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CUOf BILL VITAL TO c amtes glass. Chief features of New federal Re* serve Act Here Presented-fed. eral Reserve Board of Seven Members to Su? pervise Banking System of the Country. Till: federal reserve act Is now a fart of the law of the land. With President Wilsons algna ttire to tbe new Ulass-Owen currency reform bill the country looks forward to the practical working out of the act The law la in part as fol? lows: Au act to provide for the establish ment of federal reserve banks to fur alab an elastic currency, to afford ids of redis? count l o|; codM rial paper, to es? tablish a more ef t e c 11 v a super vision of bau king la the United States and for other purposes. That the short title cf this act shall be tbe "fed? eral reserve act" Sec. 2. As soon as practicable tbe Jy A?r,c? ? - Prtss Association, secret nr.- of the isury, tbe sec- TH* *mbidbiit. ratsry ad agriculture and the comp? troller of tbe currency, acting aa "the reserve bunk organisation committee.' shall designate not leas than eight nor mors than twelve cities to be known as federal reserve cities, aud shall divide tbe continental United States, exclud? ing Alaska, into districts, each district to eoutatn otdy one of iu< n *? derul rc cltl^t fc NAMING RESERVE BANKS. Te Take Title of Prinoipsl City In Re* serve District. The said committee shall sujwrvlse the organization In each of the Htles designs ted of a federal reserve bank, wblcb shall Include In Its title the name of the city In which it is situat? ed, aa "Federal Reserve Dank of Chi ca go Under rcgulatl n .to he prescribed by tbe organization committee every na tlonsl bat King association In the Unit? ed State* Is hereby required and every eligible bank In tbe United States and every trust company within tbe Dis? trict of Columbls Is hereby authorized to signify In writing within sixty days after tbe passage of this act Its ac? ceptance of tbe terms and provisions bereor When tbe organization committee shilt have designated the cities in which federal reserve banks are to be organized and fixed the geographical limits of the federal reserve districts every nstlon.il bsnklug sssovlattou wttblo t.nt district ahsll be required wltblo thirty days ufter uotlce from the org? ni/jition committee to sub? scribe to tbe capital stock of such fed eral reserve hank In a turn equal to 0 per cent of tbe paid up capital stock sod surplus of such bank. Any national bnuk fulling to signify its acceptance of tbe terms of this act within the sixty daw aforesaid rtbal) cease to act as s reserve ugent upon thirty dar?' uotlce to be given within illscr.'tlon of the said orguul/utlon 0) It tee or of tbe fjder.il reserve hoard. "Should any national banking associa? tion In the ('tilted States now organ is*d fall sltbln one year after tbe pas? sage of this act to become a member bank under the provisions bei-clubefore atuted or fall to comply with any of tbe provisions of this act applicable thereto all of tbe rights, privileges and fraucnhMM of such aemndatiou granted to It uadvr tbe natloual bauk act or un? der tbe provisions of thla act ahull be thereby forfeited. No Individual, copartnership or cor ?oration other tbnn a member bank of Its district shall be permitted to auhscrlhe for or to bold tit any time more than IHUMX) par value of stock In rny federal reserve Imnk Such atock ahall be known as public stock and may be transferred on the books of tbe federal reserve bank by the chairman of tbe board of directors of au. h bank. Should the subscription of atock by bauk* and the public be Inadequate tie government Itself may aubscribe for atock. Stock not held by member banks ahall be voted by Claas c direc? tors ouly. RESERVE BANK BRANCHES. Rsgljnsl lostitutiona Eivowerad to Eatabhth Sub Banke. Hi federal reserve hank shall com meme hu*lne*s with h subscribed cap Ital less In amount than tTtrfnt.OOO. Sec. 3. Kacli federal reserve bauk I B. L. OWEf. Eight to Twelve Reserve Banks to Be Establish? ed In Various Parts of the Land ? Enacts Money Reforms, Particularly With Regard to farmers. n1u.11 extabllsh branch banks within tbe federal reserre district In which It Is located and may do so in the dis? trict of any federal reserre bank which may have been suspended. Such branches sball be operated by a board of directors under the rules and regulations approved by the federal reserve board. Directors of branch banks shall possess the same qualtfl cations as directors of the federal re? serre bauks. Four of said directors ?hall be selected by the reserve bank &n? three by the federal reserve board, and they shall hold office during the pleasure, respectively, of the parent bank and tbe federal reserve board Tbe reserve bank shall designate one of the directors as manager. # Bee. 4. ? ? ? Upon the filing of ? ? ? certifieste with the comptroller of the currency ? ? ? the said federal re? serre bank shall become a body cor poiate and aa such and in the name designated In such organization csr till ate shall have power First?To adopt and use a corporate seal. Svond ?To have succession for s pe? riod of twenty years from Its organisa? tion unless ft la sooner dissolved by sn set of congress or noises Its franchise becomes forfeited by some violation of law. Third.?To make contracts Fourth ?To aue and be sued, com : \ 1 n and flVfend, in any court of lew ur equity. Klfth.? To trpolut br its' boa*! of directors, elected as hereinafter pro v d *l, such officer*, as are i I tier wise provided for In tlih* set I i defli < their duties, require bonds of them and fix the penalty thereof, to dismiss such officers or any of them as may be ap? pointed by them at pleasure and to sp point others to fill their places. S, xtb.?To prescribe by its board of directors bylaws not inconsistent wltb luw regulating the manner In which its general business may he conducted and the privilege* granted to it by law U'uy be exercised and enjoyed. Seventh.- To exercise by Its board of directors or duly authorized officers or agents ull powers specifically granted by the provisions of this net and such Incidental powers as shall be necessary to ;\rry ou tbe business of banking wlt.iln tbe limitations prescribed by this act. E-.ghth.?I'pon deposit with the tress urer of the United States of any bonds of tbe United States In tbe manner provided by existing law relating to uatonul bunks to receive from the comptroller of tbe currency circulating notes lu blank, registered and counter signed as provided ty law. equal In amount to the par value of tbe bonds so de|Misited. such notes to be Issued under the same conditions and provl aloris of law which relate to the Issue of circulating notes of notional banks secured by bonds of the halted States bearing the circulating privilege, ei cept that the Issue of such notes shall not be limited to the amount of the capital Htock of such federal reserve ba nk. Hut no federal reserve bank shall transact any business except such as Is Incidental and netessti rily prellml nary to Its organization until It bas been authorized by tbe comptroller of the currency to commence business un? der Uie provisions of this act CLASSES OF DIRECTORS. Board of Nine to Control lisch Reserve Bank. livery federal reserve bmk shall be conducted under the supervision snd control of a l>oard of directors. Such board of directors shall be se leeted M hereinafter specified and shall consist of nine tn'tubers. holding office for three years and divided Into three classes, designated as Classes A, B and C. Class A shall consist of three mem? bers, who shall be chosen by nnd be representative of the stock holding banks Class R shall consist of three mem? bers, who ut the time of their election shall be actively eugaged in their dis? trict in commerce. In agriculture or In some other industrial pursuit Class C skull consist of three mem hers, who abull be designated by the federal reserve board. Wbeu the nec? essary subscriptions to the capital stock have been obtslued for tho or? ganization for auy federal reserve bank tie federal reserve board shall appoint the Class C directors nnd shall designate one of stich directors ns ein?Irman of the nonrd to be selected. Pending the designation of such cluilr Uiuu 11,0 organisation committee shall exorcise the powers and (intics epper t tuning to tbe office of chairman m tbe organization of auch federal reserve bank. No senator or representative It. con? gress shall be a member of federal re? serve board or an officer or a director of a federal reserve bank. No director of Class B shall bo an 1 officer, director or employee oi any bauk. I No director of Class 0 shall be ao 1 officer, director, employee or stock? holder of any bank. Class C directors shall be appointed by the federal reserve bou. * Tb ahall have been fur at least two years residents of the district for wbicb they are appointed, one of whom shall be designated by said board as chairman of the board of directors of the federal reserve bank and as "fed? eral reserve agent" He shall be ft person of tested banking exper' nee, and in addition to his duties aaii man of the board of dlrectv ; federal reserve bank he sba quired to maintain under reg. Mors to be established by the federal i ? board a local office of said boai the premises of the federal reev^ed bank. Sec. & The capital stock of each fet eral reserve bank shall be divided Into shares of $100 each. Diviaion of Earnings. Sec. 7. After all necessary expenses of a federal reserve bank have been paid or provided for, the stockhold? ers ahall be entitled to receive an annual dividend of 0 per centum on tbe paid In capital atock. which divi? dend ahull be cumulative. After the aforesaid divtdeud claims have V^n fully met all net earnings ahall be paid to the United States aa a franchise tax. except that one-half of such net earnings shall be paid into a surplus fund until It ahall amount to 40 per centum of the paid in capital etcsk of auch bank. The net earnings derived by the Unit? ed States from federal reserve banka shall, in the discretion of the secretary, be used to supplement tbe gold reserve held against outstanding United States notes, or shall be applied to tbe re? duction of the outstanding bonded in debtednesa of tbe United States. Re i serve banka shall not be taxed except upon real estate. Section 8 amends the existing bank Ing laws, ao that stockholders owning 51 per cent of tbe stock of banks other than national banks can convert their organisations Into national banka. Section 9 describes how state banks may become members of reserve banka FPOERAL RESERVE BOARD. I i.- I ! 5Uv?o toam?er? Fiv? Whc.n Ar? u? < G"t $12 000 ? Year Each. I" 10 - fedora,! reserve based *p! hereby crct * . which shall cou*ist of seven members. Including the secre- | tury of tbe treasury and tlie eomptrol- j let of the currency? who shall be mem ben ex officio, und live members ap pointed by the president of the Unit cd States, by and with the advice and consent of tbe setiate In selecting the live 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 repre? sentation of the dltYereut geographical divisions of the country The five mem? bers of the federal reserve board ap poluted by tbe president and confirmed as aforesaid shall devote their entire j time to tbe business of tbe federal re- 1 serve board and sbull each receive an annual salary of $12.000. together with actual necessary traveling expenses, and the comptroller of tbe currency, us ex officio mein her of the federal re? serve 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 us a member of said board The members of said board, the secretary of tbe treasury, the assistant secretary of the treasury and the comptroller of the currency shatl be ineligible during the time they are in office and for two years thereaft er to hold any office, position or em? ployment lu any member bank. Of the five members thus appointed by the president at least two shall be persons experienced in banking or finance. One ahall be designated by tbe president to nerve for two. one for four, one for six. one for eight one for ten. and thereafter each member ao appointed sbull serve for a term of ten years unless sooner to moved for cause by the president Of the five persons thus uppoluted one shall be designated by the president aa gov ernor and one as vice governor of the federal reserve board. Tbe governor of the federal reserve board, subject to its supervision, shall be tbe acting ex? ecutive officer The federal reserve board ahall have power to levy semiannual y upon the federal reserve banks In proportion to their capital stock and surplus an as? sessment sufficient to pay its estimated expenses and salaries of its members and employees for tbe half year suc? ceeding tbe levying of such assessment together with any deficit carried for wurd from the preceding half year. The first meeting of the federal re? serve board shall be held iu Washing? ton, District of Columbia, as soou as may be after the passage oif this act at a date to be fixed by the reserve bank organization committee T'.iosecretary of the treasury shall be ex officio chair? man of tbe federal reserve board. No member of the federal reiierve board ahall be an officer or dirts tor of any bank, hanking Institution, truat com pany or federal reserve bank nor hold dock hi ins bunk, banking Institution .?I trust compnny, and before entering i a h dm lea na a member of the federal ic> rve board be shall certify nhder oath tu the secretJtry of the Ueeeurj that be baa complied with this requirement. Whenever a vacan? cy shall occur other than by expiration of term among the six members of tbe federal reserve board appointed by the president, as above provided, a succes? sor shall be appointed by the president, with the advice and consent of the senate, to fill such vacancy. The president shall have power to fill all vacancies that may happen on the federal reserve board during tbe recess of tbe senate by granting com? missions which shall expire thirty days after the next session of tbe senate onvenes. RESERVE BOARD POWERS. Has Controlling Hand on Banking of tha Nation. Sec. 11. The federal reserve board shall be authorized and empowered: (a) To examine at its discretion the accounts, books and affairs of each ?ederal reserve bank and of each mem >r bank and to require such state* u ? nts and reports as it r^j ^eem ssar.7. The said board shall pub uce each week a statement show M+, % condition of each federal re ink nnd a consolidated state i? all federal reserve banks, ??ments sball show in detail n*e asfets : nd liabilities of the federal mkm, single and combined, iish full Information re g. praeter of the money he.^ and the amount, na tu re 'es of the paper and other owned or held by federu. oanks. (h) Tc . v-rmit or on the affirmative vote of at least five members of the reserve board to require federal re? serve banks to rediscount tbe discount? ed paper of other federal reserve banks at rates of Interest to be fixed by the federal reserve board. (c) To suspend for a period not ex? ceeding thirty day8, and from time to time to renew auch suspension for pe rlods not exceeding fifteen days, any reserve requirement sptcifled In this act: Provided, that It shall establish a graduated tax upon the amounts by which the reserve requirements of this act may be permitted to fall below the level hereinafter specified; and provided, further, that when the gold reserve held against federal reserve notes falls below 40 per centum, the federal reserve board shall establish a graduated tax of not more than 1 per centum upon such deficiency until the reserves fall to 32V? per centum, and when aaid reserve falls below 32^ per centum, a tax at the rate increas? ingly of not less than lx,i per centum upon each 2% per centum or fraction thereof that such reserve falls below 82% per centum. The tax sball be paid by the reserve bank, but the reserve ben-: shall nfld an amount equal \o sa^l t?* b> the rats* of interest and i Uscotuit fixed by the federal reserve I btmrJ. (4j To snperi He and regulate tarou go tine bureau ander the* charge of the comptroller of the currency the Issue and retirement of federal reserve notes, and to prescribe rules and regu? lations under which such notes may be delivered by the comptroller to the federal reserve agents applying there for. ' (e) To add to the number of cities classified as reserve and central re? serve cities under existing law tn which national banking associations are subject to tbe reserve require? ments set forth In section 20 of this act, or to reclassify existing reserve and central reserve cities or to terml uate their designation as such. (f) To suspend or remove any officer or director of any federal reserve | bank, the cause of such removal to be forthwith communicated in writing by the federal reserve board to the re moved officer or director and to said bank. (g) To require tbe writing off of j doubtful or worthless assets upon the books and balance sheets of federal reserve banks. (h) To suspend, for the violation of any of the provisions of this act, the operations of any federal reserve bank, to take possession thereof, ad minister the same during the period of suspension and when deemed advisa? ble to liquidate or reorganize such bank. (i) To require bonds of federal re? serve agents, to make regulations for the safeguarding of all collateral, bonds, federal reserve notes, money or property of any kind deposited in the hands of such agents, and said board shall perform the duties, functions or services specified in this act and to make all rules and regulations neces? sary to enable said board effectively to perform the same (J) To exercise general supervision over said federal reserve banks. (k) To grunt by special permit to na? tional banks applying therefor, when not in contravention of state or local law, the right to act as trustee, ex ecutor, administrator or registrar of stocks and bonds under such rules and regulations as the said board may pre? scribe. (1) To employ such attorneys, ex? perts, assistants, clerks or other em? ployees us may be deemed necessary I to properly 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 tbe members of said board. All such attorneys, experts, assistants, clerks und other employees shall be appointed without regard to the provisions of the act of Jan. 1<>, 1883 (volume 22. United States stat? utes at large, page 403), and amend? ments thereto or any rule or regulation made In pursuance thereof. Section 12 creates a federal advisory council, consisting of one member from each federal reserve district, which Is empowered to confer with the federal reserve board and make representations regarding the business of the board. RESERVE BANK POWERS Principal Functions of the Now Re? gional Institutions. Sec. 13. Any federal reserve bank may receive from any of Its member banka and from the United States de? posits of current funds in lawful mon? ey, national bank notes, federal reserve notes or checks and drafts upon mem? ber banks, payable upon presentation or solely for exchange purposes may receive from other federal reserve banks deposits of current funds in lawful money, national bank notes or checks and drafts upon solvent mem ber or other federal reserve banka payable upon presentation. Upon the indorsement of any of its member banks, with a waiver of de? mand notice and protest by such bank, any federal reserve bank may dis? count notes, drafts and bills of ex? change arising out of actual commer? cial transactions?that Is. notes, drafts and bills of exchange issued or drawn for agricultural, industrial or commer? cial purposes or the proceeds of which have been used or are to be used for such purposes, the fedaral reserve board to have the right to determine or define the character of the paper thus eligible for discount within tbe meaning of this act Nothing in this act contained shall be construed to prohibit such notes, drafts and bills of exchange secured by staple agricul? tural products or other goods, warea or merchandise from being eligible for such discount but such definition shall not include notes, drafts or bills cov | erlng merely investments or Issued or drawn for the purpose of carrying or trading in stocks, bonds or other in? vestment securities except bonds and notea of the government of the United States. Notes, drafts and bills admit ted to discount under the terms of this paragraph tnuat have a maturity at the time of discount of not more than ninety days, provided that notes, drafts and billa drawn or Issued for agricultural purposes or based on live stock and having a maturity not ex? ceeding six months may be discounted In an amount to be limited to a per? centage of the capital of the federal reserve bank, to be ascertained and fixed by the federal reserve board. j Discounting Acoeptancea. Any federal reserve bank may dis? count acceptances which are based on tbe importation or exportation or do meatic shipment of goods and which have a maturity at time of discount of not more than three mouths and In dorsed by at least one member bank. The amount of acceptances so dis? counted shall at no time exceed one half the paid up capital atock and sur? plus of die bank for "which tbe re? discount* ftre made. T ;r. ;re?e of sucn aouw . bill* bearing the signature or ttidorR* ! ? e.ut of any one person, company or; i arm ei corporation *eun*coumeo tor any one bank shall at no time exceed 10 per centum of the unimpaired capi? tal and surplus of said bank, but this restriction shall not apply to the dis? count of billa of exchange drawn in ! good faith against actually existing values. Any member bank may accept drafts or bills of exchange drawn upon It and growing out of transactions in I volvlng the Importation or exportation I of goods having not more than six ' months sight to run, but no bank shall accept such bills to an amount equal at any time in tbe aggregate to more than one-half of ita paid up capital stock and surplus. Open Market Operations. Sec. 14. Any federal reserve bank may, under aies and regulations pre? scribed by tbe federal reserve board, purchase and sell in the open market at home or abroad, either from or to ! domestic or foreign banks. Arms, cor? porations or individuals, cable trans | fers and bankers' acceptances and bills of exchange of the kinds snd ma? turities by this act made eligible for rediscount with or without the indorse? ment of a member bank. Every federal reserve bank ahall have power: (a) To deal In gold coin and bullion at home or abroad, to make loans thereon, exchange federal reserve notes for gold, gold coin or gold cer? tificates 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 banka are authorized to bold; tb) To buy and sell at homo or abroad bonds and notes of tbe United States and bills, notes, revenue bouds and warrants with a maturity from date of purchasing of not exceeding six months, issued In anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any state, county, district political subdi? vision or municipality In the conti? nental United States, including irriga? tion, drainage and reclamation dis? tricts, such purchases to be made in accordance with rules and regulations prescribed by the federal reserve board; (O To purchase from member banks and to sell, with or without Its In? dorsement, bills of exchange arising out of commercial transactions aa hereinbefore defined; (dl To establish from time to time. ?Object to review and determination of the federal reserve board, rates of discount to be charged by the federal reserve bank for each c]n%* of paper, which shall be fixed with a view of ac? commodating commerce and business: tel To establish accounts with other federal reserve banks for exchange purposes and, with the consent of the federal reserve board, to open and maintain banking accounts In foreign countries, appoint correspondents and establish agencies lu sudi countries i wheresoever It my deem best for the j purpose of purchasing, selling end col? lecting bills of exchange, and to buy and sell with or without Its Indorse* j nieut through such correspondents or I agencies, bills of exchange arising ont of actual commercial transactions which bare not more than ninety days to run and which bear tbe signature of two or more responsible parties. Section 15 provides that inoneys held in the general fund of the United States treasury, except tbe 5 per cen? tum fund for the redemption of out? standing national bank notes and the funds provided in the set for the re? demption of federal reserve notes, may be deposited in federal reserve banks which shall act as fiscal agents and that tbe funds of the Philippine Islands, the postal savings and any other government funds most be de? posited in federal reserve, banks. Section 16 provides for the Issuance of federal reserve notes to federal re? serve banks, redeemable in gold on de? mand at the treasury department or In gold or lawful money at r?ny fed? eral reserve bank. The collateral se? curity shall he notes and bills accept? ed for rediscount under section 18. Federal reserve banks shall have a gold reserve of 40 per cent of their federal reserve notes and shall malm* tain In tbe United States treasury In gold a reserve of not less than 5 per cent of the federal reserve notes for their redemption. Section 17 repeals laws requiring na? tional banks to deposit government bonds with the United States treasurer. Section 18 provides a plan for retir? ing the 2 per cent bonds on which the present currency is based. Under tbe plan $25,000,000 worth of these bonds will be purchased each year, beginning two years after the system Is placed la operation, by the new regional banks from member banks On one naif of its holdings each regional bank may Ve? nue currency. Tbe remainder will be refunded hi 3 per cent thirty year bonds or 3 per cent one year treasury notes, which the banks must agree te renew each year for thirty years. Section 10 describes bow member banks shall establish and maintain re? serves. Section 21 provides for the examina? tion of each member bank by the comptroller of the currency at least twice s year, for a special examination of member banks when desired by federal reserve banks and for a spe? cial examination of soy federal re? serve bank upon the application ef ten member banks. PENALTY F0R_DISH0NESTY. T?*??ro mo With Bans Exam an are Made Criminal O*?ons?. Sec. 2 No msaioer oana or a**y officer, director or employes thereof shall 11 arseftor make ac^y lean or grant any gratuity to any bank ex? aminer. Any bank officer, dlrectee or employee violating this provision shall be deemed guilty of a misde? meanor and shall be Imprisoned net exceeding one year or fined not more than $5,000. or both, may be fined a for* ther sum equal to tbe money so loan? ed or gratuity given. Any examiner accepting a loan or gratuity from any bank examined by blm or from an officer, director or employee thereof shall be deemed guilty of a misde? meanor and shall be tmprbtoaed net exceeding oue year or fined not more than $5.ooo. or both. Section 23 provide* that national bank stockholders shall be reaponslble for all contracts, debts and engage? ments of their banks to the amount of their stock at par value In addition to tbe amount invested In auch stock. If they transfer their stock within sixty days before tbe failure of their banks they shall be liable to the same extent in ease the transferee falls to meet such liability. Loan* on Farm Lands, Sec. 24. Any national banking as? sociation not situated in s central reserve city may make loana secur? ed by Improved and unencumbered farm land situated within its fed? eral reserve district, but no auch loan shall be made for a longer time than five years nor for an amount exceeding 50 per centum of the actual value of the property offered sa se<^-lty Any such betttk may make such loans lo an aggregate sum equal to 25 per centum of IbR capital and surplus or to one* third of its time deposits, snd such hanks may continue hereafter, as here? tofore, to receive time deposits snd pay Interest on the sama ,. The federal reserve board shall bare power from time to time to add to the list of cities In which national banks shall uot be permitted to make loans secured upon real estate in the man? ner described In this section. Section 25 authorises nations 1 bank? ing associations possessing a capital aud surplus of ItjuUMJOO or more to es? tablish foreign branches under the di? rection of the federal reserve board. Section 28 ?ether!ess tbe secretary of the treasury to strengthen the gold reserve by borrowing gold on United States bonds or by selling them. Section 27 extends from June 80, 1014. uutll .lune 30. 1915, tbe life of en act authorizing national currency as? sociations, the Issuance of additional national bank circulation and the cre? ation of a national monetary commie slot) It re-enacts certain United states banking statutes amended by an act of May 30. 1908. aubject to such amendments or modifications as SPS contained In the new currency lsw. It amends the May 30. 19ts\, set In re? gard to the taxation of clrcuistlng notes held by national banking asso? ciations and secured otherwise than by United States bonds. Section 28 provides that If sny part of the act is declared luv slid by a court the hi dement shall not affect the remainder of the act