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c c
(Third Tentative Draft - September 22, 1931.)
A BILL
To
amend Section
19 of the
Federal Reserve
Act , and for
other
purposes.
BE IT ENACTED BY THE SENATE AHD HOUSE OP REPRESENTATIVES OF THE
UNITED STATES 01 AMERICA IB CONGRESS ASSEMBLED, That Section 19 of the
Federal Reserve Act (United States Code, Title 12, Sections 461 to 466,
inclusive, and Section 374) , a s amended, be further amended an d reenacted
to read a s follows:
BAHK RESERVES
Section
19 . ( a )
Each member bank sh al l e s t ab l i sh
and
maintain
r e -
serves equal
to
f ive
p e r
centum
(5$) of the
amount
o f i t s n e t
deposits,
p l u s f i f t y
p e r
centum
(50$) of the
amount
o f i t s
dai ly debi ts;
bu t , in no
event, shall th e aggregate reserves required to be maintained by any mem-
b e r bank exceed thirteen p e r centum (13$) of i t s gross deposits.
(b ) Each member bank in a ci ty i n which a Federal reserve bank o r
a branch thereof i s located, or in any other city i n close proximity there-
t o designated by the Federal Reserve Board, shall maintain n o t le ss than
f o u r - f i f t h s
o f i t s
total required reserves
in the
form
of a
reserve balance
on deposit with th e Federal reserve bank: Provided, however. That, with the
permission
of the
Federal Reserve Board which
may be
granted, denied,
o r
revoked in the d iscret ion of said Board, banks i n outlying sections of such
c i t i e s may maintain n o t less than two-fifths of their total required reserves
in the form of reserve balances on deposit with th e Federal reserve bank.
Every other member bank shall maintain n o t less than two-fifths o f i t s total
required reserves in the form of a reserve balance on deposit with the Fed-
eral reserve bank.
The
remainder
of
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th e total required r6serves of each member bank, over and above th e amount r e -
quired to be maintained in the form of a reserve balance on deposit with the
Federal reserve bank, may, a t the option of such member bank, co ns is t e i th er
of a reserve balance on deposit with t h e Federal reserve bank, or of cash
owned
by
such member bank
o n i t s
premises
or in
transit between such member
bank and the Federal reserve bank.
(c) The term
1
gross depo si ts ' , within th e meaning o f this section,
shall include a l l depos i t l i ab i l i t i e s of any member bank of any kind o r
cha racte r, incl uding demand depos it s, time dep osi ts , savings accounts, time
c e r t i f i c a t e s o f deposit, postal savings deposits, deposits o f public moneys
of the United States or of any St at e, county, ci ty , town, vi ll ag e, municipal-
i t y o r po li ti c al subdivision there of, ce rt if ie d checks outstanding, cas hie rs' ,
t r easu re r s '
and
other officers' checks outstanding, cash letters
of
credi t ,
tr av el er s' checks outstanding,
an d a l l
o ther s imi lar l iab i l i t ies ,
a s
further
defined
and
speci f ied
by the
Federal Reserve Board.
n
(d) The term ' n e t depos i t s ' , a s used in this section, shall mean
th e
amount
of the
gross deposits
of any
member bank,
a s
above defined
and
a s further defined by the Federal Reserve Board, minus the sum of ( 1) a l l
balances due to such member bank from other member banks in the United
States and their domestic branches, and (2) checks and other cash items i n
process
of
collection which
a r e
payable immediately upon presentation
in the
United States, within th e meaning of those terms a s further defined by the
Federal Reserve Board.
(e) The
term 'deb i t s ' ,
a s
used
i n
this section, shall mean
the
total daily amount of charges o r 'debits made by any member bank to any and
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a l l accounts included i n gross deposits a s above defined and as fu r ther d e -
f ined by th e federal Reserve Board, except charges resulting from th e payment
o f
cert i f ied checks
and
cas h ier s ' , t reasurers '
and
other officers' checks.
( f ) The term 'cash', within th e meaning of this section, shall
include gold bul lio n, gold coins, standard si lv er do ll ar s, subsidiary si lv er
coins, minor coins, United States notes, gold certificates, silver certifi-
cates, Treasury notes of 1890, nat ion al bank not es , Federal res erv e not es ,
and Federal reserve bank notes, lawfully coined o r issued under t h e laws of
th e
United States,
a s
further defined
by the
Federal Reserve Board.
(g) The teim
T
r e serve balance *, as used i n this section, shall mean
a
member bank's actual
n e t
balance
on the
books
of the
Federal reserve bank
representing actually collected funds available f o r immediate withdrawal
o r f o r
reserve purposes under regulations prescribed
by the
Federal Reserve
Board.
(h ) With re spec t to each member bank, th e term 'Federal reserve
bank' , a s used i n this section, shall mean th e Federal reserve bank o r branch
Federal reserve bank of the d i s t r i c t i n which such member bank i s located.
( i ) For the purpose o f computing an d maintaining th e reserves r e -
quired by t h i s secti on , each member bank an d each branch of a member bank
shal l b e deemed to be a sep arat e bank# Each branch o f a member bank shall
maintain
i t s
reserve balance
on
deposit with
t h e
Federal reserve bank
o r
branch Federal reserve bank of t he d i s t r i c t i n which i t i s located, unless
th e Federal Reserve Board, i n i t s discret ion, directs that i t s reserve
balance be maintained on deposit with t h e Federal reserve bank o r branch
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Federal reserve bank of the dis tr ic t i n which th e parent bank i s
located.
( j) The
Federal Reserve Board
i s
authorized
and
empowered
t o
prescribe regulat ions defining further
the
various terms used
i n
this
Ac t ,
fixing periods over which reserve requirements
and
actual
r e -
serves
may he
averaged, determining
th e
methods
by
which reserve
requirements
and
actual reserves shall
be
computed,
and
prescribing
pena l t i e s
f o r
def ic iencies
i n
re se rv es. Su.cn re gu la ti on s
and a l l
other lawful regulations
o f the
Federal Reserve Board shall have
the
force
and
e f f e c t
of law and the
courts shall take judicial notice
of
them.
(k )
Subject
to
such regulations
and
penal t ies
as may be
prescribed by the Federal Reserve Board, any member bank may draw
against
o r
otherwise uti l ize
i t s
reserves
f o r t h e
purpose
of
meeting
existing liabilities: Provided, however. That,
i f a
member bank
in a
c i ty i n which a Federal reserve bank o r branch thereof i s located,
or in any
other ci ty
i n
close proximity thereto designated
by the
Federal Reserve Board, shall fail
f o r s i x
consecutive business days
to
maintain
th e
reserves required
by
this section,
or i f a
member
bank
in any
other ci ty shall fai l
f o r
twelve consecutive business
days
t o
maintain
th e
reserves required
by
this section,
th e
d i r e c -
tors
of
such bank shall
be
jo in t l y
and
severally l iable
for any and
a l l
losses
to
such bank arising
out of any new
loans
o r
investments
made following such periods of continued deficiencies and pr io r to
th e res to ra t ion o f i t s reserves to the amount required b y this
A c t .
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( 1 ) A l l penal t ies f o r deficiencies i n reserves which a r e here-
after incurred under regulations prescribed
by the
Federal Reserve Board
pursuant to the provisions of th is Act shal l be paid to the Federal reserve
bank by the member bank against which they a r e assessed.
(m ) Whenever, in the judgment of the Federal Beserve Board such
action i s necessary to protect t h e gold reserves of the Federal Reserve Sys-
tem, the Federal Reserve*Board, i n i t s discret ion and upon t h e aff i rmative
vote of f i v e o f i t s members, may require any o r a l l member banks to pay
and
deliver
to the
Federal reserve bank
any o r a l l
gold coin, gold bullion,
and
gold certificates owned
by
such member bank
o r
banks. Upon re cei pt
of
such gold coin,- gold bullion o r gold cer t i f icates , t h e Federal reserve bank
shal l pay therefor an equivalent amount of other cash or shall give the
member bank immediate credit therefor i n i t s reserve balance, a t the op-
t ion of the member bank, and shal l p a y a l l costs of the transportat ion of
such gold bul lio n, gold coin, gold c e rt if ic a te s o r other cash, including
th e cost of insurance, (protecti on, and such other incidental costs as may
be
reasonably necessary.
(n) Ho member bank shall keep on deposit with any State bank o r
t rus t company which i s no t a member bank a sum in excess of t en pe r centum
of i ts own paid-up c ap ita l an d surplus.
(o )
Except with
t h e
permission
of the
Federal Reserve Board,
which may be granted, denied or revoked in the discret ion of said Board,
no
member bank shall
a c t a s t h e
medium
o r
agent
of a
non-member bank
in
applying f o r o r receiving discounts o r other credit accommodations from
a Federal reserve bank under t h e provisions of th is Act .
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11
( p ) Natio nal banks o r banks organized, under lo ca l l aws, loca ted
i n Alaska or in a dependency o r insular possession or any par t of the United
States outside of the continental United States may remain non-member banks,
and shal l in that event maintain th e reserves and comply with a l l t h e
other conditions provided by law regulating them prior t o t he enactment
of the Federal Reserve Act ; o r said banks may, with th e consent of the
Federal Reserve Board, become member banks
of an y one of t h e
Federal
R e-
serve Distr icts , and shal l i n that event take stock, maintain reserves,
and be
subject
t o a l l t h e
other provisions
of
th i s
Act .
(q) The provisions of Section 7 of the First Liberty Bond
Act , approved April 24, 1917, Section 8 of the Second liberty Bond Act ,
approved September 24, 1917, and Section 8 of th e Third Liberty Bond
A c t ,
approved April
4, 1918 (U.S.
Code, Title
31 ,
Section
771)
which
exempt deposits
of
public moneys
by the
United States
i n
designated
d e -
positaries from
t h e
reserve requirements
of
t h i s
Ac t and a l l
other acts
o r par t s of acts i n conflict with this Act a re hereby repealed only in
s o f a r a s they a r e i n conflict with t h e provisions of th i s A c t .
Section 2 . This Act shall become effective s i x months after
i t s approval by t he President of the United States.