?tate (^allege of Agriculture At (dnrnell Mttiaetaitj} Stlrara, N. % iCihtranj Cornell university Library HG 2560.N27 Le ra Uese S ac Sr n d ea,oOec, mb UBRflfeY &a.\ j j * -. ' MO W MAR IS i% f Federal Reserve Act As Amended to December 24, 1919 National Sank of Commerce in New York January, 1920 x Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924014448496 Foreword T HE rapidly broadening scope of American banking activity gives to the provisions of law governing the operations of the Federal reserve system an increasing importance. The National Bank of Commerce in New York herewith presents for the convenience of its friends a revised edition of the text of the Federal Reserve Act with amendments. Certain of these amendments are particularly significant in connection with the development in international" activities that characterizes American banking today. The problem of financing supplies needed for European reconstruction gave rise to the amend- ment of December 24, 1919, commonly known as the Edge Act, which provides for the organization under Federal charter of corporations to engage in foreign banking and financing opera- tions. Of similar origin is the amend- ment of September 17, 1919, which authorizes national banks to invest in the stock of foreign financing cor- porations. JAMES S. ALEXANDER President Federal Reserve Act (Approved December 23, 1913) As amended August 4, 1914; August 15, 1914; March 3, 1915; September 7, 1916; June 21, 1917; Septem- ber 26, 1918; March 3, 1919; September 17, 1919; December 24, 1919. An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commer- cial paper, to establish a more effective supervision of banking in the United States, and for other purposes. Be it enacted by the Senate and House of Representa- Definition! tives of the United States of America in Congress assem- bled, That the short title of this Act shall be the "Fed- eral Reserve Act." Wherever the word "bank" is used in this Act, the word shall be held to include State bank, banking asso- ciation, 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 synon- ymous 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 Board; the term "district" shall be held to mean Federal reserve district; the term "reserve bank" shall be held to mean Federal reserve bank. The Fedehal Reserve Act Organization of Federal reserve system Acceptance of Act FEDERAL RESERVE DISTRICTS. Sec. 2. As soon as practicable, the Secretary of the Treasury, the Secretary of Agriculture and the Comp- troller 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 neces- sarily be coterminous with any State or States. The districts thus created may be readjusted and new dis- tricts may from time to time be created by the Federal Reserve Board, not to exceed twelve in all. Such dis- tricts 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 dis- tricts and in designating the cities within such districts where such Federal reserve banks shall be severally located. The said committee shall supervise the organ- ization 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 organiza- tion 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 The Federal Reserve Act 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 Federal reserve banks are to be 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 com- mittee, to subscribe to the capital stock of such Federal ^"""P 1 """ «° 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 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 Shareholders' be held individually responsible, equally and ratably, luAl]%t f and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of their subscriptions 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 Pena "y for the terms of this Act within the sixty days aforesaid, non " accep ance 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 Penalty for United States now organized fail within one year after »»»™n>pi»»<:« 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 the provisions of this Act, shall be thereby forfeited. Any noncompliance with The Federal Reserve Act 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 pur- pose 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 provi- sions 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 damages which said bank, its shareholders, or any other person shall have sus- tained 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. Pnblk stock 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 such 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 trans- ferred on the books of the Federal reserve bank by the chairman of the board of directors of such bank. United statei stock Should the total subscriptions by banks and the pub- lic 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 The Fedebal Reserve Act required therefor, then and in that event the said organi- zation committee shall allot to the United States such an amount of said stock as said committee shall de- termine. 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 Minimum capital of with a subscribed capital less than $4,000,000. The reserve banI " 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 deem 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 any moneys in the Treasury not otherwise appropriated, for the payment of such expenses. BRANCH OFFICES. Sec. 3.* The Federal Reserve Board may permit or R eS erve bank require any Federal reserve bank to establish branch branches banks within the Federal reserve district in which it is located or within the district of any Federal reserve * As amended by act of June 21, 1917. 10 The Federal Reserve Act bank which may have been suspended. Such branches, subject to such rules and regulations as the Federal Reserve Board may prescribe, shall be operated under the supervision of a board of directors to consist of not more than seven nor less than three directors, of whom a majority of one shall be appointed by the Federal reserve bank of the district, and the remaining directors by the Federal Reserve Board. Directors of branch banks shall hold office during the pleasure of the Federal Reserve Board. FEDERAL RESERVE BANKS. Organization Sec. 4.* When the organization committee shall procedure 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 such other banks declared to be eligible by the organization committee which may apply there- for, 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 pre- scribed 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 * As amended by acts of June 21, 1917, and September 26, 1918. The Federal Reserve Act 11 extent of the district over which the operations of such Federal reserve bank are to be carried on, the city and State in which said bank is to be located, the amount of capital stock and the number of shares into which the same is divided, the name and place of doing busi- ness 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 sub- scribe to the capital stock of such Federal reserve bank, to avail themselves of the advantages of this Act. The said organization certificate shall be acknowl- edged 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 Comp- General powers of troller of the Currency as aforesaid, the said Federal reserve banks 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- laws not inconsistent with law, regulating the manner 12 The Federal Reserve Act Federal eral reserve bank Board of directors 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 by 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 by 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 priv- ilege, 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 busi- ness except such as is incidental and necessarily pre- liminary 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 asso- ciations 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 of 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 * See section 18, page 50. The act of April 23, 1918, authorized the issu- ance of Federal reserve bank notes in any denominations (including $1 and $2) against the security of United States certificates of indebtedness or one-year gold notes. director! The Federal Rbsebve Act 13 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 herein- Classification of after specified and shall consist of nine members, hold- ing 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 consist of three members, who at the time of their election shall be actively engaged in their district in commerce, agriculture or some other indus- trial 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 com- mittee shall exercise the powers 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. f Directors of class A and class B shall be chosen in the following manner: The Federal Reserve Board shall classify the member * The prohibition of interlocking bank directorates in the act of October IS, 1914, was so modified by the act of May IS, 1916, as to authorize the Federal Reserve Board to permit an officer, director, or employee of a mem- ber bank or a class A director of a Federal reserve bank to be an officer, director, or employee of not more than two other banking companies not in substantial competition with such member bank. f As amended by act of September 26, 1918. 14 The Federal Resebve Act Election of directors banks of the district into three general groups or divi- o c asses and B s j ons> designating each group by number. Each group shall consist as nearly as may be of banks of similar capitalization. Each member bank shall be permitted to nominate to the chairman of the board of directors of the Federal reserve bank of the district one candidate for director of class A and one candidate for director of 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 member bank. Each member bank by a resolution of the board or by an amendment to its by-laws shall authorize its president, cashier, or some other officer to cast the vote of the member bank in the elections of class A and class B directors. Within fifteen days after receipt of the list of candi- dates the duly authorized officer of a member bank shall certify to the chairman his first, second, and other choices for director of class A and class B, respectively, upon a preferential ballot upon a form furnished by the chairman of the board of directors of the Federal re- serve bank of the district. Each such officer 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 one candidate. No officer or director of a member bank shall be eligible to serve as a class A director un- less nominated and elected by banks which are members of the same group as the member bank of which he is an officer or director. Any person who is an officer or director of more than one member bank shall not be eligible for nomination as a class A director except by banks in the same group as the bank having the largest aggregate resources of any of those of which such person is an officer or direc- tor. 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 The Federal Reserve Act 15 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 for other choices shall be added together in like manner, and the candidate then having the highest number of votes shall be de- clared elected. An immediate report of election shall be declared. * Class C directors shall be appointed by the Federal Appointment of Reserve Board. They shall have been for at least two years residents of the district for which they are ap- pointed, 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 direc- tors 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 per- formance 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 shall be appointed by the Federal Reserve Board as deputy chairman to exercise the powers of the chairman of the board when neces- sary. In case of the absence of the chairman and deputy chairman, the third class C director shall preside at meetings of the board. Subject to the approval of the Federal Reserve Board, class C directors Federal reserve agent Assistant reserve agents * As amended by act of June 21, 1917. 16 The Federal Reserve Act Compensation of directors Term of office of directors Vacancies the Federal reserve agent shall appoint one or more assistants. Such assistants, who shall be persons of tested banking experience, shall assist the Federal reserve agent in the performance of his duties and shall also have power to act in his name and stead during his absence or disability. The Federal Reserve Board shall require such bonds of the assistant Federal reserve agents as it may deem necessary for the protection of the United States. Assistants to the Federal reserve agent shall receive an annual compensation, to be fixed and paid in the same manner as that of the Federal reserve agent. $ 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 boards of di- rectors 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 neces- sary to carry out the purposes of this Act, and may exercise the functions herein conferred upon the chair- man 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 desig- nate 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 herein- before provided shall hold office for a term of three years. Vacancies that may occur in the several classes The Federal Reserve Act 17 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 unex- pired terms of their predecessors. stock issues; increase and decrease op 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 there- for its par value plus one-half of one per centum a month from the period of the last dividend. 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 Adjustment of reserve bank stock case of increase members' capital In case of reduction of members' capital 18 The Federal Reserve Act Insolvency of member bank 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 surrendered 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 insolv- ent 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 a 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. Dividends Sec. 7. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stock- holders shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock, which Franchise tax dividend shall be cumulative. After the aforesaid dividend claims have been fully met, the net earnings shall be paid to the United States as a franchise tax except that the whole of such net earnings, including those for the year ending December thirty-first, nine- teen hundred and eighteen, shall be paid into a surplus The Federal Reserve Act 19 Employment of sums paid to U. S. Exemption from taxation fund until it shall amount to one hundred per centum Surplus fund of the subscribed capital stock of such bank, and that thereafter ten per centum of such net earnings shall be paid into the surplus.* 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 upon 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 Conversion of state or of the United States or organized under the general into miimai » anks 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 con- verted 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 * As amended by act of March 3, 1919. 20 The Federal Keserve Act 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 certif- icate and to change or convert the bank or banking institution into a national association. A majority of the directors, after executing the articles of associa- tion and the organization certificate, shall have power to execute all other papers and to 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 each as they were before the conversion, and the directors may con- tinue 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 Comp- troller 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. Application for g EC- 9 * ^ny k an k incorporated by special law of any mem ers lp State, or organized under the general laws of any State or of the United States, desiring to become a member of the Federal Reserve System, may make application to the Federal Reserve Board, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal reserve bank organized within the district in which the applying bank is located. Such application shall be for the same amount of stock that the applying bank would be required to subscribe * As amended by act of June 21, 1917. The Federal Reserve Act 2i to as a national bank. The Federal Reserve Board, subject to such conditions as it may prescribe, may per- mit the applying bank to become a stockholder of such Federal reserve bank. In acting upon such applications the Federal Reserve Board shall consider the financial condition of the ap- plying bank, the general character of its management, and whether or not the corporate powers exercised are consistent with the purposes of this Act. Whenever the Federal Reserve Board shall permit the applying bank to become a stockholder in the Fed- eral reserve bank of the district its stock subscription shall be payable on call of the Federal Reserve Board, and stock issued to it shall be held subject to the provi- sions of this Act. All banks admitted to membership under authority Conditions of of this section shall be required to comply with the membership reserve and capital requirements of this Act and to conform to those provisions of law imposed on national banks which prohibit such banks from lending on or purchasing their own stock, which relate to the with- drawal or impairment of their capital stock, and which relate to the payment of unearned dividends. Such banks and the officers, agents, and employees thereof shall also be subject to the provisions of and to the penalities prescribed by section fifty-two hundred and nine of the Revised Statutes* and shall be required to make reports of condition and of the payment of divi- dends to the Federal reserve bank of which they become a member. Not less than three of such reports shall be made annually on call of the Federal reserve bank on dates to be fixed by the Federal Reserve Board. Failure to make such reports within ten days after the date they are called for shall subject the offending bank to a penalty of $100 a day for each day that it fails to transmit such report; such penalty to be collected by the Federal reserve bank by suit or otherwise. * Imposing penalties for embezzlement and other frauds by bank officers and employees. 22 The Federal Resebve Act Examinations of state banks Expulsion of state banks Withdrawal from membership As a condition of membership such banks shall like- wise be subject to examinations made by direction of the Federal Reserve Board or of the Federal reserve bank by examiners selected or approved by the Federal Reserve Board. Whenever the directors of the Federal reserve bank shall approve the examinations made by the State au- thorities, such examinations and the reports thereof may be accepted in lieu of examinations made by exam- iners selected or approved by the Federal Reserve Board: Provided, however, That when it deems it neces- sary the board may order special examinations by exam- iners of its own selection and shall in all cases approve the form of the report. The expenses of all examina- tions, other than those made by State authorities, shall be assessed against and paid by the banks examined. 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 made pursuant thereto, it shall be within the power of the board after hearing to re- quire such bank to surrender its stock in the Federal reserve bank and to forfeit all rights and privileges of membership. The Federal Reserve Board may restore membership upon due proof of compliance with the conditions imposed by this section. Any State bank or trust company desiring to with- draw from membership in a Federal reserve bank may do so, after six months' written notice shall have been filed with the Federal Reserve Board, upon the surren- der and cancellation of all of its holdings of capital stock in the Federal reserve bank : Provided, however, That no Federal reserve bank shall, except under express au- thority of the Federal Reserve Board, cancel within the same calendar year more than twenty-five per centum of its capital stock for the purpose of effecting voluntary withdrawals during that year. All such applications shall be dealt with in the order in which they are filed with the board. Whenever a member bank shall sur- render its stock holdings in a Federal reserve bank, or The Federal Reserve Act 23 shall be ordered to do so by the Federal Reserve Board, under authority of law, all of its rights and privileges as a member bank shall thereupon cease and determine, and after due provision has been made for any indebted- ness due or to become due to the Federal reserve bank it shall be entitled to a refund of its cash paid subscrip- tion with interest at the rate of one-half of one per cen- tum per month from date of last dividend, if earned, the amount refunded in no event to exceed the book value of the stock at that time, and shall likewise be entitled to repayment of deposits and of any other balance due from the Federal reserve bank. No applying bank shall be admitted to membership Capital required 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-bank act. Banks becoming members of the Federal Reserve s tale i n , t itution» System under authority of this section shall be subject retain darter powen to the provisions of this section and to those of this Act which relate specifically to member banks, but shall not be subject to examination under the provisions of the first two paragraphs of section fifty-two hundred and forty of the Revised Statutes as amended by sec- tion twenty-one of this Act.* Subject to the provisions of this Act and to the regulations of the board made pursuant thereto, any bank becoming a member of the Federal Reserve System shall retain its full charter and statutory rights as a State bank or trust company, and may continue to exercise all corporate powers granted it by the State in which it was created, and shall be entitled to all privileges of member banks: Provided, however, That no Federal reserve bank shall be permitted to discount for any State bank or trust company notes, drafts, or bills of exchange of any one borrower who is liable for borrowed money to such State bank or trust company in an amount greater than ten per centum of the capital and surplus of such Limit on loans * See page 54. 24 The Federal Reserve Act State bank or trust company, but the discount of bills of exchange drawn against actually existing value and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as borrowed money within the meaning of this section.* The Federal reserve bank, as a condi- tion of the discount of notes, drafts, and bills of ex- change for such State bank or trust company, shall require a certificate or guaranty to the effect that the borrower is not liable to such bank in excess of the amount provided by this section, and will not be per- mitted to become liable in excess of this amount while such notes, drafts, or bills of exchange are under dis- count with the Federal reserve bank. Over-certification It shall be unlawful for any officer, clerk, or agent of prohibited an y Dail k: admitted to membership under authority of this section to certify any check drawn upon such bank unless the person or company drawing the check has on deposit therewith at the time such check is certified an amount of money equal to the amount specified in such check. Any check so certified by duly authorized officers shall be a good and valid obligation against such bank, but the act of any such officer, clerk, or agent in violation of this section may subject such bank to a forfeiture of its membership in the Federal Reserve System upon hearing by the Federal Reserve Board. FEDERAL RESERVE BOARD. Memberi 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 representa- • For exception see section 11 (m), page Si. The Federal Reserve Act 25 tion of the different commercial, industrial and geo- graphical divisions of the country. The five members of the Federal Reserve Board appointed by the Presi- dent and confirmed as aforesaid shall devote their en- tire time to the business of the Federal Reserve Board and shall each receive an annual salary of $12,000, payable monthly together with actual necessary travel- ing 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 a member of said board. The Secretary of the Treasury and the Comptroller ^Itf°" "' 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. The appointive members of the Federal Reserve Board 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, except that this restriction shall not apply to a member who has served the full term for which he was appointed.* 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 Re- serve 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. * As amended by act of March 3, 1919. 26 The Federal Reserve Act Expenses of board ^he Federal Reserve Board shall have power to levy semiannually upon the Federal reserve banks, in pro- portion 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 succeed- ing 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 chair- man 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, or Federal reserve bank nor hold stock in any bank, bank- ing 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 require- Vacancies in board ment. 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 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 super- vision, management, and control of the Treasury De- partment and bureaus under such department, and wherever any power vested by this Act in the Federal Reserve Board or the Federal reserve agent appears to The Federal Reserve Act 27 Supervision of Federal reserve note conflict with the powers of the Secretary of the Treas- ury, such powers shall be exercised subject to the super- vision and control of the Secretary. The Federal Reserve Board shall annually make a Annual report 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 Re- vised Statutes of the United States shall be amended so as to read as follows: There shall be in the Depart- ment of the Treasury a bureau charged with the execu- tion of all laws passed by Congress relating to the issue and regulation of national currency secured by 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 Comp- troller of the Currency and shall perform his duties under the general directions of the Secretary of the Treasury. Sec. 11. The Federal Reserve Board shall be author- ized 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 re- ports as it may deem necessary. The said board shall publish once each week a statement showing the condi- tion of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such state- ments 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 Int ef-«serve bank five members of the Reserve Board to require Federal KC0UDlt reserve banks to rediscount the discounted paper of other Federal reserve banks at rates of interest to be fixed by the Federal Reserve Board. Suasion of reserve (c) To suspend for a period not exceeding thirty days, requirements Powers of board Examinations 28 The Federal Reserve Act and from time to time to renew such suspension for periods not exceeding fifteen days, any reserve require- ments specified in this Act: Provided, That it shall Penalty for deficient 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 reserves fall 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. Regulation of Federal (d) To supervise and regulate through the bureau reserve note issues 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. Classification of ( 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. Suspension of reserve (f) T suspend or remove any officer or director of bank officers any p e( j e ral 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. Doubtful assets (g) To require the writing off of doubtful or worthless assets upon the books and balance sheets of Federal reserve banks. reserve and central reserve cities The Federal Reserve Act 29 (h) To Suspend, for the violation of any of the provi- Suspension of reserve sions of this Act,* the operations of any Federal reserve bank * bank, to take possession thereof, administer the same during the period of suspension, and, when deemed ad- visable, to liquidate or reorganize such bank. (i) To require bonds of Federal reserve agents, to Safety of securities 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 serv- ices specified in this Act, and make all rules and regula- tions necessary to enable said board effectively to perform the same. (j) To exercise general supervision over said Federal reserve banks. (k)f To grant by special permit to national banks J™ t J' 1 ™°" ks ° t applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, ad- ministrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of luna- tics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are per- mitted to act under the laws of the State in which the national bank is located. Whenever the laws of such State authorize or permit Conditions the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this Act. National banks exercising any or all of the powers Separate records enumerated in this subsection shall segregate all assets held in any fiduciary capacity from the general assets of the bank and shall keep a separate set of books and * Or of section 5208 Revised Statutes, relating to over-certification, t As amended by act of September 26, 1918. 30 The Federal Resebve Act Segregation of trust funds Compliance with state law records showing in proper detail all transactions engaged in under authority of this subsection. Such books and records shall be open to inspection by the State authori- ties to the same extent as the books and records of corporations organized under State law which exercise fiduciary powers, but nothing in this Act shall be con- strued as authorizing the State authorities to examine the books, records, and assets of the national bank which are not held in trust under authority of this subsection. No national bank shall receive in its trust depart- ment deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange purposes. Funds deposited or held in trust by the bank awaiting invest- ment shall be carried in a separate account and shall not be used by the bank in the conduct of its business unless it shall first set aside in the trust department United States bonds or other securities approved by the Federal Reserve Board. In the event of the failure of such bank the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart in addition to their claim against the estate of the bank. Whenever the laws of a State require corporations acting in a fiduciary capacity, to deposit securities with the State authorities for the protection of private or court trusts, national banks so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by the State law. National banks in such cases shall not be required to execute the bond usually required of individuals if State corporations under similar circumstances are exempt from this requirement. National banks shall have power to execute such bond when so required by the laws of the State. In any case in which the laws of a State require that a corporation acting as trustee, executor, administrator, The Federal Reserve Act 31 or in any capacity specified in this section, shall take an oath or make an affidavit, the president, vice president, cashier, or trust officer of such national bank may take the necessary oath or execute the necessary affidavit. It shall be unlawful for any national banking asso- Loan » of trns * lmi * ciation to lend any officer, director, or employee any ,0 office " funds held in trust under the powers conferred by this section. Any officer, director, or employee making such loan, or to whom such loan is made, may be fined not more than $5,000, or imprisoned not more than five years, or may be both fined and imprisoned, in the discretion of the court. In passing upon applications for permission to exer- Qualifications for cise the powers enumerated in this subsection, the trusl P° we " Federal Reserve Board may take into consideration the amount of capital and surplus of the applying bank, whether or not such capital and surplus is sufficient under the circumstances of the case, the needs of the community to be served, and any other facts and cir- cumstances that seem to it proper, and may grant or refuse the application accordingly: Provided, That no permit shall be issued to any national banking associa- tion having a capital and surplus less than the capital and surplus required by State law of State banks, trust companies, and ^corporations exercising such powers. (1) To employ such attorneys, experts, assistants, Rese "« Board staff 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. 32 The Federal Reserve Act Rediscounts in excess ( m )* Upon the affirmative vote of not less than five of 10% limit of itg mem b erS) the Federal Reserve Board shall have power to permit Federal reserve banks to discount for any member bank notes, drafts, or bills of exchange bearing the signature or endorsement of any one bor- rower in excess of the amount permitted by section nine and section thirteen of this Act,f but in no case to exceed twenty per centum of the member bank's capital and surplus: Provided, however, That all such notes, drafts, or bills of exchange discounted for any member bank in excess of the amount permitted under such sections shall be secured by not less than a like face amount of bonds or notes of the United States issued since April twenty -fourth, nineteen hundred and seventeen, or certificates of indebtedness of the United States: Provided further, That the provisions of this subsection (m) shall not be operative after December thirty-first, nineteen hundred and twenty. FEDERAL ADVISORY COUNCIL. Members 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 trans- * As amended by act of March 3, 1919. f 10% of capital and surplus, with certain exceptions — see pages 23 and 35. The Federal Reserve Act 33 action 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 Powers of Ad ™°'y itself or through its officers, (1) to confer directly with ouaa the Federal Reserve Board on general business condi- tions; (2) to make oral or written representations con- cerning matters within the jurisdiction of said board; (3) to call for information and to make recommenda- tions in regard to discount rates, rediscount business, note issues, reserve conditions in the various districts, the purchase and sale 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 Receipt of deposit! from any of its member banks, and from the United States,f deposits of current funds in lawful money, national-bank notes, Federal reserve notes, or checks, and drafts, payable upon presentation, and also, for collection, maturing notes and bills; or, solely for purposes of exchange or of collection, may receive from other Federal reserve banks deposits of current funds in lawful money, national-bank notes, or checks upon other Federal reserve banks, and checks and drafts, payable upon presentation within its district, and maturing notes and bills payable within its dis- trict; or, solely for the purposes of exchange or of collection, may receive from any nonmember bank or trust company deposits of current funds in lawful money, national-bank notes, Federal reserve notes, checks and drafts payable upon presentation, or ma- turing notes and bills : Provided, Such nonmember bank or trust company maintains with the Federal reserve bank of its district a balance sufficient to offset the items * Paragraph 1 a9 amended by act of June 21, 1917. f Also from the War Finance Corporation, under the act of April 5, 1918. 34 The Federal Reserve Act in transit held for its account by the Federal reserve Collection charges bank: Provided, further, That nothing in this or any other section of this Act shall be construed as prohibit- ing a member or nonmember bank from making reason- able charges, to be determined and regulated by the Federal Reserve Board, but in no case to exceed 10 cents per $100 or fraction thereof, based on the total of checks and drafts presented at any one time, for collection or payment of checks and drafts and remis- sion therefor by exchange or otherwise; but no such charges shall be made against the Federal reserve banks. Rediscounts * Upon the indorsement of any of its member banks, which shall be deemed a waiver of demand, notice and protest by such bank as to its own indorsement ex- clusively, any Federal reserve bank may discount notes, drafts, and bills of exchange arising out of actual com- mercial 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 ag- ricultural products, or other goods, wares, or merchan- dise from being eligible for such discount; but such definition shall not include notes, drafts, or bills cover- ing merely investments or issued or drawn for the pur- pose of carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States.f Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at the time of dis- count of not more than ninety days, exclusive of days Agricultural paper of grace: Provided, That notes, drafts, and bills drawn or issued for agricultural purposes or based on live stock * Paragraphs 2, 3 and 4 amended by act of September 7, 1916. t Or bonds of the War Finance Corporation. Act of April 5, 1918. The Fedehal Reserve Act 36 and having a maturity not exceeding six months, exclusive of days of grace, may be discounted in an amount to be limited to a percentage of the assets of the Federal reserve bank, to be ascertained and fixed by the Federal Reserve Board. The aggregate of such notes, drafts, and bills bearing Paper of one interest the signature or indorsement of any one borrower, whether a 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 Federal reserve bank may discount acceptances Discount of of the kinds hereinafter described, which have a ma- acceptances turity at the time of discount of not more than three months' sight, exclusive of days of grace, and which are indorsed by at least one member bank. f Any member bank may accept drafts or bills of AnAority of member exchange drawn upon it having not more than six banks to accept bills months' sight to run, exclusive of days of grace, which grow out of transactions involving the importation or exportation of goods ; or which grow out of transactions involving the domestic shipment of goods provided shipping documents conveying or securing title are attached at the time of acceptance; or which are secured at the time of acceptance by a warehouse receipt or other such document conveying or securing title cover- ing readily marketable staples. No member bank shall Ac «P tan " s for »" e accept, whether in a foreign or domestic transaction, for any one person, company, firm, or corporation to an amount equal at any time in the aggregate to more than ten per centum of its paid-up and unimpaired capital stock and surplus, unless the bank is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance; and no bank shall accept such bills to an Limit on to'* 1 «»oont interest * Amended by section 11 (m), as amended March 3, 1919. See page 32. f Paragraph 5 as amended by act of June 21, 1917. 36 The Federal Reserve Act amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus: Provided, however, That the Federal Reserve Board, under such general regulations as it may prescribe, which shall apply to all banks alike regardless of the amount of capital stock and surplus, may authorize any member bank to accept such bills to an amount not exceeding at any time in the aggre- gate one hundred per centum of its paid-up and unim- paired capital stock and surplus: Provided further, That the aggregate of acceptances growing out of domestic transactions shall in no event exceed fifty per centum of such capital stock and surplus. Advances to members * Any Federal reserve bank may make advances to its member banks on their promissory notes for a period not exceeding fifteen days at rates to be established by such Federal reserve banks, subject to the review and determination of the Federal Reserve Board, provided such promissory notes are secured by such notes, drafts, bills of exchange, or bankers' acceptances as are eligible for rediscount or for purchase by Federal reserve banks under the provisions of this Act, or by the deposit or pledge of bonds or notes of the United States.f Limitation on liabili- % Section fifty-two hundred and two of the Revised tie> of national banks Statutes of the United States is hereby amended so as to read as follows : Sec. 5202. 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 na- ture following: First. Notes of circulation. [I Second. Moneys deposited with or collected by the association. Third. Bills of exchange or drafts drawn against * As amended by act of September 7, 1916. t Or by bonds and notes of the War Finance Corporation under act of April 5, 1918. J As amended by acts of April 5, 1918, and October 22, 1919. The Federal Reserve Act 37 money actually on deposit to the credit of the associa- tion, or due thereto. Fourth. Liabilities to the stockholders of the asso- ciation for dividends and reserve profits. Fifth. Liabilities incurred under the provisions of the Federal Reserve Act. Sixth. Liabilities incurred under the provisions of the War Finance Corporation Act. Seventh. Liabilities created by the indorsement of accepted bills of exchange payable abroad actually owned by the indorsing bank and discounted at home or abroad. * The discount and rediscount and the purchase and sale 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. That in addition to the powers now vested by law Insurance agency in national banking associations organized under the p°wer» laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comp- troller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by soliciting and selling insur- ance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon be- tween the said association and the insurance company for which it may act as agent; and may also act as the broker or agent for others in making or procuring loans Real e»i«te l°»n on real estate located within one hundred miles of the a e enc y place in which said bank may be located, receiving for such services a reasonable fee or commission: Provided, * Following paragraphs as amended by act of September 7, 1916. furniik dollar exchange 38 The Federal Reserve Act however, That no such bank shall in any case guarantee either the principal or interest of any such loans or assume or guarantee the payment of any premium on insurance policies issued through its agency by its principal: And provided further, That the bank shall not guarantee the truth of any statement made by an as- sured in filing his application for insurance. Accepting to ^ n y me mber bank may accept drafts or bills of ex- change drawn upon it having not more than three months' sight to run, exclusive of days of grace, drawn under regulations to be prescribed by the Federal Reserve Board by banks or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange as required by the usages of trade in the respective coun- tries, dependencies, or insular possessions. Such drafts or bills may be acquired by Federal reserve banks in such amounts and subject to such regulations, restric- tions, and limitations as may be prescribed by the Federal Reserve Board: Provided, however, That no member bank shall accept such drafts or bills of ex- change referred to in this paragraph for any one bank to an amount exceeding in the aggregate ten per centum of the paid-up and unimpaired capital and surplus of the accepting bank unless the draft or bill of exchange is accompanied by documents conveying or securing title or by some other adequate security: Provided fur- ther, That no member bank shall accept such drafts or bills in an amount exceeding at any time the aggre- gate of one-half of its paid-up and unimpaired capital and surplus. OPEN-MARKET OPERATIONS. Dealings in exchange g EC> 14 A n y Federal reserve bank may, under rules and regulations prescribed by the Federal Reserve Board, purchase 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 The Federal Reserve Act 39 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 Bullion abroad, to make loans thereon, exchange Federal re- serve notes for gold, gold coin, or gold certificates, and to contract for loans of 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 Public securities notes of the United States, and bills, notes, revenue bonds, and warrants with a maturity from date of pur- chase of not exceeding six months, issued in anticipa- tion of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, dis- trict, political subdivision, or municipality in the con- tinental 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, Commercial bills with or without its endorsement, bills of exchange arising out of commercial transactions, as hereinbefore defined; (d) To establish from time to time, subject to review Determination of and determination of the Federal Reserve Board, rates discount 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)f To establish accounts with other Federal reserve Foreign correspond- banks for exchange purposes and, with the consent or ents or agencies upon the order and direction of the Federal Reserve Board and under regulations to be prescribed by said board, to open and maintain accounts in foreign coun- * The act of July 17, 1916, authorized Federal reserve banks to deal in Federal farm loan bonds under the same conditions as in other public secu- rities. t As amended by act of June 21, 1917. LIBRARY MAR 18 1946 40 The Federal Reserve Act tries, appoint correspondents, and establish agencies in such countries wheresoever it may be deemed best for the purpose of purchasing, selling, and collecting bills of exchange, and to buy and sell, with or without its indorsement, through such correspondents or agen- cies, bills of exchange (or acceptances) arising out of actual commercial transactions which have not more than ninety days to run, exclusive of days of grace, and which bear the signature of two or more responsible parties, and, with the consent of the Federal Reserve Board, to open and maintain banking accounts for such foreign correspondents or agencies. Whenever any such account has been opened or agency or correspond- ent has been appointed by a Federal reserve bank, with the consent of or under the order and direction of the Federal Reserve Board, any other Federal reserve bank may, with the consent and approval of the Federal Reserve Board, be permitted to carry on or conduct, through the Federal reserve bank opening such account or appointing such agency or correspondent, any trans- action authorized by this section under rules and regula- tions to be prescribed by the board. GOVERNMENT DEPOSITS. Government fiscal agents 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. Government deposits No public funds of the Philippine Islands, or of the * Under the act of April 5, 1918, as amended March 8, 1919, Federal reserve banks may also act as fiscal agents and depositaries of the War Finance Corporation. The Federal Reserve Act 41 postal savings, or any Government funds, shall be deposited in the continental United States in any 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 Federal reserve discretion of the Federal Reserve Board for the purpose no,es 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. f Any Federal reserve bank may make application Application for notes to the local Federal reserve agent for such amount of the Federal reserve notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal reserve agent of col- lateral 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 Collateral security be notes, drafts, bills of exchange, or acceptances ac- quired under the provisions of section thirteen of this Act, or bills of exchange indorsed by a member bank of any Federal reserve district and purchased under the provisions of section fourteen of this Act, or bankers' acceptances purchased under the provisions of said section fourteen, or gold or gold certificates; but in no * Under the Liberty bond acts, the proceeds of sales of Liberty bonds and income and profits taxes may be deposited in non-member banks. The act of May 18, 1916, authorizes the deposit of postal savings funds in non- member banks. f The six following paragraphs as amended by act of June 21, 1917. 42 The Federal Reserve Act Gold Redemption of Fed- eral reserve notes Penalt) event shall such collateral security, whether gold, gold certificates, or eligible paper, be less than the amount of Federal reserve notes applied for.* 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 he is accredited. The said Federal Reserve Board may at any time call upon a Federal reserve bank for addi- tional 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 : Provided, however, That when the Federal reserve agent holds gold or gold certificates as collateral for Federal reserve notes issued to the bank such gold or gold certificates shall be counted as part of the gold reserve which such bank is required to main- tain against its Federal reserve notes in actual circula- tion. Notes so paid out shall bear upon their faces a distinctive letter and serial number which shall be as- signed 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 or, upon direction of such Federal reserve bank, they shall be forwarded direct to the Treasurer of the United States to be retired. 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 * Under the act of April 5, 1918, notes secured by War Finance Corporation bonds may be used as collateral to the same extent as notes secured by United States bonds. The Federal Reserve Act 43 Federal reserve bank shall, upon demand of the Secre- tary 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 certifi- cates, 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 Treasurer other- wise 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 Cur- rency 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 judg- ment of the Secretary of the Treasury for the redemp- tion of the Federal reserve notes issued to such bank, but in no event less than five per centum of the total amount of notes issued less the amount of gold or gold certificates held by the Federal reserve agent as col- lateral security; 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 appli- cation 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 banks so applying, and such bank shall be charged with the amount of notes issued to it and shall Interest on not«» pay such rate of interest as may be established by the Gold redemption fund 44 The Federal Reserve Act Retirement of notes Substitution of collateral Federal Reserve Board on only that amount of such notes which equals the total amount of its outstanding Federal reserve notes less the amount of gold or gold certificates held by the Federal reserve agent as col- lateral security. Federal reserve notes 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 de- posited 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 to the Treasurer of the United States so much of the gold held by him as collateral security for Federal reserve notes as may be required for the exclusive purpose of the redemption of such Federal reserve notes, but such gold when de- posited with the Treasurer shall be counted and con- sidered as if collateral security on deposit with the Federal reserve agent. Any Federal reserve bank may at its discretion with- draw collateral deposited with the local Federal reserve agent for the protection of its Federal reserve notes issued to it and shall at the same time substitute there- for other collateral of equal amount with the approval of the Federal reserve agent under regulations to be * Or upon security of certificates of indebtedness, or one-year gold notes under the act of April 23, 1918. The Federal Reserve Act 45 prescribed by the Federal Reserve Board. Any Fed- eral reserve bank may retire any of its Federal reserve notes by depositing them with the Federal reserve agent or with the Treasurer of the United States, and such Federal reserve bank shall thereupon be entitled to receive back the collateral deposited with the Federal reserve agent for the security of such notes. Federal reserve banks shall not be required to maintain the reserve or the redemption fund heretofore provided for against Federal reserve notes which have been retired. Federal reserve notes so deposited shall not be reissued except upon compliance with the conditions of an orig- inal issue. * All Federal reserve notes and all gold, gold certifi- Gwtody of currency cates, and lawful money issued to or deposited with any Federal reserve agent under the provisions of the Fed- eral Reserve Act shall hereafter be held for such agent, under such rules and regulations as the Federal Reserve Board may prescribe, in the joint custody of himself and the Federal reserve bank to which he is accredited. Such agent and such Federal reserve bank shall be jointly liable for the safe-keeping of such Federal re- serve notes, gold, gold certificates, and lawful money. Nothing herein contained, however, shall be construed to prohibit a Federal reserve agent from depositing gold or gold certificates with the Federal Reserve Board, to be held by such board subject to his order, or with the Treasurer of the United States for the purposes author- ized by law. f In order to furnish suitable notes for circulation as P™*'"* »f "»te» Federal reserve notes, the Comptroller of the Currency shall, under the direction of the Secretary of the Treas- ury, 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 denom- inations of $5, $10, $20, $50, $100, $500, $1000, $5000, * Paragraph added by act of June 21, 1917. t As amended by act of September 26, 1918. 46 TheFederalReserveAct $10,000 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 Federal reserve banks through which they are issued. Custody of When such notes have been prepared, they shall be note , 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 by this Act. The plates and dies to be procured by the Comptrol- ler of the 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 pro- vided 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 dis- tinctive 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 The Federal Reserve Act 47 Clearing and collec- tion of checks 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 deposi- tors, 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 mem- ber 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 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 of clearing or collection rendered by the Federal reserve bank. The Federal Reserve Board shall make and promul- gate from time to time regulations governing the trans- fer of funds and charges therefor among Federal reserve banks and their branches, and may at its discretion exercise the functions of a clearing house for such Fed- eral 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. * That the Secretary of the Treasury js hereby au- Gold settlement fund thorized and directed to receive deposits of gold coin or of gold certificates with the Treasurer or any assistant treasurer of the United States when tendered by any Clearing house fuoctions * Remaining paragraphs added by act of June 21, 1917. 48 The Federal Reserve Act Federal reserve bank or Federal reserve agent for credit to its or his account with the Federal Reserve Board. The Secretary shall prescribe by regulation the form of receipt to be issued by the Treasurer or Assistant Treas- urer to the Federal reserve bank or Federal reserve agent making the deposit, and a duplicate of such receipt shall be delivered to the Federal Reserve Board by the Treasurer at Washington upon proper advices from any assistant treasurer that such deposit has been made. Deposits so made shall be held subject to the orders of the Federal Reserve Board and shall be pay- able in gold coin or gold certificates on the order of the Federal Reserve Board to any Federal reserve bank or Federal reserve agent at the Treasury or at the Sub- treasury of the United States nearest the place of busi- ness of such Federal reserve bank or such Federal reserve agent: Provided, however, That any expense incurred in shipping gold to or from the Treasury or subtreasuries in order to make such payments, or as a result of making such payments, shall be paid by the Federal Reserve Board and assessed against the Federal reserve banks. The order used by the Federal Reserve Board in making such payments shall be signed by the governor or vice governor, or such other officers or members as the board may by regulation prescribe. The form of such order shall be approved by the Secretary of the Treasury. Expenses The expenses necessarily incurred in carrying out these provisions, including the cost of the certificates or receipts issued for deposits received, and all expenses incident to the handling of such deposits shall be paid by the Federal Reserve Board and included in its assess- ments against the several Federal reserve banks. Gold deposits as Gold deposits standing to the credit of any Federal reserve reserve bank with the Federal Reserve Board shall, at the option of said bank, be counted as part of the law- ful reserve which it is required to maintain against out- standing Federal reserve notes, or as a part of the reserve it is required to maintain against deposits. Gold certificates Nothing in this section shall be construed as amend- ing section six of the act of March fourteenth, nineteen The Federal Reserve Act *9 hundred, as amended by the acts of March fourth, nineteen hundred and seven, March second, nineteen hundred and eleven, and June twelfth, nineteen hundred and sixteen, nor shall the provisions of this section be construed to apply to the deposits made or to the re- ceipts or certificates issued under those acts. Sec. 17.* So much of the provisions of section fifty- Deposit of bonds by one hundred and fifty-nine of the Revised Statutes of ,,a,io,,a, b,,I,fe, 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 association 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, and so much of those provisions or of any other provisions of existing statutes as require any national banking association now or hereafter organized to maintain a minimum deposit of such bonds with the Treasurer is hereby repealed. REFUNDING BONDS. Sec. 18. After two years from the passage of this Retirement of national- Act, and at any time during a period of twenty years ba,,k note » 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 Purchase of bonds by period, furnish the Federal Reserve Board with a list reserve banks 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 applica- tions 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 * As amended by act of June 21, 1917. SO The Federal Reserve Act 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 out- standing notes secured by such bonds, which notes shall be canceled and permanently retired when re- deemed. Federal reserve The Federal reserve banks purchasing such bonds buk notei 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 cir- culating 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 * Under the act of April 23, 1918, Federal reserve banks may issue Federal reserve bank notes in any denominations, including $1 and $2, against the security of United States certificates of indebtedness or one-year gold notes. The Federal Reserve Act 5] national-bank notes now provided by law. They shall be issued and redeemed under the same terms and con- ditions 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, ap- Refunding of 2% proved by the Federal Reserve Board, the Secretary of hmil the Treasury may issue, in exchange for United States two per centum gold bonds bearing the circulation priv- ilege, but against which no circulation is outstanding, one-year gold 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 ex- change, 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 pur- chase at maturity such notes shall continue in force for a period not to exceed thirty years. For the purpose of making the exchange herein pro- i, sue of notes and vided for, the Secretary of the Treasury is authorized bonds 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 in- terest at the rate of three per centum per annum, pay- * These notes are given the circulation privilege under certain conditions by the act of April 23, 1918. 52 The Federal Reserve Act able quarterly, such Treasury notes to be payable not more than one year from the date of their issu'e 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 State, municipal, or local authorities. And for the same purpose, the Secretary is authorized and empow- ered 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, ap- proved by the Federal Reserve Board, the Secretary may issue at par such three per centum bonds in ex- change for the one-year gold notes herein provided for. Demand and time deposits defined Memb ers reserves Country banks 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, all savings accounts and certificates of deposit which are subject to not less than thirty days' notice before payment, and all postal savings deposits.! Every bank, banking association, or trust company which is or which becomes a member of any Federal reserve bank shall establish and maintain reserve bal- ances with its Federal reserve bank as follows : (a) If not in a reserve or central reserve city, as now or hereafter defined, it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than seven per centum of the aggregate * As amended by act of June 21, 1917. t Under the Liberty Bond acts, Government deposits other than postal savings deposits are not subject to reserve requirements. The Federal Reserve Act 53 amount of its demand deposits and three per centum of its time deposits. (b)* If in a reserve city, as now or hereafter defined, Re*e"e city banks it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than ten per centum of the aggregate amount of its demand deposits and three per centum of its time deposits: Provided, however, That if located in the outlying dis- tricts of a reserve city or in territory added to such a city by the extension of its corporate charter, it may, upon the affirmative vote of five members of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraph (a) hereof. (c) If in a central reserve city, as now or hereafter Central reserve denned, it shall hold and maintain with the Federal cily bank ' reserve bank of its district an actual net balance equal to not less than thirteen per centum of the aggregate amount of its demand deposits and three per centum of its time deposits: Provided, however, That if located in the outlying districts of a central reserve city or in territory added to such city by the extension of its corporate charter, it may, upon the affirmative vote of five members of the Federal Reserve Board, hold and maintain the reserve balances^specified in paragraphs (a) or (b) thereof. No member bank shall keep on deposit with any State Deposits with bank or trust company which is not a member bank a nonmembers sum in excess of ten per centum of its own paid-up capi- tal 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 required balance carried by a member bank with Maintenance of a Federal reserve bank may, under the regulations and reserves subject to such penalties as may be prescribed by the Federal Reserve Board, be checked against and with- drawn by such member bank for the purpose of meeting * Subdivisions (b) and (c) as amended by act of September 26, 1918. 54 The Federal Reserve Act Basis for computing Banks outside continental U. S. National-bank note redemption fund existing liabilities: Provided, however, That no bank shall at any time make new loans or shall pay any divi- dends unless and until the total balance required by law is fully restored. In estimating the balances required by this Act, the net difference of amounts due to and from other banks shall be taken as the basis for ascertaining the deposits against which required balances with Federal reserve banks shall be determined. National banks, or banks organized under local laws, located in Alaska or in a dependency or insular posses- sion or any part of the United States outside the conti- nental 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 may, with the consent of the Re- serve 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 pro- visions 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 bank- ing 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 afore- said, is hereby repealed. And from and after the pas- sage 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. Examination of member banks 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 examin- TheFedebalResebveAct 55 ers 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 author- ities 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. The examiner making the examination of any national bank, or of any other member bank, shall have power to make a thorough examination of all the affairs of the bank, and in doing so he shall have power to ad- minister 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 recommenda- tion of the Comptroller of the Currency, shall fix 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 s P ecial examinations by the Comptroller of the Currency, every Federal re- serve 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 expense 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 all times furnish to the Federal Reserve Board such information as may be demanded concerning the condition of any member * Except banks admitted to membership in the system under authority of section 9 of this Act. See page 22. 56 The Federal Reserve Act Examination of Fed- eral reierre bank* Loam or gratuities to bank examiner! Restriction! on examiner! bank within the district of the said Federal reserve bank. No bank shall be subject to any 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 each 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 exam- ination and report of the condition of any Federal reserve bank. Sec. 22.* (a) No member bank and no officer, direc- tor, 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 deemed guilty of a misde- meanor and shall be imprisoned one year or fined not more than $5,000, or both, and may be fined a further sum equal to the money so loaned or gratuity given, and shall forever thereafter be disqualified from holding office as a national bank examiner. (b) No national bank examiner shall perform any other service for compensation while holding such office for any bank or officer, director, or employee thereof. No examiner, public or private, shall disclose the names of borrowers or th$ collateral for loans of a mem- ber 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 * As amended by act of September 26, 1918. The Federal Reserve Act 57 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 bank exam- iner violating the provisions of this subsection shall be imprisoned not more than one year or fined not more than $5,000, or both. (c) Except as herein provided, any officer, director, Acceptance of employee, or attorney of a member bank who stipulates con5ldera,,0,, for » , , • • procuring loans for or receives or consents or agrees to receive any tee, commission, gift, or thing of value from any person, firm, or corporation, for procuring or endeavoring to procure for such person, firm, or corporation, or for any other person, firm, or corporation, any loan from or the purchase or discount of any paper, note, draft, check, or bill of exchange by such member bank shall be deemed guilty of a misdemeanor and shall be im- prisoned not more than one year or fined not more than $5,000, or both. (d) Any member bank may contract for, or purchase Dealings with from, any of its directors or from any firm of which any directors of its directors is a member, any securities or other property, when (and not otherwise) such purchase is made in the regular course of business upon terms not less favorable to the bank than those offered to others, or when such purchase is authorized by a majority of the board of directors not interested in the sale of such securities or property, such authority to be evidenced by the affirmative vote or written assent of such direc- tors: Provided, however, That when any director, or firm of which any director is a member, acting for or on behalf of others, sells securities or other property to a member bank, the Federal Reserve Board by regula- tion may, in any or all cases, require a full disclosure to be made, on forms to be prescribed by it, of all commis- sions or other considerations received, and whenever such director or firm, acting in his or its own behalf, sells securities or other property to the bank the Federal 58 The Federal Reserve Act Interest on deposits of officers, etc. Penalties Reserve Board by regulation, may require a full dis- closure of all profit realized from such sale. Any member bank may sell securities or other prop- erty to any of its directors, or to a firm of which any of its directors is a member, in the regular course of business on terms not more favorable to such director or firm than those offered to others, or when such sale is authorized by a majority of the board of directors of a member bank to be evidenced by their affirmative vote or written assent: Provided, however, That nothing in this subsection contained shall be construed as authorizing member banks to purchase or sell securities or other property which such banks are not otherwise authorized by law to purchase or sell. (e) No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank. (f) If the directors or officers of any member bank shall knowingly violate or permit any of the agents, officers, or directors of any member bank to violate any of the provisions of this section or regulations of the board made under authority thereof, every director and officer participating in or assenting to such viola- tion shall be held liable in his personal and individual capacity for all damages which the member bank, its shareholders, or any other persons shall have sustained in consequence of such violation. Stockholders' Sec. 23. The stockholders of every national banking liability association shall be held individually responsible for all contracts, debts, and engagements of such associa- tion, 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 associa- tion to meet its obligations, or with knowledge of such impending failure, shall be liable to the same extent The Federal Reserve Act 59 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 ON FARM LANDS. Sec. 24.* Any national banking association not situ- ated in a central reserve city may make loans secured by improved and unencumbered farm land situated within its Federal reserve district or within a radius of one hundred miles of the place in which such bank is located, irrespective of district lines, and may also make loans secured by improved and unencumbered real estate located within one hundred miles of the place in which such bank is located, irrespective of district lines ; but no loan made upon the security of such farm land shall be made for a longer time than five years, and no loan made upon the security of such real estate as distinguished from farm land shall be made for a longer time than one year nor shall the amount of any such loan, whether upon such farm land or upon such real estate, exceed fifty per centum of the actual value of the property offered as security. Any such bank may make such loans, whether secured by such farm land or such real estate, 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 con- tinue hereafter as heretofore to receive time deposits and to pay interest on the same. The Federal Reserve Board shall have 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. Loans by reserve city and country banks FOREIGN BRANCHES. Powers of certain Sec. 25.* Any national banking association possess- national banks * As amended by act of September 7, 1916. 60 TheFedeealKesebveAct ing a capital and surplus of $1,000,000 or more may file application with the Federal Reserve Board for per- mission to exercise, upon such conditions and under such regulations as may be prescribed by the said board, either or both of the following powers : Foreign branches First. To establish branches in foreign countries or dependencies or insular possessions 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. Investment in foreign Second. To invest an amount not exceeding in the banking corporations aggregate ten per centum of its paid-in capital stock and surplus in the stock of one or more banks or corpora- tions chartered or incorporated under the laws of the United States or of any State thereof, and principally engaged in international or foreign banking, or banking in a dependency or insular possession of the United States either directly or through the agency, ownership, or control of local institutions in foreign countries, or in such dependencies or insular possessions. Investment in foreign * Until January 1, 1921, any national banking asso- 6nancin g corporations c i a ti on , without regard to the amount of its capital and surplus, may file application with the Federal Reserve Board for permission, upon such conditions and under such regulations as may be prescribed by said board, to invest an amount not exceeding in the aggregate 5 per centum of its paid-in capital and sur- plus in the stock of one or more corporations chartered or incorporated under the laws of the United States or of any State thereof and* regardless of its location, principally engaged in such phases of international or foreign financial operations as may be necessary to facilitate the export of goods, wares, or merchandise from the United States or any of its dependencies or insular possessions to any foreign country: Provided, however, That in no event shall the total investments authorized by this section by any one national bank exceed 10 per centum of its capital and surplus. • Paragraphs 2, 3 and 4 as amended by act of September 17, 1919. The Federal Reserve Act 61 Such application shall specify the name and capital Application for of the banking association filing it, the powers applied pow "" for, and the place or places where the banking or finan- cial operations proposed are to be carried on. The Federal Reserve Board shall have power to approve or to reject such application in whole or in part if for any reason the granting of such application is deemed inex- pedient, and shall also have power from time to time to increase or decrease the number of places where such banking operations may be carried on. Every national banking association operating foreign Reports and exami- branches shall be required to furnish information con- nations of branches cerning the condition of such branches to the Comp- and corporation! troller of the Currency upon demand, and every mem- ber bank investing in the capital stock of banks or corporations described above shall be required to fur- nish information concerning the condition of such banks or corporations to the Federal Reserve Board upon demand, and the Federal Reserve Board may order special examinations of the said branches, banks, or corporations at such time or times as it may deem best. Before any national bank shall be permitted to pur- chase stock in any such corporation the said corporation shall enter into an agreement or undertaking with the Federal Reserve Board to restrict its operations or conduct its business in such manner or under such limitations and restrictions as the said board may pre- scribe for the place or places wherein such business is to be conducted. If at any time the Federal Reserve Board shall ascertain that the regulations prescribed by it are not being complied with, said board is hereby authorized and empowered to institute an investigation of the matter and to send for persons and papers, subpoena witnesses, and administer oaths in order to satisfy itself as to the actual nature of the transactions referred to. Should such investigation result in estab- lishing the failure of the corporation in question, or of the national bank or banks which may be stockholders therein, to comply with the regulations laid down by the said Federal Reserve Board, such national banks Regulations of Fed- eral Reserve Board 62 TheFedebalResebveAct may be required to dispose of stock holdings in the said corporation upon reasonable notice. Segregation of Every such national banking association shall con- accounts duct 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 accrued at each branch as a separate item. Interlocking ^ nv di rec tor or other officer, agent, or employee of directorate permitted any member bank mav> with t h e approval of the Federal Reserve Board, be a director or other officer, agent, or employee of any such bank or corporation above mentioned in the capital stock of which such member bank shall have invested as hereinbefore pro- vided, without being subject to the provisions of section eight of the Act approved October fifteenth, nine- teen hundred and fourteen, entitled "An Act to supple- ment existing laws against unlawful restraints and mon- opolies, and for other purposes."* BANKING CORPORATIONS AUTHORIZED TO DO FOREIGN BANKING BUSINESS. Pur P° s « Sec. 25 A.f Corporations to be organized for the purpose of engaging in international or foreign banking or other international or foreign financial operations, or in banking or other financial operations in a depen- dency or insular possession of the United States, either directly or through the agency, ownership, or control of local institutions in foreign countries, or in such dependencies or insular possessions as provided by this section, and to act when required by the Secretary of the Treasury as fiscal agents of the United States, may be formed by any number of natural persons, not less in any case than five. Article* of Such persons shall enter into articles of association association which shall specify in general terms the objects for which the association is formed and may contain any other provisions not inconsistent with law which the * The Clayton Act. f As amended by act of December 24, 1919, (Edge Act). The Fedebal Reserve Act 63 association may see fit to adopt for the regulation of its business and the conduct of its affairs. Such articles of association shall be signed by all of Organization the persons intending to participate in the organization certlficale of the corporation and, thereafter, shall be forwarded to the Federal Reserve Board and shall be filed and preserved in its office. The persons signing the said articles of association shall, under their hands, make an organization certificate which shall specifically state: First. The name assumed by such corporation, which shall be subject to the approval of the Federal Reserve Board. Second. The place or places where its operations are to be carried on. Third. The place in the United States where its home office is to be located. Fourth. The amount of its capital stock and the number of shares into which the same shall be divided. Fifth. The names and places of business or residence of the persons executing the certificate and the number of shares to which each has subscribed. Sixth. The fact that the certificate is made to enable the persons subscribing the same, and all other persons, firms, companies, and corporations, who or which may thereafter subscribe to or purchase shares of the cap- ital stock of such corporation, to avail themselves of the advantages of this section. The persons signing the organization certificate shall Disposition of duly acknowledge the execution thereof before a judge cerhficate of some court of record or notary public, who shall certify thereto under the seal of such court or notary, and thereafter the certificate shall be forwarded to the Federal Reserve Board to be filed and preserved in its office. Upon duly making and filing articles of asso- ciation and an organization certificate, and after the Federal Reserve Board has approved the same and issued a permit to begin business, the association shall become and be a body corporate, and as such and in the name designated therein shall have power to General powers adopt and use a corporate seal, which may be changed 64 The Federal Resebve Act at the pleasure of its board of directors; to have suc- cession for a period of twenty years unless sooner dis- solved by the act of the shareholders owning two-thirds of the stock or by an Act of Congress or unless its franchises become forfeited by some violation of law; to make contracts; to sue and be sued, complain, and defend in any court of law or equity; to elect or appoint directors, all of whom shall be citizens of the United States; and, by its board of directors, to appoint such officers and employees as may be deemed proper, define their authority and duties, require bonds of them, and fix the penalty thereof, dismiss such officers or employees, or any thereof, at pleasure and appoint others to fill their places; to prescribe, by its board of directors, by-laws not inconsistent with law or with the regulations of the Federal Reserve Board regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers and em- ployees appointed, its property transferred, and the privileges granted to it by law exercised and enjoyed. Special powen Each corporation so organized shall have power, under such rules and regulations as the Federal Reserve Board may prescribe: (a) To purchase, sell, discount, and negotiate, with or without its indorsement or guaranty, notes, drafts, checks, bills of exchange, acceptances, including bank- ers' acceptances, cable transfers, and other evidences of indebtedness; to purchase and sell, with or without its indorsement or guaranty, securities, including the obligations of the United States or of any State thereof but not including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restric- tions as the Federal Reserve Board may impose; to issue letters of credit; to purchase and sell coin, bullion, and exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the Federal Reserve Board may prescribe, but in no event having liabilities outstanding thereon at any The Federal Reserve Act 65 one time exceeding ten times its capital stock and sur- plus; to receive deposits outside of the United States and to receive only such deposits within the United States as may be incidental to or for the purpose of carrying out transactions in foreign countries or depen- dencies or insular possessions of the United States; and generally to exercise such powers as are incidental to the powers conferred by this Act or as may be usual, in the determination of the Federal Reserve Board, in connection with the transaction of the business of bank- ing or other financial operations in the countries, colo- nies, dependencies, or possessions in which it shall trans- act business and not inconsistent with the powers specifically granted herein. Nothing contained in this section shall be construed to prohibit the Federal Reserve Board, under its power to prescribe rules and regulations, from limiting the aggregate amount of liabilities of any or all classes incurred by the corpora- tion and outstanding at any one time. Whenever a corporation organized under this section receives de- posits in the United States authorized by this section it shall carry reserves in such amounts as the Federal Reserve Board may prescribe, but in no event less than 10 per centum of its deposits. (b) To establish and maintain for the transaction of its business branches or agencies in foreign countries, their dependencies or colonies, and in the dependencies or insular possessions of the United States, at such places as may be approved by the Federal Reserve Board and under such rules and regulations as it may prescribe, including countries or dependencies not specified in the original organization certificate. (c) With the consent of the Federal Reserve Board to purchase and hold stock or other certificates of owner- ship in any other corporation organized under the provisions of this section, or under the laws of any for- eign country or a colony or dependency thereof, or under the laws of any State, dependency or insular possession of the United States but not engaged in the general business of buying or selling goods, wares, Branches and agencies Stockholding in other corporations 66 The Federal Reserve Act Stock acquired in satisfaction of debt Business in U. S. Restrictions on char- acter of business merchandise, or commodities in the United States, and not transacting any business in the United States except such as in the judgment of the Federal Reserve Board may be incidental to its international or foreign business: Provided, however, That, except with the ap- proval of the Federal Reserve Board, no corporation organized hereunder shall invest in any one corporation an amount in excess of 10 per centum of its own capital and surplus, except in a corporation engaged in the business of banking, when 15 per centum of its capital and surplus may be so invested: Provided further, That no corporation organized hereunder shall purchase, own, or hold stock or certificates of ownership in any other corporation organized hereunder or under the laws of any State which is in substantial competition therewith, or which holds stock or certificates or owner- ship in corporations which are in substantial competi- tion with the purchasing corporation. Nothing contained herein shall prevent corporations organized hereunder from purchasing and holding stock in any corporation where such purchase shall be neces- sary to prevent a loss upon a debt previously contracted in good faith; and stock so purchased or acquired in corporations organized under this section shall within six months from such purchase be sold or disposed of at public or private sale unless the time to so dispose of same is extended by the Federal Reserve Board. No corporation organized under this section shall carry on any part of its business in the United States except such as, in the judgment of the Federal Reserve Board, shall be incidental to its international or foreign business : And provided further, That except such as is incidental and preliminary to its organization no such corporation shall exercise any of the powers conferred by this section until it has been duly authorized by the Federal Reserve Board to commence business as a corporation organized under the provisions of this section. No corporation organized under this section shall engage in commerce or trade in commodities except as The Federal Besehve Act 67 specifically provided in this section, nor shall it either directly or indirectly control or fix or attempt to control or fix the price of any such commodities. The charter of any corporation violating this provision shall be subject to forfeiture in the manner hereinafter provided in this section. It shall be unlawful for any director, officer, agent, or employee of any such corporation to use or to conspire to use the credit, the funds, or the power of the corporation to fix or control the price of any such commodities, and any such person violating this provision shall be liable to a fine of not less than $1,000 and not exceeding $5,000 or imprisonment not less than one year and not exceeding five years, or both, in the discretion of the court. No corporation shall be organized under the provi- Capital stock sions of this section with a capital stock of less than $2,000,000, one-quarter of which must be paid in before the corporation may be authorized to begin business, and the remainder of the capital stock of such corpora- tion shall be paid in installments of at least 10 per cen- tum on the whole amount to which the corporation shall be limited as frequently as one installment at the end of each succeeding two months from the time of the commencement of its business operations until the whole of the capital stock shall be paid in. The capital stock of any such corporation may be increased Increase of at any time, with the approval of the Federal Reserve Board, by a vote of two-thirds of its shareholders or by unanimous consent in writing of the shareholders without a meeting and without a formal vote, but any such increase of capital shall be fully paid in within ninety days after such approval; and may be reduced Decrease of in like manner, provided that in no event shall it be less than $2,000,000. No corporation, except as herein provided, shall during the time it shall continue its operations withdraw or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. Any national banking association may investment* in »t invest in the stock of any corporation organized under national banks the provisions of this section, but the aggregate amount 68 The Federal Reserve Act American control required Anti-trosl laws Exceptions Federal Reserve Board of stock held in all corporations engaged in business of the kind described in this section and in section 25 of the Federal Reserve Act as amended shall not exceed 10 per centum of the subscribing bank's capital and surplus. A majority of the shares of the capital stock of any such corporation shall at all times be held and owned by citizens of the United States, by corporations the controlling interest in which is owned by citizens of the United States, chartered under the laws of the United States or of a State of the United States, or by firms or companies, the controlling interest in which is owned by citizens of the United States. The provi- sions of section 8 of the Act approved October 15, 1914, entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," as amended by the Acts of May 15, 1916, and September 7, 1916, shall be construed to apply to the directors, other officers, agents, or em- ployees of corporations organized under the provisions of this section : Provided, however, That nothing herein contained shall (1) prohibit any director or other officer, agent or employee of any member bank, who has procured the approval of the Federal Reserve Board from serving at the same time as a director or other officer, agent or employee of any corporation organized under the provisions of this section in whose capital stock such member bank shall have invested; or (2) prohibit any director or other officer, agent, or employee of any corporation organized under the provisions of this section, who has procured the approval of the Fed- eral Reserve Board, from serving at the same time as a director or other officer, agent or employee of any other corporation in whose capital stock such first mentioned corporation shall have invested under the provisions of this section. No member of the Federal Reserve Board shall be an officer or director of any corporation organized under the provisions of this section, or of any corporation engaged in similar business organized under the laws The Federal Reserve Act 69 of any State, nor hold stock in any such corporation, 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. Shareholders in any corporation organized under the Liability of provisions of this section shall be liable for the amount shareholders of their unpaid stock subscriptions. No such corpora- tion shall become a member of any Federal reserve bank. Should any corporation organized hereunder violate or Forfeiture of charter fail to comply with any of the provisions of this section, all of its rights, privileges, and franchises derived here- from may thereby be forfeited. Before anysuch corpora- tion shall be declared dissolved, or its rights, privileges, and franchises forfeited, any noncompliance with, or violation of such laws shall, however, be determined and adjudged by a court of the United States of com- petent jurisdiction, in a suit brought for that purpose in the district or territory in which the home office of such corporation is located, which suit shall be brought by the United States at the instance of the Federal Reserve Board or the Attorney General. Upon adjudication of such noncompliance or violation, each director and officer who participated in, or assented to, the illegal act or acts, shall be liable in his personal or individual capacity for all damages which the said corporation shall have sustained in consequence thereof. No dissolution shall take away or impair any remedy against the corporation, its stockholders, or officers for any liability or penalty previously incurred. Any such corporation may go into voluntary liquida- Voluntary liquidation tion and be closed by a vote of its shareholders owning two-thirds of its stock. Whenever the Federal Reserve Board shall become insolvency satisfied of the insolvency of any such corporation, it may appoint a receiver who shall take possession of all of the property and assets of the corporation and exer- cise the same rights, privileges, powers, and authority with respect thereto as are now exercised by receivers 10 The Federal Reserve Act Stockholders' meetings Reports and examinations of national banks appointed by the Comptroller of the Currency of the United States: Provided, however, That the assets of the corporation subject to the laws of other countries or jurisdictions shall be dealt with in accordance with the terms of such laws. Every corporation organized under the provisions of this section shall hold a meeting of its stockholders annually upon a date fixed in its by-laws, such meeting to be held at its home office in the United States. Every such corporation shall keep at its home office books containing the names of all stockholders thereof, and the names and addresses of the members of its board of directors, together with copies of all reports made by it to the Federal Reserve Board. Every such corporation shall make reports to the Federal Reserve Board at such times and in such form as it may require; and shall be subject to examination once a year and at such other times as may be deemed necessary by the Federal Reserve Board by examiners appointed by the Federal Reserve Board, the cost of such examinations, including the compensation of the examiners, to be fixed by the Federal Reserve Board and to be paid by the corporation examined. Dividends and surplus The directors of any corporation organized under the provisions of this section may, semiannually, declare a dividend of so much of the net profits of the corporation as they shall judge expedient; but each corporation shall, before the declaration of a dividend, carry one- tenth of its net profits of the preceding half year to its surplus fund until the same shall amount to 20 per centum of its capital stock. Taxation Any corporation organized under the provisions of this section shall be subject to tax by the State within which its home office is located in the same manner and to the same extent as other corporations organized under the laws of that State which are transacting a similar character of business. The shares of stock in such corporation shall also be subject to tax as the personal property of the owners or holders thereof in The Federal Reserve Act 71 Conversion from state to federal charter the same manner and to the same extent as the shares of stock in similar State corporations. Any corporation organized under the provisions of Renewal of charter this section may at any time within the two years next previous to the date of the expiration of its corporate existence, by a vote of the shareholders owning two- thirds of its stock, apply to the Federal Reserve Board for its approval to extend the period of its corporate existence for a term of not more than twenty years, and upon certified approval of the Federal Reserve Board such corporation shall have its corporate exist- ence for such extended period unless sooner dissolved by the act of the shareholders owning two-thirds of its stock, or by an act of Congress or unless its franchise becomes forfeited by some violation of law. Any bank or banking institution, principally engaged in foreign business 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 corporation under the provisions of this sec- tion may, by the vote of the shareholders owning not less than two-thirds of the capital stock of such bank or banking association, with the approval of the Federal Reserve Board, be converted into a Federal corporation of the kind authorized by this section with any name approved by the Federal Reserve Board: Provided, however, That said conversion shall not be in contra- vention 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 at least two-thirds of the capital stock have authorized the directors to make such certificate and to change or convert the bank or banking institution into a Federal corporation. A majority of the directors, after executing the articles of association and the organ- ization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a Federal corpora- 72 The Federal Reserve Act tion. The shares of any such corporation may continue to be for the same amount each as they were before the conversion, and the directors may continue to be direc- tors of the corporation until others are elected or ap- pointed in accordance with the provisions of this sec- tion. When the Federal Reserve Board has given to such corporation a certificate that the provisions of this section have been complied with, such corporation and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be sub- ject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed by this sec- tion for corporations originally organized hereunder. Penalties Every officer, director, clerk, employee, or agent of any corporation organized under this section who em- bezzles, abstracts, or willfully misapplies any of the moneys, funds, credits, securities, evidences of indebted- ness or assets of any character of such corporation; or who, without authority from the directors, issues or puts forth any certificate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, debenture, draft, bill of exchange, mortgage, judgment, or decree; or who makes any false entry in any book, report, or statement of such corpora- tion with intent, in either case, to injure or defraud such corporation or any other company, body politic or corporate, or any individual person, or to deceive any officer of such corporation, the Federal Reserve Board, or any agent or examiner appointed to examine the affairs of any such corporation; and every receiver of any such corporation and every clerk or employee of such receiver who shall embezzle, abstract, or will- fully misapply or wrongfully convert to his own use any moneys, funds, credits, or assets of any character which may come into his possession or under his control in the execution of his trust or the performance of the duties of his employment; and every such receiver or clerk or employee of such receiver who shall, with intent to injure or defraud any person, body politic or corpor- ate, or to deceive or mislead the Federal Reserve Board, The Federal Reserve Act 73 or any agent or examiner appointed to examine the affairs of such receiver, shall make any false entry in any book, report, or record of any matter connected with the duties of such receiver; and every person who with like intent aids or abets any officer, director, clerk, employee, or agent of any corporation organized under this section, or receiver or clerk or employee of such receiver as aforesaid in any violation of this sec- tion, shall upon conviction thereof be imprisoned for not less than two years nor more than ten years, and may also be fined not more than $5,000, in the discre- tion of the Gourt. Whoever being connected in any capacity with any Misrepresentation corporation organized under this section represents in any way that the United States is liable for the payment of any bond or other obligation, or the interest thereon, issued or incurred by any corporation organized here- under, or that the United States incurs any liability in respect of any act or omission of the corporation, shall be punished by a fine of not more than $10,000 and by imprisonment for not more than five years. Sec. 26. All provisions of law inconsistent with or superseded by any of the provisions of this Act are to that extent and to that extent only hereby repealed: Provided, Nothing in this Act contained shall be con- strued to repeal the parity provision or provisions con- tained 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 of not to exceed three per centum per annum, or sell the same if neces- sary to obtain gold. When the funds of the Treasury on hand justify, he may purchase and retire such out- standing bonds and notes. Maintenance of gold standard 74 The Federal Reserve Act Emergency currency act Tax on emergency currency Restrictions on issue Sec. 27.* The provisions of the Act of May thirtieth, nineteen hundred and eight, authorizing national cur- rency 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,f 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 aver- age amount of such of their notes in circulation as are based upon the deposit of such securities, and after- wards 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 : Provided further, That whenever in his judgment he may deem it desirable, the Secre- tary of the Treasury shall have power to suspend the limitations imposed by section one and section three of the Act referred to in this section, which prescribe that such additional circulation secured otherwise * As amended by act of August 4, 1914. t Section 5172 was amended by the act of March 3, 1919. The Federal Reserve Act 75 than by bonds of the United States shall be issued only to national banks having circulating notes outstanding secured by the deposit of bonds of the United States to an amount not less than forty per centum of the capital stock of such banks, and to suspend also the conditions and limitations of section five of said Act except that no bank shall be permitted to issue circulat- ing notes in excess of one hundred and twenty-five per centum of its unimpaired capital and surplus. He shall require each bank and currency association to maintain on deposit in the Treasury of the United States a sum in gold sufficient in his judgment for the redemp- tion of such notes, but in no event less than five per centum. He may permit national banks, during the period for which such provisions are suspended, to issue additional circulation under the terms and condi- tion of the Act referred to as herein amended: Provided further, That the Secretary of the Treasury, in his dis- cretion, is further authorized to extend the benefits of this Act to all qualified State banks and trust com- panies, which have joined the Federal reserve system, or which may contract to join within fifteen days after the passage of this Act. Sec. 28. Section fifty-one hundred and forty-three Reduction of capital of the Revised Statutes is hereby amended and re- stock of national enacted to read as follows: Any association formed bank under this title may, by the vote of 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 cap- ital 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 Comp- troller of the Currency and by the Federal Reserve Board, or by the organization committee pending the organization of the Federal Reserve Board. 76 TheFederalReseeveAct invalidity of any g EC# £9. jf any c i ause> 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. INDEX Acceptance of terms of Federal Reserve Act 6 Acceptances: By member banks in domestic transactions 35-36 By member banks in foreign transactions 35-36 By member banks to furnish dollar exchange 38 Purchase of, by Federal reserve banks 38-39 Rediscount of, by Federal reserve banks 34-35 Advances on promissory notes 36 Agricultural paper, rediscount of 34-35 Alaska, national banks in, may remain non-members 54 B. Balances : Reserve 52-54 With Federal reserve banks, to offset items in transit 33-34 Banks: Definition 5 (See also State banks; Federal reserve banks; member banks; national banks.) Bank acceptances: In domestic transactions 35-36 In foreign transactions 35-36 Purchase of, by Federal reserve banks 38-40 Rediscount of, by Federal reserve banks 35-37 To furnish dollar exchange 35, 37, 38 Bonds: Deposit requirement of national banks repealed 49 Exchange of 2 per cent, for 3 per cent 49,50,51,52 Federal reserve agents' 29 Federal reserve banks must purchase 49-50 Limitation on amount to be purchased 50 Notes against bonds purchased 12, 50-51 Officers and employes of Federal reserve banks 11 Paper secured by Government 32, 34, 36 Refunding 51-52 Repurchase of 1-year bonds from year to year 51 Revenue bonds, purchase by Federal reserve banks 39 Branch banks: Of Federal reserve banks 9-10 Of member banks 59-60, 61 Brokers procuring real estate loans, national banks as 37-38 C. Capital stock. See Stock. Central reserve cities: Classification by Federal Reserve Board 28 Previous status not changed 7, 9 77 78 Index page Certificates of indebtedness, rediscount of paper secured by 32 Certifying checks against insufficient funds 24, 29, n. Clayton Act: Exception as to foreign banks in which member banks are stockholders 62, 68 Clearing house: Federal reserve bank to act as 47 Federal Reserve Board may act as 47-48 Federal Reserve Board to fix charges 48 Collections: By Federal reserve banks 33-34, 47 Charges for 34, 47 Expenses of 47 Commissions for procuring loans forbidden 57 Comptroller of Currency: Authorizing Federal reserve banks to commence business 12 Ex officio member of Federal Reserve Board 25 Conversion of State bank into national bank 10 D. Definitions: Bank 5 Board 5 Demand deposits 52 District 5 Member bank 5 National bank 5 National banking association 5 Reserve bank 5 Time deposits 52 Demand deposits, definition 52 Dependencies, national banks in, may remain nonmembers 54 Deposits. (See also Government deposits.) Demand 52 Postal savings funds 40-41, 52 Proceeds of sale of bonds and certificates of indebtedness 41, n. Reserve against. (See Reserve.) Time 52 What deposits accepted by Federal reserve bank 33, 47 Deputy chairman 15 Directors: Branch banks 10 Federal reserve bank 12-17 Duties 12-13 Removal of 28 Selection and qualifications 13-15 Member banks — Fees or commission prohibited 57 Interest on deposits allowed 58 Interlocking directorates :••;•. 13, 62, 68 Member of Federal Reserve Board ineligible 25 Purchases by bank from 57-58 National banks — Personal liability for noncompliance with the act 8 Interlocking directorates 13, 62, 68 Index 79 Discount, rate of: page (See also Rediscounts.) Federal Advisory Council to recommend 33 Subject to regulation of Federal Reserve Board 39 District reserve electors 14 Dividends, Federal reserve banks 18-19 E. Earnings of Federal reserve banks: Distribution of 18-19 Franchise tax on Federal reserve banks 18 Share of United States, how applied 19 Edge Act 62-73 Embezzlement 21 Emergency currency 74-75 Examinations: Expenses 22, 55 Federal reserve banks 27, 56 Member banks 27, 54 Other visitatorial powers 56 Power of Federal Reserve Board 27 Special examinations by Federal reserve bank 55 State banks 22 State examinations may be accepted 22, 55 Examiners: Appointment and powers 54-55 Disclosure of confidential information 56-57 Loans and gratuities must not be made to 56 Other services shall not be performed by 56 Penalties 57 Exchange: Not to be charged against Federal reserve banks 34 Not prohibited in certain cases 34, 47 Regulated by Federal Reserve Board 34, 47 Farm lands, loans on 59 Farm loan bonds, Federal reserve banks may invest in 39, n. Federal Advisory Council 32-33 Federal reserve agent: Appointment and qualifications 15 Assistants 15-16 Bond 29 Deposits by, with Federal Reserve Board or Treasurer of United States .... 45 Deposits with 41, 44, 45 Duties in general 15 Holding money for redemption of Federal reserve notes 44 Notice to Board of issuance and withdrawal of Federal reserve notes 42 Reports 15 Federal reserve bank notes: Amount issued may equal value of bonds purchased 12, 50 Denominations 50 Expenses of printing and issuing 47 Obligations of Federal reserve bank 50 Power of issue 12, 50 Redemption 50 80 Index Federal reserve banks: page Accounts with other Federal reserve banks 39 Adjustment of stock issues 17-18 Advances to members 36 Assessments for expenses of Federal Reserve Board 26 Authority to commence business 12 Banks in Alaska, dependencies, and possessions may become members 54 Branches 9-10 Chairman of board of directors 15 Clearing and collection 47 Collections and charges 34, 47 Deposits 33, 47 Directors 12-17, 28 Discounts for member banks 34-35,36,39 Dividends 18 Doubtful assets 28 Examination of 27, 56 Exemption from taxation 19 Farm loan bonds, may invest in 39, n. Fiscal agents 40 Forfeiture of membership in 22, 24 Foreign accounts and agencies 39-40 Franchise tax 18 Information to be furnished Federal Reserve Board 55 Liquidation 19 Officers, ineligibility of Senators and Representatives 13 Open-market operations 38-39 Organization 6,8-9,10-11 Over-certification 29, n. Powers 33-35,36,38-40 Special examinations of members 55 Stock. (See Stock.) Supervision by Federal Reserve Board 29 Surplus, additions to, from net earnings 18-19 Suspension or liquidation by Federal Reserve Board 29 Suspension or removal of officers and directors 28 Weekly statement of condition by Federal Reserve Board 27 Federal Reserve Board: Allotment of refunding bonds 50 Annual report 27 Appointments by 15 Approval of directors' compensation 16 Assessments against Federal reserve banks to pay expenses of 26 Deposits with Secretary of Treasury subject to order of 47-48 Expenses, how met 26 Expenses of handling deposits with Secretary of Treasury 48 Expenses of money shipments 48 Governor, appointment and duties of 25 Members- Appointment and qualifications of 24-25 Term of office 25 Powers — Clearing house, with respect to 47 Federal reserve districts, readjustment of 6 Note issues, authorization of 41, 43 Rediscount among reserve banks 27 Removal of reserve bank officers, etc 28 Supervision of Federal reserve banks 29 Supervision of reserve bank foreign accounts 39-40 Suspension of reserve requirements 27-28 Index 81 Federal Reserve Board — Continued. page Powers — Continued. Trust powers, grant of 29-31 Regulations — Acceptances 32, 35-36 Charges for collections 34, 47 Checking against reserve by member banks 53, 54 Clearing house activities 47-48 Dealings in commercial paper 34-35 Foreign branches 59-62 Rates of discount 36, 39 Rediscounts 27,34-35,37 Transfers of stock .. 9 Reports of 27 Staff, employment and expenses of 26, 31 Vacancies, how filled 26 Vice governor 25 Weekly statement of condition of Federal reserve banks 27 Federal reserve cities 6 Federal reserve districts 6 Federal reserve notes: Additional security may be required 42 Application for 41 Cancellation and destruction 43 Collateral security 41, 44 Custody, pending issue 45, 46 Custody of plates and dies 46 Deposits against 44, 47 Discretion of board to grant application for issue 41, 43 Expenses of issue and retirement 46, 47 Interest on 43-44 Issue 28 Lien on assets of bank 44 Notice to board of issues and withdrawals 42 Obligation of United States 41 Purposes for which issued 41 Redemption of 41, 42, 43 Reserve against 42 Retirement of 44 Return or retirement by another Federal reserve bank 42 Status as currency , 41 Supervision and control of issue and retirement 28 Tax on deficiency in gold reserve 28 Fiduciary powers of national banks 29-31 Foreign accounts, Federal reserve banks 39-40 Foreign agencies, Federal reserve banks 39-40 Foreign banking and financing corporations: 62-73 Capitalization of 67, 70 Conversion of state corporations 71-72 Directors 68, 70 Incorporation of 62-63 Investment in, by national banks 60, 67-68 Liquidation 69 Penalties 72-73 Powers of 63-66 Regulation of business of 66-67,69-70 Stock control .' 68 Taxation of 70-71 Foreign branches of national banks 59-60, 61 Franchise tax 18 82 Index G. Gold settlement fund 47 ~48 Gold standard, Secretary of Treasury to maintain ' " Government deposits: yin_Ai Funds to be deposited ^n In Federal reserve banks 4 y In member banks 41 In non-member banks 4 *> n - I. Insular possessions, national banks in 54 Insurance agencies 37 Interlocking directorates 13, 62, 68 Invalidity of part of Act •. '6 Investment by national banks in foreign banking and financing corporations .... 60, 67-68 Liberty bonds, rediscount of paper secured by 32 Limitations: Bankers' acceptances 35-36 Deposits by member banks with non-member banks 53 Indebtedness of national banks 36-37 Rediscount of paper of one borrower 23-24,32,35 State banks, rediscounts for 23-24 Loans: Examiners 56 Farm lands and real estate 59 Trust funds, to officers, etc., of national banks 31 M. Member banks: Acceptances by 35, 38 Banks in Alaska or other dependencies or possessions 54 Cancellation of stock in reserve banks upon insolvency 18 Definition 5 Dividends, while reserve is impaired 54 Examinations of. Federal Reserve Board 27 Fees or commissions to officers or directors for loans prohibited 57-58 Forfeiture of membership 22, 24 Insolvency 18 Interest on deposits of officers, directors, or employes 58 Limitations on deposits with non-member banks 53 Loans, additional, while reserve is impaired 54 Loans or gratuities to bank examiners prohibited 56 Maintenance of reserves 53 Officers and employes may serve foreign branches 62 Over-certification 24 Purchases from directors 57-58 Rediscounts for nonmember banks 53 Reserves of (See Reserves.) Sale of bonds securing notes to be retired 49-50 Stock in Federal reserve banks 17-18 Visitatorial powers to which subject 56 Money shipments, expense of 48 Index 83 N. PAGE National banks: Acceptance of terms of Federal Reserve Act 6 Bond deposit requirements repealed 49 Bonds of, when acting in fiduciary capacities 30 Brokers to procure real estate loans 37-38 Converted from State banks 19-20 Definition 5 Deposits of securities with State authorities 30 Deposits of trust funds 30 Directors personally liable for noncompliance with Act 8 Dissolution for noncompliance with Act 7-8 Fiduciary powers 29-31 Foreign branches 59-60, 61 Funds held in trust 30 Indebtedness limited 36-37 Insular possessions, non-member national banks in 54 Insurance agencies 37 Interlocking directorates 13, 62, 68 Investment in foreign banking and financing corporations 60, 67-68 Lien to secure trusts 30 Limitation on indebtedness of 36-37 Loans of trust funds to officers, directors, or employes 31 Loans on farm lands 59 Penalty for failing to accept terms of Act 7-8 Personal liability of stockholders 58-59 Reduction of capital stock 17-18, 75 Segregation of assets when operating trust department 30 Subscription to capital stock of Federal reserve banks 6-7, 10 Transfer of shares before failure 58-59 Trust department 29-31 Notes. (See Federal reserve notes; Federal reserve bank notes.) Notes issued against bonds purchased 12, 50-51 O. Open-market transactions 38-39 Organization of Federal reserve banks and districts 6,8-9,10-11 Over-certification prohibited 24, 29, n. P. Penalties and forfeitures: Certifying checks drawn against insufficient funds 24, 29, n. Examiners disclosing confidential information 56-57 Failure of State banks to make reports 21 Forfeiture of membership 22 Loans or gratuities to examiners 56 Noncompliance with Act 7-8 Paying out notes of another Federal reserve bank 42 Postal Savings funds, deposit of 40-41, 52 Public moneys, reserves against 52 Public stock 8 R. Real estate loans: National banks may make 59 National banks may act as brokers to procure 37-38 84 Index PAGE Rediscounts: Acceptances 34-35 Agricultural paper 34-35 Conditions of, for State banks 23-24 Discounted paper of other Federal reserve banks 27 Limitations on amount 35-36 Limitations on amount for State banks 23-24 Paper secured by bonds of War Finance Corporation 34, n. Paper secured by Liberty bonds or certificates of indebtedness 34 Paper subject to 34, 35 Rates 33, 39 Regulation by Federal Reserve Board 27,34-35,37 Remedies, survival against dissolved bank 8 Repayment of deposits upon withdrawal of State banks 23 Repeal of inconsistent laws 73 Reports : Federal Reserve Board. (See Federal Reserve Board.) State banks 21 Reserve Bank Organization Committee 6 Reserve cities: Classification by Federal Reserve Board 28 Previous status not changed 9 Reserves : Banks in Alaska, dependencies or possessions 54 Deposits of public moneys 52 Federal reserve banks 42, 48 Member banks — Amount required 52-53 Computation of balances 54 Maintenance of 53-54 Suspension of reserve requirements by Federal Reserve Board 27-28 Tax on deficiencies 28 S. Secretary of Treasury : Deposits with, by Federal reserve bank or agent 47-48 Ex officio member of Federal Reserve Board 24 Expenses of handling deposits 48 Gold reserve to be maintained by 73 Management of United States stock 8-9 Shareholders, individual liability (See also Stock) : Federal reserve banks 7 National banks 58-59 State banks: Cancellation of stock in Federal reserve banks 22-23 Certificates as to liabilities of debtors 24 Certifying checks against insufficient funds 24 Conditions of membership 21-22, 23 Converted into national banks 19-20 Eligibility for membership 20-22, 23 Examination (See also Examinations.) 22 Forfeiture of membership 22 Member, subject to laws applying to member banks, exception 23-24 Member, subject to R. S . 5209 21 Members of Federal reserve bank 20-24 Index 85 PAGE State banks — Continued. Penalties for failure to make reports 21 Regulations 21-22 Retain powers under State charters 23 State examinations may be accepted 22 Subscription to stock in Federal reserve banks 21 Withdrawal from membership 22-23 Stock: Of Federal reserve banks — Adjustment to changes in capital or surplus of members 17-18 Amount to be held by single member or shareholder 7 Calls on subscriptions 7 Cancellation of stock held by insolvent member banks 18 Limitation on cancellations 22 National banks must subscribe 7 Payments on subscriptions 7 Public subscriptions 8 Reduction 17-18 Shares owned by member banks not to be transferred 17 Subscription by national banks 7 Subscription by State banks 20-21 Subscription required of new members 17 Transfer of 9 Voting power 9 Of member banks, increase.or reduction 17-18 Of national banks — Reduction 75 Transfer of before failure 58-59 Surplus 18-19 T. Tax upon deficiencies in reserves 28 Taxation, Federal reserve banks exempt from 19 Time deposits, definition 52 Trust companies (See also State banks) : Acceptance of terms of Federal Reserve Act 6-7 Trust powers of national banks 29-31 U. United States stock 8-9 United States obligations, paper secured by 32, 34, 36 V. Validity of certified checks drawn against insufficient funds 24 W. War Finance Corporation: Bonds, purchase and discount by Federal reserve banks of obligations secured by 36, n. Deposits of funds with Federal reserve banks 33, n. Fiscal agents, Federal reserve banks as 40 National Bank of Commerce in New York ESTABLISHED 1839 J. Howard Ardrey Joseph A. Broderick Guy Emerson President James S. Alexander Vice-Presidents Herbert P. Howell Louis A. Keidel David H. G. Penny John E. Rovensky Fans E. Russell Stevenson E. Ward Roger H. Williams Harry P. Barrand Louis P. Christenson Cashier Richard W. Saunders Emanuel C. Gersten Gaston L. Ghegan Elmore F. Higgins William F. Hofmayer John J. Keenan James S. Alexander William A. Day Henry W. de Forest Forrest F. Dryden Second Vice-Presidents James I. Clarke Archibald F. Maxwell Edward H. Rawls Assistant Cashiers Edward W. McDonald Franz Meyer Don L. Moore Alfred J. Oxenham Directors Charles E. Dunlap Herbert P. Howell Andrew W. Mellon Charles H. Russell Everett E. Risley Henry C. Stevens Auditor Albert Emerton Roy H. Passmore Julius Paul Henry W. Schrader Edward A. Schroeder Hamilton G. Stenersen Valentine P. Snyder Harry B. Thayer James Timpson Thomas Williams Statement of Condition, December 31, 1919 RESOURCES Loans and Discounts $312,775,083.36 U. S. Bonds and Certificates of Indebtedness and Loans secured thereby. . 73,989,598.85 Other Bonds and Securities 14,505,403.30 U. S. Bonds and Certificates Borrowed 16,317,720.00 Stock of Federal Reserve Bank 1,500,000.00 Banking House 4,000,000.00 Cash, Exchanges, and due from Federal Reserve Bank 127,108,880.70 Due from Banks and Bankers 8,887,105.45 Interest Accrued 1,460,694.18 Customers' Liability under Letters of Credit and Acceptances 63,347,746.66 §623,892,082.50 LIABILITIES Capital $25,000,000.00 Surplus 25,000,000.00 Undivided Profits 4,085,889.91 Deposits 403,140,460.35 U. S. Bonds and Certificates Borrowed 16,317,720.00 Bills Payable and Rediscounts with Federal Reserve Bank 73,868,596.31 Time Drafts of this Bank Outstanding 2,306,250.00 Reserved for Taxes, etc 2,895,800.24 Dividend Payable Jan. 2, 1920 (including extra dividend) 1,125,000.00 Unearned Discount 1,956,558.62 Letters of Credit and Acceptances 64,865,797.93 Other Liabilities 3,330,009.14 $623,892,082.50 National Bank of Commerce in New York Capital, Surplus & Undivided Profits Over Fifty Million Dollars 1 PamphleF Binder Gaylord Bros. Makers Syracuse, N. Y. PAT, JAN 21, 19M • ijljili;:';: