(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Pratt's digest of federal banking laws, 1920 ed., containing full text of the National bank act, the Federal reserve act and other laws of interest to banks, with all amendments, annotations, cases, notes, informal rulings, regulations and opinions of counsel to April 1, 1920"

This is a digital copy of a book that was preserved for generations on library shelves before it was carefully scanned by Google as part of a project 
to make the world's books discoverable online. 

It has survived long enough for the copyright to expire and the book to enter the public domain. A public domain book is one that was never subject 
to copyright or whose legal copyright term has expired. Whether a book is in the public domain may vary country to country. Public domain books 
are our gateways to the past, representing a wealth of history, culture and knowledge that's often difficult to discover. 

Marks, notations and other marginalia present in the original volume will appear in this file - a reminder of this book's long journey from the 
publisher to a library and finally to you. 

Usage guidelines 

Google is proud to partner with libraries to digitize public domain materials and make them widely accessible. Public domain books belong to the 
public and we are merely their custodians. Nevertheless, this work is expensive, so in order to keep providing this resource, we have taken steps to 
prevent abuse by commercial parties, including placing technical restrictions on automated querying. 

We also ask that you: 

+ Make non-commercial use of the files We designed Google Book Search for use by individuals, and we request that you use these files for 
personal, non-commercial purposes. 

+ Refrain from automated querying Do not send automated queries of any sort to Google's system: If you are conducting research on machine 
translation, optical character recognition or other areas where access to a large amount of text is helpful, please contact us. We encourage the 
use of public domain materials for these purposes and may be able to help. 

+ Maintain attribution The Google "watermark" you see on each file is essential for informing people about this project and helping them find 
additional materials through Google Book Search. Please do not remove it. 

+ Keep it legal Whatever your use, remember that you are responsible for ensuring that what you are doing is legal. Do not assume that just 
because we believe a book is in the public domain for users in the United States, that the work is also in the public domain for users in other 
countries. Whether a book is still in copyright varies from country to country, and we can't offer guidance on whether any specific use of 
any specific book is allowed. Please do not assume that a book's appearance in Google Book Search means it can be used in any manner 
anywhere in the world. Copyright infringement liability can be quite severe. 

About Google Book Search 

Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers 
discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web 

at http : //books . google . com/| 



Digitized by CjOOQ IC 



.^. t- 







oogle 



LIBE 



ARV 






Digitized by CjOOQ IC 



Digitized by CjOOQ IC' 



Digitized by CjOOQ IC 



Digitized by CjOOQ IC 



PRATT'S DIGEST 



C 



OF 



FEDERAL BANKING LAWS 

1920EDrnQN 



CONTAININQ THB FULL TEXT OF THB NATIONAL BANK AOTp 
THB FEDERAL RESERVE ACT AND OTHER LAWS OF 
INTEREST TO BANKS WITH ALL AMENDMENTS, 
ANNOTATIONS, CASES, NOTES, INFORMAL 
RULINGS, REGULATIONS AND OPIN- 
IONS OF COUNSEL TO 
APRIL 1, 1920. 



COBiPILBD AND PUBLISHED BT "! 

A. S. ^RATT^& SONS, Inc. 

National Bank Aobnts and Attornits 
WTLKINS BUIIJ)ING WASHINGTON, D. 0. 



Digitized by CjOOQ IC 



CopTTlglit, 1920, by 
A. S. PRATT ft SONS 

INOOBPOB^TED 



Digitized by CjOOQ IC 



Table of Contents 



PART I. 



tr 



I 



o 



TBB IfATIOHAL BAKK ACT, AMlNDlCXNTB AlfD BUPPLBMKNTABT ACTB, 
GHAPTD PAAB 

I. Comptroller of the Currency 1 

II. Organization and Powers of National Banks 7 

III. Officers and Shareholders 64 

IV. Issue and Redemption of Circulating Notes 7S 

V. Regulation of the Banking Business 99 

VI. Reports and Examinations 115 

VII. Taxation ISl 

VIII. Dissolution and Receivership 144 

IX. Crimes and Misdemeanors 169 

X. Suits, Jurisdiction and Eyidenoe 184 



PART II. 

M^x THB FEDERAL SS8EBVB ACT, WITH AIX AHENDMklfTS TO AFETL 1, 1920. 

^-0 L The Federal Reserve Act, with all Amendments to April 1, 



1920 193 

PART III. 

ACTS OF A GENIBAL NATUBE, SECTIONS OF BEVIBED STATD1S0 AKD 
BBGX7LATION8, NOT INCLUDED IN PABT8 I AND H, A FFEU T IN O NA- 
TIONAL BANKS. 

I. The Clayton Act and The Kern Amendment 883 

II. Government Depositaries 845 

III. Postal Savings Depositaries 361 

IV. Currency and Money 376 

V. Regulations of Treasury Department Relating to United 

States Bonds 896 

, PART IV. 

SPECIAL ABT1CLE8 ON SUBJECTS OF INTEBEST TO NATIONAL BANKS. 

I. Organisation De Novo 420 

II. By-Laws 451 

111 



•J 



Digitized by^ 



/google 



CHAPTER PAOK 

III. Reorganization of State and Private Banks 457 

IV. Conversion of State Bank to National 461 

V. Bonds and Circulation 472 

VI. Consolidation of National Banks 491 

VII. Increase and Reduction of Capital Stock, Restoration of Im- 
paired Capital, Change of Name or Location 505 

VIII. LiquldaUon 522 

IX. Extension of Corporate Existence , 524 



Digitized by LjOOQ IC 



Table of Cases Cited 



A 

PAGE 

Adair V. Robinson, 6 Tex. Civ. App., 276 189 

Adams v. Nashville, 96 U. S^ 19 187 

Adams v, Spokane Drug Company, 67 Fed. Rep., 888 167 

Agnew t?. U. S., 165 U. S. 36 178 

Albion NaUonal Bank v. Montgomery, 64 Neb. 681 118, 122, 124 

Albuquerque National Bank v. Perea, 147 U. 8. 87 142 

Aldrich V. Bingham, 131 Fed. Rep. 363 61 

Aldrich V. Campbell, 97 Fed. Rep. 663 62, 68 

Aldrich v. Chemical NaUonal Bank, 176 U. 8. 618 18 

Aldrich v. Yates, 95 Fed. Rep. 78 68 

Allen V. First National Bank of Xenia, 23 Ohio St 97 106 

Allen V. Luke, 141 Fed- Rep. 694 163, 164 

American National Bank v. Adams, 44 OkUk 129 11 

Amoskeag Savings Bank v. Purdy, 231 U. S. 373 136, 189, 142 

Anderson v. Line, 14 Fed. Rep. 405 69 

Anderson v, Phila. Warehouse Co., Ill U. 8. 479 60 

Armstrong, In re, 41 Fed. Rep. 381 166 

Armstrong v. Chemical National Bank, 41 Fed. Rep. 234 166 

Armstrong v. Chemical National Bank, 83 Fed. Rep. 556 14 

Armstrong v. Second National Bank, 38 Fed. Rep. 883 100 

Armstrong, Receiver v. Warner, 49 Ohio St. 376 167 

Aspey 17. Whittemore, 199 Mass. 65 53 

Aspinwall v. Butler, 133 U. 8. 696 43, 190 

Assaria State Bank v. DoUey, 219 U. S., 121 19 

Atlantic National Bank v. Harris, 118 Mass. 147 46 

Atlantic State Bank v. Savery, 82 N. Y. 291 14 

Auburn Savings Bank v. Hayes, 61 Fed. Rep. 911 162, 168 

Auten V. Manistee National Bank, 67 Ark. 248 15, 149 

B 

Bailey v. Mosher, 63 Fed. Rep. 488 163 

Bailey v. TiUinghast. 99 Fed. Rep. 801 62 

Baker v, Ault, 78 Fed. Rep. 374 188 

Baker v. Beach, 85 Fed. Rep. 836 65 

T 



Digitized by CjOOQ IC 



▼1 

TASm 

Baker v. Schofield, 221 Fed. Rep. 822 23, 151 

Baldwin v. State National Bank, 26 Minn. 48 22 

Bank v. Beach, Fed. Case No. 2736 100 

Bank v. Ck>nway, 87 Wash. 506 22 

Bank v. Kennedy, 17 WaU. 19 150, 152 

Bank v. Lanier, 11 Wall. 369 109, 110, 435 

Bank t;. Mclntyre, 40 Ohio St. 528 46 

Bank v. Williams, 58 N. J. Law 45 137 

Bank of Augusta v, Earle, 13 Pet. 519 100 

Bank of Bethel v. Pahquioque Bank, 14 Wall. 383 149, 152, 154 

Bank of Cadiz v. Slemans, 34 Ohio St 142 124 

Bank of California v. Richardson, 248 U. S. 476 135 

Bank of Redemption v, Boston, 125 U. S. 60 135, 136 

Bank of Weston v. Lynch, 69 W. Va. 333 119 

Bamet v. Muncie National Bank, 98 XT. S. 855 11<8, 119, 123 

Barron v. McKinnon, 196 Fed. Rep. 933 12, 14, 23, 110 

Batchelor v. United States, 156 U. S. 426 174 

Bates V. Dresser, 229 Fed. Rep. 772 164, 186 

Bath Savings Institution v. Sagadahoc N. B. 89 Me. 500 146 

Beall 17. Essex Savings Bank, 67 Fed. Rep. 816 60 

Beard's Estate, In re, 7 Wyoming 104 63 

Bell 17. Hanover National Bank, 57 Fed. Rep. 821 166 

Bethel i7. Pahquioque Bank, 14 WalL 388 '. 154 

BiUingsley 17. United States, 178 Fed. Rep. 654 173, 175 

Binghampton Trust Co. 17. Auten, 68 Ark. 299 118 

Birmingham National Bank 17. Mayer, 104 Ala. 634 146 

Blair v. First National Bank of Mansfield, 10 Chicago Legal News 

84; 2 Nat Bank Cas. 173 16 

Bletz 17. Columbia NaUonal Bank, 87 Pa. St 87 123, 187 

Board of Commissioners of Morgan County i7. First National Bank, 

57 N. E. Rep. 728 137 

Bobs 17. People's National Bank, 21 Fed. Rep. 888 122 

Boone County National Bank 17. Latimer, 67 Fed. Rep. 27 167 

Bowden 17. Johnson, 107 U. S. 251 152 

Bowen 17. Needles National Bank, 94 Fed. Rep. 925 15 

Bowerman 17. Hamner, 250 U. S. 504 162 

Boyd 17. Schneider, 124 Fed. Rep. 239; 131 Fed. Rep. 223 163, 164 

Boyer 17. Boyer, 113 U. S. 690 138, 142 

BoynoU i7. State, 25 Wis. 112 140 

Braden's Estate, In re, 165 Pa. St 184 85 

Bradley v. People, 4 Wall. 459 140 

Breese 17. U. S., 106 Fed. Rep. 680 175 

Bridgers v. First NaUonal Bank, 152 N. C. 298 55 

Briggs 17. Spaulding. 141 U. S. 132 69, 162, 168 

BrinkerhofC 17. Bostwick, 88 N. Y. 52 168, 168« 186 



Digitized by CjOOQ IC 



Til 

BHttm V. BirmasTlUe NaUonia Bank, 105 U. 8. 822 1S8 

Brooks V. Neal, 228 Man. 467 152 

Brown v. Kllla, 108 FM. Rep. 884 88 

Brown v. Finn, 142 U. 8. 56 58 

Brown V. French* 80 Fed. Rep. 166 142 

Brown v. Marion National Bank, 169 U. 8. 416 120, 124 

Brown v. Scfaleler, 118 Fed. Rep. 881 21 

Bnllaxd v. National Bank, 18 WalL 589 108 

Bnnd7 1^. OockOp 128 U. 8. 185 U 

Bnndy v. Jackaon, 24 Fed. Rep. 628 110 

Bnmliain v. Flrat National Bank, 58 Fed. Rep. 163 186 

BnrrowB v. Niblack, 84 Fed. Rep. HI 110 

Burrows v. Bmith, 96 Va. 694 189 

BoshneU v. Chataoqoa Co. Natl. Bank« 74 N. T. 290 11 

BusbneU v. Leland, 164 U. 8. 684 148 

Butler v. Baton, 141 U. 8. 240 86 

BnUer 17. Poole, 44 Fed. Rep. 586 68, 151, 152,187 

O 

Cadle V. Baker, 20 WalL 650 149 

California Naa Bank v. Kennedy, 167 U. 8. 862 12, 18 

CaL NatL Bank of San Diego, In re, 53 F^ Rep. 38 151 

Carlon v. First National Bank, 157 Fed. Rep. 809 129 

Case V. Citizens' Bank. 100 U. 8. 446 37 

Case V. Citizens' Bank of Lonisiana, Fed. Case No. 2489 166 

Case V. First Natl. Bank. 109 N. Y. 8upp. 1119 17 

Case V. 8mall, 10 Fed. Rep. 722 151 

Casey V. OalU, 94 U. 8. 673 58, 61. 62. 191, 470 

Castles V. City of New Orleans, 46 La. Ann. 542 142 

Catch V. Fitch, 34 Fed. Rep. 566 61 

Central National Bank v, Pratt, 115 Mass. 539 123 

Chadwick v. United SUtes, 141 Fed. Rep. 225 176 

Charleston v. People's National Bank, 5 8. C. 103 42. 135 

Charleston National Bank v. Bradford, 51 W. Va. 255 119. 123 

Chatham St PhoDnix NatL Bank v. Guaranty Trust Co., 256 Fed. 

