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C O P Y  •

  1 8 1

2-7099

TEXT  OF  GLA.SS-STEAGALL BILL  AS  PASSED  BY  SENATE  ON FEBRUARY  19 th , 1932 .

72d  Congress

1 s t

  Session

H. R.

  9203

A  bill  t o  improve  t h e  f a c i l i t i e s  o f the  Federal reserve system  f o r t h e s e r -

vice

  of

  commerce, industry,

  and

  agr icu l tu re ,

  t o

  provide means

  f o r

  meeting

  t h e

needs  of  member banks  i n  exceptional circumstances,  a n d f o r  other purposes.

Be i t

  enacted

  b y t h e

  Senate

  and

  House

  of

  Representat ives

  of the

  United

Sta tes

  of

  America

  i n

  Congress assembled, That

  t h e

  Federal Reserve

  A c t , a s

  amended,

i s

  further amended

  by

  insert ing, between sections

  10 and 11

  t h e re o f ,

  a new

  section

reading

  a s

  follows:

SEC. 10. (a)

  Upon re ce iv in g

  t h e

  consent

  of not

  less than

  s i x

  members

  of

t h e

  Federal Reserve Board,

  any

  Federal reserve bank

  may

  make advances,

  i n

  such

amount

  a s t h e

  board

  of

  d i r e c t o r s

  of

  such Federal reserve bank

  may

  determine,

  to

groups

  of

  f i v e

  o r

  more member banks

  a

  major i ty

  of

  them independently owned

  and

controlled, within

  i t s

  d i s t r i c t upon the ir t ime

  o r

  demand promissory notes,

provided

  t h e

  bank

  or

  banks which receive

  t h e

  proceeds

  of

  such advances

  a s

  herein

provided have

  no

  adequate amounts

  of

  e l i g i b l e

  o r

  acceptable assets available

  t o

enable such bank

  o r

  banks

  t o

  obtain sufficient credit accommodations from

  t h e

Federal reserve bank through rediscounts  o r  advances other than  a s  provided  i n

sec t ion  10 ( b ) . The  l i a b i l i t y  o f the  individual banks  i n  each group must  b e

l imi ted  t o  such pro por tio n  o f t h e  total amount advanced  t o  such group  a s the

d e p o s i t l i a b i l i t y  o f the  respective banks bears  t o t h e  aggregate depos i t l iabi l i ty

o f a l l  banks  i n  such group,  b u t  such advances  may be  made  t o a  lesser number  of

such member banks  i f t h e  aggregate amount  of  the i r depos i t l i ab i l i ty cons t i tu te s

a t  l e a s t  10 pe r  centum  o f the  en t i re depos i t l i ab i l i ty  o f t h e  member banks within

such d i s t r i c t . Such banks sh al l

  be

  authorized

  t o

  d i s t r i b u t e

  t h e

  proceeds

  of

  such

loans  t o  such  of  their number  a nd in  such amount  a s  they  may  agree upon,  b u t

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before  so  doing they shall require such recipient banks  t o  deposit with  a  sui table

t rus tee , represent ing

  th e

  entire group, their individual notes made

  i n

  favor

  o f

t h e

  group protected

  by

  such col la te ra l secur i ty

  a s may be

  agreed upon.

  Any

Fed era l re se rv e bank making such advance sh a ll charge i n t e r e s t ther eon  a t a  rate

n o t

  less than

  1 p e r

  centum above

  i t s d i

  ..count rate

  i n

  e f f e c t

  a t t h e

  time

  of mak-

i n g

  such advance.

  No

  such note upon which advances

  a r e

  made

  b y a

  Federal reserve

bank under t h i s se cti on sh al l  be  eligible under sect ion  16 of  t h i s  Act as

co l l a te ra l s ecur i ty

  f o r

  Federal reserve notes.

No

  ob l iga t ions

  of any

  for eig n government, in di vid ual , pa rt ne rs hi p, asso -

c ia t ion ,  o r  corporation organized under  t h e  laws thereof shall  be  e l i g i b l e  a s

co l l a te ra l s ecur i ty

  f o r

  advances under this section.

Member banks

  a r e

  author ized

  t o

  obligate themselves

  i n

  accordance with

  t h e

provis ions  of  th i s s ec t ion .

SEC. 2 . The

  Federal Reserve

  Ac t , a s

  amended,

  i s

  further amended

  by

  adding,

immediately after such

  new

  sec t ion

  10 ( a ) , a n

  addi t ional

  new

  section reading

  a s

fo l lows:

  x

SBC. 1 0 . ( b)

  Un t il March

  3 , 1934, and in

  exceptional

  and

  exigent circum-

stances,

  and

  when

  any

  member bank, having

  a

  c a p i t a l

  of

  $2,000,000

  o r

  l e s s ,

  ha s

no  f u r t h e r e l i g i b l e  and  acceptable assets available  t o  enable  i t t o  obtain

adequate credit accommodations through rediscounting  a t t h e  Federal reserve bank

or any  other method provided  by  t h i s  A ct  other than that provided  by  Section  10

( a ) , a n y

  Federal reserve bank, subject

  i n

  each case

  t o

  a f f i rma t ive ac t ion

  by not

less than  s i x  members  o f t h e  Federal Reserve Board  may  make advances  to  such

member bank  o n i t s  time  o r  demand promissory notes secured  t o t h e  s a t i s f a c t i o n  o f

such Federal reserve bank; PROVIDED, That

  ( l )

  each such note sh al l bea r i n t e r e s t

a t a  ra te  n o t  less than  1 p e r  centum  p e r  annum hi gh er than  t h e  highest discount

r a t e  i n  e f f e c t  a t  such Federal reserve bank  on the  date  o f  such note;  (2) the

Federal Reserve Board

  mgy by

  regula t ion l imi t

  and

  de f ine

  t h e

  c la s ses

  o f

  assfets

which  may be  accepted  a s  secur i ty  f o r  advances made under authority  o f  th is

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sect ion;  and (3) no  note accepted  f o r a n y  such advance shall  b e  e l i g i b l e  a s

co l l a t e ra l secu r i ty

  f o r

  Federal reserve notes.

«2To ob l i ga t ions  of any  for ei gn government, indi vid ual , pa rt ne rs hi p, asso cia-

t ion ,

  o r

  corporation organized under

  t h e

  laws thereof shall

  b e

  e l i g i b l e

  a s

  c o l l a t -

era l secur i ty

  f o r

  advances under th is s ec ti on.

SEC. 3 . The  second paragraph  o f  sect ion  16 of th e  Federal 3eserve  A c t , a s

amended,

  is ar .

 ended

  to

  read

  a s

  follows:

Any   Federal reserve bank:  may  make application  t o t h e  local Federal reserve

agent

  f o r

  svcli amount

  of the

  Federal reserve notes hereinbefore provided

  f o r a s

i t may

  re qui re . Such app lic at ion sh al l

  b e

  accompanied with

  a

  tender

  to t h e

local Federal reserve agent

  o f

  c o l l a t e r a l

  i n

  amount equal

  to t he sum of th e

Federal reserve notes thus applied

  f o r a n d

  issued pursuant

  to

  such application.

I h e

  co l la t era l s ecur i ty thus of f ere d shal l

  b e

  n o te s , d r a f t s , b i l l s

  o f

  exchange,

o r  acceptances acquired under  t h e  provis ions  o f  sect ion  13 of  t h i s  A c t , o r  b i l l s

of

  exchan.-e indorsed

  by a

  member bank

  of any

  Federal reserve d i s t r i c t

  a n d p u r -

chased under  t h e  provis ions  o f  sec t ion  14 of  t h i s  A c t , o r  cancers' acc ept anc es

purchased under  t h e  orovis ions  of  said sect ion  1 4 , o r  gold  o r  g o l d c e r t i f i c a t e s  :

PROVIDED, EOTCEVER, That, u n t i l March

  3 , 1934 ,

  should

  t h e

  Federal Reserve Board

deem

  i t i n t h e

  pub l i c i n t e res t ,

  i t may ,

  upon

  th e

  a f f i rm at ive vo te

  o f n o t

  less

than  a  major i ty  o f i t s  members, authorize  t h e  Federal reserve banks  t o  o f f e r ,

an d th e

  Federal reserve agents

  t o

  accept ,

  a s

  such co l l at er al sec uri ty , d i rec t

ob l igat ions

  o f t h e

  United States.

  On

  March

  3 , 193 4 , o r

  sooner should

  t h e

  Federal

Reserve Board  so  decide, such aut hor iza tio n sha ll termin ate  and  such obligations

of the

  United States

  b e

  r e t i r e d

  a s

  secur i ty

  f o r

  Federal reserve notes.

  In no

event sha l l such co l l at er al s ec uri ty  b e  less than  th e  amount  o f  Federal reserve

notes applied  f o r . T he  Federal re se rve agent sh al l each  day  n o t i f y  t h e  Federal

Reserve Board

  of a l l

  i s sues

  an d

  withdrawals

  of

  Federal reserve notes

  to and by

t h e

  Federal reserve bank

  to

  which

  h e i s

  accred i ted .

  The

  said Federal Reserve

Board

  .nay at any

  time call upon

  a

  Federal reserve bank

  f o r

  addi t iona l secur i ty

  to

pro tect  th e  Federal reserve notes issued  to i t .