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FEDERAL RESERVE BOARD ; 421 WASHINGTON address official correspondence t o the federal reserve board X-7680 November 15, 1933* SUBJECT: Payment of I n t e r e s t on D e p o s i t s of P u b l i c Funds by S t a t e Banks Applying f o r Membership. Dear S i r : In revie wing a p p l i c a t i o n s f o r membership i n t h e F e d e r a l Reserve System s u b m i t t e d t o t h e F e d e r a l Reserve Board, i t has been noted t h a t i n many i n s t a n c e s t h e a p p l i c a n t bank pays i n t e r e s t on c e r t a i n p u b l i c accounts* As you know, s e c t i o n 19 of t h e F e d e r a l Reserve Act, as amended by t h e Banking Act of 1933, p r o h i b i t s a member bank, e x c e p t as s t a t e d t h e r e i n , from paying i n t e r e s t on dep o s i t s which are payable on demand# Accordingly, i f t h e p u b l i c accounts above r e f e r r e d t o are demand d e p o s i t s and do n o t come w i t h i n t h e e x c e p t i o n s t o s e c t i o n 19, t h e payment of i n t e r e s t t h e r e on by a S t a t e bank a f t e r i t becomes a member of t h e F e d e r a l Reserve System would be u n l a w f u l • I n c e r t a i n l e t t e r s t o t h e F e d e r a l Reserve Agents a d v i s i n g of approval of a p p l i c a t i o n s f o r membership, t h e Board has c a l l e d a t t e n t i o n t o t h i s s i t u a t i o n and has r e q u e s t e d t h e Agent t o b r i n g t h e m a t t e r t o t h e a t t e n t i o n of t h e management of t h e a p p l i c a n t bank. 2- X-7680 You a r e r e q u e s t e d t o t a k e s i m i l a r a c t i o n i n a l l such c a s e s a r i s i n g i n your d i s t r i c t . In t h e f u t u r e , t h e r e f o r e , no comment of t h i s n a t u r e w i l l be made i n t h e l e t t e r s t o t h e F e d e r a l Reserve Agents a d v i s i n g of approval of a p p l i c a t i o n s f o r membership. TO ALL FEDERAL Very t r u l y y o u r s , Chester M o r r i l l , Secretary. RESERVE AGENTS
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