Draft of an Act to Incorporate the Federal Reserve Bank of the United States

Draft of an Act to Incorporate the Federal Reserve Bank of the United States

Strong, Benjamin, 1872-1928

WWP18419

1913 November 1

H.R. 7837, a draft of the Federal Reserve Act.

Benjamin Strong Jr. Papers, New York Federal Reserve Bank

English

An Act
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To incorporate The Federal Reserve Bank of the United States, establish banking districts, mobilize bank reserves, refund and retire a portion of the national debt, provide for an elastic currency, afford means for rediscounting commercial paper, establish more effective supervision of banking, and for other purposes.Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled:That the short title of this Act shall be “The Federal Reserve Act.”
Definitions.Sec. 2. The words and phrases used in this Act, except where the context clearly indicates a contrary intention, shall be defined as follows:The word “Committee” shall mean the Organization Committee of the Federal Reserve Bank of the United States.The word “Bank” shall mean the Federal Reserve Bank of the United States and shall include all the branches, sub-branches and agencies thereof.The word “Board” shall mean the Board of seven directors of the Federal Reserve Bank of the United States, known as the Federal Reserve Board.The word “Branch” shall mean a branch of the Federal Reserve Bank of the United States established in the United States.The words “Executive Committee” shall mean the Executive Committee of a branch of the Federal Reserve Bank of the United States.The words “national bank” shall mean a national banking association now or hereafter organized or existing.The word “depositor” shall mean such a bank or trust company, organized under the laws of a state or the laws of the United States relating to the District of Columbia, or such a national bank, as shall have a deposit in the Federal Reserve Bank of the United States.The word “district” shall mean a banking district from time to time created and designated by the Federal Reserve Board.The words “net deposits” shall mean net deposits as from time to time defined by the Comptroller of the Currency.The words “sub-branches” shall mean subordinate offices of branches of the Federal Reserve Bank of the United States.The word “agencies” shall mean agencies of the Federal Reserve Bank of the United States located in foreign countries.
Organization Committee.
Sec. 3. That as soon as practicable after the passage of thisAct the President shall appoint a committee of five, to be designated The Federal Reserve Bank Organization Committee. The Committee:(a) Shall select a Chairman and Secretary and such other officers as it may deem necessary from its own members and appoint assistant officers, clerks and other necessary employes;(b) Shall organize the Federal Reserve Bank of the United States and branches thereof;(c) Shall adopt a seal for the Bank, which shall, during the process of organization thereof, be the seal of the Committee, and adopt seals for the several branches, which shall correspond to the seal of the Bank with the name of the branch added;(d) Shall invite and receive popular subscriptions at par to the capital stock of the Bank, in accordance with the provisions of Sec. 5 of this Act and under regulations to be prescribed by the Committee;(e) Shall make the certificate provided in Sec. 6 hereof;(f) Shall do all other things necessary to effect the corporate organization of the Bank. Sec. 4. That there is hereby appropriation for Expenses. appropriated out of any money in the Treasury not otherwise appropriated, a sum sufficient to establish and provide accomodations for the Bank and its branches, not to exceed five hundred thousand dollars for the Bank and an equal amount for each branch thereof, and for the purpose of carrying out the provisions of this Act, in accordance with the following limitations, viz: Each member of the Committee shall receive in full compensation for his services the sum of $10,000, besides his actual and necessary traveling expenses, and in carrying out the provisions of this Act the Committee is authorized to incur such expenses as it shall deem necessary, not exceeding the sum of $250,000, all of which compensation and expenses shall be payable by the Treasurer of the United States upon vouchers approved by the Committee. The balance of the appropriation herein made shall be disbursed by the Board for the purposes herein set forth, payments to be made by the Treasurer of the United States upon vouchers approved by the Board. The total amount of the appropriation herein made shall, from time to time, be reimbursed to the United States by the Bank from its net earnings after the payment of dividends to the stockholders and before the establishment of a surplus fund.Stock Issue.Sec. 5. That the capital stock of the Bank shall be $100,000,000, divided into one million shares of a par value of $100 each; such stock shall have no voting power, and shall be free of all Federal, State, Municipal or other taxes, except that the holders thereof shall be subject to the provisions of federal income tax laws with respect to the income derived therefrom. The holders of such stock shall be entitled to dividends thereon at the rate of five per centum per annum and no more, which dividends shall be cumulative, and upon dissolution of the Bank such holder shall receive the par amount of such stock and all the balance of the assets shall be paid to the United States. Applied to purch. U.S. Bonds—Such stock shall be offered for popular subscription at par by the Committee under regulations to be prescribed by it and within six months after the passage of this Act. In case the amount of capital stock is over-subscribed, the Committee shall first allot the shares of stock to the subscribers for the smallest number of shares. Every subscriber shall accompany his subscription with cash or a certified check for five per centum of the total amount thereof. The proceeds of the five per cent.um payment of the stock subscription, shall be deposited in national banks to the credit of the Committee, and by the Committee assigned and transferred to the credit of the Bank upon its organization.
Organization Certificate.Sec. 6. After the popular subscriptions to the capital stock of the Bank shall have been closed, the Committee shall make an organization certificate specifying(a) The names of the several subscribers to the stock, with the number of shares allotted to them, respectively;(b) The form of stock certificate adopted by the Committee and the methods for the transfer thereof and such other details in connection with the organization as the Committee may determine.Such certificate shall be executed under the name of the Committee by the Chairman and Secretary thereof and attested with its seal and shall be forthwith transmitted to the Comptroller of the Currency, who shall file, record and carefully preserve the same in his office.Charter.Sec. 7. Upon receipt of such certificate, the Comptroller of the Currency shall issue a charter of incorporation to the persons who shall have been appointed by the President and confirmed by the Senate as the directors of the Bank, which charter shall contain a recital of the compliance with the provisions of this Act by the Committee and a statement of the subscriptions that have been made to the capital stock of $100,000,000 of The Federal Reserve Bank of the United States; and the issuance of such charter by the Comptroller of the Currency, countersigned by the Secretary of the Treasury, shall complete the corporate organization of the Federal Reserve Bank of the United States. Upon such organization, the Board and their successors and the stockholders of the Bank as they may from time to time exist, shall be a body corporate, to be known as “The Federal Reserve Bank of the United States,” to have a term of existence of fifty years from the date of the issuing of the organization certificate by the Comptroller of the Currency, countersigned by the Secretary of the Treasury, to have the power to contract, to sue and be sued, to acquire, own, lease, and hold such real and personal property as may be necessary for To sell & sublet its business, to buy, sell and deal in gold coin and gold bullion, promissory notes and other evidences of indebtedness, and to discount notes, bills and acceptances, and to have such further powers, privileges and functions as are hereinafter specified in this Act. The Bank shall be located in the City of Washington, D. C., and shall have twelve branches located in cities selected by the Board and sub-branches wherever designated by the D.C. board. Government of the Bank.Sec. 8. That the government and control of the Bank shall be and hereby is vested in a board of seven directors to be known as the Federal Reserve Board, whose powers shall be the same as those conferred upon boards of directors of national banks under existing law not inconsistent with the provisions of this Act. Such directors shall be appointed, and one of them shall be designated as Governor, and another of them shall be designated as Deputy Governor by the President of the United States, all by and with the advice and consent of the Senate. Such selections shall be made from persons qualified by experience and training for the proper discharge of the duties imposed upon them by this Act, and in making such selections due weight shall be given to the various commercial interests of the different sections of the country, and at least three of the members shall be persons of recognized wide banking and financial experience.The term of office of each member of the Board shall be fourteen years, except that the terms of office of six of the persons first appointed shall expire at the end of two, four, six, eight, ten, and twelve years, respectively. The President shall have power to remove any member of the Board for cause after due hearing, such removal and his reasons therfor to be communicated by him to the Senate. The Governor and the Deputy Governor shall, subject to the supervision of the Board, be the active executive officers of the Bank. No member of the Board shall be an officer or director of any bank or banking institution, or hold stock in any bank or banking institution, and before entering on his duties as a member of the Board, he shall certify under oath that he has complied with this requirement. Vacancies caused by death, resignation, retirement or removal of the Governor, Deputy Governor or other members of the Board, shall be filled by the President, by and with the advice and consent of the Senate, and any person appointed to fill such vacancy shall hold office for the unexpired term of the member to whose place he is appointed. Members of the Board shall take an oath of office, which shall be filed with the Comptroller of the Currency, shall devote all their time to their official duties, and shall retire at the age of seventy years. The Governor, or in his absence the Deputy Governor, shall act as Chairman of the Board. The salary of the Governor and Deputy Governor shall be $17,500 and $16,000 per annum, respectively, and of the other members of the Board $15,000 per annum. The Board shall make report annually of the operations of the Bank to the Speaker of the House of Representatives, to which shall be attached the certificate of the Comptroller of the Currency certifying that he has made an audit and examination of the books, accounts and affairs of the Bank. The Board shall fix a date which shall be within six months after its appointment and qualification, upon which subscriptions to the stock of the Bank shall be paid in full. Such date may be extended by the Board with the approval of the President of the United States.Any subscriber failing to pay for the shares allotted to him by the Committee shall forfeit his right thereto and to his five per cent. deposit, which deposit shall be so forfeited to the Bank, and such shares may thereupon be allotted by the Board to other subscribers.In case the full amount of the capital stock shall not have been subscribed for and paid for in full, the Board shall forthwith allot the portion so unsubscribed and not paid for to the several national banks then in existence in proportion, as nearly as may be convenient, to their respective amounts of capital, and each such allotment shall fix a liability upon each of the said national banks to subscribe for and take the number of shares so allotted, such liability to accrue as of the date of such allotments.Upon the payment of the ninety-five per cent. residue of the stock subscriptions, the proceeds shall be deposited with national banks by and to the credit of the Bank, and shall be so kept on deposit pending the opening of the Bank for business.Branch Reserve Banks.Sec. 9. That the Board shall create and designate in the continental United States, exclusive of Alaska, twelve banking districts for the purpose of establishing within each of such districts a branch of the Bank. Such districts shall be established with due regard to the convenience and customary course of business of the community and shall not necessarily coincide with the boundaries of such state or states as may be wholly or in part included within any given district. The Board shall also establish within each district a branch of the Bank which shall be designated by prefixing the name of the city in which such branch is established to the words “Branch, Federal Reserve Bank”. The number of such branches and of such districts may be reduced by the Board when in its judgment the interests of trade and commerce so require; and in like manner the number of such branches and districts may be increased by the Board after two years from the time of the organization of the Bank.The management of such branches shall be vested in an Executive Committee consisting of five persons to be appointed by the Board, who shall be residents of the districts in which they serve, shall devote all their time to their official duties, and shall retire at the age of seventy years. Each member of an Executive Committee before entering upon the discharge of his duties shall take an oath of office which shall be filed with the Board. The term of office of each member of such Executive Committee shall be ten years, except that terms of office of four of the persons first appointed by the Board upon each such Executive Committee shall expire at the end of two, four, six and eight years, respectively. The Board shall fix the compensation to be received by the members of the Executive Committee and shall designate a chairman and vice-chairman for each Executive Committee. The chairman, or in his absence the vice-chairman, shall preside over the meetings of the Executive Committee and, subject to the supervision of the Executive Committee, shall be the active executive officers of the branches. The Executive Committee shall have authority to establish and discontinue sub-branches, within their respective districts. No member of an Executive Committee shall be an officer or a director of any bank or banking institution, or hold stock in any bank or banking institution and, before entering upon his duties as a member of such Committee, he shall certify under oath that he has complied with this requirement. Vacancies caused by death, resignation, retirement or removal shall be filled by the Board and any person appointed to fill such vacancy shall hold office for the unexpired term of the member to whose place he is appointed. Members of Executive Committees may be summarily suspended and subsequently removed for cause by the Board after due hearing, and shall be so removed at the request of% the depositors of a district expressed by a votes of the boards of directors of such depositors. Each such Executive Committee shall annually and more frequently if required by the Board. make a report of the operations of its branch to the Board to be by it transmitted with its annual report to the Speaker of the House of Representatives. Such report of the Executive Committee shall contain reports from each sub-branch established in the district.All actions of the Executive Committees shall be subject to the approval of Board.Powers of the Federal Reserve Board.Sec. 10. That the Board shall be authorized and empowered:(a) To govern and control the operations of the Bank;(b) To supervise and control the actions of the Executive Committees;(c) To supervise and regulate the issue and retirement of notes of the Bank, and to prescribe the form, tenor and denominations of such notes;(d) To suspend in whole or in part in an emergency all reserve requirements of the Bank for thirty days, and to continue such suspension for periods not to exceed fifteen days;(e) To suspend in whole or in part in an emergency all reserve requirements relative to national banks for thirty days, and to continue such suspension for periods not to exceed fifteen days; (f) To examine, at its discretion, the accounts, books and affairs of depositors;(g) To call for statements of condition of all depositors, in such form as it may prescribe;(h) To open and maintain banking accounts in foreign countries, to establish agencies in foreign countries and to make regulations for the conduct of the foreign business of the branches through such agencies.The enumeration of the powers hereinabove set forth shall not be deemed to be a limitation upon the general authority of the Board to perform and exercise all the duties, services or functions or services specified or implied in this Act.Application of Earnings.Sec. 11. That the net earnings of the Bank, after deducting taxes, expenses and proper reserves against the acquisition of permanent property, shall be devoted, first, to the payment of a five per cent. cumulative dividend upon the stock, and second, after the reimbursement to the United States of the advances appropriated under Sec. 4 of this Act, to the accumulation of a surplus of Twenty million dollars, and after the accumulation of such surplus, one-half of such earnings above said dividend requirements shall be paid to the United States and the other one-half devoted to the accumulation of a further surplus until the total surplus reaches fifty million dollars, and thereafter all earnings beyond such dividend requirements shall be paid to the United States so long as such surplus is maintained. The earnings so distributed to the United States shall be applied by the Secretary of the Treasury, not more than three months after the receipt thereof, to the redemption of outstanding bonds of the United States, after advertisement published in each district at least once a week for four successive weeks immediately preceding the date fixed for such redemption, which advertisement shall call for the tender of bonds, and the Secretary of the Treasury shall thereupon in his discretion purchase of the bonds so tendered those offered at the lowest prices up to the amount of such earnings in his hands at such redemption date.Business of the Federal Reserve Bank.Sec. 12. That the Bank shall conduct business solely with the United States Government, with the national banks, and with such other banks and trust companies as may from time to time be permitted to deposit their reserves with the Bank, except as otherwise provided in this Act. The accounts and transactions of all depositors shall be confined to the branch and sub-branches of the banking district in which they are located. foreign branch do business with foreign agenciesFiscal Agency.Sec. 13. That the Bank shall be the fiscal agent and sole depositary of the United States, except that for purposes of collection and transfer only the Secretary of the Treasury may designate national banks as Government depositories.The Secretary of the Treasury shall gradually effect a transfer of the General Fund of the Treasury to the Bank, which transfer shall be completed within twelve months after the organization of the Bank. Such transfer, however, shall not include the five per centum fund for the redemption of outstanding national bank notes, nor that portion of the General Fund of the Treasury held by government depositories in the insular possessions or territories of the United States or balances of disbursing officers there held so long as no branch or sub-branch of the Bank exists in such possessions or territories.On and after a date to be determined by the Secretary of the Treasury and the Board, but not later than six months from the organization of the Bank, all the revenues of the United States shall be regularly deposited in the Bank and disbursements shall be made by checks drawn against such deposits, except revenues and disbursements in the insular possessions and territories of the United States.Five Per Cent.um Redemption Fund.Sec. 14. That the Bank shall be required in behalf of the national banks which have notes in circulation to make good the five per centum redemption fund held in the general fund of the United States Treasury and any deficiencies in the said fund shall be forthwith paid by the Bank to the Treasury of the United States upon demand, and the Bank shall be forthwith reimbursed by the national bank in whose behalf such payment is made.General Functions of the Federal Reserve Bank.Sec. 15. That the Bank shall have power:(a) To purchase and sell the obligations or other securities of the United States, as defined by Section 5413 of the Revised Statutes, and also such of the obligations of the Territories and Insular possessions of the United States as are guaranteed principal and interest by the United States;(b) To purchase, sell and deal in gold coin and gold bullion, to make loans thereon, and to contract for loans of gold coin and gold bullion, with or without giving security therefor, which security may include the bonds and other obligations of the United States owned by the Bank;(c) To receive from any depositor for deposit or collection current funds in lawful money, national bank notes, notes of the Bank, or checks, drafts, notes or bills of exchange payable upon presentation;(d) With the acceptance or endorsement of any depositor, to discount notes, drafts, and bills of exchange arising out of commercial transactions, such notes, drafts and bills to be of a character to be determined and defined by the Board. Such definition shall only include notes, drafts and bills of exchange issued or drawn for agricultural, industrial or commerical purposes, or which shall represent a bona fide sale of agricultural products or other goods, wares or merchandise, or which shall have been issued for the purchase or sale of the bonds or other obligations of the United States. Such definition shall not, however, include notes, drafts or bills of exchange issued or drawn for the purpose of holding for future sale and delivery agricultural products or other goods, wares or merchandise, or for carrying or trading in stocks, bonds or investment securities, other than the bonds and obligations of the United States. Notes, drafts and bills of exchange admitted to rediscount, as so defined under this paragraph, must mature within not exceeding ninety days from the date of rediscount.(e) With the acceptance or endorsement of any depositor to discount notes, drafts or bills of exchange which are based upon the exportation or importation of goods, wares, merchandise or agricultural products, as determined and defined by the Board, and which mature within not exceeding six months from the date of rediscount; (f) To purchase from depositors and to sell, with or without its endorsement, bills of exchange arising out of commercial transactions as determined and defined by the Board and payable in foreign countries, but such bills of exchange must mature in not exceeding ninety days from the date of the purchase and must bear the signature, endorsement or acceptance of two or more responsible parties, of which at least one shall be that of a depositor;(g) Under rules and regulations prescribed by the Board, to purchase and sell in the open market, either from or to depositors or through its agencies or from or to banks, firms, corporations or individuals in foreign countries, notes, drafts and bills of exchange of the kinds and maturities by this Act made eligible for re-discount, and cable transfers;(h) To open and maintain banking accounts in foreign countries, and establish agencies in such countries, for the purpose of purchasing, selling, collecting, and dealing in foreign bills of exchange, gold coin and gold bullion, and cable transfers, and to buy and sell, with or without its endorsement, through such correspondents or agencies, prime foreign bills of exchange, arising out of commercial transactions, as may be defined by the Board, which have not exceeding ninety days to run, and which bear the signature, acceptance or endorsement of two or more responsible parties.Domestic Exchanges.Sec. 16. That the Bank shall receive at par all checks, drafts or other obligations of the Bank and each of its branches or sub-branches. The Executive Committee of each branch shall from time to time, subject to the approval of the Board, determine and publish exchange and collection charges to be made with respect to all checks, drafts and other exchange and collection items, other than those of the bank, received in accordance with paragraph (c), Section 15 of this Act. Such charges shall not be in excess of the approximate actual cost of collection of such checks, drafts and other items.Priority of Lien.Sec. 17. That the Bank shall have a first and paramount lien upon all of the assets of every national bank for all debts and liabilities due from it to the Bank, except as to the claims of the United States, and the Bank shall likewise have a first and paramount lien upon all the assets of every other depositor for all debts and liabilities due from it to the Bank, except debts due by such a depositor to the United States and to the State of its incorporation, and except with respect to trust funds held by trust companies.Limitations of Discounts.Sec. 18. That no depositor shall be entitled to discount notes, drafts, bills of exchange or acceptances, with the Bank, in excess of the amount of the unimpaired capital and surplus of such depositor, nor shall the aggregate of such notes, drafts, bills of exchange, and acceptances, upon which any one person, company, firm or corporation shall be primarily liable rediscounted for any one depositor, at any time exceed ten per centum of the unimpaired capital stock and surplus of such depositor; but this restriction shall not apply to the discount of bills of exchange payable outside of the continental United States, drawn in good faith against existing values.Restriction of Indebtedness of National and State Banks.Sec. 19. That no national bank shall at any time be indebted or in any way liable to an amount exceeding the amount of its capital stock at such time actually paid in and remaining undiminished by losses or otherwise, except on account of demands of the nature following:(a) Notes of circulation;(b) Moneys deposited with or collected by the national bank;(c) Bills of exchange or drafts drawn against credits due the national bank, or money actually on deposit to the credit of the national bank or due thereto;(d) Liabilities to the stockholders of the national bank for dividends and reserve profits;(e) Liabilities incurred under the provisions of paragraph (d), Section 15, of this Act;(f) Liability as endorser on notes, drafts and bills of exchange, arising out of commercial transactions, as defined in paragraph (f), Section 15, of this Act;(g) Liability as acceptor of drafts or bills of exchange, subject to the limitations of Section 20, of this Act;Section 5202 of the Revised Statutes of the United States is hereby repealed.Depositors other than national banks, shall be subject to the limitations defined in Section 18 of this Act.Acceptances.Sec. 20. That any national bank may at its discretion accept drafts or bills of exchange drawn upon it, having not more than six months' sight to run, and growing out of commercial transactions as described in par d. Sec 15 this Act and as defined by the Board, but no national bank shall accept such drafts or bills of exchange to an amount at any time exceeding in the aggregate one-half of its paid-up and unimpaired capital stock and surplus. fundCirculating Notes.Sec. 21. That the Bank may issue its circulating notes, which shall be receivable at par in all parts of the United States in payment of all taxes and excises and all other dues to the United States and also for all salaries and other debts and demands owing by the United States to individuals, corporations and associations within the United States and its possessions except interest on the public debt. Such notes shall be a first lien on all of the assets of the Bank and shall be redeemable on demand at any office of the Bank in lawful money of the United States. As long as any such notes are outstanding the Bank shall segregate in its own vaults and carry in a special reserve account on its books gold coin or gold bullion or United States gold certificates to the amount of the face value of the notes from time to time so outstanding or, at its option, shall so segregate gold coin or gold bullion or United States gold certificates to the amount of not less than fifty per centum of such face value, and collaterals, consisting of promissory notes and bills accepted for rediscount under the provisions of Sec. 15 of this Act, or refunding notes of the United States, hereinafter provided for, or both such collaterals and refunding notes, equal at the face the cash value to one hundred per centum of the face value of the notes from time to time so outstanding. Such collaterals may be exchanged from time to time for other collaterals or refunding notes within the limitations aforesaid and of equal face cash value.Printing, Denominations and Form of the Circulating Notes of The Bank.Sec. 22. That in order to furnish suitable notes for the Bank, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved, in the best manner to guard against counterfeiting and fraudulent alterations, and shall have printed therefrom, upon the distinctive or special paper which has heretofore been or may hereafter be lawfully adopted by him for printing United States notes, and numbered, such quantity of notes, in blank, of the denominations of five dollars, ten dollars, twenty dollars, fifty dollars, one hundred dollars, five hundred dollars, one thousand dollars, and ten thousand dollars, as may be required by the Bank. Such notes shall express upon their face the promise of the Bank to pay on demand, attested by the written or engraved signature of the Governor or Deputy Governor and Cashier, and bear the engraved imprint of the seal of the Bank.Reserves of National Banks.Sec. 23. That from and after a date to be fixed by the Board, in no event longer than five years nor less than thirty months from the date of the organization of the Bank, all national banks shall be required to keep and maintain a reserve of not less than twelve per centum of their net deposit liabilities, as defined by the Comptroller of the Currency. Any part of such reserve, but in no event less than one-half thereof, may consist of a deposit with the Bank, and the remainder shall be in gold and lawful money in the vaults of the national banks.From and after the organization of the Bank the Board shall effect as rapidly as it may deem wise under commerical conditions from time to time existing, and complete within the periods herein provided, the change to the minimum reserve requirements above set forth. Such change shall be effected by the publication of notices to all national banks which shall state the percentage of the total reserve which must thirty days thereafter, and until further notice, be deposited with the Bank, and the amount which thereafter may be held in gold or and lawful money in its vaults. Such requirements, however, shall fairly consider the commercial and industrial conditions of the country and its various sections and be so apportioned and determined as to cause the least restrictions upon the business of national banks, and compliance with such directions of the Board shall be mandatory upon national banks, and in such direction the Board shall give due weight to the distinctions recognized under existing laws between country banks, reserve city banks and central reserve city banks, but such directions shall be uniform with respect to banks of each of such classes.Abolition of National Bank Classification.Sec. 24. That from and after the organization of the Bank no action shall be taken under the provisions of Section 1 of the Act of March 3, 1903, or Section 2 of the Act of March 3, 1887, providing for the designation of cities as additional reserve cities and additional central reserve cities, respectively, and from and after the establishment of the new minimum reserve provided in this Act the classification of national banks, as now provided by Section 5191 of the Revised Statutes of the United States, as amended, shall be abolished.Reserves.Sec. 25. That the Bank shall establish and maintain at all times a reserve equal to not less than fifty per centum of the net deposit liabilities of the Bank. Such reserve shall consist of gold coin, gold bullion, United States gold and silver certificates, and other lawful money of the United States.Rates of Discount.Sec. 26. The Board shall establish from time to time a normal rate of discount for each class of paper in par d & E Sec 15 which shall be uniform at branches and sub branches of the Bank, except as herein provided, and the Board shall renew or change such normal rate at stated meetings to be held at least once in each week and shall immediately publish the normal rate so renewed or changed. The normal rate of discount so established shall be charged by the branches and sub branches of the Bank to depositors with respect to all rediscounts of such depositors up to an amount not exceeding the amount of twenty per centum of the unimpaired capital and surplus of each such depositor; and the rate of discount charged by the branches and sub branches of the Bank upon all rediscounts in excess of such twenty per cent. shall be increased by the Board for each ten per centum of increase in such redicounts above such twenty per centum. The additional rates of discount established by the Board upon such rediscounts in excess of said twenty per centum shall in like manner be uniform throughout the United States, but such additional rates may shall be established by the Board in progressively increasing amounts for each ten per centum of excess rediscounts above the said twenty per centum, and such additional rates of discount about the normal rate shall, in like manner, be published from time to time by the Board.Refunding Notes.Sec. 27. That the Secretary of the Treasury is hereby authorized and directed to refund one-half of the two per centum United States bonds having the circulation privilege and on deposit with the Treasurer of the United States to secure national bank note circulation at the date of the organization of the Bank. He shall accomplish such refunding by the issue of refunding notes. Such refunding notes shall be a direct obligation of the United States, shall bear interest at the rate of three per centum per annum, shall be payable in gold of the present standard of weight and fineness and only at the Bank or any of its branches, and shall mature at various periods as determined by the Secretary of the Treasury not exceeding one year from their respective dates of issue, and shall be issued under regulations to be prescribed by the Secretary of the Treasury as to the form, tenor and denominations thereof; provided, that such notes may, at the option of the Secretary of the Treasury, be extended for periods of one year during a period of twenty years from the date of the organization of the Bank.The Secretary of the Treasury is further hereby authorized and directed to refund such of the two per centum United States bonds having the circulation privilege, the refunding of which is not hereinbefore provided for. He shall accomplish such refunding by the issue of bonds. Such bonds shall be a direct obligation of the United States, shall bear interest at the rate of three per centum per annum, shall be payable in gold coin of the present standard of weight and fineness, shall mature twenty years from the date of issue thereof, shall not have the circulation privilege, and shall be issued under regulations to be prescribed by the Secretary of the Treasury as to the form, tenor, denominations and nature thereof. Both the refunding notes and the three per centum bonds hereinabove authorized shall be exempt from Federal, State, municipal and other taxation both as to income and principal. The Secretary of the Treasury shall upon the first day of July, nineteen hundred and fifteen, and annually thereafter, under regulations to be prescribed by him, allot among the several national banks, in proportion to the respective amounts of their circulating notes outstanding upon such dates, an aggregate amount of two per centum United States bonds with the circulation privilege, which such banks shall be entitled to exchange for the three per centum United States bonds hereinbefore authorized, provided, that in no one year shall he allot a greater aggregate amount than ac twenty million dollars thereof, and upon the receipt of such two per centum bonds from such national banks, the Secretary of the Treasury shall effect the exchange. Should any national bank fail in any year so to exchange its full allotment of two per centum bonds for the three per centum bonds as herein provided, the Secretary of the Treasury may permit any other national bank or banks to exchange bonds in an amount equal to the deficiency caused by the failure of any one or more banks to make exchange in such year. At the expiration of twenty years from the passage of this Act every holder of United States two per centum bonds then outstanding shall receive payment therefor at par and accrued interest, and thereafter such bonds shall carry no interest. Nothing contained in this Act shall be construed to alter, impair or restrict the circulation privileges now given by law to any bonds of the United States.Purchase and Refunding of Two Per Centum Bonds.Sec. 28. That the Bank shall from time to time purchase from the several national banks at prices not exceeding par and accrued interest two per centum bonds of the United States up to an amount not exceeding one-half of the total of such bonds on deposit at the date of the organization of the Bank with the Treasurer of the United States to secure circulation. Such purchases shall be made from the several national banks up to amounts not exceeding the par value of one-half of the amounts of bonds owned by the respective national banks and securing their circulations outstanding at the date of the organization of the Bank, and thereupon the Bank shall be responsible for the redemption and retirement of the notes of each of such national banks to the amount of the purchase price of the bonds, less interest, so purchased from it, which responsibility shall constitute payment to such national banks, respectively, for such bonds.Immediately after purchasing such bonds the Bank, under regulations to be prescribed by the Secretary of the Treasury and the Board, shall, from time to time, as and when the national bank notes secured by such bonds are redeemed, exchange such bonds with the Treasurer of the United States, to an amount not exceeding at par the aggregate amount of the face value of such redeemed notes. Such exchange shall be for an equal amount at par of refunding notes hereinbefore authorized, and upon the maturity of any such Refunding Notes the Bank shall pay such Notes, for the account of the United States, to the holders thereof, but it shall, at the option of the Secretary of the Treasury, for a period of twenty years from the date of the organization of the Bank, in lieu of reimbursement for such payments, accept in exchange for such Notes new Refunding Notes of an equal aggregate amount and of analogous form and tenor. The Bank shall pay semi-annually to the United States out of its earnings and before reimbursement of advances made by the United States under the provisions of Sec. 4 of this Act, a tax upon its circulating notes equal to of an amount of equal to one and one-half per centum per annum, calculated upon the amount of refunding notes from time to time so outstanding.State Banks as Depositors.Sec. 29. That from and after the organization of the Bank any bank or banking association or trust company organized under any law of any state or under any law of the United States relating to the District of Columbia may make application to the Board and shall by the Board be authorized to become a depositor in the branch organized or to be organized within the district where the principal office of the applicant is located, but before granting such application, and from time to time thereafter, the Board shall satisfy itself that no provision of the charter of such applicant or of any law applying to such applicant prevents a lawful compliance by the applicant with the requirements of this Act and the regulations of the Board, and unless so satisfied the Board shall refuse such application or require the retirement of such depositor.Before being admitted as a depositor, and during the period when it shall continue as a depositor, each applicant shall comply with the regulations promulgated from time to time by the Board, and with the following requirements:(a) To establish and maintain a reserve of the character defined in this Act equal to twelve per cent. of its net deposits as defined by the Board;(b) To establish and maintain a paid-up and unimpaired capital to an amount not less than that required of national banks under the provisions of Section 5138 of the Revised Statutes, as amended;(c) To be subject to such examinations of its books and affairs as the Board may from time to time direct;(d) To prepare and submit reports of its condition and transactions at such times and in such forms as the Board shall direct.Upon the issuance of a certificate of authority by the Board each applicant shall be entitled to have all the rights and privileges enjoyed by national banks as depositors in the Bank.If at any time it shall appear to the Board that any such applicant which has become a depositor has failed or ceased or become unable to comply with the provisions of this section or the regulations of the Board, it shall be within the power of the Board to require such depositor to surrender its rights as a depositor and to pay and discharge in full any and all of its obligations to the Bank and to the United States.No such applicant admitted as a depositor may surrender its rights or withdraw from its obligations as such until after the expiration of six months from the giving by it to the Bank of a written notice of its intention so to do, nor unless and until it shall have paid or discharged in full all indebtedness and obligation of every kind owing by it to the Bank and to the United States.Bank Examinations.Sec. 30. That the Board shall, at least once in each calendar year, cause an examination to be made of the assets and affairs of every depositor, and more frequently if the Board shall consider special examinations necessary, in order to furnish a full and complete knowledge of the condition of any such depositor. The reports of such examinations shall be made in triplicate, one copy thereof filed in the office of the Comptroller of the Currency, one copy in the principal office of the Bank and one copy in the office of the branch of the Bank of the district in which such depositor has its principal office. The person assigned to the making of such examinations shall have power to call together a quorum of the directors of the depositor being examined, who may be required to state under oath the character and cirucmstances of any asset or liability of such depositor. All examiners, their assistants and clerks, other than those appointed by the board, shall be appointed and employed by the Executive Committees of the respective branches, subject to the approval of the Board and for service within the districts where such branches are located. They shall receive fixed salaries, the amounts wereof shall be determined by the Board. The expenses of the examinations herein provided for shall be assessed by the Executive Committee upon the depositors of the respective districts, in proportion to the assets or resources held by such depositors upon the dates of the examinations.Upon request of any depositor the Executive Committee of any branch may arrange for special or periodical examinations of its affairs, the cost and expenses of such examination to be borne by such depositor. All examinations, whether thus regularly provided or specially authorized, shall be so conducted as to inform the Bank of the actual condition of the depositor examined, and the lines of credit being extended by such depositor, and any other information essential to a knowledge of the condition of such depositor, as may be required.The Board shall, at least once each year, order an examination of each branch and sub branch, and a report of such examination shall be made in triplicate and one copy thereof filed in the office of the Comptroller of the Currency, one copy in the principal office of the Bank, and one copy in the offices of the respective branches. Such examinations and reports shall be so conducted and made as to exhibit the actual condition of the assets and liabilities of the respective branchs, and the amount and character of their reserves, and of the amount, character and maturity of all of their investments and rediscounted paper.The Comptroller of the Currency shall, at least once in each calendar year, make an audit and examination of the books, accounts and affairs of the Bank, a report of which he shall include in his annual report to the Congress. The cost of such examination shall be borne by the Bank.No depositor, nor any officer, director or employe thereof, shall make any loan or grant any gratuity to any examiner. Any bank officer, director or employe violating this provision shall be deemed guilty of a misdemeanor, and shall be fined not more than five thousand dollars, and a further sum equal to the money so loaned or gratuity given. Any examiner accepting a loan or gratuity from any depositor shall be deemed guilty of a misdemeanor, and shall be fined not more than five thousand dollars, and a further sum equal to the money so loaned or gratuity given, and shall forever be disqualified from holding office as an examiner for the Bank. No examiner shall perform any other service for compensation while holding such office, nor shall he be an officer or director of any financial institution.The Comptroller of the Currency shall file one copy of every report made in accordance with the provisions of Sections 5211 and 5240 of the Revised Statutes with the Board, and one copy in the office of the branch within the district in which the respective depositors under examination have their offices.Section 5241 of the Revised Statutes is hereby amended to read as follows: “No association shall be subject to any visitorial powers other than such as are authorized by this title, or are vested in the directors, officers or employees of the Federal Reserve Bank of the United States, or are vested in the courts of justice.”Prohibited Compensation.Sec. 31. That no officer, director or employe of a national bank shall be beneficiary of or receive, either directly or indirectly, any fee (other than the usual salary or director's fee paid to such officer, director or employe by the national bank and other than a legitimate fee paid to an attorney at law for legal services) or any commission, gift or other consideration other than as aforesaid for or on account of his services, vote or influence as such officer, director or employe, in connection with or in respect of any loan, purchase, sale, payment exchange or transaction with respect to stocks, bonds, or other investment securities or notes, bill of exchange, acceptances, bankers' bills, cable transfers or mortgages made by or on behalf of a national bank of which he is such officer, director or employe. Any person violating any provision of this section shall be punished by a fine of not exceeding %5,000 or by imprisionment not exceeding five years, or by both such fine and imprisonment, in the discretion of the the court having jurisdiction; Provided, that this restriction shall not be construed to cover transactions in good faith and in the ordinary course of business between a national bank and another national bank or a banking firm or a state bank or a trust company.Powers of National Banks.Sec. 32. That from and after the passage of this Act any national bank having a paid up and unimpaired capital stock of not less than one million dollars shall be authorized to establish agencies or branches in foreign countries, and such agencies or branches shall be established and maintained under regulations to be prescribed by the Comptroller of the Currency; and any national bank whose place of business shall be in a city of not less than fifty thousand population shall be entitled to establish branches within the corporate limits of the municipalilty within which its principal office is located and all national banks shall be authorized to exercise such trust company powers and functions as may be permitted by the laws of the state within which its principal office is located.Repeal of Bond Requirement.Sec. 33. That so much of the provisions of Section fifty-one hundred and fifty-nine of the Revised Statutes of the United States, and Section four of the Act of June twentieth, eighteen hundred and seventy-four, and Section eight of the Act of July twelfth, eighteen hundred and eighty-two, and of any other provisions of existing statutes, as require that before any national bank shall be authorized to commence banking business it shall transfer and deliver to the Treasurer of the United States a stated amount of United States registered bonds be, and the same is hereby, repealed, and hereafter a national bank, having retired all of its nation bank note circulation, may withdraw all United States bonds deposited with the Treasurer of the United States. From and after the organization of the Bank, no national bank not having Government funds on deposit with the Treasurer of the United States any bonds of the United States in excess of the amount required to secure the outstanding notes of the national bank.
Exemption From Tax.
Sec. 34. That Sections 19 and 20 of the Act of February 8, 1875, shall be amended to read as follows:
“Sec. 19. That every person, firm, association other than national bank associations, and every corporation, State bank, or State banking association other than the Federal Reserve Bank of the United States shall pay a tax of ten per centum on the amount of their own notes used for circulation and paid out by them.”
“Sec. 20. That every such person, firm, association, corporation, State bank, or State bank association, and also every national banking association, shall pay a like tax of ten per centum on the rmount of notes of any person, firm, association other than a national banking association, or of any corporation, State bank, other than the Federal Reserve Bank of the United States, or of any town, city or municipal corporation, used for circulation and paid out by them.”
Sec. 35. That all existing statutes relating to the control and examination of the plates and dies for the printing of the notes of national banks, and relating to destroying and replacing of worn out, lost, stolen and mutilated notes of national banks, and to the maceration of notes of the national banks, and presribing penalties for imitating or mutilating all notes of the national banks, and for using or having control, custody or possession of any such plates without authority, and for passing counterfeit circulation, and for taking unauthorized impressions of tools used in the preparation of notes of national banks, or having the same in possession, or for dealing in counterfeit circulation, shall apply in all respects to the notes of the Bank and to the plates, dies and tools of all descriptions connected with the issuance thereof as fully and with the same force and effect as such statutes now apply to the notes of the national banks and to the plates, dies and tools connected with the issuance thereof; and all penal provisions of existing laws in connection with any acts done with respect to any of the matters or things above described shall be applicable to such acts done with respect to the matters and things relating to the issuance of notes of the Bank.
Repeal.Sec. 36. That all provisions of law inconsistent with or superseded by any of the provisions of this Act be, and the same are hereby, repealed.
Amendment.Sec. 37. That the right to amend, alter, or repeal this Act is hereby expressly reserved.

Draft

Strong, Benjamin, 1872-1928