89–006 

115TH CONGRESS REPT. 115–1116 " ! HOUSE OF REPRESENTATIVES 2d Session Part 1 

FEDERAL RESERVE REFORM ACT OF 2018 

JANUARY 2, 2019.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 6741] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 6741) to amend the Federal Reserve Act to increase monetary policy transparency and accountability and to make reforms 

to the Federal Reserve System, and for other purposes, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Federal Reserve Reform Act of 

2018’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Monetary policy transparency and accountability. 

Sec. 3. Independence from credit policy. 

Sec. 4. Congressional accountability for emergency lending programs. 

Sec. 5. Interest rates on balances maintained at a Federal Reserve Bank by depository institutions established 

by Federal Open Market Committee. 

Sec. 6. Membership of Federal Open Market Committee. 

Sec. 7. Bringing the non-monetary policy related functions of the Board of Governors of the Federal Reserve 

System into the appropriations process. 

Sec. 8. Amendment to appointment of presidents of Federal Reserve Banks. 

Sec. 9. Federal Open Market Committee blackout period. 

Sec. 10. Salaries, financial disclosures, and office staff of the Board of Governors of the Federal Reserve System. 

Sec. 11. Vice Chairman for Supervision report requirement. 

SEC. 2. MONETARY POLICY TRANSPARENCY AND ACCOUNTABILITY. 

Section 12A of the Federal Reserve Act (12 U.S.C. 263) is amended— 

(1) by redesignating subsections (b) and (c) as subsections (d) and (e), respectively; and 

(2) by inserting after subsection (a) the following new subsections: 


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‘‘(b) POLICY TRANSPARENCY.— 

‘‘(1) MONETARY POLICY STRATEGY.— 

‘‘(A) IN GENERAL.—The Committee shall annually establish exactly 1 

monetary policy strategy, which shall serve as a non-technical public communication of the Committee’s consensus expectation for the conduct of 

monetary policy during that calendar year. 

‘‘(B) REQUIREMENTS.—Each monetary policy strategy of the Committee 

shall include the following: 

‘‘(i) A plain English description of how the Committee would adjust 

each of the following monetary policy instruments in reaction to 

changes in a small and well-defined set of publicly available economic 

indicators: 

‘‘(I) Short-term interest rate targets established by the Committee. 

‘‘(II) Open-market operations authorized under section 14. 

‘‘(III) Earnings on balances maintained at a Federal reserve bank 

by or on behalf of a depository institution under section 19(b)(12). 

‘‘(ii) An identification of 1 monetary policy instrument from the list 

in clause (i) that the Committee expects to use as the primary instrument for implementing the monetary policy strategy described under 

subparagraph (A). 

‘‘(2) REFERENCE MONETARY POLICY RULES.—In addition to the monetary policy 

strategy required under paragraph (1), the Committee shall annually adopt at 

least 1 and not more than 3 reference monetary policy rules, each of which shall 

mathematically express how the primary monetary policy instrument identified 

under paragraph (1)(B)(ii) reacts to changes in a small and well-defined set of 

publicly available economic indicators. 

‘‘(3) DEVIATIONS.—Nothing in this subsection shall be construed to prevent 

the Committee from setting short-term interest rate targets, conducting openmarket operations, or paying earnings on balances pursuant to section 19(b)(12) 

in a manner that deviates from a monetary policy strategy or any reference 

monetary policy rules established under this subsection. 

‘‘(c) TESTIMONY AND REPORTS OF THE CHAIRMAN.—The Chairman shall, concurrent 

with each semi-annual hearing required under section 2B, submit a report to the 

Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking and Financial Services of the House of Representatives, containing— 

‘‘(1) a statement as to whether the monetary policy strategy established under 

subsection (b)(1) qualitatively differs from any of the reference monetary policy 

rules required under subsection (b)(2) and, if applicable, a full and non-technical 

explanation of any such difference; 

‘‘(2) a statement as to whether the Committee’s conduct of monetary policy 

since the previous report quantitatively differs from any reference monetary policy rule and, if applicable, a full and non-technical explanation of any such differences; and 

‘‘(3) a description of— 

‘‘(A) the circumstances under which the Committee’s monetary policy 

strategy may be amended from year to year; and 

‘‘(B) a full and non-technical explanation of any such actual amendment.’’. 

SEC. 3. INDEPENDENCE FROM CREDIT POLICY. 

(a) RETURNING TO A MONETARY POLICY BALANCE SHEET.— 

(1) IN GENERAL.—Not later than 1 year after the date of the enactment of this 

Act— 

(A) the Board of Governors of the Federal Reserve System shall transfer 

to the Department of the Treasury all covered assets that are neither gold 

stock, Treasury currency, nor direct obligations of the United States, foreign central banks, or the International Monetary Fund; and 

(B) the Secretary of the Treasury shall transfer to the Federal reserve 

banks direct obligations of the United States of equivalent market value to 

such covered assets. 

(2) COVERED ASSETS DEFINED.—In this subsection, the term ‘‘covered assets’’ 

means all assets— 

(A) purchased through open-market operations by the Federal reserve 

banks; or 

(B) acquired through transactions under the following sections of the Federal Reserve Act (12 U.S.C. 221 et seq.): 

(i) Section 10A before the date of the enactment of this Act. 

(ii) Section 10B. 


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(iii) Section 13. 

(iv) Section 13A. 

(v) Section 24. 

(b) OPEN MARKET ASSET PURCHASES.—Section 14(b) (12 U.S.C. 355) of the Federal 

Reserve Act (relating to ‘‘Purchase and sale of obligations of United States, States, 

counties, etc.’’) is amended to read as follows: 

‘‘(b) To buy and sell in the open market, at home or abroad, under the direction 

and regulations of the Federal Open Market Committee, gold stock, Treasury currency, or direct obligations of the United States, foreign central banks, or the International Monetary Fund. Nothing in this subsection shall be construed to limit advances under section 10B, or discount loans under sections 13, 13A, or 24.’’. 

(c) MAINTAINING A MONETARY POLICY BALANCE SHEET.— 

(1) ASSETS ACQUIRED UNDER EMERGENCY LENDING.—Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)) is amended by adding at the end the following new subparagraph: 

‘‘(F) Not later than 1 year after a Federal reserve bank acquires any assets under this paragraph that are neither gold nor direct obligations of the 

United States, foreign central banks, or the International Monetary Fund— 

‘‘(i) the Board shall transfer such assets of the Federal reserve bank 

to the Department of the Treasury; and 

‘‘(ii) the Secretary of the Treasury shall transfer to the Federal reserve banks direct obligations of the United States of equivalent market value to the assets described in clause (i).’’. 

(2) REPEAL OF AUTHORITY TO PROVIDE EMERGENCY ADVANCES TO GROUPS OF

MEMBER BANKS.—Section 10A of the Federal Reserve Act is repealed. 

(3) ASSETS ACQUIRED THROUGH ADVANCES TO MEMBER BANKS.—The second undesignated paragraph of subsection (a) of section 10B of the Federal Reserve Act 

is amended— 

(A) by inserting ‘‘not’’ before ‘‘secured by mortgage loans’’; and 

(B) by striking ‘‘lowest discount rate’’ and inserting ‘‘highest discount 

rate’’. 

SEC. 4. CONGRESSIONAL ACCOUNTABILITY FOR EMERGENCY LENDING PROGRAMS. 

Section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)), as amended by section 

3, is further amended— 

(1) in subparagraph (A)— 

(A) by inserting ‘‘that pose a threat to the financial stability of the United 

States’’ after ‘‘unusual and exigent circumstances’’; and 

(B) by striking ‘‘the affirmative vote of not less than five members’’ and 

inserting ‘‘the prior approval of the Secretary of the Treasury and not less 

than 2⁄3 of the members of the Federal Open Market Committee’’; 

(2) in subparagraph (B)— 

(A) by moving such subparagraph 4 ems to the left; 

(B) in clause (i), by inserting at the end the following: ‘‘Federal reserve 

banks may not accept equity securities issued by the recipient of any loan 

or other financial assistance under this paragraph as collateral. Not later 

than 6 months after the date of the enactment of this sentence, the Board 

shall, by rule, establish— 

‘‘(I) a method for determining the sufficiency of the collateral required under 

this paragraph; 

‘‘(II) acceptable classes of collateral; 

‘‘(III) the amount of any discount on the value of the collateral that the Federal reserve banks will apply for purposes of calculating the sufficiency of collateral under this paragraph; and 

‘‘(IV) a method for obtaining independent appraisals of the value of collateral 

the Federal reserve banks receive.’’; 

(C) in clause (ii)— 

(i) by striking the second sentence; and 

(ii) by inserting after the first sentence the following: ‘‘A borrower 

shall not be eligible to borrow from any emergency lending program or 

facility unless the Board and all Federal banking regulators with jurisdiction over the borrower certify that, at the time the borrower initially 

borrows under the program or facility, the borrower is not insolvent.’’; 

and 

(D) by striking clause (iv); 

(3) by inserting ‘‘financial institution’’ before ‘‘participant’’ each place such 

term appears; 

(4) in subparagraph (D)(i), by inserting ‘‘financial institution’’ before ‘‘participants’’; and 


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(5) by adding at the end the following new subparagraphs: 

‘‘(G) JOINT RESOLUTION OF APPROVAL.— ‘‘(i) IN GENERAL.—A program or facility created under subparagraph 

(A) shall terminate on the date that is 30 calendar days after the date 

on which Congress receives a report described in subparagraph (C) unless there is enacted into law a joint resolution approving the program 

or facility not later than 30 calendar days after the date on which the 

report is received. Any loan offered through the program or facility that 

is outstanding as of the date on which the program or facility is terminated shall be repaid in full not later than 30 calendar days after the 

date on which the program or facility is terminated. 

‘‘(ii) CONTENTS OF JOINT RESOLUTION.—For the purpose of this subparagraph, the term ‘joint resolution’ means only a joint resolution— 

‘‘(I) that is introduced not later than 3 calendar days after the 

date on which the report described in subparagraph (C) is received 

by Congress; 

‘‘(II) that does not have a preamble; 

‘‘(III) the title of which is as follows: ‘Joint resolution relating to 

the approval of a program or facility created by the Board of Governors of the Federal Reserve System’; and 

‘‘(IV) the matter after the resolving clause of which is as follows: 

‘That Congress approves the program or facility created by the 

Board of Governors of the Federal Reserve System on 

llllllllll.’ (The blank space being appropriately filled 

in). 

‘‘(iii) FAST TRACK CONSIDERATION IN HOUSE OF REPRESENTATIVES.— 

‘‘(I) RECONVENING.—Upon receipt of a report under subparagraph 

(C), the Speaker, if the House would otherwise be adjourned, shall 

notify the Members of the House that, pursuant to this subparagraph, the House shall convene not later than the second calendar 

day after receipt of such report. 

‘‘(II) REPORTING AND DISCHARGE.—Any committee of the House of 

Representatives to which a joint resolution is referred shall report 

it to the House not later than 5 calendar days after the date of receipt of the report described in subparagraph (C). If a committee 

fails to report the joint resolution within that period, the committee 

shall be discharged from further consideration of the joint resolution and the joint resolution shall be referred to the appropriate 

calendar. 

‘‘(III) PROCEEDING TO CONSIDERATION.—After each committee authorized to consider a joint resolution reports it to the House or has 

been discharged from its consideration, it shall be in order, not 

later than the sixth day after Congress receives the report described in subparagraph (C), to move to proceed to consider the 

joint resolution in the House. All points of order against the motion 

are waived. Such a motion shall not be in order after the House 

has disposed of a motion to proceed on the joint resolution. The 

previous question shall be considered as ordered on the motion to 

its adoption without intervening motion. The motion shall not be 

debatable. A motion to reconsider the vote by which the motion is 

disposed of shall not be in order. 

‘‘(IV) CONSIDERATION.—The joint resolution shall be considered 

as read. All points of order against the joint resolution and against 

its consideration are waived. The previous question shall be considered as ordered on the joint resolution to its passage without intervening motion except 2 hours of debate equally divided and controlled by the proponent and an opponent. A motion to reconsider 

the vote on passage of the joint resolution shall not be in order. 

‘‘(iv) FAST TRACK CONSIDERATION IN SENATE.— 

‘‘(I) RECONVENING.—Upon receipt of a report under subparagraph 

(C), if the Senate has adjourned or recessed for more than 2 days, 

the majority leader of the Senate, after consultation with the minority leader of the Senate, shall notify the Members of the Senate 

that, pursuant to this subparagraph, the Senate shall convene not 

later than the second calendar day after receipt of such report. 

‘‘(II) PLACEMENT ON CALENDAR.—Upon introduction in the Senate, the joint resolution shall be placed immediately on the calendar. 

‘‘(III) FLOOR CONSIDERATION.— 


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‘‘(aa) IN GENERAL.—Notwithstanding Rule XXII of the Standing Rules of the Senate, it is in order at any time during the 

period beginning on the fourth day after the date on which 

Congress receives a report described in subparagraph (C) and 

ending on the sixth day after the date on which Congress receives the report (even though a previous motion to the same 

effect has been disagreed to) to move to proceed to the consideration of the joint resolution, and all points of order against 

the joint resolution (and against consideration of the joint resolution) are waived. The motion to proceed is not debatable. The 

motion is not subject to a motion to postpone. A motion to reconsider the vote by which the motion is agreed to or disagreed 

to shall not be in order. If a motion to proceed to the consideration of the resolution is agreed to, the joint resolution shall 

remain the unfinished business until disposed of. 

‘‘(bb) DEBATE.—Debate on the joint resolution, and on all debatable motions and appeals in connection therewith, shall be 

limited to not more than 10 hours, which shall be divided 

equally between the majority and minority leaders or their 

designees. A motion further to limit debate is in order and not 

debatable. An amendment to, or a motion to postpone, or a motion to proceed to the consideration of other business, or a motion to recommit the joint resolution is not in order. 

‘‘(cc) VOTE ON PASSAGE.—The vote on passage shall occur immediately following the conclusion of the debate on a joint resolution, and a single quorum call at the conclusion of the debate if requested in accordance with the rules of the Senate. 

‘‘(dd) RULINGS OF THE CHAIR ON PROCEDURE.—Appeals from 

the decisions of the Chair relating to the application of the 

rules of the Senate, as the case may be, to the procedure relating to a joint resolution shall be decided without debate. 

‘‘(v) COORDINATION WITH ACTION BY OTHER HOUSE.— 

‘‘(I) IN GENERAL.—If, before the passage by one House of a joint 

resolution of that House, that House receives from the other House 

a joint resolution, then the following procedures shall apply: 

‘‘(aa) The joint resolution of the other House shall not be referred to a committee. 

‘‘(bb) With respect to a joint resolution of the House receiving 

the resolution— 

‘‘(AA) the procedure in that House shall be the same as 

if no joint resolution had been received from the other 

House; but 

‘‘(BB) the vote on passage shall be on the joint resolution 

of the other House. 

‘‘(II) TREATMENT OF JOINT RESOLUTION OF OTHER HOUSE.—If one 

House fails to introduce or consider a joint resolution under this 

section, the joint resolution of the other House shall be entitled to 

expedited floor procedures under this section. 

‘‘(III) CONSIDERATION AFTER PASSAGE.—If, following passage of 

the joint resolution in the Senate, the Senate then receives the 

companion measure from the House of Representatives, the companion measure shall not be debatable. 

‘‘(IV) VETOES.—If the President vetoes the joint resolution, the 

period beginning on the date the President vetoes the joint resolution and ending on the date the Congress receives the veto message 

with respect to the joint resolution shall be disregarded in computing the 30-calendar day period described in clause (i) and debate on a veto message in the Senate under this section shall be 

1 hour equally divided between the majority and minority leaders 

or their designees. 

‘‘(V) RULES OF HOUSE OF REPRESENTATIVES AND SENATE.—This 

subparagraph is enacted by Congress— 

‘‘(aa) as an exercise of the rulemaking power of the Senate 

and House of Representatives, respectively, and as such it is 

deemed a part of the rules of each House, respectively, but applicable only with respect to the procedure to be followed in 

that House in the case of a joint resolution, and it supersedes 

other rules only to the extent that it is inconsistent with such 

rules; and 


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‘‘(bb) with full recognition of the constitutional right of either 

House to change the rules (so far as relating to the procedure 

of that House) at any time, in the same manner, and to the 

same extent as in the case of any other rule of that House. 

‘‘(H) PENALTY RATE.— 

‘‘(i) IN GENERAL.—Not later than 6 months after the date of enactment of this subparagraph, the Board shall, with respect to a recipient 

of any loan or other financial assistance under this paragraph, establish by rule a minimum interest rate on the principal amount of any 

loan or other financial assistance. 

‘‘(ii) MINIMUM INTEREST RATE DEFINED.—In this subparagraph, the 

term ‘minimum interest rate’ shall mean the sum of— 

‘‘(I) the average of the secondary discount rate of all Federal reserve banks over the most recent 90-day period; and 

‘‘(II) the average of the difference between a distressed corporate 

bond yield index (as defined by rule of the Board) and a bond yield 

index of debt issued by the United States (as defined by rule of the 

Board) over the most recent 90-day period. 

‘‘(I) FINANCIAL INSTITUTION PARTICIPANT DEFINED.—For purposes of this 

paragraph, the term ‘financial institution participant’— 

‘‘(i) means a company that is predominantly engaged in financial activities (as defined in section 102(a) of the Financial Stability Act of 

2010 (12 U.S.C. 5311(a))); and 

‘‘(ii) does not include an agency described in subparagraph (W) of section 5312(a)(2) of title 31, United States Code, or an entity controlled 

or sponsored by such an agency.’’. 

SEC. 5. INTEREST RATES ON BALANCES MAINTAINED AT A FEDERAL RESERVE BANK BY DEPOSITORY INSTITUTIONS ESTABLISHED BY FEDERAL OPEN MARKET COMMITTEE. 

Subparagraph (A) of section 19(b)(12) of the Federal Reserve Act (12 U.S.C. 

461(b)(12)(A)) is amended by inserting ‘‘established by the Federal Open Market 

Committee’’ after ‘‘rate or rates’’. 

SEC. 6. MEMBERSHIP OF FEDERAL OPEN MARKET COMMITTEE. 

Section 12A(a) of the Federal Reserve Act (12 U.S.C. 263(a)) is amended— 

(1) in the first sentence, by striking ‘‘five representatives of the Federal Reserve banks to be selected as hereinafter provided’’ and inserting ‘‘one representative from each of the Federal Reserve banks’’; 

(2) in the second sentence, by striking ‘‘and, beginning’’ and all that follows 

through ‘‘San Francisco’’; and 

(3) by striking the third and fourth sentences. 

SEC. 7. BRINGING THE NON-MONETARY POLICY RELATED FUNCTIONS OF THE BOARD OF 

GOVERNORS OF THE FEDERAL RESERVE SYSTEM INTO THE APPROPRIATIONS 

PROCESS. 

(a) IN GENERAL.—The Federal Reserve Act is amended by inserting after section 

11B the following: 

‘‘SEC. 11C. APPROPRIATIONS REQUIREMENT FOR NON-MONETARY POLICY RELATED ADMINISTRATIVE COSTS. 

‘‘(a) APPROPRIATIONS REQUIREMENT.— 

‘‘(1) RECOVERY OF COSTS OF ANNUAL APPROPRIATION.—The Board of Governors 

of the Federal Reserve System and the Federal reserve banks shall collect assessments and other fees, as provided under this Act, that are designed to recover the costs to the Government of the annual appropriation to the Board of 

Governors of the Federal Reserve System by Congress. The Board of Governors 

of the Federal Reserve System and the Federal reserve banks may only incur 

obligations or allow and pay expenses with respect to non-monetary policy related administrative costs pursuant to an appropriations Act. 

