Where corporations consolidate under the provisions of this act, all of the rights, franchises, and interest of said corporations shall be consolidated in and to every species of property, personal and mixed, and choses in action thereto belonging, and shall be deemed to be transferred to and vested in the corporation into which it is consolidated without any deed or other transfer, and the said consolidated corporation shall hold and enjoy the same and all rights of property, franchises, and interest, in the same manner and to the same extent as they were held and enjoyed by the corporations so consolidated therewith.

SEC. 17. Insolvency, receivership, and liquidation: Whenever any corporation organized under the provisions of this act shall be dissolved and its rights, privileges, and franchises declared forfeited as prescribed in the preceding section, or whenever any creditor of any such corporation shall have obtained a judgment against it in any court of record and made application accompanied by a certificate from the clerk of the court, stating that such judgment has been rendered and has remained unpaid for the space of thirty days or whenever the comptroller shall become satisfied of the insolvency of such corporation, he may, after due examination of its affairs in either case, appoint a receiver who shall proceed to wind up the affairs of such corporation. The receiver so appointed shall exercise the powers and be subject to the restrictions of receivers of national banks; and the comptroller shall have the same powers and duties in connection with the administration of such receivership as he has in reference to the receivership of national banks.

Shareholders' agents for shareholders of corporations organized under the provisions of this act may be appointed in the manner prescribed by section 522 of the national bank act, being the act of June 30, 1876, as amended, and shall have the same general powers and duties and be subject to the same restrictions as shareholders' agents of a national bank.

Corporations organized under the provisions of this act may be placed in voluntary liquidation in the manner prescribed for national banking associations by sections 5220 and 5221 of the United States Revised Statutes.

SEC. 18. Penalty for violation of the provisions of this act: If the directors of any corporation organized under the provisions of this act shall knowingly violate or knowingly permit any of the officers, agents, or servants of the corporation to violate any of the provisions of this act, all the rights, privileges, and franchises of the corporation shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a district court of the United States in a suit brought for that purpose by the Comptroller of the Currency in his own name before the corporation shall be declared dissolved, and in cases of such violation, every director who participated or assented to the same shall be held liable in his personal and individual capacity for all damages which the corporation, its shareholders, or any other person shall have sustained in consequence of such violation.

SEC. 19. Penalty for embezzlement, forgery, false statements, and so forth: Any officer, director, agent, or employee of any corporation organized under the provisions of this act who embezzles, abstracts, or willfully misapplies any of the moneys, funds, or credits of such corporation, or who, without authority from the directors, draws any order or bill of exchange, makes any acceptance, issues, puts forth, or assigns any note, debenture, bond, draft, bill of exchange, mortgage, judgment, or decree, or who makes any false entry in any book, report, or statement of such corporation with intent in any case to injure or defraud such corporation or any other company or person, or to deceive any officer of such corporation or the Comptroller of the Currency, or any agent or examiner appointed to examine the affairs of such corporation; and every receiver of such corporation who, with like intent to defraud or injure, embezzles, abstracts, purloins, or willfully misapplies any of the moneys, funds, or assets of the corporation, and every person who with like intent aids or abets any officer, director, agent, employee, or receiver in any violation of this section shall be deemed guilty of a misdemeanor, and upon conviction thereof in any district court of the United States shall be fined not more than $5,000, or shall be imprisoned for not more than five years, or both, at the discretion of the court.

Whoever (1) makes any statement, knowing it to be false, for the purpose of obtaining for himself or for any other person, firm, corporation, or association any advance from a corporation organized under the provisions of this act, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

Whoever willfully overvalues any security by which any such advance is secured shall be punished by a fine of not more than $5,000, or by imprisonment for not more than two years, or both.

Whoever (1) falsely makes, forges, or counterfeits any debenture, bond, coupon, or other obligation of any corporation organized under the provisions of this act, in imitation of or purporting to be in imitation of any such obligation issued by any such

corporation; or (2) passes, utters, or publishes, or attemps to pass, utter, or publish, any false, forged, or counterfeited bond, debenture, coupon, or other obligation purporting to be issued by any such corporation, knowing the same to be falsely made, forged, or counterfeited; or (3) falsely alters any such bond, debenture, coupon, or other obligation; or (4) passes, utters, or publishes as true any falsely altered or spurious bond, debenture, coupon, or other obligation, issued or purported to have been issued by any such corporation, knowing the same to be falsely altered or spurious, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

TITLE II.

AMENDMENTS TO FEDERAL RESERVE ACT.

SECTION 1. That section 13 of the Federal reserve act, as amended, be further amended by striking out the proviso at the end of the second paragraph of said section, so that said paragraph shall read as follows:

"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 Federal Reserve Board 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, 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 ninety days, exclusive of days of grace."

SEC. 2. That the Federal reserve act, as amended, be further amended by striking out the fourth paragraph of section 13 thereof and inserting in lieu of said fourth paragraph the following:

66

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 ninety days sight, exclusive of days of grace, and which are indorsed by at least one membr bank: Provided, That such acceptances if drawn for an agricultural purpose and secured at the time of acceptance by warehouse receipts or other such document 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."

SEC. 3. That the Federal reserve act, as amended, be further amended by adding at the end of section 13 a new section, to be numbered section 13a and to read as follows:

66 DISCOUNT OF AGRICULTURAL AND LIVE-STOCK PAPER.

"SEC. 13a. 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 issued or drawn for an agricultural purpose, or based upon live stock, and having a maturity, at the time of discount, exclusive of days of grace, not exceeding six months: Provided, however, That (a) such notes, drafts, or bills of exchange, when secured by warehouse receipts or other such negotiable documents, conveying or securing title to readily marketable, nonperishable agricultural products, may be discounted with a maturity, at the time of discount, not exceeding nine months, under regulations to be prescribed by the Federal Reserve Board. Such regulations shall be designed to insure that such notes, drafts, or bills of exchange were drawn or issued as a part of a program of orderly marketing of such agricultural products, and not for speculative holding of such products. (b) Such notes, drafts, or bills of exchange, when secured by chattel mortgage upon live stock, may be discounted with a maturity not exceeding nine months, provided such live stock is at the time of discount being fattened for market, under such conditions that it will be ready for market on or before the date of maturity of such note, draft, or bill. Notes, drafts,

or bills of exchange secured by chattel mortgage upon breeding herds shall not be eligible for rediscount under this section.

Notes, drafts, or bills of exchangé issued or drawn by cooperative marketing associations composed of producers of agricultural products shall be deemed to have been issued or drawn for an agricultural purpose, within the meaning of this section, if the proceeds thereof have been or are to be advanced by such association to any members thereof for an agricultural purpose, or have been or are to be used by such association in making payments to any members thereof on account of agricultural products delivered by such members to the association, or if such proceeds have been or are to be used by such association to meet expenditures incurred or to be incurred by the association in connection with the grading, processing, packing, preparation for market, or marketing of any agricultural product handled by such association for any of its members.

The Federal Reserve Board may, by regulation, limit to a percentage of the assets of a Federal reserve bank the amount of notes, drafts, acceptances or bills having a maturity in excess of three months, but not exceeding six months, exclusive of days of grace, which may be discounted by such bank, and the amount of notes, drafts, or bills, or acceptances having a maturity in excess of six months, but not exceeding nine months, which may be discounted by such bank."

SEC. 4. That the Federal reserve act, as amended, be further amended by adding at the end of section 14 a new paragraph as follows:

"(f) Whenever the Federal Reserve Board shall declare that the public interest so requires, to purchase and sell in the open market, either from or to domestic banks, firms, corporations, or individuals, acceptances of corporations organized upon the Federal agricultural credits act."

SEC. 5. That the Federal reserve act, as amended, be further amended by striking out the ninth paragraph of section 9 of said act and substituting in lieu thereof the following:

"No applying bank shall be admitted to membership in a Federal reserve bank unless it possesses a paid-up, unimpaired capital sufficient to entitle it to become a national banking association in the place where it is situated under the provisions of the national bank act: Provided, however, That an applying bank organized in a place the population of which does not exceed six thousand inhabitants may, in the discretion of the Federal Reserve Board, be admitted to membership if it possesses a paid-up, unimpaired capital of at least $30,000, and if the application is accompanied by adequate undertakings of such bank and of its principal stockholders that the capital of such bank will within three years be increased to $50,000: And provided further, That an applying bank, organized in a place the population of which does not exceed three thousand inhabitants, may, in the discretion of the Federal Reserve Board, be admitted to membership if it possesses a paid-up, unimpaired capital of at least $15,000, and if it is accompanied by adequate undertakings of such bank and of its principal stockholders that such capital will within three years be increased to $25,000. If any such undertakings have not been fulfilled within three years the Federal Reserve Board may forbid such bank to enjoy any of the privileges of this act, and may require it to withdraw forthwith from membership in the Federal reserve system."

TITLE III.

AMENDMENT TO FEDERAL FARM LOAN ACT.

SECTION 1. That paragraph seventh of section 12 of the Federal farm loan act be amended to read as follows:

"Seventh. The amount of loans to any one borrower shall in no case exceed a maximum of $25,000, nor shall any one loan be for a less sum than $100."

STATEMENT OF MR. J. SHEEHAN, WINNEMUCCA, NEV.

The CHAIRMAN. Mr. Sheehan, will you please give your full name and your connections?

Mr. SHEEHAN. J. Sheehan; member of the committee selected by the American National Live Stock Association; banker and live-stock man.

I will state, gentlemen, that last August a meeting of live-stock owners was held in Denver. At that time this committee was formed to study financial conditions, and out of such meeting was brought about this bill. It is not a hastily prepared bill. It has been given a lot of consideration by men interested in both the financial affairs and the live-stock industry of the West.

It

The depression we passed through during the two years has brought out very clearly the fact that the live-stock industry has never been properly financed. has no home in the financial world to-day so far as the breeding or the ranging cattle of the West are concerned. We thought we had. Banks accepting deposits on demand would loan to our stockmen, in accordance with the national banking act, which we believed to be at that time a liquid loan. The depression came along, deposits decreased, and what was then a liquid loan became a loan that we could not call, resulting in the fact, as some gentleman said here a little while ago, that we had to call the good loans in order to keep the banks open.

At the time we granted credit to a man who was in a good, financial condition, we thought we were extending a favor but the result was that we did him an injury because we led him to believe that he could go ahead and increase his herd, and when the depression came we forced him to sell his herds at a lower cost, and practically broke him.

The salient features of this bill and the parts in which we are particularly interested, as stated by our president, Mr. Bixby, are the live stock or breeding parts of it. The fattening end of it, in which perhaps the farmers of the Corn Belt section are concerned are fairly well taken care of under the Federal reserve act, for their paper can be rediscounted at six months, but it seemed advisable to make it nine months in order to properly market the fattening stuff.

We have condensed the bill down so that we will not take up very much of your time.

Title I of the bill authorizes the formation, under Federal law, of agricultural credit corporations having a minimum capital of $250,000. These corporations are placed under the supervision of the Comptroller of the Currency, in much the same way as national banks are now under his supervision. It is provided that national banks may, with the approval of the Comptroller of the Currency, subscribe to the capital stock of one or more of these corporations, the aggregate subscription, however, not to exceed 10 per cent of the paid in capital and surplus of the bank.

Agricultural credit corporations are authorized to make advances, or discount paper, or accept drafts, of three general types:

(1) Paper secured by warehouse receipts representing nonperishable agricultural commodities, and having a maturity not exceeding nine months.

(2) Paper secured by chattel mortgage on live stock which is being fattened for market, such paper having a maturity not exceeding nine months.

(3) Paper secured by chattel mortgage on breeding or dairy herds, and having a maturity not exceeding three years.

That, gentlemen, is the paragraph in which we are particularly and vitally interested.

In addition these corporations are given authority to act as custodians, trustees or agents of banks which are members of the Federal reserve systems, and to act, upon request of the Secretary of the Treasury, as fiscal agent of the United States. They are also authorized to deal in bonds or other obligations of the United States.

The amount of loans which such a corporation may make to any one customer is limited to 20 per cent of its capital and surplus, except that where the loans are secured by warehouse receipts representing readily marketable agricultural commodities, the amount must not exceed 50 per cent of the paid in capital and surplus.

To finance the operations of these agricultural credit corporations three general methods are provided:

(1) The paper of these corporations, complying with the eligibility rules affecting agricultural paper as provided in existing law and as modified by Title II of the bill, will be eligible for rediscount with Federal reserve banks. In addition, the bill authorizes Federal reserve banks to purchase in the open market acceptances of these corporations, with a maturity not exceeding nine months.

I will state, in connection with this provision, that we who deal exclusively in paper of live stock and breeding herds do not avail ourselves of the facilities of the Federal reserve banks for the reason that it would only be a temporary relief. We might discount a man's paper for four months or six months, but we know at the time that the man can not meet it, so it involves a liability and a hardship on us to substitute something else for that paper when it matures.

(2) Corporations are authorized to sell paper with or without their indorsement. and to issue collateral trust notes or debentures with a maturity not exceeding three years, secured by agricultural paper held by the corporations.

(3) Provision is made for incorporation of Federal live-stock rediscount corporations, with a minimum capital of $1,000,000, and with authority to rediscount paper for corporations organized under the bill, and to issue collateral trust notes or debentures as above stated.

The CHAIRMAN. Is there any limitation on the amount of trust notes or debentures that may be issued by these rediscount corporations?

Mr. SHEEHAN. No; but the Comptroller of the Currency may by general regulations prescribe the amount of indebtedness which such corporations may incur and the amount which they may rediscount for any one corporation.

Provision is made for examination by the Comptroller of the Currency of corporations organized under the act in the same manner as examinations are now made of national banks.

Title II of the bill contains the following amendments to the Federal reserve act: (1) Drafts issued or drawn for agricultural purposes, secured by warehouse receipts, and accepted by member banks, are made eligible for rediscount with a maturity up to six months, instead of the maturity of three months as provided in the present law. (2) Notes, drafts, or bills of exchange issued or drawn for agricultural purposes, and secured by warehouse receipts representing agricultural commodities, are made eligible for rediscount, upon the indorsement of a member bank, with a maturity not exceeding nine months, provided the paper is drawn or issued as a part of a program of orderly marketing of agricultural commodities.

The CHAIRMAN. Your bill provides for the lending of money on three years' time in special cases.

Mr. SHEEHAN. Yes, sir.

The CHAIRMAN. Is there anything in the bill which provides that under certain circumstances that paper may be eligible for rediscount in the Federal reserve system? Mr. SHEEHAN. No, sir.

The CHAIRMAN. Would it be eligible for rediscount when it came within the six months' or nine months' period of maturity?

Mr. SHEEHAN. Yes, sir; but that does not help us. We have tried that ever since the reserve banks were established.

Mr. NELSON. Did I understand you to state that these corporations could lend to one individual 20 per cent of its capital stock?

Mr. SHEEHAN. Yes, sir.

Mr. NELSON. And by vote of the majority directors up to 50 per cent, is that it? Mr. SHEEHAN. No, sir; 50 per cent when the loan is secured by warehouse receipts covering readily marketable agricultural commodities.

Mr. STRONG. Does your bill take care of the need of the grain farmer for a year's credit during which time he would plant, grow, harvest, and market his grain crop? Mr. SHEEHAN. That is not provided for directly.

Mr. STRONG. Do you not think the farmer has as much need for a year's credit in order to plant, produce, harvest, and market his crop, as the cattleman has for a loan of from one to three years? I am in favor of the proposition for the cattlemen but should not there be provision made also for the grain farmer.

Mr. SHEEHAN. They will be taken care of through the joint land stock banks. Mr. STRONG. But that provides for a mortgage upon his farm.

Mr. SHEEHAN. Yes, sir.

Mr. STRONG. But suppose he wants personal credit to carry him through the time during which he will plant, produce, harvest and market a crop, which would take a year, should he not have personal credit for a year?

The CHAIRMAN. Mr. Strong, if you will permit me, these are all cattlemen who are here this morning and they want to present the cattle phase of this situation.

Mr. STRONG. I understand that. I was in consultation with them yesterday, but I wanted to ask if there was anything in the bill that would take care of the grain farmers' phase of the proposition.

Mr. SHEEHAN. Usually, in cases of that kind, the farmer borrows on the live stock and uses that money in taking care of his farm, offering us his liquid assets in order to raise the money.

Mr. STRONG. I know that, but I have lost of farmers who want to borrow for a year, which is the time they need to plant, grow, and harvest a crop, and I wish to know if any provision had been made for that kind of credit in this bill.

Mr. SHEEHAN. No; none that I can see in this bill.

Mr. STRONG. There must be such provision made.

I will proceed with the summary of the bill:

(3) Agricultural paper secured by chattel mortgage on live stock which is being fattened for market is made eligible for rediscount with a maturity not exceeding nine months.

(4) It is provided that paper of agricultural cooperative marketing associations, the proceeds of which have been or are to be used by the association in making advances or payments to its members, or for expenses incurred in connection with the market