CONSOLIDATION OF NATIONAL BANKING ASSOCIATIONS, ETC. COMMITTEE ON BANKING AND CURRENCY, The committee met at 10.30 a. m., Hon. Louis T. McFadden presiding. The committee thereupon proceeded to the consideration of H. R. 6855, which is as follows: [H. R. 6855, Sixty-eighth Congress, first session] [Omit the part in black brackets and insert the part printed in italic] A BILL To amend an act entitled "An act to provide for the consolidation of national banking associations," approved November 7, 1918; to amend section 5136 as amended, section 5137, section 5142, section 5150, section 5190, section 5200 as amended, section 5202 as amended, section 5208 as amended, section 5211 as amended, of the Revised Statutes of the United States; and to amend section 9, section 13, section 22, and section 24 of the Federal reserve act Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That the act entitled "An act to provide for the consolidation of national banking associations," approved November 7, 1918, be amended by adding at the end thereof the following language: "SEC. 3. That upon the [same] foregoing terms and conditions, so far as applicable, relating to the consolidation of national banking associations, any bank incorporated by special or general law of any State [having an unimpaired capital sufficient to entitle it to become a national banking association] or any bank incorporated in the District of Columbia, may, when not in contravention of the laws of any such State, with the approval of the Comptroller of the Currency, be consolidated with any national banking association located within the same county, city, town, or village, under the charter of such national banking association: Provided, That it shall be unlawful for a national banking association into which such State bank has been consolidated to retain in operation any branches beyond the corporate limits of such city, town, or village which such State bank may have established after the approval of this act." SEC. 2. That section 5136 of the Revised Statutes of the United States, subsection second" thereof as amended, be amended to read as follows: Second. To have succession [in perpetuity] from the date of the approval of this act, or from the date of its organization if organized after [that date,] such date of approval unless it shall be [sooner] dissolved by the act of its shareholders [owing] owning two-thirds of its stock, or unless its franchise shall become forfeited by reason of violation of law, or unless it shall be terminated by act of Congress hereafter enacted or unless its affairs are placed in the hands of a receiver and finally wound up by him." SEC. 3. That section 5137 of the Revised Statutes of the United States, subsection First" thereof, be amended to read as follows: "First, such as shall be necessary for its accommodation in the transaction of its business." Sec. 4. That section 5138 of the Revised Statutes of the United States, as amended, be amended to read as follows: · Section 5138. No association shall be organized with a less capital than $100,000, except that banks with a capital of not less than $50,000 may, with the approval of the Secretary of the Treasury, be organized in any place the 1 population of which does not exceed sir thousand inhabitants, and except that banks with a capital of not less than $25,000 may, with the sanction of the Secretary of the Treasury, be organized in any place the population of which does not exceed three thousand inhabitants. No association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of less than $200,000, except that in the outlying districts of such a city or in territory added to such a city by the extension of its corporate charter, banks now organized or hereafter organized may, with the approval of the Comptroller of the Currency, have a capital of not less than $100,000." SEC. [4] 5. That section 5142 of the Revised Statutes of the United States, as amended, be amended to read as follows: "SEC. 5142. Any national banking association may, with the approval of the Comptroller of the Currency, and by a vote of shareholders owning two-thirds of the stock of such association, increase its capital stock to any sum approved by the said comptroller, but no increase in capital shall be valid until the whole amount of such increase is paid in and notice thereof, under oath [acknowledged], duly acknowledged before a notary public by the president, vice president, or cashier of said association, has been transmitted to the Comtroller of the Currency and his certificate obtained specifying the amount of such increase in capita! stock [with] and his approval thereof, and that it has been duly paid in as part of the capital of such association: Provided, however, That a national banking association may, with the approval of the Comptroller of the Currency, and by the vote of shareholders owning twothirds of the stock of such association, increase its capital by the declaration of a stock dividend, provided that the surplus of said association, after the approval of the increase, shall be at least equal to 20 per centum of the capital stock as increased. Such increase shall not be effective until a certificate certifying to such declaration of dividend, signed by the president, vice president, or cashier of said association and duly acknowledged before a notary public. shall have been forwarded to the Comptroller of the Currency and his certificate obtained specifying the amount of such increase of capital stock by stock dividend, and his approvel thereof." SEC. [5] 6. That section 5150 of the Revised Statutes of the United States be amended to read as follows: [" SEC. 5150. One of the directors, to be chosen by the board, shall be chairman of the board and shall perform such duties as may be designated by the board."] "Sec. 5150. The president of the bank shall be a member of the board and shall be the chairman thereof, but the board may designate a director in lien of the president to be chairman of the board, who shall perform such duties as may be designated by the board." Sec. 7. That section 5155 of the Revised Statutes of the United States be amended to read as follows: “SEC. 5155. It shall be lawful for any bank or banking association organized under State laws and having branches to become a national banking association in conformity with existing laws, and to retain and keep in operation its branches, or such one or more of them as it may elect to retain: Provided, That no such State bank having branches in operation established after the approval of this act, outside of the corporate limits or other such boundaries of the city. town, or village in which such State bank is located, shall, upon cnoversion into a national banking association, retain or keep in operation such branches: And provided further, That it shall be lawful for any national banking association having, prior to the approval of this Act, acquired branches by virtue of having elected to retain such branches after having been converted from a State bank with branches into a national banking association, or through consolidation with such an association having such branches, to continue to operate any such branches. SEC.[6] 8. That section 5190 of the Revised Statutes of the United States be amended to read as follows: "SEC. 5190. (a) The general business of each national banking association shall be transacted at only one office or banking house which shall be located in the place specified in its organization certificate. [“(b) The Comptroller of the Currency may, in his discretion, upon application to him, permit any national banking association to establish a branch or branches within the corporate limits of the municipality wherein such association is located but he shall not permit the establishment of a branch or branches by any such association in any State which by law or regulation pro hibits the establishment of branches by the State banks therein. All such branches of national banking associations shall be subject to the general supervisory powers of the Comptroller of the Currency and shall operate under such regulations as he may prescribe]: and no such association shall own, establish, maintain, or operate any branch or branches in any State which does not by law or regulation authorize banks created by or existing under the laws of such State to own, establish, maintain, and operate such branches, and no such association in any State whatsoever shall own, establish, maintain, or operate any branch or branches beyond the corporate limits of the municipality wherein such association is located, but any such association in any State which by law or regulation authorize banks created by or existing under the laws of such State to own, establish, maintain, and operate such branches may, upon application to the Comptroller of the Currency and upon approval by him, be permitted to establish and operate a branch or branches within the corporate limits of the municipality wherein such association is located: Provided, however, That all such branches of such associations shall be subject to the general supervisory powers of the Comptroller of the Currency and shall operate under such regulations as he may prescribe. "This section shall not be construed to amend or repeal section 25 of the Federal reserve act, as amended, authorizing the establishment by national banking associations of branches in foreign countries or in independencies or insular possessions of the United States. "The term 'branch' or branches' as used in this section shall be held to include any branch bank, branch office, branch agency, additional office, or any branch place of business at which deposits are recewed or checks cashed or money loaned." SEC. [7] 9. That section 9 of the Federal reserve act, paragraph 1 thereof, be amended by adding at the end thereof the following language: "Provided, That on and after the approval of this act the board shall not permit any such applying bank to become a stockholder of such Federal reserve bank except upon condition that such applying bank relinquish any branches which it may have established on or after the above-mentioned date beyond the corporate limits of the municipality in which the parent bank is located: Provided further, That no member bank shall, after the approval of this act. be permitted to establish a branch beyond the corporate limits of the municipality in which such bank is located. [The board may, upon violation of this provision by any member bank, exclude such member bank from the Federal reserve system.] ["The term 'branch or branches' as used in this and the preceding section shall be held to embrace any additional office maintained by an association at which deposits are received or checks cashed outside of the parent_bank."] "The term 'branch or branches' as used in this section shall be held to include any branch bank, branch office, branch agency, additional office, or any branch place of business at which deposits are received or checks cashed or money loaned." SEC. [8] 10. That section 5200 of the Revised Statutes of the United States, as amended, be amended to read as follows: SEC. 5200. The total obligations to any national banking association of any [obligor] person, copartnership, association, or corporation shall at no time exceed 10 per centum of the amount of the capital stock of such association actually paid in and unimpaired and 10 per centum of its unimpaired surplus. fund. The term obligations' shall mean [direct obligations for money borrowed and direct obligations discounted or purchased] the direct liability of the maker or acceptor of paper discounted with or sold to such association and the liability of the indorser, drawer, or guarantor who obtains a loan from or discounts paper with or sells paper under his guaranty to such association and shall include in the case of obligations of a copartnership or association the obligations of the several members thereof. [The term obligor shall include a person, copartnership, association, or corporation.] Such limitation of 10 per centum shall be subject to the following_exceptions: "(1) Obligations in the form of drafts [resulting from the sale of goods drawn by the seller in good faith against actually existing values and accepted by the purchaser] or notes resulting from the sale of goods drain by the seller in good faith against actually existing values, or given by the purchaser in payment for such goods owned by the person, corporation, association, or copartnership, indorsing and negotiating the same shall not be subject under this section to any limitation based upon such capital and surplus; ["(2) Obligations in the form of drafts resulting from the sale of goods and drawn in good faith against actually existing values secured by shipping documents transferring or securing title to goods shipped or in process of shipment shall not be subject under this section to any limitation based upon such capital and surplus:] "[(3) Demand obligations] (2) Obligations drawn in good faith against actually existing values and secured by [documents covering readily marketable nonperishable staple agricultural products] commodities in process of shipment shall not be subject under this section to any limitation based upon such capital and surplus ; but this exception shall cease to apply to such obligations after the process of shipment has been completed.] “ ([4] 3) Obligations in the form of notes, having a maturity of not more than six months, [originally given in payment for commodities] and owned by the person, corporation, association, or copartnership indorsing and negotiating the same shall be subject under this section to a limitation of 15 per centum of such capital and surplus in addition to such 10 per centum of such capital and surplus; “([5]4) Obligations in the form of bankers' acceptances of other banks of the kind described in section 13 of the Federal Reserve Act shall not be subject under this section to any limitation based upon such capital and surplus; "([6] 5) Obligations [of any obligor] in the form of notes or drafts secured by shipping documents, warehouse receipts, or other such documents transferring or securing title covering readily marketable nonperishable staples, when the market value of the staples securing the obligation is not at any time less than 115 per centum of the face amount of the notes secured by such documents and when such property is fully covered by insurance shall be subject under this section to a limitation of 15 per centum of such capital and surplus in addition to such 10 per centum of such capital and surplus, but this exception shall not apply to obligations in the form of notes of any one [obligor] maker arising from the same transactions or secured upon the same staples for more than ten months in any consecutive twelve months; "([7] 6) Obligations [of any obligor] in the form of notes or drafts secured by shipping documents or instruments transferring or securing title covering livestock] or giving a lien on livestock when the market value of the livestock securing the obligation is not at any time less than 115 per centum of the face amount of the notes covered by such documents, shall be subject under this section to a limitation of 15 per centum of such capital and surplus in addition to such 10 per centum of such capital and surplus; "([8] 7) Obligations [of any obligor] in the form of notes secured by not less than a like amount of bonds or notes of the United States issued since April 24, 1917, or certificates of indebtedness of the United States, shall (except to the extent permitted by rules and regulations prescribed by the Comptroller of the Currency, with the approval of the Secretary of the Treasury) be subject under this section to a limitation of 10 per centum of such capital and surplus in addition to such 10 per centum of such capital and surplus; ([9] 8) Obligations [of any obligor and] of the kind described in section 24 (b) of the Federal reserve act as amended, shall be subject to a limitation of 15 per centum of such capital and surplus in addition to such 10 per centum of such capital and surplus; except that obligations of the United States or general obligations of any State or of any political subdivision thereof shall not be subject under this section to any limitation based on such capital and surplus." SEC. [9] 11. That section 5202 of the Revised Statutes of the United States as amended be amended by adding at the end thereof the following language: [Eighth, United States bonds of all denominations deposited with or procured by the association."] · Eighth. Liabilities incurred under the provisions of section 20 of the Federal farm loan act, approved July 17, 1916, as amended. Ninth. United States bonds, notes, or certificates of indebtedness deposited with or procured by the association: Provided, however, That liabilities incurred under any of the foregoing enumerated exceptions through the use of such bonds, notes, or certificates shall not exceed the capital stock of such association as provided in the general limitation of this section.” SEC. [10] 12. That section 5208 of the Revised Statutes of the United States as amended be amended by striking out the words "or who shall certify a check before the amount thereof shall have been regularly entered to the credit of the drawer upon the books of the bank," and in lieu thereof inserting the |