TIIE SUNDAY OBEGONIAN, rORTLAXD, DECEIREB 23, 1913.
ELASTIC
Regional Reserve Banks, Dominated by Federal
WASHINGTON. Dec z7 The full
text of the new currency law,
features of which are provision
for currency issues, taxable on a slid
ing scale and based on commercial
callateral. and for loans on farm mort
gages, is as follows:
Be it enacted by tne Sonata and
House of Representatives of the United
States of America in Congress assem
bled. That the short title of this act
shall be the -Federal Reserve Act.
Wherever the word "bank" is used
in tnis act. the word sliall be held to
include state Bank, banking association.
and trust company, except where na
tional banks pr Federal reserve banks
are specifically referred to.
r. "Vatinnal h.ink tnd Na
me ....j .K!
tional banking association
act s::all be held to be synonymous
thi.'
nd
act s::au u it. u w
interchangeable. The term member
in irn lift 1.1 -
. .. . .. t. I . n mnn anv ka
lian snaii oc mm. -
tional bank, state bank, or bank or trust
company which has become a member
of one of the reserve banks created by
this act. The term bo
tnis act. mo i 1 .
held to mean Federal reserve board;
Uie term "district" shall be held to
mean Federal reserve district: the term
"reserve bank" shall be held to mean
Tedcval reserve bank.
i.-- rirrsl llmrvc District Created.
c?.... - a - iinn njt practicable.
the
i . - -
r .ha TToo.urv the Sec
:re
M"l Tf IAI r ' v - - - "
tary of Agriculture and tne uoniruurr
of the Currency, acting as "the reserve
bank organization committee. shall
designate n.ot less than eight nor more
than 12 citi.w to be known as Federal
reserve citie. and shall divide the con
tinental Vnh.ea States, excluding Alas
ka into districts, each district to con
lain only on. J of such Federal reserve
cities The determination of said or
ganization committee shall not be sub
ject to revlci except by the redera.
reserve board when organized: Provid
ed That the districts shall be appor
tioned with c'ue regard to the conveni
ence and customary course of business
and shall not necessarily be cotermin
ous with any state or states. The dls-t-icts
thus ereted may be readjusted
nd new districts may from time to
t'me be created by the Federal reserve
hoard, not to exi eed 12 In all. Such dis
tricts shall be 1-nown as Federal re
serve districts and may be designated
hv number. A majority of the organi
sation committee shall constitute a quo
rum with authority to act.
Said organization committee shall be
authorized to employ counsel and ex
pert aid. to take testimony, to send for
persons and papers, to administer oaths,
snd to make such investigation as may
be deemed neees:iry by the said com
mittee in determining the reserve dis
tricts and in designating the cities
within such districts where such Fed
eral reserve banks shall be severally
located. The said committee shall su
pervise the organization In each of the
cities designated of a Federal reserve
bank, which shall Include In Its title
the name of the city In which it is
situated, as "Federal Reserve Bank of
Chicago."
Raaka Keqnirrd to Subscribe.
Under regulations to be prescribed
by the organization committee, every
National banking association In the
United states Is hereby required, and
every eligible bank in the United States
and everr trust company within the
District of Columbia, is hereby author
ized to signify in wrMing. within SO
days after the passage of this act. its
acceptance of the terms and provisions
hereof. When the organization commit
tee shall have designated the cities
In which Federal reserve banks are to
he organized, and fixed the geograph
ical limits of the Federal reserve dis
tricts, every National banking associa
tion within that district shall be re
quired within 30 days after notice from
the organization committee, to subscribe
to the capital stock of such Federa.
rr,erve bank in a sum equal to per
cent of the paid-up capital stock and
surplus of such bank, one-sixth of the
subscription to be payable on call of
the arganlzatlon committee or of the
Federal reserve board, one-sixth within
three months and one-sixth within six
months thereafter, and the remainder
of the subscription, or any part there
of, shall be subject to call when
deemed necessary by the Federal re
serve board, said payments to be In
gold or gold certificates.
The shareholders of every Federal
reserve bank shall be held individually
responsible, equally and ratably, ana
' not one for another, for all contracts,
debts and engagements of such bank
to the extent of the amount of their
inscriptions to such "stock at the par
value thereof In addition to the amount
subscribed, whether such subscriptions
have been paid up in whole or In part,
under the provisions of this act.
Anv National hank falling to signify
its acceptance of the terms of this act
within the 60 days aforesaid, shall
reaj-e to act as a reserve agent, upon 30
rtava" notice, to be given within the
discretion of the said organization com
mittee or of the Federal reserve board.
-ramplluer Korfelts Charter.
Should any. National banking asso
ciation In the Unite States now organ
ized fail within one year after the pass
age of this act to become a member
bank or fail to comply with any of the
provisions of this act applicaple there
to all of the rights, privileges and fran
chises of such association granted to it
under the National bank act. or under
the provisions of this act. shall
be thereby forfeited. Any noncom
pliance with or violation of this . act
hall, however, be determined and ad
Jidsed by any court of the United
StaTes of competent Jurisdiction In a
suit brought for that purpose in the
district or territory In which such
bank is located, under direction of
the Federal Reserve Board, by the
Controller of the Currency in his own
name before the association shall be
declared dissolved. In cases of such
noncompliance or violation, other than
the fcllure to become a member bank
under the provisions of this act, every
director who participated in or as
sented to the same shall be held liable
In his personal or Individual capacity
for all damages which said bank, its
shareholders, or any other person shall
have sustained in consequence of such
violation.
Such dissolution shall not take away
or impair any remedy against such cor
poration. Its stockholders or officers,
for any liability or penalty which shall
have been previously incurred.
Should the subscriptions by banks to
the stock of said Federal reserve banks
or any one or more of them be, in the
Judgment of the organization commit
tee, insufficient to provide the amount
of capital required therefor, then and?
in that event the said organization
committer may. under conditions and
regulations to be prescribed by It, of
fer to public subscription at par such
an amount of stock in said Federal
reserve banks, or any one or more of
them, as aid committee shall deter
mine, subject to the same conditions
as to payment and stock liability as
provided for member banks.
Outside (luldlaga Limited.
No Individual, copartnership or cor
poration other than a member bank
of its district shall be permitted to
s-.ibscribe for or to hold at any time
more than $25,000 par value of stock
in any Federal reserve bank. SncH
stock shall be known as public stock
nd may be transferred on the bosks
of the Federal reserve bank by the
chairman of the board of directors of
aurh bank.
Should the total subscriptions by
banks and the public to the stock of
said Federal reserve banks, or any one
RESERVE FUND
or more or them, be, in the Judgment
of the organization committee, insuf
ficient to provide the amount of capi
tal required therefor, then and in that
event the said organization committee
shall allot to the United States such
an amount of said stock as said com
mittee shall determine. Said United
States stock shall be paid for at par
out of any money In the treasury not
other ise appropriated, and shall be
held by the Secretary of the Treasury
and disposed of for the benefit of the
United States in sucn manner, at such
times, and at such price, not less than
par. as the Secretary of the Treasury
shall determine.
Stock not held by member banks
shall not be entitled to voting power.
The Federal Reserve Board Is here
by empowered to adopt and promul
gate rules and regulations governing
the transfers of said stock.
No Federal reserve bank shall com
mence business with a subscribed capi
tal less than $4,000,000. The organiza
tion of reserve districts and Federal
reserve cities shall not be construed as
changing the present status of reserve
cities and central reserve cities, except
in so far as this act changes the
amount of reserves that may be car
ried with approved reserve agents lo
cated therein. The organization com
mittee shall have power to appoint such
assistants and incur such expenses In
carrying out the provisions of this act
as it shall deem necessary, and such
expenses shall be payable by the treas
urer of the United States upon voucher
approved by the Secretary of the Treas
ury, and the sum of $100,000, or ao
much thereof as may be necessary, is
hereby appropriated, out of any moneys
In the treasury not otherwise appropri
ated, for the payment of such expenses.
Braara Banks May Be Designated.
Sec. 3 E c h Federal reserve
bank shall establish branch banks
within the Federal reserve district In
which It is located and may do so In
the district of any Federal reserve
bank which may have been suspended.
Such branches shall be operated by a
board of directors under rules and reg
ulations approved by the Federal Re
serve Board. Directors of branch
banks shall possess the same qualifica
tions as directors of the Federal re
serve banks. Four of said directors
shall be selected by the reserve bank
and three by the Federal Reserve
Board, and they shall hold office dur
ing the pleasure, respectively, of the
parent bank and the Federal ' Reserve
Board. The reserve bank shall desig
nate one of the directors as manager.
Sec. 4. When the organisation
committee shall have established Fed
eral reserve districts as provided In
Section 2 of this act, a certificate shall
be filed with the Controller of the Cur
rency showing the geographical lim
its of such districts and the Federal
reserve city designated in each of such
districts. The Controller of the Cur
rency shall thereupon cause to be for
warded to each National bank located
In each district, and to such other
banks declared to be eligible by the
organization committee which may ap
ply therefor, an application blank in
form to be approved by the organiza
tion committee, which blank shall con
tain a resolution to be adopted by the
board of directors of each bank ex
ecuting such application, authorizing
a subscription to the capital stock of
the Federal reserve bank organizing
in that district In accordance with the
provisions of this act.
Organisation Provided For.
When the minimum amount of capi
tal stock prescribed1 by this act for
the organization of any Federal re
serve bank shall have been subscribed
and allotted, the organization commit
tee shall designate any five banks of
those whose applications have been re
ceived, to execute a certificate of or
ganization, and thereupon the banks
so designated shall, under their seals,
make an organization certificate which
shall specifically suite the name of
such Federal reserve bank, the ter
ritorial extent of the district over
which the operations of such Federal
reserve bank are to be carried on, the
city and state in which said bank is
to be located, the amount of capital
stock and the number of shares into
which tho same is divided, the name
and place of doing business of each
bank executing such certificate, and of
all banks which have subscribed to the
capital stock of such Federal reserve
bank and the number of shares sub
scribed by each, and the fact that the
certificate is made to enable those
banks executing same, and all banks
which have subscribed or may there
rafter subscribe to the capital stock of
such Federal reserve bank, to avail
themselves of the advantages of this
act.
The said organization certificate
shall be acknowledged before a Judge
of some court of record or notary pub
lie; and shall be, together with the
acknowledgment thereof, authenticated
by the seal of such court, or notary.
transmitted to the Controller of the
Currency, who shall file, record and
carefully preserve the same in his
office.
Reserve Banks Powers Defined.
Unon the filing of such certificate
with the Controller of the Currency
as aforesaid, the said Federal reserve
bank shall become a body corporate,
and as such, and in the name desig
nated in such organization certificate
shall have power
First. To adopt and use a corporate
seat
Second. To have succession for a
period of 10 years from Its organiza
tion unless it is sooner dissolved by an
Act of Congress, or unless its fran
chise becomes forfeited by some viola
tion of law.
Third. To make contracts. '
Fourth. To sue and be sued, com
plain and defend, in any court of law
or equity.
Fifth. To appoint by Its board of di
rectors, such officers and employes as
are not otherwise provided for in this
act. to define their duties, require
bonds of them and fix the penalty
thereof, and to dismiss at pleasure such
officers or employes.
Sixth. To prescribe by Its board of
directors, bylaws not inconsistent with
law. regulating the manner In which
its general business may be conducted,
and the privileges granted to It by law
may be exercised and enjoyed.
Seventh. To exercise by its board of
directors, or duly authorized officers
or agents, all powers specifically grant
ed by the provlsjons of this act and
such incidental powers as shall be nec
essary to carry on the business of bank
ing within the limitations prescribed
by this act.
Eighth. Upon deposit with the Treas
urer of the United States of any bonds
of tho United States in the manner
provided by existing law relating to
National banks, to receive from the
Controller of the Currency circulating
notes in blank, registered and counter,
signed as provided by law, equal In
amount to the par value of the bonds
so deposited, such notes to be issued
under the same conditions and provi
sions of law as relate to the issue of
circulating notes of National banks se
cured by bonds of the United States
bearing the circulating privilege, ex
cept that the Issue of such notes shall
not be limited to the capital stock of
such Federal reserve bank.
Directors of Tare Classes.
But no Federal reserve bank shall
transact any business except such as
is incidental and necessarily prelimi
nary to its organization nntll It has
been authorised by the Controller of
Reserve Board and Acting
BRIEF OUTLINE OF PROVISIONS OF BILL ' THAT REVOLUTIONIZES CURRENCY SYSTEM
OF UNITED STATES.
Country to be divided into eight to 12 districts, each containing a Federal reserve city in which a re
serve bank shall be located. National banks participating In each district are required to subscribe to
the caDital stock of the Federal reserve bank a Bum equal to 6 per cent of its paid-up capital and sur
plus, one-sixth to be paid on call, one-sixth within three months, one-sixth within six months, and the
remainder when deemed necessary. '
National banks filing to participate within one year will forfeit their charters organization
If bank' subscriptions to Federal reserve bank stock prove in the Judgment of the organization
committee to be inadequate, the committee is to offer stock to the public at par. No one other than a
member bank shall hold more than 325.000 of the stock. Stock not held by f""'0 ivot"
lng power. Federal reserve banks are required to have a subscribed capital of at least 4-000-- '
Directors of Federal reserve banks are divided into three classes, as follows: A, thre e chosen by
the stockholding banks; B, three actively engaged in commerce, agriculture or some other industrial pur
suit: C, three members designated by the Federal Reserve Board. .. . r
Members of Congress are prohibited from being members of the Reserve Board or a director or of
ficer of any reserve bank. Directors of Classes A and B are to be chosen by groups. Class C directors
are prohibited from holding office in any bank. . ,. . , ,
Stockholders of Federal reserve banks are entitled to 6 per cent dividends, if earned, on a cumulative
basis. After dividends have been met, all the net earning, shall go to the United State. I . a franchise
tax. except that half the net earnings shall go to surplus until a surplus of 40 per cent has been ere
BteExtensive powers of supervision are given to the Federal Reserve Board. These include the power to
examine all "books of member banks; to permit or require Federal reserve banks to . th pnB.J?r
of. other Federal reserve banks at rates to be fixed by the Board; to suspend the reserve require
ments, subject to a graduated tax: to supervise the issuance of Federal reserve notes and to suspend
member banks and take possession of them for violations of the act
- A Federal advisory council, of one member from each district, is created, with power to mak .rec
ommendations and call for information as to discount rates, note issues, reserve ittons and so forth.
Reserve banks are empowered to discount actual business paper, the. Reserve Board determining the
character paper thus eligible. Maturity at the time of discount must "not be distant more than JO
days, except "hat agricultural paper of a maturity not exceeding six months may be accepted to a limited
proportion, fixed by the Reserve Board. . . , ...
Federal reserve banks are permitted to deal in the open market, either at home or abroad. In various
securities made eligible by the act for rediscount. . .
Federal reserve notes are to be Issued in discretion of the Federal Reserve Board for the purpose of
making advances to Federal reserve banks. The notes are redeemable in gold on demand and are legal
tender for Federal dues. Applications for the Issue of notes are required to be "XP, addmonal '
tender of collateral of the full amount. The Board Is empowered at any time to call for additional
OU Feaer"reserve banks are required to maintain a reserve of 35 per cent of deposits and 40 per
cent of note issues. Part of the 40 per cent may be in the form of a deposit with the United States
Tre8AxtTr rwears'andurto" years member banks may retire part or the whole of their circulating
""Elaborate provision Is made for maintenance of a reserve, and the form in which it shall be carried.
Banks not in central reserve cities are permitted to make loans for not more than five years on
unincumbered, improved farm land, of not more than half the value of the land and to the total ex
tent of not more than 25 per cent of the capital and surplus or one-third of the time deposits.
Note issues secured otherwise than by United States bonds-these are the emergency note issues
that are a feature of the bill-are taxed 3 per cent per annum the first three months, and thereafter an
additional one-half of 1 per cent a year until the rate of 6 per cent is reached, the rate to remain at 6
per cent until the notes are redeemed.
the Currency to commence business un
der the provisions of this act.
Every Federal reserve bank shall be
conducted under tne supervision and
control of a board of directors.
The board of directors shall perform
the duties usually appertaining to the
office of directors of banking associa
tions, and all Buch duties as are pre
scribed by law.
Said board shall administer the af
fairs of said bank fairly and impar
tially and without discrimination in
favor of or against any member bank
or banks and shall, subject to the pro
visions of law and the orders of the
Federal Reserve Board, extend to each
member bank such discounts, advance
ments and accommodations as may be
safely and reasonably made with due
regard for the claims and demands of
other member banks.
Such board of directors shall be se
lected s.s hereinafter specified, and
shall consist of nine members, holding
office for three years, and divided into
three classes, designated as classes A,
B. and C.
Class A shall consist of three mem
bers, who shall be chosen by and be
representative of the stock-holding
banks.
Class B shall consist of three mem
bers, who at the time of their election
shall be actively engaged in their dis
trict in commerce, agriculture or some
other Industrial pursuit.
Class C shall consist of three mem
bers who shall be designated by the
Federal Reserve Board. When the nec
essary subscriptions to the 'capital
stock have been obtained for the or
ganization of any Federal , reserve
bank, the Federal Reserve Board shall
appoint the class C directors and shall
designate one of such directors as
chairman of the board to be selected.
Pending the designation of such chair
man, the organization committee shall
exercise the powers and duties apper
taining to the office of chairman in the
organization of such Federal reserve
bank.
Members of Congress Barred.
No Senator or Representative in Con
gress shall be a member of the Federal
Reserve Board or an orflcer or a oirec
tor of a Federal reserve bank.
No director of class B shall be an
officer, director, or employe of any
bank.
No director of class C shall be an.
officer, director, employe, or stock
holder of any bank.
Directors of class A and class B shall
be chosen In the following manner:
The chairman of the board of direc
tors of the Federal reserve bank of the
district in which the bank Is situated
or, pending the appointment of such
chairman, the organization committee
shall classify the member banks of
the district into three general groups
or divisions. Each group shall contain
as nearly as may be one-third of the
aggregate number of the member banks
of the district, and snail consist, as
nearly as may be, of banks of similar
capitalization. The groups shall be
designated by number by the chair
man. At a regularly-called meeting of the
board of directors of each member
bank in the district, it shall elect by
ballot a district reserve elector and
shall certify his name to the chairman
of the board of directors of the Federal
reserve bank of the district. The chair
man shall make lists of the district re.
serve electors thus named by banks In
each of the aforesaid three groups, and
shall transmit one list to each elector
in each group.
Each member bank shall be permit
ted to nominate to the chairman one
candidate for director of class A and
one candidate for director of class B.
The candidates so nominated shall be
listed by the chairman. Indicating by
whom nominated, and a copy of said
list shall, within 15 days after Its com
pletion, be furnished by the chairman
to each elector.
Preferential. Ballot Provided.
Every elector shall, within 15 days
after the receipt of the said list, cer
tify to the chairman his first, second,
and other choices of a director of class
A- and class B. respectively, upon a
preferential ballot, on a form fur
nished by the chairman of the board of
directors of the Federal reserve bank
of the district. . Each elector shall
make a cross opposite the name of the
first, second, and other choices for a
director of class A and for a director
of class B, but shall not vote more
than one choice for any one candidate.
Any candidate having a majority of
all votes cast in the column of first
choice shall be declared elected. If
no candidate have a majority of all
the votes in the first column, then
there shall be added together the votes
cast by the electors for such candidates
in the second column and the votes
cast for the several candidates in the
first column. If any candidate then
have a majority of the electors voting,
by adding together the first and sec
ond choices, he shall be declared
elected. Jf no candidate have a ma
jority of electors voting when the first
snd second choices shall have been
added, then the votes cast In the third
column for other choices shall be added
together in like manner, and the can
didate then having the highest num
ber of votes shall be declared elected.
An immediate report of election shall
be declared.
Class C directors shall be appointed
by the Federal Reserve Board. They
shall have been for at least two years
residents of the district for which
FEATURE OF CURRENCY LAW
With Advisory Council,- Permitted to Issue Notes Against Commercial Collateral When Found Necessary.
they are appointed, one of whom shall
be designated by said board as cnair
man of the board of directors of the
Federal reserve bank and as "Federal
reserve agent." He shall be a person
of tested banking experience: and In
addition to his duties as chairman of
the board of directors of the Federal
reserve bank he shall be required to
maintain under regulations to be es
tablished by the Federal Reserve Board
a local office of said board on the
premises of the Federal reserve bank.
He shall make regular reports to the
Federal Reserve Board, and shall act
as Ub official representative for the
performance of the functions conferred
upon it by this act. He shall receive
an annual compensation to be fixed
by the Federal Reserve Board and paid
monthly by the Federal reserve bank
to which he is designated.. One of the
directors of class C, who shall bo a
person of tested banking experience,
shall be appointed by the Federal Re
serve Board as deputy chairman and
deputy Federal reserve agent to exer
cise the powers of the chairman of
the board and Federal reserve agent In
case of absence or disability of his
principal.
Directors' Expenses Paid.
Directors of Federal reserve banks
shall receive, in addition to any com
pensation otherwise provided, a rea
sonable allowance for necessary ex
penses In attending meetings of their
respective boards, which amount shall
be paid, by the respective Federal re
serve banks. Any compensation that
may be provided by boards of directors
of Federal reserve banks for directors.
officers or employes shall be subject
to the approval of the Federal Reserve
Board.
The Reserve Bank Organization
Committee may, in organizing Fed
eral reserve banks, call such meetings
of bank directors in the several dis
tricts as may be necessary to carry
out the purposes of this act, and may
exercise the functions herein conferred
upon the chairman of the board of di
rcfnr of each Federal reserve bank
pending the complete organization of
such bank.
At the first meeting of the full
board of directors of each Federal re
serve bank,, it shall be the duty of the
directors of classes A, B and C, re
r,etivelv. to designate one of the
members of each class whose term of
office shall expire In one year irom
the first of January nearest to date of
such meeting, one whose term or oi
flce shall expire at the end of two
years from said date, and one whose
term of office shall expire at the end
of three years from said date. There
after every director of a Federal re
serve bank chosen as hereinbefore
provided shall hold office for a term
of three years. Vacancies that may
occur in the several classes of directors
of Federal reserve banks may be filled
In the manner provided for the origi
nal selection of such directors, such
appointees to hold office for the unex
pired terms of their predecessors.
Capital Issues Regulated.
Sec. 5. The capital Btock of each Fed
eral reserve bank shall be divided into
shares of 3100 each. The outstanding
capital stock shall be increased from
time to time as member banks increase
their capital stock and surplus or as
additional banks become members, and
may be decreased aB member banks re
duce their capital stock or surplus -or
cease to be members. Shares of the
capital stock of Federal reserve banks
owned by member banks shall not be
transferred or hypothecated. When a
member bank increases its capital
stock or surplus, it shall thereupon
subscribe for an additional amount of
capital stock of the Federal reserve
bank of its district equal to 6 per
centum of the said increase, one-half
of said subscription to be paid in the
manner hereinbefore provided for
original subscription, and one-half sub
lect to call of the Federal Reserve
Board. A bank applying for stock in
a Federal reserve bank at any time
after the organization thereof must
subscribe for an amount of the capital
stock of the Federal reserve bank equal
to 6 per centum of the paid-up capital
stock and surplus of said applicant
bank, paying therefor its par value
plus one-half of 1 per centum a month
from the period of the last dividend.
When the capital stock of any Federal
reserve bank shall have been Increased
either on account of the increase of
capital stock of member banks or on
account of the increase in the number
of member banks, the board of di
rectors shall cause to be executed a
certificate to the Comptroller of the
Currency showing the increase in cap
ital stock, the amount paid in, and by
whom paid. When a member bank
reduces its capital stock It shall sur
render a proportionate amount of Its
holdings in the capital of said Federal
reserve bank, and when a member
bank voluntarily liquidates it shall
surrender all of its holdings of the
capital stock ot said Federal reserve
bank and be released from its stock
subscription not previously called. In
either case the shares surrendered
shall be canceled and the member bank
shall receive in payment therefor, un
der regulations to be prescribed by the
Federal Reserve Board, a sum equal to
Its cash-paid subscriptions on the
shares surrendered and one-half of 1
per centum a month from the period
of the last dividend, not to exceed the
book value thereof, less any liability
of such member bank to the .Federal
reserve bank.
Sec. 6. If any member bank shall be
declared insolvent and a receiver ap
pointed therefor, the stock held by It
in said Federal reserve bank shall be
canceled, without impairment or its
liability, and all cash-paid subscrip
tions on said stock, with one-half of 1
per centum per month from the period
nf lost dividend, not to exceed the
hnnv value thereof, shall be first
mniiui in nil debts of the Insol
ent mmher bank of the Fed
eral reserve back, anfl the balance. If
any, shall be paid to tne receiver w
the insolvent banK. wiienever mo
capital stock of a Federal reserve bank
Is reduced, either on account of a re
duction In capital stock of any mem
ber bank or of the liquidation or in
solvency of such bank, the board of
directors shall cause to be executed
a certificate to the Controller of the
Currency showing such reduction of
capital stock and the amount repaid to
such bank.
Division of Earnings Made.
Bee. 7, After all necessary expenses
of a Federal reserve bank have been
paid or provided for, the stockholders
shall be entitled to receive an annual
dividend of. 6 per centum on the paid-in
capital stock, which dividend shall be
cumulative. After the aforesaid divi
dend claims have been fully met, all
the net earnings shall be paid to the
United States as a franchise tax, except
that one-half of such net earnings
shall be paid into a surplus fund until
it shall amount to 40 per centum of
the paldVln capital stock of such banK.
The net earnings derived by the
United States from Federal reserve
banks shall, in the discretion of the
Secretary, be used to supplement the
gold reserve held against outstanding
United States notes, or shall be applied
to the reduction of the outstanding
bonded indebtedness of the United
States under regulations to be pre
scribed by the Secretary of the Treas
ury. Should a Federal reserve bank
be dissolved or go into liquidation, any
surplus remaining, .after the payment
of all debts, dividend requirements as
hereinbefore provided, and the par
value of the stock, shaU be paid to and
become the property of the United
States and shall bo similarly applied.
Federal reserve banks, including the
capital stock and surplus therein, and
the income derived therefrom shall be
exempt from Federal, State and local
taxation, except taxes upon real estate.
Outside Banka Admitted.
gee. 8. Section 5154, United States
Revised Statutes, is hereby amended to
read as follows:
Any bank incorporated by special law
of any state or of the United States or
organized under the general laws of
any state or of the United States and
having an unimpaired capital sufficient
to entitle it to become a National bank
ing association under the provisions of
the existing laws may. by the vote of
the shareholders owning not less than
51 per centum of the capital stock of
such bank or banking association, with
the approval of the Controller of the
Currency be converted into a National
banking association, with any name ap
proved by the Controller of the Cur
rency: Provided, however. That said
conversion shall not be In contraven
tion of the state law. In such case the
articles of association and organization
certificate may be executed by a ma
jority of the directors of the banking
institution, and the certificate shall de
clare that the owners of 51 per centum
of the capital stock have authorized the
directors to make such certificate and
to change or convert the bank or bank
ing institution into a National associa
tion. A majority of the directors, after
executing the articles of association
and the organization certificate, shall
have power to execute all other papers
and to do whatever may be required to
make its organization perfect and com
plete as a National association. The
shares of any such bank may continue
to be for the same amount each as they
were before the conversion, and the
directors may continue to be directors
of the association -until others are
elected or appointed in accordance with
the provisions of the statutes of the
United States. When the controller
has given to such bank or banking as
sociation a certificate that the pro
visions of this act have been complied
with, such bank or banking associa
tion and all its stockholders, officers
and employes, shall have the same
powers and privileges, and shall be
subject to the same duties, liabilities
aim regulations, in all respects, as
shall have been prescribed by the Fed
eral reserve act and by the National
banking act for associations originally
organized as National banking associ
ations. State Banks as Members.
Set j. Any bank incorporated by
special law of any state, or organized
under the general laws of any state or
of the United States, may make appli
cation to the reserve bank organiza
tion committee, pending organization,
and thereafter to the Federal Reserve
Board for the right to subscribe to the
stock of the Federal reserve bank or
ganized or to be organized within the
Federal reserve district where the ap
plicant is located. The organization
committee or the Federal Reserve
Board, under such rules and regula
tions as it may prescribe, subject to
the provisions of thls section, may
permit the applying bank to become a
stockholder in the Federal reserve
bank of the district in which the ap
plying bank is located. Whenever the
organization committee or the Federal
Reserve Board shall permit the apply
ing bank to become a stockholder in
the Federal reserve bank of the dis
trict, stock shall be Issued and paid
for under the rules and regulations in
this act provided for National banks
which become stockholders In Federal
reserve banks.
The organization committee or the
Federal Reserve Board shall establish
bylaws for the general government of
Its conduct in acting upon applications
made by the state banks and banking
associations and trust companies for
stock ownership in Federal reserve
banks. Such bylaws shall require ap
plying bankB not organized under Fed
eral law to comply with the reserve
and capital requirements and to sub
mit to the examination and regulations
prescribed by the organization commit
tee or by the Federal Reserve Board.
No applying bank shall be admitted to
membership in a Federal reserve bank
unless it possesses a paid up unim
paired capital sufficient to entitle it to
become a National banking association
in the place where it Is situated, under
the provisions of the National banking
act. '
Federal lam Extended.
Any bank becoming a member of a
Federal reserve bank under the pro
visions of this section shall, in addi
tion to the regulations and restrictions
hereinbefore provided, be required to
conform to the provisions of law im
posed on the National banks respecting
the limitation of liability which may
be incurred by any person, firm or cor
poration to such banks, the prohibi
tion against making purchase of
or loans on stock of such banks.
and the withdrawal or Impairment of
capital, or the payment of unearned
dividends, and to such rules and regu
lations as the Federal Reserve Board
may. in pursuance thereof, prescribe.
Such banks, and the officers, agents.
and employes thereof, shall also be sub
ject to the provisions of and to the pen
alties prescribed by Sections 5198, 5200,
6201, and 6208, and 6209 of the Revised
Statutes. The member banks shall also
be required to make reports of the con
ditions and of the payments of divi
dends to the controller, as provided
In sections 5211 and 5212 of the Re
vised Statutes, and shall be subject to
the penalties prescribed by section
5213 for the failure to make such re
port.
If at any time it shall appear,to the
f ederal Reserve .Board tnat a mem
ber bank has failed to comply with
the provisions of this section or the
regulations of the Federal Reserve
Board, it shall be within the power of
the said board, after hearing, to ve
quire such bank to surrender its Btock
in the Federal reserve bank; upon sucn
surrender the Federal reserve bank
shall pay the cash-paid subscriptions
to the said stock with interest at the
rate of one-half of one per centum per
month, computed from the last dividend,
if earned, not to exceed the book value
thereof, less any liability to said Fed
eral reserve bank, except the subscrip
tion liability not previously called,
which shall be canceled, and said Fed
eral reserve bank shall,' upon notice
from the Federal Reserve Board, be re
auired to suspend said bank from fur-
ther privileges of membership, and
shall within 30 days of such notice can
eel and retire its stock and make pay
ment therefor in the manner herein
provided.
The Federal Reserve Board may re
store membership upon due proof of
compliance with the conditions Imposed
by this section.
Reserve Board Consists of Seven.
" Sec 10. A Federal Reserve Board is
hereby created which shall consist of
seven members, including the Secretary
of the Treasury and the Controller of
the Currency, who shall be members
ex officio, and five members appointed
bv the President of the United States,
by and with the advice and consent of
the Senate. In selecting the five ap
pointive members of the Federal Re
serve Board, not more than one of
whom shall be selected from any one
Federal Reserve district, the presi
dent shall have due regard to a fair
representation of the different commer
cial, industrial and geographical divi
sions of the country. The five members
of the Federal Reserve Board appointed
by the President and confirmed as
aforesaid shall devote their entire time
to the business of the Federal Reserve
Board and shall each receive an annual
salary of 312.000. payable montniy to
gether with actual necessary traveling
expenses, and the Controller or tne
Currency, as ex officio member of the
Federal Reserve Board, shall, in addl
tion to the salary now paid him as Con
troller of the Currency, receive the sum
of S7000 annually for his services as a
member of said board.
The members of said board, the Sec
retary of the Treasury, the Assistant
Secretaries of the Treasury, and the
Controller of the Currency shall be
Ineligible during the time tney are in
office and for two years thereafter to
hold office, position, or employment in
any member bank. Of the five mem
bers thus appointed by the President
at least two shall be persons experi
enced in banking or finance. One shall
be designated by the President to serve
for two, one for four, one for six, one
for eight and one for 10 years, and
thereafter each member so appointed
shall serve for a term of 10 years un
less sooner removed for cause by the
President. Of the five persons thus ap
pointed, one shall be designated by the
President as governor ana one as vice
srnvernor of the Federal Reserve Board.
The governor of the Federal Reserve
Board, subject to its supervision, sunn
be the active executive officer. The
Secretary of the Treasury may assign
offices In the Department of the Treas
ury for the use of the Federal Reserve
Board. Each mem Der oi tne i eaem
Bosorvn Roard shall within 15 days af
ter notice of appointment make and
subscribe to the oath or otfice.
Cost Paid by Assessments.
The Federal Reserve Board shall have
power to levy semi-annually upon tne
Federal Reserve banks. El proportion to
their capital stock and surplus, an as
sessment suficlent to pay its estimated
expenses and the salaries of its mem
bers and employes for the half year
succeeding the levying of such assess
ment, together with any deficit carried
forward from the preceding half year.
The first meeting of the Federal Re
serve Board shall be held In Washing
ton, District of Columbia, as soon as
mnv he after the passage of this act.
at a date to be fixed by the reserve
bank organization committee. The
Secretary of the Treasury shall be ex
officio chairman of the Federal Reserve
Board. No member of the Federal Re
serve Board sliall be an officer or di
rector of any bank, banking institution,
trust company, or Federal reserve bank
nor hold stock in any bank, banking
institution, or trust company; and be
fore entering upon his duties as a mem-
her of the Federal tteserve uoara no
shall certify under oath to the Secre
tary of the Treasury that he' has com
plied with this requirement. Whenever
a vacancy shall occur, other than by ex
piration of term, among the five mem
hr of the Federal Reserve Board ap
pointed by the President, as above pro-
v hi pa, a Buciiwtui cnii " i f -th
President, with the advice and
consent of the Senate, to fill such va
cancy, and when appointed he shall
hold office for the unexpired term ot
the member whose place ne is
to fill.
Th President shall have the power
-to fill all vacancies that may happen
on the Federal Reserve Board during
the recess of the Senate, by granting
commissions which shall expire 30 days
after the next session of the Senate
convenes.
Secretary's Powers Unhampered. .
Nothing in this act contained shall be
construed as taking away any powers
heretofore vested by law in the Secre
tary of the Treasury which relate to
the supervision, management, and con
trol of the Treasury Department, and
bureaus under such department, and
wherever any power vested by this act
1n the Federal Reserve Board or the
Federal reserve agent appears to con
flict with the powers of the Secretary
of the Treasury, such powers shall be
j exercised subject to the supervision and
control or tne Secretary.
The Federal Reserve Board shall an
nually make a full report of its oper
ations to the Speaker of the House of
Representatives, wiio shall cause the
same to be printed for the information
of the Congress.
Section 324 of the Revised Statutes
of the United States shall be amended
so as to read as follows: There shall
be In the Department of the Treasury
a bureau charged with the execution
of all laws passed by Congress relating
to the" Issue and regulation of national
currency secured by United States bonds
and under the general supervision of
the Federal Reserve Board, of all
Federal reserve notes, the chief officer
of which bureau shall be called the
Controller of the Currency and shall
perform his duties under the general
directions of the Secretary of the Treas- ,
ury.
Board's Powers Set Forth.
Sec. 11. The Federal Reserve Board
shall be authorized and empowered:
(a) To examine at its discretion the
accounts, books and affairs of each
Federal reserve bank and of each mem
ber bank and to require such state
ments and reports as it may deem
necessary. The said board shall pub
lish once each week a statement show
ing the condition of each Federal re
serve bank and a consolidated state
ment for all Federal reserve banks.
Such statements shall show in detail
the assets and liabilities of the Fed
eral reserve banks, single and com
bined, and shall furnish full informa
tion regarding the character of the
money held as reserve and the amount,
nature and maturities of the paper and
other investments owned or held by
Federal reserve banks.
(b) To permit, or, on the affirmative
vote of at least five members of the
Reserve Board, to require Federal re
serve banks to rediscount the 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 30 days, and from time to time
to renew such suspension for periods
not exceeding 15 days, any reserve re
quirement specified in this act: Pro
vided, that it shall establish a gradu
ated tax upon the amounts by which
the reserve requirements of this act
may be permitted to fall below the level
hereinafter specified; and, provided fur
ther, that when the gold reserve held
against Federal reserve notes falls be
low 40 per centum, the Federal Reserv
Board shall establish a graduated tax
of not more than 1 per centum per
annum upon such defiiciency until the
reserves fall to 3214 per centum, and
when said reserve falls below 32 4 per
centum per annum, a tax at the rate
increasingly of not less than 1 4 per
centum per annum upon each 2Vt per
centum or fraction thereof that such
reserve falls below 324 per centum.
The tax shall be paid by the reserve
bank, but the reserve bank shall add
an amount equal to said tax to the
rates of Interest and discount fixed by
tlie Federal Reserve Board.
ajote Retirement Regulated.
(d) To supervise and regulate
through the bureau under the charge of
the Controller of the Currency the is
sue and retirement of Federal reserve
notes, and to prescribe rules and regu
lations under which such notes may be
delivered by the Controller to the Fed
eral reserve agents applying therefor.
(e) To add to the number of cities
clasifled as reserve and central reserve
cities under existing law in which Na
tional banking associations are subject-
to the reserve requirements set
forth in section 20 of this act; or to
reclassify existing reserve and central
reserve cities or to terminate their
designation as such.
(f) To suspend or remove any offi
cer 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 the writing off ot
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 advis
able, to liquidate or reorganize such,
bank.
(i) To require bonds of Fede?l re
serve agents, to make regulations for
the safeguarding of all collateral,
bonds, Federal reserve notes, money
or property of any kind deposited in
tho hands of such agents, and said
board shall perform the duties, func-
tions or services specified in this ac"j
and 'make all rules and regulation
necessary to enable said board etttC
tively to perform the same.
(J) To exercise general supervision
over said Federal reserve banks.
(k) To grant by special permit to
National banks applying therefor,
when not in contravention of state or
local law, the right to act as trustee,
executor, administrator, or registrar
of -stocks and bonds under such rules
and regulations as the said board may.
prescribe.
(1) To employ such attorneys, ex
perts, assistants, clerks, or other em
ployes as may be deemed necessary to
conduct the business of the board. All
salaries and fees shall be fixed in ad
vance by said board and shall be paid
in the same manner as the salaries of
the members of said board. All such
attorneys, experts, assistants, clerks,
and other employes shall be appointed
without regard to tho provisions of
the act of January 16, 1S83 (volume
22, United States Statutes at Large,
page 403), and amendments thereto, or
any rule or regulation made in pur
suance thereof: Provided, that nothing
herein shall prevent the President from
placing said employes in the classified
service.
Advisory Council Created.
Sec. 12. There is hereby created a
Federal Advisory Council, which shall
consist of as many members as there
are Federal reserve districts. Each
Federal reserve bank by its board of
directors shall annually select from its
oWn Federal reserve district one mem
ber of said council, who shall receive
such compensation and allowances as
may be fixed by his beard of directors
subject to the approval of the Federal
Reserve Board. The meetings of said
advisory council shall be held at Wash
ington, District of Columbia, at least
four times each year, and oftener if
called by the Federal Reserve Board.
The council may in addition to the
meetings above provided for hold such
other meetings in Washington, Dis
trict of Columbia, or elsewhere, as it
may deem necessary, may select its
own officers and adopt its own meth
ods of nrocedure. and a majority of its
members shall constitute a quorum for
hA transaction of Dullness. vacan
cies in the council shall be, filled b,
f
A