Federal Reserve Act (1913). The American Economy: A Historical Encyclopedia

The Federal Reserve Act established the modern banking
system of the United States. Designed to provide elasticity of
the money supply and to be a lender of last resort for banks,
the Federal Reserve (Fed) regulates the money supply by
increasing or decreasing interest rates. The Fed also acts as a
clearinghouse for financial transactions. During its nine
decades of operation the policies of the Fed have helped
stabilize the U.S. economy.
An Act to provide for the establishment of Federal reserve
banks, to furnish an elastic currency, to afford means of
rediscounting commercial paper, to establish a more
effective supervision of banking in the United States, and
for other purposes.
Be it enacted by the Senate and the House of Representatives of the United States of America in Congress assembled, That the short title of this Act shall be the “Federal
Reserve Act.”
Whenever the word “bank” is used in this Act, the word
shall be held to include State bank, banking association, and
trust company, except where national banks or Federal
reserve banks are specifically referred to.
The terms “national bank” and “national banking association” used in this Act shall be held to be synonymous and
interchangeable. The term “member bank” shall be held to
mean any national bank, State bank, or bank or trust company which has become a member of one of the reserve
banks created by this Act. The term “board” shall be held to
mean Federal Reserve Boards; the term “district” shall be held
to mean Federal Reserve district; the term “reserve bank”
shall be held to mean Federal reserve bank.
FEDERAL RESERVE DISTRICTS.
Sec. 2. As soon as practicable, the Secretary of the Treasury,
the Secretary of Agriculture and the Comptroller of the Currency, acting as “The Reserve Bank Organization Committee,”
shall designate not less than eight nor more than twelve cities
to be known as Federal Reserve cities, and shall divide the continental United States, excluding Alaska, into districts, each
district to contain only one of such Federal reserve cities. The
determination of said organization committee shall not be
subject to review except by the Federal Reserve Board when
organized: Provided, That the districts shall be apportioned
with due regard to the convenience and customary course of
business and shall not necessarily be coterminous with any
State or States. The districts thus created may be readjusted
and new districts may from time to time be created by the
Federal Reserve Board, not to exceed twelve in all. Such districts shall be known as Federal reserve districts and may be
designated by number. A majority of the organization committee shall constitute a quorum with authority to act.
Said organization committee shall be authorized to employ
counsel and expert aid, to take testimony, to send for persons
and papers, to administer oaths, and to make such investigation as may be deemed necessary by the said committee in determining the reserve districts and in designating the cities
within such districts where such Federal reserve banks shall be
severally located. The said committee shall supervise the
organization in each of the cities designated of a Federal reserve bank, which shall include in its title the name of the city
in which it is situated, as “Federal Reserve Bank of Chicago.”
Under regulations to be prescribed by the organization
committee, every national banking association in the United
States is hereby required, and every eligible bank in the
United States and every trust company within the District of
Columbia, is hereby authorized to signify in writing, within
sixty days after the passage of this Act, its acceptance of the
terms and provisions hereof. When the organization committee shall have designated the cities in which the Federal
reserve banks are to organized, and fixed the geographical
limits of the Federal reserve districts, every national banking
association within that district shall be required within thirty
days after notice from the organization committee, to subscribe to the capital stock of such Federal reserve bank in a
sum equal to six per centum of the paid-up capital stock and
surplus of such bank, one-sixth of the subscription to be
payable on call of the organization committee or of the
Federal Reserve Board, one-sixth within three months and
(1913)
one-sixth within six months thereafter, and the remainder of
the subscription, or any part thereof, shall be subject to call
when deemed necessary by the Federal Reserve Board, said
payments to be in gold or gold certificates.
The shareholders of every Federal reserve bank shall be
held individually responsible, equally and ratably, and not for
one another, for all contracts, debts, and engagements of such
bank to the extent of the amount of their subscription to
such stock at the par value thereof in addition to the amount
subscribed, whether such subscriptions have been paid up in
whole or in part, under the provisions of this Act.
Any national bank failing to signify its acceptance of the
terms of this Act within the sixty days aforesaid, shall cease to
act as a reserve agent, upon thirty days notice, to be given
within the discretion of the said organization committee or
of the Federal Reserve Board.
Should any national banking association in the United
States now organized fail within one year after the passage of
this Act to become a member bank or fail to comply with any
of the provisions of this Act applicable thereto, all of the
rights, privileges, and franchises of such association granted
to it under the national-bank Act, or under provisions of this
Act, shall be thereby forfeited. Any noncompliance with or
violation of this Act shall, however, be determined and
adjudged by any court of the United States of competent jurisdiction in a suit brought for that purpose in the district or
territory in which such bank is located, under direction of the
Federal Reserve Board, by the Comptroller of the Currency in
his own name before the association shall be declared dissolved. In cases of such noncompliance or violation, other
than the failure to become a member bank under the provisions of this Act, every director who participated in or assented to the same shall be held liable in his personal or
individual capacity for all the damages which said bank, its
shareholders, or any other person shall have sustained in consequence of such violation.
Such dissolution shall not take away or impair any remedy
against such corporation, its stockholders or officers, for any
liability or penalty which shall have been previously incurred.
Should the subscriptions by banks to the stock of said
Federal reserve banks or any one or more of them be, in the
judgment of the organization committee, insufficient to provide the amount of capital required therefor, then and in that
event the said organization committee may, under conditions
and regulations to be prescribed by it, offer to public subscription at par an amount of stock in said Federal reserve
banks, or any one or more of them, as said committee shall
determine, subject to the same conditions as to payment and
stock liability as provided for member banks.
No individual, copartnership, or corporation other than a
member bank of its district shall be permitted to subscribe
for or to hold at any time more than $25,000 par value of
stock in any Federal reserve bank. Such stock shall be known
as public stock and may be transferred on the books of the
Federal reserve bank by the chairman of the board of directors at such bank.
Should the total subscriptions by banks and the public to
the stock of said Federal reserve banks, or any one or more of
them, be, in the judgment of the organization committee,
insufficient to provide the amount of capital required therefor, then and in that event the said organization committee
shall allot to the United States such an amount of said stock
as said committee shall determine. Said United States stock
shall be paid for at par out of any money in the Treasury not
otherwise appropriated, and shall be held by the Secretary of
the Treasury and disposed of for the benefit of the United
States in such manner, at such times, and at such price, not
less than par, as the Secretary of the Treasury shall determine.
Stock not held by member banks shall not be entitled to
voting power.
The Federal Reserve Board is hereby empowered to adopt
and promulgate rules and regulations governing the transfers
of said stock.
No Federal reserve bank shall commence business with a
subscribed capital less than $4,000,000. The organization of
reserve districts and Federal reserve cities shall not be construed as changing the present status of reserve cities and
central reserve cities, except in so far as this Act changes the
amount of reserves that may be carried with approved
reserve agents located therein. The organization committee
shall have power to appoint such assistants and incur such
expenses in carrying out the provisions of this Act as it shall
be deemed necessary; and such expenses shall be payable by
the Treasurer of the United States upon voucher approved by
the Secretary of the Treasury, and the sum of $100,000, or so
much thereof as may be necessary, is hereby appropriated,
out of the moneys in the Treasury not otherwise appropriated, for the payment of such expenses.
BRANCH OFFICES.
Sec. 3. Each Federal reserve bank shall establish branch
banks within the Federal reserve district in which it is located
and may do so in the district of any Federal reserve bank
which may have been suspended. Such branches shall be
operated by a board of directors under rules and regulations
approved by the Federal Reserve Board. Directors of branch
banks shall possess the same qualifications as directors of the
Federal reserve banks. Four of said directors shall be selected
by the reserve bank and three by the Federal Reserve Board,
and they shall hold office during the pleasure, respectively, of
the parent bank and the Federal Reserve Board. The reserve
bank shall designate one of the directors as manager.
FEDERAL RESERVE BANKS.
Sec. 4. When the organization committee shall have established Federal reserve districts as provided in section two of
this Act, a certificate shall be filed with the Comptroller of the
Currency showing the geographical limits of such districts
and the Federal reserve city designated in each of such districts.
The Comptroller of the Currency shall thereupon cause to
be forwarded to each national bank located in each district,
and to other banks declared to be eligible by the organization
committee which may apply therefor, an application blank in
form to be approved by the organization committee, which
blank shall contain a resolution to be adopted by the board of
directors of each bank executing such application, authorizing a subscription to the capital stock of the Federal reserve
bank organizing in that district in accordance with the provisions of this Act.
