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Ward, Harry E--
CREATION OF A RECONSTRUCTION FINANCE
FRIDAY, DECEMBER 18, 1931
UNITED STATES SENATE,
Washington, D. C. The subcommittee met, pursuant to call, at 3.30 o'clock p. m., in the committee room, Senator Walcott presiding.
Present: Senators Walcott (chairman of subcommittee), Norbeck, Brookhart, Townsend, Fletcher, and Glass.
Present also : Senators Moses, Watson, Robinson, and Blaine.
Senator WALCOTT (presiding). The subcommittee will come to order. We have under consideration S. 1, a bill to provide emergency financing facilities for banks and other financial institutions, and other purposes.
(The bill is as follows:).
[S. 1, Seventy-second Congress, first session]
A BILL To provide emergency financing facilities for banks and other financial institu
tions, and other purposes
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there be, and is hereby, created a body corporate with the name “ Reconstruction Finance Corporation " (herein called the corporation). This act may be cited as the “reconstruction finance corporation act."
SEC. 2. The corporation shall have capital stock of $500,000,000, all subscribed by the United States of America, payment for which shall be subject to call in whole or in part by the board of directors of the corporation, with the approval of the Secretary of the Treasury, at such time or times as may be deemed advisable. There is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, the sum of $500,000,000, for the purpose of making payments upon such subscription when and as called. Receipts for payments by the United States of America for or on account of such stock shall be issued by the corporation to the Secretary of the Treasury and shall be evidence of the stock ownership of the United States of America.
SEC. 3. The management of the corporation shall be vested in a board of directors consisting of the Secretary of the Treasury, the governor of the Federal Reserve Board, and the farm loan commissioner, who shall be members ex officio, and two other persons appointed by the President of the United States, by and with the advice and consent of the Senate. Each director shall devote his time not otherwise required by the business of the United States principally to the business of the corporation. Before entering upon his duties each of the two directors so appointed and each officer of the corporation shall take an oath faithfully to discharge the duties of his office. Nothing contained in this or in any other act shall be construed to prevent the appointment and compensation as a director, officer, or employee of the corporation of any officer or employee of the United States in any board, commission, independent establishment, or executive department thereof. The terms of the two directors so appointed by the President of the United States shall be five years from
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the date of the enactment hereof, and thereafter the term of each director so appointed shall be five years from the date of the expiration of the term for which his predecessor was appointed. Whenever a vacancy shall occur among the directors so appointed the person appointed to fill such vacancy shall hold office for the unexpired portion of the term of the director whose place he is selected to fill. The two directors of the corporation appointed as hereinbefore provided shall receive salaries at the rate of $12,000 per annum each: Provided, That any director receiving from the United States any salary or compensation for other services shall not receive as salary from the corporation any amount which, together with any salary or compensation received from the United States, would make the total amount paid to him by the United States and by the corporation exceed $12,000 per annum.
SEC. 4. The corporation shall have succession for a period of ten years years from the date of the enactment hereof, unless it is sooner dissolved by an act of Congress. It shall have power to adopt, alter, and use a corporate seal; to make contracts, to purchase or lease and hold or dispose of such real estate as may be necessary or convenient for the transaction of its business; to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal; to select, employ, and fix the compensation of such officers, employees, attorneys, and agents as shall be necessary for the transaction of the business of the corporation, without regard to the provisions of other laws applicable to the employment and compensation of officers or employees of the United States; to define their authority and duties, require bonds of them and fix the penalties thereof, and to dismiss at pleasure such officers, employees, attorneys, and agents; and to prescribe, amend, and repeal, by its board of directors, by-laws, rules, and regulations governing the manner in which its general business may be conducted and the powers granted to it by law may be exercised and enjoyed, including the selection of its chairman and vice chairman, together with provision for such committees and the functions thereof as the board of directors may deem necessary for facilitating its business under this act. The board of directors of the corporation shall determine and prescribe the manner in which its obligations shall be incurred and its expenses allowed and paid. The corporation shall be entitled to the free use of the United States mails in the same manner as the executive departments of the Government. The corporation, with the consent of any board, commission, independent establishment, or executiye department of the Government, including any field service thereof, may avail itself of the use of information, services, facilities, officers and employees thereof in carrying out the provisions of this act. The corporation shall have such incidental powers as its board of directors shall deem necessary or expedient in carrying out the provisions of this act.
SEC. 5. The corporation is authorized and empowered to make loans, upon such terms and conditions not inconsistent with this act as it may determine, to any bank, banker, savings bank, trust company, clearing house or other association of banking institutions, building and loan association, insurance company or other financial institution in the United States (herein referred to as financial institutions). All such loans shall be fully and adequately secured in such manner as the corporation shall require. The corporation, under such conditions as it shall prescribed, may take over or provide for the administration and liquidation of any collateral accepted by it as security for such loans. Such loans may be made directly upon promissory notes of such financial insti. tutions, or by way of discount or rediscount of obligations tendered by them for the purpose, or otherwise, in such form and in such amount and at such interest or discount rates as the corporation may approve. Each such loan may be made for a period not exceeding three years, and the corporation may from time to time extend the time of payment of any such loan, through renewal, substitution of new obligations, or otherwise, but the time for such payment shall not be extended beyond five years from the date upon which such loan was made originally. The corporation may make loans under this section at any time prior to the expiration of one year from the date of the enactment hereof; and the President may from time to time postpone such date of expiration for such additional period or periods as he may deem necessary, not to exceed two years from the date of the enactment hereof. Within the foregoing limitations of this section, the corporation may also make loans to or aid in the temporary financing of steam railroads engaged in interstate commerce, when in the opinion of the board of directors of the corporation such railroads are unable to obtain funds upon reasonable terms through banking channels or from the general public and the corporation will be adequately secured.
SEC. 6. Section 5202 of the Revised Statutes of the United States, as amended (U. S. C., title 12, ch. 2, sec. 82), is hereby amended by striking out the words “ war finance corporation act” and inserting in lieu thereof the words “reconstruction finance corporation act." · SEC. 7. All moneys of the corporation not otherwise employed may be deposited with the Treasurer of the United States subject to check by authority of the corporation or in any Federal reserve bank, or may, by authorization of the board of directors of the corporation, be used in the purchase or redemption of any notes, debentures, bonds, or other obligations issued by the corpo. ration. The Federal reserve banks are authorized and directed to act as depositaries, custodians and/or fiscal agents for the reconstruction finance corporation in the general performance of its powers conferred by this act.
SEC. 8. In order to enable the corporation to carry out the provisions of this act the Treasury Department, the Comptroller of the Currency, the Federal Reserve Board, the Federal reserve banks and the Interstate Commerce Commission are hereby authorized, under such conditions as they may prescribe, to make available to the corporation in confidence such reports, records, or other information as they may have available relating to the conditions of financial institutions and/or railroads with respect to which the corporation has had or contemplates having transactions under this act, or relating to individuals, associations, partnerships, or corporations whose obligations are offered to or held by the corporations as security for loans to financial institutions or railroads under this act, and to make through their examiners or other employees for the confidential use of the corporation examinations of such financial institutions or railroads. Every applicant for a loan under this act shall, as a condition precedent thereto, consent to such examinations as the corporation may require for the purposes of this act and/or that reports of examinations by constituted authorities may be furnished by such authorities to the corporation upon request therefor.
SEC. 9. The corporation is authorized and empowered, with the approval of the Secretary of the Treasury, to issue, and to have outstanding at any one time in an amount aggregating not more than three times its subscribed capital, its notes, debentures, bonds, or other such obligations; such obligations to mature not more than five years from their respective dates of issue, to be redeemable at the option of the corporation before maturity in such manner as may be stipulated in such obligations, and to bear such rate or rates of interest as may be determined by the corporation: Provided, That the corporation, with the approval of the Secretary of the Treasury, may sell on a discount basis short-term obligations payable at maturity without interest. The notes, debentures, bonds, and other obligations of the corporation may be secured by assets of the corporation in such manner as shall be prescribed by its board of directors. Such obligations may be issued in payment of any loan authorized by this act or may be offered for sale at such price or prices as the corporation may determine with the approval of the Secretary of the Treasury. In the event that the corporation shall be unable to pay upon demand, when due, the principal of or interest on notes, debentures, bonds, or other such obligations issued by it, the Secretary of the Treasury shall pay the amount thereof, which is hereby authorized to be appropriated, out of any moneys in the Treasury not otherwise appropriated, and thereupon to the extent of the amounts so paid the Secretary of the Treasury shall succeed to all the rights of the holders of such notes, debentures, bonds, or other obligations. The Federal Reserve Banks shall have the same powers (1) to discount notes, drafts, and bills of exchange secured by obligations issued by the corporation under this act, (2) to make advances to member banks on their notes secured by such obligations, (3) to use all paper so acquired, and (4) to purchase and sell such obligations, as they have with respect to bonds and/or notes of the United States: Provided, That the rate at which such discount or advance shall be made by any Federal reserve bank shall be 1 per centum per annum above its discount rate on ninety-day commercial paper then in effect.
SEC. 10. Any and all notes, debentures, bonds, or other such obligations issued by the corporation shall be exempt both as to principal and interest from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The corporation, including its franchise, its capital, reserves, and surplus, and its income shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or