reserve bank can only discount an amount of eligible paper of any one borrower not exceeding 10 per cent of the capital and surplus of the member bank. This section does not change the character of classes of eligible paper. If the paper is already eligible for discount and the national bank act considers it safe for a national bank to take it in certain stated amounts, it is considered by this section to be safe for the Federal reserve banks to rediscount it in the same amounts. The paper itself is considered liquid and in addition has the indorsement of the member bank upon it when presented for rediscount.

Section 15: This section simply adds an additional criminal provision providing for the punishment of a national-bank examiner who commits a theft from a bank examined by him.

Section 16: This section is a restatement of the existing law relative to loans by national banks upon the security of real estate. It broadens the powers of national banks as to the time limit of the loans upon city property but at the same time makes restrictions by way of definitions. At the present time a national-bank may make a loan upon first mortgage upon city property for a period not exceeding one year. This section increases this period to five years as a maximum. At the same time it defines a real-estate loan to be one with respect to which the bank takes the entire obligation at the time of making the loan. The purpose of this definition is to prevent the possibility of a bank from purchasing real-estate bonds under the guise of making loans upon the security of real estate. Such realestate bonds as may be purchased by a bank (should the comptroller determine that any such bonds are "investment securities") would be acquired under section 2 (b) of the bill.

The State banks and trust companies are authorized to make longtime loans upon the security of first mortgage upon city real estate. National banks, by being limited to a one-year period, have found themselves handicapped in meeting the demands of their customers in this respect. The section limits all such loans to an amount not exceeding one-half of the savings deposits in the bank, and thereby relates the real estate loan business to savings deposits. This is a logical connection. National banks have on deposit about $5,000,000,000 of savings deposits from about 11,000,000 depositors. This constitutes a large proportion of the entire savings business in the United States, and it has become necessary to recognize the right of a national bank with certain definite restrictions to use these funds in the same general manner in which the State banks and trust companies are using them, which includes the right to make loans upon city property, as provided above.

The enactment of this bill into law will put new life into the national banking system. The cumulative effect of its provisions will produce a situation in the Federal reserve system where the rights of the national banks will be more nearly on a par with those of the State member banks. When the Federal reserve act was amended to let State banks come into the Federal reserve system with their full charter powers, the national banks, operating under the old national bank act of 1864, found themselves, as compulsory members of the Federal reserve system, placed at a considerable disadvantage. Many of these State banks are operating under modern banking codes. The amendments which had heretofore

been made to the national bank act were not sufficient to enable the national banks to compete on terms of equality with such State member banks, while at the same time they were compelled by law to bear the chief burden in supporting the Federal reserve system.

The bill recognizes the absolute necessity of taking legislative action with reference to the branch banking controversy. The present situation is intolerable to the national banking system. The bill proposes the only practicable solution by stopping the further extension of state-wide branch banking in the Federal reserve system by State member banks and by permitting national banks to have branches in those cities where State banks are allowed to have them under State laws.

Your committee feels that the need for this legislation is even more urgent than it was during the last Congress and respectfully urges its passage.

Mr. PEPPER, from the Committee on Banking and Currency, submitted the following

REPORT

[To accompany H. R. 2]

The Committee on Banking and Currency, to whom was referred the bill (H. R. 2) to amend an act entitled "An act to provide for the consolidation of national banking associations," approved November 7, 1918; to amend section 5136 as amended, section 5137, section 5138 as amended, section 5142, section 5150, section 5155 section 5190, section 5200 as amended, section 5202 as amended, section 5208 as amended, section 5211 as amended, of the Revised Statutes of the United States; and to amend section 9, section 13, section 22, and section 24 of the Federal reserve act, and for other purposes, having considered the same, report it back to the Senate with the recommendation that the bill do pass with the amendments herewith indicated.

The bill is in many respects identical with S. 3316, favorably reported by your committee at the first session of the Sixty-eighth Congress, and H. R. 8887, favorably reported by your committee at the second session of the Sixty-eighth Congress.

COMMITTEE AMENDMENTS

Your committee, after public hearings by a subcommittee and after due deliberation, recommends the following amendments to the bill:

Proposed amendments to section 1:

On page 2, line 4, after the word "same" insert the word "State." On page 2, line 18, strike out the word "located" and insert the words "situated, and in the legal newspaper for the publication of legal notices or advertisements, if any such paper has been designated by the rules of a court in the county where such association or bank is situated."

On page 3, line 2, after the word "organized" strike out the colon and the words "Provided, That the" and substitute a period and insert the word "The" in said line.

On page 3, line 7, after the word "State" insert the words "or District.

On page 3, line 16, after the word "State" insert the words "or District.'

On page 3, line 17, after the word "association" strike out the colon and the words "And provided further, That when" and insert a period and the word "When" in line 18.

On page 3, line 20, after the word "State" insert the words "or District.'

On page 4, line 23, strike out the colon and insert a period after the word "determine," and in line 24, strike out the words "And provided further, That the" and insert the word "The" in said line.

On page 5, line 3, after the word "provided" strike out the colon and the words "And provided further, That no" and insert a period and the word "No" in said line.

On page 5, line 5, after the word "incorporated" strike out down to and including line 19 and insert a comma.

On page 5, line 5, after the word "incorporated" insert the following words: "nor shall any such State bank or banks entering into such consolidation be located at a greater distance from such national banking association than is authorized by the laws of the State in case of the consolidation or merger of two or more State banks." On page 5, at the end of section 1 insert the following:

The words "State bank," "State banks," "bank,” or “banks" as used in this section shall be held to include trust companies, savings banks, or other such corporations or institutions carrying on the banking business under the authority of State laws.

Proposed amendment to section 2:

On page 5, line 20, strike out the word "section" and insert the words "That section."

Proposed amendment to section 3:

On page 8, line 23, strike, out the word "section" and insert the words "That section."

Proposed amendment to section 4:

On page 9, line 3, strike out the word "section" and insert the words "That section."

On page 9, line 5, after the word "No" insert the words "national banking.

On page 9, line 6, strike out the word "banks" and insert the words "such associations."

On page 9, line 10, strike out the words "banks" and insert the words "such associations."

On page 9, line 13, after the word "No" insert the word "such." On page 9, line 17, after the word "city" strike out the word "banks" and insert the following: "where the State laws permit the organization of State banks with a capital of $100,000 or less, national banking associations."

Proposed amendment to section 6:

On page 10, line 24, strike out the word "section" and insert the words "That section."

Proposed amendments to section 7: