"(g) The Federal Reserve Board shall have power to suspend all dealings in reserve balances for such period as it may deem best. In estimating the reserve balances required by this act, the net difference of amounts due to and from other banks shall be taken as the basis for ascertaining the deposits against which required balances with Federal reserve banks shall be determined; and the liability created by every repurchase or other similar agreement entered into by a member bank shall be added to such net difference as ascertained under the provisions of this paragraph.

"(h) National banks, or banks organized under local laws, located in Alaska or in a dependency or insular possession or any part of the United States outside the continental United States may remain nonmember banks and shall in that event maintain reserves and comply with all the conditions now provided by law regulating them; or said banks may, with the consent of the board, become member banks of any one of the reserve districts and shall in that event take stock, maintain reserves, and be subject to all the other provisions of this act.

SEC. 14. Section 24 of the Federal reserve act, as amended, is amended to read as follows:

"SEC. 24. Any national banking association may make loans secured by first lien upon improved real estate, including improved farm land, situated within its Federal reserve district or within a radius of one hundred miles of the place in which such bank is located, irrespective of district lines. A loan secured by real estate within the meaning of this section shall be in the form of an obligation or obligations secured by mortgage, trust deed, or other such instrument upon real estate when the entire amount of such obligation or obligations is made or is sold to such association. The amount of any such loan shall not exceed 50 per centum of the actual value of the real estate offered for security, but no such loan upon such security shall be made for a longer term than five years. Such valuations shall be revised by the Comptroller of the Currency at the time of each examination of the bank making the loan and he shall have power to order changes therein and to require the adjustment of loans to such revised valuations. Any such bank may make such loans in an aggregate sum, including in such aggregate any such loans on which it is liable as indorser or guarantor or otherwise, equal to 15 per centum of the amount of the capital stock of such association actually paid in and unimpaired and 15 per centum of its unimpaired surplus fund, or to one-half of its time deposits, at the election of the association, subject to the general limitation contained in section 5200 of the Revised Statutes. Investments in bank premises and unsecured loans whose eventual safety depends upon the value of real estate shall be counted for the purposes of this section as real-estate loans. Every such bank may apply the moneys deposited therein as time deposits to the loans herein authorized and the balance of such time deposits shall be invested in property and securities in which savings banks may invest under the law of the State where such national bank is situated, or where there is no such law relating to investments by savings banks, in such property and securities as may be specified by the Comptroller of the Currency: Provided, That every member bank shall be required to report its investments in, or holdings of, any such property and securities at an aggregate valuation which shall not exceed the aggregate market value thereof at the time such reports to the comptroller or to the Federal Reserve Board are made: Provided further, That the reserve against time deposits required by section 19 of this act shall be counted as a corresponding part of such investments. All the property of any insolvent national bank acquired under this section shall be applied by the receiver thereof in the first place ratably and proportionately to the payment in full of its time deposits. Such banks may continue hereafter as heretofore to receive time deposits and to pay interest on the same, but the rate of interest which such banks may pay upon such time deposits or other deposits shall not exceed the maximum rate authorized by law to be paid upon such deposits by State banks or trust companies organized under the laws of the State wherein such national banking association is located.

"Every national banking association and every member bank which is in existence at the date this section as amended takes effect shall be required, within a period of two years from such date, to comply fully, with the provisions of this section, and every national banking association hereafter organized and every State bank or trust company hereafter becoming a member of the Federal reserve system shall comply with the provisions of this sec

tion from the date of its organization or admission to membership, as the case may be."

SEC. 15. Paragraph "Seventh" of section 5136 of the Revised Statutes, as amended, is amended to read as follows:

"Seventh. To exercise by its board of directors or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this title; and generally by engaging in all forms of banking business and undertaking all types of banking transactions that may, by the laws of the State in which such bank is situated, be permitted to banks of deposit and discount organized and incorporated under the laws of such State, except in so far as they may be forbidden by the provisions of the national bank act, as amended, the Federal reserve act, as amended, or any other laws of the United States. The business of purchasing and selling investment securities shall hereafter be limited to purchasing and selling such securities without recourse, solely upon the order, and for the account of, customers, and in no case for its own account, and no such association shall underwrite any issue of securities; except that any such association may purchase and hold for its own account investment securities to such an amount and of such kind as may be by regulation prescribed by the Comptroller of the Currency, but in no event shall the total amount of such investment securities of any one obligor or maker held by such association exceed 10 per centum of the total amount of such issue outstanding, nor shall the total amount of the securities so purchased and held for its own account at any time exceed 15 per centum of the amount of the capital stock of such association actually paid in and unimpaired and 25 per centum of its unimpaired surplus fund. Except as hereinafter provided or otherwise permitted by law, nothing herein contained shall authorize the purchase or holding of any shares of stock of any corporation by any such association. The limitations herein contained as to the purchasing and selling of investment securities shall not apply to obligations of the United States, or general obligations of any State or of any political subdivision thereof, or obligations issued under authority of the Federal farm loan act: Provided, That in carrying on the business commonly known as the safe deposit business no such association shall invest in the capital stock of a corporation organized under the law of any State to conduct a safe deposit business in an amount in excess of 15 per centum of the capital stock of such association actually paid in and unimpaired and 15 per centum of its unimpaired surplus."

SEC. 16. Section 5138 of the Revised Statutes, as amended, is amended to read as follows:

"SEC. 5138. After this section as amended takes effect, no national banking association shall be organized with a less capital than $100,000, except that such associations with a capital of not less than $50,000 may be organized in any place the population of which does not exceed six thousand inhabitants, and except that such associations formed for the purpose of succeeding to the business of an existing bank may, in the discretion of the Comptroller of the Currency, be organized with a less capital than $50.000, but in no event less than $25,000. No such association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of less than $200,000, except that in the outlying districts of such a city where the State laws permit the organization of State banks with a capital of $100,000 or less, national banking associations now organized or hereafter organized may, with the approval of the Comptroller of the Currency, have a capital of not less than $100,000."

SEC. 17. Section 5319 of the Revised Statutes, as amended, is amended to read as follows:

"SEO. 5139. After this section as amended takes effect, the capital stock of each association shall be divided into shares of $100 each and be deemed personal property and transferable on the books of the association in such manner as may be prescribed in the by-laws or articles of association; and any such association which has certificates of stock outstanding on the date this section as amended takes effect which do not comply with the provisions of this section as amended shall, within two years after such date, issue new certificates in' compliance with such provisions. No certificate representing the stock of any

such association shall represent the stock of any other corporation, nor shall the ownership, sale, or transfer of any certificate representing the stock of any such association be conditioned in any manner whatsoever upon the ownership, sale, or transfer of a certificate representing the stock of any other corporation. Every person becoming a shareholder by transfer as permitted by this section shall in proportion to his shares succeed to all the rights and liabilities of the prior holder of such shares, and no change shall be made in the articles of association by which the rights, remedies, or security of the existing creditors of the association shall be impaired."

SEC. 18. From and after January 1, 1933, no director, officer, or employee of any national bank or member bank shall be (a) an officer of any unincorporated association or corporation engaged primarily in the business of purchasing, selling, or negotiating securities, or (b) an employee of any such unincorporated association or corporation, or of any individual or partnership engaged in such business, or (c) a director, officer, or employee of a corporation organized for any purpose whatsoever which shall make loans secured by collateral to any corporation other than its own subsidiaries, or to any individual, association, or partnership; and no national bank or member bank shall perform the functions of a correspondent bank on behalf of any such individual, partnership, unincorporated association, or corporation; and no such individual, partnership, unincorporated association, or corporation shall perform the functions of a correspondent for any national bank or member bank or hold on deposit any funds on behalf of any national bank or member bank.

SEC. 19. Section 5144 of the Revised Statutes, as amended, is amended to read as follows:

"SEC. 5144. In all elections of directors and in deciding all qestions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock actually owned by him as the result of bona fide purchase, gift, or inheritance and no shareholder who shall become such through nominal transfer, or ownership on behalf of another, shall cast such vote. No corporation, association, or partnership which is the owner of more than 10 per centum of the stock of any such national bank and no officer, director, or employee of such corporation, association, or partnership, shall cast a ballot in such elections or meetings either on shares of stock owned by the corporation or by such officer, director, or employee. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or bookkeeper of such bank shall act as proxy; and no shareholder whose liability is past due and unpaid shall be allowed to vote."

SEC. 20. Notwithstanding the provisions of section 5144 of the Revised Statutes, as amended by this act, any affiliate, or any association, corporation, or partnership other than an affiliate, which owns or controls shares of stock in any national bank may make application to the Federal Reserve Board for a voting permit entitling it to cast one vote at all elections of directors of such national bank on each share of stock actually owned or controlled by it. The Federal Reserve Board may, in its discretion, grant or withhold such permit as the public interest may require but no such permit shall be granted except upon the following conditions:

(a) Every such affiliate, association, corporation, or partnership shall, at the time of making the application for such permit, enter into an agreement with the Comptroller of the Currency (1) to receive at such periodical intervals as shall be prescribed by the comptroller, on dates identical with those fixed for the examination of national banks, examiners representing and acting for the comptroller who shall make an examination of its financial condition with the same degree of care as in the case of an examination of a national bank, such examination to be at the expense of the affiliate, corporation, association, or partnership so examined; (2) that the report of the examiner shall set forth all the facts ascertained by the examination and shall include a statement of the name, location, capital, surplus, and undivided profits of each bank in which the applicant owns stock, the number of shares so owned, the par and book value of such shares, the number of shares of bank stock acquired and sold since the last examination, and other assets of such affiliate, corporation, association, or partnership (including under separate headings obligations of the United States, and the value and nature of other securities owned); and (3) that the comptroller may examine each national bank owned or controlled by such affiliate, association, corporation, or partnership, both individually and in conjunction with others so owned or controlled, and may

require publication periodically of individual or consolidated statements of condition of such bank;

(b) Every such affiliate, association, corporation, or partnership shall hold free of any lien or claim thereon obligations of the United States in an amount equal to 10 per centum of the total of capital stock owned by it in any national bank and shall agree (1) that in the event of failure of any national bank in which it shall hold stock the stockholders' liability accruing on account of such stock shall be a first lien upon the obligations so held, and (2) that any deficiency in such obligations due to their use in meeting claims under (1) above shall be made up within ninety days after such deficiency

occurs;

(c) Every such affiliate, association, corporation, or partnership (1) shall possess at the time of the issuance of such voting permit, and shall continue to possess during the life of such permit, free and clear of any lien, pledge, or hypothecation of any nature, assets other than bank stock which, together with the amount of the obligations of the United States hereinbefore required to be held, shall not be less than 25 per centum of the aggregate par value of bank stocks held or owned by such affiliate, association, corporation, or partnership (but sums advanced during the years 1931 and 1932 for the replacement of capital in banks owned by such affiliate, association, corporation, or partnership, or for losses incurred or charge-offs made by it during those years, may be counted, up to 10 per centum of the aggregate par value of bank stocks held or owned by it, as a part of such assets); and (2) shall reinvest in assets other than bank stock all net earnings over and above 6 per centum per annum on the book value of its own shares outstanding until such assets shall equal the outstanding par value of bank shares owned by it: Provided, That from and after January 1, 1935, the 25 per centum requirement herein before provided for shall be increased by not less than 2 per centum per annum, but at no time shall the assets held to meet any future stockholders' liability be less than the total assets held by such affiliate, association, corporation, or partnership on January 1, 1932;

(d) Every officer and employee of such affiliate, association, corporation, or partnership shall be subject to the same penalties for false statement as are applicable at the time of making such statement to the officers and employees of national banks; and

(e) Every such affiliate, association, corporation, or partnership shall, at the time of application for such voting permit, (1) file a statement with the Comptroller of the Currency that it does not own, control, or have any interest in, or is not participating in the management or direction of, any affiliate formed for the purpose of, or engaged in, the issue, flotation, underwriting, public sale, or distribution at wholesale or retail or through syndicate participation of stocks, bonds, debentures, notes, or other securities of any sort, and that during the period that the permit remains in force it will not acquire any ownership, control, or interest in any such affiliate or participate in the management or direction thereof, or (2) agree that if at the time of filing the application for such permit it owns, controls, or has an interest in, or is participating in the management or direction of, any such affiliate, it will, within two years after the filing of such application, divest itself of its ownership, control, and interest in such affiliate and will cease participating in the management or direction thereof, and will not thereafter, during the period that the permit remains in force, acquire any further ownership, control, or interest. in any such affiliate or participate in the management or direction thereof, and (3) agree that thenceforth it will declare dividends only out of actual net earnings as indicated by the last preceding examination made by the comptroller.

The Federal Reserve Board may, in its discretion, revoke any such voting permit after giving sixty days' notice by registered mail of its intention to the affiliate, association, corporation, or partnership. Whenever the Federal Reserve Board shall have revoked any such voting permit, no national bank whose stock is owned in whole or in part by the affiliate, association, corporation, or partnership whose permit is so revoked shall receive deposits of United States moneys, nor shall any such national bank pay any further dividend to such affiliate, association, corporation, or partnership upon any shares of such bank owned or controlled by such affiliate, association, corporation, or partnership.

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SEC. 21. Paragraph (c) of section 5155 of the Revised Statutes, as amended, is amended to read as follows:

"(c) A national banking association may, with the approval of the Federal Reserve Board, after the date this paragraph, as amended, takes effect, establish and operate new branches within the limits of the city, town, or village, or at any point within the State in which said association is situated, if such establishment and operation are at the time permitted to State banks by the law of the State in question: Provided, That, if by reason of the proximity of such an association to a State boundary line, the ordinary and usual business of such association is found to extend into an adjacent State, the Federal Reserve Board may permit the establishment of a branch or branches by such association in an adjacent State but not beyond a distance of fifty miles from the seat of the parent bank. No such association shall establish a branch outside of the city, town, or village in which it is situated unless it has a paid-in and unimpaired capital stock of not less than $500,000. The aggregate capital of every national banking association and its branches shall at no time be less than the aggregate minimum capital required by law for the establishment of an equal number of national banking associations situated in the various places where such association and its branches are situated."

SEC. 22. Sections 1 and 3 of the act entitled "An act to provide for the consolidation of national banking associations," approved November 7, 1918, as amended, are amended by striking out the words " county, city, town, or village" wherever they occur in each such section, and inserting in lieu thereof the words "State, county, city, town, or village."

SEC. 23. The first two sentences of section 5197 of the Revised Statutes are amended to read as follows:

"Any association may take, receive, reserve, and charge on any loan or discount made, or upon any notes, bills of exchange, or other evidences of debt, interest at the rate allowed by the laws of the State, Territory, or District where the bank is located, or at a rate of 1 per centum in excess of the discount rate of the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and no more, except that where, by the laws of any State, a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under this title. When no rate is fixed by the laws of the State, or Territory, or District, the bank may take, receive, reserve, or charge a rate not exceeding 7 per centum, or 1 per centum in excess of the discount rate of the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and such interest may be taken in advance, reckoning the days for which the note, bill, or other evidence of debt has to run."

SEC. 24. No national banking association or member bank shall promise or pay to its depositors as a consideration for the maintenance of deposit balances or accounts a rate of interest in excess of one-half the rate of interest specified in section 5197 of the Revised Statutes, as amended, and whenever such depositors are bankers who maintain balances with other banks, no such association or member bank shall promise or pay for the maintenance with it of such bankers' balances a rate of interest in excess of the current rate of discount of the Federal reserve bank of the district in which the depositary bank is located, or in excess of 22 per centum per annum, whichever rate shall be the smaller.

SEC. 25. (a) The second sentence of the first paragraph of section 5200 of the Revised Statutes, as amended, is amended by inserting before the period at the end thereof the following: "and shall include in the case of obligations of a corporation all obligations of all subsidiaries thereof."

(b) Paragraph (8) of section 5200 of the Revised Statutes, as amended, is amended by inserting before the period at the end thereof a colon and the following: " Provided, That no obligation of a broker or member of any stock exchange or similar organization, or of any finance company, securities company, investment trust, or other similar institution, or of any affiliate, shall be entitled to the benefits of the foregoing exceptions, but such obligations shall in every case be subject to the limitations of 10 per centum hereinbefore set forth in this section; except that the total obligations of an affiliate shall in no case exceed the said 10 per centum limitations, or the amount of the capital stock of said affiliate actually paid in and unimpaired, whichever may be the smaller." (c) Section 5200 of the Revised Statutes, as amended, is further amended by adding at the end thereof the following new paragraphs: