View original document

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

D CONGRESS
1ST SESSION

N

1
|

0
(

)

0

1
1

I N T H E SENATE OF T H E U N I T E D STATES
MAY 1 (calendar day, MAY 10), 1933
Mr. GLASS introduced the following bill; which was read twice and referred
to the Committee on Banking and Currency

A BILL
To provide for the safer and more effective use of the assets of
Federal reserve banks and of national banking associations,
to regulate interbank control, to prevent the undue diversion
of funds into speculative operations, and for other purposes.
1

Be it enacted by the Senate and House of Representa-

2

tives of the United States of America in Congress assembled,

3

That the short title of this Act shall be the " Banking Act

4

of 1933."

5
6

SEC. 2. As used in this Act and in any provision of
law amended by this Act—

7
8

(a) The terms " banks " , " national bank

" national

banking association", "member bank", " b o a r d " , "dis-




2
1

trict

2

to them in section 1 of the Federal Reserve Act, as amended.

3

and " reserve bank " shall have the meanings assigned

(b)

Except where otherwise specifically provided,

4

the term " affiliate " shall include any corporation, business

5

trust, association, or other similar organization—

6

(1) Of which a member bank, directly or indirectly,

7

owns or controls either a majority of the voting shares or

8

more than 50 per centum of the number of shares voted for

9

the election of its directors, trustees, or other persons exer-

10

cising similar functions at the preceding election, or con-

11

trols in any manner the election of a majority of its directors,

12

trustees, or other persons exercising similar functions; or

13

(2) Of which control is held, directly or indirectly,

14

through stock ownership or in any other manner, by the

15

shareholders of a member bank who own or control either

16

a majority of the shares of such bank or more than 50 per

17

centum of the number of shares voted for the election of

18

directors of such bank at the preceding election, or by

19

trustees for the benefit of the shareholders of any such

20

bank; or

21

(3) Of which a majority of its directors, trustees, or

22

other persons exercising similar functions are directors of

23

any one member bank.

24

(c) The term " holding company affiliate " shall include

25

any corporation, business trust, association, or other similar

26

organization—




3
1

(1) Which owns or controls, directly or indirectly,

2

either a majority of the shares of capital stock of a member

3

bank or more than 50 per centum of the number of shares

4

voted for the election of directors of any one bank at the

5

preceding election, or controls in anj^ manner the election

6

of a majority of the directors of any one bank; or

7

(2) For the benefit of whose shareholders or members

8

all or substantially all the capital stock of a member bank

9

is held by trustees.

10

SEC. 8. (a) The fourth paragraph after paragraph

11

" Eighth" of section 4 of the Federal Reserve Act, as

12

amended, is amended to read as follows:

13

" Said board of directors shall administer the affairs

14

of said bank fairly and impartially and without discrimina-

15

tion in favor of or against any member bank or banks and

16

may, subject to the provisions of law and the orders of

17

the Federal Reserve Board, extend to each member bank

18

such discounts, advancements, and accommodations as may

19

be safely and reasonably made with due regard for the

20

claims and demands of other member banks, the rnainte-

21

nance of sound credit conditions, and the accommodation of

22

commerce, industry, and agriculture.

23

Board may prescribe regulations further defining within the

24

limitations of this Act the conditions under which discounts,

25

advancements, and accommodations may be extended to




The Federal Reserve

4
1

member banks.

Each Federal reserve bank shall keep

2

itself informed of the general character and amount of the

3

loans and investments of its member banks with a view to

4

ascertaining whether undue use is being made of bank credit

5

for the speculative carrying of or trading in securities, real

6

estate, or commodities, or for any other purpose inconsist-

7

ent with the maintenance of sound credit conditions; and,

8 in determining whether to grant or refuse advances, redis9

counts or other credit accommodations, the Federal reserve

10

bank shall give. consideration to such information.

11

chairman of the Federal reserve bank shall report to the

12

Federal Reserve Board any such undue use of bank credit

13

by any member bank, together with his recommendation.

14

Whenever, in the judgment of the Federal Reserve Board,

15

any member bank is making such undue use of bank credit,

16

the Board may, in its discretion, after reasonable notice and

17

an opportunity for a hearing, suspend such bank from the use

18

of the credit facilities of the Federal Reserve System and

19

may terminate such suspension or may renew it from time

20

to time."

The

21

(b) The paragraph of section 4 of the Federal Reserve

22

Act, as amended, which commences with the words " The

23

Federal Reserve Board shall classify " is amended by insert-

24

ing before the period at the end thereof a colon and the

25

following: "Provided, That whenever any two or more




5
1

member banks within the same Federal Reserve district are

2

affiliated with the same holding company affiliate, participa-

3

tion by such member banks in any such nomination or

4

election shall be confined to one of such banks, which may

5

be designated for the purpose by such holding company

6

affiliate."

7

SEC. 4. The first paragraph of section 7 of the Federal

8

Keserve Act, as amended, is amended, effective July 1,

9

1932, to read as follows:

10

"After all necessary expenses of a Federal Reserve bank

11

shall have been paid or provided for, the stockholders shall

12

be entitled to receive an annual dividend of 6 per centum on

13

the paid-in capital stock, which dividend shall be cumulative.

14

After the aforesaid dividend claims have been fully met,

15

the net earnings shall be paid into the surplus fund of the

16

Federal Reserve bank."

17

SEC. 5. (a) The first paragraph of section 9 of the

18

Federal Reserve Act, as amended, is amended by inserting

19

immediately after the words " United States " a comma

20

and the following: "including Morris Plan banks and

21

other incorporated banking institutions engaged in similar

22

business."

23

(b) The second paragraph of section 9 of the Fed-

24

eral Reserve Act, as amended, is amended by adding

25

at the eiid thereof the following: " Provided, however, That




6
1

nothing herein contained shall prevent any State member

2

bank from establishing and operating branches in the United

3

States or any dependency or insular possession thereof or in

4

any foreign country, on the same terms and conditions and

5

subject to the same limitations and restrictions as are appli-

6

cable to the establishment of branches by national banks."

7

(c) Section 9 of the Federal Reserve Act, as amended,

8

is further amended by adding at the end thereof the following

9

new paragraphs:

10

" A n y mutual savings bank having no capital stock, but

11

having surplus and undivided profits not less than the amount

12

of capital required for the organization of a national bank

13

in the same place, may apply for and be admitted to member-

14

ship in the Federal Reserve System in the same manner and

15

subject to the same provisions of law as State banks and trust

16

companies, except that such savings bank shall subscribe for

17

capital stock of the Federal Reserve bank in an amount equal

18

to six-tenths of 1 per centum of its total deposit liabilities as

19

shown by the most recent report of examination of such

20

savings bank preceding its admission to membership. There-

21

after such subscription shall be adjusted semiannually on the

22

same percentage basis in accordance with rules and regula-

23

tions prescribed by the Federal Reserve Board.

24

mutual savings bank applying for membership is not per-

25

mitted by the laws under which it was organized to purchase




I f any

7
1

stock in a Federal reserve bank, it shall, upon admission to

2

the system, deposit with the Federal reserve bank an amount

3

equal to the amount which it would have been required to

4

pay in on account of a subscription to capital stock.

5

after such deposit shall be adjusted semiannually in the same

6

manner as subscriptions for stock.

7

subject to the same conditions with respect to repayment as

8

amounts paid upon subscriptions to capital stock by other

9

member banks and the Federal reserve bank shall pay inter-

10

est thereon at the same rate as dividends are actually paid

11

on outstanding shares of stock of such Federal reserve bank.

12

I f the laws under which such savings bank was organized be

13

amended so as to authorize mutual savings banks to subscribe

14

for Federal reserve bank stock such savings bank shall there-

15

upon subscribe for the appropriate amount of stock in the

16

Federal reserve bank, and the deposit hereinbefore provided

17

for in lieu of payment upon capital stock shall be applied

18

upon such subscription.

19

ings bank was organized be not amended at the next session

20

of the legislature following the admission of such savings

21

bank to membership so as to authorize mutual savings banks

22

to purchase Federal reserve bank stock, or if such laws be so

23

amended and such bajik fail within six months thereafter to

24

purchase such stock, all of its rights and privileges as a

25

member bank shall be forfeited and its membership in the




There-

Such deposit shall be

If the laws under which such sav-

8
1

Federal Reserve System shall be terminated in the manner

2

prescribed elsewhere in this section with respect to State

3

banks and trust companies.

4

comply with all the provisions of law applicable to State

5

member banks and trust companies, with the regulations of

6

the Federal Reserve Board and with the conditions of

7

membership prescribed for such savings bank at the time of

8

admission to membership, except as otherwise hereinbefore

9

provided with respect to capital stock.

Each mutual savings bank shall

10

" Each bank admitted to membership under this section

11

shall obtain from each of its affiliates other than member

12

banks and furnish to the Federal reserve bank of its district

13

and to the Federal Reserve Board not less than three reports

14

during each year.

15

the Federal Reserve Board may prescribe, shall be verified

16

by the oath or affirmation of the president or such other

17

officer as may be designated by the board of directors of such

18

affiliate to verify such reports, and shall disclose the infor-

19

mation hereinafter provided for as of dates identical

20

with those fixed by the Federal Reserve Board for

21

reports of the condition of the affiliated member bank.

22

Each such report of an affiliate shall be transmitted as

23

herein provided at the same time as the corresponding

24

report of the affiliated member bank, except that the Fed-

25

era! Reserve Board may, in its discretion, extend such time




Such reports shall be in such form as

9
1

for good cause shown. Each such report shall contain such

2

information as in the judgment of the Federal Reserve

8

Board shall be necessary to disclose fully the relations

4

between such affiliate and such bank and to enable the Board

5

to inform itself as to the effect of such relations upon the

6

affairs of such bank.

7

be published by the bank under the same conditions as

8

govern its own condition reports.

The reports of such affiliates shall

9

"Any such affiliated member bank may be required- to

10

obtain from any such affiliate such additional reports as

11

in the opinion of its Federal reserve bank or the Federal

12

Reserve Board may be necessary in order to obtain a full

13

and complete knowledge of the condition of the affiliated

14

member bank. Such additional reports shall be transmitted

15

to the Federal reserve bank and the Federal Reserve Board

16

and shall be in such form as the Federal Reserve Board

17

may prescribe.

18

"Any such affiliated member bank which fails to

19

obtain from any of its affiliates and furnish any report

20

provided for by the two preceding paragraphs of this section

21

shall be subject to a penalty of $100 for each day during

22

which such failure continues, which, by direction of the

23

Federal Reserve Board, may be collected, by suit or other-

24

wise, by the Federal reserve bank of the district in which

25

such member bank is located.




For the purposes of this

10
1

paragraph and the two preceding paragraphs of this section,

2

the term ' affiliate' shall include holding company affiliates

3

as well as other affiliates.

4

" State member banks shall be subject to the same

5

limitations and conditions with respect to the purchasing,

6

selling, underwriting, and holding of investment securities

7

and stock as are applicable in the case of national banks

8

under paragraph ' Seventh' of section 5136 of the Revised

9

Statutes, as amended.

10

"After two years from the date of the enactment of

11

the Banking Act of 1933, no certificate representing the

12

stock of any State member bank shall represent the stock

13

of any other corporation, except a member bank, nor shall

14

the ownership, sale, or transfer of any certificate represent-

15

ing the stock of any such bank be conditioned in any manner

16

whatsoever upon the ownership, sale, or transfer of a cer-

17

tificate representing the stock of any other corporation,

18

except a member bank.

19

" Each State member bank affiliated with a holding

20

company affiliate shall obtain from such holding company

21

affiliate, within such time as the Eederal Reserve Board shall

22

prescribe, an agreement that such holding company affiliate

23

shall be subject to the same conditions and limitations as are

24

applicable under section 5144 of the Revised Statutes, as

25

amended, in the case of holding company affiliates of national




11
1

banks. A copy of each such agreement shall be filed with

2

the Federal Reserve Board.

3

member bank affiliated with a holding company affiliate to

4

obtain such an agreement within the time so prescribed, the

5

Federal Reserve Board shall require such bank to surrender

6

its stock in the Federal reserve 1

7

and privileges of membership in the Federal Reserve System

8

as provided in this section.

