FEDERAL RESERVE BANKOF NEW YORK{Circular No. 1248June 22. 1933}BANKING ACT OF 1933To all Member Banks in the Second Federal Reserve District:For your information we enclose a copy of the Banking Act of 1933, approvedJune 16, 1933, commonly known as the Glass Act.We enclose also a copy of a summary of the principal provisions of that act.This is intended merely as a summary of the law and not as an interpretationthereof or commentary thereon.George L. Harrison,Governor.[Public ² No. 66 ² 73d Congress][H.R. 5661]AN ACTTo provide for the safer and more effective use of the assets of banks, toregulate interbank control, to prevent the undue diversion of funds intospeculative operations, and for other purposes.Be it enacted by the Senate and House of Representatives of theUnited States of America in Congress assembled* That the short title of thisAct shall be the " Banking Act of 1933."Sec. 2. As used in this Act and in any provision of law amended by this Act ² (a) The terms " banks ", " national bank ", " national banking association "," member bank ", " board ", " district ", and " reserve bank " shall have themeanings assigned to them in section 1 of theFederal Reserve Act, as amended.(b) Except where otherwise specifically provided, the term " affiliate "shall include any corporation, business trust, association, or other similarorganization ² (1) Of which a member bank, directly or indirectly, owns or controls either amajority of the voting shares or more than 50 per centum of the number ofshares voted for the election of its directors, trustees, or other persons
exercising similar functions at the preceding election, or controls in anymanner the election of a majority of its directors, trustees, or otherpersons exercising similar functions; or(2) Of which control is held, directly or indirectly, through stock ownershipor in any other manner, by the shareholders of a member bank who own orcontrol either a majority of the share3 of such bank or more than 50 percentum of the number of shares voted for the election of directors of suchbank at the preceding election, or by trustees for the benefit of theshareholders of any such bank; or(3) Of which a majority of its directors, trustees, or other personsexercising similar functions are directors of any one member bank.(c) The term " holding company affiliate " shall include any corporation,business trust, association, or other similar organization ² (1) Which owns or controls, directly or indirectly, either a majority of theshares of capital stock of a member bank or more than 50 per centum of thenumber of shares voted for the election of directors of any one bank at thepreceding election, or controls in any manner the election of a majority ofthe directors of any one bank; or(2) For the benefit of whose shareholders or members all or substantially allthe capital stock of a member bank is held by trustees.[Pub. 66.]Sec. 3. (a) The fourth paragraph after paragraph " Eighth " of section 4 ofthe Federal Reserve Act, as amended (U.S.C., title 12, sec. 301), is amendedto read as follows:" Said board of directors shall administer the affairs of said bank fairlyand impartially and without discrimination in favor of or against any memberbank or banks and may, subject to the provisions of law and the orders of theFederal Reserve Board, extend to each member bank such discounts,advancements, and accommodations as may be safely and reasonably made withdue regard for the claims and demands of other member banks, the maintenanceof sound credit conditions, and the accommodation of commerce, industry, andagriculture. The Federal Reserve Board may prescribe regulations furtherdefining within the limitations of this Act the 'conditions under whichdiscounts, advancements, and the accommodations may be extended to memberbanks. Each Federal reserve bank shall keep itself informed of the generalcharacter and amount of the loans and investments of its member banks with aview to ascertaining whether undue use is being made of bank credit for thespeculative carrying of or trading in securities, real estate, orcommodities, or for any other purpose inconsistent with the maintenance ofsound credit conditions; and, in determining whether to grant or refuseadvances, rediscounts or other credit accommodations, the Federal reservebank shall give consideration to such information. The chairman of theFederal reserve bank shall report to the Federal Reserve Board any such undueuse of bank credit by any member bank, together with his recommendation.Whenever, in the judgment of the Federal Reserve Board, any member bank ismaking such undue use of bank credit, the Board may, in its discretion, afterreasonable notice and an opportunity for a hearing, suspend such bank from
the use of the credit facilities of the Federal Reserve System and mayterminate such suspension or may renew it from time to time."(b) The paragraph of section 4 of the Federal Reserve Act, as amended(U.S.C., title 12, sec. 304), which commences with the words " The FederalReserve Board shall classify " is amended by inserting before the period atthe end thereof a colon and the following: "Provided, That whenever any twoor more member banks within the same Federal reserve district are affiliatedwith the same holding company affiliate, participation by such member banksin any such nomination or election shall be confined to one of such banks,which may be designated for the purpose by such holding company affiliate."Sec. 4. The first paragraph of section 7 of the Federal ReserveAct, as amended (U.S.C., title 12, sec. 289), is amended, effectiveJuly 1, 1932, to read as follows :"After all necessary expenses of a Federal reserve bank shall have been paidor provided for, the stockholders shall be entitled to receive an annualdividend of 6 per centum on the paid-in capital stock, which dividend shallbe cumulative. After the aforesaid dividend claims have been fully met, thenet earnings shall be paid into the surplus fund of the Federal reservebank."Sec. 5. (a) The first paragraph of section 9 of the Federal ReserveI Act, as amended (U.S.C., title 12, sec. 321 ; Supp. VI, title 12, sec.821), is amended by inserting immediately after the words "UnitedStates " a comma and the following : " including Morris Plan banks and otherincorporated banking institutions engaged in similar business."(b) The second paragraph of section 9 of the Federal Reserve Act, as amended,is amended by adding at the end thereof the following :"Provided, however, That nothing herein contained shall prevent any Statemember bank from establishing and operating branches in the United States orany dependency or insular possession thereof or in any foreign country, onthe same terms and conditions and subject to the same limitations andrestrictions as are applicable to the establishment of branches by nationalbanks."(c) Section 9 of the Federal Reserve Act, as amended (U.S.C., title 12, sees.321-331; Supp. VI, title 12, sees. 321-332), is further amended by adding atthe end thereof the following new paragraphs :"Any mutual savings bank having no capital stock (including any other bankinginstitution the capital of which consists of weekly or other time depositswhich are segregated from all other deposits and are regarded as capitalstock for the purposes of taxation and the declaration of dividends), buthaving surplus and undivided profits not less than the amount of capitalrequired for the organization of a national bank in the same place, may applyfor and be admitted to membership in the Federal Reserve System in the samemanner and subject to the same provisions of law as State banks and trustcompanies, except that any such savings bank shall subscribe for capitalstock of the Federal reserve bank in an amount equal to six-tenths of1 per centum of its total deposit liabilities as shown by the most recentreport of examination of such savings bank preceding its admission tomembership. Thereafter such subscription shall be adjusted semiannually onthe same percentage basis in accordance with rules and regulations prescribedby the Federal Reserve Board. If any such mutual savings bank applying for
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Text of the Glass-Steagall Act
Complete text of the Glass Steagall-Act of 1933
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