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Calendar No. 9 0 1
73D CONGRESS

2d Session

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I N THE SENATE OF THE UNITED STATES
APRIL 26 (calendar day, APRIL 28), 1934

Mr. GLASS introduced the following bill; which was read twice and referred
to the Committee on Banking and Currency
APRIL 26 (calendar day, APRIL 28), 1934

Reported by Mr. GLASS, without amendment

A BILL
Relating to direct loans for industrial purposes by Federal Reserve
banks, and for otlier purposes.
1

Be it enacted by the Senate and House of Representa-

2

lives of the United States of America in Congress assembled,

3

That the Federal Reserve Act, as amended, is amended by

4

adding after section 13a thereof a new section reading as

5

follows:

6

" SEC. 13b. In exceptional circumstances, when it

7

appears to the satisfaction of a Federal Reserve bank that

8

an established industrial or commercial business located in

9

its district is unable to obtain requisite financial assistance

10

on a reasonable basis from the usual sources, the Federal

11

Reserve bank, pursuant to authority granted by the Federal




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1

Eeserve. Board, may make loans to, or purchase obligations

2

of, such business, or may make commitments with respect

3

thereto, on a reasonable and sound basis, for the purpose

4

of providing it with working capital, but no obligation shall

5

be acquired or commitment made hereunder with a maturity

6

exceeding *five years,.

7

" Each Federal Eeserve bank shall also have power to

8

discount for, or purchase from, any bank, trust company,

9

mortgage company, credit corporation for industry, or other

10 financing institution operating in its district, obligations hav11

ing maturities not exceeding five years, entered into for the

12

purpose of obtaining working capital for any such estab-

13

lished industrial or commercial business; to make loans or

14

advances direct to any such financing institution on the

15

security of such obligations; and to make commitments with

16

regard to such discount or purchase of obligations or with

17

respect to such loans or advances on the security thereof,

18

including commitments made in advance pf the actual under-

19

taking of such obligations.

20

shall obligate itself to the satisfaction of the Federal Eeserve

21

bank for at least 20 per centum of any loss which may be

22

sustained by such bank upon any of the obligations acquired

23

from suchfinancinginstitution, the existence and amount of

24

any such loss to be determined in accordance with regula-

25

tions of the Federal Reserve Board: Provided, That in lieu




Each suchfinancinginstitution

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1

of such obligation against loss any suchfinancinginstitution

2

may advance at least 20 per centum of such working capital

3

for any established industrial or commercial business without

4

obligating itself to the Federal Eeserve bank against loss

5

on the amount advanced by the Federal Eeserve bank:

6 Provided, however, That such advances by the financing

7 institution and the Federal Eeserve bank shall be considered
8 as one advance, and repayment shall be made pro rata under
9

such regulations as the Federal Eeserve Board may prescribe.

10

" The aggregate amount of loans, advances, and com-

11

mitments of the Federal Eeserve banks outstanding under

12

this section at any one time, plus the amount of purchases and

13

discounts under this section held at the same time, shall not

14

exceed the combined surplus of the Federal Eeserve banks A
S

15

of July 1, 1934, and all operations of the Federal Eeserve

16

banks under this section shall be subject to such regulations

17

as the Federal Eeserve Board may prescribe.

18

" For the purpose of aiding the Federal Eeserve banks

19

in carrying out the provisions of this section, there is hereby

20

established in each Federal Eeserve district an industrial

21

advisory committee, to be appointed by the Federal Eeserve

22

bank subject to the approval and regulations of the Federal

23

Eeserve Board, and to be composed of not less than three

24

nor more than five members as determined by the Federal

25

Eeserve Board. Each member of such committee shall be




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1

actively engaged in some industrial pursuit within the Fed-

2

eral Reserve district in which the committee is established,

3

and each such member shall serve without compensation but

4

shall be entitled to receive from the Federal Reserve bank

5 of such district his necessary expenses while engaged in the
6 business of the committee, or a per diem allowance in lieu
7 thereof to be fixed by the Federal Reserve Board. Each
8 application for any such loan, advance, purchase, discount,
9

or commitment shall be submitted to the appropriate com-

10 mittee and, after an examination bv it of the business with
'

V

11 respect to which the application is made, the application
12

shall be transmitted to the Federal Reserve bank, together

13 with the recommendation of the committee."
SEC, 2. In order to enable the Federal Reserve banks

14

15 to make the loans, discounts, advances, purchases, and com16 mitments provided for in section 13b of the Federal

17 Reserve Act, the Secretary of the Treasury, upon the enact18

ment of this Act, is authorized and directed to pay to each

19 Federal Reserve bank such portion of the sum of $139,20

299,557 as may be represented by the par value of the

21

holdings of each Federal Reserve bank of Federal Deposit

22 Insurance Corporation stock, upon the execution by each
23

Federal Reserve bank of its agreement (to be endorsed on

24

the certificate of such stock) to hold such stock unencum-

25

bered and to pay to the United States all dividends, all pay-




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1

ments on liquidation, and all other proceeds of such stock, for

2

which dividends, payments, and proceeds the United States

3

shall be secured by such stock itself.

4

bank, in addition, shall agree that, in the event such divi-

5

dends, payments, and other proceeds in any calendar year do

6

not aggregate 1 per centum of the par value of said stock,

7

it will pay to the United States in such year such further

8

amount, if any, up to 1 per centum of the par value of such

9

stock, as shall be covered by the net earnings of the bank

10

for that year derived from the use of the sum so paid by

11

the Secretary of the Treasury, and that for said amount so

12

due the United States shall have a first claim against such

1
3

earnings and stock, and further that it will continue such

14

payments until the final liquidation of said stock by the

15

Federal Deposit Insurance Corporation.

16

to each Federal Keserve bank by the Secretary of the

17

Treasury shall become a part of the surplus fund of such

18

Federal Reserve bank within the meaning of section 13b

19

of the Federal Reserve Act.

20

expended by the Secretary of the Treasury in order to carry

21

out the provisions of this section shall be paid out of the

22

miscellaneous receipts of the Treasury created by the

23

increment resulting from the reduction of the weight of the

24

gold dollar under the President's proclamation of January




Bach Federal Reserve

The sum so paid

All amounts required to be

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1

31, 1934; and tliere is hereby appropriated, out of such

2

receipts, such sum as shall be required for such purpose.

3

SEC. 3. Section 5202 of the Eevised Statutes of the

4

United States, a amended, is hereby amended by adding
s

5

at the end thereof the following new paragraph:

6
7

" Tenth. Liabilities incurred under the provisions of
section 13b of the Federal Reserve Act."

8

SEC. 4. Section 22 of the Federal Reserve Act is

9

amended by adding at the end thereof the following new

10

paragraphs:

11

" (h) Whoever makes any material statement, know-

12

ing it to be false, or whoever willfully overvalues any

13

security, for the purpose of influencing in any way the

14

action of a Federal Reserve bank upon any application,

15

commitment, advance, discount, purchase, or loan, or any

16

extension thereof by renewal, deferment of action, or other-

17

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

18

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

19

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

20

or both.

21

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

22

a Federal Reserve bank (1) embezzles, abstracts, purloins,

23

or willfully misapplies any moneys, funds, securities, or other

24

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

25

wise entrusted to it, or (2) with intent to defraud any




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1

Eederal Eeserve bank, or any other body politic or corpor-

2

ate, or any individual, or to deceive any officer, auditor, or

3

examiner, makes any false entry in any book, report, or

4

statement of or to a Federal Reserve bank, or, without being

5

duly authorized, draws any order or issues, puts forth, or

6

assigns any note, debenture, bond, or other obligation, or

7

draft, mortgage, judgment, or decree shall be punished

8

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

9

not more thanfiveyears, or both.

10

" (j) The provisions of sections 112, 113, 114,115, 116,

11

and 117 of the Criminal Code of the United States, insofar as

12

applicable, are extended to apply to contracts or agreements

13

of any Federal Reserve bank under this Act, which, for the

14

purposes hereof, shall be held to include advances, loans, dis-

15

counts, purchase, and repurchase agreements; extensions

16

and renewals thereof; and acceptances, releases, and substi-

17

tutions of security therefor.

18

" (k) It shall be unlawful for any person to stipulate

19

for or give or receive, or consent or agree to give or receive,

20

any fee, commission, bonus, or thing of value for procuring

21

or endeavoring to procure from any Federal Reserve bank

22

any advance, loan, or extension of credit or discount or pur-

23

chase of any obligation or commitment with respect thereto,

24

either directly from such Federal Reserve bank or indirectly

25

through any financing institution, unless such fee, commis-




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1

sion, bonus, or thing of value and all material facts with

2

respect to the arrangement or understanding therefor shall

3

be disclosed in writing in the application or request for such

4

advance, loan, extension of credit, discount, purchase, or

5

commitment.

6

graph shall be punishable by imprisonment for not more

7

than one year or by afineof not exceeding $5,000, or both.

8

If a director, officer, employee, or agent of any .Federal

9

Reserve bank shall knowingly violate this paragraph, he shall

10

be held liable in his personal and individual capacity for

11

any loss or damage sustained by such Federal Reserve bank

12

in consequence of such violation."

Any violation of the provisions of this para-

13

SEC. 5. Section 10 of the Federal Reserve Act, as

14

amended, is further amended by changing the period at

15

the end of the third paragraph thereof to a comma and

16

inserting thereafter the following: "and such assessments

17

may include amounts sufficient to provide for the acquisition

18

by the Board in its own name of such site or building in

19

the District of Columbia as in its judgment alone shall be

20

necessary for the purpose of providing suitable and adequate

21

quarters for the performance of its functions.

22

proving such plans, estimates, and specifications as it shall

23

have caused to be prepared, the Board may, notwithstand-

24

ing any other provision of law, cause to be constructed on

25

the site so acquired by it a building suitable and adequate




After ap-

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1

in its judgment for its purposes and proceed to take all

2

such steps a it may deem necessary or appropriate in
s

3

connection with the construction, equipment, and furnishing

4

of such building.

5

remodel any building s acquired or constructed and shall
o

6

have sole control of such building and space therein."

S. 3487-




2

The. Board may maintain, enlarge, or




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