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FEDERAL RESERVE BOARD WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE T O THE FEDERAL RESERVE BOARD - X-7223-c August 6, 1932. SUBJECT: S u g g e s t e d Form o f A p p l i c a t i o n f o r Discount by an I n d i v i d u a l , P a r t n e r s h i p or C o r p o r a t i o n . Dear S i r : There a r e i n c l o s e d f o r your i n f o r m a t i o n and a s s i s t a n c e two c o p i e s o f a l e t t e r a n d i n c l o s u r e s t h e r e w i t h r e c e i v e d from the Counsel f o r t h e F e d e r a l R e s e r v e Bank o f A t l a n t a , c o n t a i n i n g s u g g e s t i o n s w i t h r e g a r d t o t h e f o r m of a p p l i c a t i o n f o r d i s c o u n t b y a n i n d i v i d u a l , p a r t n e r s h i p or c o r p o r a t i o n i n c l o s e d i n t h e Board's l e t t e r of J u l y 26, 1932, ( X - 7 2 1 3 ) . Very t r u l y yours, E . M. M c C l e l l a n d , Assistant Secretary. Inclosures. TO GOVERNORS OF ALL F . R. BANKS EXCEPT ATLANTA. COPY X-7223 145 COLQUITT, PARKER, TROUTMAN & ARKWRIGHT A t t o r n e y s a t Law S u i t e 1607 W i l l i a m O l i v e r B l d g . Atlanta August 2, 1932. SUBJECT: Suggested form of A p p l i c a t i o n f o r D i s count by an I n d i v i d u a l , p a r t n e r s h i p or C o r p o r a t i o n . Mr. C h e s t e r M o r r i l l , S e c r e t a r y , Federal Reserve Board, W a s h i n g t o n , D. C. D e a r Mr. M o r r i l l : I d u l y r e c e i v e d a copy of t h e B o a r d ' s l e t t e r of J u l y 2 6 t h ( X - 7 2 1 3 ) , w i t h w h i c h t h e r e was e n c l o s e d a c o p y o f a s u g g e s t e d form of a p p l i c a t i o n f o r u s e i n connection w i t h d i s c o u n t s f o r i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s under t h e p r o v i s i o n s o f S e c t i o n 1 3 o f t h e F e d e r a l R e s e r v e A c t a s amended "by t h e A c t a p p r o v e d J u l y 2 1 , 1 9 3 2 , e t c . T h i s f o r m o f a p p l i c a t i o n seemed t o me t o 'be e x c e l l e n t . So f a r a s c o n c e r n s i t s u s e i n t h e S i x t h F e d e r a l R e s e r v e D i s t r i c t b u t One c h a n g e o f a n y i m p o r t a n c e s u g g e s t e d i t s e l f t o me. I n F l o r i d a , where powers of s a l e upon d e f a u l t have always b e e n r e g a r d e d w i t h d i s f a v o r , a s t a t u t e p r o v i d e s t h a t c o l l a t e r a l may not be s o l d a f t e r default unless a prescribed n o t i c e be given by advertisement. I have, t h e r e f o r e , suggested to the Federal R e s e r v e Bank t h a t t h e a p p l i c a t i o n p r e p a r e d f o r u s e h e r e c o n t a i n a p r o v i s o , i n s e r t e d a f t e r t h e power o f s a l e , t o t h e e f f e c t t h a t " i n a n y c a s e w h e r e some p r o v i s i o n o f a p p l i c a b l e l a w may r e q u i r e a d v e r t i s e m e n t or other n o t i c e a s a c o n d i t i o n t o t h e e x e r c i s e o f a p o w e r o f s a l e , s u c h a s i s h e r e i n g i v e n and g r a n t e d , a n y s a l e made p u r s u a n t t o | ^ i i s power s h a l l b e h a d a f t e r compliance w i t h such provisions of law." I n o t e f r o m t h e B o a r d ' s C i r c u l a r (X-7215-A). t h a t a F e d e r a l R e s e r v e Bank may d i s c o u n t f o r i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s not only n o t e s , e t c . , which are the o b l i g a t i o n s o f o t h e r p a r t i e s a c t u a l l y owned b y s u c h