Full text of Industrial Advances Act

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

[ P U B L I C — N o . 4 1 7 — 7 3 D CONGRESS]
[S. 3487]
A N ACT
Relating to direct loans for industrial purposes by Federal Reserve banks, and
for other purposes.

Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the Federal
Reserve Act, as amended, is amended by adding after section 13a
thereof a new section reading as follows:
"SEC. 13b. (a) I n exceptional circumstances, when i t appears to
the satisfaction of a Federal Reserve bank that an established indust r i a l or commercial business located in its district is unable to obtain
requisite financial assistance on a reasonable basis from the usual
sources, the Federal Reserve bank, pursuant to authority granted by
the Federal Reserve Board, may make loans, to, or purchase obligations of, such business, or may make commitments with respect
thereto, on a reasonable and sound basis, for the purpose of providing i t with working capital, but no obligation shall be acquired
or commitment made hereunder with a maturity exceeding five years.
" ( b ) Each Federal Reserve bank shall also have power to discount for, or purchase from, any bank, trust company, mortgage
company, credit corporation for industry, or other financing institution operating in its district, obligations having maturities not exceeding five years, entered into for the purpose of obtaining working
capital for any such established industrial or commercial business;
to make loans of advances direct to any such financing institution on
the security of such obligations; and to make commitments w i t h
regard to such /discount or purchase of obligations or with respect to
such loans or advances on the security thereof, including commitments made in Advance of the actual undertaking of such obligations.
Each such financing institution shall obligate itself to the satisfaction of the Fejderal Reserve bank for at least 20 per centum of any
loss which may be sustained by such bank upon any of the obligations acquired from such financing institution, the existence and
amount of any such loss to be determined i n accordance with regulations of the Federal Reserve Board: Provided, That in lieu of such
obligation against loss any such financing institution may advance
at least 20 per centum of such working capital for any established
industrial or commercial business without obligating itself to the
Federal Reserve bank against loss on the amount advanced by the
Federal Reserve bank: Provided, however, That such advances by
the financing institution and the Federal Reserve bank shall be
considered as one advance, and repayment shall be made pro rata
under such regulations as the Federal Reserve Board may prescribe.
" ( c ) The aggregate amount of loans, advances, and commitments of the Federal Reserve banks outstanding under this section
at any one time, plus the amount of purchases and discounts under
this section held at the same time, shall not exceed the combined



2

[PUB. 417.]

surplus of the Federal Reserve banks as of July 1, 1934, plus all
amounts paid to the Federal Reserve banks by the Secretary of the
Treasury under subsection (e) of this section, and all operations
of the Federal Reserve banks under this section shall be subject to
such regulations as the Federal Reserve Board may prescribe.
" ( d ) For the purpose of aiding the Federal Reserve banks in
carrying out the provisions of this section, there is hereby established in each Federal Reserve district an industrial advisory committee, to be appointed by the Federal Reserve bank subject to the
approval and regulations of the Federal Reserve Board, and to be
composed of not less than three nor more than five members as
determined by the Federal Reserve Board. Each member of such
committee shall be actively engaged in some industrial pursuit
within the Federal Reserve district in "which the committee is established, and each such member shall serve without compensation but
shall be entitled to receive from the Federal Reserve bank of such
district his necessary expenses while engaged in the business of the
committee, or a per diem allowance in lieu thereof to be fixed by
the Federal Reserve Board. Each application for any such loan,
advance, purchase, discount, or commitment shall be submitted to
the appropriate committee and, after an examination by it of the
business with respect to which the application is made, the application shall be transmitted to the Federal Reserve bank, together with
the recommendation of the committee.
"(e) I n order to enable the Federal Reserve banks to make the
loans, discounts, advances, purchases, and commitments provided
for in this section, the Secretary of the Treasury, upon the date
this section takes effect, is authorized, under such rules and regulations as he shall prescribe, to pay to each Federal Reserve bank not
to exceed such portion of the sum of $139,299,557 as may be represented by the par value of the holdings of each Federal Reserve
bank of Federal Deposit Insurance Corporation stock, upon the
execution by each Federal Reserve bank of its agreement (to be
endorsed on the certificate of such stock) to hold such stock unencumbered and to pay to the United States all dividends, all payments on liquidation, and all other proceeds of such stock, for
which dividends, payments, and proceeds the United States shall
be secured by such stock itself up to the total amount paid to each
Federal Reserve bank by the Secretary of the Treasury under this
section. Each Federal Reserve bank, in addition, shall agree that,
in the event such dividends, payments, and other proceeds in any
calendar year do not aggregate 2 per centum of the total payment
made by the Secretary of the Treasury, under this section, i t w i l l
pay to the United States in such year such further amount, i f any,
up to 2 per centum of the said total payment, as shall be covered
by the net earnings of the bank for that year derived from the use
of the sum so paid by the Secretary of the Treasury; and that for
said amount so due the United States shall have a first claim against
such earnings and stock, and further that i t w i l l continue such
payments until the final liquidation of said stock by the Federal
Deposit Insurance Corporation. The sum so paid to each Federal
Reserve bank by the Secretary of the Treasury shall become a part
of the surplus fund of sucli Federal Reserve bank within the mean


