1 exercise such functions, and may also require each such bank to 2 exercise the functions of a clearing house for its member banks. 3 SEC. 17. So much of the provisions of section fifty-one hundred 4 and fifty-nine of the Revised Statutes of the United States, and 5 section four of the Act of June twentieth, eighteen hundred and 6 seventy-four, and section eight of the Act of July twelfth, eighteen 7 hundred and eighty-two, and of any other provisions of existing 8 statutes as require that before any national banking associations 9 shall be authorized to commence banking business it shall transfer 10 and deliver to the Treasurer of the United States a stated amount of 11 United States registered bonds is hereby repealed.

12

13

REFUNDING BONDS.

SEC. 18. After two years from the passage of this Act, and at any 14 time during a period of twenty years thereafter, any member bank 15 desiring to retire the whole or any part of its circulating notes, may 16 file with the Treasurer of the United States an application to sell for 17 its account, at par and accrued interest, United States bonds secur18 ing circulation to be retired.

19 The Treasurer shall, at the end of each quarterly period, furnish 20 the Federal Reserve Board with a list of such applications, and the 21 Federal Reserve Board may, in its discretion, require the Federal 22 reserve banks to purchase such bonds from the banks whose appli23 cations have been filed with the Treasurer at least ten days before 24 the end of any quarterly period at which the Federal Reserve Board 25 may direct the purchase to be made: Provided, That Federal reserve 26 banks shall not be permitted to purchase an amount to exceed 27 $25,000,000 of such bonds in any one year, and which amount shall 28 include bonds acquired under section four of this Act by the Federal 29 reserve bank.

30 Provided further, That the Federal Reserve Board shall allot to 31 each Federal reserve bank such proportion of such bonds as the 32 capital and surplus of such bank shall bear to the aggregate capital 33 and surplus of all the Federal reserve banks.

34 Upon notice from the Treasurer of the amount of bonds so sold for 35 its account, each member bank shall duly assign and transfer, in 36 writing, such bonds to the Federal reserve bank purchasing the 37 same, and such Federal reserve bank shall, thereupon, deposit lawful 38 money with the Treasurer of the United States for the purchase price 39 of such bonds, and the Treasurer shall pay to the member bank selling 40 such bonds any balance due after deducting a sufficient sum to 41 redeem its outstanding notes secured by such bonds, which notes. 42 shall be canceled and permanently retired when redeemed.

43 The Federal reserve banks purchasing such bonds shall be per44 mitted to take out an amount of circulating notes equal to the par 45 value of such bonds.

46 Upon the deposit with the Treasurer of the United States of bonds. 47 so purchased, or any bonds with the circulating privilege acquired 48 under section four of this Act, any Federal reserve bank making 49 such deposit in the manner provided by existing law, shall be entitled 50 to receive from the Comptroller of the Currency circulating notes 51 in blank, registered and countersigned as provided by law, equal in 52 amount to the par value of the bonds so deposited. Such notes

shall be the obligations of the Federal reserve bank procuring the 1 same, and shall be in form prescribed by the Secretary of the Treas- 2 ury, and to the same tenor and effect as national-bank notes now 3 provided by law. They shall be issued and redeemed under the 4 same terms and conditions as national-bank notes except that they 5 shall not be limited to the amount of the capital stock of the Federal 6 reserve bank issuing them.

7

Upon application of any Federal reserve bank, approved by the Federal Reserve Board, the Secretary of the Treasury may issue, in 9 exchange for United States two per centum gold bonds bearing the cir- 10 culation privilege, but against which no circulation is outstanding, 11 one-year gold notes of the United States without the circulation 12 privilege, to an amount not to exceed one-half of the two per centum 13 bonds so tendered for exchange, and thirty-year three per centum 14 gold bonds without the circulation privilege for the remainder of the 15 two per centum bonds so tendered: Provided, That at the time of such 16 exchange the Federal reserve bank obtaining such one-year gold 17 notes shall enter into an obligation with the Secretary of the Treas- 18 ury binding itself to purchase from the United States for gold at the 19 maturity of such one-year notes, an amount equal to those delivered 20 in exchange for such bonds, if so requested by the Secretary, and at 21 each maturity of one-year notes so purchased by such Federal reserve 22 bank, to purchase from the United States such an amount of one-year 23 notes as the Secretary may tender to such bank, not to exceed the 24 amount issued to such bank in the first instance, in exchange for the 25 two per centum United States gold bonds; said obligation to pur- 26 chase at maturity such notes shall continue in force for a period not 27 to exceed thirty years.

28

For the purpose of making the exchange herein provided for, the 29 Secretary of the Treasury is authorized to issue at par Treasury notes 30 in coupon or registered form as he may prescribe in denominations 31 of one hundred dollars, or any multiple thereof, bearing interest at 32 the rate of three per centum per annum, payable quarterly, such 33 Treasury notes to be payable not more than one year from the date of 34 their issue in gold coin of the present standard value, and to be exempt 35 as to principal and interest from the payment of all taxes and duties 36 of the United States except as provided by this Act, as well as from 37 taxes in any form by or under State, municipal, or local authorities. 38 And for the same purpose, the Secretary is authorized and empowered 39 to issue United States gold bonds at par, bearing three per centum 40 interest payable thirty years from date of issue, such bonds to be of 41 the same general tenor and effect and to be issued under the same 42 general terms and conditions as the United States three per centum 43 bonds without the circulation privilege now issued and outstanding. 44 Upon application of any Federal reserve bank, approved by the 45 Federal Reserve Board, the Secretary may issue at par such three 46 per centum bonds in exchange for the one-year gold notes herein 47 provided for.

BANK RESERVES.

48

49

SEC. 19. Demand deposits within the meaning of this Act shall 50 comprise all deposits payable within thirty days, and time deposits 51 shall comprise all deposits payable after thirty days, and all savings 52 accounts and certificates of deposit which are subject to not less than 53 thirty days' notice before payment.

54

1

When the Secretary of the Treasury shall have officially announced, 2 in such manner as he may elect, the establishment of a Federal reserve 3 bank in any district, every subscribing member bank shall establish 4 and maintain reserves as follows:

5 (a) A bank not in a reserve or central reserve city as now or here6 after defined shall hold and maintain reserves equal to twelve per 7 centum of the aggregate amount of its demand deposits and five per 8 centum of its time deposits, as follows:

9 In its vaults for a period of thirty-six months after said date five10 twelfths thereof and permanently thereafter four-twelfths.

11 In the Federal reserve bank of its district, for a period of twelve 12 months after said date, two-twelfths, and for each succeeding six 13 months an additional one-twelfth, until five-twelfths have been so 14 deposited, which shall be the amount permanently required.

15 For a period of thirty-six months after said date the balance of 16 the reserves may be held in its own vaults, or in the Federal reserve 17 bank, or in national banks in reserve or central reserve cities as now 18 defined by law.

19 After said thirty-six months' period said reserves, other than 20 those hereinbefore required to be held in the vaults of the member 21 bank and in the Federal reserve bank, shall be held in the vaults of 22 the member bank or in the Federal reserve bank, or in both, at the 23 option of the member bank.

24

(b) A bank in a reserve city, as now or hereafter defined, shall hold 25 and maintain reserves equal to fifteen per centum of the aggregate 26 amount of its demand deposits and five per centum of its time 27 deposits, as follows:

28 In its vaults for a period of thirty-six months after said date 29 six-fifteenths thereof, and permanently thereafter five-fifteenths.

30 In the Federal reserve bank of its district for a period of twelve 31 months after the date aforesaid at least three-fifteenths, and for each 32 succeeding six months an additional one-fifteenth, until six-fifteenths 33 have been so deposited, which shall be the amount permanently 34 required.

35 For a period of thirty-six months after said date the balance of 36 the reserves may be held in its own vaults, or in the Federal reserve 37 bank, or in national banks in reserve or 1 central reserve cities as now 38 defined by law.

1

39 After said thirty-six months' period all of said reserves, except 40 those hereinbefore required to be held permanently in the vaults of 41 the member bank and in the Federal reserve bank, shall be held in 42 its vaults or in the Federal reserve bank, or in both, at the option 43 of the member bank.

44 (c) A bank in a central reserve city, as now or hereafter defined, 45 shall hold and maintain a reserve equal to eighteen per centum of 46 the aggregate amount of its demand deposits and five per centum of 47 its time deposits, as follows:

48

50

In its vaults six-eighteenths thereof.

In the Federal reserve bank seven-eighteenths.

The balance of said reserves shall be held in its own vaults or in

51 the Federal reserve bank, at its option.

52 Any Federal reserve bank may receive from the member banks as 53 reserves, not exceeding one-half of each installment, eligible paper as

The words "reserve or" were stricken out by the act of Aug. 15, 1914. See sec. 19, line 19, p. 30.

described in section fourteen1 properly indorsed and acceptable to 1 the said reserve bank.

3 4

2

7

If a State bank or trust company is required by the law of its State 3 to keep its reserves either in its own vaults or with another State bank 4 or trust company such reserve deposits so kept in such State bank 5 or trust company shall be construed, within the meaning of this sec- 6 tion, as if they were reserve deposits in a national bank in a reserve or central reserve city for a period of three years after the Secretary 8 of the Treasury shall have officially announced the establishment of a 9 Federal reserve bank in the district in which such State bank or 10 trust company is situate. Except as thus provided, no member 11 bank shall keep on deposit with any nonmember bank a sum in 12 excess of ten per centum of its own paid-up capital and surplus. 13 No member bank shall act as the medium or agent of a nonmember 14 bank in applying for or receiving discounts from a Federal reserve 15 bank under the provisions of this Act except by permission of the 16 Federal Reserve Board.

17

The reserve carried by a member bank with a Federal reserve bank 18 may, under the regulations and subject to such penalties as may be 19 prescribed by the Federal Reserve Board, be checked against and 20 withdrawn by such member bank for the purpose of meeting existing 21 liabilities: Provided, however, That no bank shall at any time make 22 new loans or shall pay any dividends unless and until the total reserve 23 required by law is fully restored.

24

In estimating the reserves required by this Act, the net balance of 25 amounts due to and from other banks shall be taken as the basis for 26 ascertaining the deposits against which reserves shall be determined. 27 Balances in reserve banks due to member banks shall, to the extent 28 herein provided, be counted as reserves.

29

National banks located in Alaska or outside the continental United 30 States may remain nonmember banks, and shall in that event 31 maintain reserves and comply with all the conditions now provided 32 by law regulating them; or said banks, except in the Philippine 33 Islands, may, with the consent of the Reserve Board, become member 34 banks of any one of the reserve districts, and shall, in that event, take 35 stock, maintain reserves, and be subject to all the other provisions 36 of this Act.

37

SEC. 20. So much of sections two and three of the Act of June 38 twentieth, eighteen hundred and seventy-four, entitled "An Act 39 fixing the amount of United States notes, providing for a redistribu- 40 tion of the national-bank currency, and for other purposes," as pro- 41 vides that the fund deposited by any national banking association 42 with the Treasurer of the United States for the redemption of its notes 43 shall be counted as a part of its lawful reserve as provided in the Act 44 aforesaid, is hereby repealed. And from and after the passage of 45 this Act such fund of five per centum shall in no case be counted by 46 any national banking association as a part of its lawful reserve.

BANK EXAMINATIONS.

47

48

SEC. 21. Section fifty-two hundred and forty, United States Re- 49 vised Statutes, is amended to read as follows:

50

The Comptroller of the Currency, with the approval of the Secre- 51 tary of the Treasury, shall appoint examiners who shall examine 52

1 The word "fourteen" changed to "thirteen" by act of Aug. 15, 1914. See sec. 19, line 35, p. 30.

2 Words "or permitted" added after the word "required" by act of Aug. 15, 1914. See sec. 19, line 37, p 30.

The words "or with a national bank" added by act of Aug. 15, 1914. See sec. 19, line 39, p. 30.

The words "or national bank" added by act of Aug. 15, 1914. See sec. 19, line 41, p. 30.

1 every member bank at least twice in each calendar year and oftener 2 if considered necessary: Provided, however, That the Federal Reserve 3 Board may authorize examination by the State authorities to be 4 accepted in the case of State banks and trust companies and may at 5 any time direct the holding of a special examination of State banks 6 or trust companies that are stockholders in any Federal reserve 7 bank. The examiner making the examination of any national bank, 8 or of any other member bank, shall have power to make a thorough 9 examination of all the affairs of the bank and in doing so he shall 10 have power to administer oaths and to examine any of the officers 11 and agents thereof under oath and shall make a full and detailed 12 report of the condition of said bank to the Comptroller of the Cur13 rency.

14 The Federal Reserve Board, upon the recommendation of the 15 Comptroller of the Currency, shall fix the salaries of all bank exam16 iners and make report thereof to Congress. The expense of the 17 examinations herein provided for shall be assessed by the Comptroller 18 of the Currency upon the banks examined in proportion to assets or 19 resources held by the banks upon the dates of examination of the 20 various banks.

21 In addition to the examinations made and conducted by the 22 Comptroller of the Currency, every Federal reserve bank may, with 23 the approval of the Federal reserve agent or the Federal Reserve Board, 24 provide for special examination of member banks within its district. 25 The expense of such examinations shall be borne by the bank exam26 ined. Such examinations shall be so conducted as to inform the 27 Federal reserve bank of the condition of its member banks and of the 28 lines of credit which are being extended by them. Every Federal 29 reserve bank shall at all times furnish to the Federal Reserve Board 30 such information as may be demanded concerning the condition of 31 any member bank within the district of the said Federal reserve bank. 32 No bank shall be subject to any visitatorial powers other than such 33 as are authorized by law, or vested in the courts of justice or such as 34 shall be or shall have been exercised or directed by Congress, or by 35 either House thereof or by any committee of Congress or of either 36 House duly authorized.

37 The Federal Reserve Board shall, at least once each year, order an 38 examination of each Federal reserve bank, and upon joint applica39 tion of ten member banks the Federal Reserve Board shall order a 40 special examination and report of the condition of any Federal 41 reserve bank.

42 SEC. 22. No member bank or any officer, director, or employee 43 thereof shall hereafter make any loan or grant any gratuity to any 44 bank examiner. Any bank officer, director, or employee violat45 ing this provision shall be deemed guilty of a misdemeanor and shall 46 be imprisoned not exceeding one year or fined not more than $5,000, 47 or both; and may be fined a further sum equal to the money so loaned 48 or gratuity given. Any examiner accepting a loan or gratuity from any 49 bank examined by him or from an officer, director, or employee thereof 50 shall be deemed guilty of a misdemeanor and shall be imprisoned not 51 exceeding one year or fined not more than $5,000, or both; and may be 52 fined a further sum equal to the money so loaned or gratuity given; 53 and shall forever thereafter be disqualified from holding office as a 54 national-bank examiner. No national-bank examiner shall perform