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X-L-Ex -Officio Members W. P. Q. HARDING. GOVERNOR PAUL M. WARBURG. VICE GOVERNOR FREDERIC A. DELANO ADOLPH C. MILLER ' CHARLES S. HAMLIN WILLIAM « . McADOO SECRETARY OF THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS FEDERAL RESERVE BOARD COMPTROLLER OF THE CURRENCY H . P A R K E R W IL U S , SECRETAR Y S H E R M A N P . A L L E N . ASST. SECR ETA R Y and WASHINGTON F is c a l A c e n t ADDRESS REPLY TO FEDERAL RESERVE BOARD October 20, 1917. Dear Sir: Fran inquiries received at this office it appears that the Officers of some normember State banks and trust com panies are under the misapprehension that such banks and trust companies becoming members of the Federal Reserve System are subject to the limitations imposed by Section 5^00 Revised Statutes which limit the total liabilities to a national bank of any one person, firm or corporal!ion to an amount not to ex ceed ten per Cent of the capital and surplus of the lending bank* Where this misapprehension exists attention should be called to the fact that under Section 9 of the Federal Reserve Act as amended, State banks and trust companies becoming members of the Federal Reserve System are not subject to the limitations of Sec tion 5^00 but are subject only to such limitations as are inposed by State laws. Such banks may, therefore, make loans to the same person, firm or corporation in any amounts permitted by the State laws. Loans to one person in excess of ten per cent are, however, not eligible for rediscount with a Federal Reserve Bank. The provision of Section 9 of the Federal Reserve Act bearing on this point is as follows: "That no Federal Reserve Bank shall be permitted to discount for any State bank or trust company, notes, drafts, or bills of exchange of any one borrower who is liable for borrowed money to such State bank or trust company in an amount greater than ten per centum of the capital and surplus of such State bank or trust company, but the discount of bills of exchange drawn against actually existing value and the dis count of commercial or business paper actually owned by the per son negotiating the same shall not be considered as borrowed money within the meaning of this section." Respectfully, Governor.
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