1

of the board of directors of the Federal reserve bank he shall be required to maintain under regulations to be established by the 2 Federal Reserve Board a local office of said board on the 3 premises of the Federal reserve bank. He shall make regular 4 reports to the Federal Reserve Board, and shall act as its official 5 representative for the performance of the functions conferred 6 upon it by this Act. He shall receive an annual compensation 7 to be fixed by the Federal Reserve Board and paid monthly by 8 the Federal reserve bank to which he is designated. One of 9 the directors of class C, who shall be a person of tested banking 10 experience, shall be appointed by the Federal Reserve Board as 11 deputy chairman and deputy Federal reserve agent to exercise the 12 powers of the chairman of the board and Federal reserve agent in 13 case of absence or disability of his principal.

14

Directors of Federal reserve banks shall receive, in addition to any 15 compensation otherwise provided, a reasonable allowance for neces- 16 sary expenses in attending meetings of their respective boards, which 17 amount shall be paid by the respective Federal reserve banks. Any 18 compensation that may be provided by boards of directors of Federal 19 reserve banks for directors, officers or employees shall be subject to 20 the approval of the Federal Reserve Board.

21

The Reserve Bank Organization Committee may, in organizing 22 Federal reserve banks, call such meetings of bank directors in the sev- 23 eral districts as may be necessary to carry out the purposes of this 24 Act, and may exercise the functions herein conferred upon the chair- 25 man of the board of directors of each Federal reserve bank pending 26 the complete organization of such bank.

27

At the first meeting of the full board of directors of each Federal 28 reserve bank, it shall be the duty of the directors of classes A, B and 29 C, respectively, to designate one of the members of each class whose 30 term of office shall expire in one year from the first of January 31 nearest to date of such meeting, one whose term of office shall expire 32 at the end of two years from said date, and one whose term of office 33 shall expire at the end of three years from said date. Thereafter 34 every director of a Federal reserve bank chosen as herein before pro- 35 vided shall hold office for a term of three years. Vacancies that 36 may occur in the several classes of directors of Federal reserve banks 37 may be filled in the manner provided for the original selection of 38 such directors, such appointees to hold office for the unexpired terms 39 of their predecessors.

STOCK ISSUES; INCREASE AND DECREASE OF CAPITAL.

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SEC. 5. The capital stock of each Federal reserve bank shall be 42 divided into shares of $100 each. The outstanding capital stock 43 shall be increased from time to time as member banks increase their 44 capital stock and surplus or as additional banks become members, 45 and may be decreased as member banks reduce their capital stock or 46 surplus or cease to be members. Shares of the capital stock of 47 Federal reserve banks owned by member banks shall not be trans- 48 ferred or hypothecated. When a member bank increases its capi- 49 tal stock or surplus, it shall thereupon subscribe for an additional 50 amount of capital stock of the Federal reserve bank of its district 51 equal to six per centum of the said increase, one-half of said sub- 52

1 scription to be paid in the manner herein before provided for original 2 subscription, and one-half subject to call of the Federal Reserve 3 Board. A bank applying for stock in a Federal reserve bank at any 4 time after the organization thereof must subscribe for an amount of 5 the capital stock of the Federal reserve bank equal to six per centum 6 of the paid-up capital stock and surplus of said applicant bank, pay7 ing therefor its par value plus one-half of one per centum a month 8 from the period of the last dividend. When the capital stock of any 9 Federal reserve bank shall have been increased either on account of 10 the increase of capital stock of member banks or on account of the 11 increase in the number of member banks, the board of directors shall 12 cause to be executed a certificate to the Comptroller of the Currency 13 showing the increase in capital stock, the amount paid in, and by 14 whom paid. When a member bank reduces its capital stock it shall 15 surrender a proportionate amount of its holdings in the capital of 16 said Federal reserve bank, and when a member bank voluntarily 17 liquidates it shall surrender all of its holdings of the capital 18 stock of said Federal reserve bank and be released from its stock 19 subscription not previously called. In either case the shares sur20 rendered shall be canceled and the member bank shall receive in 21 payment therefor, under regulations to be prescribed by the Federal 22 Reserve Board, a sum equal to its cash-paid subscriptions on the 23 shares surrendered and one-half of one per centum a month from the 24 period of the last dividend, not to exceed the book value thereof, less 25 any liability of such member bank to the Federal reserve bank. 26 SEC. 6. If any member bank shall be declared insolvent and a 27 receiver appointed therefor, the stock held by it in said Federal 28 reserve bank shall be canceled, without impairment of its liability, 29 and all cash-paid subscriptions on said stock, with one-half of one per 30 centum per month from the period of last dividend, not to exceed 31 the book value thereof, shall be first applied to all debts of the insol32 vent member bank to the Federal reserve bank, and the balance, if 33 any, shall be paid to the receiver of the insolvent bank. Whenever 34 the capital stock of a Federal reserve bank is reduced, either on 35 account of a reduction in capital stock of any member bank or of the 36 liquidation or insolvency of such bank, the board of directors shall 37 cause to be executed a certificate to the Comptroller of the Currency 38 showing such reduction of capital stock and the amount repaid to 39 such bank.

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DIVISION OF EARNINGS.

SEC. 7. After all necessary expenses of a Federal reserve bank 42 have been paid or provided for, the stockholders shall be entitled to 43 receive an annual dividend of six per centum on the paid-in capital 44 stock, which dividend shall be cumulative. After the aforesaid 45 dividend claims have been fully met, all the net earnings shall be 46 paid to the United States as a franchise tax, except that one-half of 47 such net earnings shall be paid into a surplus fund until it shall 48 amount to forty per centum of the paid-in capital stock of such 49 bank.

50

The net earnings derived by the United States from Federal reserve 51 banks shall, in the discretion of the Secretary, be used to supplement 52 the gold reserve held against outstanding United States notes, or shall 53 be applied to the reduction of the outstanding bonded indebtedness of

the United States under regulations to be perscribed by the Secre- 1 tary of the Treasury. Should a Federal reserve bank be dissolved 2 or go into liquidation, any surplus remaining, after the payment of all 3 debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to and become the property of the 5 United States and shall be similarly applied. 6

Federal reserve banks, including the capital stock and surplus 7 therein, and the income derived therefrom shall be exempt from 8 Federal, State, and local taxation, except taxes upon real estate. 9 SEC. 8. Section fifty-one hundred and fifty-four, United States 10 Revised Statutes, is hereby amended to read as follows:

11

Any bank incorporated by special law of any State or of the 12 United States or organized under the general laws of any State or of 13 the United States and having an unimpaired capital sufficient to 14 entitle it to become a national banking association under the pro- 15 visions of the existing laws may, by the vote of the shareholders 16 owning not less than fifty-one per centum of the capital stock of 17 such bank or banking association, with the approval of the Comp- 18 troller of the Currency be converted into a national banking assocía- 19 tion, with any name approved by the Comptroller of the Currency: 20 Provided, however, That said conversion shall not be in contravention 21 of the State law. In such case the articles of association and organi- 22 zation certificate may be executed by a majority of the directors of 23 the bank or banking institution, and the certificate shall declare that 24 the owners of fifty-one per centum of the capital stock have author- 25 ized the directors to make such certificate and to change or convert 26 the bank or banking institution into a national association. A ma- 27 jority of the directors, after executing the articles of association and 28 the organization certificate, shall have power to execute all other 29 papers and to do whatever may be required to make its organization 30 perfect and complete as a national association. The shares of any 31 such bank may continue to be for the same amount each as they 32 were before the conversion, and the directors may continue to be 33 directors of the association until others are elected or appointed in 34 accordance with the provisions of the statutes of the United States. 35 When the Comptroller has given to such bank or banking association 36 a certificate that the provisions of this Act have been complied with, 37 such bank or banking association, and all its stockholders, officers, 38 and employees, shall have the same powers and privileges, and shall 39 be subject to the same duties, liabilities, and regulations, in all re- 40 spects, as shall have been prescribed by the Federal Reserve Act and 41 by the national banking Act for associations originally organized as 42 national banking associations.

STATE BANKS AS MEMBERS.

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SEC. 9. Any bank incorporated by special law of any State, or 45 organized under the general laws of any State or of the United 46 States, may make application to the reserve bank organization 47 committee, pending organization, and thereafter to the Federal 48 Reserve Board for the right to subscribe to the stock of the Federal 49 reserve bank organized or to be organized within the Federal reserve 50 district where the applicant is located. The organization committee 51 or the Federal Reserve Board, under such rules and regulations as 52

1 it may prescribe, subject to the provisions of this section, may 2 permit the applying bank to become a stockholder in the Federal 3 reserve bank of the district in which the applying bank is located. 4 Whenever the organization committee or the Federal Reserve Board 5 shall permit the applying bank to become a stockholder in the Federal 6 reserve bank of the district, stock shall be issued and paid for under 7 the rules and regulations in this Act provided for national banks 8 which become stockholders in Federal reserve banks.

9

The organization committee or the Federal Reserve Board shall 10 establish by-laws for the general government of its conduct in acting 11 upon applications made by the State banks and banking associations 12 and trust companies for stock ownership in Federal reserve banks. 13 Such by-laws shall require applying banks not organized under 14 Federal law to comply with the reserve and capital requirements 15 and to submit to the examination and regulations prescribed by the 16 organization committee or by the Federal Reserve Board. No ap17 plying bank shall be admitted to membership in a Federal reserve 18 bank unless it possesses a paid-up unimpaired capital sufficient to 19 entitle it to become a national banking association in the place where 20 it is situated, under the provisions of the national banking Act. 21 Any bank becoming a member of a Federal reserve bank under the 22 provisoins of this section shall, in addition to the regulations and 23 restrictions hereinbefore provided, be required to conform to the 24 provisions of law imposed on the national banks respecting the 25 limitation of liability which may be incurred by any person, firm, or 26 corporation to such banks, the prohibition against making purchase 27 of or loans on stock of such banks, and the withdrawal or impairment 28 of capital, or the payment of unearned dividends, and to such rules 29 and regulations as the Federal Reserve Board may, in pursuance 30 thereof, prescribe.

31 Such banks, and the officers, agents, and employees thereof, shall 32 also be subject to the provisions of and to the penalties prescribed 33 by sections fifty-one hundred and ninety-eight, fifty-two hundred, 34 fifty-two hundred and one, and fifty-two hundred and eight, and 35 fifty-two hundred and nine of the Revised Statutes. The member 36 banks shall also be required to make reports of the conditions and 37 of the payments of dividends to the comptroller, as provided in 38 sections fifty-two hundred and eleven and fifty-two hundred and 39 twelve of the Revised Statutes, and shall be subject to the penalties 40 prescribed by section fifty-two hundred and thirteen for the failure 41 to make such report.

42 If at any time it shall appear to the Federal Reserve Board that a 43 member bank has failed to comply with the provisions of this section 44 or the regulations of the Federal Reserve Board, it shall be within the 45 power of the said board, after hearing, to require such bank to sur46 render its stock in the Federal reserve bank; upon such surrender the 47 Federal reserve bank shall pay the cash-paid subscriptions to the said 48 stock with interest at the rate of one-half of one per centum per 49 month, computed from the last dividend, if earned, not to exceed 50 the book value thereof, less any liability to said Federal reserve bank, 51 except the subscription liability not previously called, which shall be 52 canceled, and said Federal reserve bank shall, upon notice from the 53 Federal Reserve Board, be required to suspend said bank from further 54 privileges of membership, and shall within thirty days of such notice

cancel and retire its stock and make payment therefor in the manner 1 herein provided. The Federal Reserve Board may restore member- 2 ship upon due proof of compliance with the conditions imposed by 3 this section.

FEDERAL RESERVE BOARD.

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5

SEC. 10. A Federal Reserve Board is hereby created which shall 6 consist of seven members, including the Secretary of the Treasury 7 and the Comptroller of the Currency, who shall be members ex officio, and five members appointed by the President of the United 9 States, by and with the advice and consent of the Senate. In 10 selecting the five appointive members of the Federal Reserve 11 Board, not more than one of whom shall be selected from any 12 one Federal reserve district, the President shall have due regard to 13 a fair representation of the different commercial, industrial and 14 geographical divisions of the country. The five members of the 15 Federal Reserve Board appointed by the President and confirmed 16 as aforesaid shall devote their entire time to the business of the 17 Federal Reserve Board and shall each receive an annual salary of 18 $12,000, payable monthly together with actual necessary traveling 19 expenses, and the Comptroller of the Currency, as ex officio member 20 of the Federal Reserve Board, shall, in addition to the salary now 21 paid him as Comptroller of the Currency, receive the sum of $7,000 22 annually for his services as a member of said Board.

23

The members of said board, the Secretary of the Treasury, the 24 Assistant Secretaries of the Treasury, and the Comptroller of the Cur- 25 rency shall be ineligible during the time they are in office and for two 26. years thereafter to hold any office, position, or employment in any 27 member bank. Of the five members thus appointed by the President 28 at least two shall be persons experienced in banking or finance. One 29 shall be designated by the President to serve for two, one for four, one 30 for six, one for eight, and one for ten years, and thereafter each 31 member so appointed shall serve for a term of ten years unless 32 sooner removed for cause by the President. Of the five persons thus 33 appointed, one shall be designated by the President as governor and 34 one as vice governor of the Federal Reserve Board. The governor of 35 the Federal Reserve Board, subject to its supervision, shall be the 36 active executive officer. The Secretary of the Treasury may assign 37 offices in the Department of the Treasury for the use of the Federal 38 Reserve Board. Each member of the Federal Reserve Board shall 39 within fifteen days after notice of appointment make and subscribe 40 to the oath of office.

41

The Federal Reserve Board shall have power to levy semiannually 42 upon the Federal reserve banks, in proportion to their capital stock 43 and surplus, an assessment sufficient to pay its estimated expenses and 44 the salaries of its members and employees for the half year succeed- 45 ing the levying of such assessment, together with any deficit carried 46 forward from the preceding half year.

47

The first meeting of the Federal Reserve Board shall be held in 48 Washington, District of Columbia, as soon as may be after the passage 49 of this Act, at a date to be fixed by the Reserve Bank Organization 50 Committee. The Secretary of the Treasury shall be ex officio chair- 51 man of the Federal Reserve Board. No member of the Federal 52 Reserve Board shall be an officer or director of any bank, banking 53