9

Board shall have revoked the voting permit of any such

10

holding company affiliate, the Federal Reserve Board may,

11

in its discretion, require any or all State member banks

12

affiliated with such holding company affiliate to surrender

13

their stock in the Federal reserve bank and to forfeit all

14

rights and privileges of membership in the Federal Reserve

15

System as provided in this section.

Upon the failure of a State

' and to forfeit all rights

Whenever the Federal Reserve

16

" I n connection with examinations of State member

17

banks, examiners selected or approved by the Federal

18

Reserve Board shall make such examinations of the affairs

19

of all affiliates of such banks as shall be necessary to disclose

20

fully the relations between such banks and their affiliates

21

and the effect of such relations upon the affairs of such banks.

22

The expense of examination of affiliates of any State member

23

bank may, in the discretion of the Federal Reserve Board,

24

be assessed against such bank and, when so assessed, shall

25

be paid by such bank.




I n the event of the refusal to give

12
1

any information requested in the course of the examination

2

of any such affiliate, or in the event of the refusal to permit

8

such examination, or in the event of the refusal to pay

4

any expense so assessed, the Federal Reserve Board may,

5

in its discretion, require any or all State member banks

6

affiliated with such affiliate to surrender their stock in the

7

Federal reserve bank and to forfeit all rights and privileges

8

of membership in the Federal Reserve System, as provided

9

in this section."

10

SEC. 6. (a) The second paragraph of section 10 of

11

the Federal Reserve Act, as amended, is amended to read

12

as follows:

13

" The Secretary of the Treasury and the Comp-

14

troller of the Currency shall be ineligible during the

15

time they are in office and for two years thereafter to

16

hold any office, position, or employment in any member

17

bank.

18

Board shall be ineligible during the time they are in office

19

and for two years thereafter to hold apy office, position, or

20

employment in any member bank, except that this restric-

21

tion shall not apply to a member who has served the full

22

term for which he was appointed.

23

the term of any appointive member of the Federal Reserve

24

Board in office when this paragraph as amended takes effect,

25

the President shall fix the term of the successor to such




The appointive members of the Federal Reserve

Upon the expiration of

13
1

member at not to exceed twelve years, as designated by the

2

President at the time of nomination, but in such manner as

3

to provide for the expiration of the term of not more than one

4

appointive member in any two-year period, and thereafter

5

each appointive member shall hold office for a term of twelve

6

years from the expiration of the term of his predecessor. Of

7

the six persons thus appointed, one shall be designated by

8

the President as governor and one as vice governor of the

9

Federal Reserve Board.

The governor of the Federal

10

Reserve Board, subject to its supervision, shall be its active

11

executive officer.

12

Board shall within fifteen days after notice of appointment

13

make and subscribe to the oath of office/"

Each member of the Federal Reserve

14

(b) The fourth paragraph of section 10 of the Federal

15

Reserve Act, as amended, is amended to read as follows:

16

" The principal offices of the Board shall be in the Dis-

17

trict of Columbia.

18

of the Treasury shall preside as chairman, and, in his

19

absence, the governor shall preside.

20

both the Secretary of the Treasury and the governor the

21

vice governor shall preside.

22

tary of the Treasury, the governor, and the vice governor

23

the Board shall elect a member to act as chairman pro

24

tempore.

25

manner in which its obligations shall be incurred and




At meetings of the Board the Secretary

I n the absence of

I n the absence of the Secre-

The Board shall determine and prescribe the

14
1

its disbursements and expenses allowed and paid, and may

2

leave on deposit in the Federal Reserve banks the proceeds of

3

assessments levied upon them to defray its estimated expenses

4

and the salaries of its members and employees, whose employ-

5

ment, compensation, leave, and expenses shall be governed

6

solely by the provisions of this Act, specific amendments

7

thereof, and rules and regulations of the Board not inconsist-

8

ent therewith; and funds derived from such assessments shall

9

not be construed to be Government funds or appropriated

10

moneys.

11

an officer or director of any bank, banking institution, trust

12

company, or Federal Reserve bank or hold stock in any bank,

13

banking institution, or trust company; and before entering

14

upon his duties as a member of the Federal Reserve Board he

15

shall certify under oath that he has complied with this require-

16

ment, and such certification shall be filed with the secretary of

17

the Board.

18

expiration of term, among the six members of the Federal

19

Reserve Board appointed by the President as above provided,

20

a successor shall be appointed by the President, by and with

21

the advice and consent of the Senate, to fill such vacancy,

22

and when appointed he shall hold office for the unexpired

23

term of his predecessor."

24
25

No member of the Federal Reserve Board shall be

Whenever a vacancy shall occur, other than by

SEC. 7. Paragraph (m) of section 11 of the Federal
Reserve Act, as amended, is amended to read as follows:




15
1

" (m) Upon the affirmative vote of not less than six

2

of its members the Federal Reserve Board shall have power

3

to fix from time to time for each Federal reserve district the

4

percentage of individual bank capital and surplus which may

5

be represented by loans secured by stock or bond collateral

6

made by member banks within such district, but no such loan

7

shall be made by any such bank to any person in an amount

8

in excess of 10 per centum of the unimpaired capital and

9

surplus of such bank. Any percentage so fixed by the Fed-

10

eral Reserve Board shall be subject to change from time to

11

time upon ten days' notice, and it shall be the duty of the

12

Board to establish such percentages with a view to prevent-

13

ing the undue use of bank loans for the speculative carrying

14

of securities. The Federal Reserve Board shall have power

15

to direct any member bank to refrain from further increase

16

of its loans secured by stock or bond collateral for any period

17

up to one year under penalty of suspension of all rediscount

18

privileges at Federal reserve banks."

19

SEC. 8. The Federal Reserve Act, as amended, is

20

amended by inserting between sections 12 and 13 thereof

21

the following new sections:

22

"SEC. 12A. ,(a) There is hereby created a Federal

23

Open Market Committee (hereinafter referred to as the

24

' committee'), which shall consist of as many members as

25

there are Federal reserve districts.




Each Federal reserve

16
1

bank by its board of directors shall annually select one

2

member of said committee.

3

mittee shall be held at Washington, District of Columbia,

4

at least four times each year, upon the call of the governor

5

of the Federal Reserve Board or at the request of any

6

three members of the committee, and, in the discretion of

7

the Board, may be attended by the members of the Board.

8

" ( b ) No Federal reserve bank shall engage in open-

9

market operations under section 14 of this Act except in

The meetings of said com-

10 accordance with regulations adopted by the Federal Reserve
11

Board.

The Board shall consider, adopt, and transmit to

12

the committee and to the several Federal reserve banks

13

regulations relating to the open-market transactions of such

14

banks and the relations of the Federal Reserve System with

15

foreign central or other foreign banks.

16

" (c) The time, character, and volume of all purchases

17

and sales of paper described in section 14 of this Act as

18

eligible for open-market operations shall be governed with

19

a view to accommodating commerce and business and with

20

regard to their bearing upon the general credit situation of

21

the country.

22

" ( d ) I f any Federal reserve bank shall decide not to

23

participate in open-market operations recommended and ap-

24

proved as provided in paragraph (b) hereof, it shall file

25

with the chairman of the committee within thirty days a




17
1

notice of its decision, and transmit a copy thereof to the

2

Federal Reserve Board.

3

"SEC. 12B. (a) There is hereby created a Federal

4

Bank Deposit Insurance Corporation (hereinafter referred

5

to as the ' Corporation'), whose duty it shall be to purchase,

6

hold, and liquidate, as hereinafter provided, the assets of

7

national banks which have been closed by action of the

8

Comptroller of the Currency, or by vote of their directors,

9

and the assets of State member banks which have been closed

10

by action of the appropriate State authorities, or by vote

11

of their directors; and on and after July 1, 1934, to insure,

12

as hereinafter provided, the time and demand deposits of

13

all member banks which shall have become class A stock-

14

holders of the Corporation.

15

" (b) The management of the Corporation shall be

16

vested in a board of directors consisting of five members,

17

one of whom shall be the Comptroller of the Currency, one

18

a member of the Federal Reserve Board designated by the

19

Board for the purpose, and three selected annually by the

20

governors of the twelve Federal reserve banks under such

21

procedure as may be prescribed by the Federal Reserve

22

Board. No member of such board of directors shall receive

23

any additional compensation for his services as such member.

24

" ( c ) There is hereby authorized to be appropriated,

25

out of any money in the Treasury not otherwise appropriated,




S. 1631

2

18
1

the sum of $150,000,000,

which

shall be available

2

for payment by the Secretary of the Treasury for capital

8

stock of the Corporation in an equal amount, which shall

4

be subscribed for by him on behalf of the United States.

5

Payments upon such subscription shall be subject to call in

6

whole or in part by the board of directors of the Corporation.

7

Such stock shall be in addition to the amount of capital stock

8

required to be subscribed for by Federal reserve banks and

9

member banks as hereinafter provided, and the United States

10

shall be entitled to the payment of dividends on such stock

11

to the same extent as member banks are entitled to such pay-

12

ment on the class A stock of the Corporation held by them.

13

Receipts for payments by the United States for or on account

14

of such stock shall be issued by the Corporation to the Secre-

15

tary of the Treasury and shall be evidence of the stock

16

ownership of the United States.
" ( d ) The capital stock of the Corporation shall be

17
18

divided into shares of $100 each.

19

the Corporation shall be of two classes—class A and class B.

20

Class A stock shall be held by member banks only and they

21

shall be entitled to payment of dividends out of net earnings

22

at the rate of 6 per centum per annum on the capital stock

23

paid in by them, which dividends shall be cumulative, or

24

to the extent of 30 per centum of such net earnings in any

25

one year, whichever amount shall be the greater, but such




Certificates of stock of

19
1

stock shall have no vote at meetings of stockholders. Class

2

B stock shall be held by Federal reserve banks only and

3

shall not be entitled to the payment of dividends.

4

Federal reserve bank shall subscribe to shares of class B

5

stock in the Corporation to an amount equal to one half

6

of the surplus of such bank on January 1, 1933, and its

7

subscriptions shall be accompanied by a certified check pay-

Every

8 able to the Corporation in an amount equal to one half of
9

such subscription. The remainder of such subscription shall

10 be subject to call from time to time by the board of directors
11

upon ninety days' notice.

12

" ( e ) Every bank which is or which becomes a member

13

of the Federal Reserve System on or before July 1, 1934,

14

shall take all steps necessary to enable it to become a class

15

A stockholder of the Corporation on or before July 1, 1934;

16 and thereafter no State bank shall be admitted to member17

ship in the Federal Reserve System until it becomes a

18

class A stockholder of the Corporation, no national bank

19

in the continental United States shall be granted a certificate

20

by the Comptroller of the Currency authorizing it to com-

21

mence the business of banking until it becomes a member

22

of the Federal Reserve System and a class A stockholder

23

of the Corporation, and no national bank in the continental

24

United States for which a receiver or conservator has been

25

appointed shall be permitted to resume the transaction of




20
1

its banking business until it becomes a class A stockholder

2

of the Corporation.

3

the Corporation for class A stock of the Corporation in an

4

amount equal to one half of 1 per centum of its total deposit

5

liabilities as computed in accordance with regulations pre-

6

scribed by the Federal Reserve Board; except that in the

7

case of a member bank organized after the date this

8

section takes effect, the amount of such class A stock applied

9

for by such member bank during the first twelve months

10

after its organization shall equal 5 per centum of its

11

paid-up capital and surplus, and beginning after the ex-

12

piration of such twelve months' period the amount of such

13

class A stock of such member bank shall be adjusted

14

annually in the same manner as in the case of other

15

member banks.

16

Corporation shall request the Federal Reserve Board, in

17

the case of a member State bank, or the Comptroller of the

18

Currency, in the case of a national bank, to certify upon

19

the basis of a thorough examination of such bank whether or

20

not the assets of the applying bank are unquestionably ade-

21

quate to enable it to meet all of its liabilities to depositors

22

and other creditors; and the Federal Reserve Board or

23

the Comptroller of the Currency shall make such certification

24

as soon as practicable. I f such certification be in the affirm-

25

ative, the Corporation shall grant such application and the




Every member bank shall apply to

Upon receipt of such application the

21
1

applying bank shall pay one half of its subscription in full

2

and shall thereupon become a class A stockholder of the

3

Corporation: Provided, That no member bank shall be

4

required to make such payment or shall become a class A

5

stockholder of the Corporation before July 1, 1934.

