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FEDER L RESERVE BO RD

W SHINGTON

X-3374

March

 31, 1922.

S U B J E C T : S e n a t e B i l l N o . 3 2 5 5

D e a r S i r :

F o r y o u r i n f o r m a t i o n t h e r e i s e n c l o s e d h e r e w i t h a

c o p y

  o f

  S e n a t e B i l l

  N o . 3 ^ 5 5 a n d a

  c o p y

  o f t h e

  B o a r d s l e t t e r

t o t h e C h a i r m a n o f t h e S e n a t e C o m m i t t e e o n B a n k i n g a n d C u r r e n c y ,

s e t t i n g f o r t h i t s v i e w s w i t h r e s p e c t t o t h e p r o p o s e d l e g i s l a -

t i o n .

V e r y t r u l y y o u r s ,

G o v e r n o r .

( E n c l o s u r e s )

TO THE

 FEDERAL RESERVE AGENTS

 OF ^LL THE

 BANKS

CO^Y TO GOVERNORS

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s. 3255

x

-3371 a

tN THE SfcNATE OF THti UNITED STATES

March 7 (calendar day, March g), 1 22.

Mr.

 Ca3.der introduced

 the

 following bill; which

 was

 read twice

and referred to the Committee on Banking and Currency.

A

 BILL

To

 amend section

 513&,

 Revised Statutes

 of the

 United States,

relating

 to

 coirporate powers

 of

 associations,

 so as to

provide succession thereof until dissolved, and to apply

said section as so amended to all national banking asso-

ciations.

Be it enacted by the Senate and iotise f Representatives of

the United States of America in Congress assembled, that section

5136 of the Revised Statutes of the United States be amended so

that the paragraph therein desighated dts  Second shall read as

follows:

Second.  To have perpetual succession until it shall be dis-

solved

 by the act of its

 shareholders owning two-thirds

 of its

stock, unless its franchise shall become forfeited by Reason of

violation of law, or unless it shall be terminated by the provi-

sion of Act of Congress hereinafter enacted,

11

SEC. 2. All Acts or parts of Acts providing for the extension

of the period of succession of national banking associations for

twenty years

 are

 hereby repealed,

 and the

 provisions

 of

 paragraph

second of section 513&, Revised Statutes, as herein amended shall

apply

 to all

 national banking associations

 now

 organized

 and

operating under any law of the United States.

C O P Y

6 7 t h

 Congress,

2 d

  Session.

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C O P Y

X-337^b

March 20, 1922.

Hon.

 George

 P

v

 McLean, Chairman,

Committee

 on

 Banking

 and

 Currency,

United States Senate,

Washington,

 D. C

w

My

1

 dear

 Mr.

 Chairman:

Receipt is acknowledged of your letter of March

15, 1922, in

 which

 you ask for the

 views

 of the

 Federal

Reserve Board with regard to Senate Bill 3 5̂5« This bill,

if

 enacted, would amend Section

 513^

 Revised Statutes

 of

the

 United States

 so as to

 give

 to

 every national banking

association, whether now or hereafter organized, perpet-

ual succession until dissolved by the act of its share-

holders owning two-thirds of its stock, unless its fran-

chise shall become forfeited by reason of violation of law,

or unless it shall be terminated by the provisions of an

act of Congress hereinafter enacted,

n

The

 Federal Reserve Board

 has

 given careful

 con-

sideration to the bill and feels that its enactment is very

desirable.

  The

 Board understands that most

 of the

 States

grant charters to banking institutions for periods in ex-

cess

 of

 twenty years, many States, including

 New

 York,

granting charters which automatically continue forever un-

less revoked or forfeited, or unless the corporation is

dissolved;

 and the

 fact that

 it is

 possible

 to

 obtain char-

ters from the States which are more favorable in this re-

spect than the charters granted to national banks not only

is a

 deterrent

 to

 organization under

 the

 provisions

 of the

National Bank

 Act but

 operates also

 as an

 inducement

 to ex-

isting national banks to convert into State institutions.

The proposed legislation is particularly desir-

able from

 the

 standpoint

 of

 national banks exercising fidu-

ciary

  p o w e r s

 granted

 to

 them under

 the

 provisions

 of Sec-

tion

 11 (k) of the

 Federal Reserve

 Act. The

 Board

 has al-

ways taken the position that a national bank with trust pow-

ers may

 legally

 and

 properly undertake

 the

 execution

 of a

trust which may continue for a period beyond the term of its

original charter, but, nevertheless, the fact that the national

bank

 has to

 apply

 for

 periodical renewals

 of its

 charter

seems to be a consideration which handicaps national banks

in their competition with State institutions for fiduciary

business*

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X-337^b

N a t i o n a l b a n k s a r e s u b j e c t t o s u p e r v i s i o n a n d e x a m i n a -

t i o n b y t h e o f f i c e o f t h e C o m p t r o l l e r o f t h e C u r r e n c y a n d m a y

b e e x a m i n e d a l s o a t t h e i n s t a n c e o f t h e F e d e r a l R e s e r v e B o a r d .

S e c t i o n

  2 o f t h e

  F e d e r a l R e s e r v e

  A c t

  p r o v i d e s t h a t

  t h e

  c h a r t e r

o f a n a t i o n a l b a n k m a y b e f o r f e i t e d f o r n o n c o m p l i a n c e w i t h o r

v i o l a t i o n

  o f t h e

  F e d e r a l R e s e r v e

  A c t i n a

  s u i t b r o u g h t

  b y t h e

C o m p t r o l l e r o f t h e C u r r e n c y u n d e r t h e d i r e c t i o n o f t h e F e d e r a l

R e s e r v e B o a r d ,

  a n d

  S e c t i o n 5 2 3 9

  o f t h e

  R e v i s e d S t a t u t e s

  p r o -

v i d e s f o r s u c h f o r f e i t u r e f o r v i o l a t i o n o f t h e p r o v i s i o n s o f

t h e N a t i o n a l B a n k A c t i n a s u i t b r o u g h t b y t h e C o m p t r o l l e r o f

t h e C u r r e n c y o n h i s o w n a c c o u n t . I n v i e w o f t h e s e s t a t u t o r y

p r o v i s i o n s , i t s e e m s t o t h e B o a r d t h a t a m p l e p r o t e c t i o n i s

a f f o r d e d a g a i n s t p o s s i b l e a b u s e s

  b y

  n a t i o n a l b a n k s

  o f

  t h e i r

f r a n c h i s e s .

T h e B o a r d k n o w s o f n o v a l i d o b j e c t i o n t o g r a n t i n g p e r -

p e t u a l f r a n c h i s e s t o n a t i o n a l b a n k s , s u b j e c t t o t h e q u a l i f i c a -

t i o n s c o n t a i n e d i n S e n a t e B i l l 3 2 5 5 > a n d b e l i e v e s t h a t t h e

l e g i s l a t i o n i s e n t i r e l y c o n s i s t e n t w i t h s o u n d b a n k i n g . T h e

n a t i o n a l b a n k i n g s y s t e m s h o u l d

  b e p u t o n a n

  e q u a l f o o t i n g w i t h

t h e b a n k i n g s y s t e m o f t h e v a r i o u s S t a t e s , s o f a r a s i s c o n -

s i s t e n t w i t h s o u n d p r i n c i p l e s , a n d S e n a t e B i l l 3 2 5 5 w i l l , i f

e n a c t e d , r e m o v e

  o n e o f t h e

  u n n e c e s s a r y h a n d i c a p s u n d e r w h i c h

t h e n a t i o n a l b a n k i n g s y s t e m i s f u n c t i o n i n g a t t h e p r e s e n t t i m e .

Y o u r s v e r y t r u l y ,

( S i g n e d ) W . P . G . H A R D I N G .

G o v e r n o r .

WSLJB