94TH CONGRESS 1ST SESSION

S. 2304

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 9, 1975

Mr. PROXMIRE (for himself and Mr. TowER) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing and Urban Affairs

A BILL

To strengthen the supervisory authority of the Federal banking

1

agencies over financial institutions and their affiliates.

Be it enacted by the Senate and House of Representa

2 tives of the United States of America in Congress assembled,

3

AMENDMENTS TO THE FEDERAL RESERVE ACT

SECTION 1. The Federal Reserve Act (38 Stat. 251, as

5 amended) is amended by redesignating sections 29 and 30 as 6 sections 30 and 31 respectively, and by adding a new sec7 tion 29 to read as follows:

8

"SEC. 29. Any member bank which violates and/or any

9 officer, director, employee, agent, or other person partici10 pating in the conduct of the affairs of such member bank

II

2

1

2

3

4

who violates any provision of section 22 or 23A of this Act,

or any lawful regulation issued pursuant thereto, shall forfeit

and pay a civil penalty of not more than $1,000 per day

for each day during which such violation continues. The 5 Board shall have authority to assess such a civil penalty, 6 giving due consideration to the appropriateness of the penalty 7 with respect to the size of financial resources and good faith 8 of the member bank or person charged, the gravity of the 9 violation, and the history of previous violations. When as10 sessed, such a civil penalty may be collected, by suit or other11 wise, by the Board or the Federal Reserve Bank of the dis12 trict in which such member bank is located. As used in this 13 section, the term 'violates' includes without limitation any 14 action (alone or with another or others) for or toward caus15 ing, bringing about, participating in, counseling, or aiding or 16 abetting a violation.".

17

SEC. 2. Section 19 of the Federal Reserve Act, as 18 amended (12 U.S.C. 461), is amended by adding at the

19 end thereof the following new subsection:

20

21

222

"(1) Any member bank which violates any provi

sion of this section, or any regulation or order issued by the Board pursuant thereto, shall forfeit and pay a civil

23 penalty not exceeding $100 per day for each day during which such violation continues. The Board shall have

24

25 authority to assess such a civil penalty, giving due con

1

2

3

4

5

6

7

8

3

sideration to the appropriateness of the penalty with

respect to the size or financial resources and good faith

of the member bank charged, the gravity of the violation,

and the history of previous violations. When assessed,

such a civil penalty may be collected, by suit or other

wise, by the Board or the Federal Reserve Bank of the district in which such member bank is located.".

SEC. 3. Section 22 of the Federal Reserve Act, as 9 amended (12 U.S.C. 375, 375a, 376, and 503), is amended 10 by adding at the end thereof the following new subsection: "(h) (1) No member bank shall make any loan or ex12 tension of credit in any manner to any of its officers or direc

11

13

tors or to any individual who directly or indirectly or acting 14 through or in concert with one or more persons owns, con15 trols, or has the power to vote more than 5 per centum of any 16 class of voting securities of said member bank or to any com17 pany controlled by such an officer, director, or individual, 18 where such loan or extension of credit, when aggregated and 19 combined with all the bank's loans or extensions of credit to 20 such officer, director, or individual and to all companies con21 trolled by such officer, director, or individual, exceeds the 22 limits on loans to one borrower established by section 5200 23 of the Revised Statutes, as amended, in the case of national 24 banking associations, or by the State law applicable in the 25 case of State member banks.

1

"(2) For purposes of this section, an officer, director,

2 or individual shall be considered to have control of a com

3 pany if said officer, director, or individual:

23

13.

"(A) directly or indirectly or acting through or in concert with one or more other persons owns, controls,

or has power to vote 25 per centum or more of any class of voting securities of the company; or

"(B) controls in any manner the election of a majority of the directors of the company; or

"(C) has the power, directly or indirectly, to exercise a controlling influence over the management

or policies of such company.

"(3) For the purposes of this section, 'company' means 14 any corporation, partnership, business trust, association, joint 15 venture, pool syndicate, sole proprietorship, unincorporated 16 organization, any other form of business entity not specifi17 cally listed herein, or any other trust, but shall not include 18 any insured bank or any corporation the majority of the 19 shares of which are owned by the United States or by any State. 'Extension of credit' shall have the meaning as21 signed such term in the fourth paragraph of section 23A 22 of this Act.".

20

69-710 - 76-2

5

1. AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF

2

1956

3

SEC. 4. Section 5 of the Bank Holding Company Act of

4 1956, as amended (12 U.S.C. 1844), is amended by adding

5 at the end thereof the following new subsection:

6

"(e) (1) Notwithstanding any other provision of this 7 Act, the Board may, whenever it has reasonable cause to 8 believe that the continuation by a bank holding company of 9 any activity or of ownership or control of any of its sub10 sidiaries constitutes a serious risk to the financial safety, 11 soundness, or stability of a bank holding company's subsid12 iary bank (s) and is inconsistent with sound banking prin13 ciples or with the purposes of this Act or with the Financial 14 Institutions Supervisory Act, order the bank holding company or any of its subsidiaries, after due notice and oppor16 tunity for hearing, to terminate such activities or to terminate (within one hundred and twenty days) its ownership or 18 control of any such subsidiary either by sale or by distribu19 tion of the shares of the subsidiary to the shareholders of 20 the bank holding company. Such distribution shall be pro rata with respect to all of the shareholders of the distributing 22 bank holding company, and the holding company shall not

15

17