Rep. 90 359 

Chattahoochee Natl. Bank v. 8chley, 58 Ga. 860 11 

Chemical Natl. Bank v, Armstrong, 59 Fed. Rep. 372 165 

Chemical Natl. Bank v. Armstrong. 65 Fed. Rep. 573 14 

Chemical Natl. Bank v. Hartford Deposit Co.. 156 111. 522 s. c. 161 

U. 8. 1 149, 162 

Chemical Natl. Bank of Chicago v. Worlds' Columhian Bzposition, 

170 IlL 82 156 



Digitized by CjOOQ IC 



Tltt 

Cherry u. City NatL Bank, 144 Fed. Rep. 687 14 

Chesborough v, Woodworth, 196 Fed. Rep. 876 166 

Christopher v. Norvell, 201 U. S. 216 58, 69 

Church V, Ayer, 80 Fed. Rep. 543 68 

Citizens' Bank of Louisiana v. Board of Assessors, 52 Fed. Rep. 73.. 135 

Citizens' NaU. Bank v. Appleton, 216 U. S. 196 15, 19 

Citizens' Natl. Bank v, Donnell, 195 U. S. 369 118, 124 

Citizens' Natl. Bank v, Dowd, 35 Fed. Rep. 340 167 

Citizens' Natl. Bank v. Forman's Assignee, 111 Ky. 206 117, 121 

Citizens' Natl. Bank of Kingman v. Berry, 53 Kans. 696 16, 70 

Citizens' Natl. Bank of Lebanon v. Burton, 90 S. W. 944 140 

City NaU. Bank v. Phelps, 97 N. Y. 44 , 46 

City Natl. Bank of Mangum v. Crow, 27 Okla. 107 164 

City of Boston v. Beal, 55 Fed. Rep. 26, s. c. 51 Fed. Rep. 306 141 

City of Carthage v. First Natl. Bank, 71 Mo. 508 141 

Clement v. United States, 149 Fed. Rep. 305 51 

Clement Natl. Bank v. Vermont, 231 U. S. 120 142 

Cleveland, Brown & Co. v. Shoeman, 40 Ohio S. 176 12 

Clews V, Barden, 36 Fed. Rep. 617 163 

Cochran t?. U. S., 157 U. S. 286 173, 175 

Coffey V, National Bank of Missouri, 46 Mo. 140 11, 46 

Coffin V. United States, 162 U. S. 664 172, 174, 175 

Cogswell V. Second National Bank, 56 Atl. Rep. 674 187 

Commercial Bank v, Weinhard, 192 U. S. 243, s. c. 41 Ore. 359. .112, 616 

Commercial Natl. Bank v. Chambers, 182 U. S. 556 136, 139 

Commercial Natl. Bank v, Pirie, 82 Fed. Rep. 799 16 

Commissioners of Rice County v. Citizens' National Bank of Fair- 

Ibault, 23 Minn. 280 137 

Commonwealth v, Barry, 116 Mass. 1 174 

Commonwealth v. Felton, 101 Mass. 204 174. 187 

Commonwealth v. Ketner, 92 Pa. St. 372 174, 187 

Commonwealth v. Tanney, 97 Mass. 50 174 

Conklln v. The Second NatL Bank, 45 N. Y. 655 110 

Cook County Natl. Bank v. United States, 107 U. S. 445. . . .149, 155, 167 

Corcoran v. Batchelder, 147 Mass. 641 106 

Com Exchange Bank t?. Blye, 101 N. Y. 303 167 

Com Exchange Natl. Bank v. Kaiser, 160 Wis. 199 13 

County Commissioners v. Farmers' and Mechanics' National Bank 

48 Md. 117 136 

Cox V, Beck, 83 Fed. Rep. 269 119 

Cragie v. Hadley, 99 N. Y. 131 166 

Crocker v. First NaU. Bank, Fed. Case No. 3397 122 

Crocker v. Whitney, 71 N. Y. 161 22 

Cro8a V. North Carolina, 182 U. S. 181 17S, 174 



Digitized by CjOOQ IC 



iz 

CniBiiitngi 17. Naa Bank, 101 U. 8. 16S 142 

CtmuninsB t;. U. 8., 2S2 Fed. Rep. 844 172 

D 

Daggs V, Phoenix Bank, 177 U. B. 649 117 

Danforth v, NaU. 8tat6 Bank, 48 FM. Rep. 271 117 

Davifi V. Cook. 9 Mo. 134 186 

Davis i;. Elmlra 8ayingB Bank, 161 U. 8. 275, rer. 142 N. T. 590. . . . 167 

Davis V. Essex Baptist 8ociety, 44 Conn. 582 65 

Davis V. Weed, 44 Conn. 569 58 

Delano v. Bntler, 118 U. 8. 634 43 

Dennis v. First Naa Bank of 8eatUe, 127 CaL 453 188 

Denton v. Baker, 79 Fed. Rep. 189 156 

Deposit Bank of Owensboro v. Davles, 102 Ky. 174 140 

Deweese v, 8mltli, 106 Fed. Rep. 438 2, 62, 63, 64 

DoUey v. Abilene NatL Bank, 179 Fed. Rep. 461 19 

Doty V. First Natl. Bank of Larlmore, 3 N. D. 9 35, 36 

Dow V. United States, 82 Fed. Rep. 904 172, 173 

Dresser v. Traders' NatL Bank, 165 Mass. 120 17 

Driesbachi;. NaU. Bank, 104 U. a 52 119 

B 

HSans v. Bxchange Bank, 79 Mo. 182 i 46 

Barle, In re, 92 Fed. Rep. 22; 96 Fed. Rep. 678 161 

Barle v. Conway, 178 U. 8. 466 188 

Barle v. Pennsylvania, 178 U. 8. 449 188 

Baston v. Iowa, 188 U. 8. 220 174 

Baton V. Union County Natl. Bank, 141 Ind. 136 142 

Blder v. First Natl. Bank of Ottawa, 12 Kans. 238 106 

Bllerbee v, NatL Exchange Bank, 109 Mo. 445 14 

Bills V, First NatL Bank of Olney, 11 IlL App. 275 119 

Bills V. Utile, 27 Kans. 707 151 

Blwood V. First NaU. Bank, 41 Kans. 475 145, 146 

Bmlgh 17. BarUng, 134 Wis. 565 19 

BngeUce v. Schlender, 75 Tex. 559 189 

Bno, In re, 54 Fed. Rep. 669 ., 174, 187 

Brans v. NaU. Bank of Savannah, 251 U. 8. 108 117 

Bvans v. United States, 153 U. 8. 608 176 

Bxchange Bank v, Peters, 45 Fed. Rep. 13 163 

NatL Bank v. Orchard, 42 Neb. 579 123 



Digitized by CjOOQ IC 



F 

PAGE 

Ffeber v. Stephens, 35 Fed. Rep. 17 167 

Fanners' ft Mechanics' Bank v, Hoagland, 7 Fed. Rep. 159 120 

Farmers' & Mechanics' Natl. Bank v. Dearlng, 91 U. S. 29 116, 123 

Farmers' ft Merchants' Natl. Bank v. Smith, 77 Fed. Rep. 129 15 

Farmers' ft Traders' Natl. Bank v, Hoffman, 93 Iowa 119 135, 141 

Farmers' Natl. Bank v. McCoy, 42 Okla. 420 120. 124 

Farmers' Natl. Bank v. Suther, 28 Okla. 806 145 

Farmers' Natl. Bank v. Templeton, 40 S. W. Rep. 412 71 

FeUows v. First Natl. Bank (Mich.) , 159 N. B. 335 234 

Fidelity ft Deposit Co. v. Natl. Bank of Com. (Tex.), 106 S. W. 

Rep. 782 15 

First NaU. Bank v. Albright, 208 U. S. 548 142 

First NaU. Bank v. Bailey, 15 Mont. 301 142 

First Natl. Bank v, Beaman, 257 Fed. Rep. 729 218 

First Natl. Bank v, Brodhecker, 137 Ind. 693 142 

First Natl. Bank v. Chapman, 173 U. S. 205 136 

First Natl. Bank v. Chehalis County, 6 Wash. 64 136, 138 

First Natl. Bank v. City of Richmond, 39 Fed. Rep. 309 138 

First Natl. Bank v. Converse, 200 U. S. 425 13 

First Natl. Bank v. Davis, 135 Ga. 687. 121 

First Natl. Bank v. Fellows, 244 U. S. 416 234 

First Natl. Bank v. Forest, 40 Fed. Rep. 705 186 

First Natl. Bank v, Garlinghouse, 22 Ohio St. 492 123 

First Natl. Bank v. Grimes, 49 Kans. 219 119, 120 

First Natl. Bank v. Haire, 36 Iowa 443 22 

First Natl. Bank v. Hunter, 109 Tenn. 91 119 

First Natl. Bank v. Lanz, 202 Fed. Rep. 117 110 

First Natl. Bank t?. Latham, 37 Okla. 286 121 

First Natl. Bank v. Lavater, 196 U. S. 115 120 

First Natl. Bank v. Lindsay, 45 Fed. Rep. 619 138, 140 

First NaU. Bank v. Maxfleld, 83 Me. 576 22 

First Natl. Bank v. Monroe, 135 Ga. 614 15, 19 

First Natl. Bank v, Morgan, 132 U. S. 141 120 

First Natl. Bank v. Murray, 212 Fed. Rep. 140 49 

-First Natl. Bank v. Natl. E^xchange Bank, 92 U. S. 122 12, 13 

First NatL Bank v. Peterborough, 56 N. H. 38 136 

First Natl. Bank v, Selden, 120 Fed. Rep. 212 168 

First NaU. Bank 17. Strong, 138 111. 347 11 

First Natl. Bank v. Watt, 184 U. S. 151 121 

First Natl. Bank of AUentown v. Hock, 89 Pa. St. 324 12 

First Natl. Bank of Centralia v, Marshall, 26 IlL App. 440 145 

First Natl. Bank of Cincinnati v, Beaman, 257 Fed. Rep. 729 137 

First NatL Bank of Cincinnati v. Durr, 246 Fed. Rep. 16S 187 



Digitized by CjOOQ IC 



zi 

PAOS 

First NatL Bank of Concord v. Hawkins, 174 U. & S64, S72 13. 68 

First NatL Bank of Concordia v. Rowley, 62 Kans. 894 122 

First NaU. Bank of Dorchester v. Smitli, 89 Neb. 90 122 

First NatL Bank of Grand Forks v. Anderson, 1T2 U. 8. 673. s. c. 

6 N. D. 451 18 

First NatL Bank of Holstein v, Shallenberger, 172 Fed. Rep. 999. . . 19 

First NatL Bank of Leoti v. Fisher, 46 Kan. 726 136. 188 

First NaU. Bank of Lynn v. Ocean NatL Bank, 60 N. T. 278 11 

First NatL Bank of Moscow v. American NatL Bank, 173 Mo. 163. . 16 
First NatL Bank of Mt Pleasant v. Tinstman, Fed. Case No. 4806. . 116 

Urst NatL Bank of Pierre v. Smith, « S. D. 7 14 

First Natl. Bank of Rochester v. Harris, 108 Mass. 614 16 

First NatL Bank of Rochester v. Pierson, 24 Minn. 140 14 

First Natl. Bank of Tecumseh v. Orerman, 22 Neb. 116 124 

IFirst NaU. Bank of Youngstown t;. Hushes, 6 Fed. Rep. 737 141 

Fish V, OUn, 76 Vt. 120 j 162 

Fisher v. Yoder, 63 Fed. Rep. 666 162. 186 

Flannagan t;. California NaU. Bank, 66 Fed. Rep. 969 16 

Flickner v. United States, 150 Fed. Rep. 1 172 

Foil's Appeal, 21 Alb. L. J.; 2 N. B. C. 411 87 

Foster V. Chase, 75 Fed. Rep. 797 61 

Foster v. Wilson, 75 Fed. Rep. 797 61 

Fourth NatL Bank v, Stahlman, 132 Tenn. 367 13. 21 

Fowler v, Qowlng, 162 Fed. Rep. 801. 165 Fed. Rep. 891 , 61, 65 

Fowler v. Scully, 72 Pa. St 451 22 

Fraaer v, Seibem, 16 Ohio St 614 140 

Freeman v. Jackson, 227 Fed. Rep. 688 164 

Freeman Manufacturing Co. v, NatL Bank of the Republic. 160 

Mass. 898 188 

Fridley v, Bowen. 87 HI. 161 22 

G 

Gamer v. Second NaU. Bank, 66 Fed. Rep. 869 ; 188 

Geiger v. United States, 162 Fed. Rep. 844 176 

George v, Wallace, 186 Fed. Rep. 266 16, 185. 186 

Gibson V, Peters, 150 U. S. 842 153. 189 

Gilbert v. McNulta, 96 Fed. Rep. 83 186 

Gold Mining Co. v. Rocky Mountain NaU. Bank. 9G U. S. 640 106 

Graham v. Piatt, 28 Colo. 421 59 

Graves v. United States. 165 U. S. 323 173 

Gray v. Fanlkhauser, 68 Oregon 423 85 

Green v. Bonnet, 110 N. W. Rep. 108 146 

Grow V. CockreU. 63 Ark. 418 16 

Gruber v. First NaU. Bank, 87 Pa. St 468 116 



Digitized by CjOOQ IC 



xii 

PAOB 

Guarantee Co. v. Hanway, 104 Fed. Rep. 369 186 

Guernsey v. Black Diamond Coal ft Mining Co., 99 Iowa 471 70 

Guild V, First Natl. Bank of Deadwood, 4 S. D. 566 120 

GuthHe V. Harkneas, 199 U. 8. 148 130 



Hade v. McVey, 31 Ohio St. 231 123, 187 

Hager v. Union NatL Bank, 63 Me. 609 110 

Hale V. Walker, 31 Iowa 344 60 

HaU V. First Natl. Bank of Fairfield, 30 Neb. 94, 99 117, 121 

Hanna v. Lyon, 179 N. Y. 107 163 

Hanover Natl. Bank v. First Natl. Bank, 109 Fed. Rep. 421 16 

Hanson v. Heard, 69 N. H. 190 16, 118 

Harper v. United States, 104 S. W. Rep. 673; 170 Fed. Rep. 385. .173, 174 
Harrington v. First Natl. Bank, 1 Thompson ft Cook (N. Y.) 361. . . 17 

Haseltine v. Central NaU. Bank. 183 U. S. 132 116, 119 

Hayden v. Chemical Natl. Bank, 80 Fed. Rep. 587 166 

Hayden v. Thompson, 71 Fed. Rep. 60 113 

Hayes v. Shoemaker, 39 Fed. Rep. 319. 36 

Hays V. Beardsley, 136 N. Y. 299 166 

Hazard v. NatL Exchange Bank of Newport, 26 Fed. Rep. 94 37 

Hazen v. Lyndonville Natl. Bank, 70 Vt 543 186 

Hendee v. Conn., etc., R. R. Co., 26 Fed. Rep. 677. .^ 186 

Henderson Natl. Bank v. Alves, 91 Ky. 142 119 to 122, 124, 186 

Hennessey v. City of St. Paul, 54 Minn. 219 18 

Hepburn v. School Directors, 23 Wall. 480 137 

Herman, In re, 50 Fed. Rep. 517 158 

Herrmann v. Bdwards, 238 U. S. 107 185 

Higgins V. Fidelity Insurance, T. ft S. Dep. Co., 108 Fed. Rep. 475. . 60 

Hill V. NaU. Bank of Barre, 15 Fed. Rep. 432 121 

Hills V. Exchange Bank, 105 U. S. 319 142 

Hinds V. Marmelejo, 60 CaL 229 117 

Hintermister v. First Natl, Bank, 64 N. Y. 212 122, 123 

Hirsh V, Jones, 56 Fed. Rep. 137 164 

Hiscock V. Lacy, 9 Misc. (N. Y.) 578 113 

Hobart, Receiver, etc., v. Gould, 8 Fed. Rep. 57 63 

Hobbs V, Western Natl. Bank, Fed. Case No. 6551a 35 

Hodgson V, McKinstry, 3 Kans. App. 412 ^ 145 

Holmes v. Boyd, 90 Ind. 322 22 

Home Savings Bank v. City of Des Moines, 205 U. S. 503 140 

Hoover v. Weiss Malting and Elevator Co., 55 Fed. Rep. 356 188 

Hotchkin v. Third Natl. Bank, 219 Mass. 234 12 

Hot Springs Independent School District v. First Natl. Bank, 61 

Fed. Rep. 417 152, 186 



Digitized by CjOOQ IC 



xm 

Howmrd Natt. Bank i^. LoomU, SI Vt S49 tt 

Howe t;. Barnej, 4S Fed. Rep. 668 163 

Hugglns V. Cltiz^us' NalL Bank, 6 Tex. Cir. S3 119 

Hughitt V. Hayes, 136 N. Y. 163 167 

Hnlitt 17. Bell, 86 FM. Rep. 98 112 

Hunt, AppeUant, 141 Ifaar 516 86 

I 

International Tmst Go. v. Weeks, 303 U. 8. 364 31, IN 

Interstate NatL Bank t;. Ferguson, 48 Kans. 732 11 

lions V. Manufacturers' Nat. Bank, Fed. Case No. 7068 146, 149 

J 

Jackson v. United States, 20 Ct Cls. 298 166 

Jacobson v. Berry, 185 lU. App. 415 148 

Jenkins t;. Neff, 186 U. 8. 230, s. c 163 N. T. 320 136, 137 

Jerome v. Cogswell, 78 Conn. 75, 204 U. 8. 1 44 

JeweU V. United SUtes, 100 F^d. Rep. 832 526 

Johnson v. Laflin, 5 Dill. 65; 103 U. 8. 800 36, 37 

Johnson v, NatL Bank of GlovennrUle, 74 N. T. 329 116 

Jones V. RushYiUe NatL Bank, 138 Ind. 87 143 

Jones NaU. Bank v. Tates, 240 U. 8. 541 166 

Junction City v. Bank, 96 Kans. 407 13 

K 

Keliher v. United States, 193 Fed. Rep. 8 174, 176 

Kelsey v. National Bank of Crawford, 69 Pa. St 426 46 

Kennedy v, California Savings Bank, 101 CaL 495 13 

Kennedy v, Gibson, 8 WalL 498, 505 62, 150, 153 to 154 

Kerfoot t;. Farmers' k Merchants' Bank, 218 U. 8. 281 33 

KeUenbach v. United States, 202 Fed. Rep. 377 172 to 174 

Keyser v. Hitz, 133 U. 8. 138 3, 36, 47, 59, 190 

Kimball v, Aspey, 164 Fed. Rep. 830 53 

King i^. Armstrong, 50 Ohio St. 222 63 

King V, Miller, 53 Oregon 53 17 

King V. Pomeroy, 121 Fed. Rep. 287 149, 164 

Korbly r. Springfield Inst for Savings, 245 U. S. 330 64, 112 

L 

Lake Brie, etc., R. R. Co. v. Indianapolis NatL Bank, 66 FmA. Rep. 

