The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FEDERAL RESERVE BOARD X-6029 WASHINGTON ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD May 3, 1928. SUBJECT: D e p o s i t s of Mutual Savings Banks, Morris P l a n Banks, C r e d i t Unions, B u i l d i n g and Loan A s s o c i a t i o n s and Cooperative Banks. Dear S i r ; The q u e s t i o n has been p r e s e n t e d to the F e d e r a l R e s e r v e Board whether d e p o s i t s in member banks by mutual s a v i n g s b a n k s , Morris P l a n b a n k s , c o o p e r a t i v e banks, c r e d i t u n i o n s , and b u i l d i n g and loan a s s o c i a t i o n s should be c l a s s e d by member banks in computing r e s e r v e s as amounts 11 duo to" banks w i t h i n t h e meaning of S e c t i o n 19 of t h e F e d e r a l Reserve Act, from which amounts 11 due from" banks may be deducted. From i n f o r m a t i o n o b t a i n e d by the F e d e r a l Reserve Board i t a p p e a r s t h a t t h e r e has been no u n i form p r a c t i c e among member banks in c l a s s i f y i n f d e p o s i t s of any one of t h e c l a s s e s of i n s t i t u t i o n s mentioned. The q u e s t i o n whether t h e r e s p e c t i v e i n s t i t u t i o n s should p r o p e r l y be r e g a r d e d a s banks w i t h i n t h e meaning of S e c t i o n 19 of t h e F e d e r a l Reserve Act depends upon the n a t u r e and f u n c t i o n s of each: A mutual s a v i n g s bank i s engaged in b a n k i n g f u n c t i o n s in a c c e p t i n g d e p o s i t s and making l o a n s . The A t t o r n e y General h a s h e l d t h a t mutual s a v i n g s banks should be c o n s i d e r e d "banks" w i t h in the meaning of S e c t i o n 4 of the F e d e r a l Reserve Act and a simi l a r r e a s o n i n g would r e q u i r e t h a t they be r e g a r d e d a s "banks" w i t h i n t h e meaning of S e c t i o n 19. Morris P l a n banks a r e a l s o engaged in t h e a c c e p t a n c e o f d e p o s i t s and the making of l o a n s to c e r t a i n c l a s s e s of p e r s o n s , and the e x e r c i s e of t h e s e f u n c t i o n s r e q u i r e t h a t they be r e g a r d e d as banks. A b u i l d i n g and loan a s s o c i a t i o n i s of a somewhat d i f f e r e n t c h a r a c t e r . I t makes loans to i t s members upon t h e s e c u r i t y of r e a l e s t a t e and membership s h a r e s b u t i t does n o t u s u a l l y r e c e i v e d e p o s i t s from members or o t h e r s , except i n s t a l l m e n t payments on membership s h a r e s . Such i n s t a l l m e n t payments a r e e s s e n t i a l l y c a p i t a l r a t h e r than d e p o s i t s . The p r i m a r y f u n c t i o n of a b u i l d i n g and loan a s s o c i a t i o n i s u s u a l l y , t h e r e f o r e , to make l o a n s on r e a l e s t a t e to i t s members o u t of c a p i t a l p a i d in by such members. Inasmuch a s i t does n o t r e c e i v e d e p o s i t s and l o a n s a r e made from c a p i t a l , i t i s not to be r e g a r d e d a s a bank. Cooperative banks of the type found i n M a s s a c h u s e t t s a r e s i m i l a r i n purpose and f u n c t i o n s to b u i l d i n g and l o a n a s s o c i a t i o n s and a r e to be c l a s s i f i e d in t h e same way. C o o p e r a t i v e X-6029 -2- banks of t h e M a s s a c h u s e t t s type a r e to be d i s t i n g u i s h e d , from t h o s e s o - c a l l e d c o o p e r a t i v e banks o r g a n i z e d e i t h e r under n a t i o n a l o r S t a t e law having g e n e r a l banking powers; the l a t t e r a r e undoubtedly banks w i t h i n the meaning of S e c t i o n 19, C r e d i t u n i o n s a r e a u t h o r i z e d to r e c e i v e s a v i n g s of t h e i r members in payment f o r s h a r e s of c a p i t a l s t o c k and a l s o g e n e r a l l y to r e c e i v e such s a v i n g s on d e p o s i t . Loans a r c made to members under c e r t a i n r e s t r i c t i o n s and l i m i t a t i o n s . The f a c t t h a t t h e y r e c e i v e d e p o s i t s and l o a n s a r e t h u s made n o t o n l y out of c a p i t a l b u t from d e p o s i t s b r i n g s them w i t h i n t h e u s u a l d e f i n i t i o n of a bank. A f t e r a c a r e f u l c o n s i d e r a t i o n of t h e n a t u r e of t h e s e s e v e r a l i n s t i t u t i o n s the F e d e r a l Reserve Board i s of t h e o p i n i o n t h a t d e p o s i t s made by mutual s a v i n g s b a n k s , Morris P l a n banks and c r e d i t u n i o n s should be c l a s s i f i e d by member banks a s amounts "due to" banks w i t h i n the meaning of S e c t i o n 19 of t h e F e d e r a l Res e r v e A c t , from which amounts "due from" banks may be d e d u c t e d , b u t d e p o s i t s of b u i l d i n g and loan a s s o c i a t i o n s and c o o p e r a t i v e banks of t h e type found in M a s s a c h u s e t t s may n o t be so c l a s s i f i e d . By o r d e r of t h e F e d e r a l Reserve Board. Walter L. Eddy, Secretary. TO ALL F.R.AGENTS Al'D GOVERNORS OF F.R.BAHS.
@FedFRASER