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596 FEDERAL RESERVE BOARD WASHINGTON X-3784 July 18) 1923·· St.mJECT: Rediscounts for Nonmeniber Banks· Dear Sir: During the emergency of .1921, the F.§lderal Reserve Eoa.rd granted to member banks the privilege of acting as the media or agents of nollll)3mber ba.nks in rediscounting paper with Federal Reserve Banks. (Circular letter X-3176, July 27, 1921: Federal Reserve Bulletih, .lugust, 1921, page 963). That privilege, hovvever, was granted only as a temporary emergency measure and, the err.ergency ha:ving passed, it was revoked by the Federal Reserve :Ooa.rd under da.te of June 26, 1923 · In advising you of the withdrawal of such privilege the Board announced that all previous rulings on this subJect were rescinded, and that announcement has led to a number of inquiries a.s to the proper application of the Board's ruling. The Board has deemed it advisable, there~ fore, to announce the following rules for the guidance of the Federal :Reserve Banks and the member banks; 1. The ruling published on page 963 of the August, 1921, Bulletin, whiCh gave member banks general authority to apply to their respective Federal Reserve Banks for discounts of ~igible paper acquired from nonmeniber banks, and the ruling published on page 213 of the August, 1915, Bulletin are rescinded in toto .. T'.ne rulings published an page 520 of the June, 1918, Bulletin and on page 745 of the August, 1918, Bulletin are rescinded in so far as they apply to the rediscount of paper bearing the signature or endorsement of nonmember banks or acquired from nonmember banks. 2. Except with the :Board's permission, no Federal Reserve :Bank shall discount any paper acquired by a member lank from a nonmember bank or bearing the signature or endorsement of a nonmember bank: Provided, howeyg, That Federal Reserve :Ba.nks mav discount bankers' acceptances and other eligible paper bearing th,e signature or endorsement. of a nonmemer bank, if such paper was bought by the offering bank in good faith on the open market from some party other than the nonmember bank. 3· Applications for permission to rediscount paper acquired from nonmember banks shall be made by the member bank which desires to offer such paper for rediscount and shall state fully the facts which give rise to eaeh _application and the rea.sons why the applying member bank feels justified in seeking such permission. X-3764 -2- 4. As a gene raJ. rule, the Federa.l Reserve Board will not permit member banks to discount paper for nonmember banks which are eligible for membership, baca.use such banks should. join t;he Federal Reserve System if they desire to participa:te in its benefits. The Eoa.rd will make exceptions to this rule, however, in some cases in order to assist such banks in emergencies for a l:i.mitec.'. time; but such exceptions will be made only with the ,mderstano.:ing that they will not be contim:.od beyo::1rl the period ·when the bank concarned can qualify for admission to m~m·oer:;:hip in the Fed,;;ral Reserve System •. Ey order of the F'adera1 Raserve Loa.rd. '.'!m. W. Roxton, Secretary. TO GOVERNORS OF F. R. :i3ANKS
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