[£tra. 417.1

3

ing of this section. A l l amounts required to be expended by the
Secretary of the Treasury in order to carry out the provisions of
this section shall be paid out of the miscellaneous receipts of the
Treasury created by the increment resulting from the reduction of
the weight of the gold dollar under the President's proclamation of
January 31, 1934; and there is hereby appropriated, out of such
receipts, such sum as shall be required for such purpose."
SEC. 2. Section 5202 of the Revised Statutes of the United States,
as amended, is hereby amended by adding at the end thereof the
following new paragraph:
" Tenth; Liabilities incurred under the provisions of section 13b
of the Federal Reserve Act."
SEC. 3. Section 22 of the Federal Reserve Act is amended by adding at the end thereof the following new paragraphs :
" (h) Whoever makes, any material statement, knowing i t to be
false, or whoever willfully overvalues any security, for the purpose
of influencing in any way the action of a Federal Reserve bank upon
any application, commitment, advance, discount, purchase, or loan,
or any extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security therefor,
shall be punished by a line o l not more than $5,000 or by imprisonment for not moi'e than two years, or both.
" (i) "Whoever, being connected in any capacity with a Federal
Reserve bank (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value,
whether belonging to i t or pledged or otherwise entrusted to it, or
(2) with intent to defraud any Federal Reserve bank, or any other
body politic or corporate, or any individual, or to deceive any officer,
auditor, or examiner, makes any false entry i n any book, report, or
statement of or to a Federal Reserve bank, or, without being duly
authorized, draws any order or issues, puts forth, or assigns any
note, debenture, bond, or other obligation, or draft, mortgage, judgment, or decree shall be punished by a fine of not more than $10,000
or by imprisonment for not more than five years, or both.
* ( j ) The provisions of sections 112, 113, 114, 115, 116, and 117
of the Criminal Code of the United States, insofar as applicable,
are extended to apply to contracts or agreements of any Federal
Reserve bank under this Act, which, for the purposes hereof, shall
be held to include advances, loans, discounts, purchase, and repurchase agreements; extensions and renewals thereof; and acceptances,
releases, and substitutions of security therefor.
" (k) I t shall be unlawful for any person to stipulate for or
give or receive, or consent or agree to give or receive, any fee? commission, bonus, or thing of value for procuring or endeavoring to
procure from any Federal Reserve bank any advance, loan, or extension of credit or discount or purchase of any obligation or commitment with respect thereto, either directly from such Federal Reserve
bank or indirectly through any financing institution unless such fee,
commission, bonus, or thing of value and all material facts with
respect to the arrangement or understanding therefor shall be disclosed in writing in the application or request for such advance, loan,
extension of credit, discount, purchase, or commitment. Any violation of the provisions of this paragraph shall be punishable by



4

DPUB. 417.1

imprisonment for not more than one year or by a fine of not exceeding* $5,000, or both. I f a director, officer, employee; or agent of any
Federal Reserve bank shall knowingly violate this paragraph, he
shall be held liable in his personal and individual c a p a c i t y for any
loss or damage sustained by such Federal Reserve bank in consequence of such violation."
SEC. 4. Section 10 of the Federal Reserve Act, as amended, is
further amended by changing the period at the end of the third
paragraph thereof to a comma and inserting thereafter the following : " and such assessments may include amounts sufficient to provide for the acquisition by the Board in its own name of such site
or building in the District of Columbia as in its judgment alone shall
be necessary for the purpose of providing suitable and adequate
quarters for the performance of its functions. After approving
such plans, estimates, and specifications as i t shall have caused to be
prepared, the Board may, notwithstanding any other provision of
law, cause to be constructed on the site so acquired by i t a building
Suitable and adequate in its judgment for its purposes and proceed
to take all such steps as i t may deem necessary or appropriate in
connection with the construction, equipment, and furnishing of such
building. The Board may maintain, enlarge, or remodel any building so acquired or constructed and shall have sole control of such
building and space therein."
SEC, 5. That the Reconstruction Finance Corporation Act, as
amended (U.S.C., Supp. V I I , title 15, ch. 14), is amended by inserting before section 6 thereof the following new section:
"SEC. 5d. For the purpose of maintaining and increasing the
employment of labor, when credit at prevailing bank rates for the
character of ^loans applied for is not otherwise available at banks,
the Corporation is authorized and empowered to make loans to any
industrial or commercial business, which shall include the fishing
industry, established prior to January 1, 1934. Such loans shall
i n the opinion of the board of directors of the Corporation.be adequately secured, may be made directly, or in cooperation with banks
or other lending institutions, or by the purchase of participations,
shall have maturities not to exceed five years, shall be made only
when deemed to offer reasonable assurance of continued or increased
employment of labor, shall be made only when, i n the opinion of the
board of directors of the# Corporation^ the borrower is solvent, shall
not exceed $300,000,000 in aggregate amount at, any one time outstanding, and shall be subject to such terms, conditions, and restrictions as the board of directors of the Corporation may determine.
The aggregate amount of loans to any one borrower under this
section shall not exceed $500,000.
" The power to make loans given herein shall terminate on January 31, 1935, or on such earlier date as the President shall by
proclamation fix; but no provision of law terminating any of the
functions of the Corporation shall be construed to prohibit disbursement of funds on loans and commitments, or agreements to make
loans, made under this section prior to January 31, 1935, or such
earlier date."
SEC. 6* (a) Section 882 of the Revised Statutes (U:S.C., title 28,
sec. 661) is amended to read as follows:



[PUB. 417.1

0

"SEC. 882. (a) Copies of any books, records, papers, or other
documents in any of the executive departments, or of any corporation all of the stock of which is beneficially owned by the United
States, either directly or indirectly, shall be admitted i n evidence
equally with the originals thereof, when duly authenticated under
the seal of such department or corporation, respectively.
"(b) Books or records of account in whatever form, and minutes
(or portions thereof) of proceedings, of any such executive department or corporation, or copies of such books, records, or minutes
authenticated under the seal of such department or corporation,
shall be admissible as evidence of any act, transaction, occurrence,
or event as a memorandum of which such books, records, or minutes
were kept or made.
"(c) The seal of any such executive department or corporation
shall be judicially noticed."
(b) Section 4 of the Reconstruction Finance Corporation Act, as
amended (U.S.C., Supp. V I I , title 15, sec. 604), is amended by
inserting immediately before the semicolon following the words
" corporate seal" a comma and the words " which shall be judicially
noticed
SEC. 7. Section 1001 of the Revised Statutes, as amended (U.S.C.,
title 28, sec. 870), is amended by inserting immediately after the
word " Government" the following: " or any corporation all the
stock of which is beneficially owned by the United States, either
directly or indirectly
SEC. 8. The Reconstruction Finance Corporation Act, as amended
(U.S.C., Supp. V I I , title 15, ch. 14), is further amended by inserting
after section 5a thereof the following new section:
" SEC. 5b. Notwithstanding any other provision of law—
"(1) The maturity of drafts or bills of exchange which may be
accepted by the Corporation under section 5a of this Act, and the
period for which the Corporation may make loans or advances under
sections 201 (c) and 201 (d) of the Emergency Relief and Construction Act of 1932, as amended, and under section 5 of this Act, may
be five years, or any shorter period, from February 1,1935: Provided,
That in respect of loans or advances under such section 5 to railroads,
railways, and receivers or trustees thereof, the Corporation may
require as a condition of making any such loan or advance for a
period,longer than three years that such arrangements be made for
the reduction or amortization of the indebtedness of the railroad or
railway, either i n whole or in part, as may be approved by the Corporation after the prior approval of the Interstate Commerce
Commission.
"(2) The Corporation may at any time, or from time to time,
extend, or consent to the extension of, the time of payment of any
loan or advance made by it, through renewal, substitution of new
obligations, or otherwise, but the time for such payment shall not
be extended beyond five years from February 1, 1935: Provided,
That the time of payment of loans or advances to railroads, railways, and receivers or trustees thereof, shall not be so extended
except with the prior approval of the Interstate Commerce Commission, and, in the case of a loan to a railroad or railway, with the prior
certification of the Interstate Commerce Commission that the rail


6

[PUB.

417.]

road or railway is not in need of financial reorganization i n the
public interest.
" ( 3 ) I n connection with the reorganization under section 77 of
the Federal Bankruptcy Act, approved July 1, 1898, as amended,
or with receivership proceedings in a court or courts, of any railroad or railway indebted to the Corporation, or of any railroad or
railway the receivers or trustees of which are indebted to the Corporation, the Corporation may, with the prior approval of the Interstate Commerce Commission, adjust or compromise its claim against
such railroad or railway, or any such receiver or trustee, by accepting, in connection with any such reorganization or receivership proceedings and in exchange for securities or any part thereof then
held, new securities which may have such terms as to interest,
maturity, and otherwise as may be approved by the Corporation,
or part cash and part new securities so approved: Provided, That
any such adjustment or compromise shall not be made on less favorable terms than those provided in the reorganization of the railroad or railway for holders of claims of the same class and rank as
the claim of the Corporation."
SEC. 9. Section 301 of the National Industrial Recovery Act
(U.S.C., Supp. V I I , title 40, sec. 412) is amended by inserting beforo
the period at the end thereof a colon and the following: "Provided
further, That in connection with any loan or contract or any commitment to make a loan entered into by the Reconstruction Finance
Corporation prior to June 26,1933, to aid in financing part or all of
the construction cost of projects pursuant to section 201 (a) (1) of
the Emergency Relief and Construction Act of 1932, as amended,
the Corporation may make such further loans and contracts for the
completion of any such project, or for improvements, additions,
extensions, or equipment which are necessary or desirable for the
proper functioning of any such project, or which w i l l materially
increase the assurance that the borrower w i l l be able to repay the
entire investment of the Corporation in such project, including such
improvements, additions, extensions, or equipment; and the Corporation may disburse funds to the borrower thereunder, at any time
prior to January 23 , 1939, notwithstanding any provisions to the
contrary contained i n this section or in section 201 (h) of the Emergency Relief and Construction Act of 1932, as amended: Provided
further, That any such further loans shall be made subject to all
the terms and conditions set forth i n the Emergency Relief and
Construction Act of 1932, as amended, with respect to the loans
authorized by section 201 (a) (1) of said Act."
SEC. 10. Notwithstanding any limitations on its power, the Reconstruction Finance Corporation, upon request of any borrower under
section 201(a) of the Emergency Relief and Construction Act of
1932, as amended, may adjust the maturities of any obligations of
such borrower now held by it, or hereafter acquired by i t under lawf u l commitments, to such periods as may in the discretion of the
Reconstruction Finance Corporation be proper, but such adjustment
shall not extend any such maturity to more than twenty years from
the advancing of the stun or sums evidenced thereby.
SEC. 11. Section 36 of the Emergency Farm Mortgage Act of 1933,
as amended (U.S.C., Supp. V I I , title 43, sec- 403), is amended as
follows:



[PUB. 417.]

7

(1) B y striking from the first sentence thereof $50,000,000 to
or for the benefit of drainage districts, levee districts, levee and
drainage districts, irrigation districts, and similar districts," and
inserting in lien thereof " $125,000,000 to or for the benefit of drainage districts, levee districts, levee and drainage districts, irrigation
districts, and similar districts, mutual nonprofit companies and
incorporated water users' associations ".
(2) B y striking from the second sentence thereof " district or
political subdivision " and inserting in lieu thereof " district, political
subdivision, company, or association".
(3) By amending clause (4) thereof to read as follows:
" ( 4 ) the borrower shall agree, insofar as i t may lawfully do
so, that so long as any part of such loan shall remain unpaid the
borrower will in each year apply to the repayment of such loan
or to the purchase or redemption of the obligations issued to evidence such loan, an amount equal to the amount by which the
assessments, taxes, and other charges collected by i t exceed (a) the
cost of operation ahd maintenance of the project, (b) the debt
charges on its outstanding obligations, and (c) provision for such
reasonable reserves as may be approved by the Corporation; and
(4) By adding at the ead thereof the following new paragraph:
u
When any loan is authorized pursuant to the provisions of this
section and i t shall then or thereafter appear that repairs and necessary extensions or improvements to the project of such district,
political subdivision, company, or association are necessary or
desirable for the proper functioning of its project or for the further
assurance of its ability to repay such loan, and i f i t shall also appear
that such repairs and necessary extensions or improvements are not
designed to bring new lands into production, the Corporation, within
the limitation as to total amount provided in this section, may make
an additional loan or loans to such district, political subdivision,
company, or association for such purpose or purposes. When application therefor shall have been made by any such district, political
subdivision, company, or association any loan authorized by this
section may be made cither to such district, political subdivision,
company, or association or to the holders or representatives of the
holders of their existing indebtedness, and such loans may be made
upon promissory notes collateraled by the obligations of such district, political subdivision, company, or association or through the
purchase of securities issued or to be issued by such district, political
subdivision, company, or associaton V
SEC. 12. (a) Sections 2 and 3 of the Act entitled " A n Act to authorize the Reconstruction Finance Corporation to subscribe for preferred stock and purchase the capital notes of insurance companies,
and for other purposes", approved June 10, 1933, as amended
(U.S.C., Supp. V I I , title 15, sees. 605f and 605g), are amended to
read as follows:
A
SEC. 2. I n the event that any such insurance company shall be
incorporated, under the laws of any State which does not permit i t
to issue preferred stock, exempt from assessment or additional liability, or i f such laws permit such issue of preferred stock only by
unanimous consent of stockholders, or upon notice of more than
twenty days, or i f the insurance company is a mutual organization
1

So in original




8

[Pub. 417.]

