Page:Banking Act of 1933 (Federal Reserve Circular 1248).djvu/42

 SECTION 6(b) Other provisions regarding the Federal Reserve Board.

Section 10 of the Federal Reserve Act is also amended so as to provide that the principal offices of the Federal Reserve Board shall be in the District of Columbia. At meetings of the Board, the Secretary of the Treasury shall preside as Chairman; in his absence, the Governor shall preside; in the absence of both, the Vice Governor; and in the absence of all three, the Board shall elect a member to act as Chairman pro tempore. This section also makes clear the right of the Federal Reserve Board to leave its funds on deposit with the Federal reserve banks and clarifies the Board's powers with respect to the funds derived from the assessments levied on the Federal reserve banks for the purpose of defraying its expenses. It is also provided that the certification of a Board member that he is not an officer, director or stockholder of any bank is to be filed with the Secretary of the Board instead of with the Secretary of the Treasury.

SECTION 7

Loans by member banks on stock or bond collateral.

Section 11 (m) of the Federal Reserve Act is amended to provide that, upon the affirmative vote of six members, the Federal Reserve Board may fix the percentage of individual bank capital and surplus in each Federal Reserve District which may be represented by loans secured by stock or bond collateral made by member banks in such district. No such loan shall be made by a member bank to any person in an amount in excess of 10 per cent of its unimpaired capital and surplus. Such percentages, which may be changed from time to time upon ten days' notice, are to be fixed with a view of preventing the undue use of bank loans for the speculative carrying of securities. The Board may direct any member bank to refrain from increasing such loans, for one year or less, under penalty of suspension of rediscount privileges.

SECTION 8 Federal Open Market Committee.

A new section, known as Section 12A, is added to the Federal Reserve Act creating a Federal Open Market Committee consisting of twelve members, one being appointed by each Federal reserve bank. Their meetings, held at least four times a year, may be attended by the members of the Federal Reserve Board.

No Federal reserve bank may engage in open market operations except in accordance with regulations of the Federal Reserve Board, which shall be transmitted to the committee and to the Federal reserve banks.

Open market operations shall be governed with a view to accommodating commerce and business and with regard to their bearing on the general credit situation.

If a Federal reserve bank shall decide not to participate in open market operations, it shall notify the committee and the Board.

Federal Deposit Insurance Corporation.

Section 8 also adds a new section to the Federal Reserve Act known as Section 12B, creating a Federal Deposit Insurance Corporation and providing for the insurance of deposits in member banks of the Federal Reserve System and also in nonmember banks under certain conditions. The provisions of this section are extensive and the following paragraphs contain a brief summary of only the more important provisions of the section. Provision is made for temporary insurance of deposits and also for permanent insurance; and, for purposes of convenience, the temporary insurance provisions will be first summarized although the permanent provisions are given first in the Act.

Temporary Insurance provisions.

The Federal Deposit Insurance Corporation is required to open on its books a Temporary Fund for insuring deposits from January 1, 1934, (unless the President fixes an earlier date) until July 1, 1934. The benefits of such temporary insurance are extended to member banks licensed to open by the Secretary of the Treasury and to nonmember banks upon certification