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federal reserve board
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE T O
T H E FEDERAL RESERVE BOARD
X-4746.
December 10, 1926.
SUBJECT:
Rediscount of Notes Secured. byAdjusted Service C e r t i f i c a t e s .
Dear S i r :
I enclose f o r your information a copy of a new r e g u l a t i o n
promulgated "by the Federal Reserve Board December 9, 1926.
This
r e g u l a t i o n p e r t a i n s to the r e d i s c o u n t by Federal r e s e r v e banks of
notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s and w i l l be known
as Regulation M.
I a l s o enclose f o r your information the following:
1.
A f i n a l d r a f t of the proposed c i r c u l a r l e t t e r on the
above s u b j e c t to be s e n t by each Federal r e s e r v e bank to every
i n c o r p o r a t e d bank i n i t s d i s t r i c t .
This proposed c i r c u l a r l e t t e r
was p r e p a r e d by the Board's Counsel with the advice and a s s i s t a n c e
of a committee of o f f i c e r s of Federal r e s e r v e banks appointed p u r suant to a r e s o l u t i o n adopted a t the l a s t Governors 1 Conference,
a s more f u l l y explained i n Mr. Wyatt's l e t t e r of December 4 (X-4738);
2,
Regulation promulgated December 8, 1926* by the tJnited
S t a t e s Veterans 1 Bureau p e r t a i n i n g to loans on a d j u s t e d s e r v i c e
certificates;
Copy of form of note arid a f f i d a v i t s approved by the
United. S t a t e s V e t e r a n s ' Bureau;
4.
Proposed form of a p p l i c a t i o n f o t rediscount of such
n o t e s ; and
5.
Proposed form of r e s o l u t i o n to be adopted by banks author i z i n g the endorsement and rediscount of such n o t e s .
The Board's Regulation M i s now on the p r e s s and i t i s
hoped t h a t a supply of p r i n t e d copies can be shipped t o you on
Monday or Tuesday of next week.
The United S t a t e s Veterans' Bureau has agreed to supply
to each F e d e r a l r e s e r v e bank a s u f f i c i e n t number of copies of
the following documents to enable each Federal r e s e r v e bank to
send a copy to every i n c o r p o r a t e d bank i n i t s d i s t r i c t :
X-4746
— 2
1.
2.
3.
4.
375
The World War Adjusted Compensation Act;
The Act of July 3, 1926, amending the World War
Adjusted Compensation Act;
The r e g u l a t i o n s of the Veterans' Bureau with
r e s p e c t to loans on a d j u s t e d s e r v i c e c e r t i f i c a t e s ; and
Forms of notes and a f f i d a v i t s approved by the
V e t e r a n s ' Bureau.
A supply of each of these documents w i l l "be shipped to each
Federal r e s e r v e "bank a s soon a s they can "be p r i n t e d . A f u r t h e r supply
of the forms of notes and a f f i d a v i t s provided "by the Veterans' Bureau
f o r the u s e of l e n d i n g "banks w i l l "be f u r n i s h e d to each Federal r e s e r v e
"bank which i s w i l l i n g to d i s t r i b u t e such forms upon r e q u e s t . Most of
the Federal r e s e r v e "banks have a l r e a d y expressed t h e i r w i l l i n g n e s s to
do t h i s .
Bach Federal r e s e r v e "bank w i l l , of course, be expected to
p r i n t i t s own c i r c u l a r l e t t e r , forms of a p p l i c a t i o n f o r r e d i s c o u n t ,
and the proposed form of r e s o l u t i o n to be adopted by banks a u t h o r i z ing the endorsement and rediscount of notes secured by a d j u s t e d
service c e r t i f i c a t e s .
Very t r u l y yours,
Walter L. Eddy.
Secretary.
Enclosures.
TO GOVERNORS OF ALL FEDERAL 'RESERVE BANKS.
FEDERAL RESERVE BA2IK OF
Circular 2To.
REDISCOUNT OF 1T0TSS SECURED BY ADJUSTED SERVICE CERTIFICATES.
To a l l Incorporated Banks in the
Federal Reserve D i s t r i c t .
Under the p r o v i s i o n s of the World War Adjusted Compensation
Act, a d j u s t e d s e r v i c e c e r t i f i c a t e s s h a l l he dated as of the 1 s t day of
the month in which t h e a p p l i c a t i o n s f o r such c e r t i f i c a t e s a r e f i l e d , but
in no case b e f o r e January 1, 1925.
Banks a r e a u t h o r i z e d to make loans
on the s e c u r i t y of such a d j u s t e d s e r v i c e c e r t i f i c a t e s , but n o t b e f o r e
the e x p i r a t i o n o f ,
two years a f t e r the date of the c e r t i f i c a t e .
Only the veteran named in the c e r t i f i c a t e can l a w f u l l y o b t a i n
a loan on h i s a d j u s t e d s e r v i c e c e r t i f i c a t e and n e i t h e r the b e n e f i c i a r y
nor any o t h e r person than the v e t e r a n has any r i g h t s in t h i s r e s p e c t .
'
F ~
LOANS CiT-' ADJUSTED SERVICE CERTIFICATES.
Any n a t i o n a l bank or any bank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , t e r r i t o r y , p o s s e s s i o n or the D i s t r i c t of
Columbia, h e r e i n a f t e r r e f e r r e d to as any "bank", i s a u t h o r i z e d to loan
to any veteran upon h i s promissory n o t e secured by h i s a d j u s t e d s e r (with cr
vice c e r t i f i c a t e / \ w i t h o u t the consent of t h e b e n e f i c i a r y t h e r e o f ) any
amount not i n excess of the loan value of the . c e r t i f i c a t e a t the d a t e
the loan i s made.
Each c e r t i f i c a t e contains on i t s f a c e a t a b l e f o r
determining the loan v a l u e of the c e r t i f i c a t e .
— 2 —
X~ '.-7 4:6—8,
The United States Veterans* Bureau has prepared a form of
note f o r use in t h i s connection and i s p r i n t i n g a suoply of such forms
f o r d i s t r i b u t i o n to the banks.
*
The r e g u l a t i o n s of the Bureau provide
t h a t the form of notes used in making loans secured by a d j u s t e d s e r vice c e r t i f i c a t e s should s u b s t a n t i a l l y follow the form p r e p a r e d by the
Bureau.
The o f f i c i a l form provided by the Bureau should, t h e r e f o r e ,
be used whenever p o s s i b l e .
When i t i s not p o s s i b l e to use t h i s form
the bank should use a form s u b s t a n t i a l l y the same as t h a t provided by
the Veterans' Bureau, a sample copy of which i s enclosed h e r e w i t h .
Any bank making a loan on an a d j u s t e d s e r v i c e c e r t i f i c a t e
i s r e q u i r e d by the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau
6
promptly to n o t i f y the Bureau of the name of t h e v e t e r a n , the A-number
shown immediately a f t e r the name, t h e number of the c e r t i f i c a t e and
the amount and d a t e of the loan..
Any bank holding a n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e may s e l l the note to any bank a u t h o r i z e d to make a loan to
a veteran and d e l i v e r the c e r t i f i c a t e to such bank.
In c a s e a n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e i s
sold, discounted or r e d i s c o u n t e d , the bank making the t r a n s f e r i s r e q u i r e d
by law to n o t i f y the veteran promptly by mail a t h i s l a s t known p o s t o f f i c e
address.
Ho a d j u s t e d s e r v i c e c e r t i f i c a t e i s n e g o t i a b l e or a s s i g n a b l e , or
may serve as s e c u r i t y f o r a loan, except as provided in Section 502 of the
World War Adjusted Compensation Act, which i s p r i n t e d on t h e f a c e of each
adjusted service c e r t i f i c a t e .
Any n e g o t i a t i o n , assignment or loan not made
in accordance w i t h the p r o v i s i o n s of Section 502 of the World War Adjusted
Compensation Act i s v o i d .
The law p r o v i d e s t h a t the r a t e of i n t e r e s t which a bank may
charge upon
such loan s h a l l not exceed by more than 2^ per annum the r a t e
charged, a t the date of the loan f o r t h e discount of 90-day commercial
paper under s e c t i o n 13 of the Federal Reserve Act by the Federal Reserve
Bank of the d i s t r i c t in which the lending bank ia l o c a t e d .
The r e g u l a -
t i o n s of t h e United S t a t e s Veterans' Bureau provide t h a t , where a loan
i s made by a bank l o c a t e d in a t e r r i t o r y or possession not embraced in
any Federal Reserve D i s t r i c t , the r a t e of i n t e r e s t charged s h a l l not exceed the l e g a l r a t e in such t e r r i t o r y or p o s s e s s i o n ; provided, however,
t h a t the i n t e r e s t charged on loans made o u t s i d e the c o n t i n e n t a l l i m i t s
of the United S t a t e s by a branch of a bank whose head o f f i c e i s in a Fed-^
e r a l Reserve D i s t r i c t w i l l be governed by the discount r a t e on 90-day
commercial paper in e f f e c t a t the Federal Reserve Bank of the d i s t r i c t
in which the p a r e n t bank i s l o c a t e d .
No charge, other than the i n t e r e s t
allowed by law, may be made by the lending bank; since the a c t p r o v i d e s ,
under p e n a l t y , t h a t such bank s h a l l not charge or c o l l e c t , or a t t o u ; t
to charge or c o l l e c t , d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r onnansiation
in r e s p e c t of any loan made upon the s e c u r i t y of an a d j u s t e d s e r v i c e c e r t i f i c a t e except the i n t e r e s t a u t h o r i z e d by law.
Any v i o l a t i o n of t h i s
p r o v i s i o n w i l l make the loan void.
The D i r e c t o r of the United S t a t e s Veterans' Bureau cannot l a w f u l l y
make payment on any n o t e secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e , u n l e s s
the n o t e when p r e s e n t e d to him i s accompanied by an a f f i d a v i t made by an o f f i c e r of the bank which made the loan, b e f o r e a Notary P u b l i c or other o f f i c e r
designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r of t h e Veterans' Bureau, s t a t i n g t h a t such bank has n o t charged or c o l l e c t e d , or attempted to
charge or c o l l e c t d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r compensation
in r e s p e c t of any loan made upon the s e c u r i t y of an a d j u s t e d s e r v i c e c e r t i f i c a t e by the bank to a v e t e r a n , except the i n t e r e s t a u t h o r i z e d by law.
— 4
~
X-4746-a
8r
The Regulations of the United S t a t e s Veterans' Bureau a l s o
r e q u i r e t h a t such a f f i d a v i t s h a l l s t a t e :
(1)
That the person who obtained the loan evidenced "by such
note i s knov/n to be the veteran named i n the a d j u s t e d s e r v i c e c e r t i f i c a t e securing such note;
(2)
That the lending bank has n o t i f i e d the United S t a t e s
Veterans 1 Bureau t h a t i t has made a loan to the v e t e r a n named i n the c e r t i f i c a t e ; and
(3)
That the "bank has n o t i f i e d the v e t e r a n "by mail a t h i s l a s t
known p o s t o f f i c e address of any s a l e , discount, or r e d i s c o u n t of such
note.
The Regulations of the United S t a t e s Veterans' Bureau a l s o p r e - '
vide t h a t i n case t h e note was r e s o l d or r e d i s c o u n t e d by any bank other
than the l e n d i n g bank, a f f i d a v i t s h a l l be made by a duly a u t h o r i z e d o f f i c e r
of such bank t h a t proper n o t i c e of such r e s a l e or r e d i s c o u n t was promptly
mailed to the v e t e r a n a t h i s l a s t known a d d r e s s .
There i s p r i n t e d on the same p i e c e of paper a s the form of note
• h.
p r e p a r e d by the JEeterans' Bureau two forms of a f f i d a v i t s covering the
above requirements; and the Regulations of the Vetera ns' Bureau p r o v i d e
that the proper execution of the a p p r o p r i a t e a f f i d a v i t on such form w i l l
be considered as a compliance with the requirements cf the Veterans'
Bureau with r e s p e c t to a f f i d a v i t s .
REDEMPTION OF CERTIFICATES BY THE DIRECTOR
OF THE VETERANS' BUREAU
I f the v e t e r a n does not pay the loan a t i t s m a t u r i t y the bank
holding the note and a d j u s t e d s e r v i c e c e r t i f i c a t e may a t any time a f t e r
— 5
X~-*4: *74:6~ a
—
380
the m a t u r i t y of the loan, "but not "before the e x p i r a t i o n of s i x months
a f t e r the loan was made, p r e s e n t them to the Director of the Veterans 1
Bureau.
The Director may i n h i s d i s c r e t i o n accept the c e r t i f i c a t e and
note and pay the "bank i n f u l l s a t i s f a c t i o n of i t s claim, the amount of
the unpaid p r i n c i p a l due i t , and the unpaid i n t e r e s t accrued a t the
r a t e f i x e d i n t h e note, up to the data of the check i s s u e d to the hank.
The Regulations of the Veterans' Bureau s t a t e t h a t i t w i l l
"be the p o l i c y of t h e Bureau to redeem a l l loans made i n accordance with
the law and r e g u l a t i o n s made pursuant t h e r e t o , when such loans a r e made
i n good f a i t h to the v e t e r a n to whom the c e r t i f i c a t e was issued, except
t h a t where the note i s h e l d "by a bank f o r a p e r i o d i n excess of s i x
months a f t e r the date of m a t u r i t y , the d i s c r e t i o n a u t h o r i z e d "by law may
"be invoked and redemption r e f u s e d .
I f the v e t e r a n dies "before the m a t u r i t y of the loan, the amount
of unpaid p r i n c i p a l and unpaid i n t e r e s t accrued up to the date of h i s
death immediately becomes due and p a y a b l e .
In such case, or i f the
v e t e r a n d i e s on the date the loan matures or w i t h i n s i x months t h e r e a f t e r , the bank h o l d i n g the note and the c e r t i f i c a t e s h a l l ,
notice
of
the
death of
the
veteran,
upon
p r e s e n t thorn to the Director of the Veterans' Bureau,who s h a l l thereupon
pay the "bank i n f u l l s a t i s f a c t i o n of i t s claim the amount of the unpaid
p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d i n the note accrued up
to the date of the check issued to the bank; except t h a t i f , p r i o r to the
payment, the hank i s n o t i f i e d by the Director of the death of the veteran
and f a i l s to p r e s e n t the c e r t i f i c a t e and note to the D i r e c t o r w i t h i n 15
days a f t e r such n o t i c e , i n t e r e s t s h a l l "be p a i d only up to the 15th day
a f t e r such n o t i c e .
If the v e t e r a n has not died b e f o r e the m a t u r i t y of the c e r t i f i c a t e
and has f a i l e d to pay h i s note to the bank holding the note and c e r t i f i c a t e ,
must
such bank a t the m a t u r i t y of the c e r t i f i c a t e /
p r e s e n t the note and c e r t i f i c a t e to the D i r e c t o r of the Veterans' Bureau, who i s thereupon reouircd
by law to pay to the bank i n , f u l l s a t i s f a c t i o n of i t s claim the amotmt of
the unpaid p r i n c i p a l and unpaid i n t e r e s t a t the r a t e f i x e d in the note
accrued up to the d a t e of the m a t u r i t y of the c e r t i f i c a t e .
REDISCOUNTS WITH FEDERAL RESERVE BAMS.
Upon the indorsement of any bank, which s h a l l be deemed a waiver
of demand, n o t i c e and p r o t e s t by such bank as to i t s own indorsement exc l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d by the Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e and
held by a bank i s made e l i g i b l e f o r discount or r e d i s c o u n t by the Federal
r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such bank i s
l o c a t e d , whether or not the bank o f f e r i n g the note f o r discount
or r e d i s c o u n t i s a member of the Federal Reserve System and whether
or not i t acquired the note i n the f i r s t i n s t a n c e from the v e t e r a n
or acquired i t by t r a n s f e r upon the indorsement o£ any other
m
X-4746-a
'
r
bask; provided that at tho t i y c of discount or r g ^ ^ count such no to
3 8 2
has a maturity not in excess of nine months, exclusive of days of grace,
and complies in a l l other rogrcocts with the provisions of tho law,
regulations of the United States Veterans* Bureau, and
the regulations of the Federal Reserve Board.
the
ELIGIBILITY FOR REDISCOUNT.
-
.
•
• • • ••
'
\
•
„
In order to be e l i g i b l e f o r rediscount at a Federal reserve bank,
any such no to must}
1. Arise out of a loan made by a bank to a veteran i n f u l l compliance
' "
with
.
'
*
•
' •
the provisions of the World War Adjusted Compensation Act and the
regulations of the United States Veterans' Bureau;
2« Be secured by the adjusted service c e r t i f i c a t e issued to the maker,
which c e r t i f i c a t e must ^accompany the note;
3. Be held by the o f f e r i n g bank in i t s own r i g h t at the time i t i s
o f f e r e d f o r rediscount;
4. Be negotiable in form and otherwise in the form approved by the
United States Veterans' Bureau;
f
5.- Have a maturity at the time of rediscount not in e x c e s s of nine
months, exclusive of days of grace;
6.
J
1
Evidence a loan the amount of which does not exceed the lean value
of the adjusted service c e r t i f i c a t e f o r the year in wMicJi such loan was
made;
,
y •
7. Be payable with i n t e r e s t accruing a f t e r the date of the note at a
r a t e s t a t e d in the f a c e of the note, whfich r a t e shall not exceed by more
than 2 per cent per annum the rate charged a t the date of the loan for the
discount of 90-day commercial paper by ttye Federal reserve bank of the
lerjtding
Federal reserve d i s t r i c t in which t h e / • | * bank i s located;
8. Bear the endorsement of the baz# o f f e r i n g i t for rediscount,
J
which
endorsement s h a l l be deemed a waive* of demand, n o t i c e and p r o t e s t
by such bank as to i t s own endorsement e x c l u s i v e l y ;
9. 3e accompanied by the evidence of e l i g i b i l i t y r e q u i r e d by the
Regulations of the Federal Reserve Board and by such other evidence of
e l i g i b i l i t y a s the Federal r e s e r v e bank may r e q u i r e ;
10. Be accompanied .by such a f f i d a v i t s and other evidence as would be
r e q u i r e d by the Veterans' Bureau in the event the Federal r e s e r v e bank
should apply to the Veterans' Bureau f o r payment of the n o t e ; and
11. Comply in a l l o t h e r r e s p e c t s with the requirements of the law arid
of the r e g u l a t i o n s of the Federal Reserve Board.
DiELI&IBILITY AS COLLATERAL TO A BANK'S OWN NOTE.
i f e i t h e r a member bank nor a nonmember bank may borrow from a Federal
r e s e r v e bank on i t s own promissory note secured by n o t e s of v e t e r a n s in torn
secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s ; because n e i t h e r the Federal Reserve
Act nor the World War Adjusted Compensation Act a u t h o r i z e s the Federal r e serve banks to make such l o a n s .
That p r o v i s i o n of Section 13 of the Federal
Reserve Act which a u t h o r i z e s Federal r e s e r v e banks to make loans to memo
banks f o r p e r i o d s not in excess of 15 days on the promissory n o t e s of such
member banks
r e q u i r e s t h a t such n o t e s must be secured by paper e l i g i b l e
rediscount or f o r purchase by Federal r e s e r v e banks under the p r o v i s i o n s of
the Federal Reserve Act oi* by bonds or n o t e s of the United S t a t e s .
Section
502 of the World War Adjusted Compensation Act which a u t h o r i z e s Federal
r e s e r v e banks to r e d i s c o u n t n o t e s secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s
i s not made a p a r t of the Federal Reserve Act.
-3-
X-4746-a
3 8 4
I'ZETEOD MP B5W3 0? 35DI300T3KT.
P r i o r to t h e rediscount ox* any paper a c e r t i f i e d copy of a r e s o l u t i o n
passed by the board of d i r e c t o r s of the o f f e r i n g bank with the Seal of the
bank a f f i x e d , a u t h o r i z i n g the proper o f f i c i a l s to r e d i s c o u n t , mast be f i l e d
with the Federal r e s e r v e bank. I t w i l l not be necessary f o r member banks which
have f i l e d such a r e s o l u t i o n in connection with r e d i s c o u n t s to f i l e any add i t i o n a l r e s o l u t i o n in connection with n o t e s secured by a d j u s t e d s e r v i c e
certificates.
Before r e d i s c o u n t i n g any such notes f o r any nonmember bank, t h i s
bank w i l l r e q u i r e such nonmember bank to f u r n i s h to i t such information as
t h i s bank may consider necessary in order to s a t i s f y i t s e l f as to the condit i o n of such bank and the a d v i s a b i l i t y of making r e d i s c o u n t s f o r i t .
Blank
a p p l i c a t i o n s f o r r e d i s c o u n t w i l l be supplied by t h i s bank upon r e q u e s t .
All such n o t e s o f f e r e d f o r rediscount should be 1 i s t e d on the app l i c a t i o n form provided and the a p p l i c a t i o n signed by a duly a u t h o r i z e d
o f f i c e r . F u l l information must be f u r n i s h e d a s provided on t h e form.
Upon acccptance f o r r e d i s c o u n t by the Federal r e s e r v e bank the
proceeds of such n o t e s w i l l be c r e d i t e d to the r e s e r v e account of t h e bank,
in the case of a member bank, and, in the case of a nonmember bank, the
Federal r e s e r v e bank w i l l remit by check o r , upon r e q u e s t , w i l l c r e d i t
the account of a designated member bank l o c a t e d in t h i s Federal r e s e r v e
d i s t r i c t f o r the u s e and c r e d i t of the nonmember.
