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( C 0 t* Y ) DEPARTMENT OF JUSTICE Washington 1.9jL X-4553 March 4, 1926. Sir; I have the honor to reply to your letter of January 12, 1826, transmitting one from the Governor of the Federal Reserve Board, and submitting for my consideration and opinion the question whether a trustee, officer or employee of a mutual savings hank is eligible for appointment as a Class B or class C director of a Federal reserve bank, Section 4(5) of the Federal Reserve Act (Act of December 23, 1913, c. 6, 38 Stat. 254) provides that the board of directors of Federal reserve banks shall consist of nine members divided into three classes designated as classes A, B and C. It i s further provided that: Ho director of class B shall be an o f f i c e r , director or employee of any bank. No director of class C shall be an officer, director, employee or stockholder of any bank. It has been contended that a mutual savings bank, having no capital stock, and not engaged in a general banking business, i s not such a bank as i s contemplated by the atatute, and that, therefore, an officer of such mutual savings bank i s not prohibited from serving as a class B or class C director of a Federal reserve bank. The real question presented for my consideration, therefore, i s whether a mutual savings bank of the character above X-4553 described., is to "be considered a "bank" , as that, term is used in section 4(5) of the Federal Reserve Act, prescribing the 192 qualifications of class B and class C directors. The word "bank" i s inclusive and cannot be restricted to institutions transacting a l l of the business usually transacted by commercial banking institutions. A mutual savings bank, al- though having no capital stock, accepts deposits, makes loans, and invests i t s money in securities, paying over to i t s depositors the principal of their deposits and accrued net earnings. To that extent i t i s engaged in the banking business. Bouvier de- fines a bank as "A place for the deposit of money" . The Supreme Court of the United States, in Smith v. Kansas City Title Company, 255 U.S., 180, 210 said: 11 Generally speaking, a bank i s a moneyed institution to f a c i l i t a t e the borrowing, lending and caring for money". In Bank of Savings v. The Collector, 70 U.S. 495, the Supreme Court of the United States had under consideration the status of mutual savings banks operating without capital stock, such as those referred to in your communication. At pages 512-513 the Court said: Banks, in the commercial sense, are of three kinds, towit: 1, of deposit; 2, of discount; 3, of circulation. All or any two of these functions may, and frequently are, exercised by the sane association; but there are s t i l l banks of deposit, without authority to make discounts or issue a circulating medium. Savings banks which receive deposits and loan the same for the benefit of their depositors, although they may have no capi t a l stock, and neither make discounts nor perform other functions usually performed by commercial banks, are, nevertheless, engaged in the business of banking and are, therefore, banks within the -2- 193 meaning of section 4(5) of the Federal Reserve Act, supra. I have the honor, therefore, to aclvise you that mutual savings banks are banks within the meaning of section 4(5) of the Federal Reserve Act, prohibiting directors of class B and class C from being o f f i c e r s , directors or employees of "any bank". Respectfully, (Signed) Jno. G. Sargent Attorney General. The Honorable, The Secretary of the Treasury. -3-
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