ARGUMENTS IN THE NEGATIVE 
reserve bank. The federal reserve bank belongs to its member banks. It is all right, 
of course, that the federal reserve banks should be under very strict governmental 
regulation, but in other respects they are very much like the national banks. The 
national banks operate under government charters and the federal reserve bank 
operates under a government charter; a charter signed in each case bv the Comptroller 
of the Currency. 
“The law provides that you may have 6% cumulative dividends on your stock 
and requires your federal reserve bank to build up its surplus and when the surplus 
reaches a certain point, that is, after the surplus is equal to the subscribed capital or 
double the paid-in capital, the government gets 909% of all the rest of the earnings of 
the federal reserve bank, the remaining 10% going to surplus. 
“Every dollar with which the federal reserve bank operates, as to capital stock, 
and almost every dollar as to deposits, comes from the member banks. The govern- 
ment deposits are small and temporary in character, and their value is far more than 
offset by the actual out-of-pocket expense incurred by the federal reserve bank in acting 
as fiscal agent for the government. Senator Glass has pointed out that the government 
is tremendously compensated for anything it may have done for the federal reserve 
banks. The earnings of the federal reserve bank properly belong to you, and I believe 
if you stand up for your rights you are going to get them. I know the banks in othe: 
sections of the country feel as you do, and there are other sections that seem to have 
more political power than New England. 
“There is another matter. The Federal Reserve Act provides that in the event 
of liquidation of a federal reserve bank, the member banks get back their deposits, they 
get back what they have paid in on the capital stock, and all the rest of the assets go 
to the Government of the United States. Now, we have approximately $10,800,000 
paid-in capital. This bank can be dissolved only by an act of Congress or be liquidated 
for violation of law. It cannot be liquidated by vote of the stockholders. 
“It may continue in business as long as Congress permits; Congress could put us 
out of business tomorrow. What I want to point out is this: In the event of liquida- 
tion of this bank, you would get back approximately $10,800,000. The Government 
of the United States would get about $20,000,000. That money, that surplus, belongs 
to you; it has been made with money. furnished by you, and it has been made prin- 
cipally bv transactions which this bank had with vou. 
Present Distribution 
nf Earnings 
Liquidation 
“That fund is the result of members dealing with this bank. Now, I ask, where is 
the justice of the great Government of the United States saying that your share in the 
earnings of your own bank, every dollar of the stock of which is owned by you, shall 
be treated in that way, that a certain amount shall be carried to surplus regardless 
of whether the bank needs the surplus or not, and that everything else shall go to the 
government and that in the event of liquidation all the accumulated orofits and sur 
plus shall go to the government? * * * 
“Let us analyze this situation today. I estimate that we may have net earnings of 
approximately $3,000,000 this year. We have already paid you approximately $300, 
000 in dividends for the first six months of this year. In addition, under the present 
law, you will get $300,000 more in dividends. We must, as the law stands, accumu- 
late a surplus equal to 100% of our subscribed capital, or $21,600,000 at this time. 
That means that we shall carry between $1,800,000 and $2,000,000 to surplus. 
There is no occasion for carrying $2,000,000 more to surplus. Yet, under the present 
law, when we pay you a semi-annual dividend of $300,000 on December 31, we must 
carry at least $1,800,000 more to surplus and pay the remainder, or about $600,000, to 
the Government of the United States as a franchise tax, * * * 
(Continued on page 51) 
Boston Bank 
in 1929