i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s and endorsed by them, but a l s o t h e p r o m i s s o r y n o t e s o f s u c h i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s endorsed by o t h e r p a r t i e s , whose endorsements a r e s a t i s f a c t o r y t o t h e F e d e r a l R e s e r v e B a n k . I t s e e m e d t o me t h a t , X-7223 14(5 8—3—32 • kr, Chester Morrill - #2. i n c a s e s w h e r e t h e d i r e c t n o t e s o f a n a p p l i c a n t a r e t o "be d i s c o u n t e d , t h e e n d o r s e r s s h o u l d h e made t o a s s e n t t o t h e t e r m s and c o n d i t i o n s o f t h e a p p l i c a t i o n , w h i c h i n c l u d e i m p o r t a n t ana s u b s t a n t i a l r i g h t s touching the handling, c o l l e c t i o n , subs t i t u t i o n , c o m p r o m i s e , r e n e w a l , e x t e n s i o n and s a l e o f c o l l a t e r a l s . I have, a c c o r d i n g l y , d r a f t e d a form of consent t o b e s i g n e d by s u c h e n d o r s e r s and e n c l o s e a copy f o r your i n formation. Of c o u r s e , i n c a s e s T h e r e t h e p r o m i s s o r y n o t e s o f t h e a p p l i c a n t , duly endorsed, are discounted, the note i t s e l f w i l l b e drawn u p o n t h e F e d e r a l R e s e r v e B a n k ' s f o r m and w i l l c o n t a i n p o w e r s o f s u b s t a n t i a l l y t h e same t e n o r a s t h o s e s e t o u t i n t h e a p p l i c a t i o n . I t seemed a d v i s a b l e t o me, h o w e v e r , t h a t t h e endorsers s p e c i f i c a l l y assent to the discount of the paper u p o n t h e t e r m s s e t out i n t h e a p p l i c a t i o n . Mr. J o h n s , D e p u t y G o v e r n o r , a f t e r r e v i e w i n g t h e s u g g e s t e d f o r m o f a p p l i c a t i o n , made a n o t h e r s u g g e s t i o n , n a m e l y , t h a t t h e a p p l i c a t i o n c o n t a i n a p r o v i s i o n under which t h e F e d e r a l R e s e r v e Bank c o u l d h o l d a n y c o l l a t e r a l a c q u i r e d a s s e c u r i t y f o r t h e d i s c o u n t e d o b l i g a t i o n s f o r t h e payment of any o t h e r p a p e r o f t h e a p p l i c a n t h e l d b y t h e R e s e r v e B a n k . Mr. Johns s t a t e d t h a t i t might happen t h a t t h e bank would r e c e i v e a p p l i c a t i o n s from i n d i v i d u a l s , p a r t n e r s h i p s or c o r p o r a t i o n s w h o s e p a p e r i t h e l d u n d e r r e d i s c o u n t f r o m member b a n k s . I t was n o t e n t i r e l y c l e a r t o him w h e t h e r , i n s u c h c a s e s , t h e c o l l a t e r a l taken i n connection with the "direct" loans could be u t i l i z e d as s e c u r i t y f o r the paper taken under rediscount f r o m member b a n k s . I n o r d e r t o r e m o v e a n y d o u b t a b o u t t h i s q u e s t i o n I h a v e d r a f t e d a p a r a g r a p h w h i c h may b e p u t i n o u r form of a p p l i c a t i o n immediately above the a p p l i c a n t ' s s i g n a t u r e . A copy of t h e paragraph proposed f o r i n s e r t i o n i s also enclosed. The F e d e r a l R e s e r v e Bank w i l l , o f c o u r s e , s e n d y o u c o p i e s o f t h e a p p l i c a t i o n when t h e same h a s b e e n p u t i n f i n a l f o r m a n d p r i n t e d , b u t , i n t h e m e a n t i m e , I am s e n d i n g y o u t h e s e s u g g e s t i o n s f o r w h a t e v e r t h e y may b e w o r t h t o t h e o t h e r F e d e r a l Reserve Banks. Very t r u l y y o u r s , (S) Robt. S. P a r k e r . RSP/w. Copy t o J Mr. W a l t e r W y a t t , G e n e r a l C o u n s e l , Federal Reserve Board. 147 Cow X-7223-a CONSENT Or EHBORSEB. The u n d e r s i g n e d , b e i n g e n d o r s e r o r e n d o r s e r s o f c e r t a i n commercial, i n d u s t r i a l or a g r i c u l t u r a l paper o f f e r e d f o r d i s c o u n t to F e d e r a l B e s e r v e Bank o f A t l a n t a b y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ u n d e r an a p p l i c a t i o n d a t e d _____ d a y o f . 193 , a n d more p a r t i c u l a r l y d e s c r i b e d i n S c h e d u l e A attached to s a i d a p p l i c a t i o n , hereby agree and a s s e n t to the discount b y s a i d F e d e r a l H e s e r v e Bank o f t h e s a i d p a p e r u p o n t h e t e r m s a n d u n d e r the c o n d i t i o n s i n s a i d a p p l i c a t i o n s e t f o r t h . The u n d e r s i g n e d r e q u e s t s a i d F e d e r a l B e s e r v e Bank t o d i s c o u n t s a i d paper and e x p r e s s l y agree that, in consideration of such d i s c o u n t , h i s , i t s or t h e i r l i a b i l i t y a s e n d o r s e r or e n d o r s e r s s h a l l be a n d r e m a i n u n i m p a i r e d and u n a f f e c t e d b y t h e e x e r c i s e b y t h e F e d e r a l R e s e r v e Bank o f a n y o f t h e r i g h t s , p o w e r s o r p r i v i l e g e s i n s a i d a p p l i c a t i o n s e t f o r t h , i n c l u d i n g r i g h t s , powers or p r i v i l e g e s touching or concerning t h e h a n d l i n g , c o l l e c t i o n , s u b s t i t u t i o n , c o m p r o m i s e , r e n e w a l , e x t e n s i o n and s a l e of any of the c o l l a t e r a l s a t any time h e l d f o r the payment of the o b l i g a t i o n s u p o n w h i c h t h e u n d e r s i g n e d i s o r a r e o r may b e l i a b l e a s e n dorser or endorsers. WITNESS t h e hand the day o f and s e a l , 193 of the undersigned, this . (SEAL) (SEAL) (SEAL) Co-p.v <• X-7223-Id • INSERT BEFORE THE SIGNATURE LIME OH PAGE 8 . The a p p l i c a n t f u r t h e r e x p r e s s l y a g r e e s t h a t a n y c o l l a t e r a l or s e c u r i t y o f any kind or c h a r a c t e r a t any time h e l d by the Federal Reserve B a n k \ f o r t h e payment o f t h e c o m m e r c i a l , i n f l u x t i 1^1 o r a g r i c u l t u r a l p a p e r d e s c r i b e d i n S c h e d u l e A z he r e t o a t t a c h e d may be h e l d and u t i l i z e d b y t h e F e d e r a l R e s e r v e Bank n o t o n l y f o r t h e payment o f s a i d p a p e r a n d / o r any renewals, in whole or i n p a r t , or any e x t e n s i o n s t h e r e o f , but a l s o f o r the payment o f any o t h e r o b l i g a t i o n s of the a p p l i c a n t to t h e F e d e r a l R e s e r v e B a n k , w h e t h e r a c q u i r e d d i r e c t l y f r o m t h e a p p l i c a n t o r f r o m some t h i r d p a r t y or otherwise acquired; i t b e i n g the i n t e n t i o n hereof to p r o v i d e t h a t a n y i n d e b t e d n e s s o r o b l i g a t i o n due b y t h e a p p l i c a n t t o t h e F e d e r a l R e s e r v e Bank s h a l l b e s e c u r e d b y t h e s a i d c o l l a t e r a l s a n d s e c u r i t i e s l i s t e d on S c h e d u l e A, t h e F e d e r a l R e s e r v e Bank t o h a v e t h e r i g h t to a p p l y the p r o c e e d s o f any c o l l a t e r a l s upon any o f s u c h o b l i g a t i o n s a s t h e F e d e r a l R e s e r v e Bank may d e t e r m i n e .
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