‘‘(2) OFFSETTING COLLECTIONS.—Assessments and other fees described under 

paragraph (1) for any fiscal year— 

‘‘(A) shall be deposited and credited as offsetting collections to the account 

providing appropriations to the Board of Governors of the Federal Reserve 

System; and 

‘‘(B) shall not be collected for any fiscal year except to the extent provided 

in advance in appropriation Acts. 

‘‘(3) LIMITATION.—This subsection shall only apply to the non-monetary policy 

related administrative costs of the Board of Governors of the Federal Reserve 

System. 

‘‘(b) DEFINITIONS.—For purposes of this section: 


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‘‘(1) MONETARY POLICY.—The term ‘monetary policy’ means a strategy for producing a generally acceptable exchange medium that supports the productive 

employment of economic resources by reliably serving as both a unit of account 

and store of value. 

‘‘(2) NON-MONETARY POLICY RELATED ADMINISTRATIVE COSTS.—The term ‘nonmonetary policy related administrative costs’ means administrative costs not related to the conduct of monetary policy, and includes— 

‘‘(A) direct operating expenses for supervising and regulating entities supervised and regulated by the Board of Governors of the Federal Reserve 

System, including conducting examinations, conducting stress tests, communicating with the entities regarding supervisory matters and laws, and 

regulations; 

‘‘(B) operating expenses for activities integral to carrying out supervisory 

and regulatory responsibilities, such as training staff in the supervisory 

function, research and analysis functions including library subscription 

services, and collecting and processing regulatory reports filed by supervised institutions; and 

‘‘(C) support, overhead, and pension expenses related to the items described under subparagraphs (A) and (B).’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to expenses paid and fees collected on or after October 1, 2018. 

SEC. 8. AMENDMENT TO APPOINTMENT OF PRESIDENTS OF FEDERAL RESERVE BANKS. 

The fifth subparagraph of the fourth undesignated paragraph of section 4 of the 

Federal Reserve Act (12 U.S.C. 341) is amended by striking ‘‘Class B and Class C 

directors’’ and inserting ‘‘board of directors’’. 

SEC. 9. FEDERAL OPEN MARKET COMMITTEE BLACKOUT PERIOD. 

Section 12A of the Federal Reserve Act (12 U.S.C. 263), as amended by section 

2, is further amended by adding at the end the following new subsection: 

‘‘(f) BLACKOUT PERIOD.— 

‘‘(1) IN GENERAL.—During a blackout period, the only public communications 

that may be made by members and staff of the Committee with respect to macroeconomic or financial developments or about current or prospective monetary 

policy issues are the following: 

‘‘(A) The dissemination of published data, surveys, and reports that have 

been cleared for publication by the Board of Governors of the Federal Reserve System. 

‘‘(B) Answers to technical questions specific to a data release. 

‘‘(C) Communications with respect to the prudential or supervisory functions of the Board of Governors. 

‘‘(2) BLACKOUT PERIOD DEFINED.—For purposes of this subsection, and with 

respect to a meeting of the Committee described under subsection (a), the term 

‘blackout period’ means the time period that— 

‘‘(A) begins immediately after midnight on the day that is one week prior 

to the date on which such meeting takes place; and 

‘‘(B) ends at midnight on the day after the date on which such meeting 

takes place. 

‘‘(3) EXEMPTION FOR CHAIRMAN OF THE BOARD OF GOVERNORS.—Nothing in 

this section shall prohibit the Chairman of the Board of Governors of the Federal Reserve System from participating in or issuing public communications.’’. 

SEC. 10. SALARIES, FINANCIAL DISCLOSURES, AND OFFICE STAFF OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. 

(a) IN GENERAL.—Section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended— 

(1) by redesignating the second subsection (s) (relating to ‘‘Assessments, Fees, 

and Other Charges for Certain Companies’’) as subsection (t); and 

(2) by adding at the end the following new subsections: 

‘‘(u) PROHIBITED AND RESTRICTED FINANCIAL INTERESTS AND TRANSACTIONS.—The 

members and employees of the Board of Governors of the Federal Reserve System 

shall be subject to the provisions under section 4401.102 of title 5, Code of Federal 

Regulations, to the same extent as such provisions apply to an employee of the Securities and Exchange Commission. 

‘‘(v) DISCLOSURE OF STAFF SALARIES AND FINANCIAL INFORMATION.—The Board of 

Governors of the Federal Reserve System shall make publicly available, on the 

website of the Board of Governors, a searchable database that contains the names 

of all members, officers, and employees of the Board of Governors who receive an 

annual salary in excess of the annual rate of basic pay for GS–15 of the General 

Schedule, and— 


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‘‘(1) the yearly salary information for such individuals, along with any nonsalary compensation received by such individuals; and 

‘‘(2) any financial disclosures required to be made by such individuals.’’. 

(b) OFFICE STAFF FOR EACH MEMBER OF THE BOARD OF GOVERNORS.—Subsection 

(l) of section 11 of the Federal Reserve Act (12 U.S.C. 248) is amended by adding 

at the end the following: ‘‘Each member of the Board of Governors of the Federal 

Reserve System may employ, at a minimum, 2 individuals, with such individuals 

selected by such member and the salaries of such individuals set by such member. 

A member may employ additional individuals as determined necessary by the Board 

of Governors.’’. 

SEC. 11. VICE CHAIRMAN FOR SUPERVISION REPORT REQUIREMENT. 

Paragraph (12) of section 10 of the Federal Reserve Act (12 U.S.C. 247b) is 

amended— 

(1) by redesignating such paragraph as paragraph (11); and 

(2) in such paragraph— 

(A) by striking ‘‘shall appear’’ and inserting ‘‘shall provide written testimony and appear’’; and 

(B) by adding at the end the following: ‘‘If, at the time of any appearance 

described in this paragraph, the position of Vice Chairman for Supervision 

is vacant, the Chairman or their designee shall appear instead and provide 

the required written testimony.’’. 

PURPOSE AND SUMMARY

On September 7, 2018, Representative Andy Barr introduced 

H.R. 6741, the ‘‘Federal Reserve Reform Act of 2018’’ to provide for 

a reduction in monetary policy uncertainty, an orderly return to a 

more conventional monetary policy balance sheet; and hold Congress accountable for America’s credit policy instead of ceding responsibility to the Federal Reserve for unconventional asset purchases. Given that interest on reserves now regularly serves as a 

monetary policy rate, H.R. 6741 also provides for the Federal Reserve’s full monetary policy committee—the Federal Open Market 

Committee or FOMC, not just the Board of Governors—to vote on 

those rates. It also provides for a more fully informed monetary 

policy by expanding FOMC voting membership to all Federal Reserve banks for each meeting. H.R. 6741 also provides greater accountability for bank supervision and regulation by requiring an 

appropriation for non-monetary policy related costs, and returns 

the authority for each class of Federal Reserve bank directors to 

contribute to the search and hiring process for District Bank presidents. H.R. 6741 reforms the ‘‘blackout period’’ that governs when 

Federal Reserve Governors and employees may publicly speak on 

certain matters; requires the Federal Reserve to disclose the salaries of highly paid employees; and provides for the Federal Reserve 

Chair or a designee to testify in the event that the Vice Chair for 

Supervision is vacant. 

BACKGROUND AND NEED FOR LEGISLATION

If monetary policy does not work, then our economy cannot work. 

H.R. 6741, the Federal Reserve Reform Act of 2018, thus provides 

for a more growth-oriented and less politically prone monetary policy. It does so, in important part, by 

(1) reducing growth-killing uncertainty that undercuts the 

efficacy of monetary policies; 

(2) unwinding the Fed’s non-monetary policy assets; and 

(3) holding Congress accountable for America’s credit policies instead of relying on the Fed to initiate off-budget spending. 


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1 A recent study by Federal Reserve Board economists finds that ‘‘uncertainty about monetary 

policy robustly raise credit spreads and reduce output.’’ Source: Lucas Husted, John Rogers, and 

Bo Sun (2017). ‘‘Monetary Policy Uncertainty,’’ International Finance Discussion Papers1215. 

Available at https://doi.org/10.17016/IFDP.2017.1215. 2Monetary Policy and Trade Subcommittee hearing entitled ‘‘The Fed Turns 100: Lessons 

Learned Over a Century of Central Banking,’’ September 11, 2013. Quoted from page 11 of the 

printed hearing, available at https://financialservices.house.gov/calendar/ 

eventsingle.aspx?EventID=347585. 3Federal Reserve Statistical Release (H.4.1), ‘‘Factors Affecting Reserve Balances,’’ October 26, 

2017. Accessed October 27, 2017 at Board of Governors, Recent Balance Sheet Trends, available 

at https://www.federalreserve.gov/releases/h41/current/h41.htm. 

Better communication may sound boring. But it is key to reducing growth-killing policy uncertainty that, according to Federal Reserve research, creates a significant drag on our economy.1 The 

Committee’s legislation brings greater transparency to how monetary policy reacts to economic changes so that households and businesses have the information they need to make productive decisions. 

The Federal Open Market Committee (FOMC) has characterized 

its conduct of monetary policy as, quote, ‘‘data dependent.’’ In doing 

so, however, it leaves households and businesses uncertain about 

what data matter and how they matter. By providing for the annual adoption of both a plain English policy strategy and a small 

set of comparison policy rules of the FOMC’s own choosing, H.R. 

6741 reduces that uncertainty to provide for a more reliable allocation of real goods and services to their most promising economic opportunities. 

Adopting the best of proposals from both sides of the aisle, this 

framework promises to reliably support a stronger economy that 

works for everyone. Testifying before our monetary policy subcommittee, Dr. Joseph Gagnon from the Peterson Institute shared 

the following observation: 2

The best strategy is for the Fed to use various rules in 

assessing the stance of policy. Whenever it deviates noticeably from popular rules, the Fed should explain clearly 

why it is doing so. 

The Federal Reserve Reform Act of 2018 provides for exactly the 

type of framework that Dr. Gagnon and other highly regarded witnesses from both sides of the aisle have advocated during extensive 

Committee hearings. 

In addition, monetary policy loses its independence when it extends into politically sensitive credit markets. Almost half of today’s Federal Reserve balance sheet continues to reflect the Fed’s 

emergency expedition into favoring some asset prices at the expense of others.3 In addition to distorting the price of credit and 

thus compromising efficiency in the real economy, the Fed’s decadeold maintenance of this expedition (with little if any end in sight) 

continues to put monetary policy independence at undue risk. The 

Federal Reserve Reform Act of 2018 thus provides for an asset 

swap facility that leaves the Fed with the assets it needs to conduct monetary policy and requiring our government’s fiscal principals—Congress—to decide in a more accountable manner when 

and where American households and businesses fund the public 

coffers. 

Monetary policy works best when it simply helps goods and services readily find their most promising opportunities. To be sure, reVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1116P1.XXX HR1116P1

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4 As of October 26, 2017, the Federal Reserve banks own almost $1.8 trillion of Federal agency 

debt securities and Mortgage-backed securities. Source: https://www.federalreserve.gov/releases/ 

h41/current/h41.htm. 5See the MPT Subcommittee hearing entitled ‘‘Unconventional monetary policy,’’ December 7, 

2016. Archived webcast available at https://financialservices.house.gov/calendar/eventsingle. 

aspx?EventID=401201. 6Full-Committee hearing entitled ‘‘Monetary Policy and the State of the Economy,’’ July 12, 

2017. Archived webcast available at https://financialservices.house.gov/calendar/eventsingle. 

aspx?EventID=402098. 7Dennis Kelleher, ‘‘Better Markets Statement on the Introduction of the Bailout Prevention 

Act,’’ May 13, 2015. Accessed at https://bettermarkets.com/newsroom/better-markets-statementintroduction-bailout-prevention-act. 

alizing this ideal is hard, even under favorable conditions. It becomes harder still when central banks step beyond their monetary 

policy roles and into the political realm of favoring some credit 

prices over others (as the Fed has done, for example, by purchasing 

almost $2 trillion of MBS during and after the Financial Crisis).4

Economists of different stripes shared strong concerns to the 

Committee about this unfortunate development. Testifying as a minority witness before the monetary policy subcommittee, MIT Professor Simon Johnson observed that: 5

we’re all agreeing . . . that fiscal policy infrastructure is 

the responsibility of the fiscal authority, which is that Congress in the United States . . . it is not the responsibility, 

and should not become the responsibility of the Federal 

Reserve. 

The Federal Reserve Reform Act of 2018 provides for an orderly 

return of the Fed’s balance sheet to what former Federal Reserve 

Board Chair Yellen called ‘‘a primarily treasury-only portfolio,’’ 6

and thus promotes both a more resilient financial system and more 

productive allocation of credit in the real economy. 

H.R. 6741 also provides for a long-overdue framework that holds 

Congress to account for extending emergency credit to distressed 

banks. Time and again, Americans have watched their Federal Reserve stretch its mandates beyond the breaking point, with the predictable result of increased financial fragility and decreased economic opportunity. 

Politicians and advocacy groups from both sides of the aisle agree 

that doing better requires a brighter line between conventional 

monetary policy and emergency credit policy. Following the introduction of Warren-Vitter, the President and CEO of Better Markets 

warned that: 7

While the much smaller $700 billion TARP program received widespread scrutiny, the Fed’s trillions in bailouts 

did not. In fact, the public and even its elected officials in 

Congress were mostly kept in the dark about these bailouts. That was wrong. The Dodd-Frank Wall Street Reform and Consumer Protection Act made some modest 

changes to limit the Fed’s ability to bailout Wall Street in 

the future, but more needs to be done if taxpayers are to 

be protected, bailouts are to be limited, too big to fail is to 

be ended and market discipline is to apply to Wall Street 

like the rest of America’s banks and businesses. 

By drawing a bright line of accountability between monetary and 

credit policy, the Federal Reserve Reform Act of 2018 provides for 

both a more productive monetary policy and less distortionary credVerDate Sep 11 2014 00:46 Jan 04, 2019 Jkt 089006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1116P1.XXX HR1116P1

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8 ‘‘About AFR: Americans for Financial Reform is a nonpartisan and nonprofit coalition of 

more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups. Formed in the wake of the 2008 crisis, we are working to lay the foundation 

for a strong, stable, and ethical financial system—one that serves the economy and the nation 

as a whole. AFR has been called ‘‘the leading voice for Wall Street accountability’’ in Washington 

(by Zach Carter of the Huffington Post).’’ (Source: http://ourfinancialsecurity.org/about/) 9Quoted from Senator Elizabeth Warren, ‘‘Warren, Vitter Introduced Bailout Prevention Act,’’ 

May 13, 2015. Press release available at https://www.warren.senate.gov/?p=press_ 

release&id=818. 10 ‘‘If anything, the major change in the post-crisis financial regulatory system is an increasingly powerful Federal Reserve.’’ Source: http://www.hblr.org/2011/06/why-the-federal-reserve-isdodd-franks-big-winner/; ‘‘The 2010 Dodd-Frank Wall Street Reform and Consumer Protection 

Act increased the powers of the Board of Governors of the Federal Reserve System along almost 

all dimensions pertaining to the supervision and operation of systemically important financial 

institutions, available at https://piie.com/publications/policy-briefs/governing-federal-reservesystem-after-dodd-frank-act. 11See for example Dodd-Frank Act, Section 112. Council authority, Section 115. Enhanced supervision and prudential standard for nonbank financial companies supervised by the Board of 

Governors and certain bank holding companies, Section 120. Additional standards applicable to 

activities or practices for financial stability purposes, and Section 121. Mitigation of risks to financial stability, available at https://www.govtrack.us/congress/bills/111/hr4173/text. 12See for example: Committee on Financial Services, April 17, 2018, hearing entitled, ‘‘SemiAnnual Testimony on the Federal Reserve’s Regulation and Supervision of the Financial System,’’ available at: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID= 

403293; see also ‘‘Quarles Defends Fed Moves on Bank Regulation’’, available at: https:// 

thehill.com/policy/finance/383601-quarles-defends-feds-moves-on-bank-regulation-supervision. 13See https://taxnews.ey.com/news/2017-1120-house-financial-services-committee-questionsfederal-reserve-chair-janet-yellen. 

it policy, and does so in a manner that Americans for Financial Reform 8 characterized as aligning ‘‘not only with the intent of the 

Dodd-Frank Act, but with traditional principles of central bank 

lending that go back centuries.’’ 9

The Dodd-Frank Act’s post crisis regime rewarded the Federal 

Reserve with the greatest expansion of regulatory power in its history.10 The Federal Reserve, separate and apart from monetary 

policy, can now impose ‘‘heightened prudential standards’’ on any 

large financial institution deemed ‘‘systemically important.’’ 11

Figuratively, and in some reported cases literally, the Federal Reserve has now taken a seat in bank board rooms where it can 

alarmingly influence, if not outright veto, mergers, acquisitions, 

and dividend distributions among other corporate actions.12 This 

unchecked power should concern us all. The ‘‘Federal Reserve Reform Act’’ makes a needed change by bifurcating the Fed’s budget 

to separate the funding of the Federal Reserve’s monetary policy 

function from its prudential regulator function. Monetary policy 

independence should not be an escape hatch from Congressional 

regulatory accountability, particularly as the Fed exercises its 

newly acquired powers to regulate an alarming share of our nation’s economy. 

Regardless of the exigencies of 2008, monetary policy is not and 

can never be a substitute for sound fiscal policy. The nation needs 

a prudent path to a more normal Fed balance sheet in size and 

composition where interest rates are once again market based. Forays into credit allocation, fiscal policy and bank management 

threaten the Federal Reserve’s monetary policy independence, not 

to mention checks and balances. Although a strong and independent Federal Reserve remains critical, we cannot afford to one 

day awake only to find our central bankers have become our central planners and long-term economic growth is harmed.13

American economic opportunity depends on monetary policy 

doing what it can and only what it can—that is, maintaining an 

efficient exchange medium so that real goods and services (which 


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include labor) can freely engage their most promising opportunities. 

The Federal Reserve Reform Act of 2018 does just that, by reducing 

policy uncertainty, facilitating an orderly exit from distortionary 

Fed credit policies, holding Congress to account for risking taxpayers’ money through emergency loans, providing for more deliberative and better informed monetary policies, and increasing accountability for bank supervision and regulation. 

HEARINGS

The Subcommittee on Monetary Policy and Trade held eight 

hearings to consider matters relating to H.R. 6741 on March 17, 

2017; April 4, 2017; April 26, 2017; April 28, 2017; June 28, 2017; 

July 20, 2017; November 7, 2017; and January 10, 2018. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

September 13, 2018, and ordered H.R. 6741 to be reported favorably to the House, as amended by a recorded vote of 30 yeas to 21 

nays (recorded vote no. FC–212), a quorum being present. An 

amendment in the nature of a substitute, offered by Rep. Barr, was 

agreed to by voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 30 yeas to 21 nays (Record vote no. FC– 

212), a quorum being present. 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 6741 will 

strengthen Federal Reserve System’s ability to provide for efficient 

and effective monetary policies and supervisory services. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

The Committee has not received an estimate of new budget authority contained in the cost estimate prepared by the Director of 

the Congressional Budget Office pursuant to Sec. 402 of the Congressional Budget Act of 1974. In compliance with clause 3(c)(2) of 

rule XIII of the Rules of the House, the Committee opines that 

H.R. 6741 will not establish any new budget or entitlement authority or create any tax expenditures. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

The cost estimate prepared by the Director of the Congressional 

Budget Office pursuant to Sec. 402 of the Congressional Budget Act 

of 1974 was not submitted timely to the Committee. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. The Committee has 

determined that the bill does not contain Federal mandates on the 

private sector. The Committee has determined that the bill does 

not impose a Federal intergovernmental mandate on State, local, or 

tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 


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accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5 (115th Congress), the following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 6741 as the ‘‘Federal Reserve Reform Act 

of 2018.’’ 

Section 2. Monetary policy transparency and accountability 

This section provides for the Committee to annually establish a 

non-technical monetary policy strategy, as well as a small set of 

reference rules to increase policy transparency. 