without capital stock, the Reconstruction Finance Corporation is
authorized for the purposes of this Act to purchase the legally issued
capital notes of such insurance company, or, i f the company is u
mutual organization without capital stock, such other form or forms
of indebtedness as the laws of the State under which such company
is organized permit, or to make loans secured by such notes or such
other form or forms of indebtedness as collateral, which may be
subordinated in whole or in part or to any degree to claims of othercreditors.
" SEC, 3. The Reconstruction Finance Corporation shall not subscribe for or purchase any preferred stock or capital notes of any
applicant insurance company, (1) until the applicant shows to the
satisfaction of the Corporation that i t has unimpaired capital, or that
i t w i l l furnish new capital which will be subordinate to the preferred
stock or capital notes to be subscribed for or purchased by the Corporation, equal to the amount of said preferred stock or capital notes
so subscribed for or purchased by the Corporation: Provided, That
the Corporation may make loans upon said preferred stock or capital
notes, or other form or forms of indebtedness permitted by the laws
of the State under which said applicant is organized, i f , in its opinion, such loans w i l l be adequately secured by said stock or capital
notes or other form or forms of indebtedness and/or such other forms
of security as the Corporation may require, (2) i f at the time of such
subscription, purchase, or loan any officer, director, or employee of
the applicant is receiving total compensation in a sum in excess of
$17,500 per annum from the applicant and/or any of its affiliates, and
(3) unless at such time, the insurance company agrees to the satisfaction of the Corporation that while any part of the preferred
stock, notes, bonds, or debentures (or, in the case of a mutual insurance company, other form or forms of indebtedness permitted by the
laws of the State under which the company is organized) of such
insurance company is held by the Corporation, the insurance company, except with the consent of the Corporation, will not (a)
increase the compensation received by any of its officers, directors, or
employees from the insurance company and/or any of its affiliates,
and in no event increase any such compensation to an amount
exceeding $17,500 per annum, or (b) retire any of its stock, notes,
bonds, debentures, or other forms of indebtedness issued for capital
purposes. For the purposes of this section, the term "compensation " includes any salary, fee, bonus, commission, or other payment
direct or indirect, in money or otherwise for personal services."
(b) Section 11 of such Act of June 10,1933, as amended (U.S.C.,
Supp. V H , title 15, sec. 605i), is amended by adding at the end
thereof the following new sentence: "As used in this section and i n
sections 1, 2, and 3 of this Act, the term 6 State' means any State,
Territory, or possession of the United States, the Canal Zone, and
the District of Columbia.55
SEC. 13. The Reconstruction Finance Corporation is authorized and
empowered to make loans upon f u l l and adequate security, based on
mineral acreage, to recognized arid established incorporated managing agencies of farmers' cooperative mineral rights pools not engaged i n drilling or mining operations, said loans to be made for
the purpose of defraying the cost of organizing such pools.



[PUB. 417.]

9

SEC. 14. The Reconstruction Finance Corporation is authorized and
empowered to make loans upon adequate security, based on mineral
acreage to recognized and established incorporated agencies, individuals, and partnerships engaged in the business of mining, milling,
or smelting of ores.
SEC. 15. The Corporation is authorized and empowered to make
loans under section 5 of the Reconstruction Finance Corporation Act,
as amended, to any person, association, or corporation organized
under the laws of any State, the District of Columbia, Alaska,
Hawaii, or Puerto Rico, for the purpose of financing the production,
storage, handling, packing, processing, carrying, and/or orderly
marketing of fish of American fisheries and/or products thereof
upon the same terms and conditions, and subject to the same limitations, as are applicable in case of loans made under said section 5,
as amended.
SEC. 16. The Reconstruction Finance Corporation is hereby authorized and empowered to make ldans at any time prior to January
31, 1935, out of the funds of the Corporation upon f u l l and adequate security, to public-school districts or other similar publicschool authorities organized pursuant to State law, for the purpose
of payment of teachers' salaries due prior to June 1, 1934: Provided,
That the agregate1 amount of such loans at any time outstanding
shall not exceed $75,000,000.
Approved, June 19, 1934.
1

So in original.