are divided among the Treasurer of the United States, the Comptroller of the Currency, and the Bureau of the Public Debt. The suggested amendment would simplify the procedure by clarifying and broadening the authority of the Secretary of the Treasury to allocate and discharge these duties in an effective manner. 3. Much of section 16 has remained unchanged since the original enactment of the Federal Reserve Act in 1913. Some of its provisions followed the analogy of the statutes relating to national bank notes, others were designed to assure the acceptance of Federal Reserve notes as a part of the currency. In a few respects the terminology of section 16 is inconsistent, or unclear, or repetitious. Without any material changes of substances, such defects could be corrected and the section thereby clarified. In addition, the sequence of various sentences and paragraphs of the section could be improved from the point of view of logical arrangement. Existing law 75. FEDERAL RESERVE BANK NOTES Section 18 of the Federal Reserve Act (12 U. S. C. 441-448) provides: "SEC. 18. After two years from the passage of this Act, and at any time during a period of twenty years thereafter, any member bank desiring to retire the whole or any part of its circulating notes, may file with the Treasurer of the United States an application to sell for its account, at par and accrued interest, United States bonds securing circulation to be retired. "The Treasurer shall, at the end of each quarterly period, furnish the Board of Governors of the Federal Reserve System with a list of such applications, and the Board of Governors of the Federal Reserve System may, in its discretion, require the Federal reserve banks to purchase such bonds from the banks whose applications have been filed with the Treaurer at least ten days before the end of any quarterly period at which the Board of Governors of the Federal Reserve System may direct the purchase to be made: Provided, That Federal reserve banks shall not be permitted to purchase an amount to exceed $25,000,000 of such bonds in any one year, and which amount shall include bonds acquired under section four of this Act by the Federal reserve bank. "Provided further, That the Board of Governors of the Federal Reserve System shall allot to each Federal reserve bank such proportion of such bonds as the capital and surplus of such bank shall bear to the aggregate capital and surplus of all the Federal reserve banks. "Upon notice from the Treasurer of the amount of bonds so sold for its account, each member bank shall duly assign and transfer, in writing, such bonds to the Federal reserve bank purchasing the same, and such Federal reserve bank shall, thereupon, deposit lawful money with the Treasurer of the United States for the purchase price of such bonds, and the Treasurer shall pay to the member bank selling such bonds any balance due after deducting a sufficient sum to redeem its outstanding notes secured by such bonds, which notes shall be canceled and permanently retired when redeemed. "The Federal reserve banks purchasing such bonds shall be permitted to take out an amount of circulating notes equal to the par value of such bonds. "Upon the deposit with the Treasurer of the United States, (a) of any direct obligations of the United States or (b) of any notes, drafts, bills of exchange, or bankers' acceptances acquired under the provisions of this Act, any Federal reserve bank making such deposit in the manner prescribed by the Secretary of the Treasury shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, duly registered and countersigned. When such circulating notes are issued against the security of obligations of the United States, the amount of such circulating notes shal lbe equal to the face value of the direct obligations of the United States so deposited as security; and, when issued against the security of notes, drafts, bills of exchange and bankers' acceptances acquired under the provisions of this Act, the amount thereof shall be equal to not more than 90 percent of the estimated value of such notes, drafts, bills of exchange and bankers' acceptances so deposited as security. Such notes shall be the obligations of the Federal reserve bank procuring the same, shall be in form prescribed by the Secretary of the Treasury, shall be receivable at par in all parts of the United States for the same purposes as are national bank notes, and shall be redeemable in lawful money of the United States on presentation at the United States Treasury or at the bank of issue. The Secretary of the Treasury is authorized and empowered to prescribe regulations governing the issuance, redemption, replacement, retirement and destruction of such circulating notes and the release and substitution of security therefor. Such circulating notes shall be subject to the same tax as is provided by law for the circulating notes of national banks secured by 2 per cent bonds of the United States. No such circulating notes shall be issued under this paragraph after the President has declared by proclamation that the emergency recognized by the President by proclamation of March 6, 1933, has terminated, unless such circulating notes are secured by deposits of bonds of the United States bearing the circulation privilege. When required to do so by the Secretary of the Treasury, each Federal reserve agent shall act as agent of the Treasurer of the United States or of the Comptroller of the Currency, or both, for the performance of any of the functions which the Treasurer or the Comptroller may be called upon to perform in carrying out the provisions of this paragraph. Appropriations available for distinctive paper and printing United States currency or national bank currency are hereby made available for the production of the circulating notes of Federal reserve banks herein provided; but the United States shall be reimbursed by the Federal reserve bank to which such notes are issued for all expenses necessarily incurred in connection with the procuring of such notes and all other expenses incidental to their issue, redemption, replacement, retirement and destruction. "Upon application of any Federal reserve bank, approved by the Board of Governors of the Federal Reserve System, the Secretary of the Treasury may issue, in exchange for United States two per centum gold bonds bearing the circulation privilege, but against which no circulation is outstanding, one-year gold notes of the United States without the circulation privilege, to an amount not to exceed one-half of the two per centum bonds so tendered for exchange, and thirty 83668-56-8 year three per centum gold bonds without the circulation privilege for the remainder of the two per centum bonds so tendered: Provided, That at the time of such exchange the Federal reserve bank obtaining such one-year gold notes shall enter into an obligation with the Secretary of the Treasury binding itself to purchase from the United States for gold at the maturity of such one-year notes, an amount equal to those delivered in exchange for such bonds, if so requested by the Secretary, and at each maturity of one-year notes so purchased by such Federal reserve bank, to purchase from the United States such an amount of one-year notes as the Secretary may tender to such bank, not to exceed the amount issued to such bank in the first instance, in exchange for the two per centum United States gold bonds; said obligation to purchase at maturity such notes shall continue in force for a period not to exceed thirty years. "For the purpose of making the exchange herein provided for, the Secretary of the Treasury is authorized to issue at par Treasury notes in coupon or registered form as he may prescribe in denominations of one hundred dollars, or any multiple thereof, bearing interest at the rate of three per centum per annum, payable quarterly, such Treasury notes to be payable not more than one year from the date of their issue in gold coin of the present standard value, and to be exempt as to principal and interest from the payment of all taxes and duties of the United States except as provided by this Act, as well as from taxes in any form by or under State, municipal, or local authorities. And for the same purpose, the Secretary is authorized and empowered to issue United States gold bonds at par, bearing three per centum interest payable thirty years from date of issue, such bonds to be of the same general tenor and effect and to be issued under the same general terms and conditions as the United States three per centum bonds without the circulation privilege now issued and outstanding. "Upon application of any Federal reserve bank, approved by the Board of Governors of the Federal Reserve System, the Secretary may issue at par such three per centum bonds in exchange for the one-year gold notes herein provided for." The fourth paragraph of section 4 of the Federal Reserve Act (12 U. S. C. 341) provides that each Federal Reserve bank shall have power "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 the same conditions and provisions of law as relate to the issue of circulating notes of national banks secured by bonds of the United States bearing the circulating privilege, except that the issue of such notes shall not be limited to the capital stock of such Federal reserve bank." Recommendation An amendment to repeal subparagraph "Eighth" of the fourth paragraph of section 4 of the Federal Reserve Act and all of section 18 of the Federal Reserve Act, relating to the issuance of Federal Reserve banknotes and exchanges of United States bonds bearing the "circulation privilege." Reasons All of the provisions of section 18 of the Federal Reserve Act are now obsolete. The first 4 paragraphs, by reason of the time limitation contained in the first paragraph, expired by their terms on December 23, 1935. The fifth paragraph of the section authorizing Federal Reserve banks to issue circulating notes (Federal Reserve banknotes) against the bonds purchased by them pursuant to this section has likewise become obsolete because of expiration of the authority to purchase such bonds. All authority contained in the sixth paragraph of section 18, as amended in 1933, with respect to the issuance of Federal Reserve banknotes against obligations of the United States and certain other types of paper, was repealed by act of June 12, 1945. The seventh, eighth, and ninth paragraphs of section 18 provide for the exchange of United States 2-percent gold bonds bearing the circulation privilege for either 1-year gold notes, or 30-year 3-percent gold bonds, and for the exchange of 1-year notes, for 3-percent bonds. However, in 1935, the Secretary of the Treasury called for redemption all bonds bearing the circulation privilege of the kinds mentioned in this section; and consequently the provisions of these paragraphs appear to be no longer of any significance. The authorization for the issuance of notes against United States bonds in the fourth paragraph of section 4 of the act is likewise of no present significance and should be repealed. 76. OBSOLETE PROVISION REGARDING RESERVE REQUIREMENTS Existing law By act of Congress, approved August 16, 1948 (62 Stat. 1291; not in U. S. Code), the following paragraph was inserted in section 19 of the Federal Reserve Act after the sixth paragraph thereof: "Notwithstanding any other provision of law, the Board of Governors of the Federal Reserve System, in order to prevent injurious credit expansion, may by regulation change the requirements as to reserves to be maintained pursuant to this section against demand or time deposits or both (1) by member banks in central reserve cities, or (2) by member banks in reserve cities, or (3) by member banks not in reserve or central reserve cities, or (4) by all members banks; but no such change shall have the effect of requiring any such member bank to maintain a reserve balance against its time deposits in an amount equal to more than 712 per centum thereof, or a reserve balance against its demand deposits in an amount equal to more than 30 per centum thereof if such bank is in a central reserve city, 24 per centum thereof if in a reserve city, or 18 per centum thereof if not in a reserve or central reserve city. No change in reserve requirements made under authority of this paragraph shall continue in effect after June 30, 1949." Recommendation An amendment to repeal this provision of law. Reasons This paragraph is obsolete as the statute expressly provides that any change in reserve requirements made under authority of this statute shall not continue in effect after June 30, 1949. As this date has passed, the statute has no current or future effect. The permanent authority for changes in reserve requirements by the Board, subject to certain limitations, which is contained in the sixth paragraph of section 19 (12 U. S. C. 462b), would not be affected by this recommendation. Existing law 77. PAYMENT OF INTEREST ON DEPOSITS The 12th paragraph of section 19 of the Federal Reserve Act (12 U. S. C. 371a), with certain exceptions, provides that "No member bank shall, directly or indirectly, by any device whatsoever, pay any interest on any deposit which is payable on demand." The 13th paragraph of section 19 of the Federal Reserve Act (12 U. S. C. 3716) provides in part that "The Board of Governors of the Federal Reserve System shall from time to time limit by regulation the rate of interest which may be paid by member banks on time and savings deposits ***** The first paragraph of section 19 of the Federal Reserve Act (12 U. S. C. 461) provides in part that "The Board of Governors of the Federal Reserve System is authorized for the purposes of this section *** to determine what shall be deemed to be a payment of interest, and to prescribe such rules and regulations as it may deem necessary to effectuate the purposes of this section and prevent evasions thereof * * *” Section 18 (g) of the Federal Deposit Insurance Act (12 U. S. C. 1828 (g)) provides in part "The Board of Directors shall by regulation prohibit the payment. of interest on demand deposits in insured nonmember banks and for such purpose it may define the term 'demand deposits'; but such exceptions from this prohibition shall be made as are now or may hereafter be prescribed with respect to deposits payable on demand in member banks by section 19 of the Federal Reserve Act, as amended, or by regulation of the Board of Governors of the Federal Reserve System. The Board of Directors shall from time to time limit by regulation the rates of interest or dividends which may be paid by insured nonmember banks on time and savings deposits, ***" Recommendation Amendments to section 19 of the Federal Reserve Act to eliminate the words "directly or indirectly by any device whatsoever" from the language prohibiting interest on demand deposits and to make it clear that the term "interest" shall include only cash payments made, or credits given, by a bank for the account or benefit of a depositor; together with an appropriate amendment to make certain that the same limitations as to payment of interest shall apply to both member and nonmember insured banks, either by an explicit statement in the law as to both types of banks as to whether absorption of exchange charges shall be deemed a payment of interest, or by a provision authorizing either the Board of Governors or the Federal Deposit |