frsbog_mim_v28_0396.pdf

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FEDER L RESERVE BO RD

W SHINGTON

T O

T H E FEDERAL RESERVE BOARD

X-6015

Ap r i l 12 , 1928 .

J S C

SUBJECT.: Topic f o r Governor s' Co nferenc e.

Bear S i r . :

A t t h e suggest ion o f t h e Board there h a s

been placed upon

t h e

program

f o r t h e

forthcoming

conference o f Governors t h e quest ion of the

D e s i r a b i l i t y

o f

recommending legislation amend-

i n g Sec t io n 19 of Federal Reserve A c t r e l a t i n g t o

requ i red reserves

o f

member banks

and o f

wri t ing

i n t o law a complete def in i t ion (a long l ines o f

t h e

Board 's Regulat ion

D) of

what const i tu tes

sav ings an d other t ime de po si ts . F o r co n s id e ra -

t i o n by the Governors i n advance o f t h e conference,

th e re i s enclosed herewith copy o f a memorandum

addressed t o t h e Board under date o f June 2 7 , 1927

b y t h e

Chief

of t he

Board 's Division

o f

Bank Opera-

t ions -(St .5420) o n t h e s u b j e c t o f t h e genera l

r e v i s i o n

of

member bank re se rv e r eq ui re me nt s,

t o -

gether with copy of a b i l l p rep ared b y t h e Board 's

General Counsel (X-5090-C)

to

amend Section

19 of

t h e Federal Reserve A c t along t h e l i n e s o f t h e

recommendations contained

i n t h e

memorandum.

Very truly yours,

Edmund P i a t t ,

Vice-Governor.

Enclosures .

TO GOVERNORS OF ALL F.R. BANKS.

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I 3 9 Y

X-5090-c

A BILL

To

amend Section

19 of the

Federal Reserve

A c t .

BE IT

ENACTED

BY THE

S SIATE

AND

HOUSE

OF

REPRESENTATIVES

OF THE

UNITED STATES

OF

AMERICA

IN

CONGRESS ASSEMBLED, That

t h e

f i r s t p a r a g r a p h o f Sect ion 19 of the Federal Reserve A c t , a s

amended,

be

further amended

a n d

re -enac ted

t o

read

a s

fo l lows:

Bank Reserves.

Sec . 19 . The

term

1

demand de po si ts ' wit hin

t h e

mean-

i n g o f

t h i s

a c t

sha l l inc lude

a l l

depos i t s

of

publ ic

moneys o f t h e Uni ted S ta tes , a l l cer t i f ied checks , cash-

i e r ' s

checks, t r ea s ur er 's checks, demand l e t t e r s

of

c r e d i t ,

and

t r av e l le rs ' checks ou ts t andin g ,

a n d a l l

other deposi ts except ' t ime deposi ts ' an d ' 'bank de po s it s'

a s

he re ina f t e r de f ined .

T he term ' t ime deposi ts ' wi thin t h e meaning o f this

a c t

sha l l i nc lude

a l l

1

savings acco un t s ' , ' t ime c e r t i f i -

ca tes

o f

de po s i t ' , ' pos t a l s avings depo s i t s '

a n d

1

open

account t ime deposits ' a s here inaf te r def ined , except

that whenever,

b y t h e

l apse

o f

time

o r t h e

g iv ing

of

n o t i c e

of an

intende d withdr awal, sa vings accou nts , t ime

c e r t i f i c a t e s o f d e p o s i t , a n d open account time deposits

become payable

i n

less than

30

days, such de po si ts sh a ll

b e

considered demand deposits.

T he

term 's avi ngs accounts s ha ll mean dep osi ts

o f

i n d i v i d u a l s

a n d

r e l i g i o u s , c h a r i t a b l e

o r

similar corpora-

t i ons , i n r e spec t t o wlaich-

* .» '

(1 ) A

pas s book, ce r t i f i c a t e

o r

other similar form

o f

r e c e i p t , d e l i v e r e d to and r e t a i n e d by the depos i tor

o r h i s

ass ignee , mas t ac tua l ly

b e

p re sen t ed

t o t h e

bank whenever

a

withdrawal

i s

made;

(2) The

depos i tor

o r h i s

ass ignee

may a t a ny

time

b e

r equ i r ed

by the

bank

t o

give not ice

of an

i n t e n d -

ed

withdrawal

n o t

le ss than t h i r t y days be fo re

a withdrawal i s made; and

(3) The

bank ' s p r in te d re gu la t i on s , accepted

by the

depos i tor inc lude t h e above requirements.

Deposits which

a r e

pe rmi t t ed

t o b e

withdrawn

b y

check

o r otherwise, without t h e a c t u a l p r e s e n t a t i o n o f the pass

b o o k , c e r t i f i c a t e ,

o r

other similar form

o f

receipt whenever

a

withdrawal

i s

made, shall

n o t b e

cons idered

1

savings

a c -

counts ' wi th in t h e meaning of t h i s a c t . The r e t e n t i o n o f

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X-5090&

t h e pas s book, ce r t i f i c a t e or other s imilar form of ,

r e c e i p t o r a dup l i ca t e of same, b y t h e bank or by an

o f f i c e r , a g e n t o r employee thereof, a n d t h e p r e s e n -

t a t i o n

of

same

by t | i e

bank,

or by an

o f f i ce r , agen t

o r

employee thereof, shall

n o t b e

cons idered

a n

ac tua l

presen ta t ion wi th in : the meaning

of

t h i s

a c t , A d e -

posit made

by one

bank

i n

another

o r a

depos i t

of a

bus iness corpora t ion

or

f i rm sha l l

n o t i n a n y

case

b e

considered

a

'savings account ' wi thin

t h e

meaning

o f

t h i s

a c t .

T he term

1

time c e r t i f i c a t e of d e p o s i t

1

sha l l

mean a deposit evidenced b y wr i t ten ins t rument de l i ve r -

ed to and r e t a i n e d by the deposi tor evidencing t h e d e -

pos i t w i th a bank, e i t he r with or w i t h o u t i n t e r e s t , of

a c e r t a i n sum s p e c i f i e d o n t h e face of t he c e r t i f i c a t e ,

payable i n whole or i n p a r t t o t h e depos i to r or on h i s

orde r -

(1 ) On a ce r t a in da t e , spec i f i ed on the c e r t i f i c a t e ,

more than thir ty days af ter t h e da te o f t h e d e -

p o s i t ; o r

( 2 ) A f t e r th e lapse of a certain t ime subsequent t o

t h e

da te

of the

c e r t i f i c a t e ,

in no

case less

than thir ty days;

or

( 3 )

After wri t ten not ice which

t n e

bank

m ay a t i t s

opt ion requi re

to be

given

a

c e r t a i n s p e c i f i e d

number

of

days,

n o t

less than thir ty days before

th e

da te

of

repayment;

and

( 4 ) I n a l l

case s only upon

t h e

ac tua l p r e sen t a t i on

of the

c e r t i f i c a t e

a t

each withdrawal

f o r

proper

endorsement

o r

sur render .

T he r e t e n t i o n of t he c e r t i f i c a t e , o r a d u p l i c a t e of same,

b y t h e bank or by an o f f i c e r , a g e n t o r employee thereof, and

th e p r e s e n t a t i o n of same b y t h e bank or by an o f f i ce r , agen t

o r employee thereof shall n o t b e considered a n a c t u a l p r e s e n t a -

t ion wi th in t h e meaning o f t h i s a c t . A de po si t made by one bank

i n another sha l l n o t i n a n y case be considered a

1

time c e r t i f i c a t e

o f depos i t

1

wi th in t h e meaning of t h i s a c t .

The term 'postal savings deposi ts

1

a s

used i n tr . is a c t

shal l mean deposi ts of po st al savings funds i n banks under tne

terms of t he po s t a l sav ings a c t . approved June 2 5 , 1 9 1 9 , a s amended.

The

term 'open account time deposits'

a s

used

i n

t h i s

a c t

shal l mean deposi ts n o t evidenced by c e r t i f i c a t e s o f depos i t s o r

savings pass books,

i n

r e s p e c t

t o

^hich

a

wr i t t en con t r ac t

i s e n -

t e red in to wi th

t h e

depos i to r

a t the

time

t h e

depos i t

i s

made

p r o -

vid ing tha t ne i ther

t h e

whole

or any

p a r t

o f

such deposi t

may be

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3 9 L

- 3 - X-5090-c

withdrawn,

by

check

o r

otherwise, except

on a

given date, more than

th i r t y days a f t e r t h e date o f t h e depos i t , or on wr i t t en no t i ce

which mast be given by th e depos i tor a c er ta in s pe c i f i ed number of

days i n advance, in no case less than thir ty days. I n order f o r

depos i t s

to be

c l a s s i f i e d

a s

'open account t ime de po si ts '

t h e

bank

i n which such deposits a r e made mast ac t ua ll y req ui re such w ri t te n

not ice before permi t t ing wi thdrawals to be made.

n

The term

1

bank deposits* sh al l inclu de

a l l

depos i t bala nces

due to

other banks, bankers,

a n d

trust companies

i n t h e

United

S t a t e s a n d fo re ign coun t r i e s .

Every bank, banking association, a n d t r u s t company which i s

o r

which becomes

a

member

of any

Federal reserve bank shall

e s t a b l i s h a n d ma in t a in a r e se rve cons i s t i ng of an a c t u a l n e t

balance with t h e Federal reserve bank of i t s d i s t r i c t equa l

t o n o t l e s s than th i r t e en p e r centum of t h e aggregate amount

o f i t s

bank dep osi ts , three

p e r

centum

of t he

aggregate amount

o f i t s t ime deposi ts , a n d t h e fo l lowing p e r centum o f t h e a g -

gregate amount of i t s n e t demand de po si ts :

Banks

i n

c e n t r a l r e s e r v e c i t i e s ,

1 3 p e r

centum;

Banks i n r e s e r v e c i t i e s , 9 p e r centum; a n d

Other banks, 7 p e r centum;

PROVIDED, HOWE VSR, That, upon t h e a f f i rma t ive vo t e o f f ive

members of t h e Federal Reserve Board, a n y bank located i n a n o u t -

l y i n g d i s t r i c t of a cent ra l reserve c i ty may be pe rmi t t ed t o main-

t a i n

a

reserve balance equal

t o n o t

less than seven

o r

nine

p e r •

centum

o f i t s n e t

demand deposits,

and any

bank located

i n a n o u t -

l y i n g d i s t r i c t of a reserve c i ty may be pe rmi t t ed t o main ta in a

reserve balance equal t o n o t less than seven p e r centum o f i t s

n e t demand deposits; AHD PROVIDED FURTHER, That, i n computing t h e

amounts o f n e t demand deposits against which reserves must b e

mainta ined ,

a l l

member banks

may

deduct from

t h e

amount

of

t h e i r

gross demand deposits, a l l ba lances due to them from other banks

(except Federal reserve banks a n d fore ign banks) , a l l cash items

depos i ted

by

them wit h Fed era l re se rv e banks

a n d

other banks

i n

proces s

of

c o l l e c t i o n ,

a l l

exchanges

f o r t h e

clear ing house,

a n d a l l checks i n other banks i n t h e same p l a c e ,

T he Federal Reserve Board shall have authority t o p re sc r ibe

regula t ions govern ing

t h e

maintenance

o f t h e

reserves requi red

by th i s s ec t i on a n d f u r t h e r d e f i n i n g t h e va r ious c l a s se s o f d e -

pos i t s here in ment ioned .

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- 4 -

X-^090-c

Ho

member bank shall keep

on

deposi t with

a n y

State bank

•

o r t r u s t company which i s n o t a member bank a sum in excess o f

t e n p e r centum of i t s own paid -up cap i ta l and s u r p l u s . No mem-

b e r bank shal l a c t a s t h e medium o r agent o f a nonmember bank

i n

applying

f o r o r

receiving discounts from

a

Federal reserve

bank under

t h e

p ro v i s io n s

of

t h i s

A c t ,

except

by

permission

o f t h e Federal Reserve Board.

The requ i red balance carr ied by a member bank with a

Federal reserve bank

may,

under

t h e

r e g u l a t i o n s

and

sub ject

t o

such p en a l t i e s

a s may be

p r e s c r i b e d

b y t h e

Federal Reserve

Board, b e checked against and wi thdrawn by such member bank

f o r t h e purpose of meeting e xi s t i ng l i a b i l i t i e s : PROVIDED*

HOWEVER, That no bank shal l a t a n y time make new loans o r

s h a l l

p a y a n y

dividends unless

an d

u n t i l

t h e

total balance

r e q u i r e d by l aw i s f u l l y r e s t o r e d .

National banks, or banks organi zed under l oc al la ws,

l o c a t e d i n Alaska or i n a dependency o r insu lar possess ion

o r a n y

p a r t

o f t h e

United Sta te s outsi de

t h e

con t inen ta l

United States may remain nonmember banks, a n d s h a l l i n that

event maintain reserves and comply with a l l t h e condit ions

no w provided by l aw regulating them; or said banks may , with

t h e

consent

o f t h e

Reserve Board, become member banks

of

any one of the

r e s e r v e d i s t r i c t s ,

and

s h a l l

i n

that event

take s tock , main ta in reserves , and be s u b j e c t t o a l l t h e

other p rov is ions of t h i s A c t .

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