The r a t e of discount deducted by t h i s bank w i l l be the same
as t h a t deducted by i t in r e d i s c o u n t i n g 20 day n o t e s i s s u e d f o r commercial
purposes.
CQILSCTIor OF 3EDISCOUNTED NOTES AT MATURITY
In the cr se of member banks, the usual procedure w i l l be to forward
f o r c o l l e c t i o n a l l notes secured by a d j u s t e d service c e r t i f i c a t e s to the
banks discounting such notes, several days in advance of t h e i r m a t u r i t y .
Such notes w i l l be charged to the member b a n k ' s account when due without
n o t i c e , i t b e i n g assumed t h a t on t h e maturity date the member bank w i l l
provide funds in excess of i t s r e q u i r e d r e s e r v e to meet the n o t e s .
In the case of nonmember banks, n o t i c e of approaching m a t u r i t y
w i l l be forwarded to the discounting banks approximately ten days in
advance of the maturity of each note, and the discounting banks w i l l be
required to p l a c e funds i n the hands of the Federal reserve bank to pay
them, which funds must be a v a i l a b l e on the date of maturity of the n o t e s .
FURTHER INFORMATION ENCLOSED.
For your information t h e r e are enclosed the following:
1 . The World War Adjusted Compensation Act.
Sections 501,
502 and 504 deserve the s p e c i a l a t t e n t i o n of banks which contemplate
making loans on the s e c u r i t y of a d j u s t e d s e r v i c e c e r t i f i c a t e s .
2. The Act of J u l y 3, 1926, amending the World War Adjusted Compensation
4 (a) and Section
Act. Section/503 as amended by t h i s Act deserves special a t t e n t i o n .
3. The Regulations of the Veterans' Bureau with r e s p e c t to loans on
adjusted service c e r t i f i c a t e s .
-
X-4746-
11 -
«j o
oo
4 . The Regulations ox" the Federal Reserve Board with r e s p e c t to
the rediscount of notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s .
5. A sample copy of the form of note and a f f i d a v i t s , approved
by the United S t a t e s Veterans' Bureau.
A supply of these forms w i l l
be provided by the Veterans' Bureau and any incorporated bank may obtain
a supply from the United S t a t e s Veterans' Bureau, Washington, D.C., or
from t h i s bank, upon r e q u e s t .
6. A proposed form of r e s o l u t i o n to be adopted by banks authori z i n g the endorsement and rediscount of such n o t e s .
7. Copies of form of a p p l i c a t i o n to t h i s Federal r e s e r v e bank
f o r rediscount of such no.tes.
Additional copies of t h i s form w i l l be
supplied by t h i s bank, upon r e q u e s t .
Very t r u l y yours,
X-4?46-b
3
PE'DIRAL RESERVE BOARD
REGULATION M, SSRIEo 0? 1926
mDISCOWT 0? NOTES SECURED BY ADJUSTED SERVICE CERTIFICATES
SECTION I . STATUTORY PROVISIONS.
Under the terms of the World War Adjusted Compensation Act as
amended loans nay l a w f u l l y be made to veterans upon t h e i r a d j u s t e d s e r v i c e
c e r t i f i c a t e s only i n accordance with the p r o v i s i o n s of Section 502 t h e r e o f . .
Any n a t i o n a l hank, or any bank or t r u s t company i n c o r p o r a t e d
under the laws of any S t a t e , T e r r i t o r y , p o s s e s s i o n , or the D i s t r i c t ef
Columbia i s a u t h o r i z e d , a f t e r the e x p i r a t i o n of two y e a r s a f t e r the date
af the c e r t i f i c a t e , to l e a n to any v e t e r a n upon h i s promissory note
secured by h i s a d j u s t e d s e r v i c e c e r t i f i c a t e , any amount not i n excess of
the loan value of the c e r t i f i c a t e , which i s s t a t e d on the f a c e of the
certificate.
The law provides t h a t the r a t e of i n t e r e s t charged upon
the loan by the lending bank s h a l l not exceed by more than 2 p e r cent per
annum the r a t e charged a t the date of the loan f o r the discount of SO day$
commercial paper by the Federal r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which the l e n d i n g bank i s l o c a t e d .
Upon the indorsement of any bank, which s h a l l be deemed a
waiver of demand, n o t i c e and p r o t e s t by such bank a s to i t s ewn i n d o r s e ment e x c l u s i v e l y , and s u b j e c t to r e g u l a t i o n s to be p r e s c r i b e d by the
Federal Reserve Board, any such note secured by an a d j u s t e d s e r v i c e c e r t i f i c a t e and h e l d by a bank i s made e l i g i b l e f o r r e d i s c o u n t with the
Federal r e s e r v e bank of the Federal r e s e r v e d i s t r i c t i n which such bank
X-4746-Td
-
2
-
i s l o c a t c d , whether or not the "bank o f f e r i n g the note f o r rediscount
i s a member of the Federal Reserve System and whether or not i t acquired
the note i n the f i r s t i n s t a n c e from the v e t e r a n or a c q u i r e d i t "by t r a n s f e r
upon the indorsement of any other tank; provided t h a t a t the time of r e discount such note has a maturity not i n excess of nine months, e x c l u s i v e
of days of grace, and complies i n a l l other r e s p e c t s with the p r o v i s i o n s
of the law, the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau and the
r e g u l a t i o n s of the Federal Reserve Board.
SECTION I I .
DEFINITIONS.
Within the meaning of t h i s Regulation:
(a)
The term "the Act" s h a l l mean t h e World War Adjusted Com-
p e n s a t i o n Act as amended;
("b)
The term "Director" s h a l l mean the Director of the United
S t a t e s Veterans' Bureau;
(c)
The term " c e r t i f i c a t e " s h a l l mean an a d j u s t e d s e r v i c e c e r -
t i f i c a t e i s s u e d under t h e p r o v i s i o n s of Section 501 of the World War
Adjusted Compensation Act as amended;
(d)
The term "veteran" s h a l l mean any person to whom an ad-
j u s t e d s e r v i c e c e r t i f i c a t e has "been i s s u e d "by the Director under the
p r o v i s i o n s of the World War Adjusted Compensation Act as amended;
(e)
The term "hank" s h a l l mean any n a t i o n a l "bank or any "bank
or t r u s t company i n c o r p o r a t e d under the laws of any S t a t e , T e r r i t o r y ,
p o s s e s s i o n or t h e D i s t r i c t of Columbia;
(f)
The term "note" s h a l l mean a promissory n o t e , n e g o t i -
a b l e i n form, secured "by an a d j u s t e d s e r v i c e c e r t i f i c a t e , and
3
389
X-4746-b
evidencing a loan made "by a tank on the s e c u r i t y of such c e r t i f i c a t e i n
f u l l compliance with the p r o v i s i o n s of the World War Adjusted Compensation
Act as amended and the r e g u l a t i o n s of the United S t a t e s Veterans' Bureau.
SECTION I I I .
ELIGIBILITY.
In order to be e l i g i b l e f o r rediscount a t a Federal r e s e r v e
"bank, any such note must:
(a)
A r i s e out of a loan made "by a "bank to a v e t e r a n i n f u l l
compliance with the p r o v i s i o n s of the Act and of any r e g u l a t i o n which the
Director may p r o s c r i b e ;
(b)
Be secured by the c e r t i f i c a t e i s s u e d to t h e maker, which
c e r t i f i c a t e must accompany the n o t e ;
(c)
Be h e l d by t h e o f f e r i n g bank i n i t s own r i g h t a t the time
i t i s offered f o r rediscount;
(d)
Be negotiable^ i n form and otherwise i n the form approved
by the D i r e c t o r ;
(e)
Have a m a t u r i t y a t the time of r e d i s c o u n t not i n excess
of nine months, e x c l u s i v e of days of grace;
(f)
Evidence a l e a n the amount of which does not exceed the
loan value of t h e c e r t i f i c a t e f o r t h e year i n which such l e a n was made;
(g)
Be payable with i n t e r e s t accruing a f t e r the date of the
note a t a r a t e s t a t e d i n the f a c e of the note, which r a t e mast not exceed
by more than 2 p e r cent p e r annum the r a t e charged a t the date of the loan
f o r the discount of 90-day commercial paper by the Federal r e s e r v e bank
of the Federal r e s e r v e d i s t r i c t i n which the lending bank i s l o c a t e d ;
*-*746-*
(h)
390
Bear the endorsement of the bank o f f e r i n g i t for r e d i s -
count, which endorsement shall "be deemed a waiver of demand, n o t i c e ,
and protest "by such bank as to i t s own endorsement exclusively;
(i)
3e accompanied by the evidence of e l i g i b i l i t y r e q u i r e d by
t h i s Regulation and such other evidence of e l i g i b i l i t y as may be r e quired by the Federal r e s e r v e bank to which i t i s o f f e r e d f o r r e d i s count; and
(j)
Comply in a l l other r e s p e c t s with the requirements of the
law and of t h i s Regulation.
SECTION IV.
(a)
EVIDMCB OF ELIGIBILITY.
General. - The Federal r e s e r v e bank to which a n o t e i s o f f e r e d
f o r rediscount must be s a t i s f i e d e i t h e r by r e f e r e n c e to the note i t s e l f
or otherwise t h a t the loan evidenced by the note or any s a l e , d i s c o u n t , o r
rediscount thereof complies in a l l r e s p e c t s with the p r o v i s i o n s of section
502 of the Act and t h a t the note i s e l i g i b l e f o r rediscount by a Federa l r e s e r v e bank under the terms of the law and the p r o v i s i o n s of t h i s
Regulation.
(b) A f f i d a v i t of Lending Bank. - Any n o t e o f f e r e d to a Fede r a l r e s e r v e bank f o r rediscount must be accompanied by the a f f i d a v i t r e q u i r e d by Section 502 (h) of the Act and the r e g u l a t i o n s of the
D i r e c t o r , in form approved by the D i r e c t o r , made by an o f f i c e r of the
bank which made the loan, b e f o r e a n o t a r y p u b l i c or o t h e r o f f i c e r
designated f o r the purpose by r e g u l a t i o n of the D i r e c t o r s t a t i n g t h a t :
391
5
1.
"*
X-474S-1;
Such "bank has not char god. or c o l l c c t e d , or attempted to
chargc or c o l l e c t , d i r e c t l y or i n d i r e c t l y , any fee or other compensation
in respect
of any loan, made "by such hank to any v e t e r a n under Section
502 of the Act, except the i n t e r e s t a u t h o r i z e d by such s e c t i o n ;
2.
The person who obtained the loan evidenced by such note i s
known to be the v e t e r a n named i n the c e r t i f i c a t e s e c u r i n g such n o t e ;
3.
Such bank has n o t i f i e d the Director t h a t i t has made a
loan to the v e t e r a n named i n the c e r t i f i c a t e , as r e q u i r e d by the Regulat i o n of the D i r e c t o r ; and
4.
Such bank has n o t i f i e d the v e t e r a n by mail a t h i s l a s t
known p o s t o f f i c e address of any s a l e , discount, or rediscount of such
note by such bank, as r e q u i r e d by Section 502(b) of t h e Act.
(c)
A f f i d a v i t of Other Banks. — If such note i s o f f e r e d f o r
r e d i s c o u n t by a bank o t h e r than the bank which made the loan thereon,
i t must a l s o bo accompanied by an a f f i d a v i t of an o f f i c e r of the
o f f e r i n g bank and an a f f i d a v i t of an o f f i c e r of each other bank
which
has sold, discounted or r e d i s c o u n t e d such note, which a f f i d a v i t s h a l l
be i n form approved by the Director and s h a l l s t a t e t h a t the bank ef
which the a f f i a n t i s an o f f i c e r has promptly n o t i f i e d the v e t e r a n by
mail a t h i s l a s t kabwn p o s t o f f i c e address of the s a l e , discount or
m-.r
r e d i s c o u n t of such note by such bank, as r e q u i r e d by S e c t i o n 502(b) of
the Act.
SECTION V.
APPLICATION FOE REDISCOUNT.
Every a p p l i c a t i o n f o r the rediscount of such notes s h a l l be
made on & form approved by the Federal r e s e r v e bank to which such
noto i s o f f e r e d and s h a l l contain a c e r t i f i c a t e of the o f f e r i n g bank
to the e f f e c t th&t, to the 'best of i t s knowledge and b e l i e f , such
note a r o s e out of a loan mad® i n f u l l compliance with the p r o v i s i o n s
of the Act and the r e g u l a t i o n s of the D i r e c t o r and i s f e l i g i b l e f o r
r e d i s c o u n t under the p r o v i s i o n s of Section 502 of the Act and of t h i s
Regulation.
SECTION VI.
PEPPER BANK FOR REDISCOUNT.
No such note s h a l l he r e d i s c o u n t e d by aiyr Federal r e s e r v e
bank f o r any bank not l o c a t e d i n i t s own Federal r e s e r v e d i s t r i c t ,
except t h a t such notes may be rediscounted by any Federal r e s e r v e bank
f o r any other Federal r e s e r v e bank.
SECTION VII.
RATE OF REDISCOUNT.
The r a t e of i n t e r e s t charged by amy Federal r e s e r v e bank en
any such note r e d i s c o u n t e d by i t s h a l l be the same as t h a t charged by
i t f o r the r e d i s c o u n t of 90-day notes drawn f o r a commercial purpose,
except t h a t when such notes are rediscounted f o r another Federal r e s e r v e
bank the r a t e s h a l l be t h a t f i x e d by the Federal Reserve Board.
SECTION V I I I .
REDISCOUNTS FOR NONMEMBER BANKS.
No Federal r e s e r v e bank s h a l l r e d i s c o u n t such notes f o r any
nornneniber bank u n t i l such bank has f u r n i s h e d to t h e Federal r e s e r v e
bank such i n f o r m a t i o n a s i t may r e q u e s t i n order to s a t i s f y i t s e l f as
to the condition of such bank and the a d v i s a b i l i t y of making the r e d i s count f o r i t .
December
1926.
X-4"46-o
3 9 3
AUTHORITY FOB 2 E D I S C O U H T I K G FOTFS
S E C U R E D BY A D J U S T E D
S E R V I C E C E R T I F I C A T E S W I T H THE F E D 3 P A L R E S E R V E B A H
OF
.
WHEREAS, i t i s d e s i r e d t h a t the o f f i c e r s of t h i s 'bank
should from time to time bo a b l e to rediscount 'on i t s "behalf veterans'?
notes secured by a d j u s t e d s e r v i c e c e r t i f i c a t e s , Now, t h e r e f o r e , be i t
RESOLVED:
1 s t . That the P r e s i d e n t , Vice P r e s i d e n t and Cashier a r e ,
and each or e i t h e r of them i s , hereby a u t h o r i z e d to r e d i s c o u n t with the
Federal Reserve Bank of
, any such notes now
or h e r e a f t e r h e l d by t h i s bank, upon such terms and a t such time or
times as to him or them may seem d e s i r a b l e .
2nd. That the foregoing powers s h a l l continue and remain
i n f o r c e u n t i l express n o t i c e vf t h e i r revocation has been duly given to
s a i d Federal Reserve Bank of
.
I
do hereby c e r t i f y t h a t the
foregoing i s a t r u e e x t r a c t from the minutes of a meeting of the Board
of D i r e c t o r s of the
a quorum being p r e s e n t , h e l d a t
day c f
19
the
.
In witness whereof, I have hereunto s e t my hand and a f f i x e d
the o f f i c i a l s e a l of the s a i d Bank t h i s
19
.
SEAL
day of
X-4746-d
894
APPLICATION FOR REDISCOUNT OF NOTES SECURED BY
ADJUSTED SERVICE CERTIFICATES.
To the Federal Reserve Batik of
, The
»
, "bank of
.
offers
herewith the f o l l o w i n g Vetetans 1 notes secured "by a d j u s t e d s e r v i c e
c e r t i f i c a t e s , duly endorsed by i t .
We agree t h a t the f e d e r a l Reserve Batik df
.
may charge the amount ef the notes t« our account a t t h e i r m a t u r i t y ,
e r , i f not a member cf the Federal Reserve System, we promise to p l a c e
a c c e p t a b l e funds i n the hauds of the Federal Reserve Bank of
cfcvering the amount t f each nrte$ which funds s h a l l he a v a i l a b l e on
the day each note matures.
Our endorsement s h a l l be deemed a waiver ef demand, n e t i c e
and p r o t e s t *
I hereby c e r t i f y t h a t , to the best of my knowledge and bel i e f , the r-s»te or n c t a s o f f e r e d herewith arose out of a l o a n made i n
f u l l compliance with the p r o v i s i o n s @f the World War Adjusted Comp e n s a t i o n Act and the r e g u l a t i o n s of the D i r e c t o r of the United;
S t a t e s Veterans' Bureau and i s e l i g i b l e f o r r e d i s c o u n t with a Federal
Reserve Bank under the p r o v i s i o n s of S e c t i a n 502 t f the World War
Adjusted Compensation Act and %f the r e g u l a t i o n s of the Federal Reserve Board.
President
( Cashier ]
395
- 2 Please l i s t i n m a t u r i t y order
—
MATURITY
».,...«••*
HAMS OF fSTERAU
:
.1,,
, » * » . .
.
...
ADDRESS
.
.
'
•
DO HOT USE
: THIS COLUMN: AMOUNT
X-4746-e
?.
(Place)
(Date)
a f t e r d a t e , I promise to
pay to the order of
of
(ITame of Bank or Trust Company)
(City or Town and. S t a t e )
f o r value r e c e i v e d , with i n t e r e s t a f t e r date a t
p a i d . This n o t e i s payable a t the bank named above.
Do l i a r s
p e r cent u n t i l
As c o l l a t e r a l s e c u r i t y f o r the prompt payment of t h i s note I
have d e l i v e r e d to and do hereby pledge with the h o l d e r of t h i s note my
a d j u s t e d s e r v i c e c e r t i f i c a t e Ho.
dated
f u r t h e r i d e n t i f i e d by No. A
. This note may be s o l d ,
discounted or rediscountecL and the c e r t i f i c a t e pledged herewith may be
t r a n s f e r r e d in accordance with the p r o v i s i o n s of the World War Adjusted
Compensation Act, a s amendedi If the p r i n c i p a l and i n t e r e s t of t h i s note
are not p a i d a t i t s m a t u r i t y any bank holding t h i s note and c e r t i f i c a t e
may, a t any time a f t e r m a t u r i t y of the loan, but not b e f o r e the e x p i r a t i o n of s i x months a f t e r the loan was made, p r e s e n t t h i s n o t e and c e r t i f i c a t e to the Director of the United S t a t e s Veterans' Bureau in order to
secure payment of t h i s l o a n , as provided in the World War Adjusted Compensation Act,
(Signature of V e t e r a n ) .
(
(
(
(
Please p r i n t or typewrite
name and address of v e t e r a n
here.
(ITame of Veteran)
( __
S t a t e of
)SS:
County of
)
(
( S t r e e t Address or Route JTumber)
(
(City or Town and S t a t e )
)
I,
say t h a t I am
, being duly sworn depose and
(Name of O f f i c e r )
.
( T i t l e of Office? )
of
.
(Bank or Trust Company)
X-4746-e
, which i s a bank incorporated
-A.'-*
of
•
T~
(City or Town and S t a t e )
•under the laws of
;
; t h a t the person who obtained
the loan evidenced by the above note i s known to be the v e t e r a n named in
the a d j u s t e d s e r v i c e c e r t i f i c a t e r e f e r r e d to t h e r e i n ; t h a t the s a i d bank
or t r u s t cormany has not charged or c o l l e c t e d or attempted to charge or
c o l l e c t , d i r e c t l y or i n d i r e c t l y , any f e e or o t h e r compensation (except
i n t e r e s t as a u t h o r i z e d by Section 502 of the World War Adjusted Compensat i o n Act as amended) in r e s p e c t of any loan made under t h i s s e c t i o n by the
bank to a veteran; t h a t the United S t a t e s Veterans' Bureau was promptly
n o t i f i e d of the making of the o r i g i n a l loan as r e q u i r e d by paragraph 3
of Regulation
of the United S t a t e s Veterans' Bureau; t h a t in any neg o t i a t i o n of t h i s note by s a l e , discount or r e d i s c o u n t subsequent to the
o r i g i n a l loan, proper l e g a l n o t i c e was given to the veteran a s r e q u i r e d
by Section 502 (b) of the Act, and t h a t t h i s a f f i d a v i t i s made pursuant
to a u t h o r i t y given by the Board of D i r e c t o r s .
Subscribed and sworn to b e f o r e me t h i s
day of •
(Signature of O f f i c e r )
(Notary P u b l i c , or o t h e r o f f i c e r d e s i g nated by the United S t a t e s Veterans' Bureau).
S t a t e of
) S3:
)
County of
)
I,
(Fame of O f f i c e r )
being sworn deoose and say t h a t I am
, thereunto duly a u t h o r i z e d ,
„ °f the
( T i t l e of O f f i c e " )
of
(Hams of Bank or Trust Company)
(City or Town and S t a t e )
and t h a t the v e t e r a n who obtairted the loan evidenced by the above n o t e ,
which was t r a n s f e r r e d to t h i s bank by '
(Name of Bank or T r u s t Company)
has been n o t i f i e d by the
(Name of Bank or Trust Company)
t h a t the s a i d n o t 3 i s being -retrrjasfer-red to the
(Name of Bank or Trust
for sale, discount,or rediscount.
Company)
(Signature of O f f i c e r )
Subscribed and sworn to b e f o r e me t h i s
'
day of
.
(Notary P u b l i c , or o t h e r o f f i c e r d e s i g n a t e d by the United S t a t e s Veterans'
Bureau. See Regulation
U.S.V.B.)
@FedFRASER