Full text of S. 1631, 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 : 73d Congress, 1st Session
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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