6

remainder of such subscription shall be subject to call from

7

time to time by the board of directors of the Corporation.

8

I f such certification be in the negative, the Corporation shall

9

deny such application.

The

If any national bank shall not have

10

become a class A stockholder of the Corporation on or before

11

July 1, 1934, the Comptroller of the Currency shall appoint

12

a receiver or conservator therefor in accordance with the pro-

13

visions of existing law.

14

not have become a class A stockholder of the Corporation

15

on or before July 1, 1934, the Federal Reserve Board shall

16

terminate its membership in the Federal Reserve System in

17

accordance with the provisions of section 9 of this Act.

I f any State member bank shall

18

" ( f ) Any State bank or trust company which has ap-

19

plied for membership in the Federal Reserve System or for

20

conversion into a national banking association may, with the

21

consent of the Corporation, obtain the benefits of this sec-

22

tion, pending action on such application, by subscribing and

23

paying for the same amount of stock of the Corporation as

24

it would be required to subscribe and pay for upon becom-

25

ing a member bank.




Thereupon the provisions of this sec-

22
1'

tion applicable to member banks shall be applicable to such

2

State bank or trust company to the same extent as if it

3

were already a member bank: Provided, That if the appli-

4

cation of such State bank or trust company for membership

5

in the Federal Reserve System or for conversion into a

6

national banking association be approved and it shall not

7

complete its membership in the Federal Reserve System or

8

its conversion into a national banking association within a

9

reasonable time, or if such application shall be disapproved,

10

then the amount paid by such bank or trust company on

11

account of its subscription to the capital stock of the Corpo-

12

ration shall be repaid to it and it shall no longer be subject

13

to the provisions or entitled to the privileges of this section.

14

" (g) I f any mutual savings bank which hereafter be-

15

comes a member of the Federal Reserve System is not per-

16

mitted by the laws under which it was organized to purchase

17

stock in the Corporation, it shall apply to the Corporation

18

for admission to the benefits of this section and, if such

19

application be granted after appropriate certification in

20

accordance with this section, it shall deposit with the Cor-

21

poration an amount equal to the amount which it would have

22

been required to pay in on account of a subscription to

23

capital stock of the Corporation.

24

shall be adjusted in the same manner as subscriptions for

25

stock by class A stockholders. Such deposit shall be subject




Thereafter such deposit

23
1

to the same conditions with respect to repayment as amounts

2

paid on subscriptions to class A stock by other member banks

3

and the Corporation shall pay interest thereon at the same

4

rate as dividends are actually paid on outstanding shares

5

of class A stock.

6

with the Corporation, such mutual savings bank shall, for

7

the purposes of this section, be deemed to be a class A stock-

8

holder of the Corporation.

9

savings bank was organized be amended so as to authorize

10

mutual savings banks to subscribe for class A stock of the

11

Corporation, such savings bank shall within six months

12

thereafter subscribe for an appropriate amount of such

13

class A stock and the deposit hereinafter provided for in lieu

14

of payment upon class A stock shall be applied upon such

15

subscription.

16

was organized be not amended at the next session of the

17

legislature following the admission of such savings bank

18

to the benefits of this section so as to authorize mutual savings

19

banks to purchase class A stock, or, if the law be so amended

20

and such bank shall fail within six months thereafter to

21

purchase such class A stock, the deposit previously made

22

with the Corporation shall be returned to such savings bank

23

and it shall no longer be entitled to the benefits of this section,

24

unless it shall have been closed in the meantime on account

25

of inability to meet the demands of its depositors.




As long as such deposit is maintained

I f the laws under which such

I f the law under which such savings bank

24
1

" ( h ) The amount of the outstanding class A stock

2

of the Corporation held by member banks shall be annually

3

adjusted as hereinafter provided as of the last preceding

4

call date as member banks increase their time and demand

5

deposits or as additional banks become members or sub-

6

scribe to the stock of the Corporation, and such stock may be

7

decreased in amount as member banks reduce their time

8

and demand deposits or cease to be members.

9

the capital stock of the Corporation owned by member

Shares of

10

banks shall not be transferred or hypothecated.

11

member bank increases its time and demand deposits it

12

shall, at the beginning of each calendar year, subscribe

13

for an additional amount of capital stock of the Corporation

14

equal to one half of 1 per centum of such increase in de-

15

posits.

16

be paid for at the time of the subscription therefor, and the

17

balance shall be subject to call by the board of directors of

18

the Corporation.

19

this section takes effect and admitted to membership in the

20

Eederal Reserve System at any time after the organization

21

of the Corporation shall be required to subscribe for an

22

amount of class A capital stock equal to one half of 1 per

23

centum of the time and demand deposits of the appli-

24

cant bank as of the date of such admission, paying there-

25

for its par value plus one half of 1 per centum a month




When a

One half of the amount of such additional stock shall

A bank organized on or before the date

25
1

from the period of the last dividend on the class A stock

2

of the Corporation.

3

time and demand deposits it shall surrender, not later

4

than the 1st day of January thereafter, a proportionate

5

amount of its holdings in the capital stock of the Corporation,

6

and when a member bank voluntarily liquidates it shall sur-

7

render all its holdings of the capital stock of the Corporation

8

and be released from its stock subscription not previously

9

called.

When a member bank reduces its

The shares so surrendered shall be canceled and

10

the member bank shall receive in payment therefor, under

11

regulations to be prescribed by the Federal Reserve Board,

12

a sum equal to its cash-paid subscriptions on the shares

13

surrendered and its proportionate share of dividends not to

14

exceed one half of 1 per centum a month, from the period

15

of the last dividend on such stock, less any liability of such

16

member bank to the Corporation.

17

" ( i ) I f any member bank shall be declared insol-

18

vent, or shall cease to be a member bank, the stock held by

19

it in the Corporation shall be canceled, without impairment

20

of the liability of such bank, and all cash-paid subscriptions

21

on such stock, with its proportionate share of dividends not

22

to exceed one half of 1 per centum per month from the

23

period of last dividend on such stock shall be first applied

$4

to all debts of the insolvent bank or the receiver thereof




26
1

to the Corporation, and the balance, if any, shall be paid

2

to the receiver of the insolvent bank.

3

" (j) Upon the date of enactment of the Banking Act

4

of 1933, the Corporation shall become a body corporate

5

and as such shall have power—

6

" First. To adopt and use a corporate seal.

7

" Second. To have succession until dissolved by an

8

Act of Congress.

9

" Third. To make contracts.

10
11

" Fourth. To sue and be sued, complain and defend,
in any court of law or equity, State or Federal.

12

" Fifth. To appoint by its board of directors such offi-

13

cers and employees as are not otherwise provided for in this

14

section, to define their duties, fix their compensation,

15

require bonds of them and fix the penalty thereof, and to

16

dismiss at pleasure such officers or employees.

17

this or any other Act shall be construed to prevent the

18

appointment and compensation as an officer or employee

19

of the Corporation of any officer or employee of the United

20

States in any board, commission, independent establishment,

21

or executive department thereof.

Nothing in

22

" Sixth. To prescribe by its board of directors, bylaws

23

not inconsistent with law, regulating the manner in which

24

its general business may be conducted, and the privileges

25

granted to it by law may be exercised and enjoyed.




27
1

" Seventh. To exercise by its board of directors, or duly

2

authorized officers or agents, all powers specifically granted

3

by the provisions of this section and such incidental powers

4

as shall be necessary to carry out the powers so granted.

5

" (k) The board of directors shall administer the

6

affairs of the Corporation fairly and impartially and without

7

discrimination in favor of or against any member bank or

8 banks and may, subject to the provisions of law, extend to
9

each national bank which is closed by action of the Comp-

10

troller of the Currency, or by vote of its directors, and to

11

each State member bank which is closed by action of the

12

appropriate State authorities, or by vote of its directors, such

13

accommodations as may be safely and reasonably made

14

with due regard for the claims and demands of other mem-

15

ber banks. The board of directors of the Corporation shall

16

determine and prescribe the manner in which its obligations

17

shall be incurred and its expenses allowed and paid.

18

Corporation shall be entitled to the free use of the United

19

States mails in the same manner as the executive depart-

20

ments of the Government.

21

sent of any Federal reserve bank or of any board, commis-

22

sion, independent establishment, or executive department

23

of the Government, including any field service thereof, may

24

avail itself of the use of information, services, and facilities

25

thereof in carrying out the provisions of this section.




The

The Corporation with the con-

28
1

" (1) Effective on and after July 1, 1934 (thus afford-

2

ing ample time for examination and preparation), the

3

Corporation shall insure the time and demand deposits of

4

all member banks which are class A stockholders of the

5

Corporation as hereinafter prescribed.

6

any other provision of law, whenever any national bank

7

which is a class A stockholder of the Corporation shall

8

have been closed by action of its board of directors or by

9

the Comptroller of the Currency, as the case may be, on

10

account of inability to meet the demands of its depositors,

11

the Comptroller of the Currency shall appoint the Corpo-

12

ration receiver for such bank.

13

after the Corporation shall organize a new national bank

14

to assume the insured deposit liabilities of such closed bank,

15

to receive new deposits and otherwise to perform tempo-

16

rarily the functions provided for it in this paragraph.

17

the purposes of this subsection, the term ' insured deposit

18

liability ' shall mean with respect to the owner of any claim

19

arising out of a deposit liability of such closed bank the

20

following percentages of the net amount due to such

21

owner by such closed bank on account of deposit lia-

22

bilities: 100 per centum of the amount by which such

23

net amount does not exceed $10,000; and 75 per centum

24

of the amount, if any, by which such net amount exceeds

25

$10,000 but does not exceed $50,000; and 50 per centum




Notwithstanding

As soon as possible there-

For

29
1

of the amount, if any, by which such net amount exceeds

2

$50,000: Provided, That, in determining the amount due

3

to such owner for the purpose of fixing such percentage,

4

there shall be added together all net amounts due to such

5

owner in the same capacity or the same right, on account

6

of deposits, regardless of whether such deposits be main-

7

tained in his name or in the names of others for his benefit.

8

For the purposes of this subsection, the term ' insured de-

9

posit liabilities ' shall mean the aggregate amount of all

10

such insured deposit liabilities of such closed bank.

11

Corporation shall determine as expeditiously as possible the

12

net amounts due to depositors of the closed bank and shall

13

make available to the new bank an amount equal to the

14

insured deposit liabilities of such closed bank, whereupon

15

such new bank shall assume the insured deposit liability of

16

such closed bank to each of its depositors, and the Corpora-

17

tion shall be subrogated to all rights against the closed bank

18

of the owners of such deposits and shall be entitled to receive

19

the same dividends from the proceeds of the assets of such

20

closed bank as would have been payable to each such deposi-

21

tor until such dividends shall equal the insured deposit liabil-

22

ity to such depositor assumed by the new bank, whereupon

23

all further dividends shall be payable to such depositor. Of

24

the amount thus made available by the Corporation to the

25

new bank, such portion shall be paid to it in cash as may be




The

30
1

necessary to enable it to meet immediate cash demands and

2

the remainder shall be credited to it on the books of the Cor-

3

poration subject to withdrawal on demand and shall bear

4

interest at the rate of 3 per centum per annum until with-

5

drawn.

6

poration, accept new deposits, which, together with all

7

amounts made available to the new bank by the Corporation,

8

shall be kept on hand in cash, invested in direct obligations

9

of the United States, or deposited with the Corporation or

The new bank may, with the approval of the Cor-

10

with

a Federal Reserve bank.

Such new bank shall main-

H

tain on deposit with the Federal Reserve bank of its district

12

the reserves required by law of member banks but shall not
be required to subscribe for stock of the Federal Reserve bank until its own capital stock has been subscribed
and paid for in the manner hereinafter provided.

The

16

articles of association and organization certificate of such

17

new bank may be executed by such representatives of the

1®

Corporation as it may designate; the new bank shall not

19

be required to have any directors at the time of its organiza-

20

tion, but shall be managed by an executive officer to be desig-

21

nated by the Corporation; and no capital stock need be paid
in by the Corporation; but in other respects such bank shall

23

organized in accordance with the existing provisions of

2^

law relating to the organization of national banks; and,

2^

until the requisite amount of capital stock for such bank has




31
1

been subscribed and paid for in the manner hereinafter pro-

2

vided, such bank shall transact no business except that

3

authorized by this subsection and such business as may be

4

incidental to its organization. When in the judgment of the

5

Corporation it is desirable to do so, the Corporation shall

6

offer capital stock of the new bank for sale on such terms and

7

conditions as the Corporation shall deem advisable, in an

8

amount sufficient in the opinion of the Corporation to make

9

possible the conduct of the business of the new bank on a

10

sound basis, but in no event less than that required by section

11

5158 of the Revised Statutes, as amended, for the organiza-

12

tion of a national bank in the place where such new bank is

13

located, giving the stockholders of the closed bank the first

14

opportunity to purchase such stock.

15

adequate amount of capital stock of the new bank has been

16

subscribed and paid for in cash by subscribers satisfactory

17

to the Comptroller of the Currency, he shall issue to such

18

bank a certificate of authority to commence business and

19

thereafter it shall be managed by directors elected by its own

20

shareholders and may exercise all of the powers granted by

21

law to national banking associations. If an adequate amount

22

of capital for such new bank is not subscribed and paid in,

23

the Corporation may offer to transfer its business to any

24

other banking institution in the same place which will take

25

over its assets, assume its liabilities, and pay to the Corpora-




Upon proof that an

32
1

tion for such business such amount as the Corporation may

2

deem adequate.

3

sold or its assets acquired and its liabilities assumed by

4

another banking institution, in the manner herein prescribed,

5

within two years from the date of its organization, the Cor-

6

poration shall place the new bank in voluntary liquidation

7

and wind up its affairs.

8

books a deposit insurance account and, as soon as possible

9

after taking possession of any closed national bank, the Cor-

10

poration shall make an estimate of the amount which will

11

be available from all sources for application in satisfaction

12

of the portion of the claims of depositors to which it has been

13

subrogated and shall debit to such deposit insurance account

14

the excess, if any, of the amount ma,de available by the Cor-

15

poration to the new bank for depositors over and above the

16

amount of such estimate.

17

ration to realize as rapidly as possible upon the assets of such

18

closed bank, having due regard to the condition of credit in

19

the district in which such closed bank is located; to enforce

20

the individual liability of the stockholders and directors

21

thereof; and to wind up the affairs of such closed bank in

22

conformity with the provisions of law relating to the liquida-

23

tion of closed national banks, except as herein otherwise pro-

24

vided, retaining for its own account such portion of the

25

amount realized from such liquidation as it shall be entitled




Unless the capital stock of the new bank is

The Corporation shall open on its

I t shall be the duty of the Corpo-

33
1

to receive on account of its subrogation to the claims of de-

2

positors and paying to depositors and other creditors the

3

amount available for distribution to them, after deducting

4

therefrom their share of the costs of the liquidation of the

5

closed bank.

6

tion on account of its subrogation to the claims of depositors

7

be less than the amount of the estimate hereinabove provided

8

for, the deposit insurance account shall be charged with the

9

deficiency and, if the total amount so realized shall exceed

10

the amount of such estimate, such account shall be credited

11

with such excess.

12

the Corporation shall have all the rights, powers, and privi-

13

leges now possessed by or hereafter given receivers of insol-

14

vent national banks and shall be subject to the obligations and

15

penalties not inconsistent with the provisions of this para-

16

graph to which such receivers are now or may hereafter

17

become subject.

I f the total amount realized by the Corpora-

With respect to such closed national banks,

18

" Whenever any State member bank which is a class A

19

stockholder of the Corporation shall have been closed by

20

action of its board of directors or by the appropriate State

21

authority, as the case may be, on account of inability to

22

meet the demands of its depositors, the Corporation shall

23

accept appointment as receiver thereof, if such appointment

24

be tendered by the appropriate State authority and be au-




S. 1631

3

34
1

thorized or permitted by State law.

Thereupon the Cor-

2

poration shall Organize a new national bank, in accordance

3

with the provisions of this subsection, to assume the insured

4

deposit liabilities of such closed State bank, to receive new

5

deposits and otherwise to perform temporarily the functions

6 provided for in this subsection. Upon satisfactory recogni7

tion of the right of the Corporation to receive dividends on

8 the same basis as in the case of a closed national bank under
9

this subsection, such recognition being accorded by State

10

law, by allowance of claims by the appropriate State au-

11

thority, by assignment of claims by depositors, or by any

12

other effective method, the Corporation shall make available

13

to such new national bank, in the manner prescribed by this

14

subsection, an amount equal to the insured deposit liabilities

15

of such closed State bank; and the Corporation and such new

16

national bank shall perform all of the functions and duties

17

and shall have all the rights and privileges with respect to

18

such State bank and the depositors thereof which are pre-

19

scribed by this subsection with respect to closed national banks

20

holding class A stock in the Corporation: Provided, That

21

the rights of depositors and other creditors of such State bank

22

shall be determined in accordance with the applicable pro-

23

visions of State law: And provided further, That, with

24

respect to such State bank, the Corporation shall possess the

25

powers and privileges provided by State law with respect to




35
1

a receiver of such State bank, except insofar as the same

2

are in conflict with the provisions of this subsection.

3

" Whenever any State member bank which is a class A

4

stockholder of the Corporation shall have been closed by action

5

of its board of directors or by the appropriate State authority,

6

as the case may be, on account of inability to meet the demands

7

of its depositors, and the applicable State law does not permit

8

the appointment of the Corporation as receiver of such bank,

9

the Corporation shall organize a new national bank, in

10

accordance with the provisions of this subsection, to assume

11

the insured deposit liabilities of such closed State bank, to

12

receive new deposits, and otherwise to perform temporarily

13

the functions provided for in this subsection.

14

factory recognition of the right of the Corporation to receive

15

dividends on the same basis as in the case of a closed national

16

bank under this subsection, such recognition being accorded

17

by State law, by allowance of claims by the appropriate

18

State authority, by assignment of claims by depositors, or

19

by any other effective method, the Corporation shall make

20

available to such new bank, in accordance with the pro-

21

visions of this subsection, the amount of insured deposit

22

liabilities as to which such recognition has been accorded;

23

and such new bank shall assume such insured deposit liabili-

24

ties and shall in other respects comply with the provisions

25

of this subsection respecting new banks organized to assume




Upon satis-

36
1

insured deposit liabilities of closed national banks.

2

as possible in view of the applicable provisions of State law,

3

the Corporation shall proceed with respect to the receiver of

4

such closed bank and with respect to the new bank organized

5

to assume its insured deposit liabilities in the manner pre-

6

scribed by this subsection with respect to closed national

7

banks and new banks organized to assume their insured

8

deposit liabilities, except that the Corporation shall have

9

none of the powers, duties, or responsibilities of a receiver

10

with respect to the winding up of the affairs of such closed

11

State bank.

12

may purchase and liquidate any or all of the assets of such

13

bank'

Insofar

The Corporation, in its discretion, however,

14

" Whenever the net debit balance of the deposit insur-

15

ance account of the Corporation shall equal or exceed one

16

fourth of 1 per centum of the total deposit liabilities of all

17

class A stockholders as of the date of the last preceding call

18

report, the Corporation shall levy upon such stockholders

19

an assessment equal to one fourth of 1 per centum of their

20

total deposit liabilities and shall credit the amount collected

21

from such assessment to such deposit insurance account. No

22

bank which is a holder of class A stock shall pay any divi-

23

dends until all assessments levied upon it by the Corporation

24

shall have been paid in full; and any director or officer of

25

any such bank who participates in the declaration or pay-




37
1

ment of any such dividend may, upon conviction, be fined

2

not more than $1,000, or imprisoned for not more than one

3

year, or both.

4

" The term

4

receiver' as used in this section shall

5

mean a receiver, liquidating agent, or conservator of a

6

national bank, and a receiver, liquidating agent, conserva-

7

tor, commission, person, or other agency charged by State

8

law with the responsibility and the duty of winding up the

9

affairs of an insolvent State member bank.

10

" F o r the purposes of this section only, the term

11

' national bank' shall include all national banking associa-

12

tions and all banks, banking associations, trust companies,

13

savings banks, and other banking institutions located in the

14

District of Columbia which are members of the Federal

15

Reserve System; and the term ' State member bank' shall

16

include all State banks, banking associations, trust compa-

17

nies, savings banks, and other banking institutions organized

18

under the laws of any State, which are members of the

19

Federal Reserve System.

20

" I n any determination of the insured deposit liabilities

21

of any closed bank or of the total deposit liabilities of any

22

bank which is a holder of class A stock of the Corporation,

23

for the purposes of this subsection, there shall be excluded

24

the amounts of all deposits of such bank which are payable

25

only at an office thereof located in a foreign country.




38
1

" The Corporation may make such rules, regulations,

2

and contracts as it may deem necessary in order to carry out

3

the provisions of this section.

4

" Money of the Corporation not otherwise employed

5

shall be invested in securities of the Government of the United

6

States, except that for temporary periods, in the discretion of

7

the board of directors, funds of the Corporation may be

8

deposited in any Federal reserve bank or with the Treasurer

9

of the United States. When designated for that purpose by

10

the Secretary of the Treasury, the Corporation shall be a

11

depositary of public moneys, except receipts from customs,

12

under such regulations as may be prescribed by the said

13

Secretary, and may also be employed as a financial agent

14

of the Government.

15

duties as depositary of public moneys and financial agent of

16

the Government as may be required of it.

I t shall perform all such reasonable

17

" ( n i ) Nothing herein contained shall be construed to

18

prevent the Corporation from making loans to national banks

19

closed by action of the Comptroller of the Currency, or by

20

vote of their directors, or to State member banks closed by

21

action of the appropriate State authorities, or by vote of

22

their directors, or from entering into negotiations to secure

23

the reopening of such banks.

24
25

" ( n ) Receivers

or

liquidators

of

member

banks

which are now or may hereafter become insolvent or sus-




39
1

ponded shall be entitled to offer the assets of such banks for

2

sale to the Corporation or as security for loans from the Cor-

3

poration, upon receiving permission from the appropriate

4

State authority in accordance with express provision of State

5

law in the case of State member banks, or from the Comp-

6 troller of the Currency in the case of national banks. The
7

proceeds of every such sale or loan shall be utilized for the

8

same purposes and in the same manner as other funds real-

9

ized from, the liquidation of the assets of such banks.

The

10

Comptroller of the Currency may, in his discretion, pay

11

dividends on proved claims at any time after the expiration

12

of the period of advertisement made pursuant to section 5235

13

of the Revised Statutes, and no liability shall attach to the

14

Comptroller of the Currency or to the receiver of any

15

national bank by reason of any such payment for failure to

16

pay dividends to a claimant whose claim is not proved at

17

the time of any such payment.

18

" (o) The Corporation is authorized and empowered

19

to issue and to have outstanding at any one time in an

20

amount aggregating not more than twice the amount of

21

its capital, its notes, debentures, bonds, or other such obli-

22

gations, to be redeemable at the option of the Corporation

23

before maturity in such manner as may be stipulated in

24

such obligations, and to bear such rate or rates of interest,

25

and to mature at such time or times as may be determined




40
1

by the Corporation: Provided, That the Corporation mdy

2

sell on a discount basis short-term obligations payable at

3

maturity without interest.

4

and other such obligations of the Corporation may be

5

secured by assets of the Corporation in such manner as

6

shall be prescribed by its board of directors.

7

tions may be offered for sale at such price or prices as the

8

corporation may determine.

The notes, debentures, bonds,

Such obliga-

9

" (p) A l l notes, debentures, bonds, or other such obli-

10

gations issued by the Corporation shall be exempt, both

11

as to principal and interest, from all taxation (except estate

12

and inheritance taxes) now or hereafter imposed by the

13

United States, by any Territory, dependency, or possession

14

thereof, or by any State, county, municipality, or local taxing

15

authority. The Corporation, including its franchise, its capi-

16

tai, reserves, and surplus, and its income, shall be exempt

17

from all taxation now or hereafter imposed by the United

18

States, by any Territory, dependency, or possession thereof,

19

or by any State, county, municipality, or local taxing author-

20

ity, except that any real property of the Corporation shall be

21

subject to State, Territorial, county, municipal, or local tax-

22

ation to the same extent according to its value as other real

23

property is taxed.

24

" (q) I n order that the Corporation may be sup-

25

plied with such forms of notes, debentures, bonds, or other




41
1

such obligations as it may need for issuance under this Act,

2

the Secretary of the Treasury is authorized to prepare such

3

forms as shall be suitable and approved by the Corporation,

4

to be held in the Treasury subject to delivery, upon order

5

of the Corporation.

6

and other material executed in connection therewith shall

7

remain in the custody of the Secretary of the Treasury.

8

The Corporation shall reimburse the Secretary of the Treas-

9

ury for any expenses incurred in the preparation, custody,

10

and delivery of such notes, debentures, bonds, or other

11

such obligations.

12

"(r)

The engraved plates, dies, bed pieces,

The Corporation shall annually make a report

13

of its operations to the Congress as soon as practicable

14

after the 1st day of January in each year.

15

" (s) Whoever, for the purpose of obtaining any loan

16

from the

17

thereof, or the acceptance, release, or substitution of security

18

therefor, or for the purpose of inducing the Corporation to

19

purchase any assets, or for the purpose of influencing in any

20

way the action of the Corporation under this section, makes

21

any statement, knowing it to be false, or willfully overvalues

22

any security, shall be punished by a fine of not more than

23

$5,000, or by imprisonment for not more than two years, or

24

both.




Corporation,

or any

extension

or

renewal

42
1

" ( t ) Whoever (1) falsely makes, forges, or counter-

2

feits any obligation or coupon, in imitation of or pur-

3

porting to be an obligation or coupon issued by the Cor-

4

poration, or (2) passes, utters, or publishes, or attempts

5

to pass, utter, or publish, any false, forged, or counterfeited

6

obligation or coupon purporting to have been issued by the

7

Corporation, knowing the same to be false, forged, or coun-

8

terfeited, or (3) falsely alters any obligation or coupon

9

issued or purporting to have been issued by the Corporation,

10

or (4) passes, utters, or publishes, or attempts to pass, utter,

11

or publish, as true, any falsely altered or spurious obligation

12

or coupon, issued or purporting to have been issued by the

13

Corporation, knowing the same to be falsely altered or

14

spurious, shall be punished by a fine of not more than

15

$10,000, or by imprisonment for not more than five years,

16

or both.

17

" (u) Whoever, being connected in any capacity with

18

the Corporation,

19

willfully misapplies any moneys, funds, securities, or other

20

things of value, whether belonging to it or pledged, or

21

otherwise intrusted to it, or (2) with intent to defraud the

22

Corporation or any other body, politic or corporate, or

23

any individual, or to deceive any officer, auditor, ot exam-

24

iner of the Corporation, makes any false entry in any

25

book, report, or statement of or to the Corporation, or




(1)

embezzles, abstracts, purloins, or

43
1

without being duly authorized draws any order or issues,

2

puts forth, or assigns any note, debenture, bond, or other

3

such obligation, or draft, bill of exchange, mortgage, judg-

4

ment, or decree thereof, shall be punished by a fine of not

5

more than $10,000, or by imprisonment for not more than

6 five years, or both.
7

" (v) No individual, association, partnership, or corpo-

8

ration shall use the words ' Federal Bank Deposit Insurance

9

C o r p o r a t i o n o r a combination of any three of these five

10

words, as the name or a part thereof under which he or it

11

shall do business.

12

or corporation shall advertise or otherwise represent falsely

13

by any device whatsoever that his or its deposit liabilities

14

are insured or in anywise guaranteed by the Federal

15

Bank Deposit Insurance Corporation, or by the Govern-

16

ment of the United States, or by any instrumentality thereof;

17

and no class A stockholder of the Federal Bank Deposit

18

Insurance Corporation shall advertise or otherwise repre-

19

sent falsely by any device whatsoever the extent to which

20

or the manner in which its deposit liabilities are insured

21

by the Federal Bank Deposit Insurance

22

Every individual, partnership, association, or corporation

23

violating this subdivision shall be punished by a fine of not

24

exceeding $1,000, or by imprisonment not exceeding one

25

year, or both.




No individual, association, partnership,

Corporation.

44
X

" ( w ) The provisions of sections 112, 113, 114, 115,

2

116, and 117 of the Criminal Code of the United States

3

(U.S.C., title 18, ch. 5, sees. 202 to 207, inclusive), in

4

so far as applicable, are extended to apply to contracts or

5

agreements with the Corporation under this section, which for

6

the purposes hereof shall be held to include loans, advances,

7

extensions, and renewals thereof, and acceptances, releases,

8

and substitutions of security therefor, purchases or sales of

9

assets, and all contracts and agreements pertaining to the

10

same.

11

" (x)

The Secret Service Division of the Treasury

12

Department is authorized to detect, arrest, and deliver

13

into the custody of the United States marshal having

14

jurisdiction any person committing any of the offenses

15

punishable under this section."

16

SEC. 9. The eighth paragraph of section 13 of the

17

Federal Reserve Act, as amended, is amended to read as

18

follows:

19

"Any Eederal reserve bank may make advances for

20

periods not exceeding fifteen days to its member banks on

21

their promissory notes secured by the deposit or pledge

22

of bonds, notes, certificates of indebtedness, or Treasury

23

bills of the United States, or by the deposit or pledge of

24

debentures or other such obligations of Eederal inter-

25

mediate credit banks which are eligible for .purchase by




45
1

Federal reserve banks under section 13 (a) of this Act; and

2

any Federal reserve bank may make advances for periods

3

not exceeding ninety days to its member banks on their

4

promissory notes secured by such notes, drafts, bills of ex-

5

change, or bankers' acceptances as are eligible for rediscount

6

or for purchase by Federal reserve banks under the provi-

7

sions of this Act. All such advances shall be made at rates

8

to be established by such Federal reserve banks, subject to

9

the review and determination of the Federal Reserve Board.

10

I f any member bank to which any such advance has been

11

made shall, during the life or continuance of such advance,

12

and despite an official warning of the reserve bank of the

13

district or of the Federal Reserve Board to the contrary,

14

increase its outstanding loans secured by collateral in the

15

form of stocks, bonds, debentures, or other such obligations,

16

or loans made to members of any organized stock exchange,

17

investment house, or dealer in securities, upon any obliga-

18

tion, note, or bill, secured or unsecured, for the purpose of

19

purchasing and/or carrying stocks, bonds, or other invest-

20

ment securities (except obligations of the United States)

21

such advance shall be deemed immediately due and payable,

22

and such member bank shall be ineligible as a borrower at

23

the reserve bank of the district under the provisions of this

24

paragraph for such period as the Federal Reserve Board

25

shall determine : Provided, That no temporary carrying or




46
1

clearance loans made solely for the purpose of facilitating

2

the purchase or delivery of securities offered for public sub-

3

scription shall be included in the loans referred to in this

4

paragraph."

5

SEC. 10. Section 14 of the Federal Reserve Act, as

6

amended, is amended by adding at the end thereof the

7

following new paragraph:

8

" (g) The Federal Reserve Board shall exercise special

9

supervision over all relationships and transactions of any

10

kind entered into by any Federal reserve bank with any

11

foreign bank or banker, or with any group of foreign banks

12

or bankers, and all such relationships and transactions shall

13

be subject to such regulations, conditions, and limitations as

14

the Board may prescribe.

15

tive of any Federal reserve bank shall conduct negotiations

16

of any kind with the officers or representatives of any

17

foreign bank or banker without first obtaining the permis-

18

sion of the Federal Reserve Board.

19

Board shall have the right, in its discretion, to be represented

20

in any conference or negotiations by such representative or

21

representatives as the Board may designate.

22

of all conferences or negotiations, and all understandings or

23

agreements arrived at or transactions agreed upon, and all

24

other material facts appertaining to such conferences or

25

negotiations, shall be filed with the Federal Reserve Board




No officer or other representa-

The Federal Reserve

A full report

47
1

in writing by a duly authorized officer of each Federal reserve

2

bank which shall have participated in such conferences or

3

negotiations."

4

SEC. 11. (a) Section 19 of the Federal Reserve

5

Act, as amended, is amended by inserting after the sixth

6

paragraph thereof the following new paragraph:
" No member bank shall act as the medium or agent of

7

8 any nonbanking corporation, partnership, association, busi9

ness trust, or individual in, making loans on the security of

10

stocks, bonds, and other investment securities to brokers or

11

dealers in stocks, bonds, and other investment securities.

12

Every violation of this provision by any member bank shall

13

be punishable by a fine of not more than $100 per day dur-

14

ing the continuance of such violation; and such fine may be

15

collected, by suit or otherwise, by the Federal reserve bank

16

of the district in which such member bank is located."

17

(b) Such section 19 of the Federal Reserve Act, as

18

amended, is further amended by adding at the end thereof

19

the following new paragraphs:

20

" No member bank shall, directly or indirectly by any

21

device whatsoever, pay any interest on any deposit which is

22

payable unconditionally on demand: Provided, That nothing

23

herein contained shall be construed as prohibiting the pay-

24

ment of interest in accordance with the terms of any certifi-

25

cate of deposit or other contract heretofore entered into




48
1

m good faith which is in force on the date of thief enactment

2

of this paragraph; hut no such certificate of deposit or other

3

contract shall be renewed or extended unless it shall be

4

modified to conform to this paragraph, and every member

5

bank shall take such action as may be necessary to conform

6

to this paragraph as soon as possible consistently with its

7

contractual obligations: Provided, however, That this para-

8

graph shall not apply to any deposit of such bank which is

9

payable only at an office thereof located in a foreign country.

10

" The Eederal Reserve Board shall from time to time

H

limit by regulation the rate of interest which may be paid

12

by member banks on time deposits, and may prescribe differ-

13

ent rates for such payment on time and savings deposits

14

having different maturities or subject to different conditions

l^

respecting withdrawal or repayment. 'No member baok

1®

shall pay any time deposit before its maturity, or waive any

17

requirement of notice before payment of any savings deposit

1®

except as to all saving deposits having the same requirement/'

19

(c) Section 8 of the Act entitled " A n Act to estab-

20

list postal savings depositories for depositing savings at

21

interest with the security of the Government for repayment

22

thereof, and for other purposes " approved June 25, 1910,
as amended, is amended by striking out the first sentence

24

thereof and inserting in lieu thereof the following: " No
deposit shall be made with any postal savings depositary




49
1

for a period of less than sixty days, and no depositor may

2

withdraw the whole or any part of the funds deposited to

3

his or her credit, or the accrued interest thereon, at any

4

time prior to the expiration of sixty days after the funds

5

sought to be withdrawn were deposited.

6

withdrawn at the expiration of the period for which they

7

were deposited shall be deemed to be redeposited for a

8

period of sixty days; and all funds deposited with any postal

9

savings depository on the date this section, as amended,

10

takes effect, shall be deemed to be deposited on such date

11

for a period of sixty days.

12

under such regulations, not inconsistent with this Act, as

13

the Postmaster General may prescribe."

Any funds not

A l l withdrawals shall be made

14

SEC. 12. Section 22 of the Federal Keserve Act, as

15

amended, is further amended by adding at the end thereof

16

the following new paragraph:

17

" (g) No executive officer of any member bank shall

18

borrow from or otherwise become indebted to any member

19

bank of which he is an executive officer, and no member

20

bank shall make any loan or extend credit in any other man-

21

ner to any of its own executive officers.

22

officer of any member bank borrow from or if he be or

23

become indebted to anv bank other than a member bank of

24

which he is an executive officer, he shall make a written




S. 1 6 3 1

4

I f any executive

no
1

report to the chairman of the board of directors of the mem-

2

ber bank of which he is an executive officer, stating the date

3

and amount of such loan or indebtedness, the security there-

4

for, and the purpose for which the proceeds have been or

r>

are to be used. Any executive officer of any member bank

G

violating the provisions of this paragraph shall be deemed

7

guilty of a misdemeanor and shall be imprisoned not exceed-

8

ing one year, or fined not more than $5,000, or both; and

9

any member bank violating the provisions of this paragraph

10

shall be fined not more than $10,000, and may be fined a

11

further sum equal to the amount so loaned or credit so

12

extended."

13

SEC. 13. The Federal Eeserve Act, as amended, is

14

amended by inserting between sections 23 and 24 thereof

15

the following new section:

16

"SEC. 23 A. No member bank shall (1) make any loan

17

or any extension of credit to, or purchase securities under

18

repurchase agreement from, any of its affiliates, or (2) invest

19

any of its funds in the capital stock, bonds, debentures, or

20

other such obligations of any such affiliate, or (3) accept the

21

capital stock, bonds, debentures, or other such obligations of

22

any such affiliate as collateral security for advances made

23

to any person, partnership, association, or corporation, if, in

24

the case of any such affiliate, the aggregate amount of such

25

loans, extensions of credit, repurchase agreements, invest-




51
1

ments, and advances against such collateral security will

2

exceed 10 per centum of the capital stock and surplus of

3

such member bank, or if, in the case of all such affiliates,

4

the aggregate amount of such loans, extensions of credits,

5

repurchase agreements, investments, and advances against

6

such collateral security will exceed 20 per centum of the

7

capital stock and surplus of such member bank.

8

" Within the foregoing limitations, each loan or exten-

9

sion of credit of any kind or character to an affiliate shall be

10

secured by collateral in the form of stocks, bonds, debentures,

11

or other such obligations having a market value at the time

12

of making the loan! or extension of credit of at least 20 per

13

centum more than the amount of the loan or extension of

14

credit, or of at least 10 per centum more than the amount of

15

the loan or extension of credit if it is secured by obligations

16

of any State, or of any political subdivision or agency

17

thereof: Provided, That the provisions of this paragraph

18

shall not apply to loans or extensions of credit secured by

19

obligations of the United States Government, the Federal

20

intermediate credit banks, of the Eederai land banks, or by

21

such notes, drafts, bills of exchange, or bankers' acceptances

22

as are eligible for rediscount or for purchase by Federal

23

Eeserve banks. A loan or extension of credit to a director

24

officer, clerk, or other employee or any representative of

25

any such affiliate shall be deemed a loan to the affiliate to




52
1

the extent that the proceeds of such loan are used for the

2

benefit of, or transferred to, the affiliate.

3

" For the purposes of this section the term ' affiliate 9

4

shall include holding company affiliates as well as other

5

affiliates, and the provisions of this section shall not apply

6

to any affiliate (1) engaged solely in holding the bank

7

premises of the member bank with which it is affiliated,

8

(2) engaged solely in conducting a safe-deposit business or

9

the business of an agricultural credit corporation or livestock

10

loan company, (3) in the capital stock of which a national

11

banking association is authorized to invest pursuant to

12

section 25 of the Federal Eeserve Act, as amended,

13

or (4) organized under section 25 (a) of the Federal

14

Eeserve Act, as amended; but as to any such affiliate, mem-

15

ber banks shall continue to be subject to other provisions of

16

law applicable to loans by such banks and investments by

17

such banks in stocks, bonds, debentures, or other such

18

obligations."

19

SEC. 14. The Federal Eeserve Act, as amended, is

20

amended by inserting between section 24 and section 25

21

thereof the following new section:

22

" SEC. 24A. Hereafter no national bank, without the

23

approval of the Comptroller of the Currency, and no State

24

member bank, without the approval of the Federal Eeserve

25

Board, shall (1) invest in bank premises, or in the stock,




53
1

bonds, debentures, or other such obligations of any corpora-

2

tion holding the premises of such bank or (2) make loans

3

to or upon the security of the stock of any such corporation,

4

if the aggregate of all such investments and loans will

5

exceed the amount of the capital stock of such bank."

0

SEC. 15. The Federal Reserve Act, as amended, is

7

further amended by inserting after section 25 (a) thereof

8

the following new section:

9

" SEC. 25. (b) Notwithstanding any other provision

10

of law all suits of a civil nature at common law or in equity

11

to which any corporation organized under the laws of the

12

United States shall be a party, arising out of transactions

13

involving international or foreign banking, or banking in

14

a dependency or insular possession of the United States,

15

or out of other international or foreign financial operations,

16

either directly or through the agency, ownership, or control

17

of branches or local institutions in dependencies or insular

18

possessions of the United States or in foreign countries,

19

shall be deemed to arise under the laws of the United States,

20

and the district courts of the United States shall have

21

original jurisdiction of all such suits; and any defendant in

22

any such suit may, at any time before the trial thereof,

23

remove such suits from a State court into the district court

24

of the United States for the proper district by following the




54
1

procedure for the removal of causes otherwise provided by-

2

law.

3

" Notwithstanding any other provision of law, all suits

4

of a civil na,ture at common law or in equity to which any

5

Federal Reserve bank shall be a party shall be deemed to

6 arise under the laws of the United States, and the district
7

courts of the United States shall have original jurisdiction

8 of all such suits; and any Federal Reserve bank which is a
9

defendant in any such suit may, at any time before the trial

10

thereof, remove such suit from a State court into the district

11

court of the United States for the proper district by following

12

the procedure for the removal of causes otherwise provided

13

by law.

14

any Federal Reserve bank or its property before final judg-

15

ment in any suit, action, or proceeding in any State, county,

16

municipal, or United States court."

No attachment or execution shall be issued against

17

SEC. 16. Paragraph "Seventh" of section 5136 of

18

the Revised Statutes, as amended, is amended to read as

19

follows:

20

" Seventh. To exercise by its board of directors or

21

duly authorized officers or agents, subject to law, all such

22

incidental powers as shall be necessary to carry on the busi-

23

ness of banking; by discounting and negotiating promissory

24

notes, drafts, bills of exchange, and other evidences of debt;

25

by receiving deposits; by buying and selling exchange, coin,




55
1

and bullion; by loaning money on personal security; and

2

by obtaining, issuing, and circulating notes according to

3

the provisions of this title; and generally by engaging in all

4

forms of banking business and undertaking all types of

5

banking transactions that may, by the laws of the State

6

in which such bank is situated, be permitted to banks of

7

deposit and discount organized and incorporated under the

8

laws of such State, except in so far as they may be for-

9

bidden by the provisions of any Act of Congress. The busi-

10

ness of dealing in investment securities by the association shall

11

be limited to purchasing and selling such securities without

12

recourse, solely upon the order, and for the account of,

13

customers, and in no case for its own account, and the asso-

14

ciation shall not underwrite any issue of securities: Pro-

15

vided, That the association may purchase for its own account

16

investment securities under such limitations and restrictions

17

as the Comptroller of the Currency may by regulation pre-

18

scribe, but in no event (1) shall the total amount of any

19

issue of investment securities of any one obligor or maker

20

purchased after this section as amended takes effect and held

21

by the association for its own account exceed at any time 10

22

per centum of the total amount of such issue outstanding, but

23

this limitation shall not apply to any such issue the total

24

amount of which does not exceed $100,000 and does not

25

exceed 50 per centum of the capital of the association, nor




56
1

(2) shall the total amount of the investment securities of

2

any one obligor or maker purchased after this section as

8

amended takes effect and held by the association for its own

4

account exceed at any time 15 per centum of the amount of

5

the capital stock of the association actually paid in and un-

6

impaired and 25 per centum of its unimpaired surplus fund.

7

As used in this section the term ' investment securities'

8

shall mean marketable obligations evidencing indebtedness

9

of any person, copartnership, association, or corporation in

10

the form of bonds, notes and/or debentures commonly

11

known as investment securities under such further definition

12

of the term ' investment securities' as may by regulation

IB

be prescribed by the Comptroller of the Currency.

14

as hereinafter provided or otherwise permitted by law, noth-

15

ing herein contained shall authorize the purchase by the asso-

16

ciation of any shares of stock of any corporation.

17

tations herein contained as to investment securities shall not

18

apply to obligations of the United States, or obligations of

19

any State or of any political subdivision thereof, or obliga-

20

tions issued under authority of the Eederal Earm Loan Act,

21

as amended: Provided, That in carrying on the business

22

commonly known as the safe-deposit business the associa-

23

tion shall not invest in the capital stock of a corporation

24

organized under the law of any State to conduct a safe-

25

deposit business in an ajnount in excess of 15 per centum




Except

The limi-

57
1

of the capital stock of the association actually paid in and

2

unimpaired and 15 per centum of its unimpaired surplus."

3

The restrictions of this section as to dealing in invest-

4

ment securities shall take effect two years after the date

5

of the approval of this Act.

6
7

SEC. 17. (a) Section 5138 of the Revised Statutes,
as amended, is amended to read as follows:

8

" SEC. 5138. After this section as amended takes effect,

9

no national banking association shall be organized with a

10

less capital than $100,000, except that such associations

11

with, a capital of not less than $50,000 may be organized

12

in any place the population of which does hot exceed

13

six thousand inhabitants.

14

organized in a city the population of which exceeds

No such association shall be

15 fifty thousand persons with a capital of less than $200,000,
16

except that in the outlying districts of such a city where the

17

State laws permit the organization of State banks with a

18

capital of $100,000 or less, national banking associations

19

now organized or hereafter organized may, with the approval

20

of the Comptroller of the Currency, have a capital of not

21

less than $100,000."

22

(b) The tenth paragraph of section 9 of the Federal

23

Reserve Act, as amended, is amended to read as follows:

24

" No applying bank shall be admitted to membership

25

in a Federal reserve bank unless it possesses a paid-up unrm-




58
1

paired capital sufficient to entitle it to become a national

2

banking association in the place where it is situated under

3

the provisions of the National Bank Act, as amended."

4

SEC. 18. Section 5139 of the Revised Statutes, as

5

amended, is amended by adding at the end thereof the fol-

6

lowing new paragraph:

7

" After two years from the date of the enactment of

8

the Banking Act of 1933, no certificate representing the

9

stock of any such association shall represent the stock of

10

any other corporation, except a member bank, nor shall the

11

ownership, sale, or transfer of any certificate representing

12

the stock of any such association be conditioned in any

13

manner whatsoever upon the ownership, sale, or transfer

14

of a certificate representing the stock of any other corpora-

15

tion, except a member bank."
SEC. 19. Section 5144 of the Revised Statutes, as

16
17

amended, is amended to read as follows:

18

" SEC. 5144. I n all elections of directors and in de-

19

ciding all questions at meetings of shareholders, each share-

20

holder shall be entitled to one vote on each share of stock

21

held by him; except (1) that shares of its own stock held

22

by a national bank as sole trustee shall not be voted, and

23

shares of its own stock held by a national bank and one

24

or more persons as trustees may be voted by such other

25

person or persons, as trustees, in the same manner as if he




59
1

or they were the sole trustee, and (2) shares controlled

2

by any holding company affiliate of a national bank shall

3

not be voted unless such holding company affiliate shall

4

have first obtained a voting permit as hereinafter provided,

5

which permit is in force at the time such shares are voted.

6 Shareholders may vote by proxies duly authorized in
7

writing; but no officer, clerk, teller, or bookkeeper of such

8 bank shall act as proxy; and no shareholder whose liability
9

is past due and unpaid shall be allowed to vote.

10

" For the purposes of this section shares shall be

11

deemed to be controlled by a holding company affiliate if

12

they are owned or controlled directly or indirectly by such

13

holding company affiliate, or held by any trustee for the

14

benefit of the shareholders or members thereof.

15

"Any such holding company affiliate may make appli-

16

cation to the Federal Reserve Board for a voting permit

17

entitling it to cast one vote at all elections of directors and

18

in deciding all questions at meetings of shareholders of such

19

bank on each share of stock controlled by it or authoriz-

20

ing the trustee or trustees holding the stock for its benefit

21

or for the benefit of its shareholders so to vote the same.

22

The Federal Reserve Board may, in its discretion, grant or

23

withhold such permit as the public interest may require.

24

I n acting upon such application, the Board shall consider

25

the financial condition of the applicant, the general character




60
1

of its management, and the probable effect of the granting

2

of such permit upon the affairs of such bank, but no such

3

permit shall be granted except upon the following conditions:

4

" (a) Every such holding company affiliate shall, in

5

making the application for such permit, agree (1) to

6

receive, on dates identical with those fixed for the examina-

7

tion of banks with which it is affiliated, examiners duly

8

authorized to examine such banks, who shall make such

9

examinations of such holding company affiliate as shall be

10

necessary to disclose fully the relations between such banks

11

and such holding company affiliate and the effect of such

12

relations upon the affairs of such banks, such examinations

13

to be at the expense of the holding company affiliate so

14

examined; (2) that the reports of such examiners shall

15

contain such information as shall be necessary to disclose

16

fully the relations between such affiliate and such banks

17

and the effect of such relations upon the affairs of such

18

banks; (3) that such examiners may examine each bank

19

owned or controlled by the holding company affiliate, both

20

individually and in conjunction with other banks owned or

21

controlled by such holding company affiliate; and (4) that

22

publication of individual or consolidated statements of con-

23

dition of such banks may be required;

24

" (b) After five years after the enactment of the

25

Banking Act of 1933? every such holding company affiliate




61
1

(1)

shall possess, and shall continue to possess during

2

the life of such permit, free and clear of any lien, pledge,

3

or hypothecation of any nature, readily marketable assets

4

other than bank stock in an amount not less than 12 per

5

centum of the aggregate par value of all bank stocks con-

6

trolled by such holding company affiliate, which amount

7

shall be increased by not less than 2 per centum per annum of

8

such aggregate par value until such assets shall amount to 25

9

per centum of the aggregate par value of such bank stocks;

10

and (2) shall reinvest in readily marketable assets other than

11

bank stock all net earnings over and above 6 per centum

12

per annum on the book value of its own shares outstanding

13

until such assets shall amount to such 25 per centum of the

14

aggregate par value of all bank stocks controlled by i t ;

15

" ( c ) Notwithstanding the foregoing provisions of this

16

section, after five years after the enactment of the Bank-

17

ing Act of 1933, (1) any such holding company affiliate

18

the shareholders or members of which shall be indi-

19

vidually and severally liable in proportion to the number

20

of shares of such holding company affiliate held by them

21

respectively, in addition to amounts invested therein, for

22

all statutory liability imposed on such holding company

23

affiliate by reason of its control of shares of stock of banks,

24

shall be required only to establish and maintain out of net

25

earnings over and above 6 per centum per annum on the




62
1

book value of its own shares outstanding a reserve of readily

2

marketable assets in an amount not less than 12 per centum

3

of the aggregate par value of bank stocks controlled by it,

4

and (2) the assets required by this section to be possessed

5

by such holding company affiliate may be used by it for

6

replacement of capital in banks affiliated with it and for

7

losses incurred in such banks, but any deficiency in such

8

assets resulting from such use shall be made up within such

9

period as the Federal Reserve Board may by regulation

10

prescribe;

11

" (d) Every officer, director, agent, and employee of

12

every such holding company affiliate shall be subject to the

13

same penalties for false entries in any book, report, or

14

statement of such holding company affiliate as are applicable

15

to officers, directors, agents, and employees of member

16

banks under section 5209 of the Revised Statutes, as

17

amended; and

18

" ( e ) Every such holding company affiliate shall, in its

19

application for such voting permit, (1) show that it does not

20

own, control, or have any interest in, and is not participating

21

in the management or direction of, any corporation, business

22

trust, association, or other similar organization formed for

23

the purpose of, or engaged principally in, the issue, flota-

24

tion, underwriting, public sale, or distribution, at wholesale

25

or retail or through syndicate participation, of stocks, bonds,




63
1

debentures, notes, or other securities of any sort (here-

2

inafter referred to as ' securities company') ; (2) agree that

3

during the period that the permit remains in force it will

4

not acquire any ownership, control, or interest in any such

5

securities company or participate in the management or

6

direction thereof; (3) agree that if, at the time of filing

7

the application for such permit, it owns, controls, or has an

8

interest in, or is participating in the management or direc-

9

tion of, any such securities company, it will, within five

10

years after the filing of such application, divest itself of its

11

ownership, control, and interest in such securities company

12

and will cease participating in the management or direction

13

thereof, and will not thereafter, during the period that the

14

permit remains in force, acquire any further ownership,

15

control, or interest in any such securities company or par-

16

ticipate in the management or direction thereof; and (4)

17

agree that thenceforth it will declare dividends only out of

18

actual net earnings.

19

" If at any time it shall appear to the Federal Eeserve

20

Board that any holding company affiliate has violated any

21

of the provisions of the Banking Act of 1933 or of any

22

agreement made pursuant to this section, the Federal Ke-

23

serve Board may, in its discretion, revoke any such voting

24

permit after giving sixty days' notice by registered mail of

25

its intention to the holding company affiliate and affording




64
1

it an opportunity to be heard. Whenever the Federal Re-

2

serve Board shall have revoked any such voting permit, no

3

national bank whose stock is controlled by the holding com-

4

pany affiliate whose permit is so revoked shall receive depos-

5

its of public moneys of the United States, nor shall any such

6

national bank pay any further dividend to such holding com-

7

pany affiliate upon any shares of such bank controlled by

8

such holding company affiliate.

9

" Whenever the Federal Reserve Board shall have re-

10

voked any voting permit as hereinbefore provided, the

11

rights, privileges, and franchises of any or all national banks

12

the stock of which is controlled by such holding company

13

affiliate shall, in the discretion of the Federal Reserve Board,

14

be subject to forfeiture in accordance with section 2 of the

15

Federal Reserve Act, as amended."

16

SEO. 20. After two years from the date of the enact-

17

ment of this Act, no member bank shall be affiliated in anv

18

manner described in section 2 (b) hereof with any corpo-

19

ration, association, business trust, or other similar organiza-

20

tion engaged principally in the issue, flotation, underwriting,

21

public sale, or distribution at wholesale or retail or through

22

syndicate participation of stocks, bonds, debentures, notes,

23

or other securities.

24

For every violation of this section the member bank

25

involved shall be subject to a penalty not exceeding $1,000




65
1

per day for each day during which such violation continues.

2

Such penalty may be assessed by the Federal Eeserve Board,

3

in its discretion, and, when so assessed, may be collected by

4

the Federal reserve bank by suit or otherwise.

5

I f any such violation shall continue for six calendar

6

months after the member bank shall have been warned by

7

the Federal Eeserve Board to discontinue the same, (a) in

8

the case of a national bank, all the rights, privileges, and

9

franchises granted to it under the National Bank Act may

10

be forfeited in the manner prescribed in section 2 of the Fed-

11

eral Eeserve Act, as amended, or, (b) in the case of a State

12

member bank, all of its rights and privileges of membership

13

in the Federal Eeserve System may be forfeited in the

14

manner prescribed in section 9 of the Federal Eeserve Act,

15

as amended.

16
17

SEC. 21. (a) After the expiration of two years after
the date of enactment of this Act, it shall be unlawful—

18

(1) For any person, firm, corporation, association,

19

business trust, or other similar organization, engaged prin-

20

cipally in the business of issuing, underwriting, selling, or

21

distributing, at wholesale or retail, or through syndicate

22

participation, stocks, bonds, debentures, notes, or other se-

23

curities, to engage at the same time to any extent whatever

24

in the business of receiving deposits subject to check or to




S. 1631

5

66
1

repayment upon presentation of a passbook, certificate of

2

deposit, or other evidence of debt, or upon request of the

3

depositor; or

4

(2) For any person, firm, corporation, association,

5

business trust, or other similar organization, other than a

6

banking institution or private banker subject to examination

7

and regulation under State or Federal law, to engage to

8

any extent whatever in the business of receiving deposits

9

subject to check or to repayment upon presentation of a

10

passbook, certificate of deposit, or other evidence of debt,

11

or upon request of the depositor, unless such person, firm,

12

corporation, association, business trust, or other similar

13

organization shall submit to periodic examination by the

14

Comptroller of the Currency or by the Federal Eeserve bank

15

of the district and shall make and publish periodic reports

16

of its condition, exhibiting in detail its resources and liabili-

17

ties, such examination and reports to be made and published

18

at the same times and in the same manner and with like

19

effect and penalties as are now provided by law in respect

20

of national banking associations transacting business in the

21

same locality.

22

(b) Whoever shall willfully violate any of the

23

visions of this section shall upon conviction be fined not

24

more than $5,000 or imprisoned not more than five yeafs,

25

or both, and any officer, director, employee, or agent of




67
1

any person, firm, corporation, association, business trust,

2

or other similar organization who knowingly participates

3

in any such violation shall be punished by a like fine or

4

imprisonment or both.

5

SEC. 22. Paragraph

(c)

of section 5155 of the

6

Revised Statutes, as amended, is amended to read as follows:

7

" ( c ) A national banking association may with the

8

approval of the Comptroller of the Currency establish and

9

operate new branches within the limits of the city, town,

10

or village, or at any point within the State in which said

11

association is situated, if such establishment and operation

12

are at the time expressly authorized to State banks by the

13

law of the State in question and subject to the restrictions as

14

to location imposed by the law of the State on State banks.

15

No such association shall establish a branch outside of the

16

city, town, or village in which it is situated unless it has a

17

paid-in and unimpaired capital stock of not less than

18

$,500,000: Provided, That in States with a population of

19

less than one million, and which have no cities located therein

20

with a population exceeding one hundred thousand, the

21

capital shall be not less than $250,000."

22
23

Paragraph (d) of section 5155 of the Revised Statutes,
as amended, is amended to read as follows:

24

" ( d ) The aggregate capital of every national banking

25

association and its branches shall at no time be less than the




68
1

aggregate minimum capital required by law for the estab-

2

lishment of an equal number of national banking associations

3

situated in the various places where such association and

4

its branches are situated."

5

SEC. 23. (a) Sections 1 and 3 of the Act entitled

6

" A n Act to provide for the consolidation of national banking

7

associations

8

amended by striking out the words " county, city, town, or

9

village" wherever they occur in each such section, and

10

inserting in lieu thereof the words " State, county, city,

11

town, or village."

approved November 7, 1918, as amended, are

12

(b) Section 3 of such Act of November 7, 1918, as

13

amended, is further amended by striking out the second

14

sentence thereof and inserting in lieu thereof the following:

15

" The capital stock of such consolidated association shall

16

not be less than that required under existing law for the

17

organization of a national banking association in the place

18

in which such consolidated association is located.

19

such a consolidation, or upon a consolidation of two or more

20

national banking associations under section 1 of this Act,

21

the corporate existence of each of the constituent banks and

22

national banking associations participating in such consoli-

23

dation shall be merged into and continued in the consoli-

24

dated national banking association and the consolidated

25

association shall be deemed to be the same corporation as




Upon

69
1

each of the constituent institutions-

A l l the rights, fran-

2

chises, and interests of each of such constituent banks arid

3

national banking associations in and to every species of

4

property, real, personal, and mixed, and choses in action

5

thereto belonging, shall be deemed to be transferred to and

6

vested in such consolidated national banking association

7

without any deed or other transfer; and such consolidated

8

national banking association, by virtue of such consolidation

9

and without any order or other action on the part of any

10

court or otherwise, shall hold and enjoy the same and all

11

rights of property, franchises, and interests, including ap-

12

pointments, designations, and nominations and all other

13

rights and interests as trustee, executor, administrator, regis-

14

trar of stocks and bonds, guardian of estates, assignee, re-

15

ceiver, committee of estates of lunatics and in every other fidii-

16

ciary capacity, in the same manner and to the same extent as

17

such rights, franchises, and interests were held or enjoyed

18

by any such constituent institution at the time of such con-

19

solidation: Provided, however, That where any such con*

20

stituent institution at the time of such consolidation was act*

21

rug under appointment of any court as trustee, executor,

22

administrator, registrar of stocks and bonds, guardian of

23

estates, assignee, receiver, committee of estates of lunatics
or in any other fiduciary capacity, the consolidated national

25

banking association shall be subject to removal by a court




70
1

of competent jurisdiction in the same manner and to the

2

same extent as was such constituent corporation prior to

3

the consolidation, and nothing herein contained shall be con-

4

strued to impair in any manner the right of any court to

S

remove such a consolidated national banking association and

6

to appoint in lieu thereof a substitute trustee, executor, or

7

other fiduciary, except that such right shall not be exercised

8

in such a manner as to discriminate against national bank-

9

ing associations, nor shall any such consolidated association

10 be removed solely because of the fact that it is a national
11

banking association."

12
13

SEC. 24. The first two sentences of section 5197 of the
Revised Statutes are amended to read as follows:

14

"Any association may take, receive, reserve, and chargc

15

on any loan or discount made, or upon any notes, bills of

16

exchange, or other evidences of debt, interest at the rate

17

allowed by the laws of the State, Territory, or District where

18

the bank is located, or at a rate of 1 per centum in excess

19

of the discount rate on ninety-day commercial paper in effect

20

at the Federal Reserve bank in the Federal Reserve district

21

where the bank is located, whichever may be the greater,

22

and no more, except that where by the laws of any State

23

a different rate is limited for banks organized under State

24

laws, the rate so limited shall be allowed for associations

25

organized or existing in any such State under this title.




71
1

When no rate is fixed by the laws of the State, or Territory,

2

or District, the bank may take, receive, reserve, or charge a

3

rate not exceeding 7 per centum, or 1 per centum in excess

4

of the discount rate on ninety-day commercial paper in

5

effect at the Federal Reserve bank in the Federal Reserve

6

district where the bank is located, whichever may be the

7

greater, and such interest may be taken in advance, reekon-

8

ing the days for which the note, bill, or other evidence of

9

debt has to run."

10

SEC. 25. (a) The second sentence of the first pariar

11

graph of section 5200 of the Revised Statutes, as amended,

12

is amended by inserting before the period at the end thereof

13

the following: " and shall include in the case of obligations

14

of a corporation all obligations of all subsidiaries thereof in

15

which such corporation owns or controls a majority

16

interest."

17

(b) The amendment made by this section shall not

18

apply to such obligations of subsidiaries held by such asso-

19

ciation on the date this section takes effect.

20

SEC. 26. Section 5211 of the Revised Statutes, as

21

amended, is amended by adding at the end thereof the fol-

22

lowing new paragraph:

23

" Each national banking association shall obtain from

24

each of its affiliates other than member banks and furnish

25

to the Comptroller of the Currency not less than three




72
1

reports during each year, in such form as the Comptroller

2

may prescribe, verified by the oath or affirmation of the

8

president or such other officer as may be designated by the

4

board of directors of such affiliate to verify such reports,

5

disclosing the information hereinafter provided for as of

6

dates identical with those for which the Comptroller shall

7

during such year require the reports of the condition of the

8

association.

9

' affiliate' shall include holding company affiliates as well

For the purpose of this section the term

10 as other affiliates.

Each such report of an affiliate shall

11

be transmitted to the Comptroller at the same time as the

12

corresponding report of the association, except that the

18

Comptroller may, in his discretion, extend such time for

14

good cause shown.

15

information as in the judgment of the Comptroller of the

16

Currency shall bo neeossary to disclose fully the relations

17

between such affiliate and such bank and to enable the

18

Comptroller to inform himself as to the effect of such rela-

19

tions upon the affairs of such bank.

20

affiliates shall be published by the association under the same

Each such report shall contain such

The reports of such

21 conditions as govern its own condition reports.

The Comp-

22 troller shall also have power to call for additional reports
23

with respect to any such affiliate whenever in his judgment

24

the same are necessary in order to obtain a full and com-

25

plete knowledge of the conditions of the association with




73
1

which it is affiliated.

2

transmitted to the Comptroller of the Currency in such form

3

as he may prescribe.

4

to obtain and furnish any report required under this section

5

shall be subject to a penalty of $100 for each day during

6

which such failure continues."

7

SEC. 2 7 .

Such additional reports shall be

Any such affiliated bank which fails

(a) The first paragraph of section

5240

of

8

the Revised Statutes, as amended, is amended by inserting

9

before the period at the end thereof a colon and the following
66

10

proviso:

11

any national bank the examiners shall include such an exam-

12

ination of the affairs of all its affiliates other than member

13

banks as shall be necessary to disclose fully the relations be-

14

tween such bank and such affiliates and the effect of such

15

relations upon the affairs of such bank; and in the event of

16

the refusal to give any information required in the course

17

of the examination of any such affiliate, or in the event of the

18

refusal to permit such examination, all the rights, privileges,

19

and franchises of the bank shall be subject to forfeiture in

20

accordance with section 2 of the Federal Reserve Act, as

21

amended.

22

power, and he is hereby authorized, to publish the report

23

of his examination of any national banking association or

24

affiliate which shall not within one hundred and twenty

25

days after notification of the recommendations or suggestions




Provided, That in making the examination of

The Comptroller of the Currency shall have

74
1

of the Comptroller, based on said examination, have com-

2

plied with the same to his satisfaction. Ninety days' notice

3

prior to such publicity shall be given to the bank or

4

affiliate."

5

(b) Section 5240 of the Ee vised Statutes, as amended,

6

is further amended by adding after the first paragraph

7

thereof the following new paragraph:

8

" The examiner making the examination of any affiliate

9

of a national bank shall have power to make a thorough

10

examination of all the affairs of the affiliate, and in doing

11

so he shall have power to administer oaths and to examine

12

any of the officers, directors, employees, and agents thereof

13

under oath and to make a report of his findings to the

14

Comptroller of the Currency.

15

of such affiliates may be assessed by the Comptroller of the

16

Currency upon the affiliates examined in proportion to assets

17

or resources held by the affiliates upon the dates of examina-

18

tion of the various affiliates.

19

refuse to pay such expenses or shall fail to do so within

20

sixty days after the date of such assessment, then such

21

expenses may be assessed against the affiliated national bank

22

and r when so assessed, shall be paid by such national bank:

23

Provided, however, That, if the affiliation is with two or

24

more national banks, such expenses may be assessed against,

25

and collected from, any or all of such national banks in such




The expense of examinations

I f any such affiliate shall

75
1

proportions as the Comptroller

2

prescribe.

3

to permit an examiner to make an examination of the affiliate

4

or shall refuse to give any information required in the course

5

of any such examination, the national bank with which it is

6

affiliated shall be subject to a penalty of not more than $100

7

for each day that any such refusal shall continue. Such pen-

8

alty may be assessed by the Comptroller of the Currency and

9

collected in the same manner as expenses of examinations."

10

SEC. 28. I n any case in which, in the opinion of the

11

Comptroller of the Currency, it would be to the advantage

12

of the depositors and unsecured creditors of any national

13

banking association whose business has been closed, for such

14

association to resume business upon the retention by the

15

association, for a reasonable period to be prescribed by the

16

Comptroller, of all or any part of its deposits, the Comp-

17

troller is authorized, in his discretion, to permit the associa-

18

tion to resume business if depositors and unsecured creditors

19

of the association representing at least 85 per centum of its

20

total deposit and unsecured credit liabilities consent in writing

21

to such retention of deposits, Nothing in this section shall

22

be construed to affect in any manner any powers of the

23

Comptroller under the provisions of law in force on the date

24

of enactment of this Act with respect to the reorganization

25

of national banking associations.




of the Currency may

If any affiliate of a national bank shall refuse

76
1

SEC. 29. Whenever, in the opinion of the Comp-

2

troller of the Currency, any director or officer of a national

3

bank, or of a bank or trust company doing business in the

4

District of Columbia, or whenever, in the opinion of a Fed-

5

eral Reserve agent, any director or officer of a State member

6

bank in his district shall have continued to violate any law

7

relating to such bank or trust company or shall have con-

8 tinued unsafe or unsound practices in conducting the business
9

of such bank or trust company, after having been warned

10

by the Comptroller of the Currency or the Federal Reserve

11

agent, as the case may be, to discontinue such violations

12

of law or such unsafe or unsound practices, the Comptroller

13

of the Currency or the Federal Reserve agent, as the case

14

may be, may certify the facts to the Federal Reserve Board.

15

I n any such case the Federal Reserve Board may cause

16 notice to be served upon such director or officer to appear

17

before such Board to show cause why he should not be

18 removed from office. A copy of such order shall be sent to

19

each director of the bank affected, by registered mail.

If

20 after granting the accused director or officer a reasonable
21 opportunity to be heard, the Federal Reserve Board finds

22

that he has continued to violate any law relating to such

23 bank or trust company or has continued unsafe or unsound
24

practices in conducting the business of such bank or trust

25 company after having been warned by the Comptroller of




77
1

the Currency or the Federal Reserve agent to discontinue

2

such violation of law or such unsafe or unsound practices,

3

the Eederal Reserve Board, in its discretion, may order that

4

such director or officer be removed from office. A copy of

5

such order shall be served upon such director or officer.

6

A copy of such order shall also be served upon the bank of

7

which he is a director or officer, whereupon such director or

8

officer shall cease to be a director or officer of such bank:

9

Provided, That such order and the findings of fact upon

10

which it is based shall not be made public or disclosed to

11

anyone except the director or officer involved and the direc-

12

tors of the bank involved, otherwise than in connection with

13

proceedings for a violation of this section. Any such director

14

or officer removed from office as herein provided who there-

15

after participates in any manner in the management of such

16

bank shall be fined not more than $5,000, or imprisoned for

17

not more than five years, or both, in the discretion of the

18

court.

19

SEC. 30. After one year from the date of enactment

20

of this Act, notwithstanding any other provision of law, the

21

board of directors, board of trustees, or other similar gov-

22

erning body of every national banking association and of

23

every State bank or trust company which is a member of the

24

Federal Reserve System shall consist of not less than five

25

nor more than twenty-five members; and every director,




78
1

trustee, or other member of such governing body shall be the

2

bona fide owner in his own right of shares of stock of such

3

banking association, State bank or trust company having a

4

par value in the aggregate of not less than $2,000.

5

national banking association violates the provisions of this

6

section and continues such violation after thirty days' notice

7

from the Comptroller of the Currency, the said Comptroller

8

may appoint a receiver or conservator therefor, in accordance

9

with the provisions of existing law.

If any

If any State bank or

10

trust company which is a member of the Federal Reserve

11

System violates the provisions of this section and continues

12

such violation after thirty days' notice from the Federal

13

Reserve Board, it shall be subject to the forfeiture of its

14

membership in the Federal Reserve System in accordance

15

with the provisions of section 9 of the Federal Reserve Act,

16

as amended.

17

SEC. 31. From and after January 1, 1934, no officer

18

or director of any member bank shall be an officer, director,

19

or manager of any corporation, partnership, or unincorpo-

20

rated association engaged primarily in the business of pur-

21

chasing, selling, or negotiating securities, and no member

22

bank shall perform the functions of a correspondent bank

23

on behalf of any such individual, partnership, corporation,

24

or unincorporated association; and no such individual, part-




79
1

nership, corporation, or unincorporated association shall

2

perform the functions of a correspondent for any member

3

bank or hold on deposit any funds on behalf of any member

4

bank, unless in any such case there is a permit therefor

5

issued by the Federal Reserve Board; and the Board is

6

authorized to issue such permit if in its judgment it is not

7

incompatible with the public interest, and to revoke any

8

such permit whenever it finds after reasonable notice and

9

opportunity to be heard, that the public interest requires

10

such revocation.

11

SKO. 32. The Act entitled " A n Act to supplement

12

existing laws against unlawful restraints and monopolies,

13

and for other purposes

14

amended, is hereby amended by adding after section 8

15

thereof the following new section:

approved October 15, 1914, as

16

" SEC. 8A. That from and after the 1st day of Janu-

17

ary .1934, no director, officer, or employee of any bank,

18

banking association, or trust company, organized or operat-

19

ing under the laws of the United States shall be at the same

20

time a director, officer, or employee of a corporation or a

21

member of a partnership organized for any purpose what-

22

soever which shall make loans secured by stock or bond

23

collateral to any individual, association, partnership, or

24

corporation other than its own subsidiaries."




80
1

SEC. 33. The right to alter, amend, or repeal this

2

Act is hereby expressly reserved.

3

this Act, or the application thereof to any person or cir-

4

cumstances, is held invalid, the remainder of the Act, and lie

5

application of such provision to other persons or circum-

6

stances, shall not be affected thereby.




If any provision of


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102