When the minimum amount of capital stock prescribed
by this Act for the organization of any Federal reserve bank
shall have been subscribed and allotted, the organization
committee shall designate any five banks of those whose
applications have been received, to execute a certificate of
organization, and thereupon the banks so designated shall,
under their seals, make an organization certificate which shall
specifically state the name of such Federal reserve bank, the
territorial extent of the district over which the operations of
such Federal reserve bank are to be carried on, the city and
the State in which said bank is to located, the amount of capital stock and the number of shares into which the same is
divided, the name and place of doing business of each bank
executing such certificate, and of all banks which have subscribed to the capital stock of such Federal reserve bank and
the number of shares subscribed by each, and the fact that the
certificate is made to enable those banks executing same, and
all banks which have subscribed or may thereafter subscribe
to the capital stock of such Federal reserve bank, to avail
themselves of the advantages of this Act.
The said organization certificate shall be acknowledged
before a judge of some court of record or notary public; and
shall be, together with the acknowledgment thereof, authenticated by the seal of such court, or notary, transmitted to the
Comptroller of the Currency, who shall file, record and carefully preserve the same in his office.
Upon the filing of such certificate with the Comptroller of
the Currency as aforesaid, the said Federal reserve bank shall
become a body corporate and as such, and in the name designated in such organization certificate, shall have power—
First. To adopt and use a corporate seal.
Second. To have succession for a period of twenty years
from its organization unless it is sooner dissolved by an Act
of Congress, or unless its franchise becomes forfeited by
some violation of law.
Third. To make contracts.
Fourth. To sue and be sued, complain and defend, in any
court of law or equity.
Fifth. To appoint by its board of directors, such officers
and employees as are not otherwise provided for in this Act,
to define their duties, require bonds of them and fix the
penalty thereof, and to dismiss at pleasure such officers or
employees.
Sixth. To prescribe by its board of directors, by in-laws not
inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to
it by law may be exercised and enjoyed.
Seventh. To exercise by its board of directors, or duly
authorized officers or agents, all powers specifically granted
for the provisions of this Act and such incidental powers as
shall be necessary to carry on the business of banking within
the limitations prescribed by this Act.
Eighth. Upon deposit with the Treasurer of the United
States of any bonds of the United States in the manner provided existing law relating to national banks, to receive from
the Comptroller of the Currency circulating notes in blank,
registered and countersigned as provided by law, equal in
amount to the par value of the bonds so deposited, such
notes to be issued under the same conditions and provisions
of law as relate to the issue of circulating notes of national
banks secured by bonds of the United States bearing the circulating privilege, except that the issue of such notes shall not
be limited to the capital stock of such Federal reserve bank.
But no Federal reserve bank shall transact any business
except such as is incidental and necessarily preliminary to its
organization until it has been authorized by the Comptroller
of the Currency to commence business under the provisions
of this Act.
Every Federal reserve bank shall be conducted under the
supervision and control of a board of directors.
The board of directors shall perform the duties usually
appertaining to the office of directors of banking associations
and all such duties as are prescribed by law.
Said board shall administer the affairs of said bank fairly
and impartially and without discrimination in favor or
against any member bank or banks and shall, subject to the
provisions of law and the orders of the Federal Reserve
Board, extend to each member bank such discounts,
advancements and accommodations as may be safely and
reasonably made with due regard for the claims and demands
of other member banks.
Such board of directors shall be selected as hereinafter
specified and shall consist of nine members, holding office
for three years, and divided into three classes, designated as
classes A, B, and C.
Class A shall consist of three members, who shall be chosen by and be representative of the stock-holding banks.
Class B shall consists of three members, who at the time of
their election shall be actively engaged in their district in
commerce, agriculture or some other industrial pursuit.
Class C shall consist of three members who shall be designated by the Federal Reserve Board. When the necessary subscriptions to the Capital stock have been obtained for the
organization of any Federal reserve bank, the Federal Reserve
Board shall appoint the class C directors and shall designate
one of such directors as chairman of the board to be selected.
Pending the designation of such chairman, the organization
committee shall exercise the power and duties appertaining
to the office of chairman in the organization of such Federal
reserve bank.
No Senator or Representative in Congress shall be a member of the Federal Reserve Board or an officer or a director of
a Federal reserve bank.
No director of class B shall be an officer, director, or
employee of any bank.
No director of class C shall be an officer, director, employee, or stockholder of any bank.
Directors of class A and B shall be chosen in the following
manner:
The chairman of the board of directors of the Federal
reserve bank of the district in which the bank is situated or,
pending the appointment of such chairman, the organization
of such chairman, the organization committee shall classify
the member banks of the districts into three groups or divisions. Each group shall contain as nearly as may be one-third
of the aggregate number of the member banks of the district
and shall consist, as nearly as may be, of banks of similar capitalization. The groups shall be designated by number by the
chairman.
At a regularly called meeting of the board of directors of
each member bank in the district it shall elect by ballot a district reserve elector and shall certify his name to the chairman
of the board of directors of the Federal reserve bank of the
district. The chairman shall make lists of the district reserve
electors thus named by banks in each of the aforesaid three
groups and shall transmit one list to each elector in each
group. Each member bank shall be permitted to nominate to
the chairman one candidate for director of class A and one
candidate for class B. The candidates so nominated shall be
listed by the chairman, indicating by whom nominated, and
a copy of said list shall, within fifteen days after its completion, be furnished by the chairman to each elector.
Every elector shall, within fifteen days after the receipt of
the said list, certify to the chairman his first, second, and
other choices of a director of class A and B, respectively, upon
a preferential ballot, on a form furnished by the chairman of
the board of directors of the Federal reserve bank of the district. Each elector shall make a cross opposite the name of the
first, second, and other choices for a director of class A and
for a director of class B, but shall not vote more than one
choice for any candidate.
Any candidate having a majority of all votes cast in the column of first choice shall be declared elected. If no candidate
have a majority of all the votes in the first column, then there
shall be added together the votes cast by the electors for such
candidates in the second column and the votes cast for the
several candidates in the first column. If any candidate then
have a majority of the electors voting, by adding together the
first and second choices, he shall be declared elected. If no
candidate have a majority of electors voting when the first
and second choices shall have been added, then the votes cast
in the third column from other choices shall be added together in like manner, and the candidate then having the
highest number of votes shall be declared elected. An immediate report of election shall be declared.
Class C directors shall be appointed by the Federal Reserve
Board. They shall have been for at least two years residents of
the district for which they are appointed, one of whom shall
be designated by said board as chairman of the board of
directors of the Federal reserve bank and as “Federal reserve
agent.” He shall be a person of tested banking experience; and
in addition to his duties as chairman of the board of directors
of the federal reserve bank he shall be required to maintain
under regulations to be established by the Federal Reserve
Board a local office of said board on the premises of the
Federal reserve bank. He shall make regular reports to the
Federal Reserve Board, and shall act as its official representative for the performance of the functions conferred upon it
by this Act. He shall receive an annual compensation to be
fixed by the Federal Reserve Board and paid monthly by the
Federal reserve bank to which he is designated. One of the
directors of class C, who shall be a person of tested banking
experience, shall be appointed by the Federal Reserve Board
as deputy chairman and deputy Federal reserve agent to exercise the powers of the chairman of the board and Federal
reserve agent in case of absence or disability of his principal.
Directors of Federal reserve banks shall receive, in addition to any compensation otherwise provided, a reasonable
allowance for necessary expenses in attending meetings of
their respective boards, which amount shall be paid by the
respective Federal reserve banks. Any compensation that may
be provided by board of directors of Federal reserve banks for
directors, officers or employees shall be subject to the
approval of the Federal Reserve Board.
The Reserve Bank Organization Committee may, in
organizing Federal reserve banks, call such meetings of bank
directors in the several districts as may be necessary to carry
out the purposes of this Act, and may exercise the functions
herein conferred upon the chairman of the board of directors
of each Federal reserve bank pending the complete organization of such bank.
At the first meeting of the full board of directors of each
Federal reserve bank, it shall be the duty of the directors of
classes A, B, and C respectively, to designate one of the members of each class whose term of office shall expire in one year
from the first of January nearest to date of such meeting, one
whose term of office shall expire at the end of two years from
said date, and one whose term of office shall expire at the end
of three years from said date. Thereafter every director of a
Federal reserve bank chosen as hereinbefore provided shall
hold office for a term of three years. Vacancies that may occur
in the several classes of directors of Federal reserve banks may
be filled in the manner provided for the original selection of
such directors, such appointees to hold office for the unexpired terms of their predecessors.
STOCK ISSUES; INCREASE AND DECREASE OF
CAPITAL.
Sec. 5. The capital stock of each Federal reserve bank shall
be divided into shares of $100 each. The outstanding capital
stock shall be increased from time to time as member banks
increase their capital stock and surplus or as additional banks
become members, and may be decreased as member banks
reduce their capital stock or surplus or cease to be members.
Shares of the capital stock of Federal reserve banks owned by
member banks shall not be transferred or hypothecated.
When a member bank increases its capital stock or surplus, it
shall thereupon subscribe for an additional amount of capital
stock of the Federal reserve bank of its district equal to six per
centum of the said increase, one-half of said subscription to
be paid in the manner hereinbefore provided for original subscription, and one-half subject to call of the Federal Reserve
Board. A bank applying for stock in a Federal reserve bank at
any time after the organization thereof must subscribe for an
amount of the capital stock of the Federal reserve bank equal
to six per centum of the paid-up capital stock and surplus of
said applicant bank, paying therefor its par value plus one-half
of one per centum a month from the period of the last divi-
dend. When the capital stock of any Federal reserve bank shall
have been increased either on account of the increase of capital stock of member banks or on account of the increase in the
number of member banks, the board of directors shall cause
to be executed a certificate to the Comptroller of the Currency
showing the increase in capital stock, the amount paid in, and
by whom paid. When a member bank reduces its capital stock
it shall surrender a proportionate amount of its holdings in
the capital of said Federal reserve bank, and when a member
bank voluntarily liquidates it shall surrender all of its holdings
of the capital stock of said Federal reserve bank and be
released from its stock subscription not previously called. In
either case the shares surrendered shall be canceled and the
member bank shall receive in payment therefor, under regulations to be prescribed by the Federal Reserve Board, a sum
equal to its cash-paid subscriptions on the shares surrounded
and one-half of one per centum a month from the period of
the last dividend, not to exceed the book value thereof, less any
liability of such member bank to the Federal reserve bank.
Sec. 6. If any member bank shall be declared insolvent and
a receiver appointed therefor, the stock held by it in said
Federal reserve bank shall be canceled, without impairment
of its liability, and all cash-paid subscriptions on said stock,
with one-half of one per centum per month from the period
of last dividend, not to exceed the book value thereof, shall be
first applied to all debts of the insolvent member bank to the
Federal reserve bank, and the balance, if any, shall be paid to
the receiver of the insolvent bank. Whenever the capital stock
of a Federal reserve bank is reduced, either on account of
reduction in capital stock of any member bank or of the liquidation or insolvency of such bank, the board of directors
shall cause to be executed a certificate to the Comptroller of
the Currency showing such reduction of capital stock and the
amount repaid to such bank.
DIVISION OF EARNINGS.
Sec. 7. After all necessary expenses of a Federal reserve
bank have been paid or provided for, the stockholders shall be
entitled to receive an annual dividend of six per centum on
the paid-in capital stock, which dividend shall be cumulative.
After the aforesaid dividend claims have been fully met, all
the net earnings shall be paid to the United States as a franchise tax, except that one-half of such net earnings shall be
paid into a surplus fund until it shall amount to forty per
centum of the paid-in capital stock of such bank.
The net earnings derived by the United States from Federal
reserve banks shall, in the discretion of the Secretary, be used
to supplement the gold reserve held against outstanding
United States notes, or shall be applied to the reduction of the
outstanding bonded indebtedness of the United States under
regulations to be prescribed by the Secretary of the Treasury.
Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts,
dividend requirements as hereinbefore provided, and the par
value of the stock, shall be paid to and become the property of
the United States and shall be similarly applied.
Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be
exempt from Federal, State, and local taxation, except taxes in
real estate.
Sec. 8. Section fifty-one hundred and fifty-four, United
States Revised Statutes, is hereby amended to read as follows:
Any bank incorporated by special law of any State or of the
United States or organized under the general laws of any State
or of the United States and having an unimpaired capital sufficient to entitle it to become a national banking association
under the provisions of the existing laws may, by the vote of
the shareholders owning not less than fifty-one per centum
of the capital stock of such bank or banking association, with
the approval of the Comptroller of the Currency be converted into a national banking association, with any name
approved by the Comptroller of the Currency:
Provided, however, That said conversion shall not be in
contravention of the State law. In such case the articles of
association and organization certificate may be executed by a
majority of the directors of the bank or banking institution,
and the certificate shall declare that the owners of fifty-one
per centum of the capital stock have authorized the directors
to make such certificate and to change or convert the bank or
banking institution into a national association. A majority of
the directors, after executing the articles of association and
the organization certificate, shall have the power to execute all
other papers and do whatever may be required to make its
organization perfect and complete as a national association.
The shares of any such bank may continue to be for the same
amount as they were before the conversion, and the directors
may continue to be directors of the association until others
are elected or appointed in accordance with the provisions of
the statutes of the United States. When the Comptroller has
given to such bank or banking association a certificate that
the provisions of this Act have been complied with, such bank
or banking association, and all its stockholders, officers, and
employees, shall have the same powers and privileges, and
shall be subject to the same duties, liabilities, and regulations,
in all respects, as shall have been prescribed by the Federal
Reserve Act and by the national banking Act for associations
originally organized as national banking associations.
STATE BANKS AS MEMBERS.
Sec. 9. Any bank incorporated by special law of any State, or
organized under the general laws of any State or of the United
States, may make application to the reserve bank organization
committee, pending organization, and thereafter to the Federal
Reserve Board for the right to subscribe to the stock of the
Federal reserve bank organized or to be organized within the
Federal reserve district where the applicant is located. The
organization committee or the Federal Reserve Board, under
such rules and regulations as it may prescribe, subject to the
provisions of this section, may permit the applying bank to
become a shareholder in the Federal reserve bank of the district
in which the applying bank is located. Whenever the organization committee or the Federal Reserve Board shall permit the
applying bank to become a stockholder in the Federal reserve
bank of the district, stock shall be issued and paid for under the
rules and regulations in this Act provided for national banks
which become stockholders in Federal reserve banks.
The organization committee or the Federal Reserve Board
shall establish by-laws for the general government of its conduct in acting upon applications made by the State banks and
banking associations and trust companies for stock ownership in Federal reserve banks. Such by-laws shall require
applying banks not organized under Federal law to comply
with the reserve and capital requirements and to submit to
the examination and regulation prescribed by the organization committee or by the Federal Reserve Board. No applying
bank shall be admitted to membership in a Federal reserve
bank unless it possesses a paid-up unimpaired capital sufficient to entitle it to become a national banking association in
the place where it is situated, under the provisions of the
national banking Act.
Any bank becoming a member of the Federal reserve bank
under the provisions of this section shall, in addition to the
regulations and restrictions hereinbefore provided, be required
to conform to the provisions of law imposed on the national
banks respecting the limitation of liability which may be
incurred by any person, firm, or corporation to such banks, the
prohibition against making purchase of loans on stock of such
banks, and the withdrawal or impairment of capital, or the
payment of unearned dividends, and to such rules and as the
Federal Reserve Board may, in pursuance thereof, prescribe.
Such banks, and the officers, agents, and employees
thereof, shall also be subject to the provisions of and to the
penalties prescribed by sections fifty-one hundred and ninetyeight, fifty-two hundred, fifty-two hundred and one, and fiftytwo hundred and eight, and fifty-two hundred and nine of the
Revised Statutes. The member banks shall also be required to
make reports of the conditions and of the payments of dividends to the comptroller, as provided in sections fifty-two
hundred and eleven and fifty-two hundred and twelve of the
Revised Statutes, and shall be subject to the penalties prescribed by section fifty-two hundred and thirteen for the failure to make such report.
If at any time it shall appear to the Federal Reserve Board
that a member bank has failed to comply with the provisions
of this section or the regulations of the federal Reserve Board,
it shall be within the power of the said board, after hearing, to
require such bank to surrender its stock in the Federal reserve
bank; upon such surrender the Federal reserve bank shall pay
the cash-paid subscriptions to the said stock with interest at
the rate of one-half of one per centum per month, computed
from the last dividend, if earned, not to exceed the book value
thereof, less any liability to said Federal reserve bank, except
the subscription liability not previously called, which shall be
canceled, and said Federal reserve bank shall, upon notice
from the Federal Reserve Board, be required to suspend said
bank from further privileges of membership, and shall within
thirty days of such notice cancel and retire its stock and make
payment therefor in the manner herein provided. The Federal
Reserve Board may restore membership upon due proof of
compliance with the conditions imposed by this section.
FEDERAL RESERVE BOARD.
Sec. 10. A Federal Reserve Board is hereby created which
shall consist of seven members, including the Secretary of the
Treasury and the Comptroller of the Currency, who shall be
members ex officio, and five members appointed by the
President of the United States, by and with the advice and
consent of the Senate. In selecting the five appointive members of the Federal Reserve Board, not more than one of
whom shall be selected from any one Federal reserve district,
the President shall have due regard to a fair representation of
the different commercial, industrial and geographical divisions of the country. The five members of the Federal Reserve
Board appointed by the President and confirmed as aforesaid
shall devote their entire time to the business of the Federal
Reserve Board and shall each receive an annual salary of
$12,000, payable monthly with actual necessary traveling
expenses, and the Comptroller of the Currency, as ex officio
member of the Federal Reserve Board, shall, in addition to
the salary now paid him as Comptroller of the Currency,
receive the sum of $7,000 annually for his services as member
of said board.
The members of said board, the Secretary of the Treasury,
the Assistant Secretaries of the Treasury, and the Comptroller
of the Currency shall be ineligible during the time they are in
office and for two years thereafter to hold any office, position,
or employment in any member bank. Of the five members
thus appointed by the President at least two shall be persons
experienced in banking or finance. One shall be designated
by the President to serve for two, one for four, one for six, one
for eight, and one for ten years, and thereafter each member
so appointed shall serve for a term of ten years unless sooner
removed for cause by the President. Of the five persons thus
appointed, one shall be designated by the President as governor and one as vice governor of the Federal Reserve Board.
The governor of the Federal Reserve Board, subject to its
supervision, shall be the active executive officer. The
Secretary of the Treasury may assign offices in the Department of the Treasury for the use of the Federal Reserve Board.
Each member of the Federal Reserve Board shall within fifteen days after notice of appointment make and subscribe to
the oath of office.
The Federal Reserve Board shall have the power to levy
semiannually upon the Federal reserve banks, in proportion
to their capital stock and surplus, an assessment sufficient to
pay its estimated expenses and the salaries of its members
and employees for the half year succeeding the levying of
such assessment, together with any deficit carried forward
from the preceding half year.
The first meeting of the Federal Reserve Board shall be
held in Washington, District of Columbia, as soon as may be
after the passage of this Act, at a date to be fixed by the
Reserve Bank Organization Committee. The Secretary of the
Treasury shall be ex officio chairman of the Federal Reserve
Board. No member of the Federal Reserve Board shall be an
officer or director of any bank, banking institution, trust
company, of Federal reserve bank nor hold stock in any bank,
banking institution, or trust company; and before entering
upon his duties as a member of the Federal Reserve Board he
shall certify under oath to the Secretary of the Treasury that
he has complied with this requirement. Whenever a vacancy
shall occur, other than by expiration of term, among the five
members of the Federal Reserve Board appointed by the
President, as above provided, a successor shall be appointed
by the President, with the advice and consent of the Senate,
to fill such vacancy, and when appointed he shall hold office
for the unexpired term of the member whose place he is
selected to fill.
The President shall have the power to fill all vacancies that
may happen on the Federal Reserve Board during the recess
of the Senate, by granting commissions which shall expire
thirty days after the next session of the Senate convenes.
Nothing in this Act contained shall be construed as taking
away any powers heretofore vested by law in the Secretary of
the Treasury which relate to the supervision, management,
and control of the Treasury Department and bureaus under
such department, and wherever any power vested by this Act
in the Federal Reserve Board or the Federal reserve agents
appears to conflict with the powers of the Secretary of the
Treasury, such powers shall be exercised subject to the supervision and control of the Secretary.
The Federal Reserve Board shall annually make a full
report of its operations to the Speaker of the House of
Representatives, who shall cause the same to be printed for
the information of the Congress.
Section three hundred and twenty-four of the Revised
Statutes shall be amended so as to read as follows: There shall
be in the Department of the Treasury a bureau charged with
the execution of all laws passed by Congress relating to the
issue and regulation of national currency secured by the
United States bonds and, under the general supervision of the
Federal Reserve Board, of all Federal reserve notes, the chief
officer of which bureau shall be called the Comptroller of
Currency and shall perform his duties under the general
directions of the Secretary of the Treasury.
Sec. 11. The Federal Reserve Board shall be authorized and
empowered:
(a) To examine at its discretion the accounts, books and
affairs of each Federal reserve bank and of each member bank
and to require such statements and reports as it may deem
necessary. The said board shall publish once each week a
statement showing the condition of each Federal reserve
bank and a consolidated statement for all Federal reserve
banks. Such statements shall show in detail the assets and liabilities of the Federal reserve banks, single and combined,
and shall furnish full information regarding the character of
the money held as reserve and the amount, nature and maturities of the paper and other investments owned or held by
Federal reserve banks.
(b) To permit, or, on the affirmative vote of at least five
members of the Reserve Board to require Federal reserve
banks to rediscount the discounted paper of other Federal
reserve banks at rates of interest to be fixed by the Federal
Reserve Board.
(c) To suspend for a period not exceeding thirty days, and
from time to time to renew such suspension for periods not
exceeding fifteen days, any reserve requirement specified in
this Act: Provided, That it shall establish a graduated tax
upon the amounts by which the reserve requirements of this
Act may be permitted to fall below the level hereinafter specified: And provided further, That when the gold reserve held
against Federal reserve notes falls below forty per centum the
Federal Reserve Board shall establish a graduated tax of not
more than one per centum per annum upon such deficiency
until the reserve falls to thirty-two and one-half per centum,
and when said reserve falls below thirty-two and one-half per
centum, a tax at the rate increasingly of not less than one and
one-half per centum per annum upon each two and one-half
per centum or fraction thereof that such reserve falls below
thirty-two and one-half per centum. The tax shall be paid by
the reserve bank, but the reserve bank shall add an amount
equal to said tax to the rates of interest and discount fixed by
the Federal Reserve Board.
(d) To supervise and regulate the bureau under the charge
of the Comptroller of the Currency the issue and retirement
of Federal reserve notes, and to prescribe rules and regulations under which such notes may be delivered by the
Comptroller to the Federal reserve agents applying therefor.
(e) To add to the number of cities classified as reserve and
central reserve cities under existing law in which national
banking associations are subject to the reserve requirements
set forth in section twenty of this Act; or to reclassify existing
reserve and central reserve cities or to terminate their designation as such.
(f) To suspend or remove any officer or director of any
Federal reserve bank, the cause of such removal to be forthwith communicated in writing by the Federal Reserve Board
to the removed officer or director and to said bank.
(g) To require the writing off of doubtful or worthless assets
upon the books and balance sheets of Federal reserve banks.
(h) To suspend, for the violation of any of the provisions
of this Act, the operations of any Federal reserve bank, to take
possession thereof, administer the same during the period of
suspension, and, when deemed advisable, to liquidate or
reorganize such bank.
(i) To require bonds of Federal reserve agents, to make regulations for the safeguarding of all collateral, bonds, Federal
reserve notes, money or property of any kind deposited in the
hands of such agents, and said board shall perform the duties,
functions, or services specified in this Act, and make all rules
and regulations necessary to enable said board effectively to
perform the same.
(j) To exercise general supervision over said Federal
reserve banks.
(k) To grant by special permit to national banks applying
therefor, when not in contravention of State or local law, the
right to act as trustee, executor, administrator, or registrar of
stocks and bonds under such rules and regulations as the said
board may prescribe.
(l) To employ such attorneys, experts, assistants, clerks, or
other employees as may be deemed necessary to conduct the
business of the board. All salaries and fees shall be fixed in
advance by said board and shall be paid in the same manner
as the salaries of the members of said board. All such attorneys, experts, assistants, clerks, and other employees shall be
appointed without regard to the provisions of the Act of
January sixteenth, eighteen hundred and eighty-three (volume twenty-two, United States Statutes at Large, page four
hundred and three), and amendments thereto, or any rule or
regulation made in pursuance thereof: Provided, That nothing herein shall prevent the President from placing said
employees in the classified service.
FEDERAL ADVISORY COUNCIL.
Sec 12. There is hereby created a Federal Advisory Council,
which shall consist of as many members as there are Federal
reserve districts. Each Federal reserve bank by its board of
directors shall annually select from its own Federal reserve
district one member of said council, who shall receive such
compensation and allowances as may be fixed by his board of
directors subject to the approval of the Federal Reserve
Board. The meetings of said advisory council shall be held at
Washington, District of Columbia, at least four times each
year, and oftener if called by the Federal Reserve Board. The
council may in addition to the meetings above provided for
hold such other meetings in Washington, District of
Columbia, or elsewhere, as it may deem necessary, may select
its own officers and adopt its own methods of procedure, and
a majority of its members shall constitute a quorum for the
transaction of business.Vacancies in the council shall be filled
by the respective reserve banks, and members selected to fill
vacancies, shall serve for the unexpired term.
The Federal Advisory Council shall have power, by itself or
through its officers, (1) to confer directly with the Federal
Reserve Board on general business conditions; (2) to make
oral or written representations concerning matters within the
jurisdiction of said board; (3) to call for information and to
make recommendations in regards to discount rates, rediscount business, note issues, reserve conditions in the various
districts, the purchase of gold or securities by reserve banks,
open-market operations by said banks, and the general affairs
of the reserve banking system.
POWERS OF FEDERAL RESERVE BANKS.
Sec. 13. Any Federal reserve bank may receive from any of
its member banks, and from the United States, deposits of
current funds in lawful money, national-bank notes, Federal
reserve notes, or checks and drafts upon solvent member
banks, payable upon presentation; or, solely for exchange
purposes, may receive from other Federal reserve banks
deposits of current funds in lawful money, national-bank
notes, or checks and drafts upon solvent member or other
Federal reserve banks, payable upon presentation.
Upon the indorsement of any of its member banks, with a
waiver of demand, notice and protest by such bank, any
Federal reserve bank may discount notes, drafts, and bills of
exchange arising out of actual commercial transactions; that
is, notes, drafts, and bills of exchange issued or drawn for
agricultural, industrial, or commercial purposes, or the proceeds of which have been used, or are to be used, for such
purposes, the Federal Reserve Board to have the right to
determine or define the character of the paper thus eligible
for discount, within the meaning of this Act. Nothing in this
Act contained shall be construed to prohibit such notes,
drafts, and bills of exchange, secured by staple agricultural
products, or other goods, wares, or merchandise from being
eligible for such discount; but such definition shall not
include notes, drafts, or bills covering merely investments or
issued or drawn for the purpose of carrying or trading in
stocks, bonds, or other investment securities, except bonds
and notes of the Government of the United States. Notes,
drafts, and bills admitted to discount under the terms of this
paragraph must have a maturity at the time of discount of
not more than ninety days: Provided, That notes, drafts, and
bills drawn or issued for agricultural purposes or based on
live stock and having a maturity not exceeding six months
may be discounted in an amount to be limited to a percentage of the capital of the Federal reserve bank, to be ascertained and fixed by the Federal Reserve Board.
Any Federal reserve bank may discount acceptances which
are based on the importation or exportation of goods and
which have a maturity at time of discount of not more than
three months, and indorsed by at least one member bank.
The amount of acceptances so discounted shall at no time
exceed one-half the paid-up capital stock and surplus of the
bank for which the rediscounts are made.
The aggregate of such notes and bills bearing the signature
or indorsement of any one person, company, firm, or corporation rediscounted for any one bank shall at no time exceed ten
per centum of the unimpaired capital and surplus of said bank;
but this restriction shall not apply to the discount of bills of
exchange drawn in good faith against actually existing values.
Any member bank may accept drafts or bills of exchange
drawn upon it and growing out of transactions involving the
importation or exportation of goods not more than six
months sight to run; but no bank shall accept such bills to an
amount equal at any time in the aggregate to more than onehalf of its paid-up capital stock and surplus.
Section fifty-two hundred and two of the Revised Statutes
of the United States is hereby amended so as to read as follows: No national banking association shall at any time be
indebted, or in any way liable, to an amount exceeding the
amount of its capital stock at such time actually paid in and
remaining undiminished by losses or otherwise, except on
account of demands of the nature following:
First. Notes of circulation.
Second. Moneys deposited with or collected by the association.
Third. Bills of exchange or drafts drawn against money
actually on deposit to the credit of the association, or due
thereto.
Fourth. Liabilities to the stockholders of the association
for dividends and reserve profits.
Fifth. Liabilities incurred under the provisions of the
Federal Reserve Act.
The rediscount by any Federal reserve bank of any bills
receivable and of domestic and foreign bills of exchange, and
of acceptances authorized by this Act, shall be subject to such
restrictions, limitations, and regulations as may be imposed
by the Federal Reserve Board.
OPEN-MARKET OPERATIONS.
Sec. 14. Any Federal reserve bank may, under rules and
regulations prescribed by the Federal Reserve Board, pur-
chase and sell in the open market, at home or abroad, either
from or to domestic or foreign banks, firms, corporations, or
individuals, cable transfers and bankers’ acceptances and bills
of exchange of the kinds and maturities by this Act made eligible for rediscount, with or without the indorsement of a
member bank.
Every Federal reserve bank shall have power:
(a) To deal in gold coin and bullion at home or abroad, to
make loans thereof, exchange Federal reserve notes for gold,
gold coin or bullion, giving therefor, when necessary, acceptable security, including the hypothecation of United States
bonds or other securities which Federal reserve banks are
authorized to hold;
(b) To buy and sell, at home or abroad, bonds and notes of
the United States, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding
six months, issued in anticipation of the collection of taxes or
in anticipation of the receipt of assured revenues by any State,
county, district, political subdivision, or municipality in the
continental United States, including irrigation, drainage and
reclamation districts, such purchases to be made in accordance with rules and regulations prescribed by the Federal
Reserve Board;
(c) To purchase from member banks and to sell, with or
without its indorsement, bills of exchange arising out of commercial transactions, as hereinbefore defined;
(d) To establish from time to time, subject to review and
determination of the Federal Reserve Board, rates of discount
to be charged by the Federal reserve bank for each class of
paper, which shall be fixed with a view of accommodating
commerce and business;
(e) To establish accounts with other Federal reserve banks
for exchange purposes and, with the consent of the Federal
Reserve Board, to open and maintain banking accounts in
foreign countries, appoint correspondents, and establish
agencies in such countries wheresoever it may deem best for
the purpose of purchasing, selling, and collecting bills of
exchange, and to buy and sell with or without its endorsement, through such correspondents or agencies, bills of
exchange arising out of actual commercial transactions
which have not more than ninety days to run and which bear
the signature of two or more reasonable parties.
GOVERNMENT DEPOSITS.
Sec. 15. The moneys held in the general fund of the
Treasury except the five per centum fund for the redemption
of outstanding national-bank notes and the funds provided
in this Act for the redemption of Federal reserve notes may,
upon the direction of the Secretary of the Treasury, be
deposited in Federal reserve banks, which banks, when
required by the Secretary of the Treasury, shall act as fiscal
agents of the United States; and the revenues of the
Government or any part thereof may be deposited in such
banks, and disbursements may be made by checks drawn
against such deposits.
No public funds of the Philippine Islands, or of the
postal savings, or any Government funds, shall be deposited
in the continental United States in and bank not belonging
to the system established by this Act: Provided, however,
That nothing in this Act shall be construed to deny the right
of the Secretary of the Treasury to use member banks as
depositories.
NOTE ISSUES.
Sec. 16. Federal reserve notes, to be issued at the discretion
of the Federal Reserve Board for the purpose of making
advances to Federal reserve banks through the Federal reserve
agents as hereinafter set forth and for no other purpose, are
hereby authorized. The said notes shall be obligations of the
United States and shall be receivable by all national and
member banks and Federal reserve banks and for all taxes,
customs, and other public dues. They shall be redeemed in
gold on demand at the Treasury Department of the United
States, in the city of Washington, District of Columbia, or in
gold or lawful money at any Federal reserve bank.
Any Federal reserve bank may make application to the
local Federal reserve agent for such amount of the Federal
reserve noted hereinbefore provided for as it may require.
Such application shall be accompanied with a tender to the
local Federal reserve agent of collateral in amount equal to
the sum of the Federal reserve notes thus applied for and
issued pursuant to such application. The collateral security
thus offered shall be notes and bills, accepted for rediscount
under the provisions of section thirteen of this Act, and the
Federal reserve agent shall each day notify the Federal Reserve
Board of all issues and withdrawals of Federal reserve notes
to and by the Federal reserve bank to which it is accredited.
The said Federal Reserve Board may at any time call upon a
Federal reserve bank for additional security to protect the
Federal reserve notes issued to it.
Every Federal reserve bank shall maintain reserves in gold
or lawful money of not less than thirty-five per centum
against its deposits and reserves in gold of not less than forty
per centum against its Federal reserve notes in actual circulation, and not offset by gold or lawful money deposited
with the Federal reserve agent. Notes so paid out shall bear
upon their faces a distinctive letter and serial number, which
shall be assigned by the Federal Reserve Board to each
Federal reserve bank. Whenever Federal reserve notes issued
through one Federal reserve bank shall be received by another Federal reserve bank they shall be promptly returned
for credit or redemption to the Federal reserve bank through
which they were originally issued. No Federal reserve bank
shall pay out notes issued through another under penalty of
a tax of ten per centum upon the face value of notes so paid
out. Notes presented for redemption at the Treasury of the
United States shall be paid out of the redemption fund and
returned to the Federal reserve banks through which they
were originally issued, and thereupon such Federal reserve
bank shall, upon demand of the Secretary of the Treasury,
reimburse such redemption fund in lawful money or, if such
Federal reserve notes have been redeemed by the Treasurer
in gold or gold certificates, then such funds shall be reimbursed to the extent deemed necessary by the Secretary of
the Treasury in gold or gold certificates, and such Federal
reserve bank shall, so long as any of its Federal reserve notes
remain outstanding, maintain with the Treasurer in gold an
amount sufficient in the judgment of the Secretary to provide for all redemptions to be made by the Treasurer. Federal
reserve notes received by the Treasury, otherwise than for
redemption, may be exchanged for gold out of the redemption fund hereinafter provided and returned to the reserve
bank through which they were originally issued, or they may
be returned to such bank for the credit of the United States.
Federal reserve notes unfit for circulation shall be returned
by the Federal reserve agents to the Comptroller of the
Currency for cancellation and destruction.
The Federal Reserve Board shall require each Federal
reserve bank to maintain on deposit in the Treasury of the
United States a sum in gold sufficient in the judgment of the
Secretary of the Treasury for the redemption of the Federal
reserve notes issued to such bank, but in no event less than
five per centum; but such deposit of gold shall be counted
and included as part of the forty per centum reserve hereinbefore required. The board shall have the right, acting
through the Federal reserve agent, to grant in whole or in part
or to reject entirely the application of any Federal reserve
bank for Federal reserve notes; but to the extent that such
application may be granted the Federal Reserve Board shall,
through its local Federal reserve agent, supply Federal reserve
notes to the bank so applying, and such bank shall be charged
with the amount of such notes and shall pay such rate of
interest on said amount as may be established by the Federal
Reserve Board, and the amount of such Federal reserve notes
so issued to any such bank shall, upon delivery, together with
such notes of such Federal reserve bank as may be issued
under section eighteen of this Act upon security of United
States two per centum Government bonds, become a first
and paramount lien on all the assets of such bank.
Any Federal reserve bank may at any time reduce its liability for outstanding Federal reserve notes by depositing, with
the Federal reserve agent, its Federal reserve notes, gold, gold
certificates, or lawful money of the United States. Federal
reserve notes so deposited shall not be reissued, except upon
compliance with the conditions of an original issue.
The Federal reserve agent shall hold such gold, gold certificates, or lawful money available exclusively for exchange
for the outstanding Federal reserve notes when offered by the
reserve bank of which he is a director. Upon the request of the
Secretary of the Treasury the Federal Reserve Board shall
require the Federal reserve agent to transmit so much of said
gold to the Treasury of the United States as may be required
for the exclusive purpose of the redemption of such notes.
Any Federal reserve bank may at its discretion withdraw
collateral deposited with the local Federal reserve agent for
the protection of its Federal reserve notes deposited with it
and shall at the same time substitute therefor other like collateral of equal amount with the approval of the Federal
reserve agent under regulations to be prescribed by the
Federal Reserve Board.
In order to furnish suitable notes for circulation as
Federal reserve notes, the Comptroller of the Currency shall,
under the direction of the Secretary of the Treasury, cause
plates and dies to be engraved in the best manner to guard
against counterfeits and fraudulent alterations, and shall
have printed therefrom and numbered such quantities of
such notes of the denominations of $5, $10, $20, $50, $100,
as may be required to supply the Federal reserve banks. Such
notes shall be in form and tenor as directed by the Secretary
of the Treasury under the provisions of this Act and shall
bear the distinctive numbers of the several reserve banks
through which they are issued.
When such notes have been prepared, they shall be
deposited in the Treasury, or in the subtreasury or mint of the
United States nearest the place of business of each Federal
reserve bank and shall be held for the use of such bank subject to the order of the Comptroller of the Currency for their
delivery, as provided for by this Act.
The plates and dies to be procured by the Comptroller of
Currency for the printing of such circulating notes shall
remain under his control and direction, and the expenses
necessarily incurred in executing the laws relating to the
procuring of such notes, and all other expenses incidental to
their issue and retirement, shall be paid by the Federal reserve
banks, and the Federal Reserve Board shall include in its estimate of expenses levied against the Federal reserve banks a
sufficient amount to cover the expenses herein provided for.
The examination of plates, dies, bed pieces, and so forth,
and regulations relating to such examination of plates, dies,
and so forth, of national-bank notes provided for in section
fifty-one hundred and seventy-four Revised Statutes, is
hereby extended to include notes herein provided for.
Any appropriation heretofore made out of the general
funds of the Treasury for engraving plates and dies, the purchase of distinctive paper, or to cover any other expense in
connection with the printing of national-bank notes or notes
provided for by the Act of May thirtieth, nineteen hundred
and eight, and any distinctive paper that may be on hand at
the time of the passage of this Act may be used in the discretion of the Secretary for the purposes of this Act, and should
the appropriations heretofore made be insufficient to meet
the requirements of this Act in addition to circulating notes
provided for by existing law, the Secretary is hereby authorized to use so much of any funds in the Treasury not otherwise appropriated for the purpose of furnishing the notes
aforesaid: Provided, however, That nothing in this section
contained shall be construed as exempting national banks or
Federal reserve banks from their liability to reimburse the
United States for any expenses incurred in printing and issuing circulating notes.
Every Federal reserve bank shall receive on deposit at par
from member banks or from Federal reserve banks checks and
drafts drawn upon any of its depositors, and when remitted by
a Federal reserve bank, checks and drafts drawn by any depositor in any other Federal reserve bank or member bank upon
funds to the credit of said depositor in said reserve bank or
member bank. Nothing herein contained shall be construed as
prohibiting a member bank from charging its actual expense
incurred in collecting and remitting funds, or for the exchange
sold to its patrons. The Federal Reserve Board shall, by rule, fix
the charges to be collected by the member banks from its
patrons whose checks are cleared through the Federal reserve
bank and the charge which may be imposed for the service
and clearing or collection rendered by the Federal reserve
bank. The Federal Reserve Board shall make and promulgate
from time to time regulations governing the transfer of funds
and charges therefor among Federal reserve banks and their
branches, and may at their discretion exercise the functions of
a clearing house for such Federal reserve banks, or may designate a Federal reserve bank to exercise such functions, and
may also require each such bank to exercise the functions of a
clearing house for its member banks.
Sec. 17. So much of the provisions of section fifty-one
hundred and fifty-nine of the Revised Statutes of the United
States, and section four of the Act of June twentieth, eighteen
hundred and seventy-four, and section eight of the Act of July
twelfth, eighteen hundred and eighty-two, and of any other
provisions of existing statutes as require that before any
national banking associations shall be authorized to commence banking business it shall transfer and deliver to the
Treasurer of the United States a stated amount of United
States registered bonds is hereby repealed.
REFUNDING BONDS.
Sec. 18. After two years from the passage of this Act, and at
any time during a period of twenty years thereafter, any member bank desiring to retire the whole or any part of its circulating notes, may file with the Treasurer of the United States an
application to sell for its account, at par and accrued interest,
United States bonds securing circulation to be retired.
The Treasurer shall, at the end of each quarterly period,
furnish the Federal Reserve Board with a list of such applications, and the Federal Reserve Board may, in its discretion,
require the Federal reserve banks to purchase such bonds
from the banks whose applications have been filed with the
Treasurer at least ten days before the end of any quarterly
period at which the Federal Reserve Board may direct the
purchase to be made: Provided, That Federal reserve banks
shall not be permitted to purchase an amount to exceed
$25,000,000 of such bonds in any one year, and which
amount shall include bonds acquired under section four of
this Act by the Federal reserve bank.
Provided further, That the Federal Reserve Board shall
allot to each Federal reserve bank such proportion of such
bonds as the capital and surplus of such bank shall bear to the
aggregate capital and surplus of all the Federal reserve banks.
Upon notice from the Treasurer of the amount of bonds
so sold for its account, each member bank shall duly assign
and transfer, in writing, such bonds to the Federal reserve
bank purchasing the same, and such Federal reserve bank
shall, thereupon, deposit lawful money with the Treasurer of
the United States for the purchase price of such bonds, and
the Treasurer shall pay to the member bank selling such
bonds any balance due after deducting a sufficient sum to
redeem its outstanding notes secured by such bonds, which
notes shall be canceled and permanently retired when
redeemed.
The Federal reserve banks purchasing such bonds shall be
permitted to take out an amount of circulating notes equal to
the par value of such bonds.
Upon the deposit with the Treasurer of the United States
of bonds so purchased, or any bonds with the circulating
privilege acquired under section four of this Act, any Federal
reserve bank making such deposit in the manner provided by
existing law, shall be entitled to receive from the Comptroller
of the Currency circulating notes in blank, registered and
countersigned as provided by law, equal in amount to the par
value of the bonds so deposited. Such notes shall be the obligations of the Federal reserve bank procuring the same, and
shall be in form prescribed by the Secretary of the Treasury,
and to the same tenor and effect as national-bank notes now
provided by law. They shall be issued and redeemed under
the same terms and conditions as national-bank notes except
that they shall not be limited to the amount of the capital
stock of the Federal reserve bank issuing them.
Upon application of any Federal reserve bank, approved
by the Federal Reserve Board, the Secretary of the Treasury
may issue, in exchange for United States two per centum
gold bonds bearing the circulation privilege, but against
which no circulation is outstanding, one-year notes of the
United States without the circulation privilege, to an amount
not to exceed one-half of the two per centum bonds so tendered for exchange, and thirty-year three per centum gold
bonds without the circulation privilege for the remainder of
the two per centum bonds so tendered: Provided, That at the
time of such exchange the Federal reserve bank obtaining
such one-year gold notes shall enter into an obligation with
the Secretary of the Treasury binding itself to purchase from
the United States for gold at the maturity of such one-year
notes, an amount equal to those delivered in exchange for
such bonds, if so requested by the Secretary, and at each
maturity of one-year notes so purchased by such Federal
reserve bank, to purchase from the United States such an
amount of one-year notes as the Secretary may tender to
such bank, not to exceed the amount issued to such bank in
the first instance, in exchange for the two per centum United
States gold bonds; said obligation to purchase at maturity
such notes shall continue in force for a period not to exceed
thirty years.
For the purpose of making the exchange herein provided
for, the Secretary of the Treasury is authorized to issue at par
Treasury notes in coupon or registered form as he may prescribe in denominations of one hundred dollars, or any multiple thereof, bearing interest at the rate of three per centum
per annum, payable quarterly, such Treasury notes to be
payable not more than one year from the date of their issue
in gold coin of the present standard value, and to be exempt
as to principal and interest from the payment of all taxes and
duties of the United States except as provided by this Act, as
well as from taxes in any form by or under any State, municipal, or local authorities. And for the same purpose, the
Secretary is authorized and empowered to issue United States
gold bonds at par, bearing three per centum interest payable
thirty years from date of issue, such bonds to be of the same
general tenor and effect and to be issued under the same general terms and conditions as the United States three per centum bonds without the circulation privilege now issued and
outstanding.
Upon application of any Federal reserve bank, approved
by the Federal Reserve Board, the Secretary may issue at par
such three per centum bonds in exchange for the one-year
gold notes herein provided for.
BANK RESERVES.
Sec. 19. Demand deposits within the meaning of this Act
shall comprise all deposits payable within thirty days, and
time deposits shall comprise all deposits payable after thirty
days, and all savings accounts and certificates of deposit which
are subject to not less than thirty days’ notice before payment.
When the Secretary of the Treasury shall have officially
announced, in such manner as he may elect, the establishment of a Federal reserve bank in any district, every subscribing member bank shall establish and maintain reserves
as follows:
(a) A bank not in a reserve or central reserve city as now
or hereafter defined shall hold and maintain reserves equal to
twelve per centum of the aggregate amount of its demand
deposits and five per centum of its time deposits, as follows:
In its vaults for a period of thirty-six months after said
date five-twelfths thereof and permanently thereafter fourtwelfths.
In the Federal reserve bank of its district, for a period of
twelve months after said date, two-twelfths, and for each succeeding six months an additional one-twelfth, until fivetwelfths have been so deposited, which shall be the amount
permanently required.
For a period of thirty-six months after said date the balance of the reserves may be held in its own vaults, or in the
Federal reserve bank, or in national banks in reserve or central reserve cities as now defined by law.
After said thirty-six months’ period said reserves, other
than those hereinbefore required to be held in the vaults of
the member bank and in the Federal reserve bank, shall be
held in the vaults of the member bank or in the Federal
reserve bank, or in both, at the option of the member bank.
(b) A bank in a reserve city, as now or hereafter defined,
shall hold and maintain reserves equal to fifteen per centum
of the aggregate amount of its demand deposits and five per
centum of its time deposits, as follows:
In its vaults for a period of thirty-six months after said
date six-fifteenths thereof, and permanently thereafter fivefifteenths.
In the Federal reserve bank of its district for a period of
twelve months after the date aforesaid at least threefifteenths, and for each succeeding six months an additional
one-fifteenth, until six-fifteenths have been so deposited,
which shall be the amount permanently required.
For a period of thirty-six months after said date the balance of the reserves may be held in its own vaults, or in the
Federal reserve bank, or in national banks in reserve or central reserve cities as now defined by law.
After thirty-six months’ period all of said reserves, except
those hereinbefore required to be held permanently in the
vaults of the member bank and in the Federal reserve bank,
shall be held in its vaults or in the Federal reserve bank, or in
both, at the option of the member bank.
(c) A bank in a central reserve city, as now or hereafter
defined, shall hold and maintain a reserve equal to eighteen
per centum of the aggregate amount of its demand deposits
and five per centum of its time deposits, as follows:
In its vaults six-eighteenths thereof.
In the Federal reserve bank seven-eighteenths.
The balance of said reserves shall be held in its own vaults
or in the Federal reserve bank, at its option.
Any Federal reserve bank may receive from the member
banks as reserves, not exceeding one-half of each installment,
eligible paper as described in section fourteen properly
indorsed and acceptable to the said reserve bank.
If a State bank or trust company is required by law of its
State to keep its reserves either in its own vaults or with
another State bank or trust company, such reserve deposits so
kept in such State bank or trust company shall be construed,
within the meaning of this section, as if they were reserve
deposits in a national bank in a reserve or central reserve city
for a period of three years after the Secretary of the Treasury
shall have officially announced the establishment of a Federal
reserve bank in the district in which such State bank or trust
company is situate. Except as thus provided, no member
bank shall keep on deposit with any nonmember bank a sum
in excess of ten per centum of its own paid-up capital and
surplus. No member bank shall act as the medium or agent
of a nonmember bank in applying for or receiving discounts
from a Federal reserve bank under the provisions of this Act
except by permission of the Federal Reserve Board.
The reserve carried by a member bank with a Federal
reserve bank may, under the regulations and subject to such
penalties as may be described by the Federal Reserve Board,
be checked against and withdrawn by such member bank for
the purpose of meeting existing liabilities: Provided, however,
That no bank shall at any time make new loans or shall pay
any dividends unless and until the total reserve required by
law is fully restored.
In estimating the reserves required by this Act, the net balance of amounts due to and from other banks shall be taken
as the basis for ascertaining the deposits against which the
reserves shall be determined. Balances in reserve banks due
to member banks shall, to the extent herein provided, be
counted as reserves.
National banks located in Alaska or outside the continental United States may remain nonmember banks, and shall in
that event maintain reserves and comply with all the conditions now provided by law regulating them; or said banks,
except in the Philippine Islands, may, with the consent of the
Reserve Board, become member banks of any one of the
reserve districts, and shall, in that event, take stock, maintain
reserves, and be subject to all the other provisions of this Act.
Sec. 20. So much of sections two and three of the Act of
June twentieth, eighteen hundred and seventy-four, entitled
“An Act fixing the amount of United States notes, providing
for a redistribution of the national-bank currency, and for
other purposes,” as provides that the fund deposited by any
national banking association with the Treasurer of the United
States for the redemption of its notes shall be counted as a part
of its lawful reserve as provided in the Act aforesaid, is hereby
repealed. And from and after the passage of this Act such fund
of five per centum shall in no case be counted by any national
banking association as a part of its lawful reserve.
BANK EXAMINATIONS.
Sec. 21. Section fifty-two hundred and forty, United States
Revised Statutes, is amended to read as follows:
The Comptroller of the Currency, with the approval of the
Secretary of the Treasury, shall appoint examiners who shall
examine every member bank at least twice in each calendar
year and oftener if considered necessary: Provided, however,
That the Federal Reserve Board may authorize examination
by the State authorities to be accepted in the case of State
banks and trust companies and may at any time direct the
holding of a special examination of State banks or trust companies that are stockholders in any Federal reserve bank, or of
any other member bank, shall have power to make a thorough examination of all the affairs of the bank and in so
doing so he shall have power to administer oaths and to
examine any of the officers and agents thereof under oath
and shall make a full and detailed report of the condition of
said bank to the Comptroller of the Currency.
The Federal Reserve Board, upon the recommendation of
the Comptroller of the Currency, shall affix the salaries of all
bank examiners and make report thereof to Congress. The
expense of the examinations herein provided for shall be
assessed by the Comptroller of the Currency upon the banks
examined in proportion to assets or resources held by the
banks upon the dates of examination of the various banks.
In addition to the examinations made and conducted by
the Comptroller of the Currency, every Federal reserve bank
may, with the approval of the Federal reserve agent or the
Federal Reserve Board, provide for special examination of
member banks within its district. The expenses of such
examinations shall be borne by the bank examined. Such
examinations shall be so conducted as to inform the Federal
reserve bank of the condition of its member banks and of the
lines of credit which are being extended by them. Every
Federal reserve bank shall at times furnish to the Federal
Reserve Board such information as may be demanded concerning the condition of any member bank within the district
of the said Federal reserve bank.
No bank shall be subject to visitatorial powers other than
such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed
by Congress, or by either House thereof or by any committee
of Congress or of either House duly authorized.
The Federal Reserve Board shall, at least once a year, order
an examination of each Federal reserve bank, and upon joint
application of ten member banks the Federal Reserve Board
shall order a special examination and report of the condition
of any Federal reserve bank.
Sec. 22. No member bank or any officer, director, or
employee thereof shall hereafter make any loan or grant any
gratuity to any bank examiner. Any bank officer, director, or
employee violating this provision shall be deemed guilty of a
misdemeanor and shall be imprisoned not exceeding one
year or fined not more than $5,000, or both; and may be fined
a further sum equal to the money so loaned or gratuity given.
Any examiner accepting a loan or gratuity from any bank
examined by him or from an officer, director, or employee
thereof shall be guilty of a misdemeanor and shall be imprisoned not exceeding one year or fined not more than $5,000,
or both; and may be fined a further sum equal to the money
so loaned or gratuity given; and shall forever thereafter be
disqualified from holding office as a national-bank examiner.
No national-bank examiner shall perform any other service
for compensation while holding such office for any bank or
officer, director, or employee thereof.
Other than the usual salary or director’s fee paid to any
officer, director, or employee of a member bank and other
than a reasonable fee paid by said bank to such officer, director, or employee for services rendered to such bank, no officer, director, employee, or attorney of a member bank shall be
a beneficiary of or receive, directly or indirectly, any fee, commission, gift, or other consideration for or in connection with
any transaction or business of the bank. No examiner, public
or private, shall disclose the names of the borrowers or the
collateral for loans of a member bank to other than the
proper officers of such bank without first having obtained the
express permission in writing from the Comptroller of the
Currency, or from the board of directors of such bank, except
when ordered to do so by a court of competent jurisdiction,
or by direction of the Congress of the United States, or of
either House thereof, or any committee of Congress or of
either House duly authorized. Any person violating any provision of this section shall be punished by a fine not exceeding $5,000 or by imprisonment not exceeding one year, or
both.
Except as provided in existing laws, this provision shall not
take effect until sixty days after the passage of this Act. The
stockholders of every national banking association shall be
held individually responsible for all contracts, debts, and
engagements of such association, each to the amount of his
stock therein, at the par value thereof in addition to the
amount invested in such stock. The stockholders in any
national banking association who shall have transferred their
shares or registered the transfer thereof within sixty days next
before the date of the failure of such association to meet its
obligations, or with knowledge of such impending failure,
shall be liable to the same extent as if they had made no such
transfer, to the extent that the subsequent transferee fails to
meet such liability; but this provision shall not be construed
to affect in any way any recourse which such shareholders
might otherwise have against those in whose names such
shares are registered at the time of such failure.
LOANS OF FARM LANDS.
Sec. 24. Any national banking association not situated in a
central reserve city may make loans secured by improved and
unencumbered farm land, situated within its Federal reserve
district, but no such loan shall be made for a longer time than
five years, nor for an amount exceeding fifty per centum of the
actual value of the property offered as security. Any such bank
may make such loans in an aggregate sum equal to twenty-five
per centum of its capital and surplus or to one-third of its
time deposits and such banks may continue hereafter as
heretofore to receive time deposits and to pay interest on the
same.
The Federal Reserve Board shall have the power from time
to time to add to the list of cities in which national banks
shall not be permitted to make loans secured upon real estate
in the manner described in this section.
FOREIGN BRANCHES.
Sec. 25. Any banking association possessing a capital and
surplus of $1,000,000 or more may file application with the
Federal Reserve Board, upon such conditions and under such
regulations as may be prescribed by the said board, for the
purpose of securing authority to establish branches in foreign
countries or dependencies of the United States for the furtherance of the foreign commerce of the United States, and to
act, if required to do so, as fiscal agents of the United States.
Such application shall specify, in addition to the name and
capital of the banking association filing it, the place or places
where the banking operations proposed are to be carried on,
and the amount of capital set aside for the conduct of its foreign business. The Federal Reserve Board shall have the power
to approve or to reject such application if, in its judgment, the
amount of capital proposed to be set aside for the conduct of
foreign business is inadequate, or if for other reasons the
granting of such application is deemed inexpedient.
Every national banking association which shall receive
authority to establish foreign branches shall be required at all
times to furnish information concerning the condition of
such branches to the Comptroller of the Currency upon
demand, and the Federal Reserve Board may order special
examinations of the said foreign branches at such time or
times as it may deem best. Every national banking association
shall conduct the accounts of each foreign branch independently of the accounts of other foreign branches established by
it and of its home office, and shall at the end of each fiscal
period transfer to its general ledger the profit or loss accruing
at each branch as a separate item.
Sec. 26. All provisions of law inconsistent with or superseded by any of the provisions of this Act are to the extent and
to that extent only hereby repealed: Provided, Nothing in this
Act contained shall be construed to repeal the parity provision or provisions contained in an Act approved March fourteenth, nineteen hundred, entitled “An Act to define and fix
the standard of value, to maintain the parity of all forms of
money issued or coined by the United States, to refund the
public debt, and for other purposes,” and the Secretary of the
Treasury may for the purpose of maintaining such parity and
to strengthen the gold reserve, borrow gold on the security of
United States bonds authorized by section two of the Act last
referred to or for one-year gold notes bearing interest at a rate
not to exceed three per centum per annum, or sell the same if
necessary to obtain gold. When the funds of the Treasury on
hand justify, he may purchase and retire such outstanding
bonds and notes.
The provisions of the Act of May thirtieth, nineteen hundred and eight, authorizing national currency associations,
the issue of additional national-bank circulation, and creating a National Monetary Commission, which expires by limitation under the terms of such Act on the thirtieth day of
June, nineteen hundred and fourteen, are hereby extended to
June thirtieth, nineteen hundred and fifteen, and sections
fifty-one hundred and fifty-three, fifty-one hundred and
seventy-two, fifty-one hundred and ninety-one, and fifty-two
hundred and fourteen of the Revised Statutes of the United
States, which were amended by the Act of May thirtieth, nineteen hundred and eight, are hereby reenacted to read as such
sections read prior to May thirtieth, nineteen hundred and
eight, subject to such amendments or modifications as are
prescribed in this Act: Provided, however, That section nine
of the Act first referred to in this section is hereby amended
so as to change the tax rates fixed in said Act by making the
portion applicable thereto read as follows:
National banking associations having circulating notes
secured otherwise than by bonds of the United States, shall
pay for the first three months a tax at the rate of three per
centum per annum upon the average amount of such of their
notes in circulation as are based upon the deposit of such
securities, and afterwards an additional tax rate of one-half of
one per centum per annum for each month until a tax of six
per centum per annum is reached, and thereafter such tax of
six per centum per annum upon the average amount of such
notes.
Sec. 28. Section fifty-one hundred and forty-three of the
Revised Statutes is hereby amended and reenacted to read as
follows: Any association formed under this title may, by the
vote of the shareholders owning two thirds of its capital
stock, reduce its capital to any sum not below the amount
required by this title to authorize the formation of associations; but no such reduction shall be allowable which will
reduce the capital of the association below the amount
required for its outstanding circulation, nor shall any reduction be made until the amount of the proposed reduction has
been reported to the Comptroller of the Currency and such
reduction has been approved by the said Comptroller of the
Currency and by the Federal Reserve Board, or by the organization committee pending the organization of the Federal
Reserve Board.
Sec. 29. If any clause, sentence, paragraph, or part of this
Act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect,
impair, or invalidate the remainder of this Act, but shall be
confined in its operation to the clause, sentence, paragraph,
or part thereof directly involved in the controversy in which
such judgment shall have been rendered.
Sec. 30. The right to amend, alter, or repeal this Act is
hereby expressly reserved.
Approved, December 23, 1913.