690 167 

Lanham v. First NatL Bank of Crete, 46 Neb. 663 133 



Digitized by CjOOQ IC 



XlT 

PAOB 

Lantry v. Wallace, 182 U. S. 536 64. 110 

Lasater v. First Natl. Bank of Jacksboro, 96 Tex. 345 122 

Latimer v. Bard, 76 Fed. Rep. 536 60 

Lazear v. Natl. Union Bank of Baltimore, 52 Md. 78 122, 123 

Leach v. Hale, 31 Iowa 69 11, 12 

Leather Mfgr. Natl. Bank t;. Ck>oper, 120 XT. 8. 778 185 

Letcher v. German Natl. Bank, 119 8. W. Rep. (Ky.) 236 35 

Levitan v. Houghton Natl. Bank, 174 Mich. 566 134 

Lewis ». Switz, 74 Fed. Rep. 381 59, 65 

Ubb7 V. Union NatL Bank, 99 IlL 622 22 

Linn Ck>. Natl. Bank v, Crawford, 69 Fed. Rep. 532 152, 186 

Lionberger v. Rouse, 9 Wall. 468. 139, 140 

Lockwood V. The American NatL Bank, 9 R. I. 308 46 

Logan Ck>unty Natl. Bank v, Townsend, 139 U. S. 67 11, 18, 186 

Lowry Natl. Bank, In re, 29 opp. Atty. Qen. 81 47, 100 

Luberg t;. Commonwealth, 94 Pa. St. 85 174 

Lucas V. Coe, 86 Fed. Rep. 972 64 

Lucas V. Goyemment NatL Bank, 78 Pa. St 228 ; 119 

Lucas County 17. Jamison, 179 Fed. Rep. 338. 155 

Lull V. Anamosa Natl. Bank, 110 Iowa 537 141 

Lynch v. Bank, 22 W. Va. 534 122 

Lyons v. Bank of Discount, 154 Fed. Rep. 391 148 

M 

Magoffin i;. Boyle Natl. Bank, 69 8. W. (Ky.) 702 22 

Magruder v. Colston, 44 Md. 349 60 

Marion Natl. Bank v. Burton, 90 8. W. 944 140 

Marion Natl. Bank v, Thompson, 101 Ky. 277 119 

Market NatL Bank t;. Pacific NatL Bank, 30 Hun (N. T.) 50 166 

Massey v, Fisher, 62 Fed. Rep. 958 167 

Matthews v. Columbia NatL Bank, 79 Fed. Rep. 558 43, 55, 56 

Mayor 1?, First Natt. Bank, 59 Ga. 648 141 

McBoyle v. Union Natl. Bank, 162 Cal. 277 18 

McBride v. lUinols NatL Bank, 128 App. Dir. (N. Y.) 603 188 

MoCann v. First Natl. Bank of Jeffersonville, 112 Ind. 354 44 

McCarthy v. First NaU. Bank, 223 U. S. 493; 121 N. W. 853.119, 121, 122 

McCartney v. Barle, 115 Fed. Rep. 462 186 

McClaine v. Rankin, 197 U. S. 154; 119 Fed. Rep. 110. . . .62, 68, 150, 151 
McCormick v. Market Natl. Bank of Chicago, 165 U. 8. 588 s. c 162 

111. 100 t, 21, 439 

McCreary v. First Natl. Bank of Morristown, 109 Tenn. 128. . . .121, 128 

McDonald v. Chemical Bank, 174 U. 8. 610 166 

McDonald v. Thompson, 184 U. 8. 71 68 



Digitized by CjOOQ IC 



XT 

PAOS 

HeFarlln v. First Natl. Bank of Kansas City, 68 Fed. Rep. 868. . . .42. 60 

MoOhee t;. First NatL Bank of Tobias, 40 Neb. 92 120 

McKinnon v. Morse» 177 Fed. Rep. 570 161 

McKnight V. U. S., 116 Fed, Rep. »72 172 

McMahon v, Macy, 61 N. Y. 166 66 

McQulddy v. King, 191 Ala. 205 89 

Mechanics' NatL Bank v. Baker, 66 N. J. Law 113 137 

MercanUle Natl. Bank t;. Mayor, 172 N. T. 86 130 

MercantUe NatL Bank v. New York, 121 U. a 138 136. 137 

Mercantile NatL Bank v. Shields, 69 F^d. Rep. 962 138 

Mercer v. Dyer, 16 Mont 817 167 

Merchants' k Planters' NaU. Bank v. Horton, 27 Okla. 689 122 

Merchants' Bank of Valdosta t;. Baird, 160 Fed. Rep. 642 16 

Merchants' Nati. Bank v. Glendon, 120 Mass. 97 190 

Merchants' NatL Bank v. Hanson, 83 Minn. 40 14 

MerchanU' NaU. Bank v. NaU. Bank, 231 Fed. Rep. 666 146 

Merchants' NatL Bank t;. Serier, 14 Fed. Rep. 662 120 

Merchants' N&tL Bank v. Sharkey. 64 Ore. 82 119 

Merchants' NatL Bank v. SUte NatL Bank, 10 WaU. 604 86, 100 

Merchants' NatL Bank v. Wehrmann, 202 U. S. 296; 69 Ohio St 160.. 17 

Merrill v. Florida Land k Improvement Ck>., 60 Fed. Rep. 17 61 

Merrill v. NaU. Bank of Jacksonville, 173 U. S. 131 164, 165, 166 

Metropolitan NatL Bank v, Claggett, 141 U. S. 620 46. 186. 470 

Metropolitan Stock Exchange v. Lyndonvllle NaU. Bank (Vt.), 67 

Aa Rep. 101 18 

Metropolitan Trust Ck>. v, McKinnon, 172 Fed. Rep. 846 12. Ill 

Meyers v. Valley NaU. Bank, Fed. Case No. 9519 Ill 

Michigan Insurance Bank v. Bldred, 143 U. S. 298 46 

Miller V. First Naa Bank of Cincinnati, 46 Ohio St 424 135 

Mmer V. Howard, 96 Tenn. 407 162 

Miller V. King, 223 U. S. 606 19 

Missouri River Telegraph Co. v. First Naa Bank. 74 111. 217 124 

Mix V. NatL Bank of Bloomington, 91 IlL 20 190 

Moore v. Jones, 8 Woods 63 60 

Morris v. Third NatL Bank, 142 Fed. Rep. 25 14. 22 

Morse v. United SUtes, 174 Fed. Rep. 639 173 

Moss V. Goodhart, 209 Fed. Rep. 102; 47 Mont 257 .151, 164 

Moss V. Whitsel, 108 Fed. Rep. 579 145. 156 

Movius V. Lee, 80 Fed. Rep. 298 69, 162 

Muir V. CiUzens' Naa Bank, 89 Wash. 67 145 

Multnomah County 17. Oregon NaU. Bank, 61 Fed. Rep. 912 167 

Murray t;. Chambers, 161 Fed. Rep. 142 186 

Murray v. Walker, 166 Ky. 686 85, 180 



Digitized by CjOOQ IC 



N 

PAGE 

NatL Bank v. Bruhn. 64 Tex. 671 117 

Natl. Bank v. Carpenter* 52 N. J. Law 165 122 

Nati. Bank v. Case, 99 U. S. 628 .12, 60, 111 

Natl. Bank v. Commonwealth, 9 Wall. 358 141 

Natl. Bank v, Drake, 35 Kans. 564 68 

Natl. Bank v. Graham, 100 U. S. 699 U 

Natl. Bank i;. Insurance Co., 104 U. S. 54 145 

NaU. Bank v. Johnson, 104 U. S. 271 116 

Naa Bank v. Matthews, 98 U. S. 621 14, 18, 22, 23 

NatL Bank v. Whitney. 103 U. S. 99 14 

NaU. Bank of Bninswick v. Sixth NatL Bank, 212 Pa. St. 288 15 

NatL Bank of Chattanooga v. Mayor, 8 Heiskell (Tenn) 814 141 

NatL Bank of Commerce v, Atkinson, 55 Fed. Rep. 465 16, 71 

Natl. Bank of Commerce v. Bquitable Trust Co., 227 Fed. Rep. 626 

s. c. 211 Fed. Rep. 688 19 

Natl. Bank of Commonwealth v. Mechanics' NatL Bank, 94 U. S. 437. 155 

Natt. Bank of Daingerfield v, Ragland, 181 U. S. 45. 121 

NaU. Bank of Guthrte v. Earl, 2 Okla. 617 16 

NaU. Bank of St Albans, In re, 49 Fed. Rep. 120 59 

NatL Bank of Rahway v. Carpenter, 52 N. J. Law 165 121 

Natl. Bank of Virginia v. City of Richmond, 42 Fed. Rep. 877 185 

NatL Bank of Winterset v. Eyre, 52 Iowa 114 128 

Nati. Bank of Xenia v. Stewart, 107 U. S. 676 110 

NaU. Exchange Bank of Balto. v, Peters, 44 Fed. 13 164 

NaU. Exchange Bank of Hartford v, Guy, 57 Conn. 224 52 

NaU. Park Bank of N. Y. v, Harmon, 214 Fed. Rep. 891 60 

NaU. Security Bank v. Butler, 129 U. S. 223 166 

NatL Security Bank v. Price, 22 Fed. Rep. 697 166 

Naa State Bank v. Brainard, 61 Hun. 839 119 

Natl. State Bank of Oskaloosa v. Young, 25 Iowa 311 184, 186 

Neyada Bank of San Francisco v. PorUand NaU. Bank, 59 Fed. 

Rep. 338 16 

Newell V. NatL Bank of Somerset, 12 Bush. (Ky.) 57 117, 124 

Newell V, Somerset First NaU. Bank, 13 Ky. L. Rep. 775 128 

New Orleans NatL Bank v. Raymond, 29 La. Ann. 355 22 

New York L. E. and W. R. R. Co., Matter of, 99 N. Y. 12 422 

Newport NatL Bank v. Board of EducaUon, 114 Ky. 87 18 

Newton NaU. Bank v. Newbegin, 74 Fed. Rep. 135 61 

Noble State Bank v. Haskell, 219 U. S. 104 19 

Norfolk NaU. Bank v. Schwenk, 46 Neb. 381 119, 128 

North Ward NatL Bank v. City of Newark, 39 N. J. Law 880 186 

Norton v. United States, 205 Fed. Rep. 698 172 



Digitized by CjOOQ IC 



o 

Oatei v. Fmt NaU. Bank, 100 U. a 23f US 

(yConnor v. Wbltherby. Ill CaL 623 6S 

0*Hare v. Second Natl. Bank of TltoBYlUa, n Pa. 8t. M loe 

Ohio YaUey NaU. Bank v. Hulltt, 204 U. 8. 162 18» €1 

Ordway v. Central Natt. Bank, 47 Md. 217 128. 145. 18C 

Omn V. Merchants' NatL Bank. 16 Kans. 34 22 

Osborn v. First NaU. Bank, 175 Pa, St, 4»4 \ 120. 122 

Owentboro NatL Bank v. Owenaboro. 178 XJ. S. 664 184 

Owinge v, Lehman, 190 111. App. 432 87 

P 

Pacific NatL Bank 17. Eaton. 141 U. S. 227 86. 48 

Pacific NatL Bank v. Mixter. 124 U. a 721; 114 U. a 462 162. 188 

Palmer v. McMahon. 133 XJ. S. 660 186 

Pape V. Capital Bank of Topeka, 20 Kana 440 14 

Park Naa Bank of Chicago v, Neblack. 67 IlL App. 688 149 

Patterson v. Plummer, 10 N. D. 95 141 

Pattison v, Syracuse Natl. Bank. 80 N. Y. 82 11 

Panl V. McOraw. 3 Wash. St. 296 141 

Faoly V, State Loan and Trust Co.. 165 U. S. 606 60 

Pearoe t;. U. S., 182 Fed. Rep. 561 172 

Pelton V. Commercial NaU. Bank. 101 U. S. 148 186. 141 

People V. Binghampton Trust Co.. 139 N. Y. 185 12 

People V. Brady, 271 111. 100 284 

People V, Commissioners. 4 Wall. 241 188 

People V. Peitner, 191 N. Y. 88 188 

People V. Remington, 121 N. T. 828 166 

People V. Weayer. 100 U. S. 539. reversing 67 N. Y. 516 and orsr- 

ruling People v. Dolan, 86 N. Y. 59 188 

People Bx. ReL Lorge v. Consolidated NatL Bank, 105 App. Dtr. 

(N. Y.). 409 180 

People's State Bank of Lakota v. Francis, 8 N. D. 869 151. 158 

Pepper v. Fidelity k Casualty Co., 125 Fed. Rep. 822 > 162 

Peterborough NatL Bank v, Chllds. 133 N. Y. 248 118 

Peters v. Bain, 133 U. S. 670 68 

Peters v. Commercial NatL Bank. 142 U. S. 614. .' 186 

Peters v. Foster, 56 Hun. 607. 149. 152 

PhiUer et al. v. Patterson, 168 Pa. St 468 17 

Pickett V, Merchants' NaU. Bank of Memphis, 32 Ark. 346 120 

Pittsburgh Works v. State Natl. Bank, Fed. Case No. 11. 198 12 

Flanten v. NaU. Nassau Bank. 174 App. DIy. (N. Y.) 264. . .145. 146. 164 



Digitized by CjOOQ IC 



FAOl 

Planters' Bank v. Berry, 92 Gcl 264 188 

Piatt V. Beebe, 67 N. Y. 889 148 

Potter 17. United States, 165 U. S. 438 176 

Presoott V, Haughey, 66 Fed. Rep. 663 164 

Prescott NatL Bank v, BuUer, 167 Mass. 648 14, 18 

Prettyman v. United States, 180 Fed. Rep. 80 171, 176 

Price V, Coleman, 88 Fed. Rep. 694 166 

R 

Rankin v. Barton, 199 U. S. 228 186 

Rankin v. Cooper, 149 Fed. Rep. 1010 164 

Rankin v, Bnkigh, 218 U. S. 27 19 

Rankin v. Fidelity Insurance, etc, Co., 189 U. S. 242 60 

Rankin v. Herod, 140 Fed. Rep. 661 186 

Rankin v. MiUer, 207 Fed. Rep. 602 62, 63 

Rankin v. Ware, 88 Kans. 23 62 

Raynor V. Pacific NatL Bank, 93 N. Y. 371 188 

Reynolds v. Crawfordsvllle Bank, 112 U. S. 406 14, 23 

Reynolds t;. Touzalln Imp. Co., 62 Neb. 236 18 

Rice Co. V. Commercial NatL Bank, 88 S. E. Rep. 999 16 

Richards v. AtUeboro Natl. Bank, 148 Mass. 187 631 

Richardson v. United States, 181 Fed. Rep. 1 171, 173, 174, 176 

Richmond 17. Irons, 121 U. S. 27 68, 146, 149, 686, 631 

Riddle t;. First Natl. Bank, 27 Fed. Rep. 608 86 

Roberts v. Hill, 23 Fed. Rep. 31 166 

Robertson v. Buffalo Co. Natl. Bank, 40 Neb. 236 17 

Robinson v. Hall, 63 Fed. Rep. 222, reversing 69 Fed. Rep. 648 

18, 163, 164, 162, 163 

Robinson v. Southern NatL Bank, 94 Fed. Rep. 964 60 

Robinson v. Turrentlne, 69 Fed. Rep. 664 69 

Rockwell 17. Farmers' Natl. Bank, 4 Colo. App. 662 117, 119 

Rosenblatt v. Johnson, 104 U. S. 462 140 

S 

St. Louis NatL Bank v. Vz^iu, Fed. Case No. 12, 239 186 

Salter v. Williams, 244 Fed. Rep. 126 61 

San Diego County v, California Natl. Bank, 62 Fed. Rep. 69 167 

San Francisco v, Crocker-Woolworth NatL Bank, 92 Fed. Rep. 273.. 134 

Schaberg's Bstate 17. McDonald, 60 Neb. 493 161 

Schofleld V, Baker, 212 Fed. Rep. 604 161 

Schofleld V. State Nati. Bank, 97 Fed. Rep. 282 16 



Digitized by CjOOQ IC 



xis: 

Schrader v. Hfgrg. NaU. Bank, IBS U. a 67 M, 146, 6M. 631 

Schuyler Naa Bank v. BoUons, 24 Neb. 821; 28 Neb. 684 

120, 121, 124, 186 

Schuyler NatL Bank t;. Qadtden, 191 U. a 461 123 

Scott v. Armstrong, 146 U. S. 499 167 

Scott V. Latimer, 89 Fed. Rep. 843 42, 64 

Scott V. United States, 180 Fed. Rep. 429 173 

The Seattle, 170 Fed. Rep. 284 106 

Second NaU. Bank 17. Fitzpatrick, 111 Ky. 228 117, 119, 121, 122 

Seeber v. Commercial NatL Bank of Ogden, 77 Fed. Rep. 9S7 18 

Shafer i;. First Naa Bank, 53 Kans. 614 119 

Shaw r. Natl. Qerman-American Bank, 132 Fed. Rep. 6S8 13 

Shunk V. First Natl. Bank of GaUon, 22 Ohio St 608 119 

Simons V, Fisher, 55 Fed. Rep. 905 71 

Simpson V. United States, 229 Fed. Rep. 940 176 

Sknd 17. TlUin^^iast, 195 Fed. Rep. 1 163 

Slaughter v. First NatL Bank, 109 Ala. 157 123, 124, 174 

SmaUey v, McGraw, 148 Mich. 394 166 

Smith V. Exchange NatL Bank of PitUburgh, 26 Ohio St 141. . .14, 123 

Smith V. First Naa Bank of Chadron, 45 Neb. 444 106 

Smith V. First Natt. Bank of Crete, 42 Neb. 687 121 

Smith V, PhilUps NatL Bank, 114 Me. 297 53 

Smithson v. Hubbell, 81 Fed. Rep. 593 186 

Snohomish County v, Puget Sound Natl. Bank, 81 Fed. Rep. 618. . . . 185 

Snyder v. Mt SterUng Natl. Bank, 94 Ky. 231 120 

Sowles V. Witters, 39 Fed. Rep. 403 63 

Spofford V. First Natl. Bank of Tama City, 37 Iowa 181 12 

Spokane County v, Clark, 61 Fed. Rep. 538 167 

Sponberg v. First NatL Bank, 18 Idaho 524 21 

StalTord NaU. Bank v, Darls, 59 N. H. 38 136 

SUte V. Clement NatL Bank, 84 Vt 167 141, 142 

State V. People's NaU. Bank, 70 AtL Rep. (N. H.) 542 11, 12 

State V. Tuller, 34 Conn. 280 174 

Stephens v. Bemays, 41 Fed. Rep. 401 152 

Stephens v. Follett, 43 Fed. Rep. 842 60 

Stephens v. Monongahela Bank, 111 U. S. 197 123 

Stephens v. Orerstoltz, 43 Fed. Rep. 465, 471 163, 164 

Stokes V. Continental Trust Co., 186 N. Y. 285 43 

Stout V. United SUtes, 227 Fed. Rep. 799 175 

Studebaker v. Perry, 184 U. a 258; 102 Fed. Rep. 947 2, 68, 64 

Supervisors v. SUnley, 106 U. S. 805 138 

Sykesi;. Canton First NatL Bank, 2 a D. 842 U 



Digitized by CjOOQ IC 



T 

PACS 

TalboU 17. SUyer Bow (bounty, 139 U. S. 438, 441 136, 140 

Tapley v. Martin, 116 Mass. 275 18, 190 

Taylor v, Hutton, 43 Barb. 195 71 

Taylor v. Thomas, 124 App. Dlv. (N. Y.) 53 165 

Teague v. First Natl. Bank of Salina, 5 Kans. App. 300 122 

Tecumseh Natl. Bank v. Chamberlain, 63 Neb. 163 153 

Thatcher v. West River Natl. Bank, 19 Mich. 196 190 

Thayer v. Butler, 141 U. S. 234 36, 59 

Third NaU. Bank, In re, 4 Fed. Rep. 775 161 

Third NaU. Bank v. Blake, 73 N. Y. 260 12. 22 

Third Natl. Bank 17. Buffalo German Ins. Co., 193 U. S. 581, s. c. 

16^ N. Y. 163 109, 110 

Third Natl. Bank v. Hughes, 76 Fed. Rep. 385 142 

Third Natl. Bank of PhUadelphia v. Miller, 90 Pa. St. 241 119 

Thomas v. City Natl. Bank of Hastings, 40 Neb. 501 15 

Thomas v. Farmers' Bank of Maryland, 46 Md. 43 46 

Thomas v. Gilbert, 101 Pac. Rep. (Oregon) 393 112 

Thomas v. Taylor, 224 U. S. 73 165 

Thompson v, German Insurance Co., 76 Fed. Rep. 892 63, 152 

Thompson t?. St. Nicholas Natl. Bank, 146 U. S. 240 14, 109 

Tifltoy V. Natl. Bank, 18 Wall. 409 116 

Tillinghast v. Bailey, 86 Fed. Rep. 46 60 

Tlmberlake v. First Natl. Bank, 43 Fed. Rep. 231 117, 120, 122, 124 

Tootle V, First Natl. Bank of Port Angeles, 6 Wash. 181 18 

Tonrtelot i;. Stoltenben, 101 Fed. Rep. 362 61 

Town Council of Lexington v. Union Natl. Bank, 75 Miss. 1 18 

Trabue v. Cook, 12 S. W. Rep. 455 122 

Traders' NatL Bank v, Chipman, 164 U. S. 347 168 

Trenholm v. Commercial Natl. Bank, 38 Fed. Rep. 823 162 

Trustees v. Natl. State Bank, 57 N. J. Law 27 18 

Tuttle V. Iron Natl. Bank, 170 N. Y. 9 145, 187 

U 

United States v. AUen, 47 Fed. Rep. 696 173 

United States v. Breese, 131 Fed. Rep. 9lS, 916 172 

United States v. Britton, 107 U. S. 655; 108 U. S. 199 172> 173 

United States v. Cadwallader, 59 Fed. Rep. 677 175 

United States v, Conners, 111 Fed. Rep. 734 17S 

United SUtes v. Corbett. 215 U. S. 233 172. 173 

United States v, Crecellus, 34 Fed. Rep. 30 173 

United States v. CurUs. 107 U. S. 671 68 

United SUtes v. Bge, 49 Fed. Rep. 852 173 



Digitized by CjOOQ IC 



m 

PUB 

United States i;. Bno, 56 FecL Rep. US 174 

United States v. Fish, 24 Fed. Rep. 585 17S 

United States v. French, 57 Fed. Rep. 882 175 

United States v. German, 115 Fed. Rep. 987 172 

United States v, Qraves, 53 Fed. Rep. 634 173 

United States v. Harper, 33 Fed. Rep. 471 172, 173 

United States r. Heinze, 161 Fed. Re0. 425; 183 Fed. Rep. Wl\ 

218 U. S. 532 10». 172, 175 

United States v. Herrlg, 204 Fed. Rep. 124 173 

United States v, HiUegas. 176 Fed. Rep. 444 174 

United SUtes ». Hnghitt, 45 Fed. Rep. 47 173 

United States v. Jewett, 84 Fed. Rep. 142 175 

United States v. Martlndale, 146 Fed. Rep. 280 172 

United States v. McClarty, 191 F^d. Rep. 523 173 

United States v. Means, 42 Fed. Rep. 599 173 

United States v. Morse, 161 Fed. Rep. 429 172 

United States r. Northwar, 129 U. S. 327 175 

United States v. Norton, 188 Fed. Rep. 256 172, 175 

United States v. Potter, 56 Fed. Rep. 83 175 

United States v. Smith, 152 Fed. Rep. 542 175 

United States v. Steinman, 172 Fed. Rep. 913 172 

United States v. Twining, 132 Fed. Rep. 129 189 

United States v. Warner, 26 Fed. Rep. 616 174 

United States v. Weitzel, 246 U. S. 533 175 

United States v. Wilson, 176 Fed. Rep. 806 172, 173 

United States ex rel. Cond v. Barry, 36 Fed. Rep. 246 56 

United States NaU. Bank v. First NaU. Bank, 79 Fed. Rep. 296. . . .14, 71 
Upton V. Natl. Bank of South Reading, 120 Mass. 153 22 

V 

Van Allen v. Assessors, 3 WaU. 573 39, 135, 137, 139, 140 

Van Lenven v. First NatL Bank, 54 N. Y. 671 12 

Van Reed v. People's Natl. Bank, 198 U. S. 554; 173 N. T. 314 188 

Van Slyke v. State, 26 Wis. 655 140 

Venango NatL Bank v. Taylor, 66 Pa. St 14 167 

W 

Waits V. Dowly, 94 U. S. 527 141 

Walden Natl. Bank v. Birch, 130 N. Y. 221 110 

Walsh V. United States. 174 Fed. Rep. 615 172 

Walker v. Windsor NatL Bank, 56 Fed. Rep. 76 ^ 186 

Washington Natl. Bank t;. King County, 9 Wash. 607 137 



Digitized by CjOOQ IC 



xzU 

Washington NatL Bank i;. Bckela, 57 Fed. Rep. ^0 146» 148 

Watkins v. NaU. Bank of Lawrence, 51 Kane. 264 145, 146 

Watt V. First NaU. Bank, 76 Minn. 458 121 

Weber v. Spokane NatL Bank, 64 Fed. Rep. 208, rerersins 50 Fed. 

Rep. 785 108 

Weckler v. First Natl. Bank of Hagerstown, 42 Md. 581 12 

Weitsel V. Brown, 224 Mass. 190 3, 62, 140, 152, 190 

WeUes V, Graves, 41 Fed. Rep. 459 162, 163, 164 

Welles V. Larrabee et aL, 86 Fed. Rep. 866 60, 65 

Welles V, Stout, 38 Fed. Rep. 807 63 

Western NatL Bank v. Armstrong, 152 U. S. 346 14 

Westervelt v. Mohrenstecher, 76 Fed. Rep. 118 17 

Wheeler v. Union NatL Bank, 96 U. S. 785 124 

Wheelock v. Kost, 77 111. 296 60, 61, 148 

Whltbecki7. Mercantile Bank, 127 U. S. 193 136 

White V. Knox, HI U. S. 784 155 

Whitney NatL Bank t;. Parker, 41 Fed. Rep. 402 135 

Wichita Naa Bank v. Smith, 72 Fed. Rep. 568 185 

Wickham v. Hull, 60 Fed. Rep. 326 58, 186 

Wigert V. First NatL Bank, 175 Fed. Rep. 739 21 

WUd, In re. Fed. Case No. 4173, 11 Blatchford 243 117 

Wiley v. First NatL Bank of BratUeboro, 47 Vt 546 11 

Wiley V. Starbuck, 44 Ind. 298 117, 123 

Willard Mfg. Co. v. Tlemey, 180 N. C. 611 188 

Williams v. American Natl. Bank, 85 Fed. Rep. 376 43 

Williams V. Brady, 232 Fed. Rep. 740 164, 165 

Williams V, Cobb, 219 Fed. Rep. 663 37 

Williamson v, American Bank, 109 Fed. Rep. 36, 115 Fed. Rep. 793 

63, 64, 147 

Winter v. Baldwin, 89 Ala. 483 36 

Witters V. Foster, 28 Fed. Rep. 737 186 

Witters v. Sowles, 35 Fed. Rep. 640; 38 Fed. Rep. 700 59 

Wolverton v. Exchange NatL Bank. 11 Wash. 94 117 

Woodward v, BUsworth, 4 Colo. 580 140 

Woodward v. Old Second Natl. Bank, 154 Mich. 459 130 

Wright V, First NatL Bank, Fed. Case No. 18,078, 8 Bliss. 243 122 

Wright V, Merchants' Natl. Bank, Fed. Case No. 18,084 149 

Wylle V. Northampton Bank, 119 U. S. 361 11 

Wyman v. Citizens' Natl. Bank of Faribault, 29 Fed. Rep. 734 106 

Wyman v, Wallace, 201 U. a 230 147 



Digitized by CjOOQ IC 



mil 

PAoa 

Tardlef v. Clothtor, 4f Ftd. lUp. 8t7; 61 FM. Rep. B06 1C7 

Tmtes V. JonM Naa Bank* 206 U. 8. 158; S40 U. a 641 164, 1C6 

TaUma NaU. Bank v. Knlpe, 6 Wash. 348 191 

Yerkei v. Naa Bank of Port Jenrls, 69 N. Y. 883 12, 14 

Tonns t;. McKay, 60 Fed. Rep. 394 36 

Yoniig V. Wempke, 46 FM. Rep. 364. 149 



Zlna V. BaxtM-, 66 Ohio St 341 163 



Digitized by CjOOQ IC 



INDEX TO SECTIONS OF U. S. REVISED STATUTES AND 

ADDITIONAL ACTS RELATING TO NATIONAL 

AND FEDERAL RESERVE BANKS 

SECTIONS OF U. S. REVISED STATUTES 



U.S. 






U.S. 






U.S. 






Revlfled 
Statute 


mSL 


FAge. 


Rerised 
Statute 


Digest 
Se^on. 


Page. 


ReTlfed 
Statute 


DlMt 

SeoSon. 


Page. 


Seotioii. 






Seotioii. 






Seottou. 






324... 


2 


2 


5152 .... 


47 


64 


6211.... 


127 


125 


825... 


8 


2 


5153 .... 


30 


44 


6212 .... 


128 


127 


326... 


4 


2 


5154 .... 


31 


45 


5213.... 


129 


128 


327... 


5 


3 


5155 . . . . 


32 


47 


5214.... 


136, 137 


131 


828... 


6 


8 


5168 .... 


56 


76 


5215.... 


139 


132 


329... 


7 


3 


5161.... 


57 


76 


5216 .... 


140 


133 


830... 


8 


4 


5162.... 


67 


79 


5217.... 


141 


133 


331... 


9 


4 


5163.... 


68 


80 


5218.... 


142 


133 


833... 


10 


5 


5164.... 


69 


80 


5219.... 


144 


134 


380... 


188 


189 


5165.... 


70 


80 


5220 .... 


149 


144 


736 .. . 


187 


189 


5166.... 


71 


81 


6221 ... . 


150 


146 


884... 


189 


189 


5167.... 


64,65,66 


78,79 


5222 .... 


94 


91 


885... 


190 


190 


5168.... 


24 


40 


5223 .... 


91 


89 


3583... 


179 


182 


5169 .... 


25 


40 


5224 .... 


95 


92 


3584... 


346 


386 


5170.... 


26 


41 


5225 .... 


97 


93 


8585... 


347 


387 


5172.... 


76 


83 


5226.... 


98 


98 


3587... 


3-)0 


387 


5173.... 


77 


84 


5227 .... 


99 


94 


3588... 


351 


387 


5174.... 


79 


84 


5228 .... 


100 


95 


3589... 


352 


887 


5175*... 


76 


82 


5229 .... 


101 


95 


3590. . 


353 


388 


6182.... 


81 


85 


5230.... 


102 


95 


8620... 


316 


345 


518S.... 


83 


86 


5231.... 


108 


96 


3701... 


146 


143 


5184 .... 


84 


86 


5232 ... 


106 


97 


8847... 


317 


346 


5187.... 


166 


169 


5233 .... 


107 


97 


5133... 


12 


8 


5188.... 


180 


182 


5234 .... 


152,164 


147, 150 


5134... 


18 


8 


5189.... 


181 


183 


5235 .... 


155 


154 


5135... 


14 


9 


5190.... 


109 


99 


5236 .... 


156 


154 


6136... 


15 


9 


5195.... 


88 


87 


5237 .... 


157 


156 


5137... 


17 


20 


5196 ... 


121 


114 


5238 .... 


158 


156 


5138... 


20 


34 


5197.... 


125 


115 


6239.... 


163 


161 


6139 . . . 


21 


34 


5198... 


126 


118 


5240.... 


131 


129 


5140... 


22 


37 


5199 ... 


119 


113 


5241.... 


135 


130 


5141... 


23 


38 


5200 .... 


113 


101 


5242 .... 


164,186 


165, 187 


6142... 


28 


42 


5201.... 


116 


109 


5243 .... 


182 


183 


5143 . . . 


29 


43 


5202.... 


114 


107 


5413.... 


169 


176 


6144... 


44 


54 


5203.... 


120 


114 


5415.... 


170 


176 


5145... 


48 


65 


5204..., 


118 


112 


5430.... 


171 


177 


5146... 


49 


66 


6205.... 


117 


111 


6431.... 


172 


179 


5147... 


50 


67 


5206.... 


122 


114 


5432.... 


178 


179 


6148... 


51 


69 


5207.... 


166 


170 


5433 .... 


174 


179 


5149... 


52 


69 


5208 ... . 


115 


108 


6434.... 


175 


180 


5150... 


53 


70 


5209.... 


167 


170 


6437.... 


176 


180 


5151... 


45 


56 


5210.... 


124 


115 


5497.... 


177 


181 



ClUpMkd) 



Digitized by CjOOQ IC 



ACTS RELATING TO NATIONAL AND FEDERAL 
RESERVE BANKS 



Aoi Dmn 

Jona 20, 1874 1 1 

June 20, 1874 78 84 

June 20, 1874 89 87 

June 20, 1874 11 89 

June 20, 1874 9€ 91 

June 20, 1874 104 96 

June 23, 1874 108 98 

Jan. 14, 1875 80 U 

Feb. 8, 1875 147 148 

Feb. 8, 1875 148 148 

Feb. 18, 1875 8 4 

Feb. 18, 1875 95 92 

Feb. 18, 1875 100 95 

Jane 30, 1876 117 111 

June 30, 1876 123 115 

June 30, 1876 151 147 

June 30, 1876 158 148 

June 30, 1876 162 158 

Feb. 27, 1877 79 84 

Feb. 27, 1877 97 98 

Feb. 27, 1877 127 125 

Feb. 27, 1877 See. 1 816 845 

Feb. 28, 1878 Sec 1 848 887 

March 1, 1879 143 138 

June 9, 1879 Sec. 3 349 387 

Feb. 26, 1881 130 128 

July 12, 1882 Ch. 290 Sec 1 37 50 

July 12, 1882 Sec. 3 40 51 

July 12, 1882 Sec 4 41 51 

July 12, 1882 Sec. 5 42 62 

July 12, 1882 Sec 7 43 98 

July 12, 1882 92 90 

July 12, 1882 93 90 

July 12, 1882 105 96 

jQly 12, 1SS2 168 175 

July 12, UM2 192 154 



Digitized by CjOOQ IC 



ZZYi 



Act 








DiOMT aacnmn 


Paoi 


July 12, 1882 1 


3ec. 12 






865 


388 


March 29, 1886 








169 


157 


March 29, 1886 








160 


158 


March 29, 1886 








161 


158 


May 1, 1886 


Ch 78 Sec 1 




27 


41 


May 1, 1886 


Ch 73 Sec 2 




84 


49 


May 1, 1886 


Ch 78 Sec S 




35 


49 


May 1, 1886 


Ch 78 Sec 4 




86 


49 


Aug. 18, 18818 








184 


185 


July 14, 1890 








90 


88 


July 28, 1892 








82 


85 


Aug. 13, 1894 








145 


142 


March 2, 1897 








162 


158 


March 14, 1900 


Sec 1 






829 


377 


March 14, 1900 


Sec 2 






880 


377 


March 14, 1900 


Sec 8 






857 


389 


March 14, 1900 


Sec 4 






881 


379 


March 14, 1900 


Sec 6 






382 


379 


March 14, 1900 


Sec 6 






388 


380 


March 14, 1900 


Sec 7 






334 


381 


March 14, 1900 


Sec 8 






335 


381 


March 14, 1900 


Sec 9 






330 


382 


March 14, 1900 


Sec 10 






20 


84 


March 14, 1900 


Sec 11 






59, 60, 61 


77 


March 14, 1900 


Sec 12 




58, 72, 73, 74, 75 


76, 81, 82 


March 14, 1900 


Sec la 






137 


181 


March 14, 1900 


Sec 14 






344 


385 


Biarch 3, 1901 


Ch871 






80 


44 


April 12, 1902 


Ch508 






88 


50 


April 28, 1902 








10, 11 


6,6 


Feb. 28, 1905 








49 


66 


Dec. 21, 1905 








62, 188 


78, 182 


Jan. 22, 1906 








113 


101 


Jan. 26, 1907 








178 


181 


March 4, 1907 








92 


90 


March 4, 1907 


Sec 1 






388 


380 


March 4, 1907 


Sec 2 






345 


386 


March 4, 1907 


Sec. 8 






30 


44 


May 27, 1908 








317 


346 


March 4, 1909 




169, 


170, 


171,172,178. 176,177, 


179, 180, 181, 






174, 


175, 


176, 177, 179, 182, 183 








180, 


181 






March 4, 1909 


Sec 285 






318 


847 



Digitized by CjOOQ IC 



ZZTll 

Aov DmiT SionoK Paoi 



Mareli4, 1909 


See. 87 


323 


360 


June 26, 1910 


Sec 8 


327 


876 


June 25, 1910 


Sec 10 


328 


375 


March 2, 1911 




63 


78 


March 2, 1911 




333 


380 


March 3, 1911 




186 


187 


Dea 23, 1913 


Sec 1 


192 


198 


Dec. 23, 1913 


Sec 2 


193, 194, 195, 196, 197, 
198, 199, 200, 201 


198, 200, 201, 202, 203 


Dec. 23, 1913 


8ec8 


202 


203 


Dec 23, 1913 


Sec4 


203, 204, 205, 206, 207, 


204, 205, 206, 207, 208, 






208, 209, 210, 211, 212 


210, 211 


Dm. 23, 1913 


Sec 6 


213 


212 


Dec 23, 1913 


Sec 6 


213 


212 


Dec 23, 1913 


Sec 7 


214, 215 


216, 218 


Dec 23, 1913 


Sec 8 


31 


45 


Dec 23, 1913 


Sec 9 


217 


218 


Dec 23, 1913 


Sec 10 


2, 218, 219, 220, 221, 
222, 223 


2, 226, 227, 228 


Dec 23, 1918 


Seen 


225. 226, 227, 228, 229, 
230, 231, 232, 233, 234, 
235, 236, 237 


229, 230, 231. 232, 237 


Dec 23, 1913 


Sec 12 


238 


238 


Dec 23, 1918 


Sec 13 


19, 114, 239, 240, 241, 


28, 107, 239, 240, 249. 






242, 243, 244, 246, 248 


252, 253, 259, 260, 261 


Dec 23, 1913 


Sec. 14 


249, 260, 251, 252, 253, 
254 


265, 268, 269, 278, 274 


Dec 23, 1913 


Sec 16 


255 


275 


Dec 23, 1913 


Sec 16 


256, 257, 258, 259, 260, 


276, 277, 278, 279, 280, 






261, 262, 263, 264, 265 


281, 282, 283 


Dec 23, 1913 


Sec 17 


54 


74 


Dec 23, 1913 


Sec 18 


55, 269, 270, 271, 272 


74, 290, 291, 292 


Dec 23, 1913 


Sec 19 


273, 274, 275, 276, 278, 


292, 294, 295, 296, 297, 






279, 280, 281 


300 


Dec 28, 1913 


Sec 20 


282 


300 


Dec 23, 1913 


Sec 21 


131, 285, 286, 287 


129, 300, 301 


Dec 23, 1913 


Sec 22 


288 


301 


Dec. 23, 1913 


Sec 23 


46 


57 


Dec 23, 1913 


Sec 24 


18 


23 


Dec 23, 1913 


Sec 26 


291, 292v 293, 294, 295, 
296 


304, 305, 306. 307 


Jhe. 2S, 191Z 


Sec 26 


298 


327 


Dec MS, tm 


Sec 17 


299 


827 



Digitized by CjOOQ IC 



SXTlll 



Act 






DimnT Sbotion 




Vam 


Dec. 23» 1913 Sec. 28 








21 






48 


Dec. 23. 1913 Sec. 29 








301 






327 


Dec. 23, 1913 Sec. 30 








302 






328 


Aug. 15, 1914 




278. 


279 


, 280, 281 






296, 297, 300 


Oct. 15, 1914 (Clayton Act) 














Sec. 8 


304, 


305, 


306, 


807, 308 


888, 


334. 


336. 338. 340 


Oct. 15, 1914 Sec. 11 


309, 
314. 


310, 
315 


311. 


312, 313, 




341, 


842, 343. 344 


March 3, 1915 








239 






239 


May 15, 1916 








154, 307 






150, 338 


May 18. 1916 Sec. 2 








325 






361 


May 18, 1916 Sec. 17 








326 






375 


June 12, 1916 








333 






380 


July 17, 1916 Sec. 6 








321 






349 


Sept. 7, 1916 


18. 


19, 114. 


237, 239, 


23, 


28, 107, 237. 239, | 




240. 


241, 


242. 


243, 244, 


240, 


249, 


252. 253, 259. 




246. 


248. 


254. 


267, 291, 


260. 


261, 


274. 277. 304, 




292. 


293. 


294, 


295. 296 


305. 


306, 


307 


April 24. 1917 Sec 7 








319, 320 






348 


June 21, 1917 








202 






203 


June 21, 1917 Sec. 2 








209 






210 


June 21. 1917 Sec. 3 








217 






218 


June 21. 1917 Sec. 4 








239 






239 


June 21. 1917 Sec. 5 








243 






253 


June 21, 1917 Sec. 6 








254 






274 


June 21, 1917 Sec. 7 


257. 
262 


258. 


259, 


260. 261, 


277, 


278, 


279, 280, 281 


June 21, 1917 Sec. 8 








266 






289 


June 21, 1917 Sec. 9 








54 






74 


June 21. 1917 Sec. 10 


273. 


274. 


275, 


276. 277. 


292. 


294, 


295. 296. 297, 




278, 


279. 


280, 


281 


300 






June 21. 1917 Sec. 11 








288 






801 


Oct. 5. 1917 








75 






82 


April 5. 1918 








114 






107 


April 23. 1918 Sec. 1 








387 






882 


April 23. 1918 Sec. 2 








388 






382 


April 23. 1918 Sec. 3 








889 






883 


April 23, 1918 Sec. 4 








340 






888 


April 23. 1918 Sec. 5 








341 






384 


April 23, 1918 Sec. 6 








842 






884 


April 23, 1918 Sec. 7 








842 






384 


April 23. 1918 Sec. 8 








848 






384 


April 23. 1918 Sec. 9 








343 






385 



Digitized by CjOOQ IC 



Am 




Dionr SBcrncm 


Pa« 


May 22, 1»18 




16 


19 


Sept 24, 1918 




113 


101 


Sept 26, 1918 




116, 167, 168 


100, 170, 176 


Sept 26, 1918 


See. 1 


208 


208 


Sept 26, 1918 


Sec 2 


tU 


282 


Sept 26, 1918 


Sec 8 


268 


282 


Sept 26, 1918 


Sec 4 


276, 276 


296 


Sept 26, 1918 


Sec 5 


188 


801 


Nov. 7, 1918 




88 


47 


March 8, 1919 




76 


88 


March 8, 1919 


Sec 1 


214 


216 


March 3, 1919 


8ec2 


219 


226 


March 8, 1919 


Sec 8 


287 


287 


S^>t 17, 1919 




292, 293 


806, 806 


Oct 22, 1919 




118, 114 


101, 107 


Dec. 24, 1919 




297,856 


807,889 


Jan. 18, 1920 




81 


86 


April 18, 1920 




218 


274 



Digitized by CjOOQ IC 



Digitized by CjOOQ IC 



PART ONB 
THE VAnOVAL BAIK ACT, AMJMJIMJUI Tg 

ASS sutplhiihtabt acts 

WITH AKN0TATI0K8 



CHAPTBB I. 



GOMPTBOILEB OF THE CITBBEHCT. 



Section 1. Title of Act. 

2. Bureau of Comptroller of the Currwicy. 

3. Comptroller of the Currency. 

4. Oath and Bond of Comptroller. 

6. Deputy Comptroll^; duties^ etc. 
"B. Clerks. 

7. Prohibition Against Interest in National Banks. 

8. Seal of OfSce. 

9. Offices^ Vaults, etc., for Bureau. 

10. Annual Beport of Comptroller. 

11. Furnishing of List of Clerks, etc 

§ 1. Title of Aot«— The act entitled ''An act to provide a 
National currency secured by a pledge of TTnited States bonds, 
and to provide for the circulation and redemption thereof,'' ap- 
proved June third, eighteen hundred and sixty-four, shall here* 
after be known as the ''National Bank Act'' (Act June 20, 1874, 
Oh. 343, Sec. 1, 18 Stai L. 123.) 

1 



Digitized by CjOOQ IC 



§ 2. Bureau of Comptroller of the Currency. — There shall be in 
the Department of the Treasury a bureau charged with the execu- 
tion of all laws passed by Congress relating to the issue and regu- 
lation of National currency secured by United States bonds and^ 
under the general supervision of the Federal Beserve Boards of all 
Federal reserve notes^ the chief officer of which bureau shall be 
called the ComptroUer of the Currency and shall perform, his 
duties under the general directions of the Secretary of the Treas- 
ury. (Bev. Stat. TJ. S. Sec. 324, as amended by Sec. 10, Act Dec. 
23, 1913, 38 Stat. L. 260.) 

While the construction of National banking laws by the Comptroller 
of the Currency is persuasive, and entitled to careful consideration, 
yet a court, if satisfied that such construction is error, will not follow 
it (Deweese v. Smith, 106 Fed. Rep., 438.) And where the meaning 
of the act is clear, the construction placed thereon by the Comptroller 
can not be considered. (Studebaker v. Perrin, 184 U. S., 252.) 

The Federal Trade Commission has no jurisdiction over banks. 

§ 3. Comptroller of the Currency— Appointment — ^Term of Offloe 
— Salary. — The Comptroller of the Currency shall be appointed by 
the President, on the recommendation of the Secretary of the 
Treasury, by and with the advice and consent of the Senate, and 
shall hold his office for the term of five years unless sooner re- 
moved by the President, upon reasons to be communicated by him 
to the Senate; and he shall be entitled to a salary of five thousand 
dollars a year. (Bev. Stat. U. S. Sec. 325.) 

For compensation of Comptroller as member of Reserve Board see 
Sec 10 Federal Reserve Act, page 226. 

§ 4. Oath and Bond of Comptroller. — The Comptroller of the 
Currency shall, within fifteen days from the time of notice of 
his appointment, take and subscribe the oath of office; and he 
shall give to the United States a bond in the penally of one hun- 
dred thousand dollars, with not less than two responsible sureties, 
to be approved by the Secretary of the Treasury, conditioned for 
the faitiiful discharge of the duties of his office. (Bev. Stat. U. S. 
Sec. 326.) 

The bond of a surety company is now accepted. 



Digitized by CjOOQ IC 



§ S. Deputy ConptroUar: Jhtdm, Ite.— There ahall be in the 
Bureau of the Comptroller of the Currency a Deputy Comptroller 
of the Currency^ to be appointed by the Secretary^ who shall be 
entitled to a salary of two thousand five hundred dollars a year> 
and who shall possess the power and perform the duties attadied 
by law to the office of Comptroller during a vacancy in the office 
or during the absence or inability of the ComptroUer. The Dqmty 
Comptroller shall also take the oath of office prescribed by the 
Constitution and laws of the United States, and shall giro a like 
bond in the penalty of fifty thousand doOars. (Ber. Stat U. S« 
Sec 827.) 

Salast.— tBy the i^q^roprlation act of Feb. 8, 1905, and an nbse- 
qaent acts the salary of the Deputy Comptrc^ler has been fixed at 98,600. 

jjnaasAL Nancs.— Hie court wUl take judicial notice of the Cset that 
a certain person was on a certain day the Deputy CknnptroUer of the 
Currency; and where he has signed a certificate as "Acting Oomp- 
troUer^ the court wUl assume that at the date itt such certlltoate he 
was anthorlied to exercise the powers and discharge the duties of 
CkMuptroUer. (Keyser v. Hits, 188 U. &, 488; Weltsel v. Brown» 884 
190.) 



ADDinoHAL Dkputt OoxFTioixii.— By the appropriation act of May 
22, 1908, provision was made for an additional Deputy Ck>mptroller, at 
a salary of $3,000, who shall possess the power and perform the duties 
attached by law to the office of Comptroller during a vacancy in the 
ofBce of Comptroller and Deputy ComptroUer, or during the absence or 
inability <^ the Comptroller and the Deputy ComptroUer, and said 
tussistant Deputy ComptroUer shall give a like b<md in the penalty of 
$60,000. 

§ 6, derio^ — The Comptroller of the Currency shall employ^ 
from time to time, the necessary d^ks, to be appointed and clas- 
sified by the Secretary of the Treasury^ to discharge such duties 
as the Comptroller shall direct. (Bev. Stat XT. S. Sec. 328.) 

§ 7. Prohibition Against Interest in National Banks.— It shall 
not be lawful for the Comptroller or the Deputy Comptroller of 
the Currency, either directly or indirectly, te be interested in any 
association issuing National Currency und^ the laws of the TJnited 
States. (Bev. Stat U. S. Sec. 329.) 



Digitized by CjOOQ IC 



For prohibition against interest in State Bank or Trust CkAnpany 
see Sec. 10 Federal Reserve Act, page 227. 

§ 8. Seal of Office.— The seal devised by the Comptroller of 
the Currency for his c^ee, and approved by the Secretary of the 
Treasury^ shall continue to be the seal of office of the Comptroller, 
and may be renewed when necessary. A description of the seal, 
with an impression thereof, and a certificate of approval by the 
Secretary of the Treasury, shall be filed in the office of the Sec- 
retary of State. (Bev. Stat TJ. S. Sec. 330 as am^ded by Act, 
Feb. 18, 1876, Chap. 80, 18 Stat L. 817.) 

§ 9. Offioei, Taultt, etc., for Bnrean. — There shall be assigned 
from time to time, to the Comptroller of the Currency, by the 
Secretary of the Treasury, suitable rooms in the Treasury build- 
ing for conducting the business of the Currency Bureau, con- 
taining safe and secure fire-proof vaults, in which the Comptroller 
shall deposit and safely keep all the plates not necessarily in the 
possession of engravers or printers, and other valuable things be- 
longing to his Department; and the Comptroller shall from time 
to time furnish the necessary furniture, stationery, fuel, lights, 
and other proper conveniences for the transaction of the business 
of his office. (Bev. Stat U. S. Sec. 331.) 

§ l<k. Annual Beport of Comptroller. — The Comptroller of 
the Currency shall make an annual report to Congress, at the com- 
mencement of its session, exhibiting — 

First. A summary of the state and condition of every associa- 
tion from which reports have been received the preceding year, at 
the several dates to which such reports refer, with an abstract of 
the whole amount of banking capital returned by them, of the 
whole amount of their debts and liabilities, the amount of circu- 
lating notes outstanding, and the total amount of means and re- 
sources, specifjring the amount of lawful money held by them at 
the times of tiieir several returns, and such other information in 
relation to such associations as, in his judgment, may be useful 

Second. A statement of the associations whose business has been 



Digitized by CjOOQ IC 



dosed during fhe year, with the amoiint of their drcQlation re- 
deemed and the amount outstanding. 

Third. Any amendment to the laws relatiye to banking by 
which the system may be improved and the security of the holders 
of its notes and other creditors may be increased. 

Fourth. A statement exhibiting under appropriate heads the 
resources and liabilities and condition of the banks, hanking oom- 
paniesy and savings banks oiganized under the laws of the several 
States and Territories; such information to be obtained by the 
Comptroller from the reports made by such banks, banking com- 
panies, and savings banks to the l^islatnres or <rfSeers of the differ- 
ent States and Territories, and, where such reports can not be ob- 
tained, the deficiency to be supplied from such other authentic 
sources as may be available. 

Fifth. The names and compensation of the clerks employed by 
him, and the whole amount of the expense of the banking de- 
partm^t during the year. (Bev. Stat U. S. Sec. 333) ; expenses 
incurred during each year, in liquidation of each failed National 
bank separately. (Sec. 12, Act April 28, 1902, 32 Stat L. 138.) 

How Copies to be OnAnnED. — The first report of the ComptroUer of 
the Currency was made tor the year ISSS hy the Hon. Huith Ho- 
CuUoch, the first ComptroUer. The earlier reports are otit of print, and 
those of some of the later years also, but copies of such as are on hand 
and can be spared may be obtained on application ta the ComptroUer 
of the Currency by bankers and others who are interested In banking 
matters. 

Refobt io bb Pbinted.— By Act January 12, 18S5, Ch. 28 (2S Stat 
L. 616), as amended by Pub. Res. 26, March 4, 1907 (34 Stat U 
1425), It is provided that there shall be printed each year thirteen 
thousand copies of ih% Report of the Comptroller of the Currency, one 
thousand for the Senate, two thousand for the House, and ten thousand 
for distribution by the Comptroller. 

§ 11. Fnniishmg of list of Clerks, Examiners, SeeeiverB, etc. 
— That for the fiscal year of nineteen hundred and two and there- 
after> a full and complete list of all officers, agents, clerks, and 
other employes of the office of the Comptroller of the Currency, 
including bank examiners, receiTers and attomqrs for receiyers. 



Digitized by CjOOQ IC 



6 

and clerks employed by such examiners and receivers^ or any other 
person connected with the work of said office in Washington or 
elsewhere^ whose salary or compensation is paid from the Treas- 
ury of the United States or assessed against or collected from 
existing or failed banks nnder their supervision or control, shall 
be transmitted to the Secretary of the Interior in accordance with 
the provision of an Act of Congress approved January twelfth, 
eighteen hundred and eighty-five, relating to the Official Register : 
And provided further. That the Comptroller of the Currency is 
hereby directed to include in his Annual Report to the Speaker of 
the House of Representatives, expenses inctured during each year, 
in liquidation of each failed national bank separately. (Act, 
April 28, 1902; 32 Stat. L., 138.) 



Digitized by CjOOQ IC 



CHAPTER n. 

Obqanization and Powms of National Bahxs. 

Section 12. Who May Fonn National Banking AModationa— Ar- 
ticles of ABsociation. 

13. Organization Certificate. 

14. Acknowledgment of Organization Certificate. 
16. Corporate Powers of Associations. 

16. Subscriptions to American National Bed Cross. 

17. Limitations as to Beal Estate and Mortgages. 

18. Loans on Beal Estate by National Banks. 

19. Power of National Banks as Insurance Agents. 

20. Amount of Capital Bequired. 

21. Pot Value of Stock— Transfers— Stockholders' Bights 

and Liabilities. 

22. When Capital Stock Must be Paid In. 

23. Failure to Pay Installments on Stock — Sale of Stock 

— ^Bestoring Capital so Beduced. 

24. Comptroller to Determine if Association is Entitied 

to Commence Business. 
26. Certificate of Authority to Commence Business. 

26. Publication of Comptroller's Certificate. 

27. Increase of Capital Stock. 

28. When Increase of Capital Stock Becomes Valid. 

29. Beduction of Capital Stock. 

30. Depositaries of Public Moneys. 

31. Conversion of State into National Banks. 

32. Same Subject — State Banks haying Branches. 

33. Consolidation of National Banking Associations. 

34. Change of Name and Location. 

36. Same Subject — Continuance of Liabilities. 
36. Same Subject. 

7 



Digitized by CjOOQ IC 



8 

87. Extension of Corporate Existence. 

88. Same Subject — ^Further Extension. 

89. Amendment of Articles in Case of Cliange. 

40. Special Examination of Extended Bank — Certificate 

of Comptroller. 

41. Privileges^ Liabilities, etc., of Extended Banks. 

42. Withdrawal of Shareholders ; Preference in Allotment. 
48. Banks not Ebrtiending — Continuance of Franchise for 

Purpose of Liquidation. 

§ 12. Who Kay Form National Banking Associations— Artidiei 
of Association. — Associations for carrying on the business of bank- 
ing under this Title may be formed by any number of natural 
persons, not less in any case than five. They shall enter into articles 
of association, which shall specify in general terms the object for 
which the association is formed, and may contain any other pro- 
visions, not inconsistent with law, which the association may see 
fit to adopt for the r^ulation of its business and the conduct of its 
affairs. These articles shall be signed by the persons uniting to 
form the association, and a copy of them shall be forwarded to 
the Comptroller of the Currency, to be filed and preserved in his 
office. (Rev. Stat U. S. Sec. 5133.) 

For full details how to proceed In the organization of a National 
Bank» with form of articles of association, etc, lee $860 fT. 

§ 13. Organisation Certificate. — The persons uniting to form 
such an association shall, under their hands, make an organization 
certificate, which shall specifically state: 

First The name assumed by such association; which name shall 
be subject to the approval of the Comptroller of the Currency. 

Second. The place where its operations of discount and deposit 
are to be carried on, designating the State, Territory, or district, 
and the particular county and city, town, or village. 

Third. The amount of capital stock and the number of shares 
into which the same is to be divided. 

Fovrth. The names and places of residence of the shareholders 
and the number of shares held by each of them. 



Digitized by CjOOQ IC 



'Fifth. The fact that tbe certificate is made to enable aach 
persona to ayail themselyes of the adrantages of this Title. (Ber. 
Stat TI. S. Sec. 5134.) 

Place of Ldcatioh — Ktyw Dnieif aisd. — The jnroTlskm of law reqnlr- 
ing that the place where the business is to be carried on shall be stated 
in the organization certillcate refers to the town or city, and not to 
the particular building or street number. (McC<Hrmick v. Market Hat 
Bank of Chicago, 162 Uh, 100.) 

FOr authority to change names or locations see act ICaj 1, 18S€, 

§ 14. Aeknowledgmait of Organisation Oertifleate^ — The or- 
ganization certificate shall be acknowledged before a judge of some 
court of record, or notary public; and shall be, together with the 
acknowledgment thereof, authenticated by the seal of such court, 
or notary, transmitted to the Comptroller of the Currency, who 
shall record and carefully preserve the same in his ot&ce. (Be?. 
Stat. U. S. Sec. 6135.) 

For form of certificate see |286. 

§ 15. Corporate Powers of Assoeiations.-^npon duly making 
and filing articles of association and an organization certificate, 
the association shall become, as from the date of the exeoution of 
its organization certificate, a body corporate, and as such, and in 
the name designated in the organizaticm certificate, it shall have 
power — 

First. To adopt and use a corporate seaL 

^Second. To haye succession for the period of twenty years from 
its organization, unless it is sooner dissolred according to the 
proTisions of its articles of association, or by the act of its share- 
holders owning two-thirds of its stock, or unless its franchise be- 
comes forfeited by some violation of law. 

Third. To nuJce contracts. 

Fourth. To sue and be sued, complain and defend, in any court 
of law and equil^, as fully as natural persons. 

Fifth. To elect or appoint directors, and by its board of direc- 



Digitized by CjOOQ IC 



10 

tors to appoint a president, vice-president^ cashier^ and other offi- 
cerSy define their duties, require bonds of them and fix the penalty 
thereof, dismiss such o£Seers or any of them at pleasure, and ap- 
point others to fill their places. 

Sixth. To prescribe, by its board of directors, by-laws not in- 
consistent with law, r^ulating the manner in which its stock shall 
be transferred, its directors elected or appointed, its officers ap- 
pointed, its property transferred, its general business conducted, 
and the privileges granted to it by law exercised and enjoyed. 

Seventh. To exercise by its board of directors, or duly author- 
ized officers or agents, subject to law, all such incidental powers 
as shall be necessary to carry on the business of banking; by dis- 
counting and n^otiating promissory notes, drafts, bills of ex- 
change, and other evidences of debt; by receiving deposits; by 
buying and selling exchange, coin, and bullion; by loaning money 
on personal security; and by obtaining, issuing, and circulating 
notes according to the provisions of this Title. 

But no association shall transact any business except such as 
is incidental and necessarily preliminary to its organization until 
it has been authorized by the Comptroller of the Currency to com- 
mence the business of banking. (Bev. Stat. IT. S. Sec. 5136.) 

NoTK.— See (26 and i26» post, relating to issuing and publishing of 
eertiflcate authorizing association to begin business. 

For power of a National bank to act as trustee, executot, adminis- 
trator, etc., see Sec 11 (k) Federal Reserve Act, (236. 

For power of a National bank to establish branches in foreign coun- 
tries, see Sec 26 of Federal Reserve Act, (291. 

For powers of a National bank regarding acceptances, see Sec 13 
of Federal Reserve Act, $243. 

Baitkiko Powebs. — ^The enumeration of powers in the seventh sub- 
division of this section merely constitutes the usual formula descrip- 
tive of the banking business, and is based on the model New York 
banking act of 1838. National banks can not only exercise the prin- 
cipal powers expressly entunerated but those which are reasonably 
implied, such as the business of making coUectlons. The banks can 



Digitized by CjOOQ IC 



11 

also exercise such powers mm are properly inddental to the prtndpal 
features enumerated in the act or implied therefrom, and can make 
any contracts which legitimately appertain to the business of hanking 
as defined by the statute. (Logan Co. Nat Bank v. Townsend, 189 
U. 8m 67, 73; Pattison i;. Syracuse Nat Bank, 80 N. T., 82.) 

DKFoerrs. — ^National banks can not only reoeiTe general deposits 
but can contract as to the parties to whom they shall be repaid. 
(Sykes v. Canton First Nat Bank, 2 8. D., 242.) They may receiTe 
deposits of the public funds of a city, agree to pay interest thereon 
and give bond for their security. (Interstate Nat Bank v. Ferguson, 
48 Kan^ 732.) 

Sfbcial Deposits.— National banks can reoetre special deposits, in- 
cluding deposits of bonds and securities ftfr safe-keeping, either tor 
a compensation or gratuitously; but not for example, a stock of mer- 
chandise to be stored in the rear of the banking-rocAn. (National 
Bank v. Graham, 100 U. 8., 699; Pattison v, Syracuse Nat Bank, 9Upra; 
First Nat Bank v. Strang, 138 IlL, 847; Am. Nat Bank v. Adams, 44 
Okla., 129.) 

For liability of National banks for loss of special deposits, see First 
Nat Bank v. Ocean Nat Bank, 60 N. T., 278; WUey v. First Nat Bank, 
47 Vt, M6; Pattison v. Syracuse Nat Bank, tupro; Chattahoochee Nat 
Bank v. Schley, 58 Ga., 860; National Bank v. Graham, 100 U. 8., 699; 
Leach v. Hale, 81 la., 69; wyUe v. Northampton Bank, 119 U. 8.* 861; 
Coltey V. Nat Bank of Mo., 46 lio., 140. 

Dbpobit as Stakkholdeb.— (A National bank may reoeiTe the deposit 
of a fund in controversy to abide the event of a litigation or award, or 
to be payable upon a contingency to some person other than the de- 
CK>Bitot. (Bushnell v. Chatauqua County National Bank, 74, N. T., 
290. But see American National Bank v. Adanui, 44 Okla., 129.) 

Satinqs Deposits.— Under the broad authority to ''receive deposits" 
conferred by the National Bank Act there appears to be no reason 
why a National bank may not receive savings accounts under rules 
similiar to those adopted by savings banks respecting the time and 
manner of withdrawal, interest etc Such deposits, however, are not 
to be invested in the manner in which savings deposits are ordinarily 
Invested, but must be employed in the modes described by the National 
Bank Act and Federal Reserve Act Such deposits are not held upon 
a trust, but the relation between the bank and the depoiritor is that 
of debtor and creditor. (State v. People's Nat Bank, 70 Atl. Rep. 
(N. H.), 542.) In some of the States, as for instance in New York, 
the use of the word ''savings'* as applied to bank deposits Is forbidden, 



Digitized by CjOOQ IC 



12 

except when used by a saTings bank organized under the State law. 
(See People v. Binghampton Trust Co., 189 N. T., 186.) But It is 
questionable whether such a statute would be held by the courts to 
haye any application to National banks doing business within the 
State. (State v. People's Nat. Bank, supra.) See Sec. 19 of Federal 
Reserve Act, page 292 and notes thereunder. 

Safe Deposit Boxes. — In the absence of statutory provisions, the 
Comptroller of the Currency leaves it to the discretion of the directors 
of National banks as to whether a moderate investment of the bank's 
funds shall be made in building safe deposit vaults for the use of 
customers. 

Secubitt fob Loans. — Since the words 'loans on personal security" 
are used in contradiction to real estate security. National banks may 
take in addition to personal security for discounts and loans, pledges 
of bonds, choses in action, bills of lading, or other personal chattels. 
(National Bank v. Case, 96 U. S., 628; Cleveland, Brown 4b Co. v, Shoe^ 
man, 40 Oh. St., 176; SpofTord v. First Nat Bank, 37 la., 181; Pittsburg 
L. & C. Works V. State Nat Bank, Fed. C^. No. 11, 198; Third Nat 
Bank v. Blake, 73 N. Y., 260.) See next section for notes on real estate 
loans. 

Dealing in Stocks and Bonds. — ^A National bank has no power to 
deal in stocks and bonds, or buy and sell them upon commission. Such 
operations are not incidental to the business of banking as defined in 
the statute. (Weckler v. First Nat. Bank of Hagerstown, 42 Md., 681; 
First Nat. Bank of Allentown v. Hock, 89 Pa. St, 324; First Nat 
Bank v. National Exchange Bank, 92 U. S., 122; California Nat Bank 
V. Kennedy, 167 U. S., 362; Metropolitan Trust Co., v. McKinnon, 172 
Fed. Rep., 846; Barrow v, McKinnon, 196 Fed. Rep., 933; Hotchkin t;. 
Third Nat Bank, 219 Mass., 234.) 

Dealino in Gk>vEBNMENT BoNDS. — It would soom, however, that Na- 
tional banks as financial agents of the Ctovemment may be employed 
to perform any duties in respect to its bonds; and may buy and sell 
and exchange Ctovemment securities for their customers. It has been 
decided that National banks have power to' receive United States 
bonds of one class for the purpose of having them converted into 
bonds of another class, and that the exchanging of Gk>vemment se- 
curities is a legitimate part of their business. (Yerkes v. National 
Bank of Port Jervis, 69 N. T., 383; Van Lenven v. First Nat Bank, 
64 N. T., 671; Leach v. Hale, 31 Iowa, 69.) 



Digitized by LjOOQ IC 



18 

Stocks Taksn ab Sbcuutt Vcm <m nr Patmckt or Don.— But white 
the National banks are Impliedly prohibited from dealing in stocks, 
they may yet accept stock when it is transferred to them, bona fide, in 
satisfaction or payment, or by way of compromise of debts due to or 
from the bank, and when it is taken with a yiew to its subsequent sale 
or conTcrsion into money so as to make good or reduce an anticipated 
loss. (First Nat Bank of Charleston v. National Exchange Bank* 9% 
V. S.» 122; Com Exchange Nat Bank v. Kaiser, 160 Wis., IN; Fourth 
Nat Bank 17. Stahlman, 182 Teiuu» 867; First Nat Bank v, ConTerse, 
200 U. a« 425.) 



DuTT TO DiSFosB ov Sioox Pbc^kblt Aoquibb>— Powib ow Cashiib to 
Sell.—- Where a National bank legally acquires title to stock in an- 
other corporation, preTiously held as collateral security or taken tor 
debt such stock should be disposed of promptly, and that action will 
be required by the Comptroller of the Currency. And a sale of the 
stock, being within the ordinary business of the bank, may be made 
by the cashier. (McBoyle v. Union Nat. Bank, 162 CaL, 277.) 

PuBOHASK OF STOCK OP Othxb NATIONAL Bakks.— A National bank 
can not lawfully acquire and hold the stock of another National bank 
as an investment And where such stock has been purchased the bank 
may plead its want of power as a defense to an assessment upon the 
stock, notwithstanding it appears as the registered owner thereof, and 
has recelTed and retained the dividends thereon. (First Nat Bank of 
Concord v. Hawkins, 174 U. 8., 364. But see Ohio Valley Nat Bank v. 
Hulitt 204 U. S., 162; see also Shaw v. National Gterman-Amerlcan 
Bank, 182 Fed. Rep., 668.) 

PuBCHAss or Municipal Bonds.— A National bank has power to deal 
In mnnlcipal bonds, and may make a contract with a municipal oor- 
IK>ration for the purchase of its bonds. (Newport Nat Bank v. Board 
of Education of Newport 114 Ky., 87; Junction City v. Bank, 96 Kan.» 
407.) 

Not liiABUB AS Stockholdeb Whxbb Pubohasb op Stock is UItba 
VtBBS. — ^Where a National bank has purchased stock in another cor- 
poration, out of the ordinary course of its business, and ndt as security 
for a debt previously contracted, it may plead ultra vires, in an action 
against it as a stockholder of such corporation. (California Nat Bank 
V. Kennedy, 167 tJ. S., 862, overruling Kennedy v. California Savings 
Bank, 101 CaL, 486.) 

Bank Can Pass Tttlb to Stock Itj.toatj.y Pubchased.— Thoufl^ a 
purchase of corporate stock by a National bank is ultra vires and void- 



Digitized by CjOOQ IC 



14 

able as between the parties. It Is not void, and title passes to^ the banlc, 
which It may transfer to a third person, prior to any election by the 
other party to the original transaction to rescind the sale. (Barron v, 
McKlnnon, 196 Fed. Rep., 988.) 

PuBCUASiNo Commercial Papkb. — ^A National bank may purchase and 
sell commercial paper, the term "discount," properly Interpreted, In- 
cluding a "purchase" as well as a loan. (Morris v. Third Nat Bank, 
142 Fed., 26; Smith v. Bank, 26 Oh. St., 141; Terkes v. Bank, 69 N. T., 
882; Atlantic State Bank i;. Savery, 82 N. T., 291; Pape v. Capital 
Bank, 20 Kans., 440. But see contra Lazear v. National Union Bank, 
68 Md., 78, and First Nat Bank v. Plerson, 24 Minn., 140; see qualify- 
ing rule In Prescott Nat. Bank v. Butler, 167 Mass., 648; Merchants 
Nat. Bank v. Hanson, 38 Minn., 40; First Nat Bank v. Smith, 8 S. D., 
7, and analogous cases, National Bank v, Mathews, 98 U. S., 621; 
National Bank v, Whitney, 108 U. S., 99; Reynolds v. CrawfordsYllle 
Bank, 112 U. S., 406; Thompson v. St Nicholas Bank, 146 U. S., 240, 
and Bllerbee v. National Exchange Bank, 109 Mo*., 446.) 

BoBBOwiNO OF MoNBT.— The power to borrow money or to give notes 
Is not expressly conferred by the act; but In proper cases a bank may 
become a temporary borrower of money. (Western Nat Bank v, Arm- 
strong, 162 U. S., 846; Chemical Nat Bank v, Armstrong, 66 Fed. Rep., 
673.) 

But such transactions are so much outside of the general scope of 
the bank's business, that the officer acting for the bank therein must 
have special authority. {Id.) But there may be cases where an officer 
may legitimately borrow money for the bank's use without authority 
from the board. (Cherry i;. City Nat Bank, 144 Fed. Rep., 687.) 

Rediscounts. — A rediscount by a National bank of Its bills receiv- 
able, though It endorses the same, and becomes contingently liable for 
their payment, is not a borrowing of mdney by the bank, but has some 
of the characteristics of a sale. (United States Nat Bank v. First Nat. 
Bank oT Ldttle Rock, 79 Fed. Rep., 296.) And such a transaction is 
not so far outside the scope of ordinary banking transactlohs as to Im- 
pose upon the bank buying such paper the duty of ascertaining that 
the act has been specially authorized by the board of directors. (Id.) 
The rule that an officer has no pcfwer to borrow money unless specially 
authorized by the directors, is not applicable in a case where a general 
and long-established usage is shown between correspondent banks to 
borrow and lend through the officers of the bank, no further authority 
being furnished or demanded; the presumption being that such usage 
was condoned and acquiesced In by the directors of the borrowing 
bank. (Armstrong v. Chemical Nat Bank, 88 Fed. Rep., 666.) 



Digitized by CjOOQ IC 



16 

And it has been held that the president of a Natktaal bank who has 
the actual management of its operations is anthorised to procnre the 
dlBcount of its paper. (HanoTer Nat Bank v. Pirst Nat Bank of 
Bnrlingame, 109 Fed. Rep., 421.) The subsequent fraud of its cashier 
will not reliere a National bank frcnn its liability as indotser on pi^mr 
transferred by him within the scope of his authority to an innocent 
third person. (Auten v. Mimistee Nat Bank, 67 Ark^ 248.) 

LdCNDiNo Cbcdit— AoooicMooATioir PAPBa.— <A National bank has no 
authority to lend its credit and its accommodation pi^Mr or indorse- 
ment or guaranty will be roid in the hands of any person taking the 
same with knowledge of the facts. (National Bank of Brunswick v. 
Sixth Nat Bank, 212 Pa. St, 2S8; Merchants' Bank of ValdosU v. 
Baird, 160 Fed. Rep., 642; Fidelity and Deposit Co. v. National Bank 
of Oommeroe (Tex.), 106 S. W. Rep., 782; National Bank of Commerce 
V. Atkinson, 66 Fed. Rep., 466.) 

OuARANTT.— nA National bank has no power to giro an accommodation 
guaranty, and such a guaranty is not enfbrceable against the bank. 
(Bowen i'. Needles National Bank, 84 Fed. Rep., 926.) So, it has been 
held that the offlcers and directors of a National bank haye no author- 
ity to bind the bank by a guaranty of the debts of a third person 
contracted for his own benefit (Commercial Nat Bank v. Pirie, 82 
Fed. Rep., 788; Farmers' and Merchants' Nat Bank v. Smith, 77 
Fed. Rep., 128; Rice 4b Hutchins Atlanta Co. v. Commercial Nat Bank, 
88 S. E. Rep., 899.) So, a National bank has no power, either with or 
without consideration, to bind itself that a draft drawn upon one of 
its customers will be paid. (First National Bank of Moscow v. 
American Nat Bank, 178 Mo., 163; National Bank of Brunswick v. 
Sixth Nat Bank, 212 Pa. St, 288; First Nat Bank Of Jallapooro v. 
Monroe, 136 CkL, 614.) But see Citisens* Nat Bank v. Appleton, 216 
U. S., 196. 

GkTABANTT OF Pafbb Sold bt Baitk.— While a National bank may not 
lend its credit for accommodation, it may guaranty the payment of 
commercial paper as incidental to the exercise of its power to buy 
and sell the same. (Thomas v. City Nat Bank of Hastings, 40 Neb., 
601.) 

AssuMiNO Cbuoations or Akothkb Bank.-^A National bank has 
power to make a contract whereby, in consideration of the transfer to 
it of the oflloe furniture, lease and cash assets of another National 
bank, it will assume and pay the liabilities of such other bank. (Sdio- 
field i;. State Nat Bank, 97 Fed. Rep., 282.) Where a contract by 
which a National bank assumed all the obligations of an insolTont 



Digitized by CjOOQ IC 



16 

bank In contemplated liquidation was fully explained at a meeting 
at which 1,665 out of 2,000 shares were represented, and after the 
contract was executed, it was ratified by a vote exceeding two-thirds 
of the stock; held that the stockholders wei^ not thereafter entitled 
to claim that such contract was ultra viret. (George v, WUlaoe, 135 
Fed. Rep., 286.) 

Loans to Offiobbs.— A National bank may make loans to its officers 
and directors as freely as to other persons. (Blair v. First Nat Bank 
of Mansfield, 10 Chicago Legal News, 84; 2 Nat Bank Cas., 173.) 
But the loans must be honest, and the borrowers must not participate 
in making the loans to themselves. {Id.) 

DsALiNo IN Chscks.— Dealing in checks is a part of the usual busi- 
ness of banking, and would be within the general powers of a bank 
without special mention. And there is no difference in this respect 
between checks pa3rable to bearer and those pa3rable to order. (First 
National Bank of Rochester v. Harris, 108 Mass., 614.) 

Lending fob Customxbs. — ^A National bank is not authorized to en- 
gage in the business of lending money for its customers; and it can 
not be held liable for the acts of its officers in so doing. (Grow v. 
C!ockriU, 63 Ark., 418.) 

Bmflotment of Attobnkts.— Under the fourth subdivision of section 
5136 a National bank has full power to employ attorneys to bring or 
defend suits in any court of law or equity; and such employment, in- 
cluding the agreement for compensation, may be made by the president 
of such bank. (National Bank of Outhrie v. Earl, 2 OkL, 617; see also 
Citizens' National Bank of Kingman v. Berry, 53 Kans., 696.) 

Binding Bank to Pat Draft. — ^An officer of a National bank has no 
power to bind it to pay the draft of a third person on one oT its cus- 
tomers to be drawn at a future day, when it expects to have a deposit 
from him sufficient to cover it, and no action lies against the bank for 
its refusal to pay such a draft (Flannagan v, California Nat Bank, 
56 Fed. Rep., 959.) 

False Rxpbesentation of Cashixb. — ^A National bank may be held 
liable for damages for a false representation made by its cashier as to 
credit of a customer seeking credit at another bank. (Neveda Bank 
of San Francisco v, Portland National Bank, 59 Fed. Rep., 388.) 

(}0LLBCTi0N8. — The cashier of a National bank has authority on be- 
half of the bank to make a collection from another bank. (Hanson v. 



Digitized by CjOOQ IC 



17 

HmH. i» N« H^ IM.) Aad a KaftSoBil btak mar tain an abaotato 
ftanmant of a dalm fo^ eoUaotloa and acra« to paj tha 
a part tlierw^ to aaothar. (Klaa a. MlOar. U Orapm. SS.) 



PAsnmaHiP.— A National bank haa no power to baeooM a 
of a partaarahlp, and eannot be hM llaMe ae a partner. diBrebanta* 
National Bank v. Vehrmann, 69 Oblo 8t, lao.) It cannot, aren In 
lattiftrtlon of a debt* beeome the abeolute tfwner of iharee in a partr 
nenhip, and aa It cannot take the iharee. It cannot be held liable tor 
the d^yta of the firm. (Herchanta* Nat Bank v. l¥lehrmann, 202 U. &, 
295.) Nor can it be estopped from daiylna that It was a partner. (Id.) 



OoiriBACT TO Pat wcm thk Piooucino or CusToiaa. — ^In the caee of 
DreaMr v. Trader's Nat Bank (165 Haea.. 120), the Sap. Ct of ICase. 
held that a National bank Is not anthCHsed to make a contract to 
famish are Insurance to a person In consideration of his procnrlna a 
eostomer for the bank, and Intimated that a Natlonml bank should not 
pay money to a third person to secnre a customer. 

DovATWS OF FnicDS.— The president of a National bank by slgnina 
Its name to a subscription paper can not obligate the bank to donate 
6200 to partlea on condition that they would erect a pi^Mr-mllL Snch 
dimatlon of its fands to aid in building a paper-mill Is not legitimate 
business for a bank; and the bank is not bound by the agreement 
(Robertson v. Buitalo Co. Nat Bank, 40 Neb., 286.) PoUtical contribu- 
tkma prohibited by act Jan. 26, 1007. See (178. (Contributions to 
Red Cross are permitted during war. See ilt. 

GLBAaDfG-HousE.--The law doea not forbid a National bank becoming 
a member of a clearing-house assodatlon organised merely for faciU- 
tating settlemMits between the members thereol (Phlller et al. p. 
Patterson, 168 Pa. St, 468.) 

OmcEia— /Tmrun or Omcs.— The officers hold their positions by the 
tenure q;>eclfied In the statute^ to wit, the pleasure of the board of 
directora and can not be chosen for any stated term. (Harrington v. 
First Nat Bank of CHiittenango, 1 Thompson 4b Cook (N. T.), 861; 
Westenrelt v. Mohrenstecher, 76 Fed. Rep., 118.) A by-law which 
provides that an officer shall hold office for a stated term, as for one 
year, is TOld. (/d.) (See also Case v. First Nat Bank, 100 N. T. 
Snpp., 1110.) 

Boifoa or Omons.— The directors should renuire bonds from the 
officers of the bank and are personally liable for losses caused by 
aegieet In leaTtng the management wholly to the cashier who had but 



Digitized by CjOOQ IC 



18 

little property and of wh(mi they required no bond. (Robinson v. 
Hmll, 63 Fed. Rep., 222, rerersing 69 Fed. Rep., 648.) 

A surety on the bond of a cashier of a National bank Is not dis- 
charged by the fact that before the bond was given, the cashier had 
committed frauds upon the bank, if such frauds were unknown to the 
officers of the bank, although they were guilty of gross negligence In 
not dlscoTertng them. (Tapley v. Bfartin, 116 Mass., 276.) 

iNsuitiNCB or LivBS OF Ofticbbs. — ^The Comptroller of the Currency 
has refused to approve a plan for the insurance by a National bank 
of the lives of its officers or employes for the benefit of the bank, but 
recommends the furnishing to small salaried clerks and employes in- 
surance equal to one year's salary for the benefit of their families, the 
premiums to be met by an adjustment of salaries. 

Ultba Vibbs.— Where a NaUonal bank makes a contract which is 
beyond its powers, such contract is void, and not merely voidable, and 
It can not be estopped from making the defense of uUra viret when 
It Is sued for nonperformance on its part (Metropolitan Stock Bz- 
change v. Lyndonville Nat Bank (Vt.), 67 AtL Rep., 101.) But there 
are many cases where such a contract having been performed, has been 
enforced. (Logan County Bank v. Townsend, 139 U. 8., 67; Prescott 
Nat Bank i;. Butler, 167 Mass., 648.) So, where a National bank has 
made a loan upon a real estate mortgage, its want of power to take 
such a security is not a defense to the mortgagee in a suit by the bank 
to foreclose the mortgage. (National Bank v. Matthews, 98 U. S., 621.) 
See also Hennessey v. City of St Paul, 64 Minn., 219. And so, in an 
action by a National bank on railroad aid bonds, the obligor cannot 
set up as a defense that the purchase of the bonds by the bank was 
ultra vires. (Town Council of Lexington v. Union Nat Bank, 76 Miss., 
1.) And where a borrower has deposited collateral securities with a 
National bank, he cannot set up as a defense that the bank had no 
power to take the same. (Reynolds i;. Touzalin Imp. Co., 62 Neb. 236.) 

Whebb Bank Has Rboeivkd BBnnrrs of Ultsa Vibes Contbaot. — 
Conversely, where a National bank has received and retained the bene- 
fit of a contract made by Its officers, it can not plead that the contract 
was unauthorized by the directors, or beyond the power of the bank 
or its officers to make. (Tootle v. First Nat Bank of Port Angeles, 6 
Wash., 181; Trustees of First Presbyterian Church v. National State 
Bank, 67 N. J. Law, 27; First Nat Bank of Grand Forks v, Anderson, 
172 U. S., 673; s. c. 6 N. D., 461; Aldrich v. Chemical Nat Bank, 176 
U. S., 618; Seeber v. Commercial Nat Bank of Ogden, 77 Fed. Rep., 
967.) 



Digitized by CjOOQ IC 



19 

Moxfsr Equitablt BcLOKonfa to Othcbs. — ^Bnt a National bank can 
not reoelTe moneys equitably belonglnir to another and not aooonnt tor 
the same* even though they be recefyed ae an Incident of the bank's 
illegal contract (National Bank of Commerce v. Bquitable Trust 
Ck>mpany, 227 Fed. Rep., 526; s. c 211 Fed. Rep., 6S8. See Citixens' 
Nat Bank v, Appleton, 216 U. S., 196, and compare First Nat Bank v. 
Monroe, 135 Ga., 614.) So, though the purchase and carrying on of 
a mercantile company by a National bank was illegal, the persons 
dealing with the mercantile compcmy are entitled to reoeire the money 
paid into the bank for their account (Rankin v. Bmlgh, 218 U. 8., 
27; Emlgh v. Barling, 184 Wis., 566.) 

National Baitk as AosifT ni ICakhto CkiLiccTioiT8.^A National bank 
under the power to "exercise all such incidental pdVers as shaU be 
necessary to carry on banking," may do those acts and occupy those 
rdatlons which are usual or necessary in making collections of com- 
mercial paper and other evidences of debt It Is both usual and proper 
for the legal title to negotiable instruments to be Tested in a bank 
by mere endorsement for purposes of collection, holding the proceeds 
as the endorser directs; and there is no difference in law if the title 
is cQ^Teyed by a lengthier and more formal instrument In both cases 
the bank takes the legal title for the purposes of demand and eoUeo- 
tion; and In a proper case, there is no reason why it may not go 
further and institute suit thereon in its own name for the reoorery of 
what may be due. (Miller v. King, 223 U. S., 506.) 

Bank GuAmAKTT Law.— The National banks located in Kansas may 
not lawfully ayall themselyes of the provisions of the Bank Depositors' 
Guaranty Act of that State. (Dolley v. Abilene Nat Bank, 179 Fed. 
Rep., 461.) But though the effect of the Act should be to attract de- 
positors from the National banks to the guaranteed State banks, this 
would not make the statute void. But see First Nat Bank of Holstein 
V. SbaUenberger, 172 Fed. Rep., 999. The constitutionality of State 
Guaranty laws is upheld in Assaria State Bank i;. Dolley» 219 U. &• 
121; Noble State Bank v. Haskell, 219 U. S., 104. 

§ 16. Snbseriptions to Amerioan Hational Bed Cioit^— That 
during the continuance of the state of war now existing it shall 
be lawful for any national banking association to contribute to 
llie American National Bed Cross, out of any net profits otherwise 
available under the law for the declaration of dividends, such 
sum or sums as the directors of said association shall deem expedi- 
ent. Bach association shall report to the Comptroller of the Cnr- 



Digitized by CjOOQ IC 



80 

rency within ten days after the making of any such contribution 
the amount of such contribution and the amount of net earnings 
in excess of such contribution. Such report shall be attested by 
the president or cashier of the association in like manner as the 
report of the declaration of any dividend. 

Seo. 2. That all sums so contributed shall be utilized by the 
American I^ational Bed Gross in furnishing volunteer aid to the 
sick and wounded of the combatant armies, the voluntary relief of 
the Army and IN'avy of the United States, and the relief and mitiga- 
tion of the suffering caused by the war to the people of the United 
States and their allied nations. (Act May 22, 1918.) 

§ 17. Idmitationa as to Seal Eitate and Kortgages, except as 
provided in the Federal Sesenre Act. — A N^ational banking asso- 
ciation may purchase, hold, and convey real estate for the following 
purposes, and for no others: 

First Such as shall be necessary for its immediate accommo- 
dation in the transaction of its business. 

Second. Such as shall be mortgaged to it in good faith by way 
of security for debts previously contracted. 

Third. Such as shall be conveyed to it in satisfaction of debts 
previously contracted in the course of its dealings. 

\Fourth. Such as it shall purchase at sales under judgments, de- 
crees, or mortgages held by the association, or shall purchase to 
secure debts due to it. 

But no such association shall hold the possession of any real 
estate under mortgage, or the title and possession of any real 
estate purchased to secure any debts' due to it, for a longer period 
than five years. (Eev. Stat. U. S. Sec. 6137.) 

For power of NatioYial banks to make loans on real estate as pro- 
vided by the Federal Reserve Act, see next section. 

How PuBOHASES AND GoiWETANCBS Kaoe. — ^In purchasing or convey- 
ing real estate a National bank should act through Its president or 
cashier, duly authorized by regular resolution of its board of directors. 

Baitkinq-Housv— Chabacibb of Imfbovxment.— Land purchased or 
leased by a National bank for the purposes of its business may be 



Digitized by CjOOQ IC 



SI 

improred by It to as to yMd tbo larfMt taeooM aad iMtaa its own 
reat Wbore a National bank InTSsts in rsal sstato In tzeess of its 
poirers, and the transaction has been aoqoiesced in I6r a Umg time, 
the Qoremment only can be heard to complain, and a reoeirer can not 
do so. (Brown v. SdUeier, 118 Fed. Rep., fSL) A bank may erect a 
building partly for its own use and partly to let dot to tenants. 
(Wlgert V. Bank, 176 Fed., 7S9.) InTestment in a banking house 
should not be out of proportion to the capital and bostuess of the 
bank and such a question is primarily for decision by the board of 
directors. 



IcASEHOLD— AamcniT 10 Bsaor Bunoro oir.-nl National bank 
may lease property for a term of years and agree with the leawr to 
construct such a building as it desires, prorided that it acts in good 
fUth, solely with a riew of dbtalning an rtigible location, and not 
with a view of iUTestlng its funds in real property or embarking them 
in speculations in real estate. (Brown v. Schleler, et aL, 118 Fed 
Rep., 981.) Such a lease is not inyalid because made for a longer 
period than the corporate existence of the bank, (/d.) And, eren 
thoui^ the lease be assignable duly with the consent of the lessor. 
(International Trust Onnpany 1;. 'WlstiDi, 208 U. 8., 864.) Nor is such 
a lease inralid because the gross rents payable during the term will 
reach a sum exceeding the amount of the bank's capital stock. (Brown 
V, Schleler, et aL, 118 Fed. Rep., 981.) But a National bank which has 
not been authorized by the certillcate of the OomptroUer &t the Cur- 
rency to commence the business of banking has no power to execute 
a lease of a banking-house fOr a term of years. (licO>tmick v, BCarket 
Nat Bank of C^cago, 165 U. S., 588 s. c 162 lU., 100.) Nerertheless, 
persons organizing a National bank may secure an option on property 
desired for a banking-house with a prdrisional agrevnent for a lease 
to be executed when the bank li chartered. 

Taking Siook nc Buiuxing Cokpant.— Where it acts in good f^th, 
with a Tiew to proriding suitable quarters for the transaction of its 
business, a National bank may acquire and hold stock in a building 
corporatioin. (Fourth Nat Bank v. Stahlman, 182 Tenn., 867.) 

Cashixb Has No AtrrBosirr to Hakb Lbasis.— The leasing of any 
part of the bank's building to otb/sn iM outside of the ordinary duties 
of the cashier, and for this purpose he should hare authority from the 
board. (Spongberg v. First Nat Bank, 18 Idaho, 5t4«) 

WHEir Rbax. BsTAn SiouiETr Mat Bb TAxmr.— The authority con- 
ferred by subdiTlsions 2, 8 and 4 li for the purpose of enabling the 
bank to collect the debts due it and is not a general grant of power 



Digitized by CjOOQ IC 



to deal in real estate, or to take real estate or any nuArtgage or Hen 
thereon as security for contemporaneous loans. Prior to taking a 
mortgage or conveyance of real estate the debt nuist prcTiously have 
been contracted in good faith and the security or real estate later 
taken in good fitith to avoid dr lessen a contemplated loss. (Bank v, 
Conway, 87 Wash., 606; Bank v. Matthews, 98 U. 8., 621; Fdwler v. 
Scully, 72 Pa. St, 451; Crocker v. Whitney, 71 N. T., 161; Pridley v. 
Bowen, 87 111., 161; First Nat Bank v. Mazfleld, 88 Me., 676; Upton v. 
Bank, 120 Mass., 163.) In order to secure antecedent indebtedness, 
the bank may make an additional advance and take a mortgage on 
real estate to secure both the advance and the prior debt and the 
real estate may be worth more than the debt And it may discharge 
or purchase prior liens and do the things an individual would reason- 
ably do under similar circumstances to secure himself against loss. 
(Ldbby V. Bank, 99 111., 622; Omn v. Bank, 16 Kans., 84; Holmes v. 
Boyd, 90 Ind., 322; Morris v. Bank, 142 Fed., 26; Magoffin v. Bank, 69 
S. W. (Ky.), 702; Ho^rard N. B. v. Loomis; 61 Vt 849; New Oiieans 
Nat Bank v. Raymond, 29 La. Antt 866.) 

Debentubes— -Stock of Real Estate Cokpakies— Wife's Separate 
BsTATB.— One question of frequent occurroice is whether the deben- 
tures of mortgage loan companies can be taken as collateral. This 
point has never been Judicially determined, but the Comptrollers of 
the Currency have generally expressed the opinion that they are not 
proper securities for a National bank to receive. But it has been held 
by the Supreme Court of Minnesota that a NaUonal bank may make 
loans upon the security of the stock of a corporation whose property 
consists solely of real estate. (Baldwin v. State Nat Bank, 26 Minn., 
48.) Where a married woman indorsed a note: *1 hereby charge my 
separate and personal estate for the payment of the within note" it 
was held in Third Nat Bank v, Blake, 73 N. T., 260 that the indorse- 
ment was to be treated as personal security, within the meaning of 
the National banking law, and not as a mortgage. 

MOBTQAOE OiVEiv TO Inoobseb TO EiUTBE TO Bakk. — A National bank 
may make an agreement that in case a note discounted by it shall 
not be paid, a mortgage given by the maker to his indorser shall 
enure to the benefit of the bank. (First Nat Bank i;. Haire, 86 Iowa, 
443). 

Pbomissobt Notes Sboubed bt Mobtoaob Notes — ^JuDoicEirT Notes.— 
The Solicitor of the Treasury, in an opinion given to the Comptroller 
of the Currency, has held that it is not unlawful for a National bank 
to lend upoli a promissory note, which is secured by bonds and notes 



Digitized by CjOOQ IC 



irbidi are in tarn leeiired by real ••tete. Ndr is It nnlawtnl for a 
Nadonnl tMUik to lend on Judgment notea, which whan recorded be- 
come liena on real eatata; provided anch loana are made aolely on 
peraonal aecuritj glTcn. 

ViokjlTidh of Law Can Not Bb 8r uf bt Boaaowa^— No one but the 
Goremment can be heard to cmnplain that a bank haa exceeded ita 
powera and acquired real estate or made real estate loans. The only 
pouaty which it incurs is a liability to a forfeiture of its franchises. 
The co n v e yance or mortgage is not TOid, but dhly voidable. (National 
Bank v. Matthews, 98 U. 8., 621; Kerfoot v. ftemers' 4b Merchants' 
Bank, 218 U. &, 281; Barron v. McKinnon, 196 Fed. Rape, »S8; Baker 
V. Sehofleld, 221 Fed. Rep., Z2%; Reynolds v. Crawtordsville Bank, 112 
U. &, 405.) 

PiDLiOT or THE LAW.r-The prohibition against loans on real estate 
other than as permitted by the Federal R c a e rv e Act, though often 
criticised, is, by the great majority of bankers, deemed wise and 
aalutary. The very nature of the banking business, as distinguished 
from Insurance, trust and other similar business, demands liquid and 
readily convertible assets. 

The prohibition against loans dn real estate has now been modifled 
by Sec 24 of the Federal Reaerve Act, so as to permit National banks 
to make loans <m the most liquid and best secured forms of real 
estate securities. (See following section.) 

S 18. Loana on Beal Estate hj Vational Banks^— Anj Na- 
tional BanBng association not situated in a central reaerve city 
may make loans secured by improved and unencumbered farm land 
situated within its Federal reserve district or within a radius of 
one hundred miles of the place in which such bank is located^ ir- 
respective of district lines, and may also make loans secured by 
improved and unencumbered real estate located within one hundred 
miles of the place in which such bank is located, irrespective of 
district lines; but no loan made upon the security of such farm 
land shall be made for a longer time than five y^rs, and no loan 
made upon the security of such real estate as distinguished from 
farm land shall be made for a longer time than one year nor shall 
the amount of any such loan, whether upon such farm land or 
upon snch real estate, exceed fifty per centum of the actual value 
of th6 property offered as security. Any such bank may make 



Digitized by CjOOQ IC 



u 

such loans^ whether secnred by such farm land or such real estate^ 
in an aggregate sum equal to twenty-fiye per centum of its capital 
and surplus or to one-third of its time deposits and such banks 
may continue hereafter as heretofore to reodve time deposits and 
to pay interest on the same. 

The Federal Beserve 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 maimer 
described in this section. (Sec. 24, Act Dec. 23, 1913, 38 Stat. L. 
273, as amended by Act Sept. 7, 1916, 39 Stat. L. 754.) 



RflouuLTioif G OF Fedebal RxsniTB BoABD, Skbobs op 1917 (Sum* 
GEDUvo Rbq. O of 1916). [To aTold repetition Sec. 24 as amended is 
not quoted.] 

National banks not located in central resenre cities may, therefore, 
legally make loans secured by improved and unencumbered farm land 
or other real estate as provided by this section. 

Certain conditions and restrictiona must, hc^Rrerer, be obaenred — 

(a) There must be no prior lien on the land; that is, the lending 
bank must hold an absolute first mortgage or deed of trust. 

(&) The amount of the loan must noft exceed 60 per cent, of the 
actual value of the land by which it is secured. 

(c) The maximum amount of loans which a national bank may make 
on real estate, whether on farm land or on other real estate as dis- 
tinguished from farm land, is limited under the terms of the act 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 deptibits 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 t*me deposits for the preceding cal^i- 
dar year, is less than one-fourth of the capital and surplus of the bank 
as of the date of making the loan, the bank in such event shall have 
authority to make loans upon real estate under the terms of the Act 
to the extent of one*f(mrth of the bank's capital and surplus as of 
that date. 

(d) Farm land to be eligible as security for a loan by a National 
bank mdst be situated within the Federal reserve district in whidi 
such bank is located or within a radius of 100 miles of such bank 
irrespective of district lines. 



Digitized by CjOOQ IC 



25 

(e) Retl Mtato m dIttiiiffiilslMd from term land to be ellslbto at 
■eenrlty for a loan by a National bank must bo looatod within a radloa 
of 100 ndlea of lucb bank irra^ioctlTO of distrlet Unaa. 

(/) The rlsht of a National bank to "nniko kMns^ under aaetlon M 
includes tbo riabt to pnrcbaae or dlaoonnt loans already made aa mUl 
aa the riabt to make sach loans in tbe first Instance: Provided^ how- 
ever. That no loan secnred bj farm land shall haTe a m^toritj of 
more than Ihre jeara from the date on which it was porchaaed or 
made by the National bank and that no loan aecnred by other real 
estate shaU hare a maturity of mcfn than one year from such dato^ 

(g) Though no National bank is authorised under the proTisions of 
section 24 to make a loan on the security of real estate, other than 
farm land, for a period exceeding one year, nerertheless, at the end of 
the year, it may properly make a new loan upon the same security 
fbr a period not exceeding one year. The maturing note must be 
cancelled and a new note taken in its places but in order to obTiate 
the necessity of making a new mortgage or deed of trust for each 
renewal, the original mortgage or deed of trust may be so drawn in 
the ilrst instance as to corer possible future renewals of the original 
note. Under no circumstances, howerer, must the bank obligate itself 
in adrance to make such a renewaL It must, in all cases, p r eee nr e the 
right to require payment at the end of the year and to foreclose the 
mortgage should that action beoomie necessary. The same principles 
a^ly to loans of longer maturities secured by farm lands. 

(h) In order that real estate loans held by a bank may be readily 
dassifled, a statement signed by the officers making a loan and haTing 
knowledge of the facts upon which it is based must be attached to 
each note secured by a flrst mortgage on the land by which the loan 
is secured, certifying in detail as of the date of the loan that aU of 
the requirements of law haTe been duly obsenred. 

liOAif s OH RxAL BsTATBr— Loans on real estate come within the liml* 
tatlon imposed by section 6200 of the Rerised Statutes of the United 
Statea. No National bank, thertfore, may loan to any one person, 
firm, or corporation on the security of real estate an amount exceeding 
10 per cent of the capital and surplus of such bank. (Opinion of 
Couns^ of Board, Harch 28, 1916.) 

Rbal Bstatb Loahs bt Camaui. Rassam Cxtt NATioif al Banks.*- 
Any National bank located in the outskirts of a central reserre dty, 
but within the corporate limits of such city, is not authorised under 
Hm proTisiona of the Federal Reserre Act to make loans on real estate. 
(Opinion of Counsel of Board, Sept 27, 1916.) 



Digitized by CjOOQ IC 



26 

Loans oh Citt Real Bstatb.— Nattonal banks in msUng loans se- 
eured bj Improved and nnencnmtered real estate nuty lend an amount 
equal to one-half of the market value of the real estate as imi«oyed. 
The value of the improvements constitutes a part of the value of the 
property offered as security. (Opinion of Ck>uns^ of Board* Oct 17, 

me.) 

Banks Not Compelled to BCakb Loans.— Memher banks may loan 
funds on real estate for a limited period, protecting themaleves by 
mortgage, but there is nothing in the Federal Reserve Act which com- 
pels them to make such loans. Notes based on real estate security 
may not be rediscounted with Federal Reserve Banks. (Informal 
Ruling of Board, July 8, 1916.) 

Loans to be Ingludd) in REPOBrxNO^— Neither Federal Reserve Board 
nor Ck>mptroller of the Currency can require banks that may choose 
to make loans under section 24 of the Act to include in the limitation 
under that section the aggregate of real estate loans which may have 
been acquired under section 6137 of the Revised Statutes. (Infotmal 
Ruling of Board, Oct 8, 1916.) 

CmCULAB OF Ck>l£FnK>LLXB, OoT. 27, 1916.-1 

National banks not situated in a ^central reserve city are now au- 
thorized to make loans secured by real estate upon the following 
conditions: 



IF THB REAL BSTATB SBCURITY IS FARM LAND 

1. It must be improved. 

2. There must be no prior lien. 

8. Property must be located in the same Federal reserve district as 
the bank making the loan or within a radius of 100 miles of the 
place in which the bank is located irrespective of district lines. 

4. The amount of the loan must not exceed 50 per cent of the actual 
value of the property upon which it is secured. 

6. The loan m!nst not be for a period longer than Hve years. 



^The Federal Reserve Board is authorised under the Act, at its tfUh 
cretion, to increase the number of cities in which it is not permissible 
for National banks to make loans secured by real estate. At present 
the only prohibited cities are the three central r e s enr o cities of New 
Yori£t Chicago and St Lools. 



Digitized by CjOOQ IC 



27 

IF THB RBAI^ B8TATB 18 NOT FABM L4ND— 

1. It must b6 Improred. 

2. There most be no prior lien. 

8. Propertr must be locmtad within a rmdint of 100 mflei of tho 
place in which the bank is located irreepectlTe of district lines. 

4. The amount of the loan must not exceed 60 per cent of the actual 
▼Blue of the pn^i^ertr upon which it is secured. 

5. The loan must not be for a period longer than one year. 

The aggregate of loans secured bj real estate-^farm land and other 
improYed real estate — ^made bjr anjr bank must not excee d 

One-fourth of the capital and surplus of the bank, or one^hird of its 
time deposits, at the time of making the loan, not exceeding 
one-third of its average time deposits during the preceding 
calendar jeiiT; 

ProTided, 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 of the loan, 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. 

A certificate should be attached to each real estate loan made under 
the provisions of Section 24, in the following form: 

WB CERTIFY THAT: » 192 

Loan number (ours. .^ 

Amount, I 

Maker, 

Dated - 

Was discounted or purchased by this bank on (if loan 

originally made by bank on date of note this tMct should be stated). 

Its maturity is 

The time to maturity from date note was acquired by this bank. . . . 
It is secured by a lien on real estate as follows (include here brief 

description of property under following headings): 
F^rm land (give number of acres) or other real estate as follows: 



Improved (state character of improvements) : 



Digitized by CjOOQ IC 



There Ui no prior lien (see abstract of title on ffle in bank). 

Land is located within FMeral Resenre District No. (or Is 

located within 100 miles of location of this bank, as the case may be). 

The estimated fftir value of the land is |. . . . per acre, bein^; |. . . . 

The estimated value of the improvements on the land is |. . . . 

The total value of the property is |. . . . 

The amount of the loan does not exceed 50 per cent, of the actual 
value of the property by which it is secured. 



OlBcers of Bank ot 

[Upon request the publishers will furnish separate forms for such 
certilicates by officers.] 

§ 19. Power of National Banks Is Insurance Agents. — That 
in addition to the powers now vested by law in National bank- 
ing associations organized under the laws of the United States 
any such association located and doing business in any place the 
population of which does not exceed five thousand inhabitants, as 
shown by the last preceding decennial census, may, under such 
rules and regulations as may be prescribed by the Comptroller of 
the Currency, act as the agent for any fire, life, or other insurance 
company authorized by the authorities of the State in which said 
bank is located to do business in said State, by soliciting and 
selling insurance and collecting premiums on policies issued by 
such company; and may receive for services so rendered such fees 
or commissions as may be agreed upon between the said association 
and the insurance company for which it may act as agent; and 
may also act as the broker or agