frsbog_mim_v14_0547.pdf

X-3109

CPANGT!::S mP'!CR VTOULD ~ ~r.TH:n !E FEDEFAL B,ESERVF. ACT

lW ENfiCTMF.NT OF P'. F. L;.go6, 67th CnNGPESS, 1st SESSI0N. - - - - - -- --- -- .

SECT!nN 2. ~resent ~vision§. Desipnates Comptroller of the Currency

as one of 0r~anization Committee to estaolish Federal reserve batiks

and divide countr,_r into Federal reserve districts. -orovides that

suits to dissolve national ban~s for viol2tion of Federal Reserve

Act shall be brou~ht by ComDtroller of the Currency, under direction

of Federal Reserve Board.

Effect of H.R. 4906. No effect in so far as concerns Organiza-

tion Comrrittee as that Comrrittee has co!!ltlleted its wor¥ and gone out

of existence. Under H. R. 4906 suits heretofore brought by the

Comotroller of the CUrrency mar be brouzht by Federal Reserve Board

in name of its Chairman.

The word "chairman" in line i3, page

8 should be changed to 11 1eovernor 11 in order that the references through-

out the bill to the active executive officer of the Federal Reserve

Board may be uniform.

S~CTION 4, ~esent ~revisions. Certificate of Organization Committee, show-

inf< f!eop:ranhical limits of each district and Federal reserve city desig-

nated in each, and certificates of orrranization of Federal reserve batiks

to be filed with Comntroller of the currency. Cotr']:ltroller to authorize

those ban¥s to commence business. Describes general ~owers of Federal

reserve banks includin~ the ~ower, unon denosit with the Treasurer of

the United States of bonds bearin;:c circulatinz 1Jrivilege, to receive

from Corontroller circulatinrr notes to be issued under sarrs condition

and provisions of law as relate to circulating notes of national bariks

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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Effect of H. R. 49C~. Pecords of COIP;trolJ.er' s office are trans

ferred to Federal Reserve 'Board. "Powers and duties of Corrmtroller in

respect to circulating notes of Federal resenre ban'.r.s are transferred to

Secretary of the Treasury so that ttese notes would be issued by the

Secretary.

SECTIONS 5 AND 6. "Present "'Dr?visio~s. Certificates of increase or reduc-

tiotl of ca:9i tal stocl· of Federal reserve ban,, s to be filed with the

ComCJtroller.

Effect of B.B, 4906. Filed 1Mith Pederal Reserve Board. ~·.~--.at~··~·~::;:-_ ... .:-~.~~.-;.":. ;r=-

Present nr ovi si ~. "Provides !'IT ocedure for c onv er si on of state bani.~ s

into national banlcs. Conversion and narre of converted ban:: to be approved

by Corrmtroller. Com~t~oller to issue certificate that provisions of Act

have been corrmlied with.

Effect of H. B. 4906. Approval given and certificate issued by

Federal Reserve "Poard.

SECTION 10 - FIRST .,1\R/IGPA"PP, "Present "Provisions. Federal Reserve Board to

consist of seven members including the Secretary of the Treasury and the

Comptroller, members ex-officio, and five members appointed by the "Preside;,~

for terms of ten years.

Effect of B.R. 4906. Federal Beserve Board to consist of seven

members includinc- t:r_e Under-secretary of the Treasury, rrember ex-officio,

and six members apnointed by the "President for terrr's of twelve years. Sec-

tion 2 of R.R. 4906 ~rovides for an Under-secretary of the Treasury to

be appointed by the ~esident at a salary of $10,000 per annum. The first

section of 4906 provides that t:r.is Under-secretary shall be paid by the


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Federal Reserve Board such additional salary as to make the ag&regate of

the salaries -paid him equal to $12J o:;o :per anm'!n, which is the salary of

the apnointive members.

~.,

SECTION 10 - 'PARAGRti'DBS '!"t'O AND Tll"FEE. 'Present "Provicions. All members of the

Federal Reserve ~oard ineligible while in office and for two years trere-

after to hold office in any member bank except that this restriction does

not ap::>lY to an ap"J?ointive member who bas served the full term for which

appointed. Of five ap-oointive members at least two JLust be ex"f:)erienced in

banking or finance. The Secretary of the Treasury may assign offices in .

the Treasury for use of Federal Reserve "Ro&rd. Federal Reserve Board to

levy semi-annual assessments upon Federal reserve b~~s to pay its estimated

ex-penses and salarie~ for succeeding ~alf year.

Effect of F.B. 4~06. No restrictions unon eligibility of ex-members

of Federal Reserve Board to hold office in member baru~s. At least three of

ap-oointive members must be experience~ ih baruring or finance. The Secretary

of the Treasury may, at the request of the Federal Reserve Board, assign

offices and vault space in the Treasury for the use of the Federal Reserve

Board. The Federal Besej,1 Ve ~oard shall have -_oc•ver to levy semi-annual as-

sessments U"J?On the Federal reserve ba.nks to ray its estimated exnenses and

salaries for the -precedin~ half year and srall have power to :orovide itself

with suitable offices and vaults in tt-e City of was:rington, D.C. and to levy

assessments u~on the Federal reserve banFs sufficient to cover the eX9enses

t)lereby incurred, provided, that in case of tl"e -purchase of pronerty or the

erection of a building or vaults the amount assessed shall be limited to

three million dollars and provided, further. that title to any pro~erty


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acquired shall be in the United States, but the :orovi sions of Section 10 of

the .Act a:pnroved March 1, 1919, autborizJng the 1:1u1:>lic Building Corrmission

to allot snace in public buildin§~S shall not be applicable to such nro1Jerty.

The amount assessed by the Federal Reserve Board against each Federal reserve

banl' may be credited by said barik to an ace own, wnicn Ir'E.Y be drawn unon by

the Federal Reserve Board, and all funds derived by the Federal Reserve Board

from any assessments may be deposited with any Federal reserve banl{, or rrember

ba.nlr. or with the Treasurer of the United States and shall be ex1:)ended in

accordance with the terrrs of the Federal Reserve Act. All accounts of

salaries and other eXPenses of the Toard shall be audited at least once every

six months by a certified rublic accountant, in lieu of other audit, and a

certified copy of eac1: audit shall be transmitted to the Sneaker of the House

of Representatives.

SECTION 10 - FIFTt.r "PAFAGR.AT.l}', "Present Provisions. T>-e "President rray fill all

vacancies that rr:ay hapnen on the Federal Reserve ~oard during a recess of

the senate by grantin; corrmissions to expire thirty days after the next

session of the Senate convenes.

Effect of R.R. 4906. Recess corrmissions ex~ire at the end of the next

session of Congress.

SECTION 10 - SE'mNTH PARAGP~pq. ~esent Provisions. Federal Reserve P.oard

shall annually make a full renort of its operations to the Speaker of the

House of Representatives.

Effect of P.R. 490~ The Board will be required to cover in the

annual re"TJort of its operations, a report of those O"P9rations which hereto-

fore carre within the jurisdiction of the Comptroller. No se:carate annual

report is reauired on account of these latter operations.


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SECTION 10 - PARAGJAPH ETGHT. Present Provisions. Recites t2xt of Section

324 R. S. c;,s a.mended :;::rovid.L1g cilo.t t.w..:;re s_:.:.,J.l oe in t:Ue Departmer.t of

tl:e Treo,sury a Bureau chc..r;ed .ii tn t..:e execu1;.ion oi ""11 lc;,ws relating

to the issue o,nd regulation of nationa.l cur~'ency secured by United Sto.tes

bonis c:.nd, under tne general s-:.1pervision of the Federa.l Reserve Board,

of ci.ll Federa.l reser·je notes, cl:le cnief officer of w. ici:l Bureau suall be

cc:.lled the Comptroller of tne Currency and si:lall rerform :Uis duties under

t.o.e general directions of the Secretary· of tne Treasury.

Effect of H.R. 4906. Repeals Section 324 R. S. ,:md tra.nsfers all

ro·vers and duties of tne Comptroller and his Bureau to che Federal Re-

serve :i3oard except t~i.d.t the powers and duties' of the Comptroller or nis

3ureau in respect to Federal reserre notes and circulating notes of

nationo.l banks and Federal reserve banks are transferred to tne Secre-

tary of the Trec:tsury.

SECTION 11 (d) Present Pro1isions. Federcl.l Reserv.e Board given :po·,ver to

supervise und reg~late tnrough Comptroller's bureau tne issue andre-

't irerr.ent. of Feierul reser .•e notes ani to prescribe regulations unier

·,v.o.ich said notes ma.y be delivered by tne Comptroller to Federal reserve

agents.

Effect of H.R. 4906. Powers c;,nd duties of Comptroller in respect

to Federal reserve notes are transferred to Secretary of tb.e Treas,.::.ry,

S'J.Ch notes to ce subject to the: order of the Federal Reserve Bo.a.ri for

their delivery.

fF.CTION 13. NEXT TO LA.ST PARAGRAPH. Present Provi§iions. Gives m tional bank.

located in place having popuh.tion of less 5, OUO po1.H~r to act as ag,ent

for insurance companies and as a~ent for others in maKing· or procur-

ing real est3.te loans under rules and regulations prescribed by Camp-

troller .. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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Effect of H.R. 4906. .Tile rules ani regulations would be

prescribed by the Federal Reserve Board.

SECTION 16. Present Provisions. Provides for ).ssue d.nd redemption of Feder-

al reserve notes - Notes unfit for circulation to be returned to Comptroller

for cancellation and destructio~ (3rd paragraph). Comptroller. under direcw

tion of Secretary of Treasury, to cause plates ci.nd dies to be engrc:l.ved. ~Tote.:;

to be in such form and tenor as iirected by Secretary of Tredsury. (9th

paragraph). Notes when prepared to be deposited in Treasury or a sub-

treasury to be held for use of Federal reserve oank subject to order of

.Comptroller. (lOth para.grdpb.) .. ;Pl3.tes and dies to be under control d.nd

direction of Comptroller, and expenses of procuring sucn notes to be paid

by Federal reser-;e banks, ( ll'th paragraph).

Effect of li.R. 4906. Powers d.r.d. duties of Comptroller in respect

to Federd.l reserve r~tes and circuld.ting notes of rational banks an~ Federcll

reserve banks are tr..msferred to Secretary of Treasury, so ;;:Oat functions

heretofore performed by Comptroller in connection with issue and redemption

of Federal reserve notes as provided by Section 16 will be performed by

Secret~y of Trea.sur~

SECTION 18. Present Provisions. Upon deposit with Treasurer of TJni ted States

of bonds bearing circulating privilege, Federal r.eserve banks entitled to

receive from the Comptroller circulating notes in form prescribed by tue

Secretary of Treas"J.ry. These notes to be of t:C.e same tenor and effect, and

to be issued and redeemed upon the same terms ~nd corditions, as natio~l

bank notes. I

Effect of H.R. 4906. Powers of Comptroller with respect to issue

and redemp~ion of circul3ting notes of Federa.l reserve banks transferred

to Secreta.ry of Treasury. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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SECTION 21, SECTION 5240, REVISED STNI' .~~s. SECTION 327. coMPTROLLER's COMPIL.A-

TION. Present Provisions. COlllfJtroller, with c::~.pproval of t:ae Sacreta.ry of

Treasury, shall appoint examiners who shall examine every national bcu"1k a.t

least tvrice a. yea.r. Examiners to make full and detailed report to Comptroll-

er of condition of banks examiner. Federal Reserve Board, upon recommenda~

tion of Comptroller, saall fix SGla.ries of ex~iners. EXpense of ex~ina-

tions sha.ll be assessed a.ga.inst banks exar..J.ned.,

Effect of H .. R. 4906. Examiners appointed by, a. m report to, Fed.-

era.l Reserve Board. Tha.t pa.rt of section repealed w .. :J.cb. req,ui.ces ~i;a.t

eact. member bank, whether State or national, sDo.ll bea.r ~.c.e cost of exam-

ina.tion.

SUGGESTE:g AMENDMENT TO H.R. 4906. Since Section 9 of ·t;ne Federal Reserve Act

cont~ins a provision req,uiring that the expenses of examinations of State

member ba.nks shall be assessed against and paid by the banks examined., and .. . since Section 5238 Revised Statutes contains c::1. provision requiring t:aat 11All

expenses of any preliminary or otmr e.xo.mina.tions into the condition of any

association sba.ll be paid by such association", it would seem that the

provision of H. R. 4906, which is intended to repeal the requirement that

the examinations of member banks shall be paid by the banks examined,

,should be broad enough to repeal the provisions of Section 5238 Revised

Statutes and Section 9 of the Federal Reserve Act a.s well a.s the provision

of Section 21 of the Federal Reserve Act. At ·11he same time it would seem

desirable to give the Board power to assess against the natiol'l.::1l bank ex-

amined the cost of tlle examination prelindnc::~.ry to the issuance of a. cer-

tificate to commence businesst a.nd it would seem desira.ble a.lso to give

the Board power to assess agc::~.inst the banks examined the cost of all ex-


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r:::: :- 'i il_j}<::__,,)l:·t;:_

aminations in the event that at any future time the earnings of the Federal

reserve banks should be insufficient to meet such cost in addition to the

operating expenses of the Federal reserve banks and six per cent dividends

payable upon their capital stock. lt is suggested, therefore, that the

sentence beginning on line 24 of page 8 and ending on line 2 of page 9 be

changed to read as follows: "Those parts of Sections 9 and 21. of the Fed

eral Reserve Act and Section 5238 of the Revised Statutes which require

respectively that each national or State bank shall bear the cost of ex-

amination are hereby repealed; Provided, however, that the Federal Reserve

Board shall have power, in its discretion ani subject to regulations pre-

scribed by it. to require each membe:;:o bwik, whether State or national, to

pay the cost of examination in whole or in part. 11

SECTION 22{b2. Present Provisions. No exJndner shall disclose names of bor-

· .~rowers or collateral for loans of member bank to other than officers of

bank without express permission in writing from Comptroller, or etc.

Effect of ELR. 4906. Permission would have to be obtained from Federal

Reserve Board.

SECTION 25. Present Provisions. National banks operating foreign branches re-

quired to furnish information concerning condition of such branches to

Comptroller upon demand.

Effect of H.R. 4906. Information could be required by Federal Reserve

Board.

SECTION 28. Present Provisions. Prescribes Gonditions and procedure for reduc

tion of oapital stoOk by national banks. Any proposed reduc~~on must be

reported to Comptroller and approved by Comptroller and Federal Reserve Board.

Effect of Hs R. 4906. Proposed reduction must be reported to and

approved by Federal Reserve Board • • Digitized for FRASER

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X-3109a

CHANGES WHICH WOULD BE EFFECTED IN NATIONAL BANKTNq LAWS BY THE._ E:r;J£1-CTM~Jl.!. OF ff. fi, 4906.,~ 6111! -

CONGRJ<..:.§.§_, F!RST SESSIO}!

H. R. 49C6) in so far as it refers to the Bureau of the Comptroller

of the Currency, expressly repeals Sections 324.; 325 and 326 R. S. (Par.

100, 101 and 162 of the Comptroller of the C1u·rency's compilation of the

lbtional Bank Act, as ame:rrled_, recomplled Feb:~·va.ry l920L and transfers to

the Secretary of the Treasury the powers and duties now conferred by law

upon the Comptroller of the Curi"Emey *'in respec·t to Federal reserve notes

and circulating notes of .na.ti0:nal banks and ::Tode:(al reserve banks) 11 and

transfers to the Federal Reserve Board all other r:P ·Jwers and duties here

tofore conferred or imposed by law upon the CompJ.~roJ.ler of the Currency."

Inasmuch as Section 324 R. s. now provides t~at there shall be in the

Department of the Treasury "a bureau charged with the execution of all lawQ

passed by Congress relating to the issue and regt•lat.ion of :na.tioml currency

secured by U. S. bonds *** the chief officer of which shall be called the

Comptroller of the Currency) 11 and im.sm1.lch as H. R. l.t9o6 propoees to abolish

the office of the Comptroller and to J~:,:\.:.nsfer the powers and duties now

exercised by the Comptroller partly to the Federal Reserve Board and pa.rUy

to the Secretary of the Trea.sury~ it would seem that, if H. R. 4906 becomes

lawl the Secretary of the Treasury thereafter would be charged gene~lly

with the execution of all laws in respect to national bank notes, Federal

reserve bank notes and Federal reserve notes which theretofore have been

exercised by the Comptroller, a.nd the Federal Reserve Beard would be charged

generally with the execution of all other laws theretofore eAercised by the

Comptroller relating to the administration of national banks.

h;: .·.'U'x..,:l l ~~


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As stated above 1 paragraphs 1001 101 and 102 of the Comptroller

;10,•• .,

of the Currency's compilation~ referred to above '~-(Sees. 3241 325 and

326 Revised Statutes) are expressly repealed. In view of the provisions

of the proposed bill, it would also seem tha~ pax·s. 103 1 104, 1051 1061

107 and 108 (Sees. 327 1 3281 329, 330 and 331 Revised StatutesL and part

of the Acts of May 221 1908 and March 41 1909, would be repealed by infer-

ence. Howeve.::, in ordo:c- that thex·e rm.y be l:10 qu.tH';t:';.on as to the appli-

cability of these sections, it is suggested that these sections likewise

be eJCpressly repealed.. It doo.s not seem aJvisable1 however, to repeal

~ r- ,-. ::.;; .;.,.i) 'i)

par •. 110~ Section 333, Revised Statutes or par. 1111 Act of April 281 1902.

There follov.a a detailed discussion of the powers and duties which

would be specifically transferred tu tLJS Federal Reserve Board or the

Secretary of the Treasury, as the case may be1 should H. R. 49o6 become

a law. Reference is made orily to those sections which now impose specific

powers or duties upon the Comptroller of the Currency. Wherever the power

or duty iD: question would be tnnsferred from the Com-ptroller of the Cur-

rency to the Federal Reserve Board or to the Secretary of the Treasury~ the

respective department 1 underscored1 is substituted in pl::Lce of the Comp-

troller of the Currency.

*Note! Hereafter 1 where the designation "par." appears, it refers to the paragraphs in the Comptroller of the Currency 1 s Compilation of the Nat,:l.or:al Bank Act, as amended1 recompiled February, 1920.


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THE ORGANIZATION AND POWERS OF NAT Tl2_N,:1. BANKS. ( CF.APTER 2 OF THE COMPTROLLER'S COMPIL~TION).

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X-3105Ja

Par. 201 - Sec. 5133 R. S. A copy of t~e articles of association#

when executed, shall be forwarded to the Fede:ra.l_ fles~ Board and filed

and prese~ved in its office.

Par. 202 ... Sec. 5134 R. S.. The orgJ.nizat:\on certificate shall

specifically state# first 1 the mme of the propo:'led association which

sh'lll be subject to the approval of the Feder:'tl R.~.§.Y.!~ Beard.

Par. 203 - Sec. 5135 R. S. The organi7,ation certificate, upon being

acknowledged before a judge cl:" notary public, §ba.ll bfl transmitted to the

Federal Reserve Board whicll flhall record it and carefully preserve it

in its office ..

Par. 204 - Sec~ 5136 R. S. Upon filing the ar.ticles of association

and. organization certificate, the association shall have certain enumerat~

corporate powers; but no association shall tr~n~act any business except

such as is ir~idental and necessary prelimir.ary to its or§anization

until it has been authorized by the Federal. g~~ Board to commeuce the

business of banking.

Par. 319- Sec. 5163 R~ S. When the orgp,nization certificate is

transmitted to the Federal Reserve Board, and the association transmitting

it notifies the Federal Reserve Boa£a that at least 50% of its cap4tal

ftnnk has been paid in, the Federal Reserve Bca rd is required to examine

into the condition of the associatio~ and the association shall transmit

a statement necessary to enable the Feder.:::~.l Resarve Fl~ to determine

whether the association is lawfully entitled to commence the business

of banking.


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Par. 320 - Sec. 5169. If upon a careful examination of the facts so

reported1 and of any other facts which may come to the knowledge of the

Federal Reserve Board. it appears to the Feder~l Reserve Board that the

association is entitled to commence the businass of banking_, the £'ed.eral

Reserve ~ shall then issae a certificate authorizing such association

to commence business1 but the Federal Reserve Board n:ay withhold th:i. s --------certificate whenever it has reason to suppose that it has been formed for

ary other .:than the legitimate objects contemplated by the Act.

Par. 209 - Act of September 7, 1916., 39 Stat. L. 752,. Amer.ding Sec.

13 of the Federal Reserve Act. See discussion of Federal Reserve Act.,infra~

Par. 210. Section 25 of the Federal Reserve Act. See discussion

Federal Reserve Act, infra.

Par .. 211 - Sec. 2 of Act of May 1., 1886, 24 Stat. L. 18. Any change

of location or change of name of a ratiGnal bank is subject to the approval

of the Federal Reserve Board, and notice of such new location or oame must

be sent to the Federal Reserve Board. No cha.n6a of name or location will

be valid until the Federal Reserv<::~ Board has issue~ a certificate of ap-

prova.l. •

Par. 215 - Sec. l. Act of July 121 1882., 22 Stat. L. 162. A national

banking association may e .. <tend its corporate existence for a period of

twenty years with the approval of the Federal ResQrve Beard by amenr1.; ;.z

its articles of association.

Par. 216 - Sec. 2 of the same Act. The consent of two-thirds of the

shareholders to an amendment in the articles of ~ssociation authorizing

the extension nust be certified 'to the Federal Reserve Board, accompanied

by an application requesting approval of the amended articles of associa··

tion by the Feder~l Reserve Board. and such amended articles are not


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valid until the Federal Reserve Board has issued a certificate under its

hand and seal that the association :b.3.s compli.ad wit.h all of the requisite

provisions and is authorized to have successio'."l . .f 01: the exten<ied period~

Par. 217 - Sec. 3 of same Act.. Upon receipt d the· application and

certificate, the Federal Reserve ~ shall r~ve a special examination

made at the expense of the association in order to determine its condition,

and if after the examination it appears to the Federal Reserve Board that

the condition is satisfactory it shall grant a certificate of approval, or

if it appears that the condition is unsatisfactory, it shall withhold the

certificate of approval.

Par. 219 - Sec. 5 of the same Act4 When the Federal Reserve ~ bas •

granted its certificate of approval to an amendmont to the articles of

association of a national bank extending its corporate existence1 and a

ahareholder dissents from the proposed action and desires to withdraw from

the associ.ation, he is entitled to the v:ll ue of his shares to be ascertained

by an appraisal to be made by a committee~ and in case the value f i.xed by

the committee is not satisfactory the shareholder may appeal to the Federa~

Reserve Board1 which shall cause a re-appraisal to b0 made which shall be

f.iual and binding.

Par. 220 - Sec. 61 of the same Act. Circul~ting notes of any associa-

tion extending its corporate existence which were issued prior to such

extension shall be redeemed at the Treasury, and when redeemed shall be

forwarded to the §_ecretary of 1h§. Treasury and destroyed as provided by law.


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Par. 222 - Act of Apr~ 12, 19021 32 Stat~ L. 102. The Federal E~-

serv.e Board is authorized to extend for a f 1A.rther psriod the chartex- of

a m tiom1 bank already extended under t;he pro-;; ;i.~ions of the Act of

July 12_, l882.l

Par. 226 - Sec. 5140. fn n:aking payment v:f the capital stock of

newly orgFLnized associationS, the payment of each installment, when due,

must be certified to the Federal Reser~~ epard under oat~

Par. 228 - Sec. 5142~ An increase of capital stock nay be n:a.de from

time to time, but the Federa1 Reserve Board shall determine the maximum

increase1 and no increase shall be valid until the whole amount has been

paid in and notice therefor has been transmitted to the Federal Reserve

Board and its certificate obtained signifying its approval thereof, and

that the increase has been paid in in accordance with law,

Par. 229. - Sec. 1. Act of May 1. 1886, 24 Stat. L. 19, A national

banking association may, with the approval of the Federal Reserve Board,

and by the necessary vote of its shareholders increase its capital stock

in an amount approved by the ._Federal Reserve Board, notwithstanding the

limit fixed by its origiml articles of association and determined by the

Federal Reserve Board.

Par. 230 - Sec. 5143. No reduction of capital •'stock shall be made

until the amount thereof has been reported to the Federa! Reserve Board

and such reduction has beenapproved by the Federal Reserve Board.(At

present, the reduction must be approved by the Comptroller of the Cur-

rency and by the Federal Reserve Board.)


h::~'~ cuJ'U..J....

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Par. 232 - Sec. 5145. The origiml directors of an association shall

be elected at a shareholders' meeting held at any time before the associa-

tion is authorized by the Federal Reserve Board to commence business.

Par. 236 - Sec. 5147 R. s. A direCtor's required oath of office) when

certified to) must immediately be transmitted to the Federal Reserve ~~

and filed and preserved in its office.

Par. 240 - Sec. 5151 R. s. Shareholders of mtioml bmks are under

double liability for debts of the banks1 "except that shareholders of any

banking association now (June 31 1864) existing under State laws, having

not less than five millions of dollars of capital actually paid in1 and

a surplus of twenty per centum on hand 1 both to be determined by the11

•Federal Reserve Board 1 1' shall be liable only to the amount invested in

their shares." In case deficiency in the surplus occurs, the Federal

Reserve Board nay compel the association to close its business and wind

up its affairs ..

Par. 245 - Sec. 5154 R. S. State banks nay be converted into national

banking associations upon the vote of not less than 51% of their stock-

holders, with the approval of the Federal Reserve Boar~ and with any name

which nay be approved by the Federal Reserve Board. The Federal Reserve

Board shall issue a certificate that the provisions of the Act have·'

been COirJplied with in the case of conversion1 and thereafter the banking

association shall have the same powers and shall be subject to the same

duties as other na.tioml ba riking associations.

OBTAINING AND ISSUING CIRCULATING NOTES. (OHAPTER J OF THE COMPTROLLER'S COMPILATION QE ~NATIONAL

BANKING~-

Par. 304 - Sec. 5160 R.S. A natioral bank, in case it desires to re-

duce its capital or close up its business, may take up ita bonds deposited

with the Treasurer of the United States upon returning to the SecretarJ[


5·~·) 'Utc-.:J

X-3109 - a -a-

of the Treasury the required amount of circulating notes.

Pdr. 306- Sec. 5162 R. s. Where United States bonds are transferred

to the Treasurer of the United States. the T:..·_;a..:;ur<lr s.~.1u.ll ::oli .such bonds

in trust for the associdtion and a receipt snall ue given to the associa-

· tion by the Secretary of the Treasur~ No assignment or transfer of such

bonds by the Treasurer shall be deemed valid unless countersigned by the

Secretary of the Treasury.

Par. 307- Sec. 5163 R. S. The Secretary of t~e Treasury shall

keep in his office a book in which si:Jall be reccJJ:·d.ei any transfer or

assignment by the Treasurer of the United StatF;s of any bonis belonging

to a national banking associa.t1 on.

Par. 308- Sec. 516~ R. S. The Sacretary ~f the Treasury, upon

entering any transfer or dSsigr~ent by the Treasurer of the United States

of bonds belonging to a national bank, shall advise tn.e bank by nail

for wnose account tne transfer is made.

Par .. 309- Sec. 5165 R. S~ T~ Secretary of the Treasury s:ilall at

all times have access to the books of the Treasurer of the United States

for tbe purpose of ascertaining the Gorrectness of any transfer or assign-

ment of bonis presented to him to com1terslgn and the Treasurer of the

United States shall have like access to the books of the Secretary of

the Treasury and the Secreta.ry of the Treasury snall also have access

to t}lE:· bonds on de:posi t ,,.,i th the Treasurer ~o a..scertain tneir amount

and condition,

P~r. 310- Sec. 51SG R. S. Every association having bonds deposited

with the Treasurer of the Uni. ted States snall examine such bonis annu<.J.lly

and compare them with the books of the SecretdrY of the Treasury. Such

examinations shall be made at any time as the Treasurer dlld. the Secretary


-9- X-3109a

of the Treasury nay select.

Par. 311- Sec. 5167 R. s. The SecretaEY ~f .,1Pe Treasury shall

give to every association a power of attorney to receive the interest

on the bonds securing its dr.culating notes whj_r::h j_ ... has tra~;sferred to

the Treasurer of the United States. Whenever the ~arket value of such

bonds is reduced below tee amount of the circulation issued against such

bonds, the Secretary~ the Treasury may receive the amount of such

depreciation in other United States bonds or in money to be deposited

with the Treasurer as long as such d.e[J:.:~ciation continues. The Secretary

of the Treasury may permit bonds to be exchanged for those received as

security for circulating notes if in his Opinion such exchange can be

made without prejudice to the United States and the ~ecretary of~

Treasurl may direct the return of any of such bonds upon surrendering

and cancelling a proportionate· amount of circulating notes.

Par. 314 Sec. 9 of the Act of July 12, 1882, 22 Stat. t. 164.

A national banking association desiring to withdraw its circulating notes.,

may, upon depositing lawful money with the Treasurer and with the con-

sent of the Secretary~~ Treasury, withdraw a propor~ionate amount

of bonds as security for such notes.

Par. 317. - Sec. 18 of the Federal Reserve Act. Se9 discussion of

Federal Reserve Act infra.

Par. 323-Sec. 12. Act of Mar. 14, 1900, as amended, 31 Stat.

L. 49. Upon depositing the necessa.ry bonds with the Treasurer of the

United States a national banking association shall receive from the

Secretary~~ Treasury circulating notes in blank and upon due

application to the Secretary of~ ~~ry may receive additional

notes from the Secretary~ ~ Treas~ to an amount which will increase


-10 ... X-3109 -e.

t:: .-"'I~ <GJi. . ...l'i!::

its circulating notes to tue par value of the bonds deposited provided that

nothing sha.ll prevent the 13ecretary of the Treasury from requiring addi-

tional deposit of bonis or lawful money in case the market value thereof

falls below the par value of the circul~ting notes outst~ding.

Par. 324- Sec. 5172 R.S. The Secretary of the Treasury shall

prepare the necessary plates and dies for printing circulating notes in

blank. (This section at present provides that the Comptroller shall 1'under

the direction of the Secretary of the Treasury" cause the necessary plates

and dies to be prJpared.) *

Par. 325. Sec. 5, Act of June 20, 1874. The Secretary of the

Treasury shall cause the charter numbers of the association to te printed

upon all national bank notes. (This sectionprovides at present that the

Comptroller shall cause, etc. nunder such rules and regulations as the

Secretary of the Treasury may pres cri be").

Par. 327- Sec. 51?3R~ S. The Secretary of the Treasury shall

he;.ve control of the plates cil1d dies procur ··ed by him for printing and

circulating notes, and the expense incident to such are to be paid out

of the taxes asse$sed uponthe circulation of national.bank rotes.

Par. 328- Sec. 5174 R. s. The Secretary of the Treasury

shall cause to be examined eacn year the plates, dies, bed pieces, etc.,

and file in his office annually a correct list of the same. ~~terial

which may have been used in printing notes of associations wnich are

in liquidation or have closed business shall be destroyed under regula-

tions prescribed by the Secretary of the Treasur~. (At present this

section provides that such material shall be destroyed under regula-

tions prescribed by the Comptroller u.nd "approved by the Secretary of

the Treasury. 11 ).


-· ,.. ,..., ,.,-,,tilt..., ·llK __ );j

X-3109- a.

-11-

Sec~ 329-Sec. 3 Act of October 5, 1917. N~tiondl Banking asso-

ciations s4J,all be entitled to receive from the .§.ecretary of the Treas-

ury circulating notes in certdin specified denominations.

Sec. 339- Sec .. 5184 R. s.. It shall l:e the duty of the Secreta:ry

of the Treasury to receive vvorn-out or mutilated circ-ulating notes which,

after a memorandum has been made in the proper books in accordance with

the regulations· establis.ued by the §ecretary of JD.f T.r:=;_asury, sball be

destroyed by maceration in t:Oe p:·:c·>e.-lce of four :. '~ :s ns 1 one to be ap-

pointed by the Secretary of the Treasury, one by the Secretary of the

Treasury(heretofore t.ue second ·representative has been appointed by the

Comptroller), one .by the Tre~surer of the United Stcites and one by the

association itself under such regulations as the Secretary may prescribe.

A certificate of_ destruction shall be m<de in the books of the Secretary of

t.ue Treasury an:i a duplicate forwarded to the association.

Pi::t.r# 414. - Sec. 3, Act of June 20, 1874, 18 Stat. L. 1 23. When

any national bank notes forw-arded to the Treasury for redemption are mu.-

tilated or otherwise unfit for circulation, they shall be fornarded to

to ~....:.a ...vssocL •. tion .-::~.::in~ r..c.;; n0c.c;33c...:ry l0posit ci:ccuL~tino; no·cas of lif-


-12- X-310~

REG'liLATION OF THE B.AlJKIHG BUSINESS: ( CRAI.:L: 1,L_ o u.~ rlili C0hlf'·:utuLlliR1 S COMJ?ILATION OF T3E NATJQNAL BAl'ilKING LA!~-

Par. 416- Sec. 6 of. Act of July 14, 1890, 26 Stat. L. 289, De-

:posits made by national banks with tile Treasurer of the United Stcttes to

redeem circu~ating notes s..:..:a.ll be covered in dS mis cellaneou.s receipts and

the Treascu-y s..:.dl1 redeem from the general casn in t}-,:; Trea.sv.ry t.c.ose circu-

lating notes w.c.ich may come into bis :possession Sc<.::,ie<~t to redemption; C~-nd

upon t.he certification of t.he .§.~e..tary of the 'j're·.:~-.§J~:!.X that such notes nave

been received by uim and thd-t tn.ey have been destr·oyed. and tnat no rew notes

will be issued in tbeir place, reimbursement snall be !lhcle to tne Treasurer

of the United. States under such regulations ,as the Secretary of the Treasury

inay prescribe.

Par. -±30- Sec. 5205 R. S. Where an association shall fail to :pay up

its capital stock, or ·vhere its ca:pi tal stock has become impaired: by losses

or otilerwise, it shd-ll make up the deficienc~r w' thin thre8 rr.onths after re-

ceiving notice from the Federal Reserve Boan=b by assessment upon its share-

nolders, and upon notification from the Federal Reserve Board the Treasurer

of the United ~tates shall withhold interest uporr.all bonds held by him in

trust until otherwise notified ..


X-3109-a.

-13-

Par. "±34- Sec. 5208-R~ S~ Wherever any officer, director, etc. ,

of a member bank falsely certifies a check, tne rrember bank, if a national

bank, sha.ll be subject to the liabilities ~nd proce3din;;s on t.1e part of

tne Federal ,Reserve Board provided for in Section 5234 R.S.

Par. 436- Sec. 5209 R.S. ~"Y officer, iirector, etc., of a Fed-

eral reserve bank or a member bcJnk -rD.o IIldkes any false entry '.:vi t:C. intent

to defraud or injure a Federal reserv<:l bank or mer.Jber ba.nk, or the Federal

Reserve Board, or any agent o:: eJc, ... :.J..Ln:;r, etc. , s:U".J.: c,~ fir.ei or ir.;rris ...

oned. (UnJ.er t.u.e present Act, bo i;h t:Ue Comptroller c.n~.i. the Feieral Re-

serve Board are incluiei in t.c.e L.st of persons.)

Par. 438 (b) Sec. 22 of ~be F. R .. Act., See iiscussion of tile Fed-

eral Reserve Act, infra.

Pa.r. '±'±0- Sec. 5211 P ... S~ ?very _ssoci~.hon s...:.c...ll.r:Jcl.ke not less

tnan five reports to tl:.e Federal Reserve Board aac.c.. year, in a.ccorla.nce

' with the form prescribed by ens Feder~l Reserve Bo~ri. T.c..e report sna.ll

be transmitted to c:W.e Federd.l Reserve Bo2.ri within five days after the

request or requisition by it ani tne report s~ll be publisned in a

newspaper in the sa.rne form in v;..nc.u. it is L;;l.le t.o c.:le Federal Reserve

Board, and proof of public~tion sLall be furnisjBd to the Federal Re-

serve Board as it "W::J.Y require.. Tne Feieral Reserve Board. shall nave

power to call for specic.l reports from any particula.r association 1Vt..en-

ever in its judgcant suc.c. reports are necessary in orier to obtain a

full and complete knowledge of its co nii tion ..

Par. 4:±1- Act of February 26, 1881, 21 Stat. L. 352. The oath

verifying tue returns Ga.ie by national b~nks to the Federal Reserve Board

as. ·required by Sec. 5211 R. S. sllall be sufficient verification. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

•·· ..

-14- X-3109-a

Par. 442, Sec. 5212 R.S. In addition to the reports required by

the preceding section each association snall report to the Federal Re-

serve Board the amount of any iivide1:-rJ. d.eclared within ten days after

its declaration, and the amount of net earnings ln excess of such divi-

dends.

Par. 443- Sec. 5213 R. S. 't'(.l:lere an a.ssQciation fails to make any

report required by law cind refuses to pay the :pena.lty inposed after

assessmen~ by the Federal R~~~erve Boari~ t~e amo~~t thereof may be re-

tained by the Treasurer of the United States ~pon tne order of the

Feder~l Reserve Board out of tne interest on tne bonds deposited with

the Treasurer to secu.re circul~tion.

Par. 447- Sec. 5216 R. s. On tae failure. of an association to

make semiannual returns to tl:..e Traa.surer of the Uni tei States, showing

the amount of its notes in circula.tion, as re~uired by par. 446- Sec.

5215 R. S.·, the dues to be paid by such association sb.a11 be assessed

upon the diilount of r:otas delivered to it by the .§.~!~ls._r;y of the Treas-

Par. 450- Sec .. 22, Internal Revenue Act- Mar. 1, 18?9, 20 Stat4 t.

351. \1.here the Federal Reserve Board finds ~ national bank to be insolv-

ent, no tax saa.ll re a.ssessei or co:;J.lected on account of suJ,;.b. ba.n.k wcich

sball diminish t~e ~ssets thereof necessary for the full pa~ent of all

of its depositors.


X-3109

DISSOLUTION Jl~ BECEIVEBSBTP. {CHlP.,TEP 5 OF ~~TROLLER'S corvr0 ITJJITION OF TFE NATIONAL B.AN!\ING t.Ams:_)

Par. 501 .... Sec.- 5221 !l. s. 1n:herever a nadonal banldng association

votes to go in liauidation, the board of dire::;tor::; srall certify this

fact to the J'ederal ~~ ~ and pubHcatio;1 thereof shall be made

in a specified newspa"?er.

Par. 502- Sec. 5222 R. s. Within six months of the date of the

vote to go into liquidat.ion, the association sh2:.!.1 deposit with the

Treasurer of the United States money sufficient ~.·.o redeem its outstand-

ing circulation. The Treasurer shall execute du.:o1 icate receipts for

such money and de1iver one to the association n:1d the other to the

Federal ]eserv~ Po~rq.

"Par. 503( a) Act of Nov. 7 ~ 1918. Two or mo1·e national banks in

the same city may consolidate into one association, with the approval

of the Federal Reserve "Hoard, ~rovided that whe:1. such consolidation - ·-

shall have been effected and aporoved by the l'£:i~~ _Reserve "Poard, any

shareholder may_ give notice within 20 .days fr,;:,m the date of the Federal

Reserve Board's certification of a:P.';)roval that he dissents from the plan

of consolidation; in which case he is entitled to receive the value of

the shares so held by hh to be; ascertained by an ap:>rai ser t and in

case the value so fixed" is not satisfactory to him, he may within 5

days thereof ap:oeal to the Federal Reserve Bo~ which shall cau:;;e a·.

reappraisal to be made.

Par. 504 - Sec. 5224 R. s. ~~ere a national bank pro~osing to close

up its business shall fail to deposit lawful mon_ey with the Treasurer of

the United States and talre up its bonds within 30 days after the expir-

• Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

-16- X-3109

ation of the time specified, the Secretary of the Treasury shall have

power to sell the bonds pledged for the circulation of the said bank

at nublic auction in New York City.

"Par. 507 - Sec. 5226 R. s. Tllrnen,-::ver a national ban,·.dng asso-

ciation fails to redeem its circulaUngnotes in lawful mone;y, its

failure shall be protested and the public notary making the protest

shall forward it to the .~ecretar:y 2.~ th~ Tre~, retaining a copy

thereof for himself.

Par. 503. - Sec. 5227 R. S. On receiving notice that any national

ba~ has failed to redeem its circulating notes as specified in the

pt"eeeding section, tl'le ..§~retary of .!b.§ Tr~~:SY tr.ay' appoint a special

agent, who shail investigate whether the ba~ has in fact refused to

redeem its circulatine- notes in lawful money, snd shall report to the

Secretary of ~ Treasurv the facts so ascer ~;ained. If the Secretar~

of~ Treasur:y is satisfied that the association is in default, he

shall within 30 d.ays after·he has received notice declare the bonds

deposited by such association forfeited to the United States.

Par. 509- Sec. 522S F. s. After the .-,S.;:.e.;:..cr.;:..e;;...t;;..;;a--.r""-v _o_f ~ Treasury

has ascertained that a default in connection with· circulating notes

has occurred, and he has given notice thereof to the association, such

· association cannot nay out any of its notes, discount any notes or bills,

or otherwise prosecute the business of banking, exce~t to receive rr.oney

belonging to it and to deliver special deposits.

Par. 510 - Sec. 5229 R. s. Upon declaring the bonds of an asso-

ciation forfeited upon non-payment of notes, the Secretary of~ Treasur¥

shall ~ive notice to the holders of the circulating note to present them


-17- X-3109

for payment at the Treasury, and upon payment the Secretary of~

Treasury rnayy in his discretion, cencel an amount of bonds -oledged by

such association e~ual at the current ~arket rates to the notes naid.

~ar. 511 - Sec. 5230 R. s. When the ~P-Cretary of the Treasury

has become satisfied that any association has refused to nay its circu-

lating notes, he may, instead of cancellin~ its bonds, sell so much of

,.....,{""'·-.{ 4' a ~i l

them as may be necessary to redeem the outstanding notes at pu~lic auction

in New York City.

Par. 512 - Sec. 5231 B. s. The Secre U~y __ o_i_!he Treasury, if

he deems it to the inte:.cest of the United s·~ci~es, may sell at private sale

any of the bonds of an association shown to have rrade default in nayin~

its notes •.


·-· . ..

f t-"{r."-.I('"'!J,

·J 5 r:.:.~

-13- X-3109 ii

?ar. 515 - Sec. 5234 B. s. Unon being satisfied that an association

has refused to nav its circulating notes and is in defaul t 7 the Feder~l

]eserve ~may fortro~ith apnoint a teceiver. SUch receiver, under the

direction of the Federal Feserve Board shall take possession of the books,

etc., of the association and collect all debts, dues and clairr·s belon~ing

to it, etc., and unon order of court trJay sell all the real and personal

nronerty of such association. Such receiver shall nay over all money so

made to tre Treasurer of tre United States subject to the order of the

Federal Feser't'e ~· T:he receiver shall also make a re"l')ort to the Fed-

~ Reserve ~oard of its act~ and nroceedinFs. The Federal Feserve

~card may if it deems ~roner, deposit any of the money so made in any

regular Government depository and such depository shall pay interest

unon such money at such rates as the Federal Reserve Board may prescribe,

not less, however, than 2~ per annum.

~ar. 516- Sec. 5235- R.S. Tbe Federal :Reserve ~oard unon apnointing .;;;..;;;;..;;.;.;;;;..;;_.- .;...;;..;;~-- - -- - -

a receiver, shall cause notice to be given by advertising in newspapers

for three consecutive months, calling on all persons to submit their.claims

and make nroof thereof.

Par. 517- Sec. 5236 R. S. After Provision has been made for refunding

to the United States any deficiency in redeeming tr.e notes of an insolvent

bank, the Federal :Reserve~ may mrure a ratable dividend of the money

paid over to it by the receiver.

-oar. 518- Sec. 5237 F. s. "''herever an association, against which

proceedings have been instituted on account of its alleged refusal to

redeem its circulating notes, denies raving failed to do so, it rray


-19-

bring proceedings in the proper Federal court to enjoin any further pro-

ceedings in the premises and the court after citing the Federal ~ill

~ to show c.ause why further ~roceedings should not be enjoined, and

after a finding that the association has no~ refused to redeem its notes,

shall make an order to enjoin the M~.~a.J~ ~!~~ li~a~<,! and any receiver

acting under its direction from all further :proceedings on account of the

alleged refusal.

l'ar. 520- Sec. 1, Act June 30, 1876, 19 Stat. L. 63. Whenever

a national bankin~ association shall be dissolved or whenever any cred-

i tor shall have obtained a judgment agai:.-.3t it in any court of record

and such judgment has remained 'l.mpaid for 30 clays, or whenever the

Federal Reserve ~rd shall become satisfied of the insolvency of a

national banking association, it may, after <l~1e examination, appoint a

receiver who shall proceed to close up the affairs of the association.

· 't>ar. 522- Sec. 3 of the same Act. 11''henever an association has been

placed in the hands of. a receiver, and when the Federal Reserve~

has paid to each creditor, not including shareholders, whose claims have

been allowed the full amount of sue:.-:.. claims, and all expenses of the

receivershi~·nave been ~ovided for, the Federal Reserve~ Shall

call a meeting of the shareholders after due notice, and at such ~eting

the shareholders shall determine whether the receiver shall be continued

and shall wind up the affairs of the association, or whether an agent

shall be elected for this purpose. In case an agent is elected, the

shareholders shall execute and file a bond to the satisfaction of the

Federal Reserve Board conditioned upon the discharge in full of every

claim wt;ich may thereafter be approved, and for the faithful performance


i.

-20- X-3109a

of the duUes of the trust. · The Federal Reserve Board and the receiver

shall thereupon transfer and deliver to such agent the assets of the

association then remaining in the hands or'subject to the control of purpose

the Federal Reserve :Roard and the receiver, and for thi~ · · - ·····- the

Federal Reserve ~oard and the receiver are empowered to execute any

deed, assignment or instrument in writdlng whioh may be necessary and

proper. The proceeds of any assets which ~ay subse~uently be received

shall be distributed, among other things, upon any assessment made upon

. the stock of the association by an order of the Federal Reserve :Board

and the balance ratably among the stockholders. This distribution shall

be ~.ade from time to time as shall be deemed advisable by the Federal

Reserve ~oard or the said agent.

Par. 523- Sec. 1, Act of March 29, 1886. Whenever the receiver of

a national bank appointed by the Federal Reserve :roard shall consider it

necessary to eiDT:l~ oy funds belonging to his trust to !JUI'Chase property in

which the trust has interests, he rre.y certify the facts in the case,

together·with'his opinion as to the value of the property to be sold,

to the Federal Reserve~ with a rec~uest for the right and authority

to -.urchase such property.

"Pc.r .. 524 - See. 2 of the same .Act. If such request is approved

by the Federal Reserve ?oard it shall be submitted, to~ether with the -certificate of facts and its recommendation as to the amount of money

necessary, to the Secretary of the Treasury and, if the request shall

be approved by him, the Federal :Reserve ~ shall allow the reouest

and notice thereof shall be filed with the Treasurer of the United States.


f \

X-3109a -21-

Par. 525- Sec. 3 of the sarre Act. Wbenever such a request is

allowed, the Federal Reserve Board is empowered to draw upon such

funds of any such trust as may be deposited with the Treasurer of

the United States to the extent of the amount recorrmended, :provided

that :9ayments on account of the purchase of any such property shall be

made by the Federal Reserve Toard direct, with the approval of the

Secretary of the Treasury, for such purpose only and in such manner

as the Federal Reserve ~ .. may determine and order.

'Par. 526- Sec. 5239 R. s. If a ciirec tor of a national ban1-

knowingly viol2.tes or ;;:>errritl3 any of its officers, a,::_ents, etc., to

violate any of tl:e provisions of t..,..e Act of June 3, 1864, as a.ir:ended,

all the rights and privileces of t:,e national bant shall be forfeited,

but the violation shall be determined by a :?ro~er Federal court in a

suit brought for that -pur:yose by the Federal Reserve ~ in the nar:e

of the Chairn.an of the C?oard, before the associstion shall be declared

dissolved.

Par. 527- Sec. 21 of the Federal Reserve Act. See discussion

of the Federal Reserve Act, infra.


• • -22- X-3109a

Par. 700 - Sec. 380 R. S. All suits and proceedings arising

out of the provisions of law governing natiocaJ_ banks, in which the

Upi ted States or any of 5 ts officers or <:~:~c::'tr, s'1all be parties,

shall be conducted by the District Attorneys of the several districts

under the direction a.nd su-cervision of the Solicitor of the Treasury.

This section is re-enacted b;y H. R. 4906 exce·,:>t that the direction

and supervision of the Attorney General of the United States is sub-

stituted for that of tx1e SolicH·)r of the T:ceaoury.

Par. 701. - Sec. 24, Sub-paragra-ph 16, cf ,Judicial Code. .Act

of March 3, 1911, 36 Stat. 1- 1092. The District Courts of the

United States to have original jurisdiction of cases comrr.enced by

the United States, or by direction of any officer thereof, against

any national bank, and of cases for winding ~p the affairs of any

such bank. and of all suits brought by any national banlc to enjoin

the Federal Reserve~ or any receiver acting under its direction.

Par. 702. - Sec. 736 R. S. All -proceedings by any national bani~

to enjoin the Federal Reserve :Roard shall be had in the district where

· such association is located.

Pars. 703 and 704. - Sees. 884 and 385 B. s. Every certificate.

assiE:!.nment, and conveyance executed by the Federal Reserve 1=<oard, in

pursuance of law, and sealed with its seal, and copies of organization

certificates of national banks, duly certified by the Federal Reserve


-23-

~,and authenticated by its seal, sr~ll be received in evidence in

all places and courts, and all copies of -papers h-1 t:he office of the

Federal Reserve~ certified by it and a.uthent:~,:2.ted by its seal

shall be evidence equally ·Nith the originals.

~ar. 715.- Same as ?ar. 450 Suura.

"Par. 771. .Act of r.~arch 22, 1918. During tee continuance of the

existing state of war any natinnal bank may con1:.ri"bute to the AILerican

National Red Cross out of net :)rofi ts available for uividends. Each

association stall re::ort to tre Federa.l ~.-::::'..5: l3.£CE"d the amount of such

contribution and the amoum:; of net earnings in excess tl:.ereof.


:.

HOUSE Bitt 4906.

TO AMEND s·ECTION 10 OF THE FEDERAL RESERVE ..AC'r.

rhe purpose of this bill in general terms is to transfer to the ' .

Federal Reserve Board those powers and functions now conferred or imposed

upon the Comptroller of the Currency of the Bureau of which he is the

chief officer.

When the Federal Reserve Act was first adopted, the Federal Reserve

Board was made a separate and independent es.tablishment of the Govern-

ment with powers and duties specifically conferred upon it relating to

the organization and operation of the Federal reserve banks and to cer-

tain specified operations of member banks, both national and state banks.

It was expressl~ provided that nothing in this Act should be construed

to take away any of the powers theretofore vested by law in the Secretary

of the Treasury relating to the supertisiont management and control of

the Treasury Department or of any of the Treasury Department Bureaus.

In other words, the effect of the Federal Reserve Act was to leave the

office of the Comptroller of the c~rrency, a Bureau of the Treasury De-

partment, in full charge of the execution of all laws relating to the

issue and regulation of national bank currency and relating to the

examination and supervisi?n of national banking associationsa None of

the powers vested in the office of the Comptroller of the Currency prior

to the enactment of the Federal Reserve Act were tr~nsferred to the Fed-.

eral Reserve Board and accordingly it has been found that the duties

and powers of the Federal Reserve Board and the Comptroller of the

Currenct have resulted either in duplication of effort and expense or in

a real conflict of purpose.


