drawn up by them and in their own language; that the Indians, on the other hand, are a weak and dependent people, who have no written language and are wholly unfamiliar with all the forms of legal expression, and whose only knowledge of the terms in which the treaty is framed is that imparted to them by the interpreter employed by the United States; and that the treaty must therefore be construed, not acccording to the technical meaning of its words to learned lawyers, but in the sense in which they would naturally be understood by the Indians.

As this is the only instance in history where Indian lands have been sold by the United States and the proceeds used for the benefit of other Indian tribes, as the Osage Indians clearly understood they were to have full benefit of the moneys received from such sales, and as the amount diverted by the United States is clearly established at the sum named in H. R. 6682, your committee believes that equity and fair dealing with the Indians demand that the United States reimburse the Osage Indians in that sum.

The Commissioner of Indian Affairs and other officials personally appeared before the committee and manifested their approval of this proposed legislation. The Secretary of the Interior, under date of March 26, 1935, addressed a communication to Hon. Will Rogers, chairman of the committee, favoring the appropriation but advises that it is in conflict with the President's financial program. A measure identical with this proposed legislation was passed by the House of Representatives at the second session of the Seventy-third Congress, and the identical measure, S. 2375, was passed by the Senate on April 15, 1935.

BANKING ACT OF 1935

APRIL 19, 1935.-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. 7617]

The Committee on Banking and Currency, to whom was referred the bill (H. R. 7617) to provide for the sound, effective, and uninterrupted operation of the banking system, and for other purposes having considered the same, report favorably thereon and recommend that the bill do pass.

GENERAL STATEMENT

Title I of the bill deals with Federal deposit insurance and places it on a permanent basis by consolidating the temporary Federal deposit insurance fund and the fund for mutuals into the permanent insurance fund for deposits, operative immediately upon enactment of the title.

Title II contains certain amendments to the Federal Reserve Act. The fundamental purposes of these amendments are as follows:

1. To increase the ability of the banking system to promote stability of employment and business, insofar as this is possible within the scope of monetary action and credit administration.

2. To concentrate the authority and responsibility for the formulation of national monetary policy in a body representing the general public interest.

3. To modify the structure of the Federal Reserve System to the extent necessary for the accomplishment of these purposes, but without interfering with regional autonomy in matters of local concern. 4. To relieve the banks of the country of unnecessary and hampering restrictions, and thus enable them to meet the credit needs of their communities more adequately and contribute more effectively to the acceleration of recovery.

Title III consists of a number of technical amendments to the National Bank Act, the Federal Reserve Act, the Banking Act of

1933, and related statutes. These amendments make no fundamental changes in the existing banking laws but are designed to improve and facilitate the administration of these laws by eliminating unnecessary inconveniences and hardships and by revising certain provisions which have been found difficult to administer in their present form. There follows a summary of the bill by titles.

TITLE I. FEDERAL DEPOSIT INSURANCE

Through the existing insurance in more than 14,000 of our 15,000 banks, there is universal justified confidence among the depositors in insured banks and the provisions in title I will place Federal deposit insurance on a permanent basis by consolidating the te nporary Federal deposit insurance fund and the fund for mutuals into the permanent insurance fund for deposits, operative immediately upon the enactment of the title (subdivision 12).

It has now been reliably determined that the $5,000 maximum insurance protection to each depositor insures in full the deposits of more than 98 percent of the depositors in insured banks and the committee has been impressed that it is neither necessary nor expedient at this time to increase the insured deposit liability carried by the Federal Deposit Insurance Corporation to give added protection to the remaining one and a fraction percent of the bank depositors. Consequently, the provisions of title I (subdivision 12) continue hereafter the present maximum insurance protection of $5,000 to each depositor and repeal the existing provisions of law which call for insurance of larger amounts after July 1, 1935.

It has also been determined by the committee that insurance assessments, based upon the insured deposit liability alone, place too large a burden upon small banking institutions, especially when reasonable regard is given to the necessity for general safety in the banking structure and to the comparative benefits. Adequate funds can be supplied to provide sound insurance with a lower original rate of levy than that provided in the Banking Act of 1933, and without subjecting the insured banks to unlimited liability for assessments. Title I (subdivision 8) therefore provides that insured banks shall pay an annual assessment of one-eighth of 1 percent payable in two installments, upon total deposit liabilities, without liability for added assessments, and repeals the provision of existing law requiring an assessment on July 1, 1935, of one-fourth of 1 percent upon total deposit liabilities as the purchase price of class A stock, with unlimited liability for subsequent assessments as needed. Under the annual assessment plan of title I a reserve fund will be gradually amassed to provide against periods when the Corporation might be called upon to pay large amounts of insured deposit liabilities.

The Corporation has received as capital funds approximately $290,000,000 from the sale of its stock to the United States and to the Federal Reserve banks. The Corporation is relieved of all requirements calling for the paying of dividends on any stock issued by it. In addition to these capital funds and the annual assessments to be paid by insured banks, provision is made, in case of need, for making available to the Corporation added funds from the sale of its obligations up to the extent of more than a billion dollars. These obliga

tions to be sold by the Corporation may be guaranteed as to principal and interest by the Government of the United States.

Title I continues the feature of the Banking Act of 1933 that it is compulsory for all member banks of the Federal Reserve System to be insured banks.

The right of nonmember banks, which voluntarily had their deposits insured for the temporary period, to terminate their relationship with the Corporation as of July 1, 1935, is preserved, but nonmember banks seeking to so terminate their insurance are required to give notice to their depositors, to the Corporation and, in certain instances, to the Reconstruction Finance Corporation (subdivision 9). This is required in the interest of fairness to their depositors, as well as to the Corporation and the Reconstruction Finance Corporation.

Title I makes it possible for the Corporation to be advised at all times of the elements affecting its insurance hazard and gives means to reasonably protect the funds against the consequences of unsound or dangerous practices on the part of insured banks. Title I makes available to the Corporation all of the reports of examinations made to the Comptroller of the Currency and to the Federal Reserve Board and it requires the Corporation to examine nonmember insured banks. With the consent of the Comptroller of the Currency or the Federal Reserve Board, the examiners of the Corporation may examine National or State member banks. The Corporation is authorized to terminate the insurance in any bank which persists in unsound practices, giving adequate protection to the depositors, however, for a reasonable time thereafter. No bank is permitted to continue as a member bank of the Federal Reserve System after its insurance has been terminated.

Under the existing law, every bank must become or apply to become a member bank of the Federal Reserve System by July 1, 1937, in order to continue as an insured bank after that date. More than 7,500 insured banks are not now members of the Federal Reserve System. The committee, after careful consideration of the factors involved, has come to the conclusion that membership in the Federal Reserve System, however desirable it may be from the viewpoint of bringing about a unified banking system, should not be rendered practically compulsory by requiring insured banks to either join the System or terminate their insurance. The committee has therefore eliminated this requirement of existing law.

Under the present law, where the Corporation makes an insurance payment to a depositor in a closed bank, it is subrogated to the entire claim of the depositor, even though he has more than $5,000, and it is given the right to collect dividends up to $5,000, after which the residue is paid over to the depositor. Under title I the subrogation right of the Corporation would extend only to such dividends as would have been payable to the depositor on a claim for the insured deposit. The Corporation is given authority to regulate interest payable by nonmember insured banks on deposits similar to the authority the Federal Reserve Board now exercises in regulating interest payable by member banks on deposits. The Corporation may prescribe different rates for different classes of banks or different classes of deposits, subject to the requirement that the rates fixed must be reasonable.