a
-The 6ommone
JANUARY, 1914
provided for in this Act, to define their duties,
require bonds of them, and, fix th'e penalty there
of , .and to dismiss at pleasure such officers or , .
employees.
Sixth. To prescribe by its board of directors,
by-laws not inconsistent with law, regulating
the manner in which its general business may
bo conducted, and the privileges granted to it by
law may be exercised and enjoyed.
Seventh. To exercise by its board of directors,
or duly authorized officers or agents, all powers
specifically granted by the provisions of this Act
and such incidental powers as shall be1 necessary
to carry on the business of banking within the -limitations
prescribed by this Act.
Eighth. Upon deposit with the Treasurer of
the United States of any bonds of the United
States in the manner provided by existing law
relating to national banks, to receive from the
Comptroller of the Currency circulating notes In
blank, registered and countersigned as provided
by law, equal in amount to the par value of the
bonds so deposited, such notes to be issued under
th'e same conditions and provisions, of law as re
late to the issue of circulating notes of national
banks secured by bonds of the United Spates
bearing the circulating privilege, except that the
issue of such notes shall not be limited to the
capital stock of such Federal reserve bank.
But no Federal reserve bank shall transact
any business except such as is Incidental and
necessarily preliminary to its organization until
it has been authorized by the Comptroller of the
Currency to commence business under the pro
visions of this Act.
Every Federal reserve bank shall be con
ducted under the supervision and control of a
board of directors.
The board of directors shall perform the duties
usually appertaining to the office of directors of
banking associations and all such duties as are
prescribed by law.
Said board shall administer the affairs of said
bank fairly and impartially and without dis
crimination in favor of or against any member
bank or banks and shall, subject to the provi
sions of law and the orders of tho 'Federal. He
servo Board',-ext'end to: each member barik 'such
discounts; advancements and accommodations 'as
may be safely atnd reasonably made with due
regard for the claims and demands of other
member banks.
Such board of directors shall be selected as
hereinafter specified and shall consist of nine
members, holding office for threo years, and divided-
into thred classes, designated as classes
A, B, and C. '
Glass A shall consist of three members, who'
shall bo chosen by and be representative of the
stock-holding banks.
Class B shall consist of three members, who
at the time of their election shall be actively en
gaged in the'r district in commerce, agriculture
or some other industrial pursuit."
Class C shall consist of three members who
'shall be designated by the Federal Reserve
Board. When the necessary subscriptions to the
capital stock have been obtained for the organ
ization of any Federal reserve bank, the Federal
Reserve Board shall appoint the class C directors
and shall designate one of such directors as
chairman of the board to be selected. Pending
the designation of such chairman, the organiza
tion committee shall exercise the powers and
duties appertaining to the office of chairman in
the organization of such Federal reserve bank.
No Senator or Representative in Congress
shall be a member of the Federal Reserve Board
or an officer or a director of a Federal reserve
bank.
No director of class B shall be an officer, di
rector, or employee of any bank.
No director of class C shall be an officer, di
rector, employee, or stockholder of any bank.
Directors of class A and class B shall be
chosen in the following manner:
The chairman of the board of directors of the
Federal reserve bank of the district in which the
bank is situated or, pending the appointment of
such chairman, the organization committee shall
classify the member banks of the district into
three general groups or divisions. Each group
shall contain as nearly as may be one-third of
the aggregate number of the member banks of
the district and shall consist, as nearly as may
be, of banks of similar capitalization. The
groups shall be designated by number by tne
chairman.
At at regularly called meeting of the board of
directors of each member bank-in the district it
shall elect by ballot a district reserve elector
and shall certify his-name to the chairman of
the board of directors of tho Federal reserve
bank of tho district. The chairman shall make
lists of the district reserve electors thus named
by banks in each of the aforesaid threo groups
and shall transmit one list to each elector in each
group. .
Each member bank shall be permitted to
nominate to tho chairman one candidate for di
rector of class A and one candidate for director
of class B. Tho candidates so nominated shall
bo listed by tho chairman, indicating by whom
nominated, and a copy of said list shall, within
fifteen days after its completion, bo furnished
by tho chairman to each elector.
Every elector shall, with fifteen days after
the receipt of the said list, certify to the chair
man his first, second, and other choices of a
director of class A and class B, respectively,
upon a preferential ballot, on a form furnished
by, tho chairman of tho board of directors of the
Federal reserve bank of the district. Each
elector shall make a cross opposite the name of
the first, second, and other choices for a director
of class A and for a director of class B, but shall
not vote moro than one choice for any oile can
didate. Any candidate having a majority of all votes
cast In the column of first choice shall be de
clared elected. If no candidate have a majority
of all the votes in the first column, then there
shall be added together the votes cast by the
electors for such candidates in the second
column and the votes cast for the several candi
dates in the first column. If any candidate then
have a majority of the electors voting, by adding
together the first and second choices, he shall be
declared elected. If no candidate have a ma
jority of electors voting when the first and sec
ond choices shall have been added, then the
votes cast in the third column for other choices
shall be added together in like manner, and the
candidate then having the highest number; of
votes shall be declared elected. An immediate
report of election shall be declared.
Class C directors shall be appointed by the
Federal Reserve Board. They shall have been for
at least two years residents of the district 1:or
which they are appointed, one of wjiom shall be
designated by said board as chairman of the
board of directors of the Federarreserve bijnk
and as "Federal reserve agent.". He shall tie a
person of tested banking experience; and in ad
dition j;o his duties as chairman of 'the board of
directors of the Federal reserve bank he shall be
required to maintain under regulations to be
established by the Federal Reserve Board a local
office of said board on the premises of the Fed
eral reservo bank. He shall make regular re
ports to the Federal Reserve Board, and shall
act as its official representative for the per
formance of the functions conferred cpon it by
this Act. He shall receive an annual compensa
tion to bo fixed by the Federal Reserve Board
and paid monthly by the Federal reserve bank
to which he is designated. One of the directors
of class C, who shall be a person of tested bank
ing experience, shall be appointed by the Federal
Reserve Board as deputy chairman and deputy
Federal reserve agent to exercise the powers of
tho chairman of tho board and Federal reserve
agent in case of absence or disability of his
principal.
Directors of Federal reserve banks shall re
ceive, In addition to any compensation otherwise
provided, a reasonable allowance for necessary
expenses in attending meetings of their respec
tive boards, which amount shall be paid by the
respective Federal reservo banks. Any com
pensation that may be provided by boards of
directors of Federal reserve banks for directors,
officers or employees shall be subject to the ap
proval of the Federal Reserve Board.
The Reserve Bank Organization Committee
may, in organizing Federal reserve banks, call
such meetings of bank directors in the several
districts as may be necessary to carry out the
purpose of this Act, and may exercise the
functions herein conferred upon the chairman
of the board of directors of each Federal reserve
bank pending the complete organization of such
bank.
At the first meeting of the full board of di
rectors of each Federal reserve bank, it shall be
the duty of the directors of classes A, B and C,
respectively, to designate one of the members
of each class whose term of office shall expire
in one year from the first of January nearest to
date of such meeting, one whose term of office
shall expire at the. end of two years from said
date, and one whose term of office shall expire
at the end of threo " years from said date.
Thereafter every director of a Federal reserve
bnnkchosen as hereinbefore provided shall hold
office for a term of three years. Vacancies that
may occur in tho several classes of directors of
Federal reserve banks may be filled in the man-
nor provided for tho original selection of such
directors, such appointees to hold office for tlie
unexpired terms of their predecessors.
STOCK ISSUES; INCREASE AND DECREASE
OF CAPITAL
Sec. H. Tho capital stock of each Federal re
serve bank shall bo divided into shares of $100
each. Tho outstanding capital stock shall bo In
creased from time to time as member banks in
crease their capital stock and surplus or as addi
tional banks become members, and may be de
creased as member banks reduce their capital
stock or surplus or cease to be members. Shares
of the capital stock of Federal reservo banks
owned by member banks shall not bo transferred
or hypothecated. When a member bank In
creases its capital stock or surplus, it shall
thereupon subscribe for an additional amount
of capital stock of the Federal reserve bank of
its district equal to six per centum of the said
Increase, one-half of said subscription to be paid
in the manner herelnboforc provided for original
subscription, and one-half subject o call of tho
Federal Reserve Board. A bank applying for
stock in a Federal reserve bank at any time
after the organization thereof must subscribe for
an amount of the capital stock of the Federal
reserve bank equal to six per centum of the
paid-up capital stock and surplus of said appli
cant bank, paying therefor its par value pluB
one-half of one per centum a month from the
period of tho last dividend. When the capital
stock of any Federal reserve bank shall have
been increased either on account of the Increase
of capital stock of member banks or on account
of the Increase In the number of member banks,
the board of directors shall cause to be executed
a certificate to tho Comptroller of the Currency
showing the increase in capital stock, the
amount paid In, and by whom paid. When a
member bank reduces its capital stock it shall
surrender a proportionate amount of its hold
Ings in tho capital of said Federal reservo bank,
and when a member bank, voluntarily liquidates
it shall surrender all- of Its holdings of tle
capital stock of said Federal reservo bank and
bo released from its stock subscription not pre
viously called. In either case the shares, sur
rendered shall be canceled and the member bank:
shall receive In payment therefor, under regular
tions to be prescribed by the Federal Reserve
Board, a sum equal to its cash-paid subscrip
tions on the shares surrendered and one-half pf
one per centum a month from tho period of the
last dividend, not to exceed tho book value
thereof, less any liability of such member bank
to tho Federal reservo bank.
Sec. G. If any member bank shall bo declared
insolvent and a receiver appointed therefor, the
stock, held by it in said Federal reservo bank
shall be canceled, without Impairment of its
liability, and all cash-paid subscriptions on said
stock, with one-half of one per centum per
month from the period of last dividend, not to
exceed the book value thereof, shall be first ap
plied to all debts of the insolvent member bank
to the Federal reserve bank, and the balance, if
any, shall be paid to the receiver of the insolvent
bank. Whenever the capital stock of a Federal
reserve bank is reduced, either on account of a
reduction in capital stock of any member bank
or of tho liquidation or insolvency of such bank,
tho board of directors shall cause to be executed
a certificate to the Comptroller of the Currency
showing such reduction of capital stock and the
amount repaid to such bank.
DIVISION OF EARNINGS
Sec. 7. After all necessary expenses of a Fed
eral reserve bank have been paid or provided
for, the stockholders shall be entitled to receive
an annual dividend of six per centum on the
paid-in capital stock, which dividend shall do
cumulative. After the aforesaid dividend claims
have been fully met, all the net earning shall be
paid to the United States as a franchise tax, ex
cept that one-half of such net earnings shall be
paid into a surplus fund until it shall amount to
forty per centum of the paid-in capital stock of
such bank.
The net earnings derived by the United States
from Federal reserve banks shall, in tho discre
tion of the Secretary, be used to supplement the
gold reservo held against outstanding United
States notes, or shall be applied to the reduction
of the outstanding bonded indebtedness of the
United States under regulations to be prescribed
by the Secretary of the Treasury. Should a
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