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Fe
d e r a l
o f
R
e s e r v e
S t . Lo
B
a n k
u is
January 31, 1936.
TO THE NONMEMBER STATE BANK ADDRESSED:
Referring to previous correspondence, I am sending
you herewith the following:
(1) Revised edition of Regulation H of Board of Governors
of the Federal Reserve System, effective January 1, 1936, which
gives the requirements of membership, the procedure of making
application, and other information.
(2) Excerpts from pamphlet, "The Federal Reserve System,"
which briefly enumerate the benefits of the Federal Reserve
Act, and the~7acilities and privileges enjoyed by members o f
the System.
In case you desire any further information in this
connection, kindly let me know.
Jnnuary 27, 1936,
BENEFITS OF FEDERAL RESERVE SYSTEM
The Federal Reserve System was established or November 16, 1914, under
the Federal Reserve Act, which became a lav; on December 23, 1913.
The following are excerpts from a booklet prepared under auspices of the
Federal R e s e r v e Agents' Conference and issued in November, 1934:
IMPROVEMENTS FROM FEDERAL RESERVE ACT
The defects existing prior to the passage of the Federal Reserve Act have
been greatly reduced under the Federal Reserve System by:
1* Establishment of an elastic currency system resulting in a more stable money
market and in improved facilities for dealing with currency crises.
2. Providing, an instrument of cooperative strength for all national banks and
those State banks which may elect to become members of the System.
3. Greater effectiveness cf bank reserves through concentration in Federal Resei've
tanks.
4. Creation of rediscount and direct borrowing facilities for member bonks, and
prevision for mobilization of credit on a national scale through rediscounting
between Federal Reserve banks themselves.
5. Providing a market at the Federal Reserve banks for, and thus increasing the
liquidity of notes, drafts, bills of exchange, and b a n k e r s ’acceptances. Seasonal
fluctuations in certain typical money rates have been less pronounced since the
establishment of the Federal Reserve System than was the case before,
6 Providing clearing facilities on a national scale which save time and expense
in the movement, collection, and transfer of funds*
7. Centralization of the fiscal agency operations of the U. S. Government.
8. Providing an arency to review the currency and credit needs of the nation in
a broad way and to influence the volume of credit in the public interest in the
light of the general domestic business situation as well as the international one.
THE I{EMBER BANKS
All national banks in the continental United States are required by law
to be members of the Federal Reserve System, and eligible State banks and trust
companies may, with the approval of the Board of Governors of the Federal Reserve
System, become members. (Regulation H gives requirements and procedure*)
About 40 per cent of the commercial banks in the United States were me m
bers of the System on June 30, 1934, and these member banks had resources amounting
to about two-thirds of the total banking resources of all banks in the country and
more than 86 per cent of the resources of all banks in the country exclusive of
mutual savings bunks. There were 6,375 active member banks on June 30, 1934, of
which 5,417 were national banks and 95b were State banks. The State bank members
ranged in size from banks with $25,000 capital to some of the largest banks in the
United States.
FACILITIES AND PRIVILEGES
Among the privileges which a bunk enjoys as a member c;f the Federal
Reserve System are the following:
1. Rediscounting eligible paper and obtaining advances on promissory notes*
2. Obtaining currency and coin when needed.
3. Direct use of Federal Reserve check collection system.
4. Direct use c f Federal Reserve jaon-cush collection service.
5. Transferring funds by telegraph*
6. Drawing drafts on Federal Reserve bunk, including Federal R eserve exchange
drafts, for -which immediate credit at pur may be obtained in thirty-seven Federal
Reserve bank and branch tank cities.
7. Use of the emblem, ’
’
Member Federal Reserve System.”
8. Continuation, after July 1, 1942, of privilege of membership in the Federal
Deposit Insurance C o r p o r a t i o n by banks having average deposits of $1,000,000 or
more.
.
@FedFRASER