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EXTENSION OR RENEWAL OF LOANS TO EXECUTIVE

OFFICERS OF BANKS

MARCH 30, 1938.-Referred to the House Calendar and ordered to be printed

Mr. STEAGALL, from the Committee on Banking and Currency,

submitted the following

REPORT

[To accompany S. 3400)

The Committee on Banking and Currency, to whom was referred the bill (S. 3400) to extend from June 16, 1938, to June 16, 1939, the period within which loans made prior to June 16, 1933, to executive officers of member banks of the Federal Reserve System may be renewed or extended, having considered the same, report favorably thereon and recommend that the bill do pass.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, existing law in which no change is made is printed in roman):

Subsection (g) of section 22 of the Federal Reserve Act, as amended,

(g) No executive officer of any member bank shall borrow from or otherwise become indebted to any member bank of which he is an executive officer, and no member bank shall make any loan or extend credit in any other manner to any of its own executive officers: Provided, That loans made to any such officer prior to June 16, 1933, may be renewed or extended for periods expiring not more than [five] siz years from such date where the board of directors of the member bank shall have satisfied themselves that such extension or renewal is in the best interest of the bank and that the officer indebted has made reasonable effort to reduce his obligation, these findings to be evidenced by resolution of the board of directors spread upon the minute book of the bank: Provided further, That with the prior approval of a majority of the entire board of directors, any member bank may extend credit to any executive officer thereof, and such officer may become indebted thereto, in an amount not exceeding $2,500. If any executive officer of any member bank borrow from or if he be or become indebted to any bank other than a member bank of which he is an executive officer, he shall make & written report to the board of directors of the member bank of which he is an executive officer, stating the date and amount of such loan or indebtedness, the security therefor, and the purpose for which the proceeds have been or are to be used. Borrowing by, or loaning to, a partnership in which one or more executive officers of a member bank are partners having either individually or together & majority interest in said partnership, shall be considered within the prohibition of this subsection. Nothing contained in this subsection shall prohibit any executive officer of a member bank from endorsing or guaranteeing for the protection of such bank any loan or other asset which shall have been previously acquired by such bank in good faith or from incurring any indebtedness to such bank for the purpose of protecting such bank against loss or giving financial assistance to it. The Board of Governors of the Federal Reserve System is authorized to define the term “executive officer”, to determine what shall be deemed to be a borrowing, indebtedness, loan, or extension of credit, for the purposes of this subsection, and to prescribe such rules and regulations as it may deem necessary to effectuate the provisions of this subsection in accordance with its purposes and to prevent evasions of such provisions. Any executive officer of a member bank accepting a loan or extension of credit which is in violation of the provisions of this subsection shall be subject to removal from office in the manner prescribed in section 30 of the Banking Act of 1933: Provided, That for each day that a loan or extension of credit made in violation of this subsection exists, it shall be deemed to be a continuation of such violation within the meaning of said section 30.

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RECONSTRUCTION FINANCE CORPORATION LOANS TO

PUBLIC AGENCIES AND BUSINESS ENTERPRISES

March 30, 1938.-Committed to the Committee of the Whole House on the

state of the Union and ordered to be printed

Mr. STEAGALL, from the Committee on Banking and Currency,

submitted the following

REPORT

(To accompany H. R. 10055)

The Committee on Banking and Currency, to whom was referred the bill (H. R. 10055) to amend section 5d of the Reconstruction Finance Corporation Act, as amended, to authorize loans to public agencies, to provide credit facilities for business enterprises, and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill, as amended, do pass.

The committee amendment strikes out all after the enacting clause and inserts in lieu thereof a substitute which reads as follows:

That section 5d of the Reconstruction Finance Corporation Act approved January 22, 1932, as amended (U. S. C., title 15, ch. 14), is amended to read as follows:

“Sec. 5d. For the purpose of maintaining and promoting the economic stability of the country or encouraging the employment of labor the Corporation is authorized and empowered, under such terms, conditions, and restrictions as the Corporation may determine, to make loans to, or contracts with, States, municipalities, and political subdivisions of States, with public agencies and instrumentalities of one or more States, municipalities, and political subdivisions of States, and with public corporations, boards, and commissions, to aid in financing projects authorized under Federal, State, or municipal law, such loans or contracts to be made through the purchase of their securities, or otherwise, and for such purpose the Corporation is authorized to bid for such securities. The Corporation is further authorized and empowered to purchase the securities and obligations of, and to make loans to, any business enterprise when capital or credit, at prevailing rates for the character of loan applied for, is not otherwise available: Provided, That all such purchases of securities and obligations and all such loans shall be, in the opinion of the board of directors, of such sound value, or so secured, as reasonably to assure retirement or repayment; may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate or by the purchase of participations, or otherwise; shall be made only when, in the opinion of the board of directors, the business enterprise is solvent; and shall be made under such terms, conditions, and restrictions as the Corporation may determine: Provided further, That in carrying out the provisions of this section, the Corporation may purchase securities and obligations, and may make loans, with such maturities as the Corporation may determine, notwithstanding any other provision of law.

"The powers granted to the corporation by this section shall terminate on June 30, 1939, or on such earlier date as the President shall determine; but no provision of law terminating any of the functions of the Corporation shall be construed (1) to prohibit disbursement of funds on purchases of securities and obligations, on loans, or on commitments or agreements to make such purchases or loans, made under this section prior to the close of business on June 30, 1939, or such earlier date, or (2) to affect the validity or performance of any agreement to participate in any purchase or loan authorized by this section."

The existing authority of the Corporation with regard to the making of industrial and commercial loans is supplemented by including among those eligible to borrow, States and their political subdivisions as well as other public agencies and bodies. This new purpose of financial assistance is effected by empowering the Corporation to purchase or make loans secured by the bonds or other obligations of the aforesaid classes of borrowers.

The provisions of the existing act with regard to disbursements and maturities of loans has been clarified, the limitation on the aggregate amount of loans which may be outstanding is removed, and it is stipulated that a termination of the activities of the Corporation will not prevent the performance of commitments or agreements theretofore made.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a, of rule XIII of the House Rules, changes in existing law made by the bill are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics):

Section 5d of the Reconstruction Finance Corporation Act, as amended:

[SEC. 5d. For the purpose of maintaining and increasing the employment of labor, when credit at prevailing bank rates for the character of loans applied for is not otherwise available at banks, the Corporation is authorized and empowered to make loans to any industrial or commercial business, which shall include the fishing industry, and to any institution, now or hereafter established, financing principally the sale of electrical, plumbing or air conditioning appliances or equipment or other household appliances, both urban and rural. Such loans shall, in the opinion of the board of directors of the Corporation, be so secured as reasonably to assure repayment of the loans, may be made directly, or in cooperation with banks or other lending institutions, or by the purchase of participations, shall mature not later than January 31, 1945, shall be made only when deemed to offer reasonable assurance of continued or increased employment of labor, shall be made only when, in the opinion of the board of directors of the Corporation, the borrower is solvent, shall not exceed $300,000,000 in aggregate amount at any one time outstanding, and shall be subject to such terms, conditions, and restrictions as the board of directors of the Corporation may determine.

The power to make loans given herein shall terminate on January 31, 1937, or on such earlier date as the President shall by proclamation fix; but no provision of law terminating any of the functions of the Corporation shall be construed to prohibit disbursements of funds on loans and commitments, or agreements to make loans, made under this section prior to January 31, 1937, or such earlier date.]

Sec. 5d. For the purpose of maintaining and promoting the economic stability of the country or encouraging the employment of labor, the Corporation is authorized and empowered to make loans to or contracts with States, municipalities, and political subdivisions of States, with public agencies and instrumentalities of one or more States, municipalities, and political subdivisions of Stales; and with public corporations, boards, and commissions, to aid in financing projects authorized under Federal, State, or municipal law, such loans or contracts to be made through the purchase of their securities, or otherwise, and for such purpose the Corporation is authorized to bid for such securities. The Corporation is further authorized and empowered to purchase the securities and obligations of, and to make loans to, any business enterprise when capital or credit, at prevailing rates for the character of loan applied for, is not otherwise available, such purchases or loans to be in the opinion of tke Board of Directors of such sound value or so secured as reasonably to assure retirement or repayment; may be made or effected either directly or in cooperation with banks or other lending institutions through agreements to participate or by the purchase of participations, or otherwise; shall be made only when, in the opinion of the Board of Directors of the Corporation, the borrower is solvent; and shall be subject to such terms, conditions, and restrictions as the Corporation may determine: Provided, That nothing herein contained shall be construed to prohibit the Corporation, in carrying out the provisions of this

paragraph, from purchasing securities or making loans with such maturities as the Corporation may determine, notwithstanding any other provision of law limiting the maturity of obligations taken by it.

The power to make loans and purchase obligations and securities given herein shall terminate in accordance with the provisions of section 1 of the Act approved January 26, 1937 (Public, Numbered 5, Seventy-fifth Congress): Provided, That no provision of law terminating any of the functions of the Corporation shall be construed to prohibit disbursement of funds on loans, purchases of obligations and securities, commitments or agreements to make such loans or purchases, made prior to the close of business on June 30, 1939, or such earlier date as the President may authorize: Provided further, That no provision of this section or any other provision of law shall affect the validity or performance of any agreement to participate."

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