June 16, 1938,
to establish and maintain out of the net earnings over 6 per cent per annum on the book value
of its own shares, a reserve of readily marketable assets of not less than 12 per cent of the
aggregate par value of such bank stock controlled by it.
SECTION 312
Retention of Ineligible Assets By Converting Banks.
Section 5154 of the Revised Statutes is amended to authorize the Comptroller of the Currency to permit State banks converting into national banks to retain and carry, at a value
determined by the Comptroller, assets not permitted to be acquired and held by national banks.
12
SECTION 313
Comptroller May Delegate Countersigning.
Section 5162 of the Revised Statutes is amended to authorize the Comptroller of the Currency to designate a person or persons to countersign on his behalf assignments and transfers
of bonds.
SECTION 314
Interest Rates Charged By National Bank Branches Outside United States.
Section 5197 of the Revised Statutes is amended to permit national bank branches located
outside the States of the United States and the District of Columbia to charge interest at the
rate permitted by local law.
SECTION 315
Accumulation of Surplus by National Bank.
Section 5199 of the Revised Statutes is amended to make the requirement that a national
bank carry one-tenth of earnings to the surplus fund before declaring a dividend, apply only
to the declaration of a dividend on its common stock, and also to change the amount of surplus
to be accumulated, from 20 per cent of its "capital stock" to 100 per cent of its "common
capital". Provision also is added to allow a national bank to treat as an addition to its surplus
fund amounts paid into its preferred-stock retirement fund.
SECTION 316
Criminal Provisions re Embezzlements, False Entries, etc., Extended to Insured Banks and
Nonmember National Banks.
The criminal provisions of section 5209 of the Revised Statutes relating to embezzlements,
false entries, etc., are extended to apply to officers, directors, and employees, etc., of insured
banks, or of nonmember national banks such as those in the Territories.
SECTION 317
Voluntary Liquidation of National Banks.
A paragraph is added to section 5220 of the Revised Statutes to provide a procedure to
be followed in cases of voluntary liquidation of national banks as authorized by that section.
Liquidation will be accomplished by a liquidating agent or committee which will be responsible
to the bank's directors and stockholders, and the bank will remain subject to examination by
the Comptroller of the Currency.
SECTION 318
Prohibition of Use of Words National", "Federal", and "United States".
Section 5243 of the Revised Statutes which prohibited the use of the word "national" in
certain cases is rewritten so as to prohibit the use of the words "national", "Federal", or
"United States" as a part of the name or title of any person, firm or corporation doing the
business of bankers, brokers or trust or savings institutions unless they are organized under
the laws of the United States or permitted by the laws of the United States to use such name
or are now lawfully using such name.
e<
SECTIONS 319(a) and 319(b)
Reduction in Federal Reserve Bank Stock to Conform to Reduction in Member Bank's Surplus.
Section 5 of the Federal Reserve Act is amended to require member banks to reduce their
holdings of Federal reserve bank stock upon a reduction in their surplus, just as they are
already required to do upon a reduction in their capital.
13
Certification to Comptroller of the Currency Upon Change in Capital Stock of Federal Reserve
Bank.
The provisions of section 5 of the Federal Reserve Act requiring the directors of a Federal
Reserve bank to execute a certificate to the Comptroller of the Currency upon an increase in
the capital stock of such bank, and the provisions of section 6 of the Federal Reserve Act
requiring a similar certification upon a reduction in such capital stock, are repealed.
SECTION 320
Publication of Condition Reports of State Member Banks.
Section 9 of the Federal Reserve Act is amended to authorize the Board of Governors of
the Federal Reserve System to prescribe the information to be contained in, and form of,
condition reports of State member banks, and to require publication of such reports under
regulations of the Board.
SECTIONS 321(a) and 321(b)
Limitation on Loans by Member Banks on Government Obligations.
Section 11 (m) of the Federal Reserve Act is amended to place State member banks on
a parity with national banks in lending on the security of bonds or notes of the United States
issued since April 24, 1917, certificates of indebtedness of the United States, Treasury bills
of the United States, or obligations guaranteed as to principal and interest by the United
States, by changing the limitation on loans to one individual on such security, from 10 per
cent of the bank's unimpaired capital and surplus to 25 per cent thereof, as provided for
national banks in section 5200 of the Revised Statutes. The latter provision is amended to
make it cover Treasury bills of the United States and obligations guaranteed as to principal
and interest by the United States, as well as the other government obligations listed above.
SECTION 322
Indorsement or Other Security Sufficient for Reserve Bank Discounts for Individuals.
The third paragraph of section 13 of the Federal Reserve Act is amended to require either
indorsement or other security, rather than both, for paper discounted by Federal reserve
banks for individuals or corporations unable to secure adequate credit accommodations from
other banks.
SECTION 323
Changes in Wording of Section 13b of Federal Reserve Act.
This section makes certain changes in the language of section 13b of the Federal Reserve
Act, making it conform to the amendment in Title I of the bill whereby stock of the Federal
Deposit Insurance Corporation subscribed for by the Federal reserve banks is changed to
no par value. These changes in section 13b, however, are in form only and do not alter the
effect of the existing law.
SECTION 324(a)
Definition of Various Classes of Deposits by Board of Governors of the Federal Reserve
System.
The definitions of "demand deposits" and "time deposits" are stricken from section 19
of the Federal Reserve Act, and instead, the Board of Governors of the Federal Reserve System is authorized to define for the purposes of the section the terms: "demand deposits",
"gross demand deposits", "deposits payable on demand", "time deposits", "savings deposits" and "trust funds", to determine what is to be deemed a payment of interest and to
prescribe regulations to effectuate the purposes of the section; but the term "time deposits"
continues to include '' savings deposits'' for the purposes of the provisions regarding member
bank reserve requirements.
14
SECTION 324(b)
Deduction of "Amounts Due From Banks" in Computing Reserves.
Section 19 of the Federal Reserve Act is amended so that, for purposes of computing
member bank reserves, amounts due from other banks (except Federal reserve banks and
foreign banks) and certain cash items in process of collection may be deducted from gross
demand deposits rather than merely from amounts due to other banks.
SECTION 324(c)
Payment of Deposits and Interest Thereon by Member Banks.
Section 19 of the Federal Reserve Act is amended to add to the exemptions from the prohibition against the payment of interest by member banks on demand deposits: (1) contracts
existing when a bank joins the System and (2) deposits payable outside the States of the
United States and the District of Columbia (rather than merely those payable in foreign
countries). The existing exemption of deposits made on behalf of any State or other such
subdivision as to which interest is required by State law and of deposits made by mutual
savings banks, is terminated two years after the date of enactment of the Banking Act of
1935; and during this two-year period there are added to these exemptions deposits made by
savings banks and deposits of trust funds on which interest is required by State law. So
much of existing law as requires the payment of interest on funds deposited by the United
States or any territory or possession thereof as is inconsistent with the provisions of section 19
is repealed.
The provision authorizing the Board, in limiting the rate of interest which may be paid
by member banks on time and savings deposits, to prescribe different rates in different circumstances, is changed to a provision that the Board "shall prescribe different rates for such
payment on time and savings deposits having different maturities, or subject to different
conditions respecting withdrawal or repayment, or subject to different conditions by reason
of different locations, or according to the varying discount rates of member banks in the
several Federal Reserve districts." The absolute prohibition against the payment of time
deposits before maturity is relaxed to permit such payments under conditions prescribed by
the Board; and deposits payable only at offices of member banks located outside the States of
the United States, and the District of Columbia are exempted from all restrictions on payment
before maturity and all restrictions on interest rates.
SECTION 324(d)
"Reserves Required on Government Deposits.
At the end of Section 19 of the Federal Reserve Act a new paragraph is added requiring
member banks to keep the same reserves against deposits of the United States as against other
deposits, thus repealing the contrary provisions of the Liberty Bond Acts.
SECTION 325
Waiver of Reports or Examinations of Affiliates.
A new paragraph is added to Section 21 of the Federal Reserve Act to permit the Board
of Governors of the Federal Reserve System or the Comptroller of the Currency, as the case
may be, to waive examination of, or reports from, affiliates of a member bank, when they are
"not necessary to disclose fully the relations between such affiliate and such bank and the
effect thereof upon the affairs of such bank".
SECTION 326(a)
Criminal Provisions Clarified, Extended to Insured Banks.
Section 22(a) is amended to make it clear that the prohibitions against loans or gratuities to bank examiners from member banks, and their officers and employees, apply only to
15
banks subject to examination by such examiners; and also to make it clear that these prohibitions and the prohibitions against thefts by examiners apply to State examiners examining member banks as well as to Federal examiners, but not to private examiners. The prohibitions are extended to cover insured banks.
SECTION 326(b)
Federal Deposit Insurance Corporation Examiners Subjected to Criminal Provisions.
The prohibition in Section 22(b) of the Federal Eeserve Act against a National Bank
Examiner receiving compensation from any bank, or officer or employee thereof, is extended
to Federal Deposit Insurance Corporation examiners; and the restrictions against examiners
revealing the borrowers or collateral of member banks is extended to cover insured banks.
SECTION 326(c)
Borrowings by Executive Officers of Member Banks—Elimination of Criminal Penalty.
Section 22(g) of the Federal Reserve Act forbidding executive officers of member banks
to borrow from their banks is amended by giving the Board of Governors of the Federal Reserve System power to remove such officers for violations, rather than subjecting them to the
present penalty of $5,000 and/or a year in jail. The $10,000 fine on the bank is eliminated.
Such loans that were outstanding on June 16, 1933, may be extended or renewed until
June 16, 1938, if a finding by the bank directors that such renewal is in the bank's interest
and that the officer has made reasonable effort to reduce his obligation is spread on the bank's
minute book. With the prior approval of a majority of the bank's directors, loans not exceeding $2,500 from a member bank to an executive officer are permitted. Borrowing by a
partnership in which one or more executive officers have individually or collectively a majority
interest are stated to be within the prohibition, whereas the old law was construed to prohibit
loans to partnerships in which an executive officer has any interest. It is made clear that, in
order to aid or protect the bank, executive officers may indorse paper previously taken by the
bank in good faith, or may incur any indebtedness to the bank. The Board is given power to
define terms used in the section and prescribe regulations to effect its purposes.
SECTION 327
Restrictions on Loans to Affiliates Relaxed.
The exemptions from the limitations of Section 23A on member banks • loans to affiliates
and loans on and investments in the securities of affiliates, is broadened to exempt from its
provisions (1) affiliates "engaged on June 16,1934" in holding the bank premises (the existing law requires them to be "solely" so engaged), (2) affiliates primarily engaged in maintaining and operating properties acquired for banking purposes prior to enactment of the
bill, (3) wholly owned subsidiaries of foreign banking corporations organized under the Federal Reserve Act, (4) wholly owned subsidiaries of similar corporations in which national
banks are authorized to invest under Section 25 of the Federal Reserve Act, (5) affiliates
engaged solely in holding obligations of, or fully guaranteed as to principal and interest by,
the United States, (the present exemption applies only to affiliates holding such direct obligations), (6) affiliates which became such through a bona fide previous debt, and (7) affiliates which are such because their shares are held by the bank as fiduciary (except when the
beneficiaries are a majority of the bank's stockholders).
The section also is made inapplicable to affiliate indebtedness arising from the unpaid
balance due on assets purchased from the bank, and to loans secured by, or extensions of
credit against obligations of, or fully guaranteed as to principal and interest by the United
States.
16
SECTION 328
"Working Capital" Loans Relieved of Real Estate Restrictions.
Section 24 of the Federal Reserve Act is amended to exempt from the restrictions of that
section on real estate loans, all "working capital" loans in which the Reconstruction Finance
Corporation or a Federal reserve bank has participated or made a commitment, or which it has
discounted, loaned upon or purchased.
SECTION 329
Interlocking Bank Directorates.
Section 8A of the Clayton Act which restricted interlocking relationships between banks
and trust companies organized or operating under the laws of the United States and institutions which "make loans secured by stock or bond collateral", is repealed; and certain provisions of Sections 25 and 25(a) of the Federal Reserve Act regarding interlocking relations
between member banks and foreign banking corporations organized under the Federal Reserve Act or in which national banks are authorized to invest under Section 25 of the Federal
Reserve Act, also are repealed.
Section 8 of the Clayton Act is rewritten to provide that "no private banker or director,
officer, or employee of any member bank of the Federal Reserve System or any branch thereof
shall be at the same time a director, officer, or employee of any other bank, banking association,
savings bank, or trust company organized under the National Bank Act or organized under
laws of any State or of the District of Columbia, or any branch thereof, except that the Board
of Governors of the Federal Reserve System may by regulation permit such service as a director, officer, or employee of not more than one other such institution or branch thereof".
However, the prohibition does not apply in the case of one or more of the following or
any branch thereof:
(1) A bank of which more than 90 per cent of the stock is owned by the United States or
by any corporation of which the United States owns more than 90 per cent of the
stock;
(2) A bank placed formally in liquidation or which is in the hands of a receiver, conservator or other such official;
(3) A corporation principally engaged in international or foreign banking or banking
in a dependency or possession of the United States which has entered into an agreement with the Board pursuant to Section 25 of the Federal Reserve Act;
(4) A bank of which more than 50 per cent of the common stock is owned by persons who
own more than 50 per cent of the common stock of the member bank;
(5) A bank not located and having no branch in the same place where the member bank
or branch thereof is located, or in a place contiguous or adjacent thereto;
(6) A bank not engaged in a class or classes of business in which a member bank is engaged; and
(7) A mutual savings bank having no capital stock.
Until February 1, 1939, the amended section will not affect the service of any director,
officer, or employee of any member bank or branch thereof who is lawfully serving on {he date
the Bill was enacted.
The Board "is authorized and directed to enforce compliance with this section, and to
prescribe such rules and regulations as it deems necessary for that purpose".
17
SECTIONS 330(a) and 330(b)
National Bank Consolidations.
Section 1 of the Act of November 7, 1918 (U.S.C., Title 12, section 33) is amended to
clarify the provisions relating to consolidations of national banks, particularly with respect
to dissenting stockholders.
SECTIONS 331(a) and 331 (b)
Consolidation of State and National Banks.
By provisions similar to those of the previous section of the Act, Section 3 of the Act of
November 7, 1918 (U.S.C., Title 12, section 34(a)) is amended to clarify the provisions relating to consolidations of State and national banks, particularly with respect to dissenting stockholders.
SECTION 332
Limitation on Use of Words "Deposit Insurance".
Section 2 of the Act of May 24, 1926 (U.S.C., Title 12, sections 584-588) forbidding the
misleading use of the words ''Federal", "United States", and "Reserve" by banks, insurance companies, and similar financial institutions is amended to forbid such use of the words
"Deposit Insurance".
SECTION 333
Robbery of Insured Bank Punished.
The Act of May 18, 1934 (48 Stat. 783) punishing robberies of member banks and of banking institutions organized or operating under Federal law, is amended to extend such protection to insured banks.
SECTION 334
Reduction in Stock of National Bank.
Section 5143 of the Revised Statutes is amended to eliminate the necessity for a national
bank obtaining the approval of the Board of Governors of the Federal Reserve System in
addition to the approval of the Comptroller of the Currency, before reducing its capital stock.
Distribution to stockholders of cash or other assets by reason of a reduction in common capital
would not be permitted except upon approval of the Comptroller of the Currency and the
affirmative vote of at least two-thirds of the shares of each class of stock outstanding, voting
by classes.
SECTION 335
Information on National Bank Stock Certificates.
Section 5139 of the Revised Statutes is amended to require certain information to be set
forth on stock certificates issued in the future by national banks. If more than one class of
stock is issued, the rights, privileges, etc., of each class of stock also must be stated in full,
summarized, or incorporated by reference, on the certificate.
SECTION 336
Issuance of Preferred Stock by National Bank.
Section 301 of the Emergency Banking Act of March 9, 1933, is amended to clarify the
provision that no issue of national bank preferred stock shall be valid until the par value of
all stock so issued shall be paid in. Notice of such payment, acknowledged before a notary
by the president, vice president, or cashier of the bank, first must be forwarded to the Comptroller of the Currency, and his certificate setting forth such payment and his approval of the
issue be obtained. Then the certificate will be conclusive evidence that the preferred stock
was duly and validly issued.
18
SECTION 337
Double Liability on District of Columbia Bank Stock Terminated.
Provision is made to terminate on July 1, 1937, the double liability on stock of savings
banks, banking institutions and trust companies in the District of Columbia. The procedure is similar to that provided in Section 304 of the Act for terminating such liability on
certain national bank stock.
Each bank in the District of Columbia is required, before the declaration of a dividend
on shares of its common stock, to carry at least one-tenth of its net profit of the preceding
half year to its surplus fund until the surplus fund equals the amount of the common stock;
and provision is made to allow such banks to treat as an addition to their surplus fund amounts
paid into their preferred-stock retirement fund.
SECTION 338
Branches of State Member Banks.
Section 9 of the Federal Reserve Act is amended to require the approval of the Board of
Governors of the Federal Reserve System instead of the Comptroller of the Currency, for
State member banks to establish or maintain certain branches on the same basis as national
banks. Except for substituting the approval of the Board for that of the Comptroller of the
Currency, no change is made in the law regarding branches of such banks.
SECTION 339
Security for National Bank Receivership Funds Deposited in Insured Bank.
The requirement of Section 5234 of the Revised Statutes that deposits of national bank
receivership funds be secured by the deposit of Government bonds or other securities, is
eliminated as to those parts of such deposits which are insured under Sec. I2B of the Federal Reserve Act.
SECTION 340
Security for Bankruptcy Funds Deposited in Insured Bank.
The requirement of Section 61 of the Bankruptcy Act that deposits of bankruptcy funds
be secured, is eliminated as to those parts of such deposits which are insured under Section
12B of the Federal Reserve Act.
SECTION 341
Interest on Postal Savings Deposits.
Section 8 of the Postal Savings Depository Act of June 25, 1910, as amended by Section
11 (c) of the Banking Act of 1933, is amended to clarify the provisions regarding the payment of interest on postal savings deposits; to prevent the rate of interest paid on such deposits exceeding the rate which may lawfully be paid on savings deposits by member banks
located in or nearest to the place where the depository office is situated; and to authorize
postal savings depositories to deposit funds on time with member banks subject to the provisions of the Federal Reserve Act and regulations thereunder regarding payment of time
deposits and interest thereon.
SECTION 342
Access of State Banking Authorities to Examination Reports of National Bank Trust
Departments.
Section 11 (k) of the Federal Reserve Act is amended to give State banking authorities, in
lieu of access to the books and records of national bank trust departments, access to reports of
examination of such departments made by the Comptroller of the Currency.
19
SECTION 343
Retirement Annuities of Employees in Office of Comptroller of the Currency.
Section 5240 of the Revised Statutes relating to the payment of compensation of employees in the office of the Comptroller of the Currency by means of assessments on banks is
amended to include the payment of retirement annuities for such employees; and also to provide that salaries of bank examiners shall be fixed by the Comptroller of the Currency, rather
than by the Board upon the recommendation of the Comptroller of the Currency.
SECTION 344
Amendments to National Housing Act.
The National Housing Act is amended to authorize the Federal Housing Administrator,
in carrying out the provisions of titles I, II, and III of that Act, to sue and be sued in any
court of competent jurisdiction; and also is amended to clarify certain provisions of that Act.
SECTION 345
Impairment of Preferred Stock and Capital Notes or Debentures.
This section, without specifically amending any Act, provides that if any part of the capital of a national bank, State member bank, or bank applying for membership in the Federal
Reserve System consists of preferred stock, or if any such bank has outstanding capital notes
or debentures of the type eligible for the purchase by the Reconstruction Finance Corporation under section 304 of the Emergency Banking Act, the determination of whether or not
the capital of such bank is impaired, and the amount of such impairment shall be based upon
the par value of its stock, even though the amount which the holders of the preferred stock
shall be entitled to receive in the event of retirement or liquidation shall be greater than the
par value of such preferred stock; and that such capital notes or debentures and any obligations expressly subordinated thereto, be excluded from the total liabilities of the bank in determining whether its capital is impaired. It also is provided that dividends not in excess of
6 per cent per annum on national bank preferred stock, and also disbursements in the event
of retirement of such stock or liquidation of the association may be based on the purchase
price rather than par value. Holders of national bank preferred stock are assured priority
over the common stockholders in the event of voluntary or involuntary liquidation of the
national bank.
SECTION 346
Separability Provision.
This section contains the usual provision that if any provision of the Act is held invalid
that shall not affect the remainder of the Act.
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