Full text of Federal Reserve Bulletin : May 1915
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FEDERAL RESERVE
BULLETIN
ISSUED BY THE
FEDERAL RESERVE BOARD
AT WASHINGTON
WASHINGTON
GOVERNMENT PRINTING OFFICE
1915
ANNOUNCEMENT.
With this issue the Federal Reserve Board begins the publication of a Federal Reserve
Bulletin. The Bulletin is intended to afford a general statement concerning business
conditions and events in the Federal reserve system that will be of interest to all member
banks. It will include consolidated statements of bank condition and such abstracts of
correspondence of the Federal Reserve Board, statements and facts relating to the national
banks and Treasury Department, and actions taken by Federal and State Governments
as have a direct relationship to banking problems. Brief comparative reports concerning the operations of the Federal reserve system in the several districts will also be published from time to time.
In the law department of the Bulletin will be included opinions of the counsel of
the Federal Reserve Board released for publication, such opinions of counsel of the several banks as may be deemed of general interest, and reports of legislation, National and
State, affecting the member banks.
The Bulletin is intended as a means of communication between the Federal Reserve
Board, the public, and the member banks. Its publication has been suggested from
many quarters, and is expected to facilitate the work of the Federal reserve banks by
keeping them in touch with common problems and methods so as to avoid needless duplication in their several districts. The Bulletin is not intended as a vehicle for the expression of opinion, but as a means of distributing information. The cooperation of all member
banks, and particularly of Federal reserve banks, is requested in order that the publication may be made as complete as possible, and may contain as much information on subjects of general interest to members as is feasible.
The Bulletin will be distributed free to Federal reserve banks and to member banks.
A subscription price for others will be determined later.
TABLE OF CONTENTS.
Announcement
Work of the Federal Reserve Board
Plan for clearing checks
Gold clearance fund at Washington
Informal rulings of the Federal Reserve Board
Law department
Applications for trustee powers approved
Circulars and regulations of the Federal Reserve Board
Press statements
Acceptances
General business conditions
Index
4
•
3
5
6
9
12
16
31
36
47
52
55
63
FEDERAL RESERVE BULLETIN
VOL. 1
MAY 1, 1915
No. 1
WORK OF THE FEDERAL RESERVE BOARD. have been issued during the year 1915. It will
It is planned to have each number of the
Federal Reserve Bulletin contain a short review
of the matters of general importance to the
Federal reserve system calling for consideration or action since the last preceding issue.
The first number, however, covers the period
since the publication of the Annual Report to
Congress on January 15, 1915.
Since presenting its report the Federal Reserve Board has been occupied with several
matters of general importance to the Federal reserve system beside the usual routine of executive business. Among such matters of broad
significance to which it has devoted its attention are (1) the revision of its list of circulars
and regulations, the reissue of some, and the
preparation of new ones; (2) the establishment and introduction of a plan for clearing
of checks by Federal reserve banks; (3) the
development of the functions of national banks
as executor, trustee, etc., under the provisions
of paragraph k of section 11 of the Federal
reserve act; (4) the preparation of regulations
governing the admission of State banks to the
new system soon to be issued; (5) the interpretation of various doubtful points under the
act; (6) the hearing and consideration of appeals from the decision of the Federal Reserve
Bank Organization Committee.
In order to facilitate the understanding of
and reference to existing rules and regulations,
the Board determined to reissue all circulars and
regulations, dropping those of preceding date
which have been found to be obsolete or which
have been altered, and assigning a new number
to each circular and regulation so issued. In
this number of the Federal Reserve Bulletin
there are accordingly republished all of those
circulars and regulations now in force that
be remembered that all circulars issued during
the year 1914 were reprinted in the Board's
annual report issued under date of January 15,
1915. Those circulars and regulations thus reissued are printed in full, because they constitute the official record of the Board;s work.
The question of developing a plan for the
clearing of checks through Federal reserve
banks has been the subject of consideration
between the Board and the governors of the
banks on the one hand, and the members of
the Federal Advisory Council on the other.
Various methods of proceeding with this
work have been considered, but ultimately
it was decided to leave to the executive
officers of the banks the duty of developing
a clearance plan which they felt would be
effective and feasible in operation, and to
afford them every facility for reaching the
object which is contemplated by the act. The
plan ultimately decided upon involves the
issue of an independent circular by each Federal Reserve Bank. All these circulars, however, were formed upon the same general
model, and it has, therefore, been deemed wise
to present in this issue one only of these circulars as an example. The circular issued by
the Federal Reserve Bank of Chicago has been
selected for this purpose, and is herewith presented on page 6. The Board itself has done
the tentative work necessary for the establishment of a national clearing plan with headquarters at" Washington, and the general basis
of this plan is outlined on page 9.
It had not been possible to proceed with the
granting of permission to national banks to
exercise the functions of executor, trustee, etc.,
until a general set of regulations relating to
this subject could be developed. This was
ultimately done, and the circular was a o
5
FEDERAL RESERVE BULLETIN.
MAY
1, 1915.
cordingly issued as Circular No. 10, Series of
PLAN FOR CLEARING CHECKS.
1915, and Regulation H. Under these regulaThe Federal Reserve Board announced on
tions the process of extending the powers of
March
4, 1915, that it had determined to
executor and trustee to applying banks has
direct
the
introduction of a voluntary recipproceeded as rapidly as was consistent with
rocal
plan
for
immediate clearance at aU Fedefficient work. In every State the Board has
eral
reserve
banks
where a clearing plan was
deemed it necessary to assure itself that it
not
already
in
operation.
This clearing plan
could properly grant the powers in question,
is
to
be
put
into
effect
with
as
little delay as posand then to make certain that the applying
sible.
Letters
were
sent
to
Federal reserve
bank was worthy of the bestowal of the funcagents
directing
that
they
take
up this matter
tions desired. A list of banks to which execuwith
their
boards
of
directors
at
once.
tor and trustee powers have thus far been |
The
Board
did
not
attempt
to prescribe
granted is given in the present issue of the |
details,
since
it
had
been
found
that in disBulletin. Many other applications are in |
tricts
where
general
clearing
was
in practice
process of investigation, and will be acted upon
the
best
results
were
obtained
by
leaving
the
as early as possible.
control
with
the
bank
officers.
In
general,
the
The work of interpreting and applying the
various provisions of the Federal reserve act plan contemplates, however, as a beginning,
has proceeded under the direction of the a reciprocal arrangement by which banks
Board, and opinions of its counsel on numerous assenting to the plan will be given the priviimportant matters are presented in this num- lege of immediate clearance at par on all other
ber of the Bulletin, but the opinions herewith banks similarly assenting.
Circulars have been issued by Federal republished are by no means all that have been
rendered. Others have been reserved for sub- serve banks to their member banks outlining
the clearing system. These are similar, and
sequent numbers.
The Board has, with one exception, heard that issued by the Federal Reserve Bank of
all but one of the appeals from the decision of Chicago is given below as an illustration of the
the Reserve Bank Organization Committee with manner in which the work has been underregard to the distiicting of the country, and has taken. Special conditions in the twelfth discompleted its survey of the evidence and argu- trict (San Francisco) may necessitate some
ments. It is in position to begin rendering modifications intended to adapt the plan to the
local situation. It is desired to put the plan
its decisions in these cases early in May.
In this number are also published various into operation generally about May 15, 1915.
rulings of an informal nature which have been FEDERAL RESERVE BANK OF CHICAGO,
prepared by the Board or its officers in con79 WEST MONROE STREET,
nection with questions brought to its attention
Chicago, April 7, 1915.
from time to time.
To the member banks of district No. 7:
Shortly before its adjournment, Congress
The Federal Reserve Bank of Chicago, in acpassed a modification of the Federal reserve cordance with the terms of the Federal reserve
act permitting State banks to accept bills and act and the rulings of the Federal Reserve
drafts running not more than six months, up Board, is prepared to inaugurate, for the bento any amount not exceeding 100 per cent of efit of its members, a system of intradistrict
collection; that is, a system of collection of
capital and surplus. This act and a summary checks and drafts received from and drawn on
of the business in acceptances done by Federal member banks in district No. 7. Membership
reserve banks, are printed in this number. in the system will be voluntary and items will
There is also published a general survey of the be received only from and upon those banks
join it. Such items will be immediately
more important items of minor or routine which
credited and debited to the accounts of the
action taken by the Board in its work since the sending and paying banks, respectively, sub1st of January.
ject to final payment.
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
For the present the system will not embrace
It is believed that the establishment of the
the interdistrict collection of checks and drafts; collection system in the 12 Federal reserve
that is, the collection of checks and drafts banks will provide a safe and economical
drawn on banks outside of district No. 7. method for the collection of country checks and
Such broader service can only be developed for will go far toward correcting the recognized
the member banks of the various districts after evils resulting from the indirect routing of such
experience shall have been gained in operating items.
the intradistrict service now offered.
We earnestly solicit your careful consideraThis system is not intended to supersede tion of the plan, also your cooperation in its
the exchange of checks through local clearing development, believing that it will result in
houses or otherwise in or between near-by cities substantial benefits to all concerned. With
or towns. And wherever, in the case of a sec- the system established, we will do all in our
tion far distant from its reserve bank or over- power to render our member banks the most
lapping two reserve districts, or for any other efficient service in its operation.
reason, the collection of checks is being made
Very respectfully,
more quickly or economically by direct interJAMES B. MCDOUGAL,
change between the banks of the section than
Governor.
Bulletin
No.
29.
would be possible under the proposed plan,
such relations, for the present at least, will RULES AND REQUIREMENTS GOVERNING THE
doubtless continue.
OPERATION OF THE COLLECTION SYSTEM OF
The collection system outlined herein is
FEDERAL RESERVE BANK OF CHICAGO.
offered by the Federal Reserve Bank of Chi1. Each member bank joining the system
cago as the first step in the improvement of
present methods of collecting checks within its authorizes the Federal Keserve Bank of Chicago
district. It is the result of much consideration to charge immediately on receipt against its
on the part of the directors and officers of this account, subject to payment by such member
bank and of many conferences of the governors bank at its banking house, checks and drafts
of the various Federal reserve banks. This payable upon presentation drawn upon it,
plan has been authorized by the Federal Re- deposited by otner member banks which have
serve Board, and it is understood that substan- joined the collection system.
2. The member bank undertakes to provide
tially similar systems of intradistrict collection
will be introduced by all other Federal reserve sufficient funds to offset the items charged
banks. The system will be subject to such against its account under the collection system,
modifications or extensions as experience may without impairing the reserve required to be
show from time to time to be necessary or kept in the Federal Reserve Bank of Chicago,
as shown by the books of the reserve bank, the
advisable.
The directors of each member bank which amount of such funds to be determined by
joins the collection system will be required to experience gained from actual operation.
3. Checks and drafts payable on presentaadopt and file with the Federal Reserve Bank
of Chicago resolutions agreeing to the rules and tion drawn on any member bank in district No.
requirements of the system. The resolutions 7, which has joined the collection system, will
and the rules and requirements are attached be received for immediate credit, subject to
hereto. There is also inclosed a copy of the final payment, but only from such member
resolutions, with the rules and requirements at- banks as have joined the collection system.
tached, to be executed and returned to this Items marked " Payable if desired" at either
bank when the resolutions have been adopted a member bank or a nonmember bank, will not
by your board of directors. Action thereon by | be received unless drawn on a member bank
your board is requested before May 15, 1915. which has joined the collection system, in which
A further circular will be issued containing a case they will be charged to the member bank
list of the banks which have joined the collec- upon which they are drawn and not to the
tion system, announcing the date upon which bank at which they are made " Payable if deit will begin operations, and giving such further sired."
information as may be necessary.
I 4. Items sent for credit should be divided in
The collection system herein proposed is j two classes:
(a) Items on member banks which are membased upon the experience of other countries
where similar systems have been in operation bers of the Chicago Clearing House Association.
(b) Items on other member banks in. this
for many years and have been developed tp a
district.
high point of efficiency.
FEDERAL RESERVE BULLETIN.
MAY
1, 1915.
The items under each of these divisions draw from the collection system. The Federal
should be listed on a separate sheet stating the Reserve Bank of Chicago may, at its discretion,
name or the American Bankers Association withdraw the privileges of the collection systransit number of the bank on which each item tem from any member bank which fails to obis drawn, and the amount. Each sheet should serve these rules and requirements, or for other
be separately footed, and where more than one good and sufficient reasons.
sheet is used in listing items under either of
On the 1st and 15th days of each month, all
the divisions, the totals of such sheets should changes, if any, which have occurred in the list
be listed and footed on a separate sheet.
of members oi the collection system since the
5. All items received before 2 o'clock p. m. preceding notice, will be published, and im(except on Saturday, when the hour will be mediately thereafter the additions or with12 o'clock noon) will be credited on the day drawals listed therein shall become effective.
9. No exchange charge will be made nor will
of receipt. Items received after these hours
will not be credited until the following busi- any exchange charge be paid by the Federal
ness day. All items, except those payable Reserve Bank of Chicago in operating this colthrough the Chicago Clearing House, will be lection system, which is a reciprocal arrangemailed at the close of each day to the member ment for the mutual benefit of all member
banks on which they are drawn. Member banks which join it.
banks shall advise the Federal Reserve Bank
(NOTE.—The Federal reserve act provides that charges
of Chicago on the day of receipt that such to be fixed by the Federal Reserve Board, may be imposed
items have been received and credited. Un- tor the service of collection rendered by the Federal
banks. No charge will be made for the present,
paid items not subject to protest shall be reserve
if after experience in operating the collection system,
returned on the day of receipt; protested items abutcharge
is found necessary, such charge will be imposed
shall be returned not later than the day after only after due notice and will not be retroactive.)
receipt. Returned items will be credited to
10. The Federal Reserve Bank of Chicago
the account of banks on which they are drawn
and charged to the account of and returned to reserves the right to add to, alter, or amend
the banks from which received. Unpaid items | these rules and requirements.
shall not be held for any purpose whatsoever | 11. All items forwarded to the Federal Reserve Bank of Chicago shall be indorsed withexcept for immediate protest.
out restriction to the order of the Federal Re6. In receiving the checks and drafts herein serve Bank of Chicago and show on each side
referred to, the Federal Reserve Bank of of the indorsement the American Bankers
Chicago will act only as the collecting agent Association transit number in prominent type.
of the sending bank, and will assume no responsibility other than due diligence until the funds
RESOLUTIONS TO BE ADOPTED BY MEMBER
are actually in its hands, and said reserve bank
BANKS.
is authorized to send them for payment direct
to the bank on which they are drawn, or for
Whereas the Federal Reserve Bank of Chicollection to another agent at its discretion. cago has announced its readiness to undertake
Banks receiving items from the Federal Re- for its member banks the collection of checks
serve Bank of Chicago for collection shall be and drafts drawn upon its member banks, and
deemed the agent of the bank depositing such
Whereas the said Federal Reserve Bank of
items with the Federal Reserve Bank of Chicago has promulgated certain rules and reChicago for credit.
quirements governing its conduct and the con7. Checks and drafts drawn on member duct of member banks in the operation of the
banks which have joined the system may be collection system, which rules and requirements
stamped or printed across the face: " Collectible are as shown by copy thereof hereto attached,
at par through the Federal Reserve Bank of and
Chicago," but such indorsement shall never be
Whereas this bank desires to avail itself of
held to import that the Federal Reserve Bank the privileges offered by the said Federal Reof Chicago, in accepting such checks or drafts serve Bank of Chicago and to join the collection
for collection, has become the owner thereof or system so to be established,
is acting otherwise than as the agent of the
Now, therefore, be it resolved, That this bank
sending bank.
hereby joins the said collection system of the
8. Member banks which do not join the col- Federal Reserve Bank of Chicago under the
lection system at the time of its inauguration, plan submitted by that bank in its circular
may do so at any subsequent time. Member letter, dated April 7, 1915, and hereby agrees
banks will be permitted, on 30 days' notice to with the said Federal Reserve Bank of Chicago
the Federal Reserve Bank of Chicago, to with- and with such other member banks of the Fed-
MAY
1, 1915.
FEDERAL RESERVE BULLETIN".
eral Reserve Bank of Chicago as have joined or
may hereafter join the said collection system,
to be bound according to the terms of the rules
and requirements hereto attached, and by such
other rules and requirements as may be hereafter promulgated.
And he it further resolved, That the cashier of
this bank (or the secretary of its board of
directors) is hereby directed to forward to the
Federal Reserve Bank of Chicago a certified
copy of these resolutions.
I, the undersigned, do hereby certify that the
foregoing is a true and correct copy of resolutions of the
duly adopted at a regular
meeting of the board of directors of the said
bank at
on the
day of
,
1915, and that the said resolutions have not
been rescinded or modified.
In witness whereof, I have hereunto subscribed my name and affixed the corporate seal
of the said bank, at
this
day
of
, 1915.
9
subject to the control of those who have the
combination of the vault itself. When the
transfers are to be made from one bank to another as the result of change in ownership
two signatures will be necessary on the order
certificates. These order certificates will be
prepared in such a way as to require the signature of the governor or acting governor of the
Board and one additional person, who may be
either the secretary, the fiscal agent, or the
supervisor of clearings.
When transfers are made by the Federal
Reserve Board, the balances that accrue to the
respective reserve banks may be paid by indorsement and by return to the respective
banks of a like amount of such gold certificates
held by the Federal Reserve Board, or by the
indorsement and delivery to the Treasurer of
a like amount of such certificates for which
he will give in exchange bearer gold certificates,
Cashier or Secretary of
[SEAL]
Board of Directors.
which the Board may send by registered mail
insured to the banks if they want funds other
GOLD CLEARANCE FUND AT WASHINGTON. than gold certificates, or in lieu of such payment the Treasurer may by wire direct payProvision has been made by the Federal Re- ment to be made by a subtreasury office, proserve Board for the establishment of a gold vided that funds are held in such office availclearance fund at Washington for the purpose able for the purpose.
of effecting with as little delay and cost as
possible settlements between Federal reserve Opinion of Counsel to Federal Reserve Board.
banks. This proposed plan of interbank setAn opinion rendered by counsel to the
tlement is intended to complete and be ad- Federal Reserve Board fully describes the
justed to the intradistrict clearance system status of the gold settlement fund in its relation
already described, but its operations will be to the reserves of Federal reserve banks, making
independent of the latter.
it plain that the shares of the several banks in
Gold coin and currency will be shipped to this fund may be counted and reported as a
Washington or to a subtreasury and turned part of their cash in vault. It is the intenover to the Treasurer of the United States, tion of the Board to treat the deposits in the
who will issue gold order certificates payable future in this way.
to the Federal Reserve Board or to any FedThe opinion referred to follows:
eral reserve bank. The books of the gold setAPRIL 19, 1915.
tlement fund will show exactly how much has
SIR
:
In
connection
with
the
plan now under
been paid in at the outset by each Federal reconsideration
under
which
the
Federal
Reserve
serve bank, and each bank will be informed of
Board
contemplates
assuming
the
functions
the receipt of this amount. Gold order certificates so received will be placed in a safe and of a clearing house for the several Federal
this safe in turn will be placed in the main vault reserve banks, this office has been requested to
of the Treasury Department. Access to the safe give an opinion on the following questions:
1. Whether gold kept in a clearing fund
will be controlled by two persons, whose presunder
the control of the Federal Reserve Board
ence will be necessary in order to open it, and,
may
be
counted by Federal reserve banks
of course, these persons will themselves be
91245—15
2
10
FEDERAL RESERVE BTJLLE^tlK.
depositing such gold as part of their reserve
against liabilities other than Federal reserve
notes.
2. Whether any part of such clearing fund
may be kept by the Federal Reserve Board in
the Treasury or one of the subtreasuries of the
United States.
In reference to the first question, Congress
has not in terms defined by statute what constitutes reserve against demand liabilities, and
in order to reach a conclusion as to what may
or may not be counted as part of such reserve,
it is necessary to review and interpret the
principal acts of Congress dealing with this
subject.
The act of June 3, 1864, being Revised
Statute, section 5191, provided in part as
follows:
Every national banking association in either
of the following cities * * * shall at all
times have on hand in lawful money of the
United States, an amount equal to at least
25 per centum of the aggregate amount of
(its notes in circulation ana) its deposits; and
every other association shall at all times have
on hand in lawful money of the United States,
an amount equal to at least 15 per centum
of the aggregate amount (of its notes in circulation and) of its deposits.
The same act further provided (section
5192) that:
Three-fifths of the reserve of 15 per centum
required by the preceding section to be kept,
may consist of balances due to an association,
available for the redemption of its circulating
notes, jfrom associations approved by the
Comptroller of the Currency * * * and
doing business in the cities of * * *. Clearing-house . certificates, representing specie or
lawful money specially deposited for the
purpose, of any clearing-house association,
shall also be deemed to be lawful money in
the possession of any association belonging to
such clearing-house, holding and owning such
certificate, within the preceding section.
The act of June 20, 1874, provided as follows:
SEO. 2. That section 31 of "the national
bank act" be so amended that the several
associations therein provided for shall not
hereafter be required to keep on hand any
amount of money whatever, by reason of the
amount of their respective circulations; but
MAX
1, 1915.
the moneys required by said section to be
kept at all times on hand shall be determined
by the amount of deposits in all respects, as
provided for in the said section.
SEC. 3. That every association organized,
or to be organized, under the provisions of the
said act, and of the several acts amendatory
thereof, shall at all times keep and have on
deposit in the Treasury of the United States,
in lawful money of the United States, a sum
equal to 5 per centum of its circulation, to be
held and used for the redemption of such
circulation; which sum shall be counted as a
part of its lawful reserve, as provided in section
2 of this act.
It will be observed from the foregoing that
prior to the act of June 20, 1874, no distinction
was made between reserve required to be held
against circulating notes and that required
against deposits, and this amendment relates
only to the amount and not to the character
of reserve required.
Analyzing the provisions quoted above, it
appears that reserve required by law before the
passage of the Federal reserve act might consist of:
(a) Lawful money on hand.
(6) Balances due from approved reserve
agents.
(c) Clearing-house certificates, representing
balances due from clearing-house associations.
(d) Five per cent redemption fund, which
consists of lawful money deposited with the
Treasurer of the United States for redemption
of circulating notes.
In other words, from such analysis, it seems
that reserve may reasonably be defined as
lawful money on hand or so deposited, in
accordance with law, as to be available at all
times for the discharge of liabilities against
which it is held. For example, lawful money
on hand is available to meet demands made
at the bank. Balances due from approved
reserve agents are available to meet those
liabilities which can be discharged by checks
or drafts drawn against such approved reserve
agents, even more satisfactorily than by the
actual shipment of lawful money, or such
balances can be immediately converted into
lawful money to meet demands made at the
bank.
MAY
1, 1&15.
Clearing-house deposits are available to meet
demands presented through the clearing house,
and the 5 per cent redemption fund is available
to redeem circulating notes presented to the
Treasurer of the United States.
The Federal reserve act repeals that part of
the act of June 20,1874 ; which permits national
banks to count the 5 per cent redemption fund
as part of their legal reserve, but does not
otherwise amend any provisions of law relating to the character of reserve to be held
against deposits. It provides that a gold reserve shall be maintained against liabilities for
Federal reserve notes and a reserve of gold or
lawful money against deposits in Federal reserve banks.
It does not otherwise define in terms legal
reserve.
Section 16 of the act reads in part as follows:
Every Federal reserve bank shall maintain
reserves in gold or lawful money of not less
than 35 per centum against its deposits and
reserves in gold of not less than 40 per centum
against its Federal reserve notes in actual circulation, etc.
The act does not provide, except by implication, where the reserve held against deposits
shall be actually carried. The reserve against
circulating Federal reserve notes, however,
under the terms of the act is to be carried
partly in the vaults of the bank and partly
with the Treasurer of the United States in
order that notes presented for redemption to
the Treasurer may be redeemed out of the
funds furnished by the Federal reserve banks.
Section 16 of the Federal reserve act provides
in part that:
The Federal Reserve Board * * * may
at its discretion exercise the functions of a
clearing house for such Federal reserve banks.
One of the principal functions of a clearing
house is to act as a depositary of funds of its
members, to be held for the discharge of liabilities of such members which are presented
to the clearing house.
By analogy, therefore, if funds deposited
with the Treasurer of the United States for the
redemption of Federal reserve notes are to be
counted as part of the legal reserve of Federal
li
FEDERAL EESEKVE BULLETIN".
reserve banks required to be maintained against
such notes, it would seem entirely consistent to
count funds deposited with the Federal Reserve Board for the discharge of its deposit
liabilities as part of the legal reserve required
to be held against such deposits.
Such a fund not only meets the general requirements of lawful reserve, as indicated by
the acts referred to, but inasmuch as clearing-house certificates are specifically authorized by statute to be counted as part of the
lawful reserve of national banks and the Board
is authorized to act as a clearing house for Federal reserve banks, it would seem that its certificates would come within the spirit of the act.
In other words, while section 5192 relates to
the reserves of national banks, the Federal
reserve act makes no distinction between the
character of reserve of such banks and the
character of reserve of Federal reserve banks.
In answer to the second question, while the
act does not in terms provide for deposits by the
Federal reserve banks, or by the Federal Reserve Board, with the Treasurer of the United
States, the Attorney General has rendered an
opinion on the status of the Federal Reserve
Board, in which he holds that the Board is an
independent establishment and the members
are officers of the United States.
As such officers it is entirely consistent with
the established practices of the Government
that accounts should be opened with the Treasurer or Assistant Treasurer for the deposit of
any funds held by the Federal Reserve Board.
In other words, since that fund will be deposited with the Federal Reserve Board and since
the Board at this time is without the necessary
facilities for keeping such fund, the Treasury
of the United States would seem to be the
proper place for its deposit.
The bookkeeping incident to handling the
clearings could, of course, be handled by the
Board without reference to the physical location of the funds in question.
I am therefore of the opinion that both questions may be answered in the affirmative.
Respectfully,
M. C. ELLIOTT,
Counsel.
12
FEDERAL RESERVE BULLETIN".
MAY
1, 1915.
INFORMAL RULINGS OF THE BOARD.
Below are reproduced letters sent out from
time to time over the signatures of the officers of the Federal Reserve Board, which contain information believed to be of general
interest to Federal reserve banks and member
banks of the system:
Reserve Requirements.
DECEMBER 12,
1914.
Shipment of Notes.
JANUARY 12,
1915.
The question has arisen as to how Federal
reserve banks shall ship National bank notes
to the Treasurer of the United States at
Washington, D. C , if, and when, they have
occasion to ship them. It is proper to state
we have been informed by the Secretary of
the Treasury that, although there was formerly
a contract with the United States Express Co.
for the shipment of currency, this contract has
now been terminated; but Wells Fargo & Co.
has offered for the time being to carry shipments at the rates formerly named by the
United States Express Co.
In order, however, to enjoy this rate, it is
necessary for Federal reserve banks to ship
currency to the Treasurer of the United States,
charges collect—not prepaid. The transportation charges will be deducted at Washington
and the net proceeds remitted to the Federal
reserve banks.
These instructions, however, are not intended to preclude Federal reserve banks
from making shipments of currency to the
Treasurer by other express companies, or by
mail, insured, if the Federal reserve banks
secure equally favorable or more favorable
terms.
In reply to your inquiry contained in your
letter of December 5, "What power, if any, has
the reserve bank to refuse payment of the draft
of the member bank when it has reason to
believe or has positive knowledge that the
member bank is violating its reserve balance V,
you are advised that the Federal reserve act
prescribes certain specific penalties for violation of reserve requirements; in substance
these are as follows:
(1) That when reserves are below the amount
required banks shall not take new loans.
(2) That the Federal Reserve Board may
impose a graduated tax.
(3) That for continued violation after notice,
the comptroller, in the case of national banks,
may, with the approval of the Secretary, appoint a receiver, or, in the case of State banks
as members, the Federal Reserve Board may
require such bank to surrender its capital stock
Silver Certificates.
and cease to be a member.
Under these circumstances the Federal
JANUARY 13, 1915.
reserve bank would have no right to refuse
At a meeting of the Federal Reserve Board
payment of the draft of the member bank on on January 12 it was voted that, inasmuch as
the ground stated.
silver certificates are now to all intents and
purposes lawful money, they may be received
Lawful Money.
by
Federal reserve agents when offered by
JANUARY 12, 1915.
Federal reserve banks for the purpose of reThe Federal Reserve Board has carefully con- ducing their liability for Federal reserve notes
sidered your letter of December 22, addressed outstanding.
to the secretary. In reply you are advised
that the primary meaning of the term "lawful Checks for Silver Certificates.
JANUARY 29, 1915.
money" would seem to be legal tender. Silver
certificates and gold certificates, however, have
In answer to inquiries made by this office,
been specifically made available for reserves of Hon. William P. Malburn, Assistant Secretary
national banks. Inasmuch as these reserves of the Treasury, writes, under date of January
have to consist, under the law, of lawful money, 26, as follows:
it would seem clear that the statutes authoriz" I have received your memorandum of Janing such silver and gold certificates for use in uary 23, stating that the governor of a Federal
reserves would bring them within the meaning reserve bank wishes to know whether, if he
of the term "lawful money of the United ships silver certificates to Washington, he will
States." The Board, therefore; is of opinion be given a transfer check therefor.
11
that Federal reserve agents should receive sil1 have the honor to advise you that there
ver certificates deposited to reduce its liability is no authority for the Treasurer to issue a
for outstanding Federal reserve notes by the transfer check for silver certificates. Silver
Federal reserve bank.
certificates are redeemable in silver, and when-
MAT
FEDERAL RESERVE BULLETIN.
1, 1915.
ever presented, the Treasurer is required to
pay silver dollars for them, but I can see no
reason why the Treasurer should issue a transfer check for them, except to relieve the Fedreal reserve bank of transportation charges on
money, and this would merely mean shifting
the charge to the Government. I do not
think, in the present state of the Treasury
Department's appropriations, it would be justified in so doing."
Silver for Retiring Circulation.
FEBRUARY 3,
1915.
Your letter of February 1, with further
reference to the stock of silver dollars and silver certificates which you have in your vaults,
is received.
I have taken the matter up with the Treasurer of the United States and am advised that
silver dollars and silver certificates may be
deposited with him for the purpose of retiring
additional circulation issued under the provisions of May 30, 1908.
Taxes on Reserve Bank Stock.
MARCH 3,
1915.
You ask a construction of section 51 of the
Federal reserve act as to whether your bank is
liable to local taxation on stock held in the
Federal reserve bank.
In reply you are informed that it is the judgment of counsel for the Board that the language
of section 7 of the Federal reserve act, which
says—
"Federal reserve banks, including the capital
stock and surplus therein, and the income derived therefrom, shall be exempt from Federal,
State, and local taxation, except taxes upon
real estate/ ;
was intended to exempt capital stock and dividends of Federal reserve banks from local
taxation.
Reports by Federal Reserve Agents.
MARCH 18,
1915.
At a conference recently held by the Federal
Reserve Board with the Federal reserve agents
a systematic form of reports by the Federal
reserve agents to the Board was discussed, and
the following plan for such reports has been
determined upon by the Board:
The Federal reserve agents are requested to
address once each week, or more often if possible, a letter to the member of the Federal
Reserve Board to whom their district has been
assigned. These reports should be informal in
nature, but should cover any points of interest
connected with the operation of the bank,
13
especially the views of the officers and directors
regarding discount rates, the business transacted by the bank, general business conditions
throughout the district, the attitude of member
banks, etc., but the report will deal mainly with
the discount policy of the bank and the discount rates in particular.
The making of discount rates is a most important function, and in the opinion of the
Federal Reserve Board should receive attention
as often as once a week. The responsibility for
establishing proper rates rests jointly upon the
reserve banks and the Federal Reserve Board,
and the Federal reserve agent has a double
responsibility as the chairman of the board of
his bank and as the official representative of
the Federal Reserve Board.
The Federal reserve act in section 14, pararaph (d) requires that " rates of discount shall
e fixed with a view of accommodating commerce and business/7 Many elements must
necessarily enter into the determination of
)roper rates, and there may be times when
! ocal or superficial conditions can not govern
absolutely when national or international factors must be given consideration.
The discount committee of the Board meets
on Wednesday afternoons, and it is desirable
that the committee should have in its hands
recommendations of the Federal reserve agents
as to rates, whether changes are desired or not.
On Thursdays the Federal Reserve Board meets
to hear a report of the discount committee on
the recommendations of the Federal reserve
agents, and on those days takes up for review
and determination the rates of discount established by the several Federal reserve banks.
The Board will telegraph to the reserve agents
of the banks its decision as to rates, and will
expect the bank to acknowledge promptly the
receipt of such notification, and to make the
public announcement forthwith. Upon receipt of acknowledgment from the Federal
reserve bank, the Board will, at its discretion,
publish the changes as approved, and will communicate this information to other Federal
reserve banks. It is not intended, however,
that this action should be construed by Federal
reserve banks as a suggestion from the Federal
Reserve Board as to their rates, as the Board
desires merely to keep the banks informed as to
its policy and of the rates established in the
various districts. Suggestions on the subject
of discount policy and rates, or a discussion of
action taken by other districts may, however,
be made to the Federal reserve agents by informal letters from a member of the Board or
by formal communications from the Board*
f
14
FEDERAL RESERVE BULLETIN.
Each Federal reserve agent will be expected
to prepare a monthly report of his bank, to be
forwarded as soon as possible after the end of
each month. For the present, the form of
these reports is left to the judgment of the
several Federal reserve agents, but ultimately
it is probable that a uniform style of report
will be recommended
The monthly report should be a digest, summary, or compilation of the weekly reports
immediately preceding it, embodying clearly
and concisely the salient features of the month's
operations and the trend of business during the
month. It should embody also the summarized results of the biweekly or monthly
reports of member banks which under the
Board's regulations are soon to be required.
The Board expects in the near future to issue a
monthly or quarterly bulletin, which will contain most of the information or statistical data
submitted by the Federal reserve agents in
these monthly reports.
As soon as practicable after November 1 of
each year, each Federal reserve agent will
make to the Federal Reserve Board an annual
report covering the operations of his bank
during the 12 months immediately preceding.
This report should be in the hands of the
Federal Reserve Board not later than December 1, in order that the information contained
therein may be availed of in the annual report
of the Federal Reserve Board for the 12-month
period ending December 31.
The annual report of the Federal reserve
agent will be entirely distinct from any statement or report that a Federal reserve bank
may deem it desirable to issue for the information of its stockholders or member banks,
and shall not take the place of such reports.
Capital Stock.
APRIL 2,
1915.
Your attention is called to the fact that the
third installment of capital stock, payable by
member banks, is due May 2, 1915.
The Board desires to follow the usual practice of having notice of this payment sent
by Federal reserve banks to their member
banks. Express charges should be paid by
member banks.
Separation of Note Accounts.
M A R C H 24, 1915.
When the first assessment of four-tenths of
1 per cent was made upon the 12 Federal
reserve banks, there was included in the esti-
MAY
1, 1915.
mate upon which it was based $240,000 for the
preparation of $250,000,000 of Federal reserve
notes. This assessment was, of course, based
upon the capital stock of the Federal reserve
banks. An analysis of the cost of Federal reserve notes for each bank, made possible by
the fact that each note bears the number and
letter showing the bank for which it was prepared, discloses that the assessment of the cost
for these notes on the basis of capital is not
equitable.
The Federal Reserve Board directed an investigation to be made of the matter, and as a
result of that a recommendation has been made
and adopted that the Bureau of Engraving
and Printing keep an account of the cost of
engraving, paper, and labor in preparing the
notes for each bank, and that an account
covering the cost of Federal reserve notes be
opened with each of the 12 banks. The separate accounts above referred to were ordered
established at a meeting held on Tuesday,
March 23.
In order to determine the present status of
such an account as is above outlined the
amount assessed upon each bank on November 2 has been reapportioned on the basis of
the $240,000 assessed as the estimated cost of
$250,000,000 Federal reserve notes, so as to
separate the amount of the assessment made
for Federal reserve notes and the amount for
the general expenses of the Federal Reserve
Board. Four banks, of which yours is one,
are found under this separation to have paid
less than the amount due for Federal reserve
notes prepared by the Bureau of Engraving
and Printing up to January 31.
The amount of your assessment on November 2, 1914, was
. Of this sum
was assessed for Federal reserve notes and
was assessed for general expenses of
the Board. This leaves a balance due on your
account for Federal reserve notes alone, up to
January 31, of
. Will you at your convenience kindly forward check for this amount
payable to the Federal Reserve Board ?
It is the purpose under the new arrangement
to ask Federal reserve banks to keep only a
small balance to the credit of the Federal
reserve note fund, and to avoid loss of interest
you will be called upon to pay into this account
only as the notes are received from the Bureau
of Engraving and Printing. As you probably
know, an order has been placed for the preparation of a further printing of $250,000,000 of
Federal reserve notes, xour proportion of
the first $250,000,000 of notes was approximately — per cent, whereas for the second
FEDERAL RESERVE BULLETIN".
MAY 1, 1915.
$250,000,000 the proportion will be approximately — per cent. The board is promised
that these notes will be completed prior to
July 1.
Attached is a table showing the manner
in which the separation of the account was
made.
Bank.
Boston
New York
Philadelphia..
Cleveland
Richmond
. Atlanta
Chicago
St. Louis
Minneapolis...
Kansas City..
Dallas
San Francisco
Amount
assessed
Nov. 2,
1914.
Amount
for
Federal
reserve
notes.
Amount
for general
expenses.
Due,
or to be
credited.
$38,847.60 $21,581.98 $17,265.62 - $4,215.53
79,726.80 44,292.62 35,434.18 - 50,888.36
50,037. 60 27,798.64 22,238.96 + 12,239.60
1223960
48,400.00 26,888.86 21,511.14
16,317.25
26,000.80 14,444.87 11,555.93
2,878.69
18,769.60 10,427.55
1,138. 63
8,342.05
52,440.80 29,133.75 23,307.05
3,764.10
22,159.20 12,310.65
3,815.10
9,848.55
19,200.00 10,666.66
25.64
8,533.34
22,228.80 12,349.32
1,708.30
9,879.48
22,868.80 12,704.88 10,163.92
1,168.74
31,088.40 17,271.32 13,817.08
6,729.75
431,768.40
239,871.10
Your letter of recent date is received.
The Superintendent of Documents determines in what form he will accept remittances.
This is a matter that the Federal Reserve
Board has nothing to do with. We sent out
the notice to member banks because it was
thought well to let them know that such a
digest had been prepared. There is no obliga-"
tion resting upon them to purchase the digest;
and on the other hand, there is nothing to prevent them from making remittance in any way
they may see fit, if they can get the Superintendent of Documents to accept such remittance. Many banks do not like to draw drafts
for so small an amount as 75 cents.
The price charged is figured as barely covering the cost of printing.
Conference of Governors.
191,897.30
NOTE.—The sign — indicates that additional payment must be made
by banks to balance the note account. The sign + indicates a credit.
Digest of Federal Reserve Act.
Believing that member banks of the Federal
reserve system would be interested to know
that the Digest of the Federal Reserve Act,
prepared by Hon. C. S. Hamlin, governor of
the Board, could be purchased from the Superintendent of Documents, Government Printing
Office, Washington, D. C, the Federal Reserve
Board caused to be mailed an announcement of
that fact, as follows:
The Federal Reserve Board has just had
printed, by the Public Printer, an IndexDigest of the Federal Reserve Act and Amendments. The digest, which has been prepared
by Hon. C. S. Hamlin, governor of the Board,
contains 490 pages, including the text of the act,
and shows, in concise form, the various uses of
the principal words in the act, with reference to
the section, line, and page of the text.
It may be procured of the Superintendent of
Documents, Government Printing Office, Washington, D. C, at the price of 75 cents per
volume.
Remittance should be made by postal money
order or express order.
Some banks have objected to remitting by
postal money order or by express order. A
letter sent by the Board in reply to such objections is given below.
15
The governors of the Federal reserve banks
held their third conference in Washington,
beginning on March 11, all being present except
Gov. Wells, of St. Louis, and the acting governor of the Federal Reserve Bank of Dallas.
Informal conferences with members of the Federal Reserve Board were held. The topics
considered were:
Intradistrict clearings.
Plan for settlements between Federal reserve
banks.
Cipher and cable codes.
Relation between the Federal reserve banks
and the national bank examiners.
Rediscounts between Federal reserve banks.
Membership by Federal reserve banks in the
American Bankers' Association and State
bankers' associations.
Foreign exchange.
The printing and use of Federal reserve
bank notes.
Uniform statements to be exchanged between Federal reserve banks.
The abrasion of gold coin.
Member banks' certification of eligibility on
commercial paper.
Chattel mortgages.
Intradistrict clearings and settlements were
referred to a subcommittee consisting of Govs.
McDougal, Aiken, Strong, Fancher, and Seay.
The conference adjourned to meet at the
call of the chairman, probably some time in the
month of May, at one of the Federal reserve
banks.
16
FEDERAL RESERVE BULLETIN.
MAY
1, 1915.
LAW DEPARTMENT.
In this department it is intended to publish
each month certain of the opinions of the counsel for the Federal Reserve Board which have
been released and which it is thought may be
of interest to bankers.
Each opinion will be given a title and will be
preceded by a short syllabus stating briefly
the subject of the opinion and the result
reached.
Decisions of the higher courts dealing with
banking questions of general interest to member banks, and opinions of the Attorney General relating to such questions, will also from
time to time be published or referred to in this
department of the Bulletin.
Interpretation of Section 22 of the Federal Reserve Act.
Any violation of the provisions of section 22 of the Federal reserve act by officers, directors or employees of a
member bank, constitutes a crime, punishable by fine or
imprisonment. No ruling or interpretation by the Federal Reserve Board would afford any protection to a person
subsequently indicted by a Federal grand jury for any
such violation, it not being within the province of the
Federal Reserve Board to make an official ruling on the
provisions of this section. This opinion is, therefore, not
published as a ruling or regulation of the Board.
It seems, however, that compensation may be paid to
officers, directors, or employees, by member banks, for
services rendered in an official capacity or for services
rendered the bank in a transaction where a bona fide
consideration moves to the bank and in which it is proper
for such director, officer, or employees, to take part.
APRIL 9,
1915.
SIR: AS requested by the Board, I have carefully examined and considered that part of
section 22 of the Federal reserve act which relates to transactions between a member bank
and the officers, directors, or employees of such
bank. The language which has been made the
basis of a number of inquiries, and which the
Board is asked to interpret, is contained in that
paragraph of the section which reads as follows:
Other than the usual salary or director's fee
paid to any officer, director, or employee of a
member bank and other than a reasonable fee
paid by said bank to such officer, director, or
employee for services rendered to such bank,
no officer, director, employee, or attorney of a
member bank shall be a beneficiary of or receive
directly or indirectly, any fee, commission, gift,
or other consideration for or in connection with
any transaction or business of the bank
* * * Any person violating any provision
of this section shall be punished by a fine of not
exceeding $5,000 or by imprisonment not exceeding one year, or both.
Under the terms of this provision any transaction engaged in between a member bank and
its directors, officers, or employees, which is
not excluded from its operation, will constitute a crime and no ruling or interpretation of.
the Federal Reserve Board which it might
attempt to apply to any concrete case would
afford any protection to a person subsequently
indicted by a Federal grand jury for any violation of the provision in question. For this
reason it does not seem advisable to attempt
to express any opinion on the various hypothetical and concrete cases presented for consideration. Inasmuch, however, as there appears to be a wide diversity of opinion as to the
proper interpretation and significance of this
section, it may be advisable to analyze, for the
benefit of those making inquiries, the provision
above quoted in order that the elements necessary to constitute a crime, within the meaning
of this section, may be made a little more clear.
The question for determination appears to
be, What class and character of transactions
did Congress intend to prohibit as between
member banks and their officers, directors,
and employees.
It will be observed that directors, officers,
and employees are expressly prohibited from
receiving any compensation on account of any
transaction except (a) the usual salary or director's fee paid to any officer, director, or employee of a member bank, and (6) a reasonable
fee paid to such officer, director, or employee
for services rendered to such bank. Under this
language it would seem that for services rendered by directors, officers, and employees in
their respective capacities of directors, officers,
and employees proper compensation may be
paid, and that in addition where services are
MAT
1, 1915.
FEDEKAL RESERVE BULLETIN.
rendered in some other capacity a reasonable
fee may in certain cases be paid for such services. It is, therefore, necessary to interpret the
language "for services rendered," in order to
determine under what circumstances directors,
officers, or employees may render services in
any other than an official capacity and receive
compensation therefor without violating the
spirit and intent of the act.
The Standard Dictionary defines " services"
as: " Any work done for the benefit of another;
the act of helping another or promoting his
interest in any way; hence also a benefit conferred; or use and advantage in general." In
35 Cyc, page 1434, "service" is defined as "an
advantage conferred; that which promotes interest or happiness; benefit." Webster's Dictionary, quoted in Dayton v. Ewart, 28 Montana, 157.
In this connection it must be noted that the
courts in construing penal statutes generally
give the defendant the benefit of the doubt in
cases of ambiguity, and in consequence, the
language "for services rendered" would probably be given a liberal rather than a restricted
meaning. The court, however, would necessarily consider all the circumstances in each case
in order to determine whether the transaction
involving such services was intended to be prohibited by the terms of the act. The rule is
clearly stated in the case of the United States
v. Starn, 17 Fed. Rep., 435, where the court
says:
It is a fundamental rule in the administration of criminal law that penal statutes are to
be construed strictly, and that cases within the
like mischief are not to be drawn within a clause
imposing a forfeiture or a penalty, unless the
words clearly comprehend the case. In construing a statute we ought undoubtedly to look
at the public mischiefs which are sought to be
suppressed, as well as the obvious object and
intent of the legislature in enacting it; and in
doubtful cases these have great influence on
the judgment in arriving at its meaning.
And again in Bolles v. Outing Company, 175
U. S., 262, where the court says:
The statute, then, being penal, must be construed with such strictness as to carefully safe91245—15
3
17
guard the rights of the defendant and at the
same time preserve the obvious intention of
the legislature. If the language be plain, it
will be construed as it reads, and the words of
the statute given their full meaning; if ambiguous, the court will lean more strongly in favor
of the defendant than it would if the statute
were remedial. In both cases it will endeavor
to effect substantial justice.
See to same effect U. S. v. Wiltberger, 5
Wheat., 76; U. S. v. Morris, 14 Peters, 464;
U. S. v. Buchanan, 9 Fed. Rep., 689.
Following the rule laid down in these and
other cases, it is proper to construe liberally
that part of the act which excepts certain transactions from its operation, but the true test in
each case would seem to be whether or not
compensation has been received in a transaction which may be said to come within what
the court describes as "the public mischiefs
which are sought to be suppressed."
Giving a liberal interpretation to the language "for services rendered," it would seem
that a director of a member bank may receive,
in addition to the usual salary or fee for services rendered as a director, reasonable compensation in those transactions where a bona fide
consideration moves from such director to the
bank, provided the transaction is one in which
it is proper for him to render such services or
to furnish such consideration. Congress clearly
intended to prohibit the receipt of any compensation, commission, or benefit, either from
the bank or from a third party, where the
director furnishes no consideration to the bank.
A consideration of the law prior to the passage of this act, and of the "public mischiefs
sought to be suppressed," clearly indicates,
however, that the sufficiency of the consideration is not the only element involved; and
that Congress intended to prohibit not only the
payment of fees when no consideration is furnished, but also another class of transactions,
namely, those in which the director, by reason
of his control of the assets, undertakes to use
such assets for his own purposes. In such case
the director may furnish a consideration; but
inasmuch as he occupies at least a quasi-fiduciary relation as custodian of the funds of others,
18
FEDERAL RESERVE BULLETIN".
it may be inferred that Congress deemed it
against public policy to permit him to use such
funds directly or indirectly for his benefit.
It is unquestionably true that in conservatively managed banks transactions engaged in
as between the bank and the directors acting
as individuals have resulted in great benefit to
the bank. A director connected with other
successfully managed corporations may very
frequently be the agency through which the
bank makes profitable investments, and directors having large interests in their banks have
in many cases materially added to the earnings
of such banks through the agency of other
firms or corporations in which they were likewise interested. Consequently, transactions
between a national bank and its directors were,
prior to the passage of this act, not made criminal by statute, and, as a matter of fact, were
not restricted. On the other hand, to incur a
criminal penalty it has heretofore been necessary for the transaction to be of such a fraudulent nature as to constitute misapplication of
funds or embezzlement. It is true that under
the provisions of the national bank act, a director may be punished by fine or imprisonment
for making a false entry or a false report with
intent to deceive the office of the comptroller
or the public, but in such cases the penalty is
based not upon the ground that a prohibited
transaction has been engaged in but rather
upon the ground that the true status of the
bank has been concealed by such false entry
or false report.
Under the national-bank act the only penalties prescribed for the use of funds of the bank
by directors, where such use does not amount
to misapplication or embezzlement, are of a
civil nature. For example, the directors may
be held liable, civilly, where excess loans or
loans upon real estate are made and loss results
thereby, or for the violation of any of the provisions of the act the comptroller may institute
a suit for the forfeiture of the charter of the bank.
While udirectors" have been specifically referred to in the foregoing discussion, analogous
principles apply with equal force to transactions involving officers or employees.
MAY
1, 1915.
It may be assumed, therefore, that Congress
intended to restrict transactions between member banks and the officers, directors, and employees of such banks, since experience has
demonstrated the fact that although the bank
may be the beneficiary in many or most
instances of such unrestricted transactions,
this lack of restriction has afforded a wide
field for dishonesty and fraud not punishable
by statute or under the common law.
To summarize transactions permitted under
the views herein expressed, a director, officer,
or employee of a member bank may receive
compensation from such bank where services
are rendered in his official capacity, or where
bona fide services are rendered, or an adequate consideration is furnished to the bank
by such director, officer, or employee acting in
his individual capacity, provided the transaction engaged in is not one in which the use of
his official position could in any way be instrumental in causing the payment of the fee, commission, gift, or other consideration received.
In no case should compensation be received
by such director, officer, or employee from a
third party for services rendered in his official
capacity when such compensation results from
a transaction between such third party and a
member bank.
As above suggested, it is not within the province of the Federal Reserve Board to make an
official ruling on the subject under consideration, and the foregoing analysis is intended
merely as an expression of individual opinion
as to what transactions Congress intended to
prohibit by that part of section 22 which is
under consideration.
Respectfully,
M. C. ELLIOTT,
Counsel,
To Hon. F. A, DELANO,
Vice Governor Federal Reserve Board.
Bight of National Banks to Advertise Savings Accounts.
Section 49 of the bank act of the State of California provides that no banking association shall advertise savings
or in any way solicit or receive deposits in the manner of a
savings bank unless it is chartered as a savings bank under
the California law.
MAY
1, 1915.
FEDEKAL KESERVE BULLETIN".
The superintendent of banks of California, by virtue of
this act, has raised the question whether a national bank
can, under the provisions of this State law, advertise
savings accounts.
The Federal law relating to the establishment and operation of national banks is superior to and controlling over a
State law which might otherwise apply to or govern the
operations of national banks. Congress having conferred
on national banks the power to pay interest on time deposits, it is evident that the right to advertise and solicit such
savings accounts is a necessary incident to the exercise of
that power, and that no State law can interfere with its
exercise.
FEBEUARY 24,
1915,
SIR: The action of Mr. W. R. Williams,
superintendent of banks of the State of California, in serving notice on certain national
banks that he will seek to have imposed the
penalties imposed by the California law for
soliciting savings accounts has been referred
to this office for attention.
It appears that section 49 of the bank act of
the State of California provides as follows:
It shall not be lawful for any commercial
bank, individual, trust company, association,
firm, stock company, copartnership, or corporation to advertise or put forth a sign as a savings
bank, either directly or indirectly or in any
way to solicit or receive deposits or to transact
business in the way or manner of a savings
bank, or advertise that he or it is receiving or
accepting savings, or in any way which might
lead the public to believe that such deposits
are received or invested under the same conditions or in the same manner as deposits in
savings banks, except in the case of savings
banks or banks having savings departments,
subject to the provisions of this act. Any
commercial ban£, individual, trust company,
association, firm, stock company, copartnership, or corporation violating any provision of
this section shall forfeit to this State $100
a day for every day during which such violation continues.
The question arises whether or not the provisions of this act can be made to apply to
national banks doing business within the State
of California.
It does not appear that Mr. Williams contends that Congress is without power to
authorize national banks to pay interest on
deposits. It is conceded by him that this can
19
be and has been done. The right is expressly
given in section 24 of the Federal reserve act,
which, in terms referring to national banks,
provides that—
such banks may continue hereafter as heretofore to receive time deposits and to pay interest
on the same.
Section 19 provides in part that—
Demand deposits within the meaning of thi3
act shall comprise all deposits payable within
30 days, and time deposits shall comprise all
deposits payable after 30 days and all savings
accounts and certificates of deposits which are
subject to not less than 30 days7 notice before
payment.
Inasmuch as Congress has the right to authorize the payment of interest on deposits as
an incident to the business of banking, and has
exercised this right, the question arises whether
or not a State law prohibiting banking associations not organized as savings banks under the
laws of that State from advertising that it will
receive savings accounts, can be held to prevent national banks from publishing such
advertisement and from soliciting such acaccounts.
It is a well-accepted principle of constitutional law that the authority of the Federal
Government is supreme in the exercise of those
powers vested in Congress, and that a State can
not interfere with the administration of laws
enacted by Congress to aid in the execution of a
governmental function. The Supreme Court
of the United States in the case of Farmers &
Mechanics National Bank v. Dearing, reported
in 91 U. S., 29, 33, states:
The national banks organized under the act
are instruments designed to be used to aid the
Government in the administration of an important branch of the public service. They
are means appropriate to that end. Of the degree of the necessity which existed for creating
them Congress is the sole judge.
Being such means, brought into existence for
this purpose, and intended to be so employed,
the States can exercise no control over them,
nor in any wise affect their operation, except in
so far as Congress may asee proper to permit.
Anything beyond this is a n abuse, because it
is the usurpation of power which a single State
20
FEDERAL RESERVE
can not give.7' Against the national will "the
States have no power, by taxation or otherwise, to retard, impede, burthen, or in any manner control the operation of the constitutional
laws enacted by Congress to carry into execution the
powers vested in the General Government.7' iBank of the United States v. McCulloch, supra; Weston and Others v. Charleston,
2 Pet., 466; Brown v. Maryland, 12 Wheat,
419; Dubbins v. Erie County, id., 419.
The power to create carries with it the power
to preserve. The latter is a corollary from the
former.
The principle announced in the authorities
cited is indispensable to the efficiency, the independence, and, indeed, to the beneficial existence of the General Government; otherwise
it would be liable, in the discharge of its most
important trusts, to be annoyed and thwarted
by the will or caprice of every State in the
"Union. Infinite confusion would follow. The
Government would be reduced to a pitiable
condition of weakness. The form might remain but the vital essence would have departed.
It is true, as stated by Mr. Williams, that
in the original House bill provision was made
for the creation of separate savings departments and that this provision was eliminatedby the Senate and agreed to by the conferees.
In its stead the provisions above quoted, authorizing banks to pay interest on deposits and
including savings accounts in the interestbearing deposits, were incorporated. The question, therefore, of whether or not the State of
California has the right to prohibit national
banks from soliciting savings accounts would
seem to depend upon whether such prohibition
can be said to be an exercise of police power by
the State and whether it is necessary for the
protection of property within its limits.
The limitation of State legislation passed in
the exercise of police power is fully discussed in
the case of Railroad Co. v. Husen, 95 U. S.,
465, 470, where the court says—
We are thus brought to the question whether
the Missouri statute is a lawful exercise of the
police power of the State. We admit that the
deposit in Congress of the power to regulate
foreign commerce among the States was not a
surrender of that which may properly be denominated police power. What that power is,
it is difficult to define with sharp precision. It
MAY
1, 1915.
is generally said to extend to making regulations promotive of domestic order, morals,
health, and safety. As was said in Thorp v.
The Rutland & Burlington Railroad Co., 27 Vt.,
149, "it extends to the protection of the lives,
limbs, health, comfort, and quiet of all persons, and the protection of all property within
the State. * * *.»
But whatever may be the nature and reach
of the police power of a State, it can not be
exercised over a subject confided exclusively
to Congress by the Federal Constitution. It
can not invade the domain of the National Government.
In the later case of Reid v. Colorado, 187
U. S., 137, 146, the question is also considered
in detail. The court in that case, in discussing
the right of the State of Colorado to enforce
certain laws which were passed in the exercise
of the police power of the State, says:
It is quite true, as urged on behalf of the
defendant, that the transportation of live
stock from State to State is a branch of interstate commerce and that any specified rule or
regulation in respect of such transportation,
which Congress may lawfully prescribe or authorize and which may properly be deemed a
regulation of such commerce, is paramount
throughout the Union. So that when the entire subject of the transportation of live stock
from one State to another is taken under direct
national supervision and a system devised by
which diseased stock may be excluded from
interstate commerce, all local or State regulations in respect of such matters and covering the same ground will cease to have any
force, whether formally abrogated or not; and
such rules and regulations as Congress may
lawfully prescribe or authorize will alone control. Gibbons y. Ogden, 9 Wheat., 1, 210;
Morgan v. Louisiana, 118 U. S., 455, 464;
Hennington v. Georgia, 163 U. S., 299, 317;
N. Y., N. H. & H. R. R. Co. v. New York,
165 U. S., 628, 631; Missouri, Kansas & Texas
Railway Co. v. Haber, 169 U. S., 613, 626;
Rasmussen v. Idaho, 181 U. S., 198, 200.
The power which the States might thus exercise may in this way be suspended until national control is abandoned, and the subject
be thereby left under the police power of the
States.
Inasmuch, therefore, as Congress has the
right to authorize national banks to charge
interest on accounts and to include in such
MAT
1, 1915.
accounts what are generally known as " savings accounts/' and since it has exercised this
right, it would seem that the California statute referred to can not properly be so construed as to defeat this right.
I can not agree with Mr. Williams that
depositors would necessarily be led to assume
that savings accounts received by national
banks would be subject to investment according to State laws; and while national banks
should not be permitted to advertise themselves as "savings banks/ 7 since they are not
so designated in the act, power is specifically
granted to member banks to receive interestbearing accounts, including "savings accounts/' and since they possess this power
the right to advertise for such accounts would
seem to be a necessary incident to its exercise.
It is not believed, therefore, that the penalties prescribed by section 49 of the bank act
of the State of California could be legally enforced against a national bank which advertises that it will receive and pay interest on
savings accounts.
Respectfully,
M. C. ELLIOTT, Counsel,
To Hon. C. S. HAMLIN,
Governor} Federal Reserve Board.
Conditions Attached to and Affecting Negotiability of
Bills of Exchange and Acceptances.
A bill of exchange, in order to be negotiable, must be an
unconditional order to pay, on demand or at a fixed or determinable future time, a certain sum of money to order or
to bearer. If payment is dependent upon the happening
of a certain contingency the bill is conditional and nonnegotiable. If payment is confined to the proceeds of a particular fund and is not chargeable to the general credit of
the drawer the bill is conditional and nonnegotiable.
A general acceptance of a conditional bill or a conditional acceptance of an unconditional bill makes the acceptance a conditional one and destroys its negotiability.
There is some doubt in the courts whether the mere
reference to a particular consignment of goods makes the
bill conditional, some courts stating that it is merely an
indication of the fund out of which the drawee is to reimburse himself; other courts holding that it makes the bill
conditional because limiting payment to the proceeds of
the particular shipment referred to. There is no doubt,
however, that a reference, in general terms, on thejace^of
21
FEDERAL RESERVE BULLETIN.
an accepted bill to the fact that it is based on the exportation or importation of goods, would not make it conditional
and nonnegotiable, and it would not, therefore, be ineligible for discount under the provisions of section 13 of the
Federal reserve act.
FEBRUARY 2,
1915.
SIR: I have the honor to acknowledge
receipt of your request for an opinion on the
subject of conditions attached to bills of exchange and acceptances which affect their
negotiability.
It is somewhat difficult to define in specific
terms what conditions may or may not be
prescribed in a bill of exchange without affecting the negotiability of such bill, since the negotiable instruments laws of all the States are
not identical and the decisions of the various
courts on this subject are by no means uniform.
As I understand it, the Board has under consideration the question of prescribing a method
by which bills of exchange or acceptances
dealt in by member banks or Federal reserve
banks may show that such bills or acceptances
grow out of transactions involving the exportation or importation of goods without
affecting their negotiability, and it is primarily upon this question that you desire an
opinion.
In dealing with this subject it is important
to keep in mind the distinctive difference between a bill of exchange and an acceptance
and also the difference in status between an
acceptor and a drawer of a bill.
Section 126 of the negotiable instruments
law adopted by 41 States and the District of
Columbia, defines a bill of exchange as an
" unconditional order in writing addressed by
one person to another, signed by the person
giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or
determinable future time a sum certain in
money to order or to bearer.'7
Section 127 states that—
A bill of itself does not operate as an assignment of the funds in the hands of the drawee
available for the payment thereof, and the
drawee is not liable on the bill unless and until
he accepts the same.
22
FEDERAL RESERVE BULLETIN.
Until the bill is accepted therefore the drawer
is primarily liable and the bank discounting
such bill can have recourse only against the
drawer or a prior endorser in the event that the
drawee declines to accept such bill when presented.
The acceptance of a bill is defined by section
132 of the negotiable instruments law as—
The signification by the drawee of his assent
to the order of the drawer. The acceptance
must be in writing and signed by the drawee.
It must not express that the drawee will perform his promise by any other means than the
payment of money.
When a bill has been accepted, the acceptor
becomes primarily liable and the contract of the
drawer is substantially changed to that of
endorser.
It will be observed from the foregoing that a
bill of exchange in order to .be negotiable must
not only be payable to order or bearer, so that
title may be transferred by the holder, but it
must also be an unconditional order to pay in
money.
A conditional acceptance is defined in 4 Am.
& Eng. Encl. of Law, 224, as an undertaking by
a drawee to pay, dependent, however, upon the
performance or happening of a stipulated condition or contingency. But, as shown later, a
general acceptance of a conditional bill is also
in effect a conditional acceptance. The terms
therefore both of the order to pay, as indicated
by the bill of exchange when drawn and the
acceptance as indicated by the language used
by the acceptor, must be free from qualifications or conditions if the bill or acceptance is
to retain in all respects its negotiability and to
be free from equities existing between the
drawer and the drawee or the acceptor. This
being true, the question arises as to what form
may be used to show the transaction on which
the acceptance is based without destroying its
negotiability.
The Federal reserve act provides that acceptances to be eligible for discount by Federal
reserve banks must grow out of transactions involving the exportation or importa-
MAY
1, 1915.
tion of goods. It is to be assumed, therefore,
that ultimately the proceeds of the sale of the
goods imported or exported are to be used to extinguish the debt evidenced by the acceptance.
To avoid any question of negotiability, however, neither the bill as drawn nor the acceptance made must be in terms to indicate that
the payment is to be confined to such proceeds.
As stated by Norton, on Bills and Notes, Third
Edition, page 138—
The true test is whether the drawee is confined to the particular fund, or whether,
though a particular fund is mentioned, the
drawee may charge the bill up to the general
account of the drawer if the designated fund
turn out to be insufficient. It must appear
that the bill of exchange is drawn on the general
credit of the drawer. It must carry with it the
personal credit of the drawer, not confined to
any fund.
This being true of a bill of exchange, the
question arises whether or not the contract of
acceptance is wholly independent of the terms
contained in the bill. The cases and authorities all agree that a general acceptance of a bill
of exchange is an undertaking on the part of the
drawee to pay the bill absolutely according to
its tenor. (4 Am. & Eng. Encl. of Law 207;
English Bills of Exch. Act, sec. 17; Cox v.
National Bank, 100 U. S. 704, 712; Bailey on
Bills, 2d Am. Ed.) 154.
Consequently If the bill orders payment out
of a particular fund, a general acceptance
thereof is an undertaking to pay out of that
fund and no more, and it is, therefore, a conditional acceptance, though general in form.
(Hoagland v. Erck, 11 Nebr. 580; Newhall v.
Clark, 3 Cush. (Mass.) 376; Smith v. Wood, 1
N. J. Eq. 74; Cook v. Wolfendale, 105 Mass.
401.)
It is to be remembered, of course, that an
acceptance may be conditional and therefore
nonnegotiable, even though the bill itself was
unconditional, if the terms in the contract of
acceptance specify that payment is to be made
out of a particular fund or is dependent upon
the happening of a certain contingency. As
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
23
Justice Clifford stated in Gox v. National Bank, New York (Hannay et al. v. The Guaranty Trust
supra, "An acceptance is an engagement to Company of New York, 187 Fed., 686) it was
pay the bill according to the tenor of the held that' l Value received and charge the same to
acceptance and * * * a general acceptance the account of 100/RSMI bales of cotton" writis an engagement to pay according to the tenor ten on a draft made it conditional because it
of the bill."
limited payment to the proceeds of this particThe difficult question, however, is to con- ular cotton. The draft having been held to
strue the words used, to apply the test given in be conditional a general acceptance thereof
Norton, to determine whether in fact the was also held to be conditional. It is true that
acceptance is conditional; or, more specifically, this decision was reversed in the United States
to determine whether the drawee is confined to Circuit Court of Appeals in 210 Fed., 810, but
a particular fund merely by a reference on the on the ground that the English instead of the
bill or in the acceptance to that fund. It is a American law applied to this particular transquestion for the court to determine in each action and without any attempt on the part of
individual case, because, the facts being proved the court to decide whether the lower court
or admitted, the question whether an under- was right or wrong under the American law.
taking is a conditional acceptance is a question Thus it is seen how difficult it is to determine
of law for the court to decide. Sproat v. Mat- how a court will rule on any specific case.
thews, 1 Term. R., 182.
The rule or test is always the same, but
It was held in Corbett v. Clark, 45 Wis., 403, whether the facts are within or without the
that an order to "pay C. A. Corbett $183 and rule is merely a matter of opinion. Extreme
take the same out of our share of the grain" cases are easy to decide, but as the cases verge
was an unconditional bill and a general ac- toward the center the line of demarcation beceptance thereof also unconditional. The court comes hazy and difficult of determination.
held that this was a mere direction as to the
It would seem, therefore, that Federal refund out of which the drawee was to reimburse serve banks and member banks should conhimself. In Redman v. Adams, 51 Maine, 433, sider carefully the risk involved in discounting
where the words of the bill were "charge the bills of exchange or acceptances which in
same against whatever amount may be due me terms indicate any particular fund or any
for my share of fish caught on board schooner particular property out of which payment of
Morning Star," and the acceptance was gen- the draft is to be made, because of the doubt
eral, the court held that this was a mere refer- as to the construction that might be put upon
ence to the fund to call the attention of the such a bill or acceptance. It would be far more
drawee to his means of reimbursement.
prudent to require that the directions be to pay
The great majority of cases incline to the money and to charge to the account of the
view that the presumption is in favor of an drawer, without any qualification as to any
unconditional order and unless the direction particular fund. There is no doubt, however,
on the bill or acceptance clearly and expressly that a reference, in general terms, on the face
directs payment to be made out of a certain of a bill to the fact that it is based on the imfund, the court will consider it merely as a portation or exportation of goods would not
reference to the mode of reimbursement rather make it conditional and nonnegotiable.
than an absolute restriction to the particular
Respectfully,
fund mentioned.
M. C. ELLIOTT, Counsel.
In a case decided in May, 1911, by the United
To Hon. C. S. HAMLIN,
States Circuit Court for the Southern District of
Governor Federal Reserve Board.
24
FEDERAL RESERVE BULLETIN.
Federal Reserve Bank Discount Rates.
Congress not only has the power to prescribe rates of
discount for Federal reserve banks, which rates may exceed the statutory rates fixed by the States in which such
Federal reserve banks are located, but it may also delegate
this power to the Federal Reserve Board, or to the Federal
reserve banks, subject to the approval of such Board.
NOVEMBER 19,
1914.
SIR: AS requested, I have given consideration to the matter of discount rates to be
charged by Federal reserve banks and particularly to the question of the application
of State laws to such rates.
The question arises in interpreting section 14
of the Federal reserve act.
Section 14, subsection (d), in defining one of
the powers of the Federal reserve banks, provided as follows:
To establish from time to time, subject to
review and determination of the Federal
Reserve Board, rates of discount to be charged
by the Federal reserve bank for each class of
paper, which shall be fixed with a view of
accommodating commerce and business.
In interpreting this section, it is necessary to
consider whether Federal reserve banks are
limited in the amount of interest which may be
charged and particularly whether such banks
are subject to the usury laws of any State
in the absence of any fixed maximum rates of
interest prescribed by Congress. This involves a consideration of the questions—
First. Has Congress the constitutional right
to prescribe a rate of interest to be charged
by a corporation organized under an act of
Congress, which rate exceeds the statutory
rate fixed by any State for persons, firms, or
corporations doing business within the limits
of such State ?
Second. If Congress has this right, may it
delegate to any executive branch of the Government the right to fix such rates ?
Third. If Congress fails to prescribe by
statute a maximum rate of interest to be
charged, will the executive branch of the
Government be controlled by such State laws
in fixing the interest rate to be charged ?
MAY
1, 1915.
Considering these questions in the order
named:
First. The right to establish interest rates
is necessarily incident to the right to create a
banking corporation, since the exercise of this
power may be said to be fundamentally a part
of the exercise of banking powers.
The right of Congress to create a bank and
to vest such corporation with the necessary
powers to perform its functions is fully considered and determined in the case of McCulloch v. Maryland, 4 Wheaton, 316. In that
case Chief Justice Marshall, who delivered the
opinion of the court, affirmed the right of Con
gress to create the Bank of the United States,
the right of the Bank of the United States to
establish a branch in Maryland as an incidental power not specifically granted by its charter,
and decided definitely that the State of Maryland could not tax the branch so established
on the ground that such a tax would retard,
impede, burden, or control the operations of
the laws enacted by Congress. That is, the
court, having decided that the Bank of the
United States was constitutional, held that the
branch which was created by the bank, " being
conducive to the complete accomplishment of
the object/' was equally constitutional. This
concedes the right of the bank to exercise
powers which are properly incident to the duties
of the bank. (See 4 Wheaton, pp. 424-425.)
A fortiori, the right to establish interest rates
equally free from State interference is incident
to the duties of the Federal reserve banks.
Without reviewing in detail the opinion
rendered in this case, the following language
is quoted as bearing on the subject under consideration:
This great principle is that the Constitution
and the laws made in pursuance thereof are
supreme; that they control the constitution
and laws of the respective States and can not
be controlled by them. From this, which may
be almost termed an axiom, other propositions are deduced as corollaries, on the truth
or error of which and on their application to
this case the cause has been supposed to
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
depend. These are (1) that a power to create
implies a power to preserve; (2) that a power to
destroy, if wielded by a different hand, is hostile to and incompatible with these powers to
create and to preserve; (3) that where this
repugnancy exists that authority which is
supreme must control, not yield to that over
which it is supreme. * * * The power of
Congress to create and, of course, to continue
the bank was the subject of the preceding part
of this opinion and is now no longer to be considered as questionable. * * * It is of the
very essence of supremacy to remove all obstacles to its action within its own sphere and so
to modify every power vested in subordinate
governments as to exempt its own operations
from their own influence. This effect need not
be stated in terms. It is so involved in the
declaration of supremacy, so necessarily implied
in it, that the expression of it could not make
it more certain. We must, therefore, keep it
in view while construing the Constitution.
The same question was considered in the case
of the Farmers & Mechanics National Bank v.
Dearing, reported in 91 U. S., 29, 33, where the
constitutional right of Congress to create national banks was discussed. The court in
that case says:
The constitutionality of the act of 1864 is not
questioned. It rests on the same principle as
the act creating the Second Bank of the United
States. The reasoning of Secretary Hamilton
and of this court in McCulloch v. Maryland (4
Wheat., 316) and in Osborne v. The Bank of
the United States (9 id., 708) therefore applies.
The national banks organized under the act
are instruments designed to be used to aid the
Government in the administration of an important branch of the public service. They
are means appropriate to that end. Of the
degree of the necessity which existed for creating them Congress is the sole judge.
Being such means, brought into existence for
this purpose, and intended to be so employed,
the States can exercise no control over them,
nor in any wise affect their operation, except
in so so far as Congress may see proper to permit. Anything beyond this is " an abuse, because it is the usurpation of power which a single State can not give." Against the national
will " the States have no power, by taxation or
otherwise, to retard, impede, burthen, or in any
manner control, the operation of the constitutional laws enacted by Congress to carry into
91245—15
4
25
execution the
powers vested in the General
Government.7' (Bank of the United States v.
McCulloch, supra; Weston and Others v.
Charleston, 2 Pet., 466; Brown v. Maryland, 12
Wheat., 419; Dubbins v. Erie County, id., 419.)
The power to create carries with it the power
to preserve. The latter is a corollary from the
former.
The principle announced in the authorities
cited is indispensable to the efficiency, the independence, and indeed to the beneficial existence, of the General Government; otherwise it
would be liable, in the discharge of its most
important trusts, to be annoyed and thwarted
by the will or caprice of every State in the
Union. Infinite confusion would follow. The
Government would be reduced to a pitiable
condition of weakness. The form might remain but the vital essence would have departed.
While this decision relates to national banks,
the reasoning will apply with even greater force
to Federal reserve banks as agents of the United
States Government. This decision has been
followed in the case of Haseltine v. Central
Bank of Springfield, 183 U. S., 132, 134, and
Schuyler National Bank v. Gadsden, 191 U. S.,
451, 456, and in other cases.
It seems to be clear, therefore, that Congress
has the right to establish banks with the power
to fix interest rates, and that these rates are
controlled by the act creating the corporation,
and not by the State law. In Haseltine v.
Central Bank of Springfield the court says:
We understand it to be conceded that as the
note in question was given to a national bank,
the definition of usury and the penalties affixed
thereto must be determined by the nationalbank act, and not by the law of the State.
Farmers and Mechanics National Bank v. Dealing, 91 U. S., 29.
Again, in the case of Schuyler National Bank
v. Gadsden the court says:
This results from the prior adjudications of
this court, holding that where usurious interest
has been paid to a national bank the remedy
afforded by section 5198 of the Revised Statutes is exclusive and is confined to an independent action to recover such usurious payments.
From these decisions it appears that the interest rates established by State laws apply to
26
FEDERAL RESERVE BULLETIN.
MAY
1, 1915.
Legislative power was exercised when Congress declared that the suspension should take
effect upon a named contingency. What the
President was required to do was simply in
execution of the act of Congress. It was not
the making of the law.
Again, in the case of Reagan v. Farmers
Loan and Trust Co., 154 U. S., 362, 393, the
court says:
Passing from the question of jurisdiction to
the act itself, there can be no doubt of the general power of a State to regulate the fares and
freights which may be charged and received by
railroad or other carriers, and that this regulation can be carried on by means of a commission. Such a commission is merely an administrative board created by the State for carrying into effect the will of the State as expressed
by its legislation. Railroad Commission Cases,
We are thus brought to the question whether 116 U. S., 307.
the Missouri statute is a lawful exercise of the
In Buttfield v. Stranahan, 192 U. S., 470,
police power of the State. We admit that
496,
the court says:
the deposit in Congress of the power to regulate foreign commerce among the States was
Congress legislated on the subject as far as
not a surrender of that which may properly was reasonably practicable, and from the necesbe denominated police power. What that sities of the case was compelled to leave to
power is it is difficult to define with sharp executive officials the duty of bringing about
precision. It is generally said to extend to the result pointed out by the statute. To
making regulations promotive of domestic deny the power of Congress to delegate such a
order, morals, health, and safety. As was duty would, in effect, amount but to declaring
said in Thorp v. The Rutland & Burlington that the plenary power vested in Congress to
Railroad Co., 27 Vt., 149, "it extends to the regulate foreign commerce could not be efficaprotection of the lives, limbs, health, comfort, ciously exerted.
and quiet of all persons, and the protection of
In a still later case, the Union Bridge Co. v.
all property within the State. * * * "
But whatever may be the nature and reach United States, 204 U. S., 364, 387, the court
of the police power of a State, it can not be says:
exercised over a subject confided exclusively
Indeed, it is not too much to say that a denial
to Congress by the Federal Constitution. It
to
Congress of the right, under the Constitution,
can not invade the domain of the National
to delegate the power to determine some fact
Government.
or the state of things upon which the enforceSecond. The question of whether or not ment of its enactment depends would be "to
Congress may delegate to the Federal Reserve stop the wheels of Government" and bring
Board or to the Federal reserve banks the right about confusion, if not paralysis, in the conto fix interest rates seems to be clearly estab- duct of the public business.
lished by a number of decisions relating to the
In view of these decisions there seems to be
right of Congress to delegate to the executive no question of the right of Congress to delegate
department the right to exercise those powers the power to fix interest rates with the view of
which are necessary to carry out the purpose accommodating commerce and business.
of the original act. For example, in the case
Third. In view of the decisions above reof Field v. Clark, 143 U. S., 649, 693, the court cited, it seems clear that the failure of Congress
says:
to prescribe in the act itself a maximum rate of
loans made by national banks only by reason
of the fact that section 5198 of the Revised
Statutes makes such rates applicable, and without the agency of this enactment of Congress
the State laws would have no application.
It might be argued that though Congress
admittedly has the power to create and provide for the management and operation of
the Federal reserve banks, nevertheless, the
State, by virtue of its so-called police power,
can restrict such banks in the rates of discount
to be charged by them. This contention,
however, is disposed of, not only by the cases
previously cited, but more specifically by the
case of Railroad Company v. Husen, 95 U. S.,
465, 470, where the court says, relative to the
exercise of the police powers of the State:
MAY
1, 1915.
FEDERAL BESEBVE BULLETIN.
interest to be charged will not make the usurylaws of the States applicable.
(a) Because, as shown in the cases of the
Farmers and Mechanics National Bank v.
Dearing, Haseltine v. Central Bank of Springfield, and Schuyler v. Gadsden, supra, the
State laws have no application in such cases
unless the act of Congress provides that such
laws shall be applied.
(b) Because Congress delegated to the Federal reserve banks, subject to review and determination of the Federal Reserve Board, the
right to fix rates of discount to be charged by
the Federal reserve banks for each class of
paper, such rates to be fixed with the view of
accommodating commerce and business.
Respectfully,
M. C. ELLIOTT, Counsel.
To Hon. CHARLES S. HAMLIN,
Governor Federal Reserve Board.
Interpretation of Section 8 of the Clayton Antitrust Act,
Approved October 15, 1914.
All three paragraphs of section 8 of the Clayton Antitrust Act, relating to interlocking directorates, become
effective from and after two years from the date of the
approval of that act—that is, October 15,1916.
This statute, being a Federal statute, can not relate to
the qualifications of directors of State banks or trust
companies, but merely provides that persons who are private bankers, or directors, officers, or employees of such
banks or trust companies, shall, under certain conditions,
be ineligible to serve as directors, officers, or employees of
banks organized under the laws of the United States.
NOVEMBER 21,
1914.
Sm: A number of letters have been received
from bankers and others asking for an interpretation of section 8 of the act approved October 15, 1914, and generally referred to as the
Clayton Act. Section 8 reads as follows:
That from and after two years from the date of the approval of this act no person shall at the same time be a
director or other officer or employee of more than one bank,
banking association, or trust company, organized or operating under the laws of the United States, either of which
has deposits, capital, surplus, and undivided profits aggregating more than $5,000,000, and no private banker or
person who is a director in any bank or trust company,
organized and operating under the laws of a State, having
27
deposits, capital, surplus, and undivided profits aggregating more than $5,000,000, shall be eligible to be a director
in any bank or banking association organized or operating
under the laws of the United States. The eligibility of a
director, officer, or employee under the foregoing provisions shall be determined by the average amount of deposits, capital, surplus, and undivided profits as shown in
the official statements of such bank, banking association,
or trust company filed as provided by law during the fiscal
year next preceding the date set for the annual election of
directors, and when a director, officer, or employee has
been elected or selected in accordance with the provisions
of this act it shall be lawful for him to continue as such
for one year thereafter under said election or employment.
No bank, banking association, or trust company organized or operating under the laws of the United States, in
any city or incorporated town or village of more than two
hundred thousand inhabitants, as shown by the last preceding decennial census of the United States, shall have
as a director or other officer or employee any private banker
or any director or other officer or employee of any other
bank, banking association, or trust company located in the
same place: Provided, That nothing in this section shall
apply to mutual savings banks not having a capital stock
represented by shares: Provided further, That a director or
other officer or employee of such bank, banking association, or trust company may be a director or other officer
or employee of not more than one other bank or trust company organized under the laws of the United States or any
State where the entire capital stock of one is owned by
stockholders in the other: And providedfurther, That nothing contained in this section shall forbid a director of class
A of a Federal reserve bank, as defined in the Federal
reserve act, from being an officer or director or both an
officer and director in one member bank.
That from and after two years from the date of the approval of this act no person at the same time shall be a
director in any two or more corporations, any one of which
has capital, surplus, and undivided profits aggregating
more than $1,000,000, engaged in whole or in part in commerce, other than banks, banking associations, trust companies, and common carriers subject to the act to regulate
commerce, approved February 4, 1887, if such corporations are or shall have been theretofore, by virtue of their
business and location of operation, competitors, so that
the elimination of competition by agreement between
them would constitute a violation of any of the provisions
of any of the antitrust laws. The eligibility of a director
under the foregoing provision shall be determined by the
aggregate amount of the capital, surplus, and undivided
profits, exclusive of dividends declared but not paid to
stockholders, at the end of the fiscal year of said corporation next preceding the election of directors, and when a
director has been elected in accordance with the provisions of this act, it shall be lawful for him to continue as
such for one year thereafter.
28
FEDERAL RESERVE BULLETIN.
When any person elected or chosen as a director or officer
or selected as an employee of any bank or other corporation
subject to the provisions of this act is eligible at the time
of his election or selection to act for such bank or other
corporation in such capacity his eligibility to act in such
capacity shall not be affected and he shall not become or
be deemed amenable to any of the provisions hereof by
reason of any change in the affairs of such bank or other
corporation from whatsoever cause, whether specifically
excepted by any of the provisions hereof or not, until the
expiration of one year from the date of his election or
employment.
It will be observed that paragraph 1 and
paragraph 3 each begins "That from and after
two years from the date of the approval of this
act," while paragraph 2 contains no such provision. The question has accordingly been
raised whether or not paragraph 2 becomes
immediately effective or after the expiration
of two years from the approval of the act. An
analysis of this section will show that paragraph 1 and paragraph 2 both deal with the
question of qualification of directors serving
on the boards of banks organized under the
laws of the United States, while paragraph 3
has reference to corporations engaged in whole
or in part in commerce and to common carriers.
Paragraph 1 and paragraph 3 each begins
with the word "That," which introduces the
grammatical object of the enacting phrase,
and as the second paragraph has no such introductory word and deals with the same general
subject matter as paragraph 1, it seems entirely
clear that paragraphs 1 and 2 constitute one
enactment and that the provisions of paragraph 2 become effective at the same time as
the provisions of paragraph 1, namely, two
years after the passage of the act. This view
is borne out by an analysis of paragraphs 1
and 2.
Paragraph 1 provides in effect that no person shall at the same time be a director, officer,
or employee of more than one bank organized
or operating under the laws of the United
States, if such person is a director, officer, or
employee of a bank having aggregate resources
of more than $5,000,000. If such person is a
director, officer, or employee of a State bank
MAY
1, 1915.
having aggregate resources of more than
$5,000,000, he shall not be eligible to serve as
a director, officer, or employee of any bank
organized or operating under the laws of the
United States.
Paragraph 2 provides in effect that no person
shall be a director in a bank organized under
the laws of the United States and located in a
city of more than 200,000 inhabitants if such
person is a director of any other bank, banking association, or trust company located in
the same place. There are certain exceptions
to this provision, namely:
(a) Mutual savings companies having no
capital stock are excluded.
(b) Class "A" directors of Federal reserve
banks may serve as directors of other banking
institutions in the same place.
(c) A director, officer, or employee of one
banking association in such city may be a director, officer, or employee of not more than
one other bank or trust company organized
under the laws of the United States where the
entire capital of one is owned by stockholders
in the other.
It will, therefore, be observed that these two
paragraphs relate to the question of what persons are eligible to serve on the board of directors of a bank organized under the laws of the
United States, or to serve in the capacity of
officer or employee of such bank.
This being a Federal statute it can not, of
course, relate to the qualifications of State
bank directors, but merely provides that persons who are directors of State banks under
certain conditions shall be ineligible to serve as
directors of banks organized under Federal
| law, and since both paragraphs relate to this
one subject, there would seem to be no justification for treating them separately, as there is
nothing to indicate that they constitute two
separate enactments.
Respectfully,
M. C. ELLIOTT, Counsel. m
To Hon.
CHARLES S. HAMLIN,
Governor.
MAY
29
FEDERAL RESERVE BULLETIN.
1, 1915.
Bight of National Banks to Have Their Deposits
Guaranteed by Surety Companies.
On March 10 the Federal Reserve Board fixed the following rates for rediscounts between Federal reserve banks:
3J per cent for maturities of 30 days and less.
4 per cent for maturities of over 30 days to 90 days, inclusive.
On April 8, 1915, Secretary McAdoo made
public an opinion of the Attorney General relating to the right of a national bank to enter
into a contract with a guaranty company under
Members of the System.
which such company insures and guarantees
each depositor in the bank the full payment of
There are now 7,605 national banks and 17
his deposit therein. This opinion, which will trust companies and State banks in the Federal
be published by the Department of Justice reserve system. This is a total of 7,622.
with the opinions of the Attorney General, is
Below is a list of State banks and trust comreferred to here because of its probable interest panies members of Federal reserve system.
to all national banks which are members of the
Continental Trust Co., Washington, D. C.
Federal reserve system.
The Savings Bank of Richmond, Richmond, Va.
The opinion holds that it is within the power
Bank of Woodruff, Woodruff, S. C.
of a national bank to enter into such a contract
Sullivan Bank & Trust Co., Montgomery, Ala.
Central Trust Co., Chicago, 111.
on the ground that it is a reasonable and proper
Bank of Wisconsin, Madison, Wis.
method of fulfilling the imperative duty which
Mercantile Trust Co., St. Louis, Mo.
the law imposes upon every bank, not only to
First State Bank, Dallas, Tex.
repay deposits but also to keep them secure.
First State Bank, Bonham, Tex.
The means by which depositors are to be proThe Citizens State Bank, Memphis, Tex.
First Guaranty State Bank, Pittsburg, Tex.
tected and secured are not expressly limited by
Farmers & Merchants State Bank, Edgewood, Tex.
statute. A large discretion is left to the bank,
Bank of Eufaula, Eufaula, Ala.
and such a contract as this is a reasonable and
First State Bank, Savoy, Tex.
suitable exercise of that discretion and fully
First State Bank, Hamlin, Tex.
within the law.
First State Bank, Wolfe City, Tex.
First State Bank, Bremond, Tex.
DISCOUNT RATES.
Discount rate of each Federal reserve bank in effect on April
26, 1915.
Federal reserve
bank.
Date of
last
change
of rate.
MaturiMaturities of
ties of 30 over 30
days and days to
60 days,
less.
inclusive.
Maturities of
over 60
Agricultural and
live-stock
days to
90 days, paper over
inclusive. 90 days.
Emergency Currency Outstanding.
The following is a statement of the emergency currency outstanding on April 20, 1915.
The States which have no currency outstanding either took out none or have retired it:
Alabama
Arizona
Boston
Feb. 3
4
4
*i
Arkansas
New York
4
4
4
Feb. 18
Philadelphia.... Jan. 28
4
4
California
Cleveland
4
4
Feb. 6
Richmond...... Feb. 19
Colorado
4^
41
Atlanta
5
Mar. 18
4i
Connecticut
Chicago
4
4
Jan. 23
St. Louis
4
4
Apr. 22
Delaware
Minneapolis
4
4^
45
Mar. 2
Kansas City
Florida
4
4
Jan. 28
Dallas
4
4
4£
Feb. 4
Georgia
San Francisco.. Jan. 22
4
4
Idaho
Illinois
Authorized rate for acceptances 2 to 4 per cent. Ac- Indiana
cepted by Boston and New York on February 18; by Phil- Iowa
ad elphia, Chicago, and Minneapolis on February 19; by Kansas
Cleveland on February 23; by San Francisco on March 4; Kentucky
and by St. Louis.
Louisiana
1
$719,750.00
None.
None.
733,965.00
None.
139,000.00
None.
334, 900. 00
13,250.00
None.
None.
24,000.00
490,650.00
None.
240,400.00
482,500.00
30
FEDERAL RESERVE BULLETIN.
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
1, 1915.
None.
$64,000.00
None.
None.
None.
89, 000. 00
30,000. 00
the Federal reserve district of Chicago. A
hearing on this appeal will be held on May 20.
None.
55,000. 00
90, 950.00
43,000.00
644, 000. 00
None.
None.
274, 010.00
175,000.00
476,050.00
None.
553,667.80
None.
221, 000.00
2, 760, 600. 60
None.
None.
131,100.00
None.
None.
45,000.00
None.
the Board. The total annual pay roll, including members of the Board, on this basis, would
be $157,100. This does not include the division of issue, operated as a part of the office
of the Comptroller of the Currency. The
salaries for April in this division were $1,293.36.
The cost of the main staff is divided as follows:
Staff of the Federal Eeserve Board.
There were employed by the Federal ReNone.
None. serve Board during the month of April a force
None. of 51 people in addition to the 7 members of
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
8,830,793.40
Appeals.
No decision has been reached by the Federal
Reserve Board in the matter of appeals from
the action of the reserve bank organization
committee in determining the various Federal
reserve districts. Hearings in all but one of
these appeals have been held by the Board
and the matters are now under consideration.
The Federal Reserve Board has made these
appeals a special order for consideration during
the week of May 3.
An extension of time to May 1 has been
granted by the Board for the filing of the brief
of the Federal Reserve Bank of Minneapolis
in reply to the petition of member banks in
eastern Wisconsin, asking that the territory
in which they are located be transferred from
the Federal reserve district of Minneapolis to
MAY
The Board and its personal staffSecretary's office
Office of counsel
Divisions:
Mails and
files
Correspondence
Statistical
Audit and examination
One telephone operator
Seven messengers
Three charwomen
$88,000
16,100
13, 900
3, 720
7, 700
7, 000
15,100
600
4, 260
720
The average salary to employees, excluding
the 7 members of the Board, based on the March
pay roll, is $1,766.66 per annum. The average
salary of all employees, exclusive of the Board
and its personal staff, based upon the March
pay roll, is $1,727.50 per annum. The average
salary of strictly clerical employees, based on
the March pay roll, is $1,415.75.
Clerical positions under the Federal Reserve
Board are filled by certification of five names
from the eligible list established through an
examination of applicants, held for the Federal
Reserve Board by the Civil Service Commission in December, 1914. This eligible list includes stenographers and typewriters, bookkeepers, clerks, and messengers. No examination is contemplated for several months, as
the list is more than sufficient for all of the additional employees of this character which will
be required by the Board for the present. The
entrance salaries for these positions are $900
per annum, except the position of messenger,
which is $600 per annum.
MAT
31
FEDERAL RESERVE BULLETIN.
1, 1915.
APPLICATIONS
FOR TRUSTEE
APPROVED.
DISTRICT NO. 1—Continued.
POWERS
DISTRICT N O . 1.
NEW HAMPSHIRE.
City.
Powers.
Bank.
CONNECTICUT.
City.
Powers.
Bank.
Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
New Haven.. Second National.
Do.
National Bank of
Norwalk
Wallingford.. First National. Trustee, executor, ad-
Middletown.. Midd l e t o w n
National.
Waterbury... Manufacturers'
National.
Trustee, executor, administrator, registrar of
stocks and bonds.
Trustee, executor, administrator, registrar
of stocks and bonds.
Do.
First National..
Merchants Na- Trustee, executor, administrator.
tional.
Strafford Na- Trustee, executor, administrator, registrar
tional.
of stocks and bonds.
Do.
Keene National
Claremont... Claremont National.
w.
Concord
Dover
Do
Keene
RHODE ISLAND.
Newport
Aquidneck National.
MAINE.
Portland
DISTRICT No. 2.
First National.. Trustee, executor, registrar of stocks and
bonds.
NEW YORK.
National Commercial.
National Bank
Auburn
of.
National ExClayton
change.
NaCooperstown.. Second
tional.
Edwards NaEdwards
tional.
Far Rockaway National Bank
Albany
MASSACHUSETTS.
Boston
Do
Do
Do
Do
Great Barrington.
Haverhill
Do
Holyoke
Do
Norwood
Salem
Springfield...
Turner Falls.
Watertown...
Webster.....
Worcester
Do
Second National Trustee, administrator,
executor, registrar of
stocks and bonds.
Peoples National
Do.
National ShawDo.
mut.
First National..
Do.
Merchants NaDo.
tional.
National MaDo.
haiwe.
Essex National. Registrar of stocks.
First National . Trustee, executor, administrator, registrar
of stocks and bonds.
Do.
City National..
Home National
Do.
Norwood NaDo.
tional.
Merchants NaDo.
tional.
Chicopee NaDo.
tional.
Do.
Croker National
Bank.
Union Market
Do.
National.
First National..
Do.
Merchants NaDo.
tional.
Worcester NaDo.
tional.
Trustee, executor, administrator, registrar
of stocks and bonds.
Geneva
First National..
Geneva NaDo
tional.
Farmers NaGranville
tional.
Washington Co.
Do
National.
Hempstead... First National..
Herkimer NaHerkimer
tional.
Lockport
National Exchange.
Mineola
First National..
Morristown... Frontier National.
New York
Bronx National.
Gotham NaDo
tional.
Liberty
NaDo
tional.
NaLincoln
Do
tional.
National Bank
Do
of Commerce.
National City...
Do
Seaboard National.
Do
Registrar of stocks and
bonds.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
Do.
32
FEDERAL RESERVE BULLETIN.
City.
Ovid
Plattsburg
Do
MAY
DISTRICT NO. 2—Continued.
DISTRICT NO. 5—Continued.
NEW YORK—Continued.
VIRGINIA—Continued.
Powers.
Bank.
First National.. Registrar of stocks and
Donus.
Plattsburg National .
City National...
First National..
Do.
Do.
Do.
Richfield
Springs.
Riverhead... Suffolk County National.
Rochester
L i n c o l n National.
Richmond
Stapleton
City.
1, 1915.
Powers.
Bank.
South Boston. Planters & Mer- Trustee, executor, adchants N a ministrator, registrar of
tional,
stocks and bonds.
Staunton
Do.
National Val-
ley.
Winchester... Shenandoah
Do.
Valley|N a tional.
Do.
Do.
DISTRICT OF COLUMBIA.
Do.
Borough National.
First
National..
Wellsville . . .
National Bank
Westfield
of.
Do.
Do.
Washington... National Metropolitan.
Do
National Bank
of.
Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
DISTRICT NO. 4.
DISTRICT No. 6.
OHIO.
ALABAMA.
Bellaire
Youngstown
First National. Trustee and registrar of
stocks and bonds.
Registrar of stocks and
do
bonds.
Birmingham..
Florence
Montgomery .
DISTRICT No. 5.
Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
Trustee, r e g i s t r a r of
stocks and bonds.
SOUTH CAROLINA.
MISSISSIPPI.
Greenville . . . P e o p l e s National.
Trustee, executor, a d ministrator, registrar of
stocks and bonds.
Biloxi
VIRGINIA.
Alexandria . . First National.. Trustee, executor, administrator, registrar of
stocks and bonds.
Charlottes- Peoples N a - Trustee, executor, adville.
tional.
ministrator.
Petersburg... Virginia N a Do.
tional.
Danville.... National Bank Trustee, executor, adof.
ministrator, registrar of
stocks and bonds.
Norfolk
National Bank
Do.
of Commerce.
Richmond... American N a Do.
tional.
Do
Merchants NaDo.
tional.
Roanoke
National E xDo.
change.
Trustee, executor, administrator, registrar
of stocks and bonds.
TENNESSEE.
Knoxville.
City National. . Trustee for bonds issued
by Fidelity Trust Co.
DISTRICT NO. 7.
ILLINOIS.
Joliet
Belvidere
Rockf ord
Free port
Macomb
Marseilles
First National.. Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
Second National
Third National.
Do.
First National..
Do.
Do.
Union National.
Do.
First National..
MAT
City.
DISTRICT NO. 7—Continued.
DISTRICT NO. 8—Continued.
INDIANA.
KENTUCKY.
Powers.
Bank.
City.
Bank.
Trustee, executor, ad- Elizabethtown.
ministrator, registrar of
stocks and bonds.
Hopkinsville.
Do.
Marion
Marion National
Lebanon
Do.
Richmond... Second National
Do.
Brazil
R i d d e l l National.
Do.
Richmond... First National..
Trustee, executor, adRussiaville . .
do
ministrator.
Sedalia.
Rushville
33
FEDEEAL RESERVE BULLETIN.
1, 1915.
Rush County
National.
First-Hardin
National.
Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
First National.
Do.
Marion National
MISSOURI.
Citizens National.
IOWA.
Trustee, executor, administrator, registrar of
stocks and bonds.
First National.. Trustee, executor, administrator.
Cedar Capids. Merchants National.
Sibley
I
MICHIGAN.
First National.. Trustee, executor, administrator, registrar of
stocks and bonds.
Battle Creek. Old National...
Do.
Grand Rapids
do
Trustee, registrar of
stocks and bonds.
Saginaw
Second National Trustee, executor, administrator, registrar of
stocks and bonds.
Bay City
WISCONSIN.
Trustee, executor, administrator,registrar of
stocks and bonds.
First National .
Do.
do
Do.
National ExDo.
change.
Beaver Dam. Old National..
Janesville . .
Monroe
Waukesha..
DISTRICT N O . 8.
ILLINOIS.
Powers.
Trustee, executqi, administrator, registrar of
stocks and bonds.
DISTRICT NO. 10.
COLORADO.
Denver
United States
National.
Do
Trustee, executor, administrator, registrar of
stocks and bonds.
Do.
Denver National.
First National. Do.
Greeley
DISTRICT No. 11.
TEXAS.
Colorado
Dallas
Fort Worth. .
Greenville...
McKinney...
San Angelo...
Stanton
City National.. Trustee, executor, registrar of stocks and
bonds.
National Bank Do.
of Commerce.
S t o c k y a r d s Do.
National.
Greenville Na- Do.
tional E x change.
First National. Do.
First National.. Do.
First National.. Trustee, executor.
Granting Trustee Powers.
The following letter has been sent by the
First National.. Trustee, executor, adBoard
to Federal reserve agents:
ministrator, registrar of
stocks and bonds.
In order that the powers of national and
Jacksonville.. Ayers National.
Do.
State banks and trust companies as members
Pittsfield
First National..
Do.
I
of the Federal reserve system may be equalized
INDIANA.
as far as possible, the Board desires to grant
to national banks applying therefor, when not
Evansville... City National.. Trustee, executor, ad- in contravention of State or local laws, perministrator, registrar
mission to act as trustee, executor, adminisof stocks and bonds.
Old State NaDo.
Do
trator, and registrar of stocks and bonds. In
tional.
acting on applications, however, for such per.
Anna
34
FEDERAL RESERVE BULLETIN.
mits, it is necessary that the Board should
take into consideration—
First. Whether or not the exercise of these
powers, or any of these powers, will be in contravention of State or local law.
Second. Whether the applying bank is in
proper condition and is equipped to handle
this class of business, and whether a permit
will, under the circumstances, prove of benefit
to such bank.
In order to pass upon the question of whether
or not action under the permit will contravene
State or local laws, the Board has requested
counsel for the various Federal reserve banks
to analyze the laws of the States in the several
districts and file his opinion with the Board.
In view of the lack of uniformity in the laws of
the several States it is difficult, if not impossible,
to prescribe any fixed rules by which this question may be determined. Inasmuch as national banks are incorporated under Federal
law, the statutes of the various States necessarily
have a very limited application, but in this instance Congress has expressly provided that
State laws shall not be contravened, just as it
did in the case of usury laws of the several
States.
There are probably no States whose statutes
in terms prohibit national banks from exercising these powers, and few which expressly authorize their exercise. The question under
consideration, therefore, can not be determined
by ascertaining merely whether a State law
specifically prohibits or specifically authorizes
national banks to act as provided by section
11 (k). Nor is it within the province of the
Federal Keserve Board to pass upon the constitutionality of this section. In general, the
Board will grant permits in accordance with
this section where the exercise of the powers
granted does not contravene the general policy
of the State laws as indicated by the statutes
dealing with banking institutions and other
corporations, and will refuse permits in those
cases where such exercise would be clearly in
contravention of the general policy of such
State laws.
MAT
1, 1915.
In determining the second question, that is,
whether or not in a given case the granting of
the permit will prove to the best interest of the
applying bank, the Board must necessarily take
into consideration the particular circumstances
in each instance. Banks having small capital
and surplus should, therefore, be requested to
indicate the nature and extent of the business
it contemplates undertaking. Its equipment
and the efficiency of its organization must of
necessity be taken into consideration in determining the general character of the estates to
be administered.
While the Board does not desire to promulgate at this time any fixed rules as to the proportion that the capital and surplus of the
applying bank should bear to the size of the
estates to be handled, it is at once manifest
that small institutions should not undertake
to administer estates which will require a
larger and more efficient trust department than
such banks will be justified in establishing.
Before making any recommendation, therefore,
to the Federal Reserve Board that application
should be approved or disapproved, Federal
reserve banks should give consideration to the
circumstances, as indicated above.
It is the desire of the Board to cooperate with
the member banks through the Federal reserve
banks in a gradual and conservative development of this class of business. To this end,
applications received by the Federal reserve
bank should be handled in the following
manner:
First. They should be submitted to counsel
for the Federal reserve bank, who will certify
thereon whether or not, in his opinion, there is
reasonable ground for believing that the exercise of the powers applied for will not be in
contravention of the laws of the State in which
the applying bank is located. The application
should then be referred to the board of directors of the Federal reserve bank.
Second. The board of directors, after due
consideration should forward the application to
the Federal Reserve Board with its recommendation. If, for any reason, the board of
MAY
1, 1915.
directors is of the opinion that the permission
applied for should not be granted, the application should be accompanied by its reasons in
writing.
Third. The Federal Reserve Board, under the
terms of the act, can authorize national banks
to exercise only those powers which are not in
contravention of State or local laws, and if,
after a permit is granted, the right to act under
it should be questioned by the State authorities,
member banks should promptly notify the
Federal reserve bank and the Federal Reserve
Board, so that arrangements may be made for
an adjustment or for a proper adjudication by a
court of competent jurisdiction.
APRIL 5,
35
FEDERAL RESERVE BULLETIN.
to the conference. The delegates already appointed include ministers of finance and LatinAmerican authorities on finance and trade.
Congress has given the Secretary of the
Treasury authority to invite, in his discretion,
representative American bankers to participate
in the conference. Secretary McAdoo has announced that this discretion will be exercised
so as to secure the attendance of as large a
number as practicable of representative financiers, that a thorough and comprehensive discussion may be had of existing financial conditions throughout the Western Hemisphere.
1915.
Advisory Council.
Pan American Conference.
Congress at its last session granted authority
to the President to invite the Governments of
Central and South America to send their ministers of finance and leading bankers to " a conference with the Secretary of the Treasury in
the city of Washington at such date as shall be
determined by the President, with a view of
establishing closer and more satisfactory financial relations between their countries and the
United States of America, and authority is
given to the Secretary of the Treasury to invite,
in his discretion, representative bankers of the
United States to participate in the said conference."
Washington was deemed the most appropriate and convenient place for the conference,
and it will be opened on May 24. The representatives of the foreign Governments will,
while here, be the guests of the Nation. An
appropriation of $50,000 has been made by
Congress for their entertainment.
Eighteen nations of Central and South America have accepted this Government's invitation
The Advisory Council of the Federal Reserve
System held its third meeting in Washington on
Wednesday, April 21. This was preceded by
a meeting of the executive committee of the
council held on the previous day. Both the
executive committee and the advisory council
itself held conferences with the Federal Reserve
Board at which there was an interchange of
views on general banking subjects. Among
the matters discussed were, whether Federal
reserve banks should be limited in their purchases of bankers' acceptances made by nonmember banks without the indorsement of a
member bank; whether acceptances based on
the movement of goods between two foreign
countries should be eligible for discount;
whether the Federal reserve banks should
undertake other foreign exchange operations
or open market transactions; the conditions
under which State banks shall be admitted to
the Federal reserve system; the question of
penalizing member banks which have allowed
their reserve deposits to fall below the required
figure.
36
MAT 1, 1915.
FEDERAL RESERVE BULLETIN.
CIRCULARS AND REGULATIONS.
On January 2 the Federal Reserve Board
issued the first of its circulars and regulations,
series of 1915. Some of the circulars are reissues of those circulated in 1914. They are as
follows:
CIRCULAR NO. 1, SERIES OF 1915.
WASHINGTON, January 2, 1915.
ISSUANCE OF CIRCULARS AND REGULATIONS.
For the convenience of all concerned the Federal Reserve Board has determined to revise certain of its circulars
and regulations, and to reissue such of those as it desires to
retain in force; the new series to be known as the "Series
of 1915.'' It proposes hereafter to issue circulars and regulations each year in a new series, and there is appended
hereto a list of the previously issued circulars and regulations and the disposition made of them.
In this way circulars and regulations of only passing
interest will be dropped and only those of permanent
importance reissued.
CIRCULARS.
No.
No. 6...
No. 6 a.
No. 7...
No. 8
No. 9 a...
No. 10....
No. 11....
No. 12....
No. 13....
Subject.
Gold fund circular of Sept.
21, 1914. Circulars and
regulations prior to this
issued by the organization
committee.
Suggested by-laws
do. (as amended)
Proposed system of accounting for Federal reserve
banks.
Outline of plan of organization for Federal reserve
banks.
Procedure for meeting of
reserve bank officers and
directors of Oct. 20-21.
In regard to the deposit of
reserves due Nov. 2,1914.
Reports of committees of
officers and directors of
Federal reserve banks at
Washington meeting of
Oct. 20-21, 1914.
Payment of first installment of stock subscriptions of member banks to
the Federal reserve banks.
Regarding commercial paper eligible for rediscount
by Federal reserve banks.
Date.
1914.
Oct. 5
Oct. 21
Oct. 14
Oct. 17
Disposition.
No longer applicable.
Do.
Do.
Effective so far as
applicable, but
to be reissued.
Do.
No longer applicable.
Oct. 28
Do.
No date.
Do.
Procedure in appeals from
decision of reserve bank
organization committee.
Nos. 2, 3, Dealing with eligibility of
4,5, and
commercial paper, accom6.
panying Circular No. 13.
No. 7
Definitions of " d e m a n d "
and " t i m e " deposits and
of "savings accounts."
No. 8
Covering bonds of Federal
reserve agents.
No. 9
Loans on farm lands
WASHINGTON, January 12, 1915.
ACCEPTANCE OF STATEMENTS IN LIEU OP CERTIFICATES AS
TO CHARACTER OF COMMERCIAL PAPER.
The necessity of giving more time before regulation No.
3, of November 10, 1914, shall become effective is recognized by the Federal Reserve Board. The accompanying
regulation is therefore issued as appended.
Regulation No. 4, of 1914, which was to go into effect
January 15, is hereby revoked and canceled and will be
replaced by a new regulation soon to be issued.
REGULATION" A, SERIES OF 1915.
(Superseding regulation No. 3, of 1914.)
WASHINGTON, January 12, 1915.
ACCEPTANCE OF STATEMENTS IN LIEU OF CERTIFICATES AS
TO CHARACTER OF COMMERCIAL PAPER.
Whenever a member bank shall offer for rediscount any
note, draft, or bill of exchange bearing the indorsement
of such member bank, with waiver of demand notice and
protest, the directors or executive committee of the
Federal reserve bank may, until July 15, 1915, accept as
evidence that the proceeds of such note, draft, or bill of
exchange were or are to be used for agricultural, industrial,
or commercial purposes (and such notes, drafts, or bills of
exchange in other respects comply with the regulations of
the board) a written statement from the officer of the
applying bank that of his own knowledge and belief the
original loan was made for one of the purposes mentioned,
and that the provisions of the act and regulations issued
by the board have been complied with.
CIRCULAR NO. 3, SERIES OF 1915.
Nov. 6
Do.
(Superseding Circular No. 13 of 1914.)
WASHINGTON, January 25, 1915.
Nov. 10
Will be reissued in
somewhat modified form.
REGULATIONS.
No. 1
CIRCULAR NO. 2, SERIES OF 1915.
Aug. 28
Effective and will
be reissued.
Nov. 10
Effective and will
be reissued in
modified form.
Will be reissued in
somewhat roodilied form.
Effective and will
be reissued.
Do.
Nov. 11
Nov. 23
Dec. 31
COMMERCIAL PAPER.
When Circular No. 13, bearing date of November 10,
1914, and the accompanying regulations were issued it was
hoped that a period of two months would suffice to enable
member banks to familiarize their customers with the requirements of Regulation No. 4 of 1914. It appears, however, that in many districts the needed readjustments of
banking and business practice can not be effected in so
short a period. An extension of time was therefore asked
by both member banks and their customers, for the purpose
of adjusting their methods to the new requirements, and
was granted by the Board. (See Regulation A, accompanying CircularJSfo. 2,[series of 1915.)
MAT 1, 1915.
FEDEKAL BESERVE BULLETIN.
In order to facilitate operations, particularly during the
initial period, the requirements as to borrowers' statements have been modified. But while Circular No. 13, of
November 10, 1914, is now superseded, the Board has not
modified its views upon the general principles therein
expressed as being of fundamental importance in the best
development of the new system.
The Board has formulated in Regulation B, hereto annexed (Paragraph III), a new method for certifying the
eligibility of bills for rediscount. While banks will not
be required to comply with the provisions of Paragraph
III until after July 15, the new method prescribed is made
a part of this regulation in order that advance notice may
be given to all banks, so that those which are equipped to
do so may begin to operate under its provisions as soon as
possible. The Board suggests* furthermore, that Federal
reserve banks insist that the accompanying regulation be
applied as promptly as possible to all so-called " purchased
paper"—that is, paper bought through brokers or others
with whom the purchasing bank has no direct business
relations. Where such direct connections do not exist,
the requirement that statements, both as to business conditions and methods of borrowing, be furnished appears to
be a matter of prudence and should not be postponed. In
such cases as these—where borrowers' statements in the
required form are not available until after the close of the
business, year—statements for the previous year may be
accepted, pending receipt of new statements in required
form, even though such statements may not contain all the
desired data.
While it has been thought best not to insist upon a written statement in the case of limited borrowings by depositors, when officers of member banks from their own
personal knowledge certify to the eligibility of the paper
for discount, it is urged, nevertheless, that member banks
do their utmost to accustom their borrowers to furnishing
such statements.
REGULATION B, SERIES OF 1915.
(Superseding Regulations 2 and 4 of 1914.)
WASHINGTON", January 25, 1915.
COMMERCIAL PAPER.
The word "bill," when used in this regulation, shall be
construed to include notes, drafts, or bills of exchange, and
the word "goods" shall be construed to include goods,
wares, merchandise, or staple agricultural products,
including live stock.
I. Statutory requirements.
The Federal reserve act provides that a bill, other than
an acceptance (see Circular No. 5 and Begulation D, to be
published shortly), to be eligible for rediscount by a member bank with a Federal reserve bank, must comply with
the following statutory requirements:
(a) It must be indorsed by a member bank, accompanied by a waiver of demand, notice, and protest.
37
(b) It must have a maturity at the time of discount of
not more than 90 days, except as provided by Begulation
0, accompanying Circular No. 4, series of 1915.
(c) It must have arisen out of actual commercial transactions; that is, be a bill which has been issued or drawn
for agricultural, industrial, or commercial purposes, or
the proceeds of which have been or are to be used for such
purposes.
(d) It must not have been issued for carrying or trading in
stocks, bonds, or other investment securities except bonds
and notes of the Government of the United States; but
the pledge of goods as security for a bill is not prohibited.
I I . Character of paper eligible.
The Federal Reserve Board, exercising its statutory
right to define the character of a bill eligible for rediscount
at a Federal reserve bank, has determined:
(a) That it must be a bill the proceeds of which have
been used or are to be used in producing, purchasing,
carrying, or marketing goods in one or more of the steps of
the process of production, manufactuie, and distribution;
(6) That no bill is' 'eligible'' the proceeds of which have
been used or are to be used:
(1) For permanent or fixed investments of any kind,
such as land, buildings, machinery (including therein
additions, alterations, or other permanent improvements,
except such as are properly to be regarded as costs of
operation). It may be considered as sufficient evidence
of compliance with this requirement if the borrower shows,
by statement or otherwise, that he has a reasonable excess
of quick assets over his current liabilities on open accounts, short-term notes, or otherwise;
(2) For investments of a merely speculative character,
whether made in goods or otherwise.
III. Method of certifying eligibility.
Any member bank applying for rediscount of a bill
after July 15, 1915, must certify in its letter of application, over the signature of a duly authorized officer, that
to the best of its knowledge and belief the bill was issued
for one of the purposes mentioned in the above paragraphs
and conforms to section 13 of the Federal reserve act and
to this regulation.
It is recommended that every member bank maintain
a file, which shall contain original signed statements of
the financial condition of borrowers, or true copies thereof,
certified by a member bank or by a notary public, designating where the original statement is on file. Statements should contain all the information essential to a
clear and correct knowledge of the borrower's credit and
of his method of borrowing. A schedule specifying certain information, which it is desirable that such statements should include, is hereto appended.
Member banks shall certify in their letters of application
for rediscount whether the paper offered for rediscount is
depositor's or purchased paper or paper rediscounted for
other member banks and whether statements are on file.
38
FEDERAL RESERVE BULLETIN.
When it does not appear that such statements are on file,
except as hereinafter provided under (1), (2), and (3),
below, the Federal reserve bank shall satisfy itself as to
the eligibility of the paper offered for rediscount, and
member banks will be expected to use such statement
forms, identifying stamps, etc., as may be prescribed by
the respective Federal reserve banks.
Any member bank rediscounting with a Federal reserve
bank paper acquired from another member bank, with
the indorsement of such member bank, may accept such
member's certification regarding the character of the paper
and the existence of the necessary statements.
Statements of the borrower's financial condition may be
waived where bills offered for rediscount have been discounted by member banks for any of their depositors in
the following cases:
(1) If the bill bears the signatures of the purchaser and
the seller of the goods and presents prima facie evidence
that it was issued for goods actually purchased or sold; or
(2) If the aggregate amount of obligations of such depositor actually rediscounted and offered for rediscount
does not exceed $5,000, but in no event a sum in excess
of 10 per centum of the paid-in capital of the member
bank; or
(3) If the bill be specifically secured by'approved warehouse receipts covering readily marketable staples:
Provided, however, That the bank shall certify to these
conditions on the application blank in a manner to be
designated by the respective Federal reserve banks.
APPENDIX,
INFORMATION DESIRED IN CREDIT FILES OF MEMBER BANKS.
The credit files of member banks, referred to in the
above regulation, should include information concerning
the following matters:
(a) The nature of the business or occupation of the
borrower;
(6) If an individual, information as to his indebtedness
and his financial responsibility;
(c) If a firm or corporation, a balance sheet showing
quick assets, slow assets, permanent or fixed assets, current liabilities and accounts, short-term loans, long-term
loans, capital and surplus;
(d) All contingent liabilities, such as indorsements,
guaranties, etc.;
(e) Particulars respecting any mortgage debt and
whether there is any lien on current assets;
(/) Such other information as may be necessary to determine whether the borrower is entitled to credit in the
torm of short-term loans.
CIRCULAR NO. 4, SERIES OF 1915.
WASHINGTON, January 15, 1915.
six MONTHS' AGRICULTURAL PAPER.
The appended regulation is issued to supersede Regulation No. 5, of November 10,1914, which is hereby revoked
and canceled.
MAY 1, 1915.
REGULATION C, SERIES OF 1915.
(Superseding Regulation No. 5, of Nov. 10,1914.)
WASHINGTON, January 15, 1915.
six MONTHS' AGRICULTURAL PAPER.
The word "bill" when used in this regulation shall be
construed to include notes, drafts, or bills of exchange.
Each Federal reserve bank may receive for discount bills
which have a maturity of more than three but less.than six
months, in an aggregate amount equal to a percentage of its
capital stock to be fixed from time to time for each Federal
reserve bank by the Federal Reserve Board.
Provided, however, That such bills are drawn or issued
for agricultural purposes, or are based on live stock; that is,
that their proceeds have been used or are to be used for
agricultural purposes, including the breeding, raising,
fattening, or marketing of live stock; and
Provided further, That such bills comply in all other respects with each and every provision of Regulation B
series of 1915.
CIRCULAR NO. 5, SERIES OF 1915.
(Superseded by Circular No. 11. See p . 44.)
CIRCULAR NO. 6, SERIES OF 1915.
(Superseding Regulation No. 7 of 1914.
WASHINGTON, January 15, 1915.
TIME DEPOSITS AND SAVINGS ACCOUNTS.
The Federal Reserve Board deems it advisable to
amplify its regulation relating to time deposits and
savings accounts issued November 11, 1914, and to define
under the following headings those deposits against which
the Federal reserve act requires a reserve of only 5 per
cent to be maintained.
1. Time deposits, open accounts.
2. Savings accounts.
3. Certificates of deposit.
It was clearly not the intention of the act to permit a
reduction of reserve to 5 per cent upon deposits which may
ordinarily be checked upon, but in respect to which a
bank, by a blanket provision in its by-laws, may at any
time require a withdrawal notice of not less than 30 days
to be given. The reduction of the reserve to be carried
against time deposits is intended to apply only to deposits
under written agreement not to be withdrawn within 30
days from the date as of which the reserve calculation is
made. Therefore, on the date of calculating reserve,
under the definitions contained in the accompanying
regulation, no deposit may be deemed a time deposit*
whether on open account or on certificate—
(a)- If it is payable within 30 days because of the approaching end of the specified period for which it was
deposited or because of receipt of notice of the date on
which withdrawal will be made;
(h) If it may be withdrawn by check within 30 days,
although the bank may have the right, by written contract or otherwise, to require a withdrawal notice of not
less than 30 days.
MAY 1, 1915.
39
FEDERAL EESERVE BULLETIN.
Nor may any certificate of deposit be considered a time
certificate if any part of the amount represented by it is
subject to check or may be withdrawn without the presentation of the certificate for proper indorsement,
While savings accounts may at any time, by the action
of the bank, be converted into time deposits, they are,
nevertheless, ordinarily withdrawable on demand. In the
absence of any statutory limitation upon the sum which
may be received by a bank from any one individual as a
savings account the Board has no authority, for the purpose of calculating reserves, to impose any such limitation,
but it feels strongly that in the interest of both the member
banks and the Federal reserve system the broad provisions of the act in respect to time deposits, savings accounts, and certificates of deposit should not be made the
means of any large general reduction of reserves by a
transfer to those forms of deposits which are in substance
demand deposits; and it is the purpose of the Board to
countenance or permit a reduction of reserves to 5 per
cent only on deposits which are, in fact as- well as in form>
entitled to such reduction within the spirit of the act.
Banks carrying savings accounts must record them in
separate ledgers which do not contain ordinary checking
accounts or other items. Open time accounts and time
certificates of deposit should also be carried in separate
ledgers, but if carried in the same ledger with current
checking accounts they must be grouped together so as to
be readily distinguished from the latter.
The Board desires to make it clear that the act requires
the full reserve, at the rate prescribed for demand deposits,
to be carried against all savings accounts and all time deposits whether on open account or certificate, which are
subject to check or which the bank has been notified are
to be withdrawn within 30 days.
except on a given date or on written notice given by the
depositor a certain specified number of days in advance,
in no case less than 30 days.
SAVINGS ACCOUNTS.
The term "savings accounts" shall be held to include
those accounts of the bank in respect to which, by its
printed regulations, accepted by the depositor at the time the
account is opened—•
(a) The pass book, certificate, or other similar form of
receipt must be presented to the bank whenever a deposit
or withdrawal is made, and
(b) The depositor may at any time be required by the
bank to give notice of an intended withdrawal not less
than 30 days before a withdrawal is made.
TIME CERTIFICATES OF DEPOSIT.
A "time certificate of deposit" is defined as an instrument evidencing the deposit with a bank, either with or
without interest, of a certain sum specified on the face
of the certificate, payable in whole or in part to the depositor or on his order—
(a) On a certain date, specified on the certificate, not
less than 30 days after the date of the deposit, or
(b) After the lapse of a certain specified time subsequent to the date of the certificate, in no case less than
30 days, or
(c) Upon written notice given a certain specified number of days, not less than 30 days before the date of repayment, and
(d) In all cases only upon presentation of the certificate
at each withdrawal for proper indorsement or surrender.
CIRCULAR NO. 7, SERIES OF 1915.
WASHINGTON, January 26, 1915.
REGULATION E, SERIES OF 1915.
(Superseding Regulation No. 7 of 1914.)
WASHINGTON, January 15,1915.
PURCHASE OP WARRANTS.
In drawing Regulation F (attached), the Federal Reserve Board has been guided by the consideration that it
is the primary purpose of the Federal reserve act to provide
Section 19 of the Federal reserve act provides, in part, a banking organization which shall be responsive to the
as follows:
ebb and flow of commerce and trade.
11
Demand deposits, within the meaning of this act, shall
Inasmuch as the funds of Federal reserve banks should
comprise all deposits payable within 30 days, and time be employed primarily in discount operations, purchases
deposits shall comprise all deposits payable after 30 days of warrants by such banks should be ordinarily limited to
and all savings accounts and certificates of deposit which a relatively small proportion of their aggregate resources.
are subject to not less than 30 days' notice before pay- This practice should be departed from only when general
ment."
banking policy renders it advisable. In any and all cases
TIME DEPOSITS, OPEN ACCOUNTS.
the interest of the Federal reserve banks rather than that
The term "time deposits, open accounts" shall be held of the municipalities desiring to sell their obligations
to include all accounts not evidenced by certificates of should be the primary consideration in making such indeposit or savings pass books, in respect to which a written vestments.
contract is entered into with the depositor at the time the
In order to keep the assets of the Federal reserve banks
deposit is made that neither the whole nor any part of in a liquid condition, investments in warrants, when made,
such deposit may be withdrawn by check or otherwise should be made by preference in such as can be readily
TIME DEPOSITS AND SAVINGS ACCOUNTS.
40
FEDERAL RESERVE BULLETIN.
marketed, so that Federal reserve banks may be able to
realize on them whenever it becomes desirable to enlarge
their discounts of commercial paper.
In restricting Federal reserve banks to the purchase of
such warrants as carry the definite assurance that the taxes
and revenues will be actually in hand before maturity, the
Board endeavors to follow the policy of the act in restricting Federal reserve banks as far as possible to investments
which are of short maturity and self-liquidating.
REGULATION F, SERIES OF 1915.
WASHINGTON, January 26, 1915.
PURCHASE OF WARRANTS.
STATUTORY REQUIREMENTS.
Section 14 of the Federal reserve act reads in part as
follows:
Every Federal reserve bank shall have power—
(b) To buy and sell, at home or abroad, bonds and notes
of the United States, and bills, notes, revenue bonds, and
warrants with a maturity from date of purchase of not
exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured
revenues by any State, county, district, political subdivision, or municipality in the continental United States,
including irrigation, drainage, and reclamation districts,
such purchases to be made in accordance with rules and
regulations prescribed by the Federal Reserve Board.
For brevity's sake, the term "warrant" when used in
this regulation shall be construed to mean "bills, notes,
revenue bonds, and warrants with a maturity from date of
purchase of not exceeding six months," and the term
"municipality" shall be construed to mean "State,
county, district, political subdivision, or municipality in
the continental United States, including irrigation, drainage, and reclamation districts."
REGULATION.
The Federal Reserve Board has determined:
I. A Federal reserve bank may purchase such warrants
as are issued by a municipality—
(a) In anticipation of the collection of taxes or in anticipation of the receipt of assured revenues. The taxes or
assured revenues against which such warrants have been
issued must be due and payable on or before the date of
maturity of such warrants. For the purposes of this regulation taxes shall be considered as due and payable on the
last day on which they may be paid without penalty;
(b) As the general obligations of the entire municipality, it being intended to exclude as ineligible for purchase all such obligations as are payable from "local benefit" and "special assessment" taxes when the municipality at large is not directly or ultimately liable;
(c) 1. Which has been in existence for a period of 10
years; 2, which for a period of 10 years previous to the
purchase has not defaulted, for longer than 15 days, in the
payment of any part of either principal or interest of any
funded debt authorized to be contracted by it; and 3,
MAY
1, 1915.
whose net funded indebtedness does not exceed 10 per
cent of the valuation of its taxable property, to be
ascertained by the last preceding valuation of property for
the assessment of taxes.
As a definition of the term "net funded indebtedness"
as used in I (c) 3, above, and in further explanation of I (c)
1 and 2, relative to the term of existence of and nondefault
by the municipality, the Federal Reserve Board has
adopted in substance the definitions and regulations of
the board of trustees of the Postal Savings System, which,
as printed hereunder as an appendix hereto, are made a
part of these regulations.
II. Except with the approval of the Federal Reserve
Board, no Federal reserve bank shall purchase and hold
an amount in excess of 25 per centum of the total amount
of warrants outstanding at any time and issued in conformity with provisions of section 14 (6) above quoted
and actually sold by a municipality.
III. Except with the approval of the Federal Reserve
Board, the aggregate amount invested by any Federal
reserve bank in warrants of all kinds shall not exceed at the
time of purchase a sum equal to 10 per centum of the deposits kept by its member banks with such Federal reserve
bank.
IV. Except with the approval of the Federal Reserve
Board, the maximum amount which may be invested at
the time of purchase by any Federal reserve bank in
warrants of any single municipality shall be limited to the
following percentages of the deposits kept in such Federal
reserve bank by its member banks:
Five per centum of such deposits in warrants of a
municipality of 50,000 population or over;
Three per centum of such deposits in warrants of a
municipality of over 30,000 population but less than
50,000;
One per centum of such deposits in warrants of a municipality of over 10,000 population but less than 30,000.
V. Warrants of a municipality of 10,000 population or
less shall be purchased only with the special approval of
the Board.
The population of a municipality shall be determined
by the last Federal or State census. Where it can not be
exactly determined the Board will make special rulings.
VI. Opinion of recognized counsel on municipal issues
or of the regularly appointed counsel of the municipality
as to the legality of the issue shall be secured and approved
in each case by counsel for the Federal reserve bank.
VII. Any Federal reserve bank may purchase from any
of its member banks warrants of any municipality, indorsed by such member bank, with waiver of demand,
notice, and protest, up to an amount not to exceed 10
per centum of the aggregate capital and surplus of such
member bank: Provided, however, That such warrants
comply with provisions I and III of these regulations,
except that where a period of 10 years is mentioned in
I (c) hereof a period of five years shall be substituted for the
purposes of this clause.
MAY
1, 1915.
DEFINITION OP " N E T FUNDED INDEBTEDNESS."
The term "net funded indebtedness" is hereby defined
to mean the legal gross indebtedness of the municipality
(including the amount of any school district or other bonds
which depend for their redemption upon taxes levied
upon property within the municipality) less the aggregate of the following items:
(1) The amount of outstanding bonds or other debt
obligations made payable from current revenues;
(2) The amount of outstanding bonds issued for the
purpose of providing the inhabitants of a municipality
with public utilities, such as waterworks, docks, electric
plants, transportation facilities, etc.: Provided, That evidence is submitted showing that the income from such
utilities is sufficient for maintenance, for payment of
interest on such bonds, and for the accumulation of a
sinking fund for their redemption;
(3) The amount of outstanding improvement bonds,
issued under laws which provide for the levying of special
assessments against abutting property in amounts sufficient
to insure the payment of interest on the bonds and the
redemption thereof: Provided, That such bonds are direct
obligations of the municipality and included in the gross
indebtedness of the municipality;
(4) The total of all sinking funds accumulated for the
redemption of the gross indebtedness of the municipality,
except sinking funds applicable to bonds just described
in (1), (2), and (3) above.
DEFINITION OF " EXISTENCE" AND a NONDEFAULT."
Warrants will be construed to comply with that part of
paragraph (c) of this regulation relative to term of existence
and nondefault, under the following conditions:
(1) Warrants issued by or in behalf of any municipality
which was, subsequent to the issuance of such warrants,
consolidated with, or merged into, an existing political
division which meets the requirements of these regulations,
will be deemed to be the warrants of such political division:
Provided, That such warrants were assumed by such
political division under statutes and appropriate proceedings the effect of which is to make such warrants general
obligations of such assuming political division, and payable, either directly or ultimately, without limitation to
a special fund, from the proceeds of taxes levied upon
all the taxable real and personal property within its territorial limits.
(2) Warrants issued by or in behalf of any municipality
which was, subsequent to the issuance of such warrants,
wholly succeeded by a newly organized political division
whose term of existence, added to that of such original
political division, or of any other political division so
succeeded, is equal to a period of 10 years, will be deemed
to be warrants of such succeeding political division:
Provided, That during such period none of such political
divisions shall have defaulted, for a period exceeding 15
days, in the payment of any part of either principal or
41
FEDERAL RESERVE BULLETIN.
interest of any funded debt authorized to be contracted
by it: And provided further, That such warrants were
assumed by such new political division under statutes and
appropriate proceedings the effect of which is to make
such warrants general obligations of such assuming political
division, and payable, either directly or ultimately,
without limitation to a special fund, from the proceeds of
taxes levied upon all the taxable real and personal property
within its territorial limits.
(3) Warrants issued by or in behalf of any municipality
which, prior to such issuance, became the successor of one
or more, or was formed by the consolidation or merger of
two or more, preexisting political divisions, the term of
existence of one or more of which, added to that of such
succeeding or consolidated political division, is equal to
a period of 10 years, will be deemed to be warrants of a
political division which has been in existence for a period
of 10 years: Provided, That during such period, none of
such original, succeeding, or consolidated political divisions shall have defaulted, for a period exceeding 15 days,
in the payment of any part of either principal or interest
of any funded debt authorized to be contracted by it.
CIRCULAR NO. 8, SERIES 1915.
WASHINGTON, January 27,1915.
WAIVER OF DEMAND, NOTICE, AND PROTEST.
Section 13 of the Federal reserve act provides in part:
Upon the indorsement of any of its member banks,
with a waiver of demand, notice, and protest by such
bank, any Federal reserve bank may discount notes,
drafts, and bills of exchange arising out of actual commercial transactions.
Attention is called to the fact that the waiver of demand,
notice, and protest by the bank procuring the discount
does not release the holder of the note or bill discounted
from the duty to protest such note or bill in order that
those indorsers who have not executed such a waiver
may be held liable.
If the holder should fail to protest an indorsed note or
bill at maturity, the Federal reserve bank might, in such
circumstances, hold the member bank liable on account
of the waiver executed, but other indorsers would be
legally released.
Federal reserve banks are, therefore, cautioned to take
all necessary steps to insure the protest of all maturing
notes and bills which are in their possession or have been
sent for collection through any correspondent bank
wherever such notes or bills contain any indorsements
not accompanied by a waiver of demand, notice, and
protest. To insure this the bank or agent presenting
any note or bill, held by the Federal reserve bank, at
the place of payment at maturity should be instructed,
if the same is dishonored, to immediately protest such
note or bill and to have all necessary notices sent to the
indorsers.
42
FEDERAL RESERVE BULLETIN.
CIRCULAR NO. 9, SERIES OF 1915.
WASHINGTON, January 28> 1915.
INCREASE AND DECREASE OP CAPITAL STOCK OP FEDERAL
RESERVE BANKS.
Section 5 of the Federal reserve act provides that—
The capital stock of each Federal reserve bank shall be
divided into shares of $100 each. The outstanding capital
stock shall be increased from time to time as member
banks increase their capital stock and surplus or as additional banks become members, and may be decreased as
member banks reduce their capital stock or surplus or
cease to be members. * * * When the capital stock
of any Federal reserve bank shall have been increased
either on account of the increase of capital stock of member banks or on account of the increase in the number of
member banks, the board of directors shall cause to be
executed a certificate to the Comptroller of the Currency
showing the increase in capital stock, the amount paid in,
and by whom paid. When a member bank reduces its
capital stock it shall surrender a proportionate amount of
its holdings in the capital of said Federal reserve bank,
and when a member bank voluntarily liquidates it shall
surrender all of its holdings of the capital stock of said
Federal reserve bank and be released from its stock subscription not previously called. In either case the shares
surrendered shall be canceled and the member bank shall
receive in payment therefor, under regulations to be prescribed by the Federal Reserve Board, a sum equal to its
cash-paid subscriptions on the shares surrendered and
one-half of one per centum a month from the period of the
last dividend, not to exceed the book value thereof, less
any liability of such member bank to the Federal reserve
bank.
Section 6 provides:
If any member bank shall be declared insolvent and a
receiver appointed therefor, the stock held by it in said
Federal reserve bank shall be canceled, without impairment of its liability, and all cash-paid subscriptions on
said stock, with one-half of one per centum per month
from the period of last dividend, not to exceed the book
value thereof, shall be first applied to all debts of the
insolvent member bank to the Federal reserve bank, and
the balance, if any, shall be paid to the receiver of the
insolvent bank. Whenever the capital stock of a Federal
reserve bank is reduced, either on account of a reduction
in capital stock of any member bank or of the liquidation
or insolvency of such bank, the board of directors shall
cause to be executed a certificate to the Comptroller of the
Currency showing such reduction of capital stock and the
amount repaid to such bank.
Pursuant to these provisions of the statute the accompanying regulations have been adopted by the Federal
Reserve Board.
MAY
1, 1915.
DECREASE OF CAPITAL STOCK OF FEDERAL RESERVE BANKS.
I. Whenever a member bank reduced its capital stock
or surplus, and, in the case of reduction of its capital, such
reduction has been approved by the Federal Reserve
Board in accordance with the provisions of section 2 of the
Federal reserve act, it shall file with the Federal reserve
bank of which it is a member an application on Form 60,
attached to and made a part of this regulation. When this
application has been approved, the Federal reserve bank
shall take up and cancel the receipt issued to such bank for
cash payments made on its subscription and shall issue in
lieu thereof a new receipt after refunding to the member
bank the proportionate amount due such bank on account
of the subscription canceled. The receipt so issued shall
show the date of original issue, so that dividends may be
calculated thereon.
II. Whenever a member bank shall be declared insolvent and a receiver appointed by the proper authorities,
the Federal reserve bank, upon being satisfied by copy of
the commission issued by the Comptroller of the Currency
or order of court appointing such receiver, of his right to act
as such, shall adjust accounts between such receiver and
such Federal reserve bank by applying to the indebtedness due by the failed bank any cash payments made by it
on its stock subscription or accrued dividends thereon,
and by paying to such receiver any balance that may be
due after making such deductions, taking up and canceling the receipts for such cash payments.
III. In case of voluntary liquidation of a member bank,
the Federal reserve bank shall require copies of all necessary resolutions of the board of directors and stockholders
and such other papers as may be necessary to establish the
right of the liquidating agent to receive and receipt for
balances due the liquidating bank, and shall adjust with
such liquidating bank the accounts between it and the
Federal reserve bank by applying the cash-paid subscriptions and accrued dividends to any indebtedness due to
said Federal reserve bank, and shall take up and cancel
any receipts issued for such payments, paying to the liquidating agent all balance due such bank.
IV. Whenever the stock of a Federal reserve bank shall
be reduced in the manner provided in Paragraphs I, II,
or III of this regulation the board of directors of such Federal reserve bank shall, in accordance with the provisions
of section 6, file with the Comptroller of the Currency a
certificate of such reduction on Form 59, hereto attached
and made a part of this regulation.
REGULATION G, SERIES OF 1915.
WASHINGTON, January 28, 1915.
INCREASE OP CAPITAL STOCK OP FEDERAL RESERVE BANKS.
Whenever the capital stock of any Federal reserve bank
shall be increased by new banks becoming members, or
by the increase of capital or surplus of any member bank
and the allotment of additional capital stock to such bank,
the board of directors of such Federal reserve bank shall certify such increase to the Comptroller of the Currency on
Form 58, attached to and made a part of this regulation.
CIRCULAR NO. 10, SERIES OF 1915.
WASHINGTON, February 15, 1915.
NATIONAL BANKS AS EXECUTORS AND TRUSTEES.
The Federal Reserve Board is empowered by paragraph
k of section 11 of the Federal reserve act to grant by special
permit to national banks the right to act as trustee, executor, administrator, or registrar of stocks and bonds where
the exercise of such powers is not in contravention of
MAY 1, 1915.
FEDERAL RESERVE BULLETIN.
43
V. Examinations.—Examiners appointed by the CompState laws. In the exercise of such, power, the Board
issues herewith. Regulation H covering such special per- troller of the Currency or designated by the Federal
Reserve Board will hereafter be instructed to make
mits.
The Board will from time to time modify and supplement thorough and complete audits of the cash, securities,
its regulations on this subject as experience may dictate. accounts, and investments of the trust department of
every bank at the same time that examination is made
of the banking department.
REGULATION H, SERIES OF 1915.
VI. Conformity with State laws.—Nothing in these
WASHINGTON, February 15, 1915.
regulations shall be construed to give to a national bank
doing business as trustee, executor, administrator, or
NATIONAL BANKS AS EXECUTORS AND TRUSTEES.
registrar of stocks and bonds under section 11 (k) of the
I. Statutory provisions.
Federal reserve act any rights or privileges in contravention of the laws of the State in which the bank is
The Federal reserve act provides:
SEC. 11. The Federal Reserve Board shall be authorized located.
VII. Revocation of permits.—The Federal Reserve Board
and empowered—
(Jc) To grant by special permit to national banks apply- reserves the right to revoke permits granted under these
ing therefor, when not in contravention of State or local regulations in any case where in the opinion of the Board
law, the right to act as trustee, executor, administrator, or
registrar of stocks and bonds, under such rules and regu- a bank has willfully violated the provisions of these regulations or the laws of any State relating to the operations of
lations as the said Board may prescribe.
such bank when acting as trustee, executor, administrator,
I I . Applications.
or registrar of stocks and bonds.
1. A national bank desiring to exercise any or all of the
VIII. Changes in rules.—These regulations are subject to
privileges authorized by section 11, subsection (/c), of the change by the Federal Reserve Board; provided, however,
Federal reserve act, shall make application to the Federal that no such change shall prejudice obligations undertaken
Reserve Board on a form approved by said Board (Form in good faith under regulations in effect at the time the
No. 61). Such application shall be forwarded by the ap- obligation was assumed.
plying bank to the chairman of the board of directors of
the Federal reserve bank of its district, and shall thereupon be transmitted to the Federal Reserve Board with
REGULATION I, SERIES OF 1915.
his recommendations.
(Superseding Regulation No. 9 of Dec. 31, 1914.)
2. There shall be attached to each application a stateWASHINGTON, February 10, 1915.
ment of the character and extent of the privileges which
the applying bank desires to exercise under the following
LOANS ON FARM LANDS.
headings:
Section
24
of
the
Federal reserve act provides that—
(a) Trustee of personal trusts.
Any national banking association not situated in a
(h) Trustee of corporate trusts.
central reserve city may make loans secured by improved
(c) Administrator of personal estates.
and unencumbered farm land, situated within its Federal
(d) Executor of wills.
reserve district, but no such loan shall be made for a longer
(e) Registrar of stocks.
time than five years, nor for an amount exceeding 50 per
cent of the actual value of the property offered as se(/) Registrar of bonds.
3. Each applicant shall, upon request, furnish copies of curity. Any such bank may make such loans in an aggregate sum equal to 25 per cent of its capital and surplus
the laws of the State in which it is located bearing upon the or to one-third of its time deposits, and such banks may
exercise of such powers in force at the time application is continue hereafter as heretofore to receive time deposits
and to pay interest on the same.
made.
III. Separate departments.
National banks not located in central reserve cities may,
Every national bank permitted to act under this section therefore, now legally make loans secured by mortgages
shall establish a separate trust department, and shall place on real estate within the following limitations:
such department under the management of an officer or
1. The real estate security must be farm land.
officers, whose duties shall be prescribed by the board of
2. It must be improved.
directors of the bank.
3. There must be no prior lien; in other words, the lending bank must hold an absolute first mortgage or deed of
IV. Provision for keeping trust funds.
trust.
The funds, securities, and investments held in each
4. The property must be located in the same Federal
trust shall be held separate and distinct from the general reserve district as the bank making the loan.
funds and securities of the bank, and separate and distinct
5. The amount of the loan must not exceed 50 per cent
one from another. The ledgers and other books kept for of the actual value of the property upon which it is secured.
the trust department shall be entirely separate and apart
6. The loan must be for a period not longer than five
from the other books and records of the bank.
years.
44
FEDERAL RESERVE BULLETIN.
7. The maximum amount of loans which a national bank
may make on real estate under the terms of the act shall
be limited to an amount not in excess of one-third of its
time deposits at the time of the making of the loan and
not in excess of one-third of its average time deposits
during the preceding calendar year; provided, however,
that if one-third of such time deposits as of the date of
making the loan, or one-third of the average time deposits
for the preceding calendar year, shall have amounted to
less than one-fourth of the capital and surplus of the bank
as of the date indicated, in such event the bank shall have
authority to make loans upon real estate under the terms
of the act to the extent of one-fourth of the bank's capital
and surplus as of the date of making the loan.
In order that real estate loans held by a bank may be
readily classified, a statement signed by the officers making
a loan and having knowledge of the facts upon which it is
based must be attached to each note secured by a first
mortgage on improved farm land, certifying in detail as
of the date of the loan that all the requirements of law
been duly observed.
The Board calls attention to the closing paragraph of
section 24 of the act which provides that—
The Federal Reserve Board shall have power from time
to time to add to the list of cities in which national banks
shall not be permitted to make loans secured upon real
estate in the manner described in this section—
and gives notice that the foregoing regulations are subject
to the authority of the Board to revise the list of cities in
which national banks shall not be permitted to make real
estate loans in the manner above provided.
CIRCULAR NO. 11, SERIES OF 1915.
(Supersedes Circular No. 5 of 1915.)
WASHINGTON, April 2, 1915.
BANKERS' ACCEPTANCES.
An amendment of the Federal reserve act, approved
March 3, 1915, made an alteration in pargraphs 3 and 5
of section 13, which are quoted at length in Circular No. 12.
This amendment granting the right to Federal reserve
banks to discount acceptances of member banks based
upon importation or exportation of goods beyond 50 per
cent up to 100 per cent of their unimpaired capital stock
and surplus, with the authority of the Federal Reserve
Board, has made it necessary to issue a new regulation on
the subject of Bankers* Acceptances. The Federal
Reserve Board, therefore, issues this circular which is a
reprint of and is to supersede Circular No. 5, series of
1915. A new regulation is hereto appended which is to
supersede Regulation D, series of 1915, and which contains some alterations that experience has proved
desirable.
"Acceptances" are dealt with in the Federal reserve
act in two different sections—sections 13 and 14. Section 13 deals with the "acceptance" as one of the forms
of paper in the discount of which Federal reserve banks
MAY
1, 1915.
may engage, restricting the discount of acceptances to
such as bear the indorsement of a member bank. Section 14 invests the Federal reserve banks, under regulations to be prepared by the Federal Reserve Board, with
power to engage in open-market operations, of which the
"banker's acceptance" is one of the most important.
Careful study has led the Federal Reserve Board to the
conclusion that, at any rate in the first stages, so far as
practicable, priority should be given to operations under
section 13. The acceptance is still in its infancy in the
field of American banking. How rapid its development
will be can not be foretold; but the development itself
is certain. Opportunity is given by the Federal reserve
act to assist the movement in this new direction; the
present regulations are to be regarded as a first step and
will be extended as circumstances and a reasonable regard
for the other uses and needs of the credit facilities of the
Federal reserve system may warrant.
It is believed that it would unduly restrict the development of the acceptance business to keep it altogether
confined within the provisions of section 13, which require
that acceptances, in order to be eligible for rediscount
at a Federal reserve bank, must bear the indorsement of
a member bank. Having found it necessary to extend
the scope of dealings in acceptances beyond these limits,
the board has exercised the authority conferred upon it
by section 14, and has formulated regulations covering the
purchase of acceptances without invariably requiring the
indorsement of a member bank.
The acceptance is the standard form of paper in the
world discount market and both on this account and
because of its acknowledged liquidity universally commands a preferential rate. By reason of its being readily
marketable it is widely regarded as a most desirable paper
in the secondary reserves of banks and will help to provide
an effective substitute for the "call loan." Its growth,
however, will depend upon the ability of the American
market to adjust its rates effectively to those prevailing in
other markets for paper of this class.
Recognizing these facts, the Federal Reserve Board has
determined to allow the Federal reserve banks latitude in
fixing rates for acceptances: Federal reserve banks may,
from time to time, submit for the approval of the board
maximum and minimum rates within which they desire
to be authorized to deal in acceptances; within such limits
and subject to such modifications as may be imposed by
the board, Federal reserve banks will be allowed to establish the rates at which they deal in acceptances.
The board believes it to be in accordance with the spirit
of the act to accord preferential treatment to acceptances
bearing the indorsement of member banks, offered for
rediscount under section 13—even to the point of allowing
lower rates for such acceptances, inasmuch as, under the
terms of this section, such acceptances are available as collateral against the issue of Federal reserve notes, and the
board will sanction a slight preferential in favor of acceptances bearing the indorsement of member banks.
MAT 1, 1915.
FEDERAL RESEKVE BULLETIN.
When acceptances bearing the indorsement of member
banks are not obtainable in adequate amount or upon satisfactory terms, Federal reserve banks desiring to purchase
acceptances should restrict themselves, as far as possible, to
such acceptances as bear some other responsible signature
(other than that of the drawer and the acceptor), and preferably that of a bank or banker.
REGULATION J, SERIES OF 1915.
(Superseding Regulation D of 1915.)
WASHINGTON, April 2, 1915.
BANKERS' ACCEPTANCES.
I. Definition,
In this regulation the term * 'acceptance'' is defined as a
draft or bill of exchange drawn to order, having a definite
maturity, and payable in dollars, in the United States, the
obligation to pay which has been accepted by an acknowledgment written or stamped and signed across the face of
the instrument by the party on whom it is drawn; such
agreement to be to the effect that the acceptor will pay at
maturity according to the tenor of such draft or bill without qualifying conditions.
II. Statutory requirements under sections 13 and 14.
Section 13 of the Federal reserve act as amended provides
that—
(a) Any Federal reserve bank may discount acceptances—
(1) Which are based on the importation or exportation
of goods;
(2) Which have a maturity at time of discount of not
more than three months; and
(3) Which are indorsed by at least one member bank.
(b) The amount of acceptances so discounted shall at no
time exceed one-half the paid-up capital stock and surplus
of the bank for which the rediscounts are made, except by
authority of the Federal Reserve Board and of such general
regulations as said board may prescribe, but not to exceed
the capital stock and surplus of such bank.
(c) The aggregate of notes and bills bearing the signature
or indorsement of any one person, company, firm, or corporation rediscounted for any one bank shall at no time
exceed 10 per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the
discount of bills of exchange drawn in good faith against
actually existing values.
Section 14 of the Federal reserve act permits Federal
reseive banks, under regulations to be prescribed by the
Federal Beserve Board, to purchase and sell in the open
market bankers' acceptances, with or without the indorsement of a member bank.
III. Ruling.
The Federal Reserve Board, exercising its power of regulation with reference to Paragraph II (b) hereof, rules as
follows:
45
Any Federal reserve bank shall be permitted to discount
for any member bank "bankers' acceptances'' as hereinafter defined up to an amount not to exceed the capital
stock and surplus of the bank for which the rediscounts
are made.
IV. Eligibility.
The Federal Reserve Board has determined that, until
further order, to be eligible for discount under section 13,
by Federal reserve banks, at the rates to be established for
bankers' acceptances:
(a) Acceptances must comply with the provisions of
Paragraph II (a), (b), (c) hereof;
(b) Acceptances must have been made by a member
bank, nonmember bank, trust company, or by some private
banking firm, person, company, or corporation engaged in
the business of accepting or discounting. Such acceptances will hereafter be referred to as "bankers'" acceptances; l
(c) A banker's acceptance must be drawn by a commercial, industrial, or agricultural concern (that is, some
person, firm, company, or corporation) directly connected
with the importation or exportation of the goods involved in the transaction in which the acceptance originated, or by a "banker." In the latter case the goods, the
importation or exportation of which is to be financed by
the acceptance, must be clearly specified in the agreement
with or the letter of advice to the acceptor. The bill must
not be drawn or renewed after the goods have been surrendered to the purchaser or consignee.
(d) A banker's acceptance must bear on its face or be
accompanied by evidence in form satisfactory to a Federal
reserve bank that it originated in an actual bona fide sale
or consignment involving the importation or exportation
of goods. Such evidence may consist of a certificate on or
accompanying the acceptance to the following effect:
"This acceptance is based upon a transaction involving
the importation or exportation of goods. Reference No.
. Name of acceptor
."
(e) Banker's acceptances, other than those of member
banks, shall be eligible only after the acceptors shall have
agreed in writing to furnish to the Federal reserve banks
of their respective districts, upon request, information
concerning the nature of the transactions against which
acceptances (certified or bearing evidence under IV (d)
hereof) have been made.
(/) A bill of exchange accepted by a "banker" may be
considered as drawn in good faith against "actually existing values," under II (c) hereof, when the acceptor is
secured by a lien on or by transfer of title to the goods to be
transported; or, in case of release of the goods before payment of the acceptance, by the substitution of other
adequate security;
(g) Except in so far as they may be secured by a lien on
or by transfer of the title to the goods to be transported, as
i Drafts and bills of exchange eligible for rediscount under sec. 13,
other than "bankers'" acceptances, have been dealt with by Regulation B, series of 1915.
46
FEDERAL RESERVE BULLETIN*.
under (/), the bills of any person, firm, company, or corporation, drawn on and accepted by any private banking
firm, person, company, or corporation (other than a bank
or trust company) engaged in the business of discounting
and accepting, and discounted by a Federal reserve bank,
shall at no time exceed in the aggregate a sum equal to
5 per centum of the paid-in capital of such Federal reserve bank;
(h) The aggregate of acceptances of any private banking
firm, person, company, or corporation (other than a bank
or trust company) engaged in the business of discounting
or accepting, discounted or purchased by a Federal reserve
bank, shall at no time exceed a sum equal to 25 per centum
of the paid-in capital of such Federal reserve bank.
To be eligible for purchase by Federal reserve banks
under section 14, bankers' acceptances must comply with
all requirements and be subject to all limitations hereinbefore stated, except that they need not be indorsed by a
member bank: Provided, however, That no Federal reserve
bank shall purchase the acceptance of a "banker" other
than a member bank which does not bear the indorsement
of a member bank, unless a Federal reserve bank has first
secured a satisfactory statement of the financial condition
of the acceptor in form to be approved by the Federal
Reserve Board.
V. Policy as to purchases.
While it would appear impracticable tofixa maximum
sum or percentage up to which Federal reserve banks may
invest in bankers' acceptances, both under section 13 and
section 14, it will be necessary to watch carefully the
aggregate amount to be held from time to time. In
framing their policy with respect to transactions in acceptances, Federal reserve banks will have to consider not
only the local demands to be expected from their own
members, but also requirements to be met in other districts. The plan to be followed must in each case adapt
itself to the constantly varying needs of the country.
CIRCULAR No. 12, SERIES OF 1915.
WASHINGTON, April 2, 1915.
ACCEPTANCE BY MEMBER BANKS.
By act of Congress approved March 3, 1915, section 13
(pars. 3, 4, and 5 of the Federal reserve act) was amended
and reenacted so as to read as follows:
Any Federal reserve bank may discount acceptances
which are based on the importation or exportation of goods
and which have a maturity at time of discount of not more
than three months and indorsed by at least one member
bank. The amount of acceptances so discounted shall at
no time exceed one-half the paid-up and unimpaired capi-
MAT 1, 1915.
tal stock and surplus of the bank for which the rediscounts
are made, except by authority of the Federal Reserve
Board, under such general regulations as said board may
prescribe, but not to exceed the capital stock and surplus
of such bank.
The aggregate of such notes and bills bearing the signature or indorsement of any one person, company, firm, or
corporation rediscounted for an}^ one bank shall at no time
exceed ten percentum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to
the discount of bills of exchange drawn in good faith
against actually existing values.
Any member bank may accept drafts or bills of exchange
drawn upon it and growing out of transactions involving
the importation or exportation of goods having not more
than six months' sight to run; but no bank shall accept
such bills to an amount equal at any time in the aggregate
to more than one-half of its paid-up and unimpaired capital
stock and surplus, except by authority of the Federal
Reserve Board, under such general regulations as said
board may prescribe, but not to exceed the capital stock
and surplus of such bank, and such regulations shall apply
to all banks alike, regardless of the amount of capital stock
and surplus.
In order to give effect to the above amendment of the
law, the Federal Reserve Board issues the appended Regulation K, series of 1915, stating the conditions under which
member banks may accept, up to 100 per cent of their
capital and surplus, drafts or bills of exchange growing out
of transactions involving the importation or exportation of
goods and having not more than six months' sight to run.
REGULATION K, SERIES OF 1915.
WASHINGTON, April
2,1915.
ACCEPTANCE BY MEMBER BANKS.
Any member bank may accept drafts or bills of exchange
drawn upon it having not more than six months sight to
run and growing out of transactions involving the importation or exportation of goods up to an amount not exceeding the capital and surplus of such bank, provided that—
(1) Every such bank shall possess an unimpaired surplus
of not less than 20 per cent of its paid-in capital.
(2) Every such bank shall file formal application with
the Federal reserve bank of its district, which shall report
to the Federal Reserve Board upon the standing of such
applicant, stating also whether the business and banking
conditions prevailing in the district warrant the granting
of such applications in said district.
(3) Every such application shall first have been approved by the Federal Reserve Board.
Approval of any such application may be rescinded and
modifications of this regulation may be made by the
Federal Reserve Board upon notice of 90 days to the bank
or banks thereby affected.
MAY
47
FEDERAL RESERVE BULLETIN.
1, 1915.
PEESS STATEMENTS.
It is the practice of the Federal Reserve
Board to issue prepared statements to the
press when the matters it has to give out are of
sufficient importance to warrant such action.
Those issued in 1915 are here reproduced.
Mr. W, P. G. Harding, who is the Southern
member of the Federal Reserve Board, will
make a trip to each of the Southern Federal
reserve banks in a short time. This action
was authorized by the Federal Reserve Board
at its meeting to-day and Mr. Harding will
discuss with the officers and directors of the
banks at special meetings which he will attend,
the quesiton of discount rates and the character
of paper eligible for rediscount.
He will also take up questions of policy both
general and those peculiar to each district.
A meeting of the central committee of the
cotton loan fund was held this afternoon at
which it was decided that it was not necessary
to consider the extension of the time for receiving applications for loans under the plan.
The time for subscriptions to the loan will,
therefore on February 1. Applications which
are made after that date will not be considered.
Those bearing the mailing stamp of February 1
will, however, be received.
Since Mr. Harding is the chairman of the
cotton loan committee, he will, while in the
South, discuss it and settle details arising in
connection with the operation of the plan.
Mr. Harding will investigate particularly the
cotton market and the probable acreage for the
next year's crop, reporting on this matter to the
Federal Reserve Board upon his return.
JANUARY 15,
1915.
The Federal Reserve Board at its meeting
yesterday authorized lower discount rates in
the southern districts. The Aldrich-Vreeland
Act as amended expires by limitation on June
30 next, by which date all currency issued under
the provisions of that act must be retired.
There are still about $50,000,000 of this additional currency outstanding in the southern
districts, and the Board deems it wise that
lower discount rates be established in the South
so as to enable the banks of that section, by
availing themselves of the rediscount privileges
offered by their Federal reserve banks, to retire
their additional currency without inconvenience
to themselves and without disturbing credit
conditions.
There is now a plethora of money in many of
the Federal reserve districts, and it seems an
inopportune time for most of the Federal reserve banks to try to force their funds into use
through discount operations in their own districts. Under the Federal Reserve System it is
possible by means of rediscount operations
between Federal reserve banks for reserve
money to flow from districts where it can not
be employed into those where it can be used
to advantage. It is therefore practicable for
the southern Federal reserve banks to discount
for their members as liberally as may be consistent with prudence, as large idle reserves
carried in other districts can be employed in
rediscounting.
Should conditions arise which would make
it undesirable for Federal reserve banks in
some districts to avail themselves of the opportunity of investing funds in rediscounts in other
districts, or should it be advisable for them to
discontinue such operations after engaging in
them, the Federal reserve banks in the borrowing districts can still be kept in a comfortable
position, as the Secretary of the Treasury has
indicated his willingness to cooperate in that
case by making deposits.
JANUARY 21,
1915.
The meeting between the governors of the
respective Federal reserve banks and the Federal Reserve Board adjourned to-day, after an
interesting discussion of many questions involving the operation of the Federal reserve
banks, including, among others, settlements between Federal reserve banks, bonding of employees, time deposits, eligible paper, revenue
warrants, acceptances, reports of member
banks, and clearing of checks.
No decision was reached as to any of these
subjects, as the meeting was merely for the
purpose of exchanging views upon the questions
discussed.
48
FEDERAL RESERVE BULLETIN.
The discussions were very interesting and
profitable and much valuable information has
been obtained by the Federal Reserve Board,
which will be of great assistance in the final
determination of these important questions.
JANUARY 21,
1915.
MAT
1, 1915.
Whereas the framers of the Federal reserve
act had in contemplation the establishment of
a coordinated system of banking in the United
States under effective governmental supervision; and
Whereas it is the opinion of the Federal
Reserve Board that the interests of the Government, the banks and the public will be best
served, and the success of the system best
assured by a membership which will include as
many as possible of the banks made eligible
under the terms of the act; and
Whereas in order to equalize the powers of
the State and national banks as members of
the system, the provisions of the act extend to
State banks and trust companies the privilege
of membership, when not in contravention of
State laws, and empower the Federal Reserve
Board to extend the powers of national banks
by granting such banks permission to act as
trustee, executor, administrator, and registrar
of stocks and bonds, when not in contravention
of State laws; and
Whereas it appears from an examination and
analysis of the laws of the several States that
banks created and organized under the laws of
certain States can not become members, and
the right to exercise the powers of trustee,
executor, administrator, etc., can not be extended to national banks in certain States by
reason of the laws of such States;
Now, therefore, he it resolved, That the Federal
Reserve Board is in entire sympathy and accord with the efforts of those who are advocating legislation designed to remove such restrictions and to make possible the perfection of a
system of banking which will uniformly serve
the interests of the public in all of the Federal
reserve districts.
It was announced to-day at the offices of the
Federal Reserve Board that the Board had
determined to direct the introduction of a
voluntary reciprocal plan of immediate clearance at all those Federal reserve banks where
a clearing plan is not already in operation, the
same to take effect with as little delay as possible. Letters are being sent to all Federal
reserve agents and the latter are directed to
take the matter up at once with their boards
of directors.
The Federal Reserve Board does not prescribe details, inasmuch as it has found in those
districts where general clearing is already being
practiced that the best results were obtained by
leaving the control of such details in the hands
of the local authorities. It, however, states
that it will approve as a beginning a reciprocal
arrangement whereby banks assenting to the
plan will be given the privileges of immediate
clearance at par upon all other banks similarly
assenting.
It is the belief of the Board that within a
short time a general clearing arrangement will
be in operation in all districts and that this will
be gradually extended so as to embrace the
MARCH 22, 1915.
bulk of the banks in the system.
The plan does not provide for the settlement
of the balances between Federal reserve banks
The Federal Reserve Board has, upon petior for the interdistrict clearing of checks. It tion of banks in that vicinity, designated the
is an intradistrict clearing plan pure and simple, city of Nashville, Tenn., as a reserve city.
the interdistrict phases of the problem being
The population of Nashville, according to
reserved for future treatment.
the census of 1910, was 110,364.
MARCH 4, 1915.
The action taken was recommended by the
Federal reserve agent at Atlanta, Ga.
The Federal Reserve Board has adopted the
The combined deposits of the six national
following resolution, which is to be transmitted banks in Nashville is stated in the petition as
to all Federal reserve agents:
$20,077,907.
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
The Board has adopted the following requirements as necessary before consideration will
hereafter be given to the designation of any
city as a reserve city:
A population of at least 50,000; combined
capital and surplus of national banks in the applying city of not less than $3,000,000, with
deposits of not less than $10,000,000; indorsement of the application by at least 50 national
banks located outside of the applying city who
will state that they are carrying or intend to
carry upon such designation, accounts with a
national bank in the applying city. Applications will be referred for report and recommendation to the Federal reserve bank of the district in which the applying city is located,
whose chairman shall certify the names of the
national banks indorsing the application.
NOTE.—Chattanooga, Tenn., was designated by the Federal Reserve Board as a reserve city on February 2§, 1915.
MARCH 22,
1915.
Gov. Charles S. Hamlin, of the Federal Reserve Board, started to-night for California.
He will meet Mr. A. C. Miller, member of the
Board, in San Francisco. Mr. Hamlin and Mr.
Miller will together inspect the Federal reserve
bank of San Francisco and on their return trip
will visit various other Federal reserve banks.
During the absence of Gov. Hamlin, Vice Gov.
Delano will be the presiding officer of the Board.
A quorum (that is, four members of the Board)
will be regularly present. The next meeting
of the Board will be held on Monday, March 29.
MARCH 26,
1915.
The Federal Keserve Board to-day issued a
comprehensive and absolute denial of current
assertions that it had in any way participated
or been represented in discussions before any
State legislature relative to pending bills authorizing the exercise of the functions of executor, trustee, etc., by national banks. The
Board has consistently declined to share in
any of the discussions that are in progress on
that subject, and it has never been represented
by an attorney or other person, directly or
indirectly, either at Albany or anywhere else.
Sometime ago the Board passed a general reso-
49
lution intended to express to the public in a
general way its attitude on the whole subject,
and this resolution has been transmitted to all
inquirers and given to the press. There has
been no other or further participation on the
part of the Board in the discussion of this
subject.
APRIL 7,
1915.
The Federal Reserve Board to-day considered the outline of a plan for effecting settlement between Federal reserve banks. Details
of the plan have been under discussion
with the representatives of the governors of
the Federal reserve banks, and general agreement on the main outline has been arrived at.
The plan is based upon the idea of a general
gold fund at Washington to be created by the
Federal reserve banks, title in which shall be
transferred by one reserve bank to another,
according as it is necessary to settle for transfers of funds between Federal reserve districts.
The plan is expected to become effective about
the middle of May. Full details will be made
known at a later date.
APRIL 7,
1915.
From recent articles and statements it appears that the impression has been received in
many quarters that where a national bank is
permitted by the Federal Reserve Board to act
as trustee, executor, or administrator, the exercise of these powers will result in serious conflict of jurisdiction as between the State courts
and authorities and the Federal Government.
It is somewhat difficult to understand upon
what theory this assumption is based.
It is assumed both as a matter of law and as
a matter of policy that national banks exercising the powers referred to will be subject to
the State laws relating to the administration
of trust estates just as any other corporation
which is permitted by State authority to exercise these powers.
When such estates are administered under
the jurisdiction of courts the national bank
appointed by the court or named in the instru-
50
FEDERAL RESERVE BULLETIN.
ment creating the trust will, of course, be subject to the orders and rules of such courts and
there should not be any conflict of jurisdiction
in so far as the administration of such estate
is concerned.
It is unfortunate that a mistaken impression of the purpose and effect of this provision
of the Federal reserve act should result in
creating a seeming issue for which no real basis
exists.
APRIL 9,
1915.
At to-day's meeting it was voted as the sense
of the Federal Reserve Board that the Board
should not postpone action granting to properly qualified banks the power to exercise the
functions of executor, trustee, etc., because of
any suits that may be filed or in prospect,
their results necessarily being uncertain. Action on trustee and executor applications is
required by the Federal reserve act, which
the Board is charged to carry out.
APRIL 12,
1915.
The Federal Reserve Board has to-day been
informed that R. L. Van Zandt, of Dallas,
Tex., has been elected governor of the Federal
Reserve Bank of Dallas, J. W. Hoopes, vice
governor, and Lynn P. Talley, cashier.
Mr. Van Zandt was formerly vice governor
and Mr. Hoopes was formerly cashier of the
Federal Reserve Bank of Dallas. Mr. Talley
is at present cashier of the Lumberman's National Bank of Houston, Tex.
APRIL 12,
1915.
The Secretary of the Treasury announced
to-day that in view of the fact that exchange
between the United States and the United
Kingdom has become practically normal, it is
no longer necessary for the two governments
1, 1915.
to exercise their good offices in connection
therewith, and that any further consideration
of the question should be left to the banks and
bankers of the respective countries.
JANUARY 7,
1915.
Acting Secretary of the Treasury Newton,
and Mr. Hamlin, governor of the Federal
Reserve Board, to-day gave out the following
interview:
Our attention has been called to the statement contained in a morning paper that the
chancellor of the exchequer sent two representatives to Washington to plead for the
immediate release of as much gold as could
be spared. This statement is not true in fact,
nor was it ever authorized or made by any
officer or member of the Treasury Department
or of the Federal Reserve Board. The purpose
of the visit of the representatives above referred to was stated in a public announcement
by the Secretary of the Treasury on October 10,
as follows:
It is true that Sir George Paish and Mr.
Basil Blackett, representing the British Treasury, are coming to America for the purpose of
discussing the international exchange and
cotton problems. Their visit is the result of
informal suggestions made by me through
diplomatic channels to the chancellor of the
exchecquer in London, because it is believed
that a discussion of certain phases of these
problems on the ground here may be productive of beneficial results. This is simply
another one of those instances where the
Government is using its good offices in every
possible way to help the business situation.
JANUARY 8,
Below are press statements of special interest to banks issued by the Secretary of the
Treasury and the Comptroller of the Currency
in 1915.
MAY
1915.
Secretary McAdoo said:
"In view of the fact that the Aldrich-Vreeland law, as amended by the Federal reserve
act, expires on June 30 next, and that 90 per
cent of the emergency currency issued under
that act has now been redeemed, and that
after the 30th of June next further issues of
emergency currency under the Aldrich-Vree-
MAT
1, 1915.
land Act can not be made, the Federal Reserve
Board has requested the Secretary of the
Treasury to continue the printing of new Federal reserve notes in order that an adequate
supply of these notes may be on hand June
30 next, when the Aldrich-Vreeland Act expires, so that they may be at all times available
for prompt issue to meet the needs of business
throughout the country.
" I t will be recalled that for many years the
Treasury Department has kept on hand a
printed supply of emergency currency, aggregating in amount $500,000,000."
Secretary McAdoo said it was the "purpose
to print and keep on hand approximately $500,000,000 of Federal reserve notes in lieu of the
$500,000,000 of emergency currency which is to
be retired."
FEBRUARY 25,
51
FEDERAL RESERVE BULLETIN.
1915.
devised a plan for the guaranteeing of bank
deposits is without foundation; that, as is well
known, some national banks in certain sections
for several years past have had their deposits
guaranteed by surety companies. Questions
having been raised as to the legality of the
method now in use, the Comptroller of the
Currency presented the matter to the Secretary
of the Treasury, with the request that the
Attorney General be asked for an opinion, and
this opinion of the Attorney General has just
been received by the Secretary of the Treasury
and in turn delivered to the Comptroller of the
Currency in response to his original request.
APRIL 6,
1915.
Branch Banks.
Several cities have considered the advisability of making application for branches of
Federal reserve banks and such an application
has been received from the city of New Orleans.
The city of Cincinnati has given consideration
to a similar request.
Applications for the establishment of
branches in Rio de Janeiro, Buenos Aires, and
Habana, made by the National City Bank of
New York, have received approval by the
Federal Reserve Board. The application of
the Commercial National Bank of Washington, D. C, for permission to establish branches
at Panama City and Cristobal have also received favorable action by the Board. On
April 17 permission was granted to the National
City Bank of New York to establish, at Montevideo, Uruguay, a subagency of the branch
already authorized at Buenos Aires. There
are no applications for foreign branches now
pending.
It was announced to-day at the office of the
Comptroller of the Currency, and confirmed by
the Federal Reserve Board, that recently published statements to the effect that the Board
has under consideration a plan for guaranteeing
bank deposits, or that it has considered the
subject, were without foundation. The question of guaranteeing deposits has never been
raised before the Board in any way whatever,
and the Board has had no official information
to the effect that the matter was under consideration by any officer of the Government.
There is no plan, so far as can be learned, for
bringing the subject before the Board for consideration. The Board learned to-day that
some time ago the Attorney General was asked
by the Secretary of the Treasury whether a
national bank could legally make a contract
with a guaranty company whereby such company would insure the full payment of deposits
in such bank. This inquiry was not made at
Arrangements for the Bulletin.
the instance of the Board, and there is no reason
APRIL 19, 1915.
for expecting any action by the Board as the
DEAR
SIR:
I
have
before
me your letter of
result of the Attorney General's reply, whatApril
13,
stating
that
the
Federal Reserve
ever that may be.
Board contemplates issuing a bulletin.
The Comptroller of the Currency added that
In reply thereto, you are advised that in
the newspaper story to the effect that he had order to insure delivery on the last day of each
52
FEDEKAL EESEKVE BULLETIN.
month, the following schedule will have to be
observed:
Copy should be sent to the Government
Printing Office on or before 8 o'clock a. m. on
the 23d of the month; galley proof to your
office on 24th; galley proof returned to Government Printing Office by 8 a. m. on 26th;
page proof to your office on 27th; page proof
returned to Government Printing Office by
8 a. m. on 29th; to press room on 30th.
The matter of mailing these documents can
be handled in the office of the Superintendent
of Documents. It will take about eight hours
to prepare and mail the publications after
complete delivery is made, provided the envelopes are furnished with list of names in
time to have them ready when the publications
are delivered to the Superintendent of Documents.
Respectfully,
CORNELIUS FORD,
Public Printer.
MAY
1, 1915.
ceed ten per centum of the unimpaired capital
and surplus of said bank; but this restriction
shall not apply to the discount of bills of exchange drawn in good faith against actually
existing
values.
4
'Any member bank may accept drafts or
bills of exchange drawn upon it and growing
out of transactions involving the importation
or exportation of goods having not more than
six months' sight to run; but no bank shall accept such bills to an amount equal at any time
in the aggregate to more than one-half of its
paid-up and unimpaired capital stock and surplus, except by authority of the Federal Reserve Board, under such general regulations as
said board may prescribe, but not to exceed the
capital stock and surplus of such bank, and
such regulations shall apply to all banks alike
regardless of the amount of capital stock and
surplus/'
Approved, March 3, 1915.
To Mr. H. PARKER WILLIS,
Secretary Federal Reserve Board,
Washington, D. C.
DEVELOPMENT OF THE ACCEPTANCE
BUSINESS.
Between the first of August and the middle
of November, 1914, some of the State institutions in the New York district, under authorBe it enacted by the Senate and House of Rep- ity of the recently revised banking law of that
resentatives of the United States of America in State, had begun through acceptances to
Congress assembled. That section thirteen, para-finance a substantial volume of exports from
graphs three, four, and five, of the Act approved which the usual European credit facilities had
December twenty-third, nineteen hundred and
thirteen, known as the Federal reserve Act, be been withdrawn. Since November 16, 1914,
amended and reenacted so as to read as several of the national banks in New York
follows:
and other cities have also accepted bills
" Any Federal reserve bank may discount ac- arising out of exportation and importation,
ceptances which are based on the importation many of which have found their way into the
or exportation of goods and which have a maturity at time of discount of not more than open market, where they have been purchased
three months and indorsed by at least one by various banking institutions, including the
member bank. The amount of acceptances Federal Reserve Bank of New York.
so discounted shall at no time exceed one-half
In March, at the time of the last available
the paid up and unimpaired capital stock and
statements,
the banking institutions of New
surplus of the bank for which the rediscounts
York
City
showed
a liability on account of
are made, except by authority of the Federal
Reserve Board, under such general regulations acceptances of about $77,500,000. The Fedas said board may prescribe, but not to exceed eral Reserve Bank of New York has been buythe capital stock and surplus of such bank.
ing acceptances since February 12, when
"The aggregate of such notes and bills bearing the signature or indorsement of any one the regulation of the Federal Reserve Board
person, company, firm, or corporation, redis- permitting their purchase was promulgated,
couixted for any one bank shall at no time ex- and on April 26 has in its portfolio $5,638,000
ACCEPTANCES.
An Act Proposing an amendment to the Federal reserve
Act relative to acceptances, and for other purposes.
MAT 1, 1915.
FEDERAL RESERVE BULLETIN.
53
of accepted bills. The rate at which, prime its rates have been raised substantially during
acceptances maturing within 90 days have the past 30 days as a protection to its resold in New York during this period has been serves.
from 2 to 2J- per cent, varying in accordance
with maturity, supply, and demand. During Acceptances, by classes, held by the Federal reserve banks
each week,
the latter part of April, the rate has been about
[In thousands of dollars.]
2\ per cent for the longer maturities.
The importance of the development of this
Nonmember banks'
banking instrument is now beginning to be
acceptances.
Member
Private
banks'
generally understood, and inquiries which have
Date.
acceptbankers. Total.
Trust
ances.
State
been made indicate that additional banks are
combanks.
panies.
preparing to offer accepting facilities to their
customers. From the point of view of the
1915.
$10
$7,734
$87
$3,075
Mar.31
$10,906
development of a stable market in New York Apr.
10
7,820
110
3,653
5
11,593
10
8,960
110
4,304
Apr. 12
13,384
City for dollar acceptances, this is of impor- Apr.
10
9,299
110
4,382
19
13,801
10
8,848
110
4,593
13,561
tance, for such a market depends primarily Apr.26
upon a large, steady volume and low, steady
NOTE.—Of the totals shown April 26, acceptances amounting to
rates. Several banks and firms dealing in bills $571,980
bore the endorsement of member banks. Of the total just stated
$522,766 is represented by member banks' acceptances, and $49,214 by
have also, largely within the present month, trust companies' acceptances.
begun to quote forward rates on bills drawn in
reserve banks on Apr. 19 and
dollars, so that exporters in distant countries Acceptances held by Federal
Apr. 26,1915.
may be able to calculate the comparative
[In thousands of dollars.]
negotiable value of sterling and dollar drafts.
This is also of fundamental importance in the
Apr. 19. Apr. 26.
development of the acceptance business. When
the movement of our exports and imports has
(A) MEMBER BANKS' ACCEPTANCES.
been sufficiently standardized through bankers' American Exchange National Bank, New York
City
$415
$415
acceptances; so that it may be facilitated as Bank
of New York, National Banking Association,
New York City
,
574
625
easily in the New York as in the London Continental & Commercial National Bank, Chicago, 111
3
market, even though the volume in the New First National Bank of Boston, Boston, Mass
1,476
1,595
First National Bank of Chicago, 111
4
York market may be much smaller, we should Irving National Bank, New York City
5
5
3
Market & Fulton National Bank, New York City.
3
be enabled readily in future, when we wish to Merchants National Bank, New York City
50
50
Bank of Commerce, New York City
13
13
protect our reserves or when they are needed National
National City Bank of New York, New York City.
1,358
1,381
Philadelphia
National
Bank,
Philadelphia,
P
a
.
.
.
.
499
for domestic expansion or seasonal movements
Total amount of member banks' acceptances.
4,382
4,593
of commodities, to deflect the financing of our
(B) NONMEMBER BANKS' ACCEPTANCES.
foreign trade from New York to London by
(1) Trust companies.
raising New York rates above London rates and
2,002
Bankers
Trust
New York City
1,385
making it cheaper for the shipper to draw on Guaranty TrustCo.,
7,247
7,413
Co., New York City
50
50
London than on New York. Conversely, when Old Colony Trust Co., Boston, Mass
9,299
8,848
we are ready to finance it again we should be
(2) State banks.
able, in normal times, to recover the business
Bank
of
America,
New York City
10
10
from London by reducing our rates below those
(C)
PRIVATE
BANKS.
of London. At other times, of course, London
110
110
may take the initiative in readjusting the rates Goldman, Sachs & Co., New York City.
Grand
total
13,801
13,561
for one or another of these purposes, just as
54
frEDEBAL RESERVE BULLETIN.
Distribution
MAY 1, 191&.
of acceptances held by Federal Reserve Banks on Apr. 19, 1915, by classes of acceptors and sizes.
Over $5,000
to $10,000.
To $5,000.
Over 810,000
to £25,000.
Over $25,000
to $50,000.
Over $50,000 Over $100,000.
to $100,000.
Total.
s
Class of acceptors.
S2
$127,152
223,410
Member banks...
Trust companies.
State banks
Private banks
Grand total
95
Per cent of total.,
Amounts
a
350,562
$367,505 114 $1,901,535
2,802,399
777,489
10,046
20,000
89,896
a
30 $1,020,573
89 3,374,393
20 1,424,629
$693,088
$272,000
697,065
$4,381,853
9,299,385
10,046
109,896
31.75
67.38
.07
1,164,994 274 4,803,876 119 4,394,966
28 2,117,717
969,065
13,801,180
100.00
15.35
7.02
2.54
8.44
34.80 . . . .
31.85
of acceptances held by the several Federal reserve banks at close of business on Fridays in April,
by maturities.
100.00
1915, distributed
[In thousands of dollars.]
Acceptances m a t u r i n g
within 30 days:
Apr. 2
Apr. 9
Apr 16
Apr. 23 ...
Acceptances maturing after
30 days but within 60 days:
Apr.2
Apr. 9 .
Apr. 16
Apr.23
Acceptanees maturing after
60 days but within 90 days:
Apr. 2
Apr. 9
Apr 16
Apr.23 ..
Total:
Apr 2
Apr 9
Apr 16
Apr. 23
New
Boston. York.
Philadelphia.
$85
163
280
409
$535
1,136
2,112
3,071
$151
345
581
754
541
3,351
3,057
2,922
1,868
771
493
725
563
798
617
357
455
304
149
792
974
806
887
1,288
1,310
845
759
330
135
125
174
1,418
1,630
1,811
1,859
5,174
5,503
5,879
5,698
1,252
1,278
1,323
1,285
Cleve- Rich- Atlanta. Chicago.
St.
land. mond.
Louis.
$74
632
837
968
$168
281
593
879
981
968
$67
41
41
San
Minne- Kansas Dallas. Franapolis.
City.
cisco,
Total.
$41
41
41
$61
61
213
$1,225
2,784
4,882
443
492
152
7,029
6,397
6,009
77
23
57
57
$43
84
184
264
265
865
700
470
25
25
25
122
115
116
116
379
394
347
256
40
40
100
100
29
56
77
87
41
60
76
259
211
684
533
3,232
3,768
3,025
1,177
1,202
1,257
1,233
1,515
1,540
1,640
1,605
107
106
166
125
337
378
428
428
82
124
174
316
1,188
1,238
424
11,486
12,949
13,916
238
167
MAT
1, 191S.
FEDERAL RESERVE BULLETIN.
55
GEHEEAI BUSINESS CONDITIONS AND PO- eral business outlook is, however, returning.
SITION OF FEDEEAL EESERVE BANKS.
Statements made by representatives of a num-
General business conditions are described in
reports made by Federal reserve agents for the
12 Federal reserve districts.
Below are given in detail digests of conditions in the various districts substantially as
reported by Federal reserve agents.
District No. 1—Boston.
Business directly affected by the European
war is in much better condition than trade not
so benefited. Commercial paper in the hands
of brokers is scanty and the demand for money
in the larger centers is light. General conditions show slight improvement.
Cotton mills are running under improved
conditions although an unsettled cotton market and light demand for goods has heretofore
operated to the disadvantage of the mills.
Dry goods houses are placing small orders.
Mills with foreign orders are running full time
and have been able to take advantage of the
low prices of cotton, but generally have not
been large purchasers. Fall River mills are
running at their full capacity and making a
fair profit. Scarcity of dyes is causing some
uneasiness.
Boot and shoe manufacturing is below normal except where influenced by war orders.
Most of the leather concerns have been doing
an excellent foreign business.
Foreign orders have kept wool dealers and
woolen mills active. Worsted mills appear to
feel the unsatisfactory condition of the market
and up to the middle of February were doing
hardly a fair amount of business. There has
since been improvement in this and other
classes of goods.
District No. 2—New York.
Conditions in New York show general improvement. In New York City there is a
change for the better and optimism as to the
outlook. The real estate situation has been
distinctly bad. Leases are being made at
greatly reduced rates. Confidence in the gen-
ber of important industries indicate, in the
main, improvement and optimism. Commodity prices, especially those for dry goods and
textiles, have quite generally advanced since
the first of the month as a reflection of better
demand.
The most noteworthy occurrence in the
New York district during the month of April
has been the development of a strong and active
market for securities on the New York Stock
Exchange. The number of shares dealt in
from April 1 to 26, inclusive, is 17,543,201, as
compared with an aggregate of 17,333,471
during the three months of January, February,
and March. The market received an impetus
during the early part of the month by rapid
advances in the securities of a number of
special industries which it was believed would
benefit largely from orders for war material
from belligerent nations.
The rise in the market has been accompanied
by moderate sales of securities for foreign account, but the freedom in dealings between
the New York and London stock markets has
been somewhat impeded by the continuance
of the rule of the New York Stock Exchange
restricting the normal arbitrage transactions.
A notable feature of the business transacted
during the past month has been the dealing in
odd lots, the volume of which is stated by some
of the specialists as having been unprecedented.
It is difficult to trace the course of security
transactions in a volume of deposits and loans
so large as that which makes up the aggregate
footings of the New York banks; yet the fact
that in spite of the active market the loans of
the New York Clearing House banks have increased only $1,047,000 thus far during April,
that call rates show practically no change for
the month, and that large New York banks
report but a small volume of loans made for
out-of-town correspondents tends to lend confirmation to the views expressed by reliable
brokers that a considerable volume of securities
has been purchased for cash.
56
FEDERAL RESERVE BULLETIN".
Bonds have also shown a firmer tendency for
the month, with dealers reporting a good demand for the seasoned issues.
The weekly reports issued by the New York
Clearing House Association indicate that from
November 14, 1914, the eve of the inauguration
of the Federal Reserve System, to April 24,
1915, the deposits of its members have increased $503,000,000, while their loans have
increased $261,000,000. The surplus reserves,
which were $7,000,000 on November 14, 1914,
and a week later, owing to the reduction in
required reserves which became effective at the
inauguration of the Federal Reserve Sysytem,
were $137,000,000, had increased on April 24
to $168,000,000, an actual gain of $31,000,000
since the Federal Reserve System began operations. Of the foregoing increases during April
deposits gained $32,000,000 and surplus reserves
gained $23,000,000.
On November 21, 1914, the end of the first
week of operations of the Federal Reserve Bank
of New York, its stock of gold was $85,000,000;
on April 26, 1915, its gold, held either in vault
or on deposit with the Federal Reserve agent,
is $121,000,000, an increase of $36,000,000.
Call money has ruled from 2 to 2J per cent
throughout the month. Time loans on stock
exchange collateral have hardened about } of
1 per cent during the month and are now from
2\ to 3 per cent for short maturities and 3f to
4\ per cent for long maturities.
Commercial paper has remained practically
steady throughout the month; Z\ per cent has
been the rate for a few of the best names, but
the general rate has been 3§ to 4 per cent.
During the middle of the month, with the hardening of the London discount market, a firmer
tendency exhibited itself in the rates for commercial paper, but with the falling back in the
London rate and the increase in the surplus
reserves of the New York Clearing House banks
during the last fortnight the firmer tendency
has disappeared. The important commercial
paper brokers in this city report that the volume
placed through them is distinctly low^er than a
year ago, and also lower than at the first of this
January.
MAT
1, 1915.
District No. 3—Philadelphia.
Information received from all parts of the
district indicates that business conditions are
below normal. There has been some improvement in the last few months, but the volume of
business is generally less than it was one
year ago.
The war has kept back foreign textiles, and
the manufacture of cotton goods, in some lines,
such as knit underwear, and in dress goods, is
fairly satisfactory. A scarcity of dyestuffs is
interfering with production, especially of
hosiery. The manufacture of carpets and
blankets is slack. There has been some advance in cotton yarns.
The wool market is quiet, and prices are declining. Orders for foreign Governments have
kept some mills active, but these have been
largely completed, and manufacturers see little
business in the near future. Domestic business
has been poor. On men's wear mills have
been run about 50 per cent of their capacity,
but on women's wear production has been
much larger.
The anthracite coal business has improved,
and mines are working to their full capacity.
The output in the various iron and steel industries has, lately, somewhat increased, and operation is now proceeding at about 65 per cent of
capacity. Some concerns are working at their
full capacity in the manufacture of ammunition
and war supplies. Shipyards are very busy.
Sole leather and heavy upper leather have
advanced in price on account of war orders.
Light upper leather business has been below
normal, on account of the falling off in the shoe
trade throughout the country. The lumber
business is improving, due to apparent increased activity in building operations. The
paint business is good. The cement business
is below normal. Collections are reported fair.
Recent large orders from the railroads for
new equipment and supplies may be taken as
evidence of improving conditions.
District No. 4—Cleveland.
Business conditions have improved materially in district No. 4, in comparison with the
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
opening of the year, or even with six weeks
ago. The metal industry has been stimulated
by foreign orders.
Manufacturers of clothing report business
gradually increasing in goods of medium grades.
The coal trade is still unsatisfactory, due to
labor, legislative, and trade conditions. Much
lake coal was carried over through the winter
on the docks, and shipping will begin much later
this year. The competitive period in prices
which existed during the price cutting of February has now been terminated, and it is predicted that trade will fully recover in the
autumn. Money is easy throughout the district,
in large as well as smaller centers. Rates are
stationary at 3f to 5 per cent on six months'
commercial paper. Funds for investment are
plentiful and permanent financing by corporations and municipalities is in progress.
Weather conditions are favorable and the |
agricultural outlook is good.
57
The industrial and manufacturing interests
of the district are again on a normal basis.
The holding back of the cotton crop and the
marketing of it in the spring instead of in the
fall, produced rigid economy. Now that cotton is - going to market, conditions are improving in all lines of trade. The result of such
rigid economy and the necessity for diversification of crops promise good results to agricultural interests.
The bank statements as of March 4 showed
a marked improvement over previous statements, and the indications point to an easy
money market through the summer.
District No. 7 -Chicago.
Business conditions in the seventh reserve
district generally show improvement. Outside
of those lines which have profited b}^ war
orders, the improvement is noticeable although
not very pronounced, and there is a general
increase in confidence that more normal condiDistrict No. 5—Biclimond.
tions will return. Seasonable weather, which
In this district conditions are improving and has prevailed throughout the whole district is
give promise of continued betterment. Prog- having its effect on production and distribution.
ress is still retarded by the conditions arising
The increase in bank deposits in the reserve
out of the war in Europe, but it is believed that I
cities, particularly Chicago, and the fact that
a quick readjustment will follow a termination |
rates on commercial paper are low (around 3 |
of the conflict.
per cent) and the supply small, while not inThere is a decided improvement in cotton dicative of business improvement, are neverprices and confidence as to the future. Cotton theless a favorable factor and will be helpful
milling is considered prosperous particularly toward increased activity. Ease of money conwith those mills which purchased the raw ma- ditions is further indicated by the very slight
terial at its lower prices. The shortage of dye- j offerings of rediscounts at this Federal reserve
stuffs is causing some uneasiness.
| bank.
!
District No. 6—Atlanta,
Advices indicate an increase in winter wheat
acreage
and satisfactory weather and crop
While the commercial and industrial affairs
conditions.
Improvement is also noted in
of the sixth Federal reserve district do not
those
portions
of the district that have been
show remarkable improvement, there is an inadversely
affected
by the cattle quarantine.
creased activity of sound and conservative
The
extensive
strikes
and lockouts in the
nature in all lines. Especially is this true in
building
trades
at
Chicago
recently inaugurated
commercial enterprises, as shown by the inhave
had
a
depressing
effect,
and if contincrease in receipts of railroads, hotels, and the
ued
much
longer
will
offset
the
general busipostal department, due largely, no doubt, to
ness
improvement
at
Chicago.
The
indications,
the advance in the price of cotton and to the
however,
favor
arbitration
and
a
speedy
endgrowth of confidence among the business and
ing
of
the
trouble.
financial element.
58
FEDERAL RESERVE BULLETIN.
MAT
1, 1915.
sympathy with conditions elsewhere, and the
result of influences growing out of the European
war. Banks are generally in excellent condition and interest rates moderate. The outlook
favors improvement in all lines of business that
are below normal and in those dependent upon
agriculture. This is reflected in activity of retail trade. Wheat acreage is the largest the
States in this district have ever seen and there
is a corresponding increase in the other cereal
crops. The tendency is toward conservatism.
In northern Michigan conditions are improved throughout the iron mining counties and
copper district. Copper mines are working full
time and some of the mining companies have advanced wages, while others have increased their
forces and intend to make wage advances in the
near future.
In Wisconsin general conditions are very
good. Manufacturing business in central Wisconsin is below normal. Furniture plants are
on short time and some may close. Leather
business is estimated as about 50 per cent less
than normal, except at those establishments
which produce heavy leather for which there is
active demand for export. Lumber business
is about one-half of normal, although local
business is fairly good. A reliable estimate
places the general situation of central Wisconsin manufacturing industries at an average of
about 25 per cent below normal with prospect
of improvement. Conditions in the paper trade
are unsatisfactory.
Conditions in the northern iron ranges of
Minnesota show depression, with little indication of return to normal. The jobbing and
distributing trade at important centers is reported good and the outlook for spring and
summer is regarded good.
Demand for money in North Dakota is increasing. War conditions have increased the
crop acreage and more land is being plowed
than experienced observers have ever known.
District No. 9—Minneapolis.
Local trade is good and collections very fair.
Speaking in a broad general way, business South Dakota reports are generally hopeful.
conditions are good. While the crop outlook Prospecting and developing in the Black Hills
is excellent there has been a slowing down in is active and encouraging. The crop acreage
District No. 8—St. Louis.
Demand for general merchandise has improved, and while below normal, generally
speaking, sales and collections for the first
quarter of the year will show an improvement
over the closing quarter and compare favorably with the first quarter of the past year.
Some portions of the section have suffered
from successive droughts, and Kentucky reports that while a good deal of its tobacco is
sold it is not delivered, and, consequently, the
sellers have not as yet collected the money due
them.
The underlying condition of business in Missouri outside of St. Louis is sound, with prospects of good crops and reason to believe that
conditions will continue to show improvement.
Conditions are also better in Arkansas, but no
decided improvement is anticipated until fall,
it being largely dependent upon whether cotton
and lumber sell at a fair profit. The Arkansas
banks, especially the small ones, show a loss in
deposits as compared with last year. Conditions continue to improve in Illinois, and there
is buying of horses and cattle. The same is
true of Indiana, and if crops turn out well, as
there is reason to anticipate, marked changes
for the better will be shown. Manufacturing
and jobbing in Kentucky is not yet up to normal,
but the tendency is good. Crops promise well,
and this is expected to put Kentucky into good
business condition. The situation in Mississippi is not unlike that in Arkansas, and if
crops turn out successfully a ready recuperation from last year's losses is anticipated. The
present is, however, a time of economy and
inactivity. Collections are reported good.
Business conditions in Tennessee are gradually improving and prospects are good.
Commercial paper rates in St. Louis are from
3£ to 4 per cent, but in the other States of the
district they are from 6 to 8 per cent.
MAY
1, 1915.
FEDERAL RESERVE BULLETIN.
in Montana is largely increased and the outlook excellent. Sheep raising districts have
been benefited by the high price of wool. There
is optimism in the cattle country.
St. Paul and Minneapolis merchants are enjoying a fair business and conditions are sound,
although there is no unusual activity. Spring
building operations are holding up well as coinpared with a year ago.
59
excellent season is anticipated. The acreage
for small grain and forage crops has increased.
Reports from cattle and live-stock interests
show conditions satisfactory and the ranges in
good condition.
Banks in agricultural and live-stock districts
report improvement in their business, with
money easy in the larger city banks at normal
rates.
There are some new enterprises under way,
District No, 10—Kansas City.
and construction work indicates some increased
Agricultural and horticultural conditions activity in that direction.
throughout this district arc almost perfect, District No. 12—San Francisco.
with every promise of abundant crops. The
Agricultural prospects in general throughout
supply of loanable funds far exceeds the de- the twelfth district are exceptionally good.
mand in practically all sections, with the result Fine cattle, sheep, and grain have been yieldthat most banks are not finding as much paper ing extraordinary returns. The new grain
as they could use. Large borrowers, especially acreage is much increased and satisfactory
stockmen, knowing the easy money conditions, moisture gives an assurance of enlarged crops.
are demanding lower rates, and are quite likely While the lumber industry is depressed, evito reap the benefit of lower rates this spring dences are increasing which indicate that the
than they have had for many years. It is how- tide has turned. The petroleum industry has
ever expected that during the next few months also been depressed, but the other mining has
loans will materially increase.
already shown improvement. Business in mercantile lines is satisfactory. Active country
District No. 11—Dallas.
There has been a steady and conservative banks are well loaned up, and city banks have
increase for the retail trade in the larger cities considerable surplus of loanable funds which
of this district, and the feeling throughout the will soon be fully employed in crop moving,
entire business, agricultural, and live-stock sec- which begins very early in this section.
tion is as a whole encouraging. Cotton and
cottonseed products show an increased demand
and sales at satisfactory prices.
The relation between business conditions and
Emergency currency will probably all be re- the operations of Federal reserve banks is seen
tired before May. Crop preparations are well in the statements for the Federal reserve banks,
advanced under favorable conditions and an a digest of which follows:
60
May 1,1915.
FEDERAL RESERVE BULLETIN.
Resources and liabilities of each of the 12 Federal reserve banks and of the Federal reserve system at close of business on
Fridays in April, 1915.
(In thousands of dollars.]
RESOURCES.
Gold coin and certificates: 1
Apr. 2
1
Apr. 9
|.
Apr. 16
!
Apr. 23
!
Legal tender notes, silver i
certificates, and subsid- !
iary coin:
i
Apr. 2
Apr.9
Apr. 16
Apr. 23
Bills discounted a n d |
loans:
i
Apr. 2
|
Apr.9
j
Apr. 16
!
Apr. 23
i
Investments:
Apr. 2
..!
Apr.9
i
Apr. 16
Apr. 23
Due from other Federal >
reserve hanks—net:
j
Apr. 2
i
Apr.9
1
!
Apr. 16
Apr.23
!
All other resources:
i
Apr. 2
!
Apr.9
i
Apr. 16
i
Apr.23
i
Total resources:
Apr. 2
Apr.9
Apr. 16
Apr.23
Boston.
New
York.
Philadelphia.
$15,080
15,252
15,643
15,695
$94,634
95,378
94,307
95,113
1,551
1,183
1,525
1,399
16,329
20,778
18,669
17,324
3,496
3,678
4,063
4,472
1,558
1,791
2,109
2,175
5,499
5,842
6,211
6,044
1,123
1,323
1,323
1,654
375
1,115
Cleve- Richland. mond.
$13,723 $16,227
14,353 16,210
14,365 16,038
14,941 16,000
Atlanta.
Chicago.
San
St.
Minne- Kansas
Louis. apolis. City. Dallas. Francisco.
Total for
system.
$7,631 $14,453
7,708 14,048
7,761 13,361
7,799 13,046
$239,176
239,540
237,206
238,710
677
687
695
698
22
8
7
5
25,627
30,018
29,360
29,184
3,792
4,106
4,357
4,675
1,767
2,510
2,543
2,536
33,678
35,251
35,915
36,478
1,046
1,095
1,118
1,182
22,299
22,751
23,303
24,628
$8,767
8,809
8,530
8,377
$4,984
4,887
4,902
4,904
669
706
751
725
42
29
29
49
1,005
962
782
485
304
333
1,140
2,331
964
1,086
1,154
1,176
5
6
6
563
563
539
514
2,288
2,250
2,140
1,967
2,010
1,997
1,888
1,989
6,667
6,810
6,846
6,947
5,538
5,407
5,025
5,153
2,489
2,379
2,464
2,483
769
685
738
708
732
781
828
812
569
693
766
989
7,444
7,544
7,754
7,885
2,027
2,002
2,067
2,167
1,364
1,399
1,441
1,904
H
1
1
1
6,025
6,025
6,159
<», 378
877
877
923
923
1,405
1,490
1,514
1,514
985
995
1,003
1,020
9,427
4,817
7,264
11,417
1,734
1,095
891
651
332
2,157
2,792
1,684
4,223
2 960
1,959
2,739
398
371
466
366
2,574
991
2,448
2,171
117
198
597
424
403
373
450
354
28
18
21
25
244
317
192
117
2,629
2,635
2,528
2,546
519
621
1,272
1,565
501
349
299
205
142
412
444
346
308
470
661
617
742
727
702
701
8,605
7,482
10,080
9,437
20,085
21,035
21,066
21,284
135.907
135,350
136,653
139,954
23,385
23,576
24.123
24', 622
21,005
20,930
20,914
21,422
15,507
15,667
15,427
15,399
11,771
11,573
10,929
11,148
48,239
48,462
47,647
47,843
17,476
16,353
16,194
17,305
10,673
10,665
10,687
10,504
!3,147
1.3,096
13,191
r.i'348
12,408
12,971
13,474
13,789
18,030
18,388
17,731
17,470
339,674
340,701
341,179
346,691
$43,834 $15,615 $8,834 i $9,943 $6, 929 $12,656
8,983 10,352
44,054 14,492
7, 153 12,757
43,237 14,324
8840 10,168
8,840
10168
6,980 12,885
9,649
43,09^ ! 15,411 j 8,763
6 981 12,650
$293,954
294,042
294,154
297,210
245
346
450
28
489
$34,635 $10,124
34,298 10,124
33,672 10,148
34,105 10,194
$8,030 $10,888
8,040 10,433
8,040 10,439
8,057 10,479
10,289
5,659
5,315
8.254
i
LIABILITIES.
Reserve deposits:
Apr. 2
km. 9
Apr. 16
Apr.23
Due to other Federal reserve banks—net:
Apr. 2
Apr. 9
Apr. 16.....
Apr. 23
Federal reserve notes in
circulation—n e t 1 i a bilitv:
Apr. 2
Apr. 9
.1.
Apr. 16
Apr.23
Capital paid in:
Apr. 2
Apr. 9
Apr. 16
Apr.23
All other liabilities:
Apr. 2
Apr.9
Apr. 16
1
Apr.23
j
Total liabilities:
{
Apr. 2
1
Apr.9
i
Apr. 16
1
Apr.23
;
$16,868 $129,267
17,818 128,683
17,532 129,967
17,599 131,458
$19,229 $16,996 $7,984 $5,799
19,418 16,922 7,849 5,561
5,520
19,965 16,905 7,831
20,464 17,259 8,094 5,789
316
452
3,217
3.217 i
3.218 !
6,640
6,667
4,156 | 4,009
4,158 I 4,008
4,009
4,158
1,804
20,085
21,035
21,066
21,289
135,907
135,350
136,653
139,954
23,385
23,576
24,123
24,622
21,005
20,930
20,914
21,422
1,213
920
501
142
432
472
4,099
4,650
4,840
4"
3,954
3,940
3,807
3,751
2,211
2,217
2,219
1,586
1,586
1,587
31
36
41
14
15
20
15,507
15,667
15,427
15,399
11,771
11,573
10,929
11,148
188 j.
205
47
211
129
2, 132
2, 021
2, 434
2, 624
133
1,411
1,859
2,120
2,209
9,597
10,449
10,767
10,889
1,936 ! 2,605
1,938
2,606
1,940
2,608
36,123
36,165
36.207
46
4,405 ! 1,861
4,408 i 1,861
4,410
1,870
1,634
1,635
1,636
2,769
3,025
2,238
1,208
880
1,157
1,747
1,863
1,864
1,866
2,210
45
51
1,865
48,239
48,462
47,647
47,843
17,476 10,673
16,353 10,665
16,194 10,687
17,305 ! 10,594
13,147
13,096
13,191
13,348
12,408
12,971
13,474
13,789
18,030
18,388
17,731
17,470
339,674
340,701
341,179
346,691
61
FEDERAL RESERVE BULLETIK.
May 1,1915.
Principal items of resources and liabilities of national banks, as shown by returns for March 4, 1915, compared with like
returns for December 81, 1914, and March 4, 1914.
Compared with Dec. 31,1914.
Items.
Increase.
Loans and discounts
Overdrafts
United States bonds
Due from Federal reserve bank
Due from other banks
Federal reserve notes
Specie
Legal-tender notes
Capital stock
Surplus and profits
National bank notes in circulation
Due to banks
Time deposits
Demand deposits
Rediscounts
Bills payable
Total resources
Number of banks reporting
Compared with Mar. 4,1914.
Returns for
Mar. 4,1915.
$6,499,964,605
7,046,534
781,193,910
290,678,432
1,345,973,690
3,698,200
591,852,399
127,091,112
1,066,589,307
1,012,990,212
746,517,138
2,243,744,736
1,199,188,335
5,149,701,825
38,534,087
57,126,299
11,566,846,004
7,599
Decrease.
$152,328,094
$8,751,690
13,885,021
29,218,657
186,984,111
1,684,515
56,995,286
637,802
4,129,789
373,973,083
27,966,117
"2*947*223
209,759,987
18
Increase.
$142,428,706 |.
Decrease.
$14,289,094
12,991,831
10,,445,185 |{1,279,862
102,289,634
10,107,187
9,013,781
25,876,804
640,036,462
25,438,207
*39*729*193'
29,761,553
11,753,564
2,348,744
106
200,841,695
48,281,909
228,696,678
492*425*831
INDEX.
Page.
Page.
12-15
Acceptances
52-54 Informal rulings of the Federal Reserve Board
Assessments for printing Federal reserve notes.
14
Held by Federal reserve banks
53
Definition of lawful money
12
Distribution of, b y classes of acceptors, sizes,
Digest of Federal reserve act
15
and maturities
54
Payment of third installment of capital stock..
14
Advisory council, meeting of
35
Reserve requirements
12
Appeals from decision of organization committee...
30
Shipment of bank notes
12
Arrangements for the Bulletin
51
Silver certificates as lawful money
12
Branch banks
51
Silver for retiring circulation
13
Business conditions, general
55-59
Taxes on reserve bank stock
13
District No. 1—Boston
55
Transfer checks for silver certificates
12
District No. 2—New York
55
Weekly and monthly reports of Federal reserve
District No. 3—Philadelphia
56
agents
13
District No. 4—Cleveland
56
29
District No. 5—Richmond
57 National banks, number of, in system
16-28
District No. 6—Atlanta
57 Opinions of counsel of Federal Reserve Board
Gold settlement fund
9
District No. 7—Chicago.. 57
Interpretation of section 22 of Federal reserve
District No. 8—fit. Louis..
57
act
16
District No. 9—Minneapolis
58
Right of national banks to advertise savings
District No. 10—Kansas City
58
DistrictNo. 11—Dallas
59
accounts
18
Conditions attached to and affecting negotiaDistrict No. 12—San Francisco
59
bility of bills of exchange and acceptances..
21
Circulars and regulations of the Federal lieserve
Board
36-46
Discount rates of Federal reserve banks
24
Clearing of checks:
Interpretation of section 8 of the Clayton antiPlan for
6
trust a c t
27
Circular of Federal Reserve Bank of Chicago on
Pan American conference
35
clearing
6 Press statements
47
Conference of Governors of Federal reserve
Resources and liabilities of Federal reserve banks
banks
15
during April
61
Discount rates in effect April 26
29 Resourced and liabiliti s of national banks as shown
Emergency currency outstanding
29
b y returns for March 4
60
Foreign branches of National City Bank oi' New
Staff of the Federal Reserve Board
30
York and Commercial National Bank of WashingState banks, list of, now in system
29
ton, D . C
51 Trustee powers:
Gold clearance fund at Washington
9
Applications for, approved
31
Opinion of counsel of Federal Reserve Board on
Circular letter regarding
33
gold settlement fund
J)
o
@FedFRASER