"(c) The capital stock of the corporation shall be divided into shares of $100 each. Certificates of stock of the corporation shall be of two classes, class A and class B. Class A stock shall be held by member banks only and shall be entitled to prior payment of dividends out of net earnings, to the extent of 30 per centum of such net earnings in any one year, after payment of all expenses of the corporation, but such stock shall have no vote at meetings of stockholders. Class B stock shall be held by Federal reserve banks only and shall not be entitled to the payment of dividends. Every Federal reserve bank shall subscribe to shares of class B stock in the corporation to an amount equal to one-fourth of the surplus of such bank on December 31, 1931, and its subscriptions shall be accompanied by a certified check payable to the Comptroller of the Currency in an amount equal to one-half of 1 per centum of such subscription. The remainder of such subscription shall be subject to call from time to time by the board of directors upon ninety days' notice and annual subscriptions to such stock shall be made by each such bank in an amount equal to one-fourth of the annual increase of such surplus.

"(d) Every member bank shall subscribe to the class A capital stock of the corporation in an amount equal to one-half of 1 per centum of its total net outstanding time and demand deposits on the last call date in the year 1931. One-half of such subscription shall be paid in full within ninety days after receipt of notice from the chairman of the board of directors of the corporation; and the remainder of such subscription shall be subject to call from time to time by the board of directors of the corporation.

"(e) The amount of the outstanding class A stock of the corporation held by member banks shall be annually adjusted as hereinafter provided as member banks increase their time and demand deposits or as additional banks become members, and such stock may be decreased in amount as member banks reduce their time and demand deposits or cease to be members. Shares of the capital stock of the corporation owned by member banks shall not be transferred or hypothecated. When a member bank increases its time and demand deposits, it shall at the beginning of each calendar year subscribe for an additional amount of capital stock of the corporation equal to one-half of 1 per centum of such increase in deposits. One-half of the amount of such additional stock shall be paid for at the time of the subscription therefor and the balance shall be subject to call by the board of directors of the corporation. A bank applying for stock in the corporation at any time after the organization thereof shall be required to subscribe for an amount of class A capital stock equal to one-half of 1 per centum of the time and demand deposits of the applicant bank, paying therefor its par value plus one-half of 1 per centum a month from the period of the last dividend on the class A stock of the corporation. When the capital stock of the corporation shall have been increased, either on account of the increase of the time and demand deposits of member banks or on account of the increase in the number of member banks, the board of directors of the corporation shall cause to be executed a certificate to the Comptroller of the Currency showing the increase in capital stock of the corporation, the amount paid in, and by whom paid. When a member bank reduces its time and demand deposits it shall surrender, not later than the 1st day of January thereafter, a proportionate amount of its holdings in the capital stock of the corporation, and when a member bank voluntarily liquidates it shall surrender all its holdings of the capital stock of the corporation and be released from its stock subscription not previously called. The shares so surrendered shall be canceled and the member bank shall receive in payment therefor, under regulations to be prescribed by the Federal Reserve Board, a sum equal to its cash-paid subscriptions on the shares surrendered and its proportionate share of earnings not to exceed one-half of 1 per centum a month, from the period of the last dividend on such stock, but not above the book value of such earnings, less any liability of such member bank to the corporation.

"(f) If any member bank shall be declared insolvent, the stock held by it in the corporation shall be canceled, without impairment of the liability of such bank, and all cash-paid subscriptions on such stock, with its proportionate share of earnings not to exceed one-half of 1 per centum per month from the period of last dividend on such stock but not above the book value of such earnings, shall be first applied to all debts of the insolvent bank to the corporation, and the balance, if any, shall be paid to the receiver of the insolvent bank. Whenever the capital stock of the corporation is reduced, either on account of a reduction in time and demand deposits of any member bank or on account of the liquidation or insolvency of such bank, the board of directors

shall cause to be executed a certificate to the Comptroller of the Currency showing such reduction of capital stock and the amount repaid to such bank.

"(g) When the minimum amount of class A and class B capital stock required by this act shall have been subscribed and paid for by such banks, the Comptroller shall designate five reserve banks to execute a certificate of organization, and thereupon the banks so designated shall, under their seals, make an organization certificate which shall specifically state the name of the corporation and the city and State in which the corporation is to be located, the amount of capital stock and the number of shares into which the same is divided, the name and place of doing business of each bank executing such certificate and of all banks which have subscribed to the capital stock of such corporation, the number of shares subscribed by each such bank, and the fact that the certificate is made to enable the banks executing the same and all banks which have subscribed or may thereafter subscribe to such capital stock to avail themselves of the advantages of this section.

"(h) Such organization certificate shall be acknowledged before a judge of a court of record or a notary public and shall, together with the acknowledgment thereof authenticated by the seal of such court or notary public, be transmitted to the Comptroller of the Currency, who shall file, record, and carefully preserve the same in his office.

"(i) Upon the filing of such certificate with the Comptroller of the Currency as aforesaid, the said corporation shall become a body corporate and as such shall have power

"First. To adopt and use a corporate seal.

"Second. To have succession for a period of twenty years from its organization unless it is sooner dissolved by an act of Congress, or unless its franchise becomes forfeited by some violation of law.

"Third. To make contracts.

"Fourth. To sue and be sued, complain and defend, in any court of law or equity.

"Fifth. To appoint by its board of directors such officers and employees as are not otherwise provided for in this section, to define their duties, require bonds of them and fix the penalty thereof, and to dismiss at pleasure such officers or employees.

"Sixth. To prescribe by its board of directors, by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed.

"Seventh. To exercise by its board of directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this section and such incidental powers as shall be necessary to carry out the powers so granted. "(j) The board of directors shall administer the affairs of the corporation fairly and impartially and without discrimination in favor of or against any member bank or banks and shall, subject to the provisions of law and the orders of the Federal Reserve Board, extend to each bank which is ordered closed by the Comptroller of the Currency, or by vote of its directors, and to each member bank which is ordered closed by the appropriate State authorities, such accommodations as may be safely and reasonably made with due regard for the claims and demands of other member banks.

"(k) Whenever any national bank shall be declared insolvent or placed in the hands of a receiver it shall be the duty of the Comptroller of the Currency to appoint a valuation committee of three members which shall include the receiver of such bank, a member to be named by the board of directors of such bank, and a person to be chosen by the receiver and the member named by the board of directors. The receiver shall be chairman of the committee, and the committee shall at once proceed to make a preliminary valuation of the assets of the bank. Thereupon the receiver shall notify the Comptroller of the Currency of the valuation agreed upon and the comptroller shall make a formal tender of such assets to the corporation which may purchase the same in whole or in part as its board of directors may determine. It shall be the duty of the corporation to proceed to realize as rapidly as possible, having due regard to the condition of credit in the district in which such bank is located, the assets so purchased, and if the amount realized from such assets exceeds the sum paid therefor, the corporation shall make an additional payment to the receiver of the bank equal to the amount of such excess, if any, after deducting a liquidation fee of 6 per centum of the sum thus realized. Money belonging to the corporation over and above such funds as may be required

for current operating expenses shall be kept invested in the assets of insolvent or closed banks or in securities of the Government of the United States.

"(1) The corporation may, in its discretion, purchase the assets of banks in the hands of receivers on the date of its organization, but on the same conditions and terms as are applicable in the case of assets of banks which may fail or be closed after such date. Nothing herein contained shall be construed to prevent the corporation from making loans to banks ordered closed by the Comptroller of the Currency or by vote of their directors, or to member banks ordered closed by the appropriate State authorities, or from entering into negotiations to secure the reopening of such banks.

"(m) Member banks organized under the law of any State which are now or may hereafter become insolvent or suspended shall be entitled to offer their assets for sale to the corporation upon receiving permission in accordance with law from the banking superintendent or commissioner of the State, under the same conditions as are applicable to the sale of assets of insolvent or suspended banks under the law of the State in which such member bank is located.

"(n) For a period of not to exceed two years after this section takes effect the corporation is authorized to purchase and for a period of five years thereafter to hold and liquidate the assets of closed State banks, to make loans to such banks, and to enter into negotiations to secure the reopening of such banks under the same terms and conditions as are applicable in the case of national banks and member banks; except that (1) no such purchase or loan shall be made and no such negotiations shall be entered into unless it is permitted under the laws of the State in which such State bank is located, and (2) the amount realized upon the sale of the assets of any such State bank in excess of the amount paid for such assets by the corporation shall, after deducting the amount of the liquidation fee authorized to be charged by the corporation under paragraph (k), be paid into the Treasury of the United States as miscellaneous receipts. For the purpose of carrying out the provisions of this paragraph, there is hereby authorized to be appropriated the sum of $200,000,000, which shall be paid by the Secretary of the Treasury to the corporation in such amounts and at such times as the board of directors thereof may require. The sums so paid to the corporation shall be used exclusively for such purposes. As used in this paragraph the term 'State bank' shall include any savings bank, trust company, or other banking institution, authorized to accept deposits, organized under the laws of any State, and which is not a member of the Federal reserve system.

"(o) The corporation is authorized and empowered to issue and to have outstanding at any one time in an amount aggregating not more than four times the amount of its capital, its notes, debentures, bonds, or other such obligations, to be redeemable at the option of the corporation before maturity in such manner as may be stipulated in such obligations, and to bear such rate or rates of interest, and to mature at such time or times as may be determined by the corporation: Provided, That the corporation may sell on a discount basis shortterm obligations payable at maturity without interest. The notes, debentures, honds, and other such obligations of the corporation may be secured by assets of the corporation in such manner as shall be prescribed by its board of direc tors. Such obligations may be offered for sale at such price or prices as the corporation may determine. The corporation is further authorized and empowered to dispose of any promissory note of any receiver evidencing loans made by the corporation, and to pledge such receivers' notes and any of the corporation's assets as collateral security to the corporation's promissory notes, under such terms and conditions as may be agreed upon by the corporation, provided that the obligations so incurred, together with all other outstanding obligations of the corporation, shall not be in excess of four times the amount of its capital.

"(p) All notes, debentures, bonds, or other such obligations issued by the corporation shall be exempt, both as to principal and interest, from all taxation (except estate and inheritance taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The corporation, including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except that any real property of the corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.

"(q) In order that the corporation may be supplied with such forms of notes, debentures, bonds, or other such obligations as it may need for issuance under this act, the Secretary of the Treasury is authorized to prepare such forms as shall be suitable and approved by the corporation, to be held in the Treasury subject to delivery upon order of the corporation. The engraved plates, dies, bed pieces, and other material executed in connection therewith shall remain in the custody of the Secretary of the Treasury. The corporation shall reimburse the Secretary of the Treasury for any expenses incurred in the preparation, custody, and delivery of such notes, debentures, bonds, or other obligations."

SEC. 11. The seventh paragraph of section 13 of the Federal reserve act, as amended, is amended to read as follows:

"Any Federal reserve bank may make advances to its member banks on their promissory notes for a period of not exceeding fifteen days at rates to be established by such Federal reserve bank, which rates shall in all cases be at least 1 per centum higher than the rediscount rate then in force at such reserve bank, subject to the review and determination of the Federal Reserve Board, provided such promissory notes are secured by such notes, drafts, bills of exchange, or bankers' acceptances as are eligible for rediscount or for purchase by Federal reserve banks under the provisions of this act, or by the deposit or pledge of bonds or notes of the United States. If any member bank to which any such advance has been made shall, during the life or continuance of such advance, and despite an official warning of the reserve bank of the district or of the Federal Reserve Board to the contrary, increase its outstanding loans made upon collateral security, or made to the members of any organized stock exchange, investment house, or dealer in securities, upon any obligation, note, or bill, secured or unsecured, for the purpose of purchasing and/or carrying investment securities (except obligations of the United States), such advance shall be immediately due and payable and such member bank shall be ineligible as a borrower at the reserve bank of the district upon fifteen-day paper for such period as the Federal Reserve Board shall determine. The Federal Reserve Board shall have power from time to time in its discretion by unanimous vote of its members to suspend the provisions of this paragraph in whole or in part, whenever in its opinion the public interest shall call for such action. Each such suspension shall be for a period of ninety days and may be renewed for one additional period of ninety days upon unanimous vote of the members of the board."

SEC. 12. Section 14 of the Federal reserve act, as amended, is amended by adding at the end thereof the following new paragraph:

"(g) Subject to the powers conveyed to and bestowed upon the Federal Open Market Committee by section 12A of this act, the Federal Reserve Board shall exercise special supervision and control over all relationships and transactions of any kind entered into by any Federal reserve bank with any foreign bank or banker, or with any group of foreign banks or bankers, and all such relationships and transactions shall be subject to such regulations, conditions, and limitations as the board may prescribe. No officer or other representative of any Federal reserve bank shall conduct negotiations of any kind with the officers or representatives of any foreign bank or banker without first obtaining the permission of the Federal Reserve Board. The Federal Reserve Board shall have the right, in its discretion, to be represented in any conference or negotiations by such representative or representatives as the board may designate. A full report of all conferences or negotiations, and all understandings or agreements arrived at or transactions agreed upon, and all other material facts appertaining to such conferences or negotiations, shall be filed with the Federal Reserve Board in writing and signed by all representatives of the Federal reserve bank attending such conferences or negotiations regardless of whether or not the Federal Reserve Board shall be represented at such conferences or negotiations."

SEC. 13. Section 19 of the Federal reserve act, as amended, is amended to read as follows:

"SEC. 19. (a) 'Demand deposits' within the meaning of this act shall comprise all deposits payable within 30 days, and 'time deposits' shall comprise all deposits payable after 30 days, all savings accounts and certificates of deposit which are subject to not less than 30 days' notice before payment, and all postal-savings deposits.

"(b) Every bank, banking association, or trust company which is or which becomes a member of any Federal reserve bank shall establish and maintain reserve balances with its Federal reserve bank as follows:

"(1) If not in a reserve or central reserve city as now or hereafter defined, it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than 7 per centum of the aggregate amount of its demand and time deposits: Provided, That the said net balance maintained against time deposits shall be 3 per centum during the calendar year 1932, and shall be increased at the rate of four-fifths of 1 per centum on the 1st day of January in each calendar year thereafter until it shall equal 7 per centum as hereinbefore prescribed.

"(2) If in a reserve city as now or hereafter defined it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than 10 per centum of the aggregate amount of its demand and time deposits: Provided, That the said net balance hereinbefore required to be maintained against time deposits shall be 3 per centum during the calendar year 1932, and shall be increased at the rate of 1% per centum on the 1st day of January in each calendar year thereafter until it shall equal 10 per centum as hereinbefore prescribed: Provided further, That if located in the outlying districts of a reserve city or in territory added to such a city by the extension of its corporate charter it may, upon the affirmative vote of five members of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraph (1) hereof.

"(3) If in a central reserve city as now or hereafter defined it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than 13 per centum of the aggregate amount of its demand and time deposits: Provided, That the said net balance hereinbefore required to be maintained against time deposits shall be 3 per centum during the calendar year 1932, and shall be increased at the rate of 2 per centum on the 1st day of January in each calendar year thereafter until it shall equal 13 per centum as hereinbefore prescribed: Provided further, That if located in the outlying districts of a central reserve city or in territory added to such a city by the extension of its corporate charter it may, upon the affirmative vote of five members of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraphs (1) and (2) hereof.

"(c) No member bank shall keep on deposit with any State bank or trust company which is not a member bank a sum in excess of 10 per centum of its own paid-up capital and surplus. No member bank shall act as the medium or agent of a nonmember bank in applying for or receiving discounts from a Federal reserve bank under the provisions of this act except by permission of the Federal Reserve Board.

"(d) No member bank shall act as the medium or agent of any nonbanking corporation or individual in making loans protected by collateral security; and no member bank shall make loans or discount paper for any corporation or individual if the proceeds of such transaction are to be used directly or indi rectly for the purpose of making loans protected by collateral security in favor of any investment banker, broker, member of any stock exchange, or any dealer in securities. Every violation of this provision by any member bank shall be punishable by a fine of not less than $100 per day during the continuance of such violation, but it shall be a good defense that the borrower at the time of obtaining such loan or discount from a member bank made a sworn statement that the proceeds of the transaction would not be used for such purpose.

"(e) The required balance carried by a member bank with a Federal reserve bank may under the regulations, and subject to such penalties as may be prescribed by the Federal Reserve Board, be checked against and withdrawn by such member bank for the purpose of meeting existing liabilities: Provided, however, That no bank shall at any time make any new loans or shall pay any dividends unless and until the total balance required by law is fully restored. "(f) No member bank shall sell or transfer to another member bank, or to a nonmember bank, private banking house, or banker, any balance standing to its credit upon the books of the Federal reserve bank of its district in excess of the balances required by this section unless the Federal Reserve Board shall have first authorized by general order the making of such sales or transfers within such district or between such district and another Federal reserve district, but no such sale or transfer shall be made by any such bank without first charging and reserving a fee to be fixed by the Federal Reserve Board on the basis of the rate of discount then charged upon ninety-day paper by the Federal reserve bank of the district in which the bank making such sale or transfer is located.