Banking Act of 1935: Difference between revisions
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== '''Title I''' == |
== '''Title I''' == |
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Title I amended the [http://uscode.house.gov/statviewer.htm?volume=48&page=162 Banking Act of 1933 section 12B] with regards to the creation of the Insurance Corporation or [[FDIC]] and its duties. The Board of directors of the FDIC will now include the [[Comptroller of Currency]] and two members selected by the President and confirmed by the Senate. They shall hold a term of 6 years and receive an annual salary of $10,000. Title I also established the maximum insured deposit to be $5,000. |
Title I amended the [http://uscode.house.gov/statviewer.htm?volume=48&page=162 Banking Act of 1933 section 12B] with regards to the creation of the Federal Deposit Insurance Corporation or [[FDIC]] and its duties. The Board of directors of the FDIC will now include the [[Comptroller of Currency]] and two members selected by the President and confirmed by the Senate. They shall hold a term of 6 years and receive an annual salary of $10,000. Title I also established the maximum insured deposit to be $5,000. |
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=== '''FDIC''' === |
=== '''FDIC''' === |
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Revision as of 22:13, 10 April 2016
The Banking Act of 1935 passed on August 19, 1935 and was signed by President Franklin D. Roosevelt on August 23. [1] The Banking Act of 1935 changed the structure and power distribution in the Federal Reserve System that began with the Banking Act of 1933. The Act contained three main sections or “Titles”.
Title I
Title I amended the Banking Act of 1933 section 12B with regards to the creation of the Federal Deposit Insurance Corporation or FDIC and its duties. The Board of directors of the FDIC will now include the Comptroller of Currency and two members selected by the President and confirmed by the Senate. They shall hold a term of 6 years and receive an annual salary of $10,000. Title I also established the maximum insured deposit to be $5,000.
FDIC
The Banking Act of 1935 made permanent the FDIC with the following provisions:
- All accounts will be insured up to $5,000. At this time 98.5% of all deposit were under the $5,000 limit. This was a dramatic change from the initial guidelines under the Banking Act of 1933.[2]
- All banks who were insured under the initial creation of the FDIC are still insured under the new permanent program. All Federal Reserve member banks are required to participate in the FDIC. Smaller state banks, national banks who were not members of the Federal Reserve System, savings and loan institutions and other similar organizations had differing requirements for participation.[2]
- All banks who participated in the FDIC were able to advertise and place signage in their business stating that the deposits (up to $5,000) were insured by the FDIC.[2] You will still see those signs today at your local bank.
Title II
The Board of Governors
Title II establishes the Board of Governors of the Federal Reserve. The Board consists of seven members selected by the President with advise and consent of the Senate. They will each serve a 14 year term on the Board. Of those selected one will be selected as the Chairman and one as the Vice-Chairman each serving 4 years in that capacity.
Federal Open Market Committee
Title II also creates a Federal Open Market Committee (FOMC). The membership of this committee will include the Board of Governors of the Federal Reserve and five representatives of the Federal Reserve Banks. The Committee meets quarterly in Washington DC.[3] The FOMC controlled how and when Reserve Banks participated in open market operations. All such decisions when through the FOMC.[1]
Loans to Member Banks
The Banking Act of 1935 renewed the ability of the Federal Reserve bank to make loans to member bank. The rates for these loans must be 0.5% above the current discount rate at the Federal Reserve.[2]
Title III
Title III includes 46 sections of technical amendments that clarify current banking legislation. These included but are not limited to the rules of stock ownership, elimination of double liability, surplus requirements, rules for loans to executives, rules of branch banking, rules of securities transactions and the rights of shareholders.[3]
Origin
For a few years prior to passage of the Banking Act of 1935 there had been growing desire for changes to be made to the Federal Reserve Act. In 1934 Jacob Viner, who was an assistant to Treasury Secretary Henry Morgenthau Jr., chaired a committee tasked with determining what changes were need to update the Federal Reserve Act. Marriner S. Eccles became Governor of the Federal Reserve Board on November 15,1934. He immediately dismissed the token reforms put forth by Viner and the committee. Eccles insisted that the two main goals of the new legislation was to "control speculation" and to "promote the stability of employment and business. To make this happen Eccles also wanted the Federal Reserve to become the Central Bank with concentrated power.[4]
Eccles proposed four key points that need to be included in the new legislation:
- Change the title and approval process for Reserve Banks heads.[4]
- Create a central committee of Board members and Bank Governors to control open market operations.[4]
- Place the Board in control of paper specification.[4]
- Ease controls on real estate lending.[4]
The Bill in Congress
On February 5, 1935 the "Administration banking bill", as it was initially titled, was given to the House Committee on Banking and Currency.[5] It passed the House (271-110) very quickly and with all main points intact.[4]
In the Senate it faced stiffer criticism, specifically from Senator Carter Glass. The main sticking point was who had the most control, the bankers or the politicians. The bill that eventually passed the Senate was a compromise between the two. The Banking Act of 1935 was signed into law by President Franklin D. Roosevelt on August 23, 1935.[4]
- ^ a b Chandler, Lester V. (1971). American Monetary Policy, 1928 to 1941. New York: Harper and Row. pp. 304–307.
- ^ a b c d Preston, Howard (December 1935). "The Banking Act of 1935" (PDF). Journal of Political Economy: 743-762. Retrieved April 9, 2016.
- ^ a b "Banking Act of 1935". uscode.house.gov (Aug. 23, 1935, ch. 614, §1, 49 Stat. 684 .). U.S. Congress. Aug. 23, 1935. Retrieved April 8, 2016.
{{cite web}}: Check date values in:|date=(help) - ^ a b c d e f g Meltzer, Allen H. (2003). A History of the Federal Reserve: Volume 1, 1913 to 1951. Chicago: University of Chicago Press. pp. 470–486. ISBN 0226520005.
- ^ Bradford, Frederick A. (1935). "The Banking Act of 1935". American Economic Review 25, no. 4: 661–672.
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