Section 3. Independence from credit policy 

This section provides for timely asset swaps between the Federal 

Reserve System and Department of the Treasury so as to ensure 

that assets on the Federal Reserve’s balance sheet exclude those 

that are not gold stock, Treasury currency, or direct obligations of 

the United States, foreign central banks, or the International Monetary Fund. 

Section 4. Congressional accountability for emergency lending 

This section provides for the ratification of emergency loans via 

a Joint Resolution, and thus allow Federal Reserve banks to continue their origination of Section 13(3) lending facilities, while returning Article I responsibility for associated fiscal consequences to 

Congress, and thus strengthening both fiscal policy accountability 

and monetary policy independence. 


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Section 5. Interest rates on balances maintained at a Federal Reserve bank by depository institutions established by the Federal 

Open Market Committee 

This section provides for the Federal Open Market Committee 

(FOMC) to participate in the establishment of interest rates on balances maintained at a Federal Reserve Bank by depository institutions. 

Section 6. Membership of Federal Open Market Committee 

This section provides for every District Bank to vote on the Fed’s 

policy directive during every Federal Open Market Committee 

(FOMC) meeting. 

Section 7. Bringing the non-monetary policy related functions of the 

board of governors of the Federal Reserve system into the appropriations process 

This section provides for the on-budget funding of the Federal 

Reserve’s non-monetary policy administrative costs. 

Section 8. Amendment to appointment of presidents of Federal Reserve banks 

This section provides for each class of Federal Reserve District 

bank directors to participate in the process of hiring their District 

bank presidents. 

Section 9. Federal Open Market Committee blackout period 

This section provides for more clarity about timing of blackout 

periods associated with FOMC meetings. 

Section 10. Salaries, financial disclosures, and office staff of the 

board of governors of the Federal Reserve system 

This section provides for greater transparency to Federal Reserve 

compensation policies. 

Section 11. Vice Chairman for Supervision report requirement 

This section provides for the Federal Reserve Board Chair, or the 

Chair’s designee, to appear before Congress, in the event that the 

Vice Chairman for Supervision has not been confirmed. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 


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FEDERAL RESERVE ACT 

* * * * * * * 

FEDERAL RESERVE BANKS. 

SEC. 4. When the organization committee shall have established 

Federal reserve districts as provided in section two of this Act, a 

certificate shall be filed with the Comptroller of the Currency showing the geographical limits of such districts and the Federal reserve 

city designated in each of such districts. The Comptroller of the 

Currency shall thereupon cause to be forwarded to each national 

bank located in each district, and to such other banks declared to 

be eligible by the organization committee which may apply therefor, an application blank in form to be approved by the organization committee, which blank shall contain a resolution to be adopted by the board of directors of each bank executing such application, authorizing a subscription to the capital stock of the Federal 

reserve bank organizing in that district in accordance with the provisions of this Act. (Omitted from U.S. Code) 

When the minimum amount of capital stock prescribed by this 

Act for the organization of any Federal reserve bank shall have 

been subscribed and allotted, the organization committee shall designate any five banks of those whose applications have been received, to execute a certificate of organization, and thereupon the 

banks so designated shall, under their seals, make an organization 

certificate which shall specifically state the name of such Federal 

reserve bank, the territorial extent of the district over which the 

operations of such Federal reserve bank are to be carried on, the 

city and State in which said bank is to be located, the amount of 

capital stock and the number of shares into which the same is divided, the name and place of doing business of each bank executing 

such certificate, and of all banks which have subscribed to the capital stock of such Federal reserve bank and the number of shares 

subscribed by each, and the fact that the certificate is made to enable those banks executing same, and all banks which have subscribed or may thereafter subscribe to the capital stock of such 

Federal reserve bank, to avail themselves of the advantages of this 

Act. (Omitted from U.S. Code) 

The said organization certificate shall be acknowledged before a 

judge of some court of record or notary public; and shall be, together with the acknowledgment thereof, authenticated by the seal 

of such court, or notary, transmitted to the Comptroller of the Currency, who shall file, record and carefully preserve the same in his 

office. (Omitted from U.S. Code) 

Upon the filing of such certificate with the Comptroller of the 

Currency as aforesaid, the said Federal reserve bank shall become 

a body corporate and as such, and in the name designated in such 

organization certificate, shall have power— 

First. To adopt and use a corporate seal. 

Second. To have succession after the approval of this Act until 

dissolved by Act of Congress or until forfeiture of franchise for violation of law. 

Third. To make contracts. 

Fourth. To sue and be sued, complain and defend, in any court 

of law or equity. 


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Fifth. To appoint by its board of directors a president, vice presidents, and such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds for them 

and fix the penalty thereof, and to dismiss at pleasure such officers 

or employees. The president shall be the chief executive officer of 

the bank and shall be appointed by the øClass B and Class C directors¿ board of directors of the bank, with the approval of the Board 

of Governors of the Federal Reserve System, for a term of 5 years; 

and all other executive officers and all employees of the bank shall 

be directly responsible to the president. The first vice president of 

the bank shall be appointed in the same manner and for the same 

term as the president, and shall, in the absence or disability of the 

president or during a vacancy in the office of president, serve as 

chief executive officer of the bank. Whenever a vacancy shall occur 

in the office of the president or the first vice president, it shall be 

filled in the manner provided for original appointments; and the 

person so appointed shall hold office until the expiration of the 

term of his predecessor. 

Sixth. To prescribe by its board of directors, by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may 

be exercised and enjoyed. 

Seventh. To exercise by its board of directors, or duly authorized 

officers or agents, all powers specifically granted by the provisions 

of this Act and such incidental powers as shall be necessary to 

carry on the business of banking within the limitations prescribed 

by this Act. 

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 Secretary of the 

Treasury 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. 

But no Federal reserve bank shall transact any business except 

such as is incidental and necessarily preliminary to its organization 

until it has been authorized by the Comptroller of the Currency to 

commence business under the provisions of this Act. 

Every Federal reserve bank shall be conducted under the supervision and control of a board of directors. 

The board of directors shall perform the duties usually appertaining to the office of directors of banking associations and all 

such duties as are prescribed by law. 

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 provisions of law and the orders of the Board of Governors of the Federal Reserve System, extend to each member bank such discounts, 

advancements, and accommodations 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, industry, and agriculture. The Board 


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of Governors of the Federal Reserve System may prescribe regulations further defining within the limitations of this Act the conditions under which discounts, advancements, and the accommodations 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 maintenance 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 information. The chairman of the Federal reserve bank shall 

report to the Board of Governors of the Federal Reserve System 

any such undue use of bank credit by any member bank, together 

with his recommendation. Whenever, in the judgment of the Board 

of Governors of the Federal Reserve System, 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. 

Such board of directors shall be selected as hereinafter specified 

and shall consist of nine members, holding office for three years, 

and divided into three classes, designated as classes A, B, and C. 

Class A shall consist of three members, without discrimination 

on the basis of race, creed, color, sex, or national origin, who shall 

be chosen by and be representative of the stock-holding banks. 

Class B shall consist of three members, who shall represent the 

public and shall be elected without discrimination on the basis of 

race, creed, color, sex, or national origin, and with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers. 

Class C shall consist of three members who shall be designated 

by the Board of Governors of the Federal Reserve System. They 

shall be elected to represent the public, without discrimination on 

the basis of race, creed, color, sex, or national origin, and with due 

but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers. When the necessary subscriptions to the capital stock have been obtained for the 

organization of any Federal reserve bank, the Board of Governors 

of the Federal Reserve System shall appoint the class C directors 

and shall designate one of such directors as chairman of the board 

to be selected. Pending the designation of such chairman, the organization committee shall exercise the powers and duties appertaining to the office of chairman in the organization of such Federal 

reserve bank. (Partially incorporated in 12 U.S.C. 302) 

No Senator or Representative in Congress shall be a member of 

the Board of Governors of the Federal Reserve System or an officer 

or a director of a Federal reserve bank. 

No director of class B shall be an officer, director, or employee 

of any bank. 

No director of class C shall be an officer, director, employee, or 

stockholder of any bank. 


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Directors of Class A and Class B shall be chosen in the following 

manner: 

The Board of Governors of the Federal Reserve System shall 

classify the member banks of the district into three general groups 

or divisions, designating each group by number. Each group shall 

consist as nearly as may be of banks of similar capitalization. Each 

member bank shall be permitted to nominate to the chairman of 

the board of directors of the Federal reserve bank of the district 

one candidate for director of Class A and one candidate for director 

of Class B. The candidates so nominated shall be listed by the 

chairman, indicating by whom nominated, and a copy of said list 

shall, within fifteen days after its completion, be furnished by the 

chairman to each member bank. Each member bank by a resolution of the board or by an amendment to its by-laws shall authorize 

its president, cashier, or some other to cast the vote of the member 

bank in the elections of Class A and Class B directors: Provided, 

That whenever any member banks within the same Federal Reserve district are subsidiaries of the same bank holding company 

within the meaning of the Bank Holding Company Act of 1956, 

participation in any such nomination or election by such member 

banks, including such bank holding company if it is also a member 

bank, shall be confined to one of such banks, which may be designated for the purpose by such holding company. 

Within fifteen days after receipt of the list of candidates the duly 

authorized officer of a member bank shall certify to the chairman 

his first, second, and other choices for director of Class A and Class 

B, respectively, upon a preferential ballot upon a form furnished by 

the Chairman of the Board of directors of the Federal reserve bank 

of the district. Each such officer shall make a cross opposite the 

name of the first second, and other choices for a director of Class 

A and for a director of Class B, but shall not vote more than one 

choice for any one candidate. No officer or director of a member 

bank shall be eligible to serve as a Class A director unless nominated and elected by banks which are members of the same group 

as the member bank of which he is an officer or director. 

Any person who is an officer or director of more than one member bank shall not be eligible for nominations as a Class A director 

except by banks in the same group as the bank having the largest 

aggregate resources of any of those of which such person is an officer or director. 

Any candidate having a majority of all votes cast in the column 

of first choice shall be declared elected. If no candidate have a majority of all the votes in the first column, then there shall be added 

together the votes cast by the electors for such candidates in the 

second column and the votes cast for the several candidates in the 

first column. The candidate then having a majority of the electors 

voting and the highest number of combined votes shall be declared 

elected. If no candidate have a majority of electors voting and the 

highest number of votes when the first and second choices shall 

have been added, then the votes cast in the third column for other 

choices shall be added together in like manner, and the candidate 

then having the highest number of votes shall be declared elected. 

An immediate report of election shall be declared. 

Class C directors shall be appointed by the Board of Governors 

of the Federal Reserve System. They shall have been for at least 


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21 

two years residents of the district for which they are appointed, one 

of whom shall be designated by said board as chairman of the 

board of directors of the Federal reserve bank and as ‘‘Federal reserve agent.’’ He shall be a person of tested banking experience, 

and in addition to his duties as chairman of the board of directors 

of the Federal reserve bank he shall be required to maintain, under 

regulations to be established by the Board of Governors of the Federal Reserve System, a local office of said board on the premises 

of the Federal reserve bank. He shall make regular reports to the 

Board of Governors of the Federal Reserve System and shall act as 

its official representative for the performance of the functions conferred upon it by this Act. He shall receive an annual compensation 

to be fixed by the Board of Governors of the Federal Reserve System and paid monthly by the Federal reserve bank to which he is 

designated. One of the directors of class C shall be appointed by 

the Board of Governors of the Federal Reserve System as deputy 

chairman to exercise the powers of the chairman of the board when 

necessary. In case of the absence of the chairman and deputy chairman, the third class C director shall preside at meetings of the 

board. 

Subject to the approval of the Board of Governors of the Federal 

Reserve System, the Federal reserve agent shall appoint one or 

more assistants. Such assistants, who shall be persons of tested 

banking experience, shall assist the Federal reserve agent in the 

performance of his duties and shall also have power to act in his 

name and stead during his absence or disability. The Board of Governors of the Federal Reserve System shall require such bonds of 

the assistant Federal reserve agents as it may deem necessary for 

the protection of the United States. Assistants to the Federal reserve agent shall receive an annual compensation, to be fixed and 

paid in the same manner as that of the Federal reserve agent. 

Directors of Federal reserve banks shall receive, in addition to 

any compensation otherwise provided, a reasonable allowance for 

necessary expenses in attending meetings of their respective 

boards, which amounts shall be paid by the respective Federal reserve banks. Any compensation that may be provided by boards of 

directors of Federal reserve banks for directors, officers or employees shall be subject to the approval of the Board of Governors of 

the Federal Reserve System. 

The Reserve Bank Organization Committee may, in organizing 

Federal reserve banks, call such meetings of bank directors in the 

several districts as may be necessary to carry out the purposes of 

this Act, and may exercise the functions herein conferred upon the 

chairman of the board of directors of each Federal reserve bank 

pending the complete organization of such bank. (Omitted from 

U.S. Code) 

At the first meeting of the full board of directors of each Federal 

reserve bank, it shall be the duty of the directors of classes A, B 

and C, respectively, to designate one of the members of each class 

whose term of office shall expire in one year from the first of January nearest to date of such meeting, one whose term of office shall 

expire at the end of two years from said date, and one whose term 

of office shall expire at the end of three years from said date. 

Thereafter every director of a Federal reserve bank chosen as hereinbefore provided shall hold office for a term of three years. 


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Vancancies that may occur in the several classes of directors of 

Federal reserve banks may be filled in the manner provided for the 

original selection of such directors, such appointees to hold office 

for the unexpired terms of their predecessors. 

* * * * * * * 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

SEC. 10. The Board of Governors of the Federal Reserve System 

(hereinafter referred to as the ‘‘Board’’) shall be composed of seven 

members, to be appointed by the President, by and with the advice 

and consent of the Senate, after the date of enactment of the Banking Act of 1935, for terms of fourteen years except as hereinafter 

provided, but each appointive member of the Federal Reserve 

Board in office on such date shall continue to serve as a member 

of the Board until February 1, 1936, and the Secretary of the 

Treasury and the Comptroller of the Currency shall continue to 

serve as members of the Board until February 1, 1936. In selecting 

the members of the Board, not more than one of whom shall be selected from any one Federal Reserve district, the President shall 

have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. In selecting members of the Board, the President shall appoint at least 1 member with demonstrated primary 

experience working in or supervising community banks having less 

than $10,000,000,000 in total assets. The members of the Board 

shall devote their entire time to the business of the Board and 

shall each receive and annual salary of $15,000, payable monthly, 

together with actual necessary traveling expenses. 

The members of the Board shall be ineligible during the time 

they are in office and for two years thereafter to hold any office, 

position, or employment in any member bank, except that this restriction shall not apply to a member who has served the full term 

for which he was appointed. Upon the expiration of the term of any 

appointive member of the Federal Reserve Board in office on the 

date of enactment of the Banking Act of 1935, the President shall 

fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the 

term of not more than one member in any two-year period, and 

thereafter each member shall hold office for a term of fourteen 

years from the expiration of the term of his predecessor, unless 

sooner removed for cause by the President. Of the persons thus appointed, 1 shall be designated by the President, by and with the 

advice and consent of the Senate, to serve as Chairman of the 

Board for a term of 4 years, and 2 shall be designated by the President, by and with the advice and consent of the Senate, to serve 

as Vice Chairmen of the Board, each for a term of 4 years, 1 of 

whom shall serve in the absence of the Chairman, as provided in 

the fourth undesignated paragraph of this section, and 1 of whom 

shall be designated Vice Chairman for Supervision. The Vice Chairman for Supervision shall develop policy recommendations for the 

Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the 

Board, and shall oversee the supervision and regulation of such 


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23 

firms. The chairman of the Board, subject to its supervision, shall 

be its active executive officer. Each member of the Board shall 

within fifteen days after notice of appointment make and subscribe 

to the oath of office. Upon the expiration of their terms of office, 

members of the Board shall continue to serve until their successors 

are appointed and have qualified. Any person appointed as a member of the Board after the date of enactment of the Banking Act 

of 1935 shall not be eligible for reappointment as such member 

after he shall have served a full term of fourteen years. 

The Board of Governors of the Federal Reserve System shall 

have power to levy semiannually upon the Federal reserve banks, 

in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year succeeding the levying of such 

assessment, together with any deficit carried forward from the preceding half year, and such assessments may include amounts sufficient to provide for the acquisition by the Board in its own name 

of such site or building in the District of Columbia as in its judgment alone shall be necessary for the purpose of providing suitable 

and adequate quarters for the performance of its functions. After 

September 1, 2000, the Board may also use such assessments to acquire, in its own name, a site or building (in addition to the facilities existing on such date) to provide for the performance of the 

functions of the Board. After approving such plans, estimates, and 

specifications as it shall have caused to be prepared, the Board 

may, notwithstanding any other provision of law, cause to be constructed on any site so acquired by it a building or buildings suitable and adequate in its judgment for its purposes and proceed to 

take all such steps as it may deem necessary or appropriate in connection with the construction, equipment, and furnishing of such 

building or buildings. The Board may maintain, enlarge, or remodel any building or buildings so acquired or constructed and 

shall have sole control of such building or buildings and space 

therein. 

The principal offices of the Board shall be in the District of Columbia. At meetings of the Board the chairman shall preside, and, 

in his absence, the vice chairman shall preside. In the absence of 

the chairman and the vice chairman, the Board shall elect a member to act as chairman pro tempore. The Board shall determine and 

prescribe the manner in which its obligations shall be incurred and 

its disbursements and expenses allowed and paid, and may leave 

on deposit in the Federal Reserve banks the proceeds of assessments levied upon them to defray its estimated expenses and the 

salaries of its members and employees, whose employment, compensation, leave, and expenses shall be governed solely by the provisions of this Act, specific amendments thereof, and rules and regulations of the Board not inconsistent therewith; and funds derived 

from such assessments shall not be construed to be Government 

funds or appropriated moneys. No member of the Board of Governors of the Federal Reserve System shall be an officer or director 

of any bank, banking institution, trust company, or Federal Reserve bank or hold stock in any bank, banking institution, or trust 

company; and before entering upon his duties as a member of the 

Board of Governors of the Federal Reserve System he shall certify 

under oath that he has complied with this requirement, and such 


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24 

certification shall be filed with the secretary of the Board. Whenever a vacancy shall occur, other than by expiration of term, among 

the six members of the Board of Governors of the Federal Reserve 

System appointed by the President as above provided, a successor 

shall be appointed by the President, by and with the advice and 

consent of the Senate, to fill such vacancy, and when appointed he 

shall hold office for the unexpired term of his predecessor. 

The President shall have power to fill all vacancies that may 

happen on the Board of Governors of the Federal Reserve System 

during the recess of the Senate by granting commissions which 

shall expire with the next session of the Senate. 

Nothing in this Act contained shall be construed as taking away 

any powers heretofore vested by law in the Secretary of the Treasury which relate to the supervision, management, and control of 

the Treasury Department and bureaus under such department, and 

wherever any power vested by this Act in the Board of Governors 

of the Federal Reserve System or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, 

such powers shall be exercised subject to the supervision and control of the Secretary. 

The Board of Governors of the Federal Reserve System shall annually make a full report of its operations to the Speaker of the 

House of Representatives, who shall cause the same to be printed 

for the information of the Congress. The report required under this 

paragraph shall include the reports required under section 707 of 

the Equal Credit Opportunity Act, section 18(f)(7) of the Federal 

Trade Commission Act, section 114 of the Truth in Lending Act, 

and the tenth undesignated paragraph of this section. 

No Federal Reserve bank may authorize the acquisition or construction of any branch building, or enter into any contract or other 

obligation for the acquisition or construction of any branch building, without the approval of the Board. 

The Board of Governors of the Federal Reserve System shall 

keep a complete record of the action taken by the Board and by the 

Federal Open Market Committee upon all questions of policy relating to open-market operations and shall record therein the votes 

taken in connection with the determination of open-market policies 

and the reasons underlying the action of the Board and the Committee in each instance. The Board shall keep a similar record with 

respect to all questions of policy determined by the Board, and 

shall include in its annual report to the Congress a full account of 

the action so taken during the preceding year with respect to openmarket policies and operations and with respect to the policies determined by it and shall include in such report a copy of the 

records required to be kept under the provisions of this paragraph. 

ø(12)¿ (11) APPEARANCES BEFORE CONGRESS.—The Vice 

Chairman for Supervision øshall appear¿ shall provide written 

testimony and appear before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives and at semiannual hearings regarding the efforts, activities, objectives, 

and plans of the Board with respect to the conduct of supervision and regulation of depository institution holding companies and other financial firms supervised by the Board. If, at 

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sition of Vice Chairman for Supervision is vacant, the Chairman or their designee shall appear instead and provide the required written testimony. 

øSEC. 10A. Upon receiving the consent of not less than five members of the Board of Governors of the Federal Reserve System, any 

Federal Reserve bank may make advances, in such amount as the 

board of directors of such Federal Reserve bank may determine, to 

groups of five or more member banks within its district, a majority 

of them independently owned and controlled, upon their time or demand promissory notes, provided the bank or banks which receive 

the proceeds of such advances as herein provided have no adequate 

amounts of eligible and acceptable assets available to enable such 

bank or banks to obtain sufficient credit accommodations from the 

Federal Reserve bank through rediscounts or advances other than 

as provided in section 10(b). The liability of the individual banks 

in each group must be limited to such proportion of the total 

amount advanced to such group as the deposit liability of the respective banks bears to the aggregate deposit liability of all banks 

in such group, but such advances may be made to a lesser number 

of such member banks if the aggregate amount of their deposit liability constitutes at least 10 per centum of the entire deposit liability of the member banks within such district. Such banks shall 

be authorized to distribute the proceeds of such loans to such of 

their number and in such amount as they may agree upon, but before so doing they shall require such recipient banks to deposit 

with a suitable trustee, representing the entire group, their individual notes made in favor of the group protected by such collateral 

security as may be agreed upon. Any Federal Reserve bank making 

such advance shall charge interest or discount thereon at a rate not 

less than 1 per centum above its discount rate in effect at the time 

of making such advance. No such note upon which advances are 

made by a Federal Reserve bank under this section shall be eligible 

under section 16 of this Act as collateral security for Federal Reserve notes. 

øNo obligations of any foreign government, individual, partnership, association, or corporation organized under the laws thereof 

shall be eligible as collateral security for advances under this section. 

øMember banks are authorized to obligate themselves in accordance with the provisions of this section. ¿ 

SEC. 10B. (a) IN GENERAL.—Any Federal Reserve bank, under 

rules and regulations prescribed by the Board of Governors of the 

Federal Reserve System, may make advances to any member bank 

on its time or demand notes having maturities of not more than 

four months and which are secured to the satisfaction of such Federal Reserve bank. 

Notwithstanding the foregoing, any Federal Reserve bank, 

under rules and regulations prescribed by the Board of Governors 

of the Federal Reserve System, may make advances to any member 

bank on its time notes having such maturities as the Board may 

prescribe and which are not secured by mortgage loans covering a 

one-to-four family residence. Such advances shall bear interest at 

a rate equal to the ølowest discount rate¿ highest discount rate in 

effect at such Federal Reserve bank on the date of such note. 

(b) LIMITATIONS ON ADVANCES.— 


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(1) LIMITATION ON EXTENDED PERIODS.—Except as provided 

in paragraph (2), no advances to any undercapitalized depository institution by any Federal Reserve bank under this section may be outstanding for more than 60 days in any 120-day 

period. 

(2) VIABILITY EXCEPTION.— (A) IN GENERAL.—If— 

(i) the head of the appropriate Federal banking 

agency certifies in advance in writing to the Federal 

Reserve bank that any depository institution is viable; 

or 

(ii) the Board conducts an examination of any depository institution and the Chairman of the Board certifies in writing to the Federal Reserve bank that the 

institution is viable, 

the limitation contained in paragraph (1) shall not apply 

during the 60-day period beginning on the date such certification is received. 

(B) EXTENSIONS OF PERIOD.—The 60-day period may be 

extended for additional 60-day periods upon receipt by the 

Federal Reserve bank of additional written certifications 

under subparagraph (A) with respect to each such additional period. 

(C) AUTHORITY TO ISSUE A CERTIFICATE OF VIABILITY MAY

NOT BE DELEGATED.—The authority of the head of any 

agency to issue a written certification of viability under 

this paragraph may not be delegated to any other person. 

(D) EXTENDED ADVANCES SUBJECT TO PARAGRAPH (3).— Notwithstanding paragraph (1), an undercapitalized depository institution which does not have a certificate of viability in effect under this paragraph may have advances outstanding for more than 60 days in any 120-day period if 

the Board elects to treat— 

(i) such institution as critically undercapitalized 

under paragraph (3); and 

(ii) any such advance as an advance described in 

subparagraph (A)(i) of paragraph (3). 

(3) ADVANCES TO CRITICALLY UNDERCAPITALIZED DEPOSITORY

INSTITUTIONS.— (A) LIABILITY FOR INCREASED LOSS.—Notwithstanding 

any other provision of this section, if— 

(i) in the case of any critically undercapitalized depository institution— 

(I) any advance under this section to such institution is outstanding without payment having 

been demanded as of the end of the 5-day period 

beginning on the date the institution becomes a 

critically undercapitalized depository institution; 

or 

(II) any new advance is made to such institution 

under this section after the end of such period; 

and 

(ii) after the end of that 5-day period, the Deposit 

Insurance Fund of the Federal Deposit Insurance Corporation incurs a loss exceeding the loss that the CorVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00026 Fmt 6659 Sfmt 6602 E:\HR\OC\HR1116P1.XXX HR1116P1

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poration would have incurred if it had liquidated that 

institution as of the end of that period, 

the Board shall, subject to the limitations in subparagraph 

(B), be liable to the Federal Deposit Insurance Corporation 

for the excess loss, without regard to the terms of the advance or any collateral pledged to secure the advance. 

(B) LIMITATION ON EXCESS LOSS.—The liability of the 

Board under subparagraph (A) shall not exceed the lesser 

of the following: 

(i) The amount of the loss the Board or any Federal 

Reserve bank would have incurred on the increases in 

the amount of advances made after the 5-day period 

referred to in subparagraph (A) if those increased advances had been unsecured. 

(ii) The interest received on the increases in the 

amount of advances made after the 5-day period referred to in subparagraph (A). 

(C) FEDERAL RESERVE TO PAY OBLIGATION.—The Board 

shall pay the Federal Deposit Insurance Corporation the 

amount of any liability of the Board under subparagraph 

(A). 

(D) REPORT.—The Board shall report to the Congress on 

any excess loss liability it incurs under subparagraph (A), 

as limited by subparagraph (B)(i), and the reasons therefore, not later than 6 months after incurring the liability. 

(4) NO OBLIGATION TO MAKE ADVANCES.—A Federal Reserve 

bank shall have no obligation to make, increase, renew, or extend any advance or discount under this Act to any depository 

institution. 

(5) DEFINITIONS.— (A) APPROPRIATE FEDERAL BANKING AGENCY.—The term 

‘‘appropriate Federal banking agency’’ has the same meaning as in section 3 of the Federal Deposit Insurance Act. 

(B) CRITICALLY UNDERCAPITALIZED.—The term ‘‘critically 

undercapitalized’’ has the same meaning as in section 38 

of the Federal Deposit Insurance Act. 

(C) DEPOSITORY INSTITUTION.—The term ‘‘depository institution’’ has the same meaning as in section 3 of the Federal Deposit Insurance Act. 

(D) UNDERCAPITALIZED DEPOSITORY INSTITUTION.—The 

term ‘‘undercapitalized depository institution’’ means any 

depository institution which— 

(i) is undercapitalized, as defined in section 38 of the 

Federal Deposit Insurance Act; or 

(ii) has a composite CAMEL rating of 5 under the 

Uniform Financial Institutions Rating System (or an 

equivalent rating by any such agency under a comparable rating system) as of the most recent examination of such institution. 

(E) VIABLE.—A depository institution is ‘‘viable’’ if the 

Board or the appropriate Federal banking agency determines, giving due regard to the economic conditions and 

circumstances in the market in which the institution operates, that the institution— 

(i) is not critically undercapitalized; 


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28 

(ii) is not expected to become critically undercapitalized; and 

(iii) is not expected to be placed in conservatorship 

or receivership. 

* * * * * * * 

SEC. 11. The Board of Governors of the Federal Reserve System 

shall be authorized and empowered: 

(a)(1) To examine at its discretion the accounts, books and affairs 

of each Federal reserve bank and of each member bank and to require such statements and reports as it may deem necessary. The 

said board shall publish once each week a statement showing the 

condition of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such statements shall show in 

detail the assets and liabilities of the Federal reserve banks, single 

and combined, and shall furnish full information regarding the 

character of the money held as reserve and the amount, nature and 

maturities of the paper and other investments owned or held by 

Federal reserve banks. 

(2) To require any depository institution specified in this paragraph to make, at such intervals as the Board may prescribe, such 

reports of its liabilities and assets as the Board may determine to 

be necessary or desirable to enable the Board to discharge its responsibility to monitor and control monetary and credit aggregates. 

Such reports shall be made (A) directly to the Board in the case 

of member banks and in the case of other depository institutions 

whose reserve requirements under section 19 of this Act exceed 

zero, and (B) for all other reports to the Board through the (i) Federal Deposit Insurance Corporation in the case of insured State 

savings associations that are insured depository institutions (as defined in section 3 of the Federal Deposit Insurance Act), State nonmember banks, savings banks, and mutual savings banks, (ii) National Credit Union Administration Board in the case of insured 

credit unions, (iii) the Comptroller of the Currency in the case of 

any Federal savings association which is an insured depository institution (as defined in section 3 of the Federal Deposit Insurance 

Act) or which is a member as defined in section 2 of the Federal 

Home Loan Bank Act, and (iv) such State officer or agency as the 

Board may designate in the case of any other type of bank, savings 

association, or credit union. The Board shall endeavor to avoid the 

imposition of unnecessary burdens on reporting institutions and 

the duplication of other reporting requirements. Except as otherwise required by law, any data provided to any department, agency, or instrumentality of the United States pursuant to other reporting requirements shall be made available to the Board. The 

Board may classify depository institutions for the purposes of this 

paragraph and may impose different requirements on each such 

class. 

(b) To permit, or, on the affirmative vote of at least five members 

of the Board of Governors of the Federal Reserve System to require 

Federal reserve banks to rediscount the discounted paper of other 

Federal reserve banks at rates of interest to be fixed by the Board 

of Governors of the Federal Reserve System. 

(c) To suspend for a period not exceeding thirty days, and from 

time to time to renew such suspension for periods not exceeding fifteen days, any reserve requirements specified in this Act. 


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29 

(d) To supervise and regulate through the Secretary of the Treasury the issue and retirement of Federal reserve notes, except for 

the cancellation and destruction, and accounting with respect to 

such cancellation and destruction, of notes unfit for circulation, and 

to prescribe rules and regulations under which such notes may be 

delivered by the Secretary of the Treasury to the Federal reserve 

agents applying therefor. 

(e) To add to the number of cities classified as Reserve cities 

under existing law in which national banking associations are subject to the Reserve requirements set forth in section twenty of this 

Act; or to reclassify existing Reserve cities or to terminate their 

designation as such. 

(f) To suspend or remove any officer or director of any Federal 

reserve bank, the cause of such removal to be forthwith communicated in writing by the Board of Governors of the Federal Reserve System to the removed officer or director and to said bank. 

(g) To require the writing off of doubtful or worthless assets upon 

the books and balance sheets of Federal reserve banks. 

(h) To suspend, for the violation of any of the provisions of this 

Act, the operations of any Federal reserve bank, to take possession 

thereof, administer the same during the period of suspension, and, 

when deemed advisable, to liquidate or reorganize such bank. 

(i) To require bonds of Federal reserve agents, to make regulations for the safeguarding of all collateral, bonds, Federal reserve 

notes, money or property of any kind deposited in the hands of 

such agents, and said board shall perform the duties, functions, or 

services specified in this Act, and make all rules and regulations 

necessary to enable said board effectively to perform the same. 

(j) To exercise general supervision over said Federal reserve 

banks. 

(k) To delegate, by published order or rule and subject to the Administrative Procedure Act, any of its functions, other than those 

relating to rulemaking or pertaining principally to monetary and 

credit policies, to one or more administrative law judges, members 

or employees of the Board, or Federal Reserve banks. The assignment of responsibility for the performance of any function that the 

Board determines to delegate shall be a function of the Chairman. 

The Board shall, upon the vote of one member, review action taken 

at a delegated level within such time and in such manner as the 

Board shall by rule prescribe. The Board of Governors may not delegate to a Federal reserve bank its functions for the establishment 

of policies for the supervision and regulation of depository institution holding companies and other financial firms supervised by the 

Board of Governors. 

(l) To employ such attorneys, experts, assistants, clerks, or other 

employees as may be deemed necessary to conduct the business of 

the board. All salaries and fees shall be fixed in advance by said 

board and shall be paid in the same manner as the salaries of the 

members of said board. All such attorneys, experts, assistants, 

clerks, and other employees shall be appointed without regard to 

the provisions of the Act of January sixteenth, eighteen hundred 

and eighty-three (volume twenty-two, United States Statutes at 

Large, page four hundred and three), and amendments thereto, or 

any rule or regulation made in pursuance thereof: Provided, That 

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ployees in the classified service. Each member of the Board of Governors of the Federal Reserve System may employ, at a minimum, 

2 individuals, with such individuals selected by such member and 

the salaries of such individuals set by such member. A member may 

employ additional individuals as determined necessary by the 

Board of Governors. 

(n) To examine, at the Board’s discretion, any depository institution, and any affiliate of such depository institution, in connection 

with any advance to, any discount of any instrument for, or any request for any such advance or discount by, such depository institution under this Act. 

(o) AUTHORITY TO APPOINT CONSERVATOR OR RECEIVER.—The 

Board may appoint the Federal Deposit Insurance Corporation as 

conservator or receiver for a State member bank under section 

11(c)(9) of the Federal Deposit Insurance Act. 

(p) AUTHORITY.—The Board may act in its own name and 

through its own attorneys in enforcing any provision of this title, 

regulations promulgated hereunder, or any other law or regulation, 

or in any action, suit, or proceeding to which the Board is a party 

and which involves the Board’s regulation or supervision of any 

bank, bank holding company (as defined in section 2 of the Bank 

Holding Company Act of 1956), or other entity, or the administration of its operations. 

(q) UNIFORM PROTECTION AUTHORITY FOR FEDERAL RESERVE FACILITIES.— 

(1) Notwithstanding any other provision of law, to authorize 

personnel to act as law enforcement officers to protect and 

safeguard the premises, grounds, property, personnel, including members of the Board, of the Board, or any Federal reserve 

bank, and operations conducted by or on behalf of the Board 

or a reserve bank. 

(2) The Board may, subject to the regulations prescribed 

under paragraph (5), delegate authority to a Federal reserve 

bank to authorize personnel to act as law enforcement officers 

to protect and safeguard the bank’s premises, grounds, property, personnel, and operations conducted by or on behalf of 

the bank. 

(3) Law enforcement officers designated or authorized by the 

Board or a reserve bank under paragraph (1) or (2) are authorized while on duty to carry firearms and make arrests without 

warrants for any offense against the United States committed 

in their presence, or for any felony cognizable under the laws 

of the United States committed or being committed within the 

buildings and grounds of the Board or a reserve bank if they 

have reasonable grounds to believe that the person to be arrested has committed or is committing such a felony. Such officers shall have access to law enforcement information that may 

be necessary for the protection of the property or personnel of 

the Board or a reserve bank. 

(4) For purposes of this subsection, the term ‘‘law enforcement officers’’ means personnel who have successfully completed law enforcement training and are authorized to carry 

firearms and make arrests pursuant to this subsection. 


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31 

(5) The law enforcement authorities provided for in this subsection may be exercised only pursuant to regulations prescribed by the Board and approved by the Attorney General. 

(r)(1) Any action that this Act provides may be taken only upon 

the affirmative vote of 5 members of the Board may be taken upon 

the unanimous vote of all members then in office if there are fewer 

than 5 members in office at the time of the action. 

(2)(A) Any action that the Board is otherwise authorized to take 

under section 13(3) may be taken upon the unanimous vote of all 

available members then in office, if— 

(i) at least 2 members are available and all available members participate in the action; 

(ii) the available members unanimously determine that— 

(I) unusual and exigent circumstances exist and the borrower is unable to secure adequate credit accommodations 

from other sources; 

(II) action on the matter is necessary to prevent, correct, 

or mitigate serious harm to the economy or the stability of 

the financial system of the United States; 

(III) despite the use of all means available (including all 

available telephonic, telegraphic, and other electronic 

means), the other members of the Board have not been 

able to be contacted on the matter; and 

(IV) action on the matter is required before the number 

of Board members otherwise required to vote on the matter can be contacted through any available means (including all available telephonic, telegraphic, and other electronic means); and 

(iii) any credit extended by a Federal reserve bank pursuant 

to such action is payable upon demand of the Board. 

(B) The available members of the Board shall document in writing the determinations required by subparagraph (A)(ii), and such 

written findings shall be included in the record of the action and 

in the official minutes of the Board, and copies of such record shall 

be provided as soon as practicable to the members of the Board 

who were not available to participate in the action and to the 

Chairman of the Committee on Banking, Housing, and Urban Affairs of the Senate and to the Chairman of the Committee on Financial Services of the House of Representatives. 

(s) FEDERAL RESERVE TRANSPARENCY AND RELEASE OF INFORMATION.— 

(1) IN GENERAL.—In order to ensure the disclosure in a timely manner consistent with the purposes of this Act of information concerning the borrowers and counterparties participating 

in emergency credit facilities, discount window lending programs, and open market operations authorized or conducted by 

the Board or a Federal reserve bank, the Board of Governors 

shall disclose, as provided in paragraph (2)— 

(A) the names and identifying details of each borrower, 

participant, or counterparty in any credit facility or covered transaction; 

(B) the amount borrowed by or transferred by or to a 

specific borrower, participant, or counterparty in any credit facility or covered transaction; 


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(C) the interest rate or discount paid by each borrower, 

participant, or counterparty in any credit facility or covered transaction; and 

(D) information identifying the types and amounts of collateral pledged or assets transferred in connection with 

participation in any credit facility or covered transaction. 

(2) MANDATORY RELEASE DATE.—In the case of— 

(A) a credit facility, the Board shall disclose the information described in paragraph (1) on the date that is 1 year 

after the effective date of the termination by the Board of 

the authorization of the credit facility; and 

(B) a covered transaction, the Board shall disclose the 

information described in paragraph (1) on the last day of 

the eighth calendar quarter following the calendar quarter 

in which the covered transaction was conducted. 

(3) EARLIER RELEASE DATE AUTHORIZED.—The Chairman of 

the Board may publicly release the information described in 

paragraph (1) before the relevant date specified in paragraph 

(2), if the Chairman determines that such disclosure would be 

in the public interest and would not harm the effectiveness of 

the relevant credit facility or the purpose or conduct of covered 

transactions. 

(4) DEFINITIONS.—For purposes of this subsection, the following definitions shall apply: 

(A) CREDIT FACILITY.—The term ‘‘credit facility’’ has the 

same meaning as in section 714(f)(1)(A) of title 31, United 

States Code. 

(B) COVERED TRANSACTION.—The term ‘‘covered transaction’’ means— 

(i) any open market transaction with a nongovernmental third party conducted under the first undesignated paragraph of section 14 or subparagraph (a), (b), 

or (c) of the 2nd undesignated paragraph of such section, after the date of enactment of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act; and 

(ii) any advance made under section 10B after the 

date of enactment of that Act. 

(5) TERMINATION OF CREDIT FACILITY BY OPERATION OF

LAW.—A credit facility shall be deemed to have terminated as 

of the end of the 24-month period beginning on the date on 

which the credit facility ceases to make extensions of credit 

and loans, unless the credit facility is otherwise terminated by 

the Board before such date. 

(6) CONSISTENT TREATMENT OF INFORMATION.—Except as provided in this subsection or section 13(3)(D), or in section 

714(f)(3)(C) of title 31, United States Code, the information described in paragraph (1) and information concerning the transactions described in section 714(f) of such title, shall be confidential, including for purposes of section 552(b)(3) of title 5 

of such Code, until the relevant mandatory release date described in paragraph (2), unless the Chairman of the Board determines that earlier disclosure of such information would be 

in the public interest and would not harm the effectiveness of 

the relevant credit facility or the purpose of conduct of the relevant transactions. 


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33 

(7) PROTECTION OF PERSONAL PRIVACY.—This subsection and 

section 13(3)(C), section 714(f)(3)(C) of title 31, United States 

Code, and subsection (a) or (c) of section 1109 of the DoddFrank Wall Street Reform and Consumer Protection Act shall 

not be construed as requiring any disclosure of nonpublic personal information (as defined for purposes of section 502 of the 

Gramm-Leach-Bliley Act (12 U.S.C. 6802)) concerning any individual who is referenced in collateral pledged or assets transferred in connection with a credit facility or covered transaction, unless the person is a borrower, participant, or 

counterparty under the credit facility or covered transaction. 

(8) STUDY OF FOIA EXEMPTION IMPACT.— 

(A) STUDY.—The Inspector General of the Board of Governors of the Federal Reserve System shall— 

(i) conduct a study on the impact that the exemption 

from section 552(b)(3) of title 5 (known as the Freedom 

of Information Act) established under paragraph (6) 

has had on the ability of the public to access information about the administration by the Board of Governors of emergency credit facilities, discount window 

lending programs, and open market operations; and 

(ii) make any recommendations on whether the exemption described in clause (i) should remain in effect. 

(B) REPORT.—Not later than 30 months after the date of 

enactment of this section, the Inspector General of the 

Board of Governors of the Federal Reserve System shall 

submit a report on the findings of the study required 

under subparagraph (A) to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, and publish the report on the website of the Board. 

(9) RULE OF CONSTRUCTION.—Nothing in this section is 

meant to affect any pending litigation or lawsuit filed under 

section 552 of title 5, United States Code (popularly known as 

the Freedom of Information Act), on or before the date of enactment of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act. 

ø(s)¿ (t) ASSESSMENTS, FEES, AND OTHER CHARGES FOR CERTAIN

COMPANIES.— 

(1) IN GENERAL.—The Board shall collect a total amount of 

assessments, fees, or other charges from the companies described in paragraph (2) that is equal to the total expenses the 

Board estimates are necessary or appropriate to carry out the 

supervisory and regulatory responsibilities of the Board with 

respect to such companies. 

(2) COMPANIES.—The companies described in this paragraph 

are— 

(A) all bank holding companies having total consolidated 

assets of $50,000,000,000 or more; 

(B) all savings and loan holding companies having total 

consolidated assets of $50,000,000,000 or more; and 

(C) all nonbank financial companies supervised by the 

Board under section 113 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act. 


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34 

(u) PROHIBITED AND RESTRICTED FINANCIAL INTERESTS AND

TRANSACTIONS.—The members and employees of the Board of Governors of the Federal Reserve System shall be subject to the provisions under section 4401.102 of title 5, Code of Federal Regulations, 

to the same extent as such provisions apply to an employee of the 

Securities and Exchange Commission. 

(v) DISCLOSURE OF STAFF SALARIES AND FINANCIAL INFORMA- TION.—The Board of Governors of the Federal Reserve System shall 

make publicly available, on the website of the Board of Governors, 

a searchable database that contains the names of all members, officers, and employees of the Board of Governors who receive an annual salary in excess of the annual rate of basic pay for GS–15 of 

the General Schedule, and— 

(1) the yearly salary information for such individuals, along 

with any nonsalary compensation received by such individuals; 

and 

(2) any financial disclosures required to be made by such individuals. 

* * * * * * * 

SEC. 11C. APPROPRIATIONS REQUIREMENT FOR NON-MONETARY POLICY RELATED ADMINISTRATIVE COSTS. 

(a) APPROPRIATIONS REQUIREMENT.— (1) RECOVERY OF COSTS OF ANNUAL APPROPRIATION.—The 

Board of Governors of the Federal Reserve System and the Federal reserve banks shall collect assessments and other fees, as 

provided under this Act, that are designed to recover the costs 

to the Government of the annual appropriation to the Board of 

Governors of the Federal Reserve System by Congress. The 

Board of Governors of the Federal Reserve System and the Federal reserve banks may only incur obligations or allow and pay 

expenses with respect to non-monetary policy related administrative costs pursuant to an appropriations Act. 

(2) OFFSETTING COLLECTIONS.—Assessments and other fees 

described under paragraph (1) for any fiscal year— 

(A) shall be deposited and credited as offsetting collections to the account providing appropriations to the Board 

of Governors of the Federal Reserve System; and 

(B) shall not be collected for any fiscal year except to the 

extent provided in advance in appropriation Acts. 

(3) LIMITATION.—This subsection shall only apply to the nonmonetary policy related administrative costs of the Board of 

Governors of the Federal Reserve System. 

(b) DEFINITIONS.—For purposes of this section: 

(1) MONETARY POLICY.—The term ‘‘monetary policy’’ means a 

strategy for producing a generally acceptable exchange medium 

that supports the productive employment of economic resources 

by reliably serving as both a unit of account and store of value. 

(2) NON-MONETARY POLICY RELATED ADMINISTRATIVE

COSTS.—The term ‘‘non-monetary policy related administrative 

costs’’ means administrative costs not related to the conduct of 

monetary policy, and includes— 

(A) direct operating expenses for supervising and regulating entities supervised and regulated by the Board of 

Governors of the Federal Reserve System, including conVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6603 E:\HR\OC\HR1116P1.XXX HR1116P1

lotter on DSKBCFDHB2PROD with REPORTS
35 

ducting examinations, conducting stress tests, communicating with the entities regarding supervisory matters 

and laws, and regulations; 

(B) operating expenses for activities integral to carrying 

out supervisory and regulatory responsibilities, such as 

training staff in the supervisory function, research and 

analysis functions including library subscription services, 

and collecting and processing regulatory reports filed by supervised institutions; and 

(C) support, overhead, and pension expenses related to 

the items described under subparagraphs (A) and (B). 

* * * * * * * 

SEC. 12A. (a) There is hereby created a Federal Open Market 

Committee (hereinafter referred to as the ‘‘Committee’’), which 

shall consist of the members of the Board of Governors of the Federal Reserve System and øfive representatives of the Federal Reserve banks to be selected as hereinafter provided¿ one representative from each of the Federal Reserve banks. Such representatives 

shall be presidents or first vice presidents of Federal Reserve banks 

øand, beginning with the election for the term commencing March 

1, 1943, shall be elected annually as follows: One by the board of 

directors of the Federal Reserve Bank of New York, one by the 

boards of directors of the Federal Reserve Banks of Boston, Philadelphia, and Richmond, one by the boards of directors of the Federal Reserve Banks of Cleveland and Chicago, one by the boards 

of directors of the Federal Reserve Banks of Atlanta, Dallas, and 

St. Louis, and one by the boards of directors of the Federal Reserve 

Banks of Minneapolis, Kansas City, and San Francisco¿.ø In such 

elections each board of directors shall have one vote; and the details of such elections may be governed by regulations prescribed 

by the committee, which may be amended from time to time. An 

alternate to serve in the absence of each such representative shall 

likewise be a president or first vice president of a Federal Reserve 

bank and shall be elected annually in the same manner.¿ The 

meetings of said Committee shall be held at Washington, District 

of Columbia, at least four times each year upon the call of the 

chairman of the Board of Governors of the Federal Reserve System 

or at the request of any three members of the Committee. 

(b) POLICY TRANSPARENCY.— (1) MONETARY POLICY STRATEGY.— (A) IN GENERAL.—The Committee shall annually establish exactly 1 monetary policy strategy, which shall serve as 

a non-technical public communication of the Committee’s 

consensus expectation for the conduct of monetary policy 

during that calendar year. 

(B) REQUIREMENTS.—Each monetary policy strategy of 

the Committee shall include the following: 

(i) A plain English description of how the Committee 

would adjust each of the following monetary policy instruments in reaction to changes in a small and welldefined set of publicly available economic indicators: 

(I) Short-term interest rate targets established by 

the Committee. 

(II) Open-market operations authorized under 

section 14. 


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36 

(III) Earnings on balances maintained at a Federal reserve bank by or on behalf of a depository 

institution under section 19(b)(12). 

(ii) An identification of 1 monetary policy instrument 

from the list in clause (i) that the Committee expects to 

use as the primary instrument for implementing the 

monetary policy strategy described under subparagraph (A). 

(2) REFERENCE MONETARY POLICY RULES.—In addition to the 

monetary policy strategy required under paragraph (1), the 

Committee shall annually adopt at least 1 and not more than 

3 reference monetary policy rules, each of which shall mathematically express how the primary monetary policy instrument 

identified under paragraph (1)(B)(ii) reacts to changes in a 

small and well-defined set of publicly available economic indicators. 

(3) DEVIATIONS.—Nothing in this subsection shall be construed to prevent the Committee from setting short-term interest 

rate targets, conducting open-market operations, or paying 

earnings on balances pursuant to section 19(b)(12) in a manner 

that deviates from a monetary policy strategy or any reference 

monetary policy rules established under this subsection. 

(c) TESTIMONY AND REPORTS OF THE CHAIRMAN.—The Chairman 

shall, concurrent with each semi-annual hearing required under 

section 2B, submit a report to the Committee on Banking, Housing, 

and Urban Affairs of the Senate and the Committee on Banking 

and Financial Services of the House of Representatives, containing— 

(1) a statement as to whether the monetary policy strategy established under subsection (b)(1) qualitatively differs from any 

of the reference monetary policy rules required under subsection 

(b)(2) and, if applicable, a full and non-technical explanation of 

any such difference; 

(2) a statement as to whether the Committee’s conduct of 

monetary policy since the previous report quantitatively differs 

from any reference monetary policy rule and, if applicable, a 

full and non-technical explanation of any such differences; and 

(3) a description of— 

(A) the circumstances under which the Committee’s monetary policy strategy may be amended from year to year; 

and 

(B) a full and non-technical explanation of any such actual amendment. 

ø(b)¿ (d) No Federal Reserve bank shall engage or decline to engage in open-market operations under section 14 of this Act except 

in accordance with the direction of and regulations adopted by the 

Committee. The Committee shall consider, adopt, and transmit to 

the several Federal Reserve banks, regulations relating to the 

open-market transactions of such banks. 

ø(c)¿ (e) The time, character, and volume of all purchases and 

sales of paper described in section 14 of this Act as eligible for 

open-market operations shall be governed with a view to accommodating commerce and business and with regard to their bearing 

upon the general credit situation of the country. 

(f) BLACKOUT PERIOD.— 


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(1) IN GENERAL.—During a blackout period, the only public 

communications that may be made by members and staff of the 

Committee with respect to macroeconomic or financial developments or about current or prospective monetary policy issues are 

the following: 

(A) The dissemination of published data, surveys, and reports that have been cleared for publication by the Board 

of Governors of the Federal Reserve System. 

(B) Answers to technical questions specific to a data release. 

(C) Communications with respect to the prudential or supervisory functions of the Board of Governors. 

(2) BLACKOUT PERIOD DEFINED.—For purposes of this subsection, and with respect to a meeting of the Committee described under subsection (a), the term ‘‘blackout period’’ means 

the time period that— 

(A) begins immediately after midnight on the day that is 

one week prior to the date on which such meeting takes 

place; and 

(B) ends at midnight on the day after the date on which 

such meeting takes place. 

(3) EXEMPTION FOR CHAIRMAN OF THE BOARD OF GOV- ERNORS.—Nothing in this section shall prohibit the Chairman 

of the Board of Governors of the Federal Reserve System from 

participating in or issuing public communications. 

POWERS OF FEDERAL RESERVE BANKS. 

SEC. 13. Any Federal reserve bank may receive from any of its 

member banks or other depository institutions, and from the 

United States, deposits of current funds in lawful money, nationalbank notes, Federal reserve notes, or checks, and drafts, payable 

upon presentation or other items, and also, for collection, maturing 

notes and bills; or, solely for purposes of exchange or of collection, 

may receive from other Federal reserve banks deposits of current 

funds in lawful money, national-bank notes, or checks upon other 

Federal reserve banks, and checks and drafts, payable upon presentation within its district or other items, and maturing notes and 

bills payable within its district; or, solely for the purposes of exchange or of collection, may receive from any nonmember bank or 

trust company or other depository institution deposits of current 

funds in lawful money, national-bank notes, Federal reserve notes, 

checks and drafts payable upon presentation or other items, or maturing notes and bills: Provided, Such nonmember bank or trust 

company or other depository institution maintains with the Federal 

reserve bank of its district a balance in such amount as the Board 

determines taking into account items in transit, services provided 

by the Federal Reserve bank, and other factors as the Board may 

deem appropriate: Provided further, That nothing in this or any 

other section of this Act shall be construed as prohibiting a member or nonmember bank or other depository institution from making reasonable charges, to be determined and regulated by the 

Board of Governors of the Federal Reserve System, but in no case 

to exceed 10 cents per $100 or fraction thereof, based on the total 

of checks and drafts presented at any one time, for collection or 

payment of checks and drafts and remission therefor by exchange 


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38 

or otherwise; but no such charges shall be made against the Federal reserve banks. 

Upon the indorsement of any of its member banks, which shall 

be deemed a waiver of demand, notice and protest by such bank 

as to its own indorsement exclusively, any Federal reserve bank 

may discount notes, drafts, and bills of exchange arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial 

purposes, or the proceeds of which have been used, or are to be 

used, for such purposes, the Board of Governors of the Federal Reserve System to have the right to determine or define the character 

of the paper thus eligible for discount, within the meaning of this 

Act. Nothing in this Act contained shall be construed to prohibit 

such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise from being 

eligible for such discount, and the notes, drafts, and bills of exchange of factors issued as such making advances exclusively to 

producers of staple agricultural products in their raw state shall be 

eligible for such discount; but such definition shall not include 

notes, drafts, or bills covering merely investments or issued or 

drawn for the purpose of carrying or trading in stocks, bonds, or 

other investment securities, except bonds and notes of the Government of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at 

the time of discount of not more than 90 days, exclusive of grace. 

(3)(A) In unusual and exigent circumstances that pose a threat to 

the financial stability of the United States, the Board of Governors 

of the Federal Reserve System, by øthe affirmative vote of not less 

than five members¿ the prior approval of the Secretary of the Treasury and not less than 2⁄3 of the members of the Federal Open Market 

Committee, may authorize any Federal reserve bank, during such 

periods as the said board may determine, at rates established in 

accordance with the provisions of section 14, subdivision (d), of this 

Act, to discount for any financial institution participant in any program or facility with broad-based eligibility, notes, drafts, and bills 

of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, 

or bill of exchange, the Federal reserve bank shall obtain evidence 

that such financial institution participant in any program or facility with broad-based eligibility is unable to secure adequate credit 

accommodations from other banking institutions. All such discounts for any financial institution participant in any program or 

facility with broad-based eligibility shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the 

Federal Reserve System may prescribe. 

(B)(i) As soon as is practicable after the date of enactment of this 

subparagraph, the Board shall establish, by regulation, in consultation with the Secretary of the Treasury, the policies and procedures 

governing emergency lending under this paragraph. Such policies 

and procedures shall be designed to ensure that any emergency 

lending program or facility is for the purpose of providing liquidity 

to the financial system, and not to aid a failing financial company, 

and that the security for emergency loans is sufficient to protect 

taxpayers from losses and that any such program is terminated in 


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39 

a timely and orderly fashion. The policies and procedures established by the Board shall require that a Federal reserve bank assign, consistent with sound risk management practices and to ensure protection for the taxpayer, a lendable value to all collateral 

for a loan executed by a Federal reserve bank under this paragraph 

in determining whether the loan is secured satisfactorily for purposes of this paragraph. Federal reserve banks may not accept equity securities issued by the recipient of any loan or other financial 

assistance under this paragraph as collateral. Not later than 6 

months after the date of the enactment of this sentence, the Board 

shall, by rule, establish— 

(I) a method for determining the sufficiency of the collateral 

required under this paragraph; 

(II) acceptable classes of collateral; 

(III) the amount of any discount on the value of the collateral 

that the Federal reserve banks will apply for purposes of calculating the sufficiency of collateral under this paragraph; and 

(IV) a method for obtaining independent appraisals of the 

value of collateral the Federal reserve banks receive. 

(ii) The Board shall establish procedures to prohibit borrowing 

from programs and facilities by borrowers that are insolvent. A borrower shall not be eligible to borrow from any emergency lending 

program or facility unless the Board and all Federal banking regulators with jurisdiction over the borrower certify that, at the time 

the borrower initially borrows under the program or facility, the 

borrower is not insolvent. øSuch procedures may include a certification from the chief executive officer (or other authorized officer) 

of the borrower, at the time the borrower initially borrows under 

the program or facility (with a duty by the borrower to update the 

certification if the information in the certification materially 

changes), that the borrower is not insolvent.¿ A borrower shall be 

considered insolvent for purposes of this subparagraph, if the borrower is in bankruptcy, resolution under title II of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, or any other 

Federal or State insolvency proceeding. 

(iii) A program or facility that is structured to remove assets 

from the balance sheet of a single and specific company, or that is 

established for the purpose of assisting a single and specific company avoid bankruptcy, resolution under title II of the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, or any other 

Federal or State insolvency proceeding, shall not be considered a 

program or facility with broad-based eligibility. 

ø(iv) The Board may not establish any program or facility under 

this paragraph without the prior approval of the Secretary of the 

Treasury.¿ 

(C) The Board shall provide to the Committee on Banking, 

Housing, and Urban Affairs of the Senate and the Committee 

on Financial Services of the House of Representatives— 

(i) not later than 7 days after the Board authorizes any 

loan or other financial assistance under this paragraph, a 

report that includes— 

(I) the justification for the exercise of authority to 

provide such assistance; 

(II) the identity of the recipients of such assistance; 


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40 

(III) the date and amount of the assistance, and 

form in which the assistance was provided; and 

(IV) the material terms of the assistance, including— 

(aa) duration; 

(bb) collateral pledged and the value thereof; 

(cc) all interest, fees, and other revenue or items 

of value to be received in exchange for the assistance; 

(dd) any requirements imposed on the recipient 

with respect to employee compensation, distribution of dividends, or any other corporate decision 

in exchange for the assistance; and 

(ee) the expected costs to the taxpayers of such 

assistance; and 

(ii) once every 30 days, with respect to any outstanding 

loan or other financial assistance under this paragraph, 

written updates on— 

(I) the value of collateral; 

(II) the amount of interest, fees, and other revenue 

or items of value received in exchange for the assistance; and 

(III) the expected or final cost to the taxpayers of 

such assistance. 

(D) The information required to be submitted to Congress 

under subparagraph (C) related to— 

(i) the identity of the financial institution participants in 

an emergency lending program or facility commenced 

under this paragraph; 

(ii) the amounts borrowed by each financial institution 

participant in any such program or facility; 

(iii) identifying details concerning the assets or collateral 

held by, under, or in connection with such a program or facility, 

shall be kept confidential, upon the written request of the 

Chairman of the Board, in which case such information 

shall be made available only to the Chairpersons or Ranking Members of the Committees described in subparagraph 

(C). 

(E) If an entity to which a Federal reserve bank has provided 

a loan under this paragraph becomes a covered financial company, as defined in section 201 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, at any time while such 

loan is outstanding, and the Federal reserve bank incurs a realized net loss on the loan, then the Federal reserve bank shall 

have a claim equal to the amount of the net realized loss 

against the covered entity, with the same priority as an obligation to the Secretary of the Treasury under section 210(b) of 

the Dodd-Frank Wall Street Reform and Consumer Protection 

Act. 

(F) Not later than 1 year after a Federal reserve bank acquires any assets under this paragraph that are neither gold 

nor direct obligations of the United States, foreign central 

banks, or the International Monetary Fund— 


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41 

(i) the Board shall transfer such assets of the Federal reserve bank to the Department of the Treasury; and 

(ii) the Secretary of the Treasury shall transfer to the 

Federal reserve banks direct obligations of the United 

States of equivalent market value to the assets described in 

clause (i). 

(G) JOINT RESOLUTION OF APPROVAL.— (i) IN GENERAL.—A program or facility created under 

subparagraph (A) shall terminate on the date that is 30 

calendar days after the date on which Congress receives a 

report described in subparagraph (C) unless there is enacted into law a joint resolution approving the program or 

facility not later than 30 calendar days after the date on 

which the report is received. Any loan offered through the 

program or facility that is outstanding as of the date on 

which the program or facility is terminated shall be repaid 

in full not later than 30 calendar days after the date on 

which the program or facility is terminated. 

(ii) CONTENTS OF JOINT RESOLUTION.—For the purpose of 

this subparagraph, the term ‘‘joint resolution’’ means only 

a joint resolution— 

(I) that is introduced not later than 3 calendar days 

after the date on which the report described in subparagraph (C) is received by Congress; 

(II) that does not have a preamble; 

(III) the title of which is as follows: ‘‘Joint resolution 

relating to the approval of a program or facility created 

by the Board of Governors of the Federal Reserve System’’; and 

(IV) the matter after the resolving clause of which is 

as follows: ‘‘That Congress approves the program or facility created by the Board of Governors of the Federal 

Reserve System on llllllllll.’’ (The blank 

space being appropriately filled in). 

(iii) FAST TRACK CONSIDERATION IN HOUSE OF REP- RESENTATIVES.— (I) RECONVENING.—Upon receipt of a report under 

subparagraph (C), the Speaker, if the House would otherwise be adjourned, shall notify the Members of the 

House that, pursuant to this subparagraph, the House 

shall convene not later than the second calendar day 

after receipt of such report. 

(II) REPORTING AND DISCHARGE.—Any committee of 

the House of Representatives to which a joint resolution 

is referred shall report it to the House not later than 

5 calendar days after the date of receipt of the report 

described in subparagraph (C). If a committee fails to 

report the joint resolution within that period, the committee shall be discharged from further consideration 

of the joint resolution and the joint resolution shall be 

referred to the appropriate calendar. 

(III) PROCEEDING TO CONSIDERATION.—After each 

committee authorized to consider a joint resolution reports it to the House or has been discharged from its 

consideration, it shall be in order, not later than the 


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42 

sixth day after Congress receives the report described 

in subparagraph (C), to move to proceed to consider the 

joint resolution in the House. All points of order 

against the motion are waived. Such a motion shall 

not be in order after the House has disposed of a motion to proceed on the joint resolution. The previous 

question shall be considered as ordered on the motion 

to its adoption without intervening motion. The motion 

shall not be debatable. A motion to reconsider the vote 

by which the motion is disposed of shall not be in 

order. 

(IV) CONSIDERATION.—The joint resolution shall be 

considered as read. All points of order against the joint 

resolution and against its consideration are waived. 

The previous question shall be considered as ordered 

on the joint resolution to its passage without intervening motion except 2 hours of debate equally divided 

and controlled by the proponent and an opponent. A 

motion to reconsider the vote on passage of the joint 

resolution shall not be in order. 

(iv) FAST TRACK CONSIDERATION IN SENATE.— (I) RECONVENING.—Upon receipt of a report under 

subparagraph (C), if the Senate has adjourned or recessed for more than 2 days, the majority leader of the 

Senate, after consultation with the minority leader of 

the Senate, shall notify the Members of the Senate that, 

pursuant to this subparagraph, the Senate shall convene not later than the second calendar day after receipt of such report. 

(II) PLACEMENT ON CALENDAR.—Upon introduction 

in the Senate, the joint resolution shall be placed immediately on the calendar. 

(III) FLOOR CONSIDERATION.— (aa) IN GENERAL.—Notwithstanding Rule XXII 

of the Standing Rules of the Senate, it is in order 

at any time during the period beginning on the 

fourth day after the date on which Congress receives a report described in subparagraph (C) and 

ending on the sixth day after the date on which 

Congress receives the report (even though a previous motion to the same effect has been disagreed 

to) to move to proceed to the consideration of the 

joint resolution, and all points of order against the 

joint resolution (and against consideration of the 

joint resolution) are waived. The motion to proceed 

is not debatable. The motion is not subject to a motion to postpone. A motion to reconsider the vote by 

which the motion is agreed to or disagreed to shall 

not be in order. If a motion to proceed to the consideration of the resolution is agreed to, the joint 

resolution shall remain the unfinished business 

until disposed of. 

(bb) DEBATE.—Debate on the joint resolution, 

and on all debatable motions and appeals in connection therewith, shall be limited to not more 


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43 

than 10 hours, which shall be divided equally between the majority and minority leaders or their 

designees. A motion further to limit debate is in 

order and not debatable. An amendment to, or a 

motion to postpone, or a motion to proceed to the 

consideration of other business, or a motion to recommit the joint resolution is not in order. 

(cc) VOTE ON PASSAGE.—The vote on passage 

shall occur immediately following the conclusion of 

the debate on a joint resolution, and a single 

quorum call at the conclusion of the debate if requested in accordance with the rules of the Senate. 

(dd) RULINGS OF THE CHAIR ON PROCEDURE.— Appeals from the decisions of the Chair relating to 

the application of the rules of the Senate, as the 

case may be, to the procedure relating to a joint 

resolution shall be decided without debate. 

(v) COORDINATION WITH ACTION BY OTHER HOUSE.— (I) IN GENERAL.—If, before the passage by one House 

of a joint resolution of that House, that House receives 

from the other House a joint resolution, then the following procedures shall apply: 

(aa) The joint resolution of the other House shall 

not be referred to a committee. 

(bb) With respect to a joint resolution of the 

House receiving the resolution— 

(AA) the procedure in that House shall be 

the same as if no joint resolution had been received from the other House; but 

(BB) the vote on passage shall be on the 

joint resolution of the other House. 

(II) TREATMENT OF JOINT RESOLUTION OF OTHER

HOUSE.—If one House fails to introduce or consider a 

joint resolution under this section, the joint resolution 

of the other House shall be entitled to expedited floor 

procedures under this section. 

(III) CONSIDERATION AFTER PASSAGE.—If, following 

passage of the joint resolution in the Senate, the Senate 

then receives the companion measure from the House of 

Representatives, the companion measure shall not be 

debatable. 

(IV) VETOES.—If the President vetoes the joint resolution, the period beginning on the date the President vetoes the joint resolution and ending on the date the 

Congress receives the veto message with respect to the 

joint resolution shall be disregarded in computing the 

30-calendar day period described in clause (i) and debate on a veto message in the Senate under this section 

shall be 1 hour equally divided between the majority 

and minority leaders or their designees. 

(V) RULES OF HOUSE OF REPRESENTATIVES AND SENATE.—This subparagraph is enacted by Congress— 

(aa) as an exercise of the rulemaking power of 

the Senate and House of Representatives, respectively, and as such it is deemed a part of the rules 


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44 

of each House, respectively, but applicable only 

with respect to the procedure to be followed in that 

House in the case of a joint resolution, and it supersedes other rules only to the extent that it is inconsistent with such rules; and 

(bb) with full recognition of the constitutional 

right of either House to change the rules (so far as 

relating to the procedure of that House) at any 

time, in the same manner, and to the same extent 

as in the case of any other rule of that House. 

(H) PENALTY RATE.— (i) IN GENERAL.—Not later than 6 months after the date 

of enactment of this subparagraph, the Board shall, with 

respect to a recipient of any loan or other financial assistance under this paragraph, establish by rule a minimum 

interest rate on the principal amount of any loan or other 

financial assistance. 

(ii) MINIMUM INTEREST RATE DEFINED.—In this subparagraph, the term ‘‘minimum interest rate’’ shall mean the 

sum of— 

(I) the average of the secondary discount rate of all 

Federal reserve banks over the most recent 90-day period; and 

(II) the average of the difference between a distressed 

corporate bond yield index (as defined by rule of the 

Board) and a bond yield index of debt issued by the 

United States (as defined by rule of the Board) over the 

most recent 90-day period. 

(I) FINANCIAL INSTITUTION PARTICIPANT DEFINED.—For purposes of this paragraph, the term ‘‘financial institution participant’’— 

(i) means a company that is predominantly engaged in financial activities (as defined in section 102(a) of the Financial Stability Act of 2010 (12 U.S.C. 5311(a))); and 

(ii) does not include an agency described in subparagraph (W) of section 5312(a)(2) of title 31, United States 

Code, or an entity controlled or sponsored by such an agency. 

Upon the indorsement of any of its member banks, which shall 

be deemed a waiver of demand, notice, and protest by such bank 

as to its own indorsement exclusively, and subject to regulations 

and limitations to be prescribed by the Board of Governors of the 

Federal Reserve System, any Federal reserve bank may discount or 

purchase bills of exchange payable at sight or on demand which 

grow out of the domestic shipment or the exportation of nonperishable, readily marketable agricultural and other staples and are secured by bills of lading or other shipping documents conveying or 

securing title to such staples: Provided, That all such bills of exchange shall be forwarded promptly for collection, and demand for 

payment shall be made with reasonable promptness after the arrival of such staples at their destination: Provided further, That no 

such bill shall in any event be held by or for the account of a Federal reserve bank for a period in excess of ninety days. In discounting such bills Federal reserve banks may compute the interest 

to be deducted on the basis of the estimated life of each bill and 


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45 

adjust the discount after payment of such bills to conform to the 

actual life thereof. 

The aggregate of notes, drafts, and bills upon which any person, 

copartnership, association, or corporation is liable as maker, acceptor, indorser, drawer, or guarantor, rediscounted for any member 

bank, shall at no time exceed the amount for which such person, 

copartnership, association, or corporation may lawfully become liable to a national banking association under the terms of section 

5200 of the Revised Statutes, as amended: Provided, however, That 

nothing in this paragraph shall be construed to change the character or class of paper now eligible for rediscount by Federal reserve banks. 

Any Federal reserve bank may discount acceptances of the kinds 

hereinafter described, which have a maturity at the time of discount of not more than 90 days’ sight, exclusive of days of grace, 

and which are indorsed by at least one member bank: Provided, 

That such acceptances if drawn for an agricultural purpose and secured at the time of acceptance by warehouse receipts or other such 

documents conveying or securing title covering readily marketable 

staples may be discounted with a maturity at the time of discount 

of not more than six months’ sight exclusive of days of grace. 

(7)(A) Any member bank and any Federal or State branch or 

agency of a foreign bank subject to reserve requirements under section 7 of the International Banking Act of 1978 (hereinafter in this 

paragraph referred to as ‘‘institutions’’), may accept drafts or bills 

of exchange drawn upon it having not more than six months’ sight 

to run, exclusive of days of grace— 

(i) which grow out of transactions involving the importation 

or exportation of goods; 

(ii) which grow out of transactions involving the domestic 

shipment of goods; or 

(iii) which are secured at the time of acceptance by a warehouse receipt or other such document conveying or securing 

title covering readily marketable staples. 

(B) Except as provided in subparagraph (C), no institution shall 

accept such bills, or be obligated for a participation share in such 

bills, in an amount equal at any time in the aggregate to more 

than 150 per centum of its paid up and unimpaired capital stock 

and surplus or, in the case of a United States branch or agency of 

a foreign bank, its dollar equivalent as determined by the Board 

under subparagraph (H). 

(C) The Board, under such conditions as it may prescribe, may 

authorize, by regulation or order, any institution to accept such 

bills, or be obligated for a participation share in such bills, in an 

amount not exceeding at any time in the aggregate 200 per centum 

of its paid up and unimpaired capital stock and surplus or, in the 

case of a United States branch or agency of a foreign bank, its dollar equivalent as determined by the Board under subparagraph 

(H). 

(D) Notwithstanding subparagraphs (B) and (C), with respect to 

any institution, the aggregate acceptances, including obligations for 

a participation share in such acceptances, growing out of domestic 

transactions shall not exceed 50 per centum of the aggregate of all 

acceptances, including obligations for a participation share in such 

acceptances, authorized for such institution under this paragraph. 


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46 

(E) No institution shall accept bills, or be obligated for a participation share in such bills, whether in a foreign or domestic transaction, for any one person, partnership, corporation, association or 

other entity in an amount equal at any time in the aggregate to 

more than 10 per centum of its paid up and unimpaired capital 

stock and surplus, or, in the case of a United States branch or 

agency of a foreign bank, its dollar equivalent as determined by the 

Board under subparagraph (H), unless the institution is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance. 

(F) With respect to an institution which issues an acceptance, the 

limitations contained in this paragraph shall not apply to that portion of an acceptance which is issued by such institution and which 

is covered by a participation agreement sold to another institution. 

(G) In order to carry out the purposes of this paragraph, the 

Board may define any of the terms used in this paragraph, and, 

with respect to institutions which do not have capital or capital 

stock, the Board shall define an equivalent measure to which the 

limitations contained in this paragraph shall apply. 

(H) Any limitation or restriction in this paragraph based on paidup and unimpaired capital stock and surplus of an institution shall 

be deemed to refer, with respect to a United States branch or agency of a foreign bank, to the dollar equivalent of the paid-up capital 

stock and surplus of the foreign bank, as determined by the Board, 

and if the foreign bank has more than one United States branch 

or agency, the business transacted by all such branches and agencies shall be aggregated in determining compliance with the limitation or restriction. 

Any Federal reserve bank may make advances for periods not exceeding fifteen days to its member banks on their promissory notes 

secured by the deposit or pledge of bonds, notes, certificates of indebtedness or Treasury bills of the United States, or by the deposit 

or pledge of debentures or other such obligations of Federal intermediate credit banks which are eligible for purchase by Federal reserve banks under section 13 (a) of this Act, or by the deposit or 

pledge of bonds issued under the provisions of subsection (c) of section 4 of the Home Owners’ Loan Act of 1933, as amended; and any 

Federal reserve bank may make advances for periods not exceeding 

ninety days to its member banks on their promissory notes secured 

by such notes, drafts, bills of exchange, or bankers’ acceptances as 

are eligible for rediscount or for purchase by Federal reserve banks 

under the provisions of this Act, or secured by such obligations as 

are eligible for purchase under section 14(b) of this Act. All such 

advances shall be made at rates to be established by such Federal 

reserve banks, such rates to be subject to the review and determination of the Board of Governors of the Federal Reserve System. 

If any member bank to which any such advance has been made 

shall, during the life or continuance of such advance, and despite 

an official warning of the reserve bank of the district or of the 

Board of Governors of the Federal Reserve System to the contrary, 

increase its outstanding loans secured by collateral in the form of 

stocks, bonds, debentures, or other such obligations, or loans made 

to members of any organized stock exchange, investment house, or 

dealer in securities, upon any obligation, note, or bill, secured or 

unsecured, for the purpose of purchasing and/or carrying stocks, 


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47 

bonds, or other investment securities (except obligations of the 

United States) such advance shall be deemed immediately due and 

payable, and such member bank shall be ineligible as a borrower 

at the reserve bank of the district under the provisions of this 

paragraph for such period as the Board of Governors of the Federal 

Reserve System shall determine: Provided, That no temporary carrying or clearance loans made solely for the purpose of facilitating 

the purchase or delivery of securities offered for public subscription 

shall be included in the loans referred to in this paragraph. 

The discount and rediscount and the purchase and sale by any 

Federal reserve bank of any bills receivable and of domestic and 

foreign bills of exchange, and of acceptances authorized by this Act, 

shall be subject to such restrictions, limitations, and regulations as 

may be imposed by the Board of Governors of the Federal Reserve 

System. (Omitted from U.S. Code) 

That in addition to the powers not vested by law in national 

banking associations organized under the laws of the United States 

any such association located and doing business in any place the 

population of which does not exceed five thousand inhabitants, as 

shown by the last preceding decennial census, may, under such 

rules and regulations as may be prescribed by the Comptroller of 

the Currency, act as the agent for any fire, life, or other insurance 

company authorized by the authorities of the State in which said 

bank is located to do business in said State, by soliciting and selling insurance and collecting premiums on policies issued by such 

company; and may receive for services so rendered such fees or 

commissions as may be agreed upon between the said association 

and the insurance company for which it may act as agent: Provided, however, That no such bank shall in any case assume or 

guarantee the payment of any premium on insurance policies 

issued through its agency by its principal: And provided further, 

That the bank shall not guarantee the truth of any statement 

made by an assured in filing his application for insurance. 

Any member bank may accept drafts or bills of exchange drawn 

upon it having not more than three months’ sight to run, exclusive 

of days of grace, drawn under regulations to be prescribed by the 

Board of Governors of the Federal Reserve System by banks or 

bankers in foreign countries or dependencies or insular possessions 

of the United States for the purpose of furnishing dollar exchange 

as required by the usages of trade in the respective countries, dependencies, or insular possessions. Such drafts or bills may be acquired by Federal reserve banks in such amounts and subject to 

such regulations, restrictions, and limitations as may be prescribed 

by the Board of Governors of the Federal Reserve System: Provided, however, That no member bank shall accept such drafts or 

bills of exchange referred to this paragraph for any one bank to an 

amount exceeding in the aggregate ten per centum of the paid-up 

and unimpaired capital and surplus of the accepting bank unless 

the draft or bill of exchange is accompanied by documents conveying or securing title or by some other adequate security: Provided further, That no member bank shall accept such drafts or 

bills in an amount exceeding at any time the aggregate of one-half 

of its paid-up and unimpaired capital and surplus. (Omitted from 

U.S. Code) 


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Subject to such limitations, restrictions and regulations as the 

Board of Governors of the Federal Reserve System may prescribe, 

any Federal reserve bank may make advances to any individual, 

partnership or corporation on the promissory notes of such individual, partnership or corporation secured by direct obligations of 

the United States or by any obligation which is a direct obligation 

of, or fully guaranteed as to principal and interest by, any agency 

of the United States. Such advances shall be made for periods not 

exceeding 90 days and shall bear interest at rates fixed from time 

to time by the Federal reserve bank, subject to the review and determination of the Board of Governors of the Federal Reserve System. 

Subject to such restrictions, limitations, and regulations as may 

be imposed by the Board of Governors of the Federal Reserve System, each Federal Reserve bank may receive deposits from, discount paper endorsed by, and make advances to any branch or 

agency of a foreign bank in the same manner and to the same extent that it may exercise such powers with respect to a member 

bank if such branch or agency is maintaining reserves with such 

Reserve bank pursuant to section 7 of the International Banking 

Act of 1978. In exercising any such powers with respect to any such 

branch or agency, each Federal Reserve bank shall give due regard 

to account balances being maintained by such branch or agency 

with such Reserve bank and the proportion of the assets of such 

branch or agency being held as reserves under section 7 of the 

International Banking Act of 1978. For the purposes of this paragraph, the terms ‘‘branch,’’‘‘agency,’’ and ‘‘foreign bank’’ shall have 

the same meanings assigned to them in section 1 of the International Banking Act of 1978. 

* * * * * * * 

OPEN-MARKET OPERATIONS

SEC. 14. Any Federal reserve bank may, under rules and regulations prescribed by the Board of Governors of the Federal Reserve 

System, purchase and sell in the open market, at home or abroad, 

either from or to domestic or foreign banks, firms, corporations, or 

individuals, cable transfers and bankers’ acceptances and bills of 

exchange of the kinds and maturities by this Act made eligible for 

rediscount, with or without the indorsement of a member bank. 

Every Federal reserve bank shall have power: 

(a) To deal in gold coin and bullion at home or abroad, to make 

loans thereon, exchange Federal reserve notes for gold, gold coin, 

or gold certificates, and to contract for loans of gold coin or bullion, 

giving therefor, when necessary, acceptable security, including the 

hypothecation of United States bonds or other securities which 

Federal reserve banks are authorized to hold; 

ø(b)(1) To buy and sell, at home or abroad, bonds and notes of 

the United States, bonds issued under the provisions of subsection 

(c) of section 4 of the Home Owners’ Loan Act of 1933, as amended, 

and having maturities from date of purchase of not exceeding six 

months, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in 

anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political 


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49 

subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, and obligations of, or fully guaranteed as to principal and interest by, a foreign government or agency thereof, such purchases to be made in 

accordance with rules and regulations prescribed by the Board of 

Governors of the Federal Reserve System. Notwithstanding any 

other provision of this Act, any bonds, notes, or other obligations 

which are direct obligations of the United States or which are fully 

guaranteed by the United States as to principal and interest may 

be bought and sold without regard to maturities but only in the 

open market. 

ø(2) To buy and sell in the open market, under the direction and 

regulations of the Federal Open Market Committee, any obligation 

which is a direct obligation of, or fully guaranteed as to principal 

and interest by, any agency of the United States. ¿ 

(b) To buy and sell in the open market, at home or abroad, under 

the direction and regulations of the Federal Open Market Committee, gold stock, Treasury currency, or direct obligations of the 

United States, foreign central banks, or the International Monetary 

Fund. Nothing in this subsection shall be construed to limit advances under section 10B, or discount loans under sections 13, 13A, 

or 24. 

(c) To purchase from member banks and to sell, with or without 

its indorsement, bills of exchange arising out of commercial transactions, as hereinbefore defined; 

(d) To establish from time to time, subject to review and determination of the Board of Governors of the Federal Reserve System, 

rates of discount to be charged by the Federal reserve bank for 

each class of paper, which shall be fixed with a view of accommodating commerce and business; but each such bank shall establish 

such rates every fourteen days, or oftener if deemed necessary by 

the Board; 

(e) To establish accounts with other Federal reserve banks for exchange purposes and, with the consent or upon the order and direction of the Board of Governors of the Federal Reserve System and 

under regulations to be prescribed by said board, to open and maintain accounts in foreign countries, appoint correspondents, and establish agencies in such countries wheresoever it may be deemed 

best for the purpose of purchasing, selling, and collecting bills of 

exchange, and to buy and sell, with or without its indorsement, 

through such correspondents or agencies, bills of exchange (or acceptances) arising out of actual commercial transactions which 

have not more than ninety days to run, exclusive of days of grace, 

and which bear the signature of two or more responsible parties, 

and, with the consent of the Board of Governors of the Federal Reserve System, to open and maintain banking accounts for such foreign correspondents or agencies, or for foreign banks or bankers, or 

for foreign states as defined in section 25 (b) of this Act. Whenever 

any such account has been opened or agency or correspondent has 

been appointed by a Federal reserve bank, with the consent of or 

under the order and direction of the Board of Governors of the Federal Reserve System, any other Federal reserve bank may, with the 

consent and approval of the Board of Governors of the Federal Reserve System, be permitted to carry on or conduct, through the 

Federal reserve bank opening such account or appointing such 


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agency or correspondent, any transaction authorized by this section 

under rules and regulations to be prescribed by the board. 

(f) To purchase and sell in the open market, either from or to domestic banks, firms, corporations, or individuals, acceptances of 

Federal Intermediate Credit Banks and of National Agricultural 

Credit Corporations, whenever the Board of Governors of the Federal Reserve System shall declare that the public interest so requires. 

(g) The Board of Governors of the Federal Reserve System shall 

exercise special supervision over all relationships and transactions 

of any kind entered into by any Federal reserve bank with any foreign bank or banker, or with any group of foreign banks or bankers, and all such relationships and transactions shall be subject to 

such regulations, conditions, and limitations as the Board may prescribe. No officer or other representative of any Federal reserve 

bank shall conduct negotiations of any kind with the officers or 

representatives of any foreign bank or banker without first obtaining the permission of the Board of Governors of the Federal Reserve System. The Board of Governors of the Federal Reserve System shall have the right, in its discretion, to be represented in any 

conference or negotiations by such representative or representatives as the Board may designate. A full report of all conferences 

or negotiations, and all understandings or agreements arrived at or 

transactions agreed upon, and all other material facts appertaining 

to such conferences or negotiations, shall be filed with the Board 

of Governors of the Federal Reserve System in writing by a duly 

authorized officer of each Federal reserve bank which shall have 

participated in such conferences or negotiations. 

* * * * * * * 

SEC. 19. (a) The Board is authorized for the purposes of this section to define the terms used in this section, to determine what 

shall be deemed a payment of interest, to determine what types of 

obligations, whether issued directly by a member bank or indirectly 

by an affiliate of a member bank or by other means, and regardless 

of the use of the proceeds, shall be deemed a deposit, and to prescribe such regulations as it may deem necessary to effectuate the 

purposes of this section and to prevent evasions thereof. 

(b) RESERVE REQUIREMENTS.— (1) DEFINITIONS.—The following definitions and rules apply 

to this subsection, subsection (c), section 11A, the first paragraph of section 13, and the second, thirteenth, and fourteenth 

paragraphs of section 16: 

(A) The term ‘‘depository institution’’ means— 

(i) any insured bank as defined in section 3 of the 

Federal Deposit Insurance Act or any bank which is 

eligible to make application to become an insured 

bank under section 5 of such Act; 

(ii) any mutual savings bank as defined in section 3 

of the Federal Deposit Insurance Act or any bank 

which is eligible to make application to become an insured bank under section 5 of such Act; 

(iii) any savings bank as defined in section 3 of the 

Federal Deposit Insurance Act or any bank which is 

eligible to make application to become an insured 

bank under section 5 of such Act; 


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51 

(iv) any insured credit union as defined in section 

101 of the Federal Credit Union Act or any credit 

union which is eligible to make application to become 

an insured credit union pursuant to section 201 of 

such Act; 

(v) any member as defined in section 2 of the Federal Home Loan Bank Act; 

(vi) any savings association (as defined in section 3 

of the Federal Deposit Insurance Act) which is an insured depository institution (as defined in such Act) or 

is eligible to apply to become an insured depository institution under the Federal Deposit Insurance Act; 

and 

(vii) for the purpose of section 13 and the fourteenth 

paragraph of section 16, any association or entity 

which is wholly owned by or which consists only of institutions referred to in clauses (i) through (vi). 

(B) The term ‘‘bank’’ means any insured or noninsured 

bank, as defined in section 3 of the Federal Deposit Insurance Act, other than a mutual savings bank or a savings 

bank as defined in such section. 

(C) The term ‘‘transaction account’’ means a deposit or 

account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable 

instrument, payment orders of withdrawal, telephone 

transfers, or other similar items for the purpose of making 

payments or transfers to third persons or others. Such 

term includes demand deposits, negotiable order of withdrawal accounts, savings deposits subject to automatic 

transfers, and share draft accounts. 

(D) The term ‘‘nonpersonal time deposits’’ means a 

transferable time deposit or account or a time deposit or 

account representing funds deposited to the credit of, or in 

which any beneficial interest is held by, a depositor who 

is not a natural person. 

(E) The term ‘‘reservable liabilities’’ means transaction 

accounts, nonpersonal time deposits, and all net balances, 

loans, assets, and obligations which are, or may be, subject 

to reserve requirements under paragraph (5). 

(F) In order to prevent evasions of the reserve requirements imposed by this subsection, after consultation with 

the Board of Directors of the Federal Deposit Insurance 

Corporation, the Comptroller of the Currency, and the National Credit Union Administration Board, the Board of 

Governors of the Federal Reserve System is authorized to 

determine, by regulation or order, that an account or deposit is a transaction account if such account or deposit 

may be used to provide funds directly or indirectly for the 

purpose of making payments or transfers to third persons 

or others. 

(2) RESERVE REQUIREMENTS.—(A) Each depository institution 

shall maintain reserves against its transaction accounts as the 

Board may prescribe by regulation solely for the purpose of implementing monetary policy— 


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52 

(i) in a ratio of not greater than 3 percent (and which 

may be zero) for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C); 

and 

(ii) in the ratio of 12 per centum, or in such other ratio 

as the Board may prescribe not greater than 14 per centum (and which may be zero), for that portion of its total 

transaction accounts in excess of $25,000,000, subject to 

subparagraph (C). 

(B) Each depository institution shall maintain reserves 

against its nonpersonal time deposits in the ratio of 3 per centum, or in such other ratio not greater than 9 per centum and 

not less than zero per centum as the Board may prescribe by 

regulation solely for the purpose of implementing monetary 

policy. 

(C) Beginning in 1981, not later than December 31 of each 

year the Board shall issue a regulation increasing for the next 

succeeding calendar year the dollar amount which is contained 

in subparagraph (A) or which was last determined pursuant to 

this subparagraph for the purpose of such subparagraph, by an 

amount obtained by multiplying such dollar amount by 80 per 

centum of the percentage increase in the total transaction accounts of all depository institutions. The increase in such 

transaction accounts shall be determined by subtracting the 

amount of such accounts on June 30 of the preceding calendar 

year from the amount of such accounts on June 30 of the calendar year involved. In the case of any such 12-month period 

in which there has been a decrease in the total transaction accounts of all depository institutions, the Board shall issue such 

a regulation decreasing for the next succeeding calendar year 

such dollar amount by an amount obtained by multiplying such 

dollar amount by 80 per centum of the percentage decrease in 

the total transaction accounts of all depository institutions. 

The decrease in such transaction accounts shall be determined 

by subtracting the amount of such accounts on June 30 of the 

calendar year involved from the amount of such accounts on 

June 30 of the previous calendar year. 

(D) Any reserve requirement imposed under this subsection 

shall be uniformly applied to all transaction accounts at all depository institutions. Reserve requirements imposed under this 

subsection shall be uniformly applied to nonpersonal time deposits at all depository institutions, except that such requirements may vary by the maturity of such deposits. 

(3) WAIVER OF RATIO LIMITS IN EXTRAORDINARY CIRCUMSTANCES.—Upon a finding by at least 5 members of the 

Board that extraordinary circumstances require such action, 

the Board, after consultation with the appropriate committees 

of the Congress, may impose, with respect to any liability of 

depository institutions, reserve requirements outside the limitations as to ratios and as to types of liabilities otherwise prescribed by paragraph (2) for a period not exceeding 180 days, 

and for further periods not exceeding 180 days each by affirmative action by at least 5 members of the Board in each instance. The Board shall promptly transmit to the Congress a 


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report of any exercise of its authority under this paragraph 

and the reasons for such exercise of authority. 

(4) SUPPLEMENTAL RESERVES.—(A) The Board may, upon the 

affirmative vote of not less than 5 members, impose a supplemental reserve requirement on every depository institution of 

not more than 4 per centum of its total transaction accounts. 

Such supplemental reserve requirement may be imposed only 

if— 

(i) the sole purpose of such requirement is to increase 

the amount of reserves maintained to a level essential for 

the conduct of monetary policy; 

(ii) such requirement is not imposed for the purpose of 

reducing the cost burdens resulting from the imposition of 

the reserve requirements pursuant to paragraph (2); 

(iii) such requirement is not imposed for the purpose of 

increasing the amount of balances needed for clearing purposes; and 

(iv) on the date on which the supplemental reserve requirement is imposed, except as provided in paragraph 

(11), the total amount of reserves required pursuant to 

paragraph (2) is not less than the amount of reserves that 

would be required if the initial ratios specified in paragraph (2) were in effect. 

(B) The Board may require the supplemental reserve authorized under subparagraph (A) only after consultation with the 

Board of Directors of the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the National Credit 

Union Administration Board. The Board shall promptly transmit to the Congress a report with respect to any exercise of its 

authority to require supplemental reserves under subparagraph (A) and such report shall state the basis for the determination to exercise such authority. 

(C) If a supplemental reserve under subparagraph (A) has 

been required of depository institutions for a period of one year 

or more, the Board shall review and determine the need for 

continued maintenance of supplemental reserves and shall 

transmit annual reports to the Congress regarding the need, if 

any, for continuing the supplemental reserve. 

(D) Any supplemental reserve imposed under subparagraph 

(A) shall terminate at the close of the first 90-day period after 

such requirement is imposed during which the average amount 

of reserves required under paragraph (2) are less than the 

amount of reserves which would be required during such period if the initial ratios specified in paragraph (2) were in effect. 

(5) RESERVES RELATED TO FOREIGN OBLIGATIONS OR ASSETS.— 

Foreign branches, subsidiaries, and international banking facilities of nonmember depository institutions shall maintain reserves to the same extent required by the Board of foreign 

branches, subsidiaries, and international banking facilities of 

member banks. In addition to any reserves otherwise required 

to be maintained pursuant to this subsection, any depository 

institution shall maintain reserves in such ratios as the Board 

may prescribe against— 


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54 

(A) net balances owed by domestic offices of such depository institution in the United States to its directly related 

foreign offices and to foreign offices of nonrelated depository institutions; 

(B) loans to United States residents made by overseas 

offices of such depository institution if such depository institution has one or more offices in the United States; and 

(C) assets (including participations) held by foreign offices of a depository institution in the United States which 

were acquired from its domestic offices. 

(6) EXEMPTION FOR CERTAIN DEPOSITS.—The requirements 

imposed under paragraph (2) shall not apply to deposits payable only outside the States of the United States and the District of Columbia, except that nothing in this subsection limits 

the authority of the Board to impose conditions and requirements on member banks under section 25 of this Act or the authority of the Board under section 7 of the International Banking Act of 1978. 

(7) DISCOUNT AND BORROWING.—Any depository institution 

in which transaction accounts or nonpersonal time deposits are 

held shall be entitled to the same discount and borrowing 

privileges as member banks. In the administration of discount 

and borrowing privileges, the Board and the Federal Reserve 

banks shall take into consideration the special needs of savings 

and other depository institutions for access to discount and 

borrowing facilities consistent with their long-term asset portfolios and the sensitivity of such institutions to trends in the 

national money markets. 

(8) TRANSITIONAL ADJUSTMENTS.— (A) Any depository institution required to maintain reserves under this subsection which was engaged in business on July 1, 1979, but was not a member of the Federal 

Reserve System on or after that date, shall maintain reserves against its deposits during the first twelve-month 

period following the effective date of this paragraph in 

amounts equal to one-eighth of those otherwise required 

by this subsection, during the second such twelve-month 

period in amounts equal to one-fourth of those otherwise 

required, during the third such twelve-month period in 

amounts equal to three-eighths of those otherwise required, during the fourth twelve-month period in amounts 

equal to one-half of those otherwise required, and during 

the fifth twelve-month period in amounts equal to fiveeighths of those otherwise required, during the sixth 

twelve-month period in amounts equal to three-fourths of 

those otherwise required, and during the seventh twelvemonth period in amounts equal to seven-eighths of those 

otherwise required. This subparagraph does not apply to 

any category of deposits or accounts which are first authorized pursuant to Federal law in any State after April 1, 

1980. 

(B) With respect to any bank which was a member of the 

Federal Reserve System during the entire period beginning 

on July 1, 1979, and ending on the effective date of the 

Monetary Control Act of 1980, the amount of required reVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00054 Fmt 6659 Sfmt 6601 E:\HR\OC\HR1116P1.XXX HR1116P1

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55 

serves imposed pursuant to this subsection on and after 

the effective date of such Act that exceeds the amount of 

reserves which would have been required of such bank if 

the reserve ratios in effect during the reserve computation 

period immediately preceding such effective date were applied may, at the discretion of the Board and in accordance 

with such rules and regulations as it may adopt, be reduced by 75 per centum during the first year which begins 

after such effective date, 50 per centum during the second 

year, and 25 per centum during the third year. 

(C)(i) With respect to any bank which is a member of the 

Federal Reserve System on the effective date of the Monetary Control Act of 1980, the amount of reserves which 

would have been required of such bank if the reserve ratios in effect during the reserve computation period immediately preceding such effective date were applied that exceeds the amount of required reserves imposed pursuant to 

this subsection shall, in accordance with such rules and 

regulations as the Board may adopt, be reduced by 25 per 

centum during the first year which begins after such effective date, 50 per centum during the second year, and 75 

per centum during the third year. 

(ii) If a bank becomes a member bank during the fouryear period beginning on the effective date of the Monetary 

Control Act of 1980, and if the amount of reserves which 

would have been required of such bank, determined as if 

the reserve ratios in effect during the reserve computation 

period immediately preceding such effective date were applied, and as if such bank had been a member during such 

period, exceeds the amount of reserves required pursuant 

to this subsection, the amount of reserves required to be 

maintained by such bank beginning on the date on which 

such bank becomes a member of the Federal Reserve System shall be the amount of reserves which would have 

been required of such bank if it had been a member on the 

day before such effective date, except that the amount of 

such excess shall, in accordance with such rules and regulations as the Board may adopt, be reduced by 25 per centum during the first year which begins after such effective 

date, 50 per centum during the second year, and 75 per 

centum during the third year. 

(D)(i) Any bank which was a member bank on July 1, 

1979, and which withdrew from membership in the Federal Reserve System during the period beginning on July 

1, 1979, and ending on March 31, 1980, shall maintain reserves during the first twelve-month period beginning on 

the date of enactment of this clause in amounts equal to 

one-half of those otherwise required by this subsection, 

during the second such twelve-month period in amounts 

equal to two-thirds of those otherwise required, and during 

the third such twelve-month period in amounts equal to 

five-sixths of those otherwise required. 

(ii) Any bank which withdraws from membership in the 

Federal Reserve System on or after the date of enactment 

of the Depository Institutions Deregulation and Monetary 


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56 

Control Act of 1980 shall maintain reserves in the same 

amount as member banks are required to maintain under 

this subsection, pursuant to subparagraphs (B) and (C)(i). 

(E) This subparagraph applies to any depository institution that, on August 1, 1978, (i) was engaged in business 

as a depository institution in a State outside the continental limits of the United States, and (ii) was not a member of the Federal Reserve System at any time on or after 

such date. Such a depository institution shall not be required to maintain reserves against such deposits held or 

maintained at its offices located in a State outside the continental limits of the United States until the first day of 

the sixth calendar year which begins after the effective 

date of the Monetary Control Act of 1980. Such a depository institution shall maintain reserves against such deposits during the sixth calendar year which begins after 

such effective date in an amount equal to one-eighth of 

that otherwise required by paragraph (2), during the seventh such year in an amount equal to one-fourth of that 

otherwise required, during the eighth such year in an 

amount equal to three-eighths of that otherwise required, 

during the ninth such year in an amount equal to one-half 

of that otherwise required, during the tenth such year in 

an amount equal to five-eighths of that otherwise required, 

during the eleventh such year in an amount equal to 

three-fourths of that otherwise required, and during the 

twelth such year in an amount equal to seven-eighths of 

that otherwise required. 

(9) EXEMPTION.—This subsection shall not apply with respect 

to any financial institution which— 

(A) is organized solely to do business with other financial institutions; 

(B) is owned primarily by the financial institutions with 

which it does business; and 

(C) does not do business with the general public. 

(10) WAIVERS.—In individual cases, where a Federal supervisory authority waives a liquidity requirement, or waives the 

penalty for failing to satisfy a liquidity requirement, the Board 

shall waive the reserve requirement, or waive the penalty for 

failing to satisfy a reserve requirement, imposed pursuant to 

this subsection for the depository institution involved when requested by the Federal supervisory authority involved. 

(11) ADDITIONAL EXEMPTIONS.—(A)(i) Notwithstanding the 

reserve requirement ratios established under paragraphs (2) 

and (5) of this subsection, a reserve ratio of zero per centum 

shall apply to any combination of reservable liabilities, which 

do not exceed $2,000,000 (as adjusted under subparagraph 

(B)), of each depository institution. 

(ii) Each depository institution may designate, in accordance 

with such rules and regulations as the Board shall prescribe, 

the types and amounts of reservable liabilities to which the reserve ratio of zero per centum shall apply, except that transaction accounts which are designated to be subject to a reserve 

ratio of zero per centum shall be accounts which would otherVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00056 Fmt 6659 Sfmt 6601 E:\HR\OC\HR1116P1.XXX HR1116P1

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wise be subject to a reserve ratio of 3 per centum under paragraph (2). 

(iii) The Board shall minimize the reporting necessary to determine whether depository institutions have total reservable 

liabilities of less than $2,000,000 (as adjusted under subparagraph (B)). Consistent with the Board’s responsibility to monitor and control monetary and credit aggregates, depository institutions which have reserve requirements under this subsection equal to zero per centum shall be subject to less overall 

reporting requirements than depository institutions which 

have a reserve requirement under this subsection that exceeds 

zero per centum. 

(B)(i) Beginning in 1982, not later than December 31 of each 

year, the Board shall issue a regulation increasing for the next 

succeeding calendar year the dollar amount specified in subparagraph (A), as previously adjusted under this subparagraph, by an amount obtained by multiplying such dollar 

amount by 80 per centum of the percentage increase in the 

total reservable liabilities of all depository institutions. 

(ii) The increase in total reservable liabilities shall be determined by subtracting the amount of total reservable liabilities 

on June 30 of the preceding calendar year from the amount of 

total reservable liabilities on June 30 of the calendar year involved. In the case of any such twelve-month period in which 

there has been a decrease in the total reservable liabilities of 

all depository institutions, no adjustment shall be made. A decrease in total reservable liabilities shall be determined by subtracting the amount of total reservable liabilities on June 30 

of the calendar year involved from the amount of total 

reservable liabilities on June 30 of the previous calendar year. 

(12) EARNINGS ON BALANCES.— (A) IN GENERAL.—Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may 

receive earnings to be paid by the Federal Reserve bank 

at least once each calendar quarter, at a rate or rates established by the Federal Open Market Committee not to exceed the general level of short-term interest rates. 

(B) REGULATIONS RELATING TO PAYMENTS AND DISTRIBU- TIONS.—The Board may prescribe regulations concerning— 

(i) the payment of earnings in accordance with this 

paragraph; 

(ii) the distribution of such earnings to the depository institutions which maintain balances at such 

banks, or on whose behalf such balances are maintained; and 

(iii) the responsibilities of depository institutions, 

Federal Home Loan Banks, and the National Credit 

Union Administration Central Liquidity Facility with 

respect to the crediting and distribution of earnings 

attributable to balances maintained, in accordance 

with subsection (c)(1)(A), in a Federal Reserve bank by 

any such entity on behalf of depository institutions. 

(C) DEPOSITORY INSTITUTIONS DEFINED.—For purposes of 

this paragraph, the term ‘‘depository institution’’, in addition to the institutions described in paragraph (1)(A), inVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00057 Fmt 6659 Sfmt 6601 E:\HR\OC\HR1116P1.XXX HR1116P1

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58 

cludes any trust company, corporation organized under 

section 25A or having an agreement with the Board under 

section 25, or any branch or agency of a foreign bank (as 

defined in section 1(b) of the International Banking Act of 

1978). 

(c)(1) Reserves held by a depository institution to meet the requirements imposed pursuant to subsection (b) shall, subject to 

such rules and regulations as the Board shall prescribe, be in the 

form of— 

(A) balances maintained for such purposes by such depository institution in the Federal Reserve bank of which it is a 

member or at which it maintains an account, except that (i) 

the Board may, by regulation or order, permit depository institutions to maintain all or a portion of their required reserves 

in the form of vault cash, except that any portion so permitted 

shall be identical for all depository institutions, and (ii) vault 

cash may be used to satisfy any supplemental reserve requirement imposed pursuant to subsection (b)(4), except that all 

such vault cash shall be excluded from any computation of 

earnings pursuant to subsection (b); and 

(B) balances maintained by a depository institution in a depository institution which maintains required reserve balances 

at a Federal Reserve bank, in a Federal Home Loan Bank, or 

in the National Credit Union Administration Central Liquidity 

Facility, if such depository institution, Federal Home Loan 

Bank, or National Credit Union Administration Central Liquidity Facility maintains such funds in the form of balances 

in a Federal Reserve bank of which it is a member or at which 

it maintains an account. Balances received by a depository institution from a second depository institution and used to satisfy the reserve requirement imposed on such second depository institution by this section shall not be subject to the reserve requirements of this section imposed on such first depository institution, and shall not be subject to assessments or reserves imposed on such first depository institution pursuant to 

section 7 of the Federal Deposit Insurance Act (12 U.S.C. 

1817), section 404 of the National Housing Act (12 U.S.C. 

1727), or section 202 of the Federal Credit Union Act (12 

U.S.C. 1782). 

(2) The balances maintained to meet the reserve requirements of 

subsection (b) by a depository institution in a Federal Reserve bank 

or passed through a Federal Home Loan Bank or the National 

Credit Union Administration Central Liquidity Facility or another 

depository institution to a Federal Reserve bank may be used to 

satisfy liquidity requirements which may be imposed under other 

provisions of Federal or State law. 

(d) No member bank shall act as the medium or agent of any 

nonbanking corporation, partnership, association, business trust, or 

individual in making loans on the security of stocks, bonds, and 

other investment securities to brokers or dealers in stocks, bonds, 

and other investment securities. Every violation of this provision 

by any member bank shall be punishable by a fine of not more 

than $100 per day during the continuance of such violation; and 

such fine may be collected, by suit or otherwise, by the Federal reserve bank of the district in which such member bank is located. 


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59 

(e) No member bank shall keep on deposit with any depository 

institution which is not authorized to have access to Federal Reserve advances under section 10(b) of this Act a sum in excess of 

10 per centum of its own paid-up capital and surplus. No member 

bank shall act as the medium or agent of a nonmember bank in 

applying for or receiving discounts from a Federal reserve bank 

under the provisions of this Act, except by permission of the Board 

of Governors of the Federal Reserve System. 

(f) The required balance carried by a member bank with a Federal reserve bank may, under the regulations and subject to such 

penalties as may be prescribed by the Board of Governors of the 

Federal Reserve System, be checked against and withdrawn by 

such member bank for the purpose of meeting existing liabilities. 

(g) In estimating the reserve balances required by this Act, member banks may deduct from the amount of their gross demand deposits the amounts of balances due from other banks (except Federal Reserve banks and foreign banks) and cash items in process 

of collection payable immediately upon presentation in the United 

States, within the meaning of these terms as defined by the Board 

of Governors of the Federal Reserve System. 

(h) National banks, or banks organized under local laws, located 

in a dependency or insular posssession or any part of the United 

States outside the continental United States may remain nonmember banks, and shall in that event maintain reserves and comply with all the conditions now provided by law regulating them; 

or said banks may, with the consent of the Board of Governors of 

the Federal Reserve System, become member banks of any one of 

the reserve districts, and shall in that event take stock, maintain 

reserves, and be subject to all the other provisions of this Act. 

(j) The Board may from time to time, after consulting with the 

Board of Directors of the Federal Deposit Insurance Corporation 

and the Director of the Office of Thrift Supervision, prescribe rules 

governing the payment and advertisement of interest on deposits, 

including limitations on the rates of interest which may be paid by 

member banks on time and savings deposits. The Board may prescribe different rate limitations for different classes of deposits, for 

deposits of different amounts or with different maturities or subject 

to different conditions regarding withdrawal or repayment, according to the nature or location of member banks or their depositors, 

or according to such other reasonable bases as the Board may deem 

desirable in the public interest. No member bank shall pay any 

time deposit before its maturity except upon such conditions and 

in accordance with such rules and regulations as may be prescribed 

by the said Board, or waive any requirement of notice before payment of any savings deposit except as to all savings deposits having the same requirement: Provided, That the provisions of this 

paragraph shall not apply to any deposit which is payable only at 

an office of a member bank located outside of the States of the 

United States and the District of Columbia. During the period commencing on October 15, 1962, and ending on October 15, 1968, the 

provisions of this paragraph shall not apply to the rate of interest 

which may be paid by member banks on time deposits of foreign 

governments, monetary and financial authorities of foreign governments when acting as such, or international financial institutions 

of which the United States is a member. 


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60 

(k) No member bank or affiliate thereof, or any successor or assignee of such member bank or affiliate or any endorser, guarantor, 

or surety of such member bank or affiliate may plead, raise, or 

claim directly or by counterclaim, setoff, or otherwise, with respect 

to any deposit or obligation of such member bank or affiliate, any 

defense, right, or benefit under any provision of a statute or constitution of a State or of a territory of the United States, or of any 

law of the District of Columbia, regulating or limiting the rate of 

interest which may be charged, taken, received, or reserved, and 

any such provision is hereby preempted, and no civil or criminal 

penalty which would otherwise be applicable under such provision 

shall apply to such member bank or affiliate or to any other person. 

(l) CIVIL MONEY PENALTY.— 

(1) FIRST TIER.—Any member bank which, and any institution-affiliated party (within the meaning of section 3(u) of the 

Federal Deposit Insurance Act) with respect to such member 

bank who, violates any provision of this section, or any regulation issued pursuant thereto, shall forfeit and pay a civil penalty of not more than $5,000 for each day during which such 

violation continues. 

(2) SECOND TIER.—Notwithstanding paragraph (1), any member bank which, and any institution-affiliated party (within the 

meaning of section 3(u) of the Federal Deposit Insurance Act) 

with respect to such member bank who— 

(A)(i) commits any violation described in paragraph (1); 

(ii) recklessly engages in an unsafe or unsound practice 

in conducting the affairs of such member bank; or 

(iii) breaches any fiduciary duty; 

(B) which violation, practice, or breach— 

(i) is part of a pattern of misconduct; 

(ii) causes or is likely to cause more than a minimal 

loss to such member bank; or 

(iii) results in pecuniary gain or other benefit to 

such party, 

shall forfeit and pay a civil penalty of not more than 

$25,000 for each day during which such violation, practice, 

or breach continues. 

(3) THIRD TIER.—Notwithstanding paragraphs (1) and 

(2), any member bank which, and any institution-affiliated 

party (within the meaning of section 3(u) of the Federal 

Deposit Insurance Act) with respect to such member bank 

who— 

(A) knowingly— 

(i) commits any violation described in paragraph 

(1); 

(ii) engages in any unsafe or unsound practice 

in conducting the affairs of such member bank; or 

(iii) breaches any fiduciary duty; and 

(B) knowingly or recklessly causes a substantial loss 

to such member bank or a substantial pecuniary gain 

or other benefit to such party by reason of such violation, practice, or breach, 

shall forfeit and pay a civil penalty in an amount not to exceed 

the applicable maximum amount determined under paragraph 


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61 

(4) for each day during which such violation, practice, or 

breach continues. 

(4) MAXIMUM AMOUNTS OF PENALTIES FOR ANY VIOLATION DE- SCRIBED IN PARAGRAPH (3).—The maximum daily amount of any 

civil penalty which may be assessed pursuant to paragraph (3) 

for any violation, practice, or breach described in such paragraph is— 

(A) in the case of any person other than a member bank, an amount not to exceed $1,000,000; and 

(B) in the case of a member bank, an amount not to exceed the lesser of— 

(i) $1,000,000; or 

(ii) 1 percent of the total assets of such member 

bank. 

(5) ASSESSMENT; ETC.—Any penalty imposed under paragraph (1), (2), or (3) may be assessed and collected by the 

Board in the manner provided in subparagraphs (E), (F), (G), 

and (I) of section 8(i)(2) of the Federal Deposit Insurance Act 

for penalties imposed (under such section) and any such assessment shall be subject to the provisions of such section. 

(6) HEARING.—The member bank or other person against 

whom any penalty is assessed under this subsection shall be 

afforded an agency hearing if such member bank or person 

submits a request for such hearing within 20 days after the 

issuance of the notice of assessment. Section 8(h) of the Federal Deposit Insurance Act shall apply to any proceeding under 

this subsection. 

(7) DISBURSEMENT.—All penalties collected under authority 

of this subsection shall be deposited into the Treasury. 

(8) VIOLATE DEFINED.—For purposes of this section, the term 

‘‘violate’’ includes any action (alone or with another or others) 

for or toward causing, bringing about, participating in, counseling, or aiding or abetting a violation. 

(9) REGULATIONS.—The Board shall prescribe regulations establishing such procedures as may be necessary to carry out 

this subsection. 

(m) NOTICE UNDER THIS SECTION AFTER SEPARATION FROM

SERVICE.—The resignation, termination of employment or participation, or separation of an institution-affiliated party (within the 

meaning of section 3(u) of the Federal Deposit Insurance Act) with 

respect to a member bank (including a separation caused by the 

closing of such a bank) shall not affect the jurisdiction and authority of the Board to issue any notice and proceed under this section 

against any such party, if such notice is served before the end of 

the 6-year period beginning on the date such party ceased to be 

such a party with respect to such bank (whether such date occurs 

before, on, or after the date of the enactment of this subsection). 

* * * * * * * 


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(62) 

MINORITY VIEWS 

H.R. 6741 would make significant and detrimental changes to 

the Federal Reserve System, severely limiting its discretion to conduct monetary policy and supervision of bank holding companies. 

Collectively, the bill would expand the voice of commercial banks, 

undermine the independence of the Federal Reserve, and destabilize the housing market. 

Expanding the voice of commercial banks. H.R. 6741 would empower commercial banks by giving them influence over the selection of members of the Federal Open Markets Committee (FOMC) 

and strengthening the authority of those members to make a larger 

number of monetary policy decisions on the FOMC. Class A directors, who are representatives of commercial banks, would be able 

to select the president of each Reserve Bank, which explicitly rolls 

back a key reform included in the Dodd-Frank Act that eliminated 

the role of these directors in selecting Reserve Bank presidents. 

Dodd-Frank eliminated the role of Class A directors to avoid the 

conflict of interest between member banks selecting a person who 

could influence when and how they could receive assistance from 

the Fed, which is their lender of last resort. 

H.R. 6741 would also expand the membership of the FOMC to 

allow one representative of each of the 12 Federal Reserve Banks 

to serve in a voting capacity on the Committee. Today, the FOMC 

is comprised of 12 members, seven of which (or a majority) are the 

Federal Reserve Governors, who are presidentially-appointed and 

Senate-confirmed, and the other five are Reserve Bank Presidents. 

By more than doubling the voting power of the Federal Reserve 

Banks, the bill would shift the balance of power away from the 

seven Governors in favor of the presidents of the 12 Reserve 

Banks. Reserve Banks and their presidents lack the same level of 

accountability as members of the Board of Governors. Not only are 

Reserve Bank presidents selected through a largely non-public 

process that lacks transparency, such institutions are considered 

private corporate entities (despite their public functions) and are 

therefore not covered by the Freedom of Information Act (FOIA). 

Reserve Banks also lack inspector general offices to monitor and 

correct wrongdoing. 

The bill would also transfer important monetary policy functions 

from the Board of Governors to the FOMC. For example, the 

FOMC would be authorized to set the interest rate paid on reserves 

held by member banks at the Federal Reserve. As a result, private 

bankers would have a much stronger voice to advocate for policy 

decisions that would directly benefit their bottom line. In addition, 

emergency financial decisions would now need a super majority of 

the FOMC putting difficult decisions like whether or not to assist 

the financial industry during a crisis in the hands of FOMC members chosen directly by the industry needing the assistance. 


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63 

Importantly, this influence could have powerful repercussions for 

the conduct of monetary policy and the vigor with which the Federal Reserve pursues its full employment mandate. Although low 

interest rates tend to promote employment, commercial banks tend 

not to prefer extended periods of low rates because they can erode 

their profits. In other words, if bankers are empowered to influence 

monetary policy decisions, such influence may favor bank profits at 

the expense of US workers. 

Undermining the independence of the Federal Reserve. H.R. 6741 

would also subject the nonmonetary policy functions of the Fed to 

the annual Congressional appropriations process. This would politicize the Fed’s supervision and enforcement through the threat of 

budget riders and funding cuts and undermine the Fed’s independent oversight of financial markets. In addition, because the 

Fed’s oversight of bank holding companies and certain other financial institutions informs its conduct of monetary policy, subjecting 

its oversight to the appropriations process could also negatively affect the conduct of monetary policy. 

The bill would impose further limits on the discretion of the Federal Reserve, by requiring it to formally adopt ‘‘exactly one’’ monetary policy strategy and between one and three reference policy 

rules annually. These reference rules not only further restrict the 

central bank’s discretion to set monetary policy in the best interests of the economy, but illogically treat interest rate targeting as 

a separate monetary policy instrument from other open-market operations and the payment on interest on reserves, even though the 

latter two activities are a means of accomplishing the interest rate 

target. Former Fed Chair Yellen has said that it ‘‘would be a grave 

mistake for the Federal Reserve to commit to conduct monetary 

policy according to a mathematical rule.’’ 

Destabilizing the Housing Market. Finally, H.R. 6741 would 

threaten the housing market as it recovers from the worst crisis 

since the Great Depression by undermining the Federal Reserves’ 

work to stabilize the market. The bill requires, within a year from 

enactment, the Federal Reserve to transfer its portfolio of agency 

(i.e., Government Sponsored Enterprise) mortgage-backed securities (MBS) and other obligations that it purchased during and after 

the 2008 financial crisis to the Treasury. Treasury, in return, must 

transfer the assets to U.S. bonds of equivalent market value. Additionally, the bill restricts the Federal Reserve from making such 

purchases in the future. The bill further amends the Fed’s emergency authority under Section 13(3) of the Federal Reserve Act to 

require that any extraordinary assets purchased pursuant to that 

authority be similarly exchanged with the Treasury for a similarly 

valued U.S. bond no later than one year after acquisition. Lastly, 

the bill also strikes the Fed’s ability to provide certain emergency 

advances to bank. 

Even though the Federal Reserve’s asset purchase program— 

which added $1.7 trillion in agency MBS to the Fed’s $4.5 trillion 

balance sheet—succeeded in driving down long-term rates, including 30-year mortgage rates, critics have nonetheless argued that 

such purchases would lead to a period of high inflation, which has 

not proven true. Given that the mortgage finance sector was one 

of the hardest hit sectors during the 2008 crisis, the Federal ReVerDate Sep 11 2014 22:33 Jan 03, 2019 Jkt 089006 PO 00000 Frm 00063 Fmt 6604 Sfmt 6604 E:\HR\OC\HR1116P1.XXX HR1116P1

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serve sought to provide targeted relief to prevent further 

illiquidity-induced price declines. If enacted, the inability to purchase or hold agency securities may put upward pressure on MBS 

yields and mortgage rates, even today. The fire sale of MBS called 

for under the bill would also likely have significant adverse effects 

in financial markets. Notably, for the proposed transfer of existing 

assets to take place, there would have to be a large increase in the 

federal debt limit, a requirement that the legislation fails to contemplate. 

Generally, H.R. 6741 would harm the ability and mission of the 

Federal Reserve to promote stable interest rates and full employment, by empowering private commercial bankers to make monetary policy decisions, curtailing the independence of the institution 

and stripping the institution of its authority to respond appropriately to unforeseen financial crises. For the above reasons, we 

oppose the legislation. 

MAXINE WATERS. CAROLYN B. MALONEY. NYDIA M. VELA ́ ZQUEZ. WM. LACY CLAY. MICHAEL E. CAPUANO. CHARLIE CRIST. 

Æ 


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