frsbog_mim_v33_0065.pdf
TRANSCRIPT
7/17/2019 frsbog_mim_v33_0065.pdf
http://slidepdf.com/reader/full/frsbogmimv330065pdf 1/5
FEDER L RESERVE BO RD
WASHINGTON
T O
T H E FEDERAL RESERVE BOARD
X-6649
July 1 , 1930.
SUBJECT: Bi l l to Amend Federal Reserve Act and
National Bank Ac t .
Dear S i r :
There i s enclos ed herewi th f o r your i n -
formation, copy o f a memorandum from th e Board's
Assistant Counsel, summarizing th e provis ions of
S-4723, a t i l l i n t roduced by Senator Glass t o
amend various provisions o f the National Bank Act
a n d t h e
Federal Reserve
A c t . As the
supply
of the
p r i n t e d
M i l i s
s t i l l l imi ted , on ly
one
copy
i s
at tached hereto .
Very truly yours,
ii. M.
McClellaild,
Assistant Secretaryi
Enclosures.
TO ALL GOVERNORS AND AGENTS.
7/17/2019 frsbog_mim_v33_0065.pdf
http://slidepdf.com/reader/full/frsbogmimv330065pdf 2/5
COPY
X-6649-a
FEDERAL RESERVE
BOARD
.
OFFICE CORRESPONDENCE
Date June 23, 1930
From
M r.
Wingfield-Assistant Counsel.
To
Fed era l Reserve Board Subject: Summary
of
Provisions
of the Bill S-4723, introduced
by Senator g la ss .
On June 17 , 1930 , Senator Carter Glass introduced a t i l l , S .4723,
t o amend t h e prov is ions of the National Bank Act and the Federal Reserve
Act in a number of re sp ec ts . When he introduced th is t i l l Senator Glass
s t a t e d on t he f l o o r of the Senate that i t i s merely a tentative measure
t o which he hopes t o d i r e c t th e inquiry into t h e banking system au th ori ze d
by the Senate. Fo r t he information of t he Board, however, I wi ll briefly
summarize below
t h e
most important changes which Senator Glass
1
bil l would
make i n t he present l aw .
(1) The f i r s t pa ragraph of the h i l l , S . 4723, states that t h e t i t l e
of the bill i s t h e Banking Act of 1930.
( 2 ) Sect ion 2 of the b i l l , S . 4723, would amend t he 7 t h paragraph
of Sect ion 5136 of the Revised Statutes which h as to do with t h e powers
which a national bank may exerc i se . I n add i t ion t o t he specific powers of
national banks now contained in the l aw, this bi l l provides that national
banks may generally engage i n a l l forms of business that commercial banks
of t he Sta te i n which t h e national bank i s s i t u a t e d a r e permit ted t o t rans -
ac t by t he
laws
of the
State, except
i n s o f a r a s
national banks
a r e
expressly forbidden t o undertake such business by t he National Bank Act ,
t h e Federal Reserve A c t , o r other laws of the United States .
Under t h e present provis ions of Section 5136 of the Revised Statutes,
national banks a r e authorized to buy and soil invostment securi t ies .
Section 2 of th e b i l l , S . 4723, would also amend Section 5136 so as to
limit this power of national banks t o only th e buying an d s e l l i n g o f i n -
vestment se cu r it ie s so le ly upon order a n d f o r account of customers, and
in no case f o r i t s o w n accoun t, except a s s p e c i f i e d i n Sect ion 24 of the
Federal Reserve A c t .
( 3 ) Sect ion 5144 of the Revised Statutes now pro vid es tha t each
shareholder of a national bank shall be e n t i t l e d to one vote on each share
of stock held b y h i m . Sect ion 3 of the b i l l S . 4723 would amend Section
5144 so as to r e s t r i c t t h e r i g h t of a shareholder t o vote only shares of
stock actually owned by him as a r e s u l t of bona fide purchase, gift o r
inhe r i t ance , and the shareholder who becomes such through nominal transfer,
o r ownership on behalf o f another, may no t vote stock so acq ui re d. This
sec t ion of the b i l l would f u r t h e r amend Sec tio n 5144 so as to provide that
no corpora t ion, asso cia t io n o r pa r tne rsh ip and no officer, employee o r
di rec to r of any corpora t ion, associa t ion o r partnership which i s t h e owner
of
stock
i n any
national bank shall vote either
th e
stock owned
by him
ind iv idua l ly o r t h e stock owned by
1
t h 9 corpora t ion. The present provision
of Section 5144 authorizing shareholders t o vote by proxy i s re ta ined i n
t h e b i l l S . 4723. via .;.
7/17/2019 frsbog_mim_v33_0065.pdf
http://slidepdf.com/reader/full/frsbogmimv330065pdf 3/5
X-66494a
— —
( 4 )
Section
4 of the
b i l l
S .
4723, would amend para graph
(c) of
Section 5155 of the Revised Statutes so as to au thor ize a national bank,
a f t e r t h e date of the approval of t h i s b i l l , to e s t a b l i s h an d operate new
branches within t h e l i m i t s of t he Sta te i n which t h e national bank i s
situated rather than merely i n t h e city, town o r v i l l a g e i n which such
national bank
i s
lo ca ted .
The
proposed amendment retains
th e
present
prov is ion of the law t h a t new branches may only be es tab l i sh ed a n d operated
i f
such establishment
a n d
operat ion
a r e
permi t ted
t o
State banks
by the law
o f t h e
S ta te
i n
which
t h e
national bank
i s
located .
( 5 ) Under t h e prov is ions of Section 5197 a s i t now reads, a national
bank i s au thor ized t o charge in terest a t t h e rate al lowed b y t h e laws
of t he S t a t e , t e r r i t o r y o r d is t r ic t where t h e bank i s lo ca ted a n d when no
r a t e
i s so
f i x e d
by
S ta te
law a
national bank
may
charge
a
r a t e
n o t e x -
ceeding
7 p e r
centum. Se ct ion
5 of th e
b i l l
S .
4723 would amend these
p r o -
vis ions
s o a s t o
au thor ize
a
national bank
to
charge
t h e
rate allowed
by
Sta te
law or a
r a t e
o n e p e r
centum
i n
excess
o f t h e
discount rate
of the
Federal reserve bank i n t h e Federal reserve district where t h e national bank
i s located, whichever may be g rea te r , a n d where no r a t e i s f i x e d by State
l aw a national bank would be au thor ized t o charge a r a t e n o t exceeding 7
p e r centum or one pe r centum i n excess of t he discount rate of the Federal
reserve bank i n t h e Federal reserve distr ict where th e national bank i s l o -
cated, whichever
may be
greater .
( 6 ) Se ct io n 5200 of t he Revised Sta tute s l i mi ts loans b y a national
bank
to any one
person
t o 1 0 p e r
cent
of t he
c a p i t a l
an d
surplus
of the
nat ion al bank. This sec tio n, however, con tai ns
a
number
of
exceptions
to
t h e 1 0 p e r cen t l i mi t a t i on . Sect ion 6 o f t he b i l l S . 4723 would amend
Section 5200
by
adding
a
provision that
no
ob l igat ion
o f a
broker
or of any
finance company, securities company, investment trust o r other similar
i n s t i t u t i o n , or o f any a f f i l i a t e , sh al l be e n t i t l e d t o t h e b e n e f i t s of
any o f t he
exceptions contained
i n
Section 5200,
b u t a l l
such obligations
shal l be sub ject t o t h e 1 0 p e r cent li mi ta ti on . This sec tio n would f u r -
ther amend Section 5200 so as to provide that th e to ta l ob l igat ions of an
a f f i l i a t e s h a l l n o t exceed t h e 1 0 p e r cen t l imi ta t ion o r t h e amount of the
capital s tock
o f t h e
a f f i l i a t e a c t u a l l y p a i d
i n a n d
unimpaired, whichever
may be the smaller . I t i s fu rt he r provided that a n a f f i l i a t e sh a l l i nc lu de
a fi na nc e company, s e c u r i t i e s company, investment tr u s t , or any other c o r -
p o ra t io n t h e control of which i s held d i rec t ly o r indirectly through stock
ownership,
or i n any
other manner
by a
national bank
or by the
shareholders
thereof
who own or
con tro l
a
major i ty
of the
stock
of the
national bank.
( 7 )
Section
7 of th e
b i l l
S .
4723 would amend Section
5211 of th e
Revised Statutes
by
adding
a new
paragraph which would require each
a f f i l i a t e of a national bank t o fu rn i sh t o t h e Comptroller of t he Currency
n o t le ss than thr ee re por ts each year, se tt in g o u t i n d e t a i l th e condi-
t io n o f t h e a f f i l i a t e . Th e pres iden t of t he national bank i s requ i red to
sa t i s fy h imsel f a s t o t h e correctness of each such re po rt t ra nsm it te d to
th e Comptroll er. This amendment cont ain s det ai le d requireme nts with r e f e r -
ence
t o t h e
f i l i n g
of
such reports
a n d t h e
form
of
such reports
a n d
author-
i zes
t h e
Comptroller
of the
Currency
t o
c a l l
f o r
special reports whenever
i n h i s judgment i t i s necessary . An a f f i l i a t e which f a i l s t o f u r n i s h the
7/17/2019 frsbog_mim_v33_0065.pdf
http://slidepdf.com/reader/full/frsbogmimv330065pdf 4/5
i
repor ts requ i red o f i t sh a l l be sub ject to a penal ty o f $ 10 0 f o r each day
during which such failure continues.
( 8 )
Section
8 of the
b i l l
S .
4723 would amend
t h e
first paragraph
of
Section
7 of th e
Federal Reserve
Act so as to
provide that a f t e r
the
payment
of a 6 p e r
cent dividend
to
member banks, one-fou r th
of th e
remainder of t he ne t earnings of a Federal reserve bank shall be p a id t o
t h e United States a s a f ran ch i se t a x , one-fourth t o t h e surplus fund of
th e Federal reserve bank ( b u t a f t e r th e surplus equals 1 0 0 p e r cent of the
subscribed capital t h e remainder goes to t he United States a s a franchise
t a x ) a n d t h e remaining 5 0 p e r cent o f t h e n e t earnings of a Federal reserve
bank shall b e p a i d t o t h e member bank stockholders.
( 9 ) Section 9 of the b i l l S . 4723 would amend Se ct io n 9 o f t he
Federal Be serve Act by adding a new par agr aph which would req ui re each
a f f i l i a t e o f a member State bank t o f u r n i s h t o t h e Federal Reserve Board
n o t
less than three reports each year, containing detailed information
with reference t o t h e condit ion of the a f f i l i a t e . This amendment contai ns
detailed requirements with reference to t he f i l i n g of such reports and the
form thereof an d req u i res t h e pres iden t of the member bank to satisfy hin>-
sel f as t o t he correctness o f each such report transmitted t o t h e Federal
Reserve Board. Any a f f i l i a t e which f a i l s t o make an y report required shal l
be
sub ject
t o a
penal ty
o f $ 1 0 0 f o r
each
day
during which such failure
conti nues. This se ct ion
of the
b i l l con ta ins subs tan t ia l ly
th e
same
d e f i n i t i o n of an a f f i l i a t e as was contained i n Section 6 of the b i l l a s
above noted.
( 1 0 ) Section 1 0 ( a ) o f t h e b i l l S . 4723 would amend t h e f i r s t
paragraph
of
Sect ion
10 of the
Federal Reserve
Act so as to
e l imin a te
t h e
Secretary of t he Treasur y from membership o n t h e Federal Reserve Board and
to provide f o r a membership of only seven members inc lu di ng s i x members a p -
poin ted by the Pres iden t of the United States and the Comptroller of the
Currency
as an ex
o f f i c i o member. Sec tion
1 0 ( b ) o f
t h i s b i l l would amend
th e
second paragraph
of
Section
10 of the
Federal Reserve
Ac t so a s to
el iminate
t h e
Secre tary
o f t h e
Treasury from
t h e
provision which
now
renders
t h e
Secre tary
o r
Comptroller
of t he
Currency ineligible during
t h e
tine
h e i s i n
o f f i c e
and fo r two
years there af t er
t o
ho ld
an y
off ice , pos i t ion
o r
employment
i n a n y
member bank. Se ct io n
1 0 ( c )
would amend
th e
fourth
paragraph o f Section 10 o f t he Federal Reserve Act to el iminate t h e
Secretary of t he Treasury as an ex officio chairman of t he Federal R e-
serve Board
a n d t o
provide that
th e
oaths
of
o f f i c e
of
members
of t he
Federal Reserve Board shall be f i l ed w i th t h e Secretary of t he Federal
Reserve Board rather than b e c e r t i f i e d t o t h e Secretary of the Treasury
as is now required*
( 1 1 ) Sect ion 11 o f t he b i l l S . 4723 would amend t h e seventh paragraph
of Section 13 of th e Federal Reserve Act so as to provi de tha t during the
l i f e or continuance of advances t o a member bank o n t h e 15-day promissory
co l l a t e ra l n o tes of t he member bank such member bank shall n o t increase o r
enlarge t h e total loans already made b y i t ei t her upon co ll at er al securi ty
to any borrower or t o t he members of any organized stock exchange, investment
7/17/2019 frsbog_mim_v33_0065.pdf
http://slidepdf.com/reader/full/frsbogmimv330065pdf 5/5
I
;
o y
X-6649-a
- 4 -
house,
o r
dealer
i n
secur i t ies , upon
any
obligat ion, note,
o r
bil l secured
o r unsecur ed, exce pt f o r t h e purpose of purchasing a n d carrying obligat ions
of the United States.
( 1 2 ) Section 12 , which i s t he las t sec t io n of the b i l l S . 4723,
would amend Section
24 of the
Federal Reserve
Act so as to
requ i re
a
national bank t o invest i t s time and savings deposits i n t he amount of
re al e st at e loans auth oriz ed under t h e provisions of Sect ion 24 of the
Federal Reserve A c t o r i n proper ty a n d s e c u r i t i e s of the kinds a n d amounts
requ i red
by law of
savings banks
i n t h e
State where
t h e
national bank
i s
s i t u a t e d . I n ease no such State savings bank law e x i s t s th e savings and
timo deposits of a national bank shall bo inves ted i n proper ty a n d secu r i -
t i e s sp ec i f i ed
by the
Comptroller
o f t he
Currency.
The
reserve
of 3$ of
t ime deposits required by the Federal Reserve A ct shall count a s a corres-
ponding part of such in vest ment s. QSiis se c t ion of the b i l l f u r t h e r p r o -
vides that
i n
case
a
national bank becomes insolvent,
a l l t h e
property
acquired under th i s s ect ion sha l l be app l ied by the receiver thereof i n
t h e f i r s t p l a c e r a t a b l y and propor t ionate ly t o t he payment i n f u l l of
t h e time a n d savings deposits of the national bank.
A copy of the b i l l S . 4723 i s at tached hereto f o r t h e Board's
information.
Respectful ly ,
(S ) B. M. Wingfield
Assistant Counsel.
Copy of b i l l a t t ach ed .
BMW-sad