-2-

For instance, while the Comptroller of the Currency has supervision

over the enforcement of ~11 of the provisions of the National Banking

Pet and has power to regulate the operations of national banks in

the exercise of many of the powers conferred by the National Banking

Pet, nevertheless the Federal Reserve Board has complete jurisdiction

over not only the operation of Federal reserve banks but also the exer-

cise of all of those powers conferred by the Federal Reserve .Act upon

member banks, including national banks. The power to make acceptances,

conferred upon all member banks by the terms of Section 13 of the

Federal Reserve .Act is one which is solely within the jurisdiction

of the Federal Reserve Board. The power of national banks to make

loans upon real estate, a power conferred by Section 24 of the Fed-

eral Reserve Act, is also one subject to regulation and jurisdiction

of the Federal Reserve Board. So also the provisions of Section 22 •

of the Federal Reserve .Act limiting certain relations between direc

tors, officers and employees of member banks with those member banks

comes within the jurisdiction of the Federal Reserve Board and not

the Comptroller of the Currency. Section 21 of the Federal Reserve

Act while authorizing the Comptroller of the Currency with the ap

proval of the Secretary of the Treasury to appoint examiners and make

ex8minations of national banks, specifically authorizes the Federal

reserve banks, with the approval of the Federal Reserve Board, to

provide for special examinations of member banks within their districts.


-3-

Numerous provisions of the Federal Reserve Actt therefore,

hBve res1..1.lted etther in actual or potential duplication of ~he powers

and duties of the Comptroller 1 s office. This division of responsibility

has led to confusion and misunderstanding throughout the country. Many

banks desiring information on this, that or the other power conferred

upon them by law, write to the Comptroller of the Currency for ad-

vice and information only to be referred to the Federal Reserve Board

because the power in question was one conferred by the Federal Re-

serve Act. On the other hand other national banks frequently write to

the Federal Reserve Board for information on matters coming solely

within the jurisdiction of the office of the Comptroller of the Cur-

rency.

Independently of these questions of operation, the real

objection to the present organization of the Federal Reserve Board . and the Comptroller's office is that with reference to examinations.

The National Bank Act requires that the Comptroller of the Currency

shall make at least two examinations each calendar year of each na

tional bank. There is no provision in the law which requires the Cornp-

troller of the Currency to make examinations in emergencies of those

banks about which the Federal Reserve Bank may desire information

or to furnish Federal reserve banks with the information obtained

as a result even of the regular examinations.

The Federal reserve banks as lenders of credit are directly

and intimately concern~d in the operations and soundness of their

member banks. They should not only be entitled but should be assured


-4-

of all information resulting from an examination of those banks.

The ti.m~, inconvenience c:m~:l ex;e:nse involved in making examint:\-

tions are such that Federal reserve banks should not be required

or expected to exercise their power to make independent examina.-

tions so long as the office of the Comptroller of the Currency is

required by law to make not less than two such examinations a year.

The only logical conclusion is to have those examinations now re-

quired to be made by the Comptroller available in every way for the

use of the Federal reserve bank of the district in which the national

bank is located.

House Bill 4906 proposes not only to abolish the office

of the Comptroller of the Currency but with certain minor exceptions

to transfer to the Federal Reserve Board all of the powers of the

Comptroller, those relating to the enforcement of the provisions

of the National Banking Act as well as those providing for the ex~

ination of national banking associations. The result.of such a

trensfer will be that the Federal Reserve Board v~ill have jurisdic-

tion over the enforcement of a~l of the provisions of law relating

to national banking associations, not only those which new come within

its own jurisdiction but also those which come with in the jurisdic-

tion of the Comptroller of the Currency. This centralization of

responsibility is both logical and necessary. It will also mean

that all of the examinations of national banks will be made by or

under the supervision of the Federal Reserve Board and will there-

fore be available always for the use of the Federal reserve ba.nk

. through the Federal reserve agent who is the local representative


•

-5-

of the Federal Reserve Board at the barik.

While the proposed bill is :purposely made sufficiently broad

to :permit the Federal Reserve Board gradually to develop its own

method of effecting the examinations now required by law, never-

theless it is probable that the Board will appoint a head examiner

to act as the heaci of its examining bureau; and the head examiner

will be located in 1~ashington; that the examinations in the various

districts will be made under the direct supervision of chief exam-

iners located in each of the districts; that the offices of the

chief examiners in each district will be located on the premises

of the Federal reserve baruc and that while orders and instructions

to these chief examiners in the field will come direct from the

head examiner in Washington, nevertheless the Federal reserve agent

who is the Board's local representative at each hank, will have

complete access to all of the records of the local chief examiner

and will also be given·authority from time to tirr.e to require the

chief examiner to make special examinations of any batiks about

which the Federal reserve bank may desire particular information.

The ability of the Federal reserve agent to coo~erate officially

and ultimately with the office of the chief examiner in his district

will perhaps do more than any one other thing to promote effectiveness

in examination and efficiency in the OT,Jeration of the Federal Re-

serve System. The only legal power of the Comptroller of the


-6-

Currency at the present time is to ap~oint a receiver for and

close any national barik which may be in difficulty, but the pro-/

posed point of c~1tact between the Federal reserve agent and the

local chief examiner will make possible a cooperation between

the examining force and the lending power of the Feder&l reserve

ban1:s that will often result in revivifying a barik that rnigh t

otherwise l:ave to be closed by the com:otroller. In fact, one

of the chief purposes of a Federal reserve bank is to rr~:e li~uid

the assets of one of its n,embers which is in need of ready cash.

Since tre examination of the assets of any member bank is the

only satisfactory method of determining the amount and character

of its assets which are eligible for rediscount by a Federal re-

serve bank, unless trere is a close cooperation between the

examining force and the Federal reserve bank it might be difficult

or impossible for the Federal reserve bank in err.ere;encies to know

how far or to what extent it might be able to afford assistance.

It is to give tris ~nfor~ation to the Federal reserve bank

immediately in cases of need that the ~ending bill provides rr.eans

whereby the examining force and the representatives of the Federal

reserve banlr may operate in unison, although supervision and

control over the examinin~ force will always be exercised by the

Federal Reserve Board, either directly or indirectly in cases of

err.ergency, throu§h its local representative the Federal reserve

agent.


i.

-7-

There are other rratters such as the right to charter new

national bariks or to renew the charters of existing ones that properly

should c erne within the jurisdiction, not of one individual, the

Comptroller of the Currency, as at present, but of the Federal Re-

serve Board, a body of men having the responsibility for the opera-

tion of the banking system as a whole. Rut these rr.atters are of les-

ser importance as COITJ?ared with the necessity of promoting a cen-

tralization of control and res?onsibility for the examinations and

operations of no. tional banl:s in one body, not in two as is the case

at present. Furthermore, the saving in expense to the Treasury

should not be overlooked for the salary roll of the Comptroller's

office alone amounts to approximately ~200,000 per annum. Under

the proposed bill this expense will be assumed by the Federal Reserve

Foard and will be assessed against the Federal reserve banks.

Inasmuch as the pro1)osed bill provides for the abolition

of the office of the Comptroller of the Currency, it was found ne-

cessary to effect a reorganization of the Federal Reserve Foard by

providing for the apnointment by the President of six instead of

five appointive members. Section 2 creates the office of Under

Secretary of the Treasury who is to be a member of the ~card ex-

officio in ylace of the Secretary of the Treasury who is now a member

ex-officio. This will .rr.ean that the -r:oard will be comoosed of seven

members as at present, but that there will be only one ex-officio

member. In order that the terms of the appointive rrerrbers may exnire


t ' ....

-8-

at regular li1tervals it is necessary to increase the term of office

of each from 10 to 12 years. It is also provided that at least

three of the ap•1ointi ve members shall be men experienced in banking

or finance instead of two as.at present. There are other features

of the bill wr ich are more rLatters of detail, but which are eviderlt

on its face.

For the convenience of the committee I have requested the

Federal Reserve ~oard to prepare a detailed analysis of all the

provisions of law, whether in the Federal Reserve Act or the National

ttanking !.ct which concern the Comptroller of the Currency with a

brief reference to the manner in which those provisions will be

disnosed of under the nroposed amendment.


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