’FULL TEXT: The Glass-Steagall Act a.k.a. The Banking Act of 1933’
22 January 2009
FEDERAL RESERVE BANK OF NEW YORK
Circular No. 1248 "1
BANKING ACT OF 1933
To all Member Banks in the Second Federal Reserve District:
For your information we enclose a copy of the Banking Act of 1933, approved June 16, 1933, commonly known as the Glass Act.
We enclose also a copy of a summary of the principal provisions of that act. This is intended merely as a summary of the law and not as an interpretation thereof or commentary thereon.
George L. Harrison,
[Public — No. 66 — 73d Congress]
To provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled* That the short title of this Act shall be the " Banking Act of 1933."
Sec. 2. As used in this Act and in any provision of law amended by this Act —
(1) Of which a member bank, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 per centum of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election, or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions; or
(2) Of which control is held, directly or indirectly, through stock ownership or in any other manner, by the shareholders of a member bank who own or control either a majority of the share3 of such bank or more than 50 per centum of the number of shares voted for the election of directors of such bank at the preceding election, or by trustees for the benefit of the shareholders of any such bank; or
(3) Of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one member bank.
(1) Which owns or controls, directly or indirectly, either a majority of the shares of capital stock of a member bank or more than 50 per centum of the number of shares voted for the election of directors of any one bank at the preceding election, or controls in any manner the election of a majority of the directors of any one bank; or
(2) For the benefit of whose shareholders or members all or substantially all the capital stock of a member bank is held by trustees.
2 [Pub. 66.]
Sec. 3. (a) The fourth paragraph after paragraph " Eighth " of section 4 of the Federal Reserve Act, as amended (U.S.C., title 12, sec. 301), is amended to read as follows:
" Said board of directors shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and may, subject to the provi- sions of law and the orders of the Federal Reserve Board, extend to each member bank such discounts, advancements, and accommoda- tions as may be safely and reasonably made with due regard for the claims and demands of other member banks, the maintenance of sound credit conditions, and the accommodation of commerce, indus- try, and agriculture. The Federal Reserve Board may prescribe regulations further defining within the limitations of this Act the ’conditions under which discounts, advancements, and the accommo- ’dations may be extended to member banks. Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the mainte- nance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts or other credit accommodations, the Federal reserve bank shall give consideration to such informa- tion. The chairman of the Federal reserve bank shall report to the Federal Reserve Board any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Federal Reserve Board, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time."
Sec. 4. The first paragraph of section 7 of the Federal Reserve Act, as amended (U.S.C., title 12, sec. 289), is amended, effective July 1, 1932, to read as follows :
"After all necessary expenses of a Federal reserve bank shall have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of 6 per centum on the paid-in capital stock, which dividend shall be cumulative. After the aforesaid dividend claims have been fully met, the net earnings shall be paid into the surplus fund of the Federal reserve bank."
Sec. 5. (a) The first paragraph of section 9 of the Federal Reserve I Act, as amended (U.S.C., title 12, sec. 321 ; Supp. VI, title 12, sec. 821), is amended by inserting immediately after the words "United
States " a comma and the following : " including Morris Plan banks and other incorporated banking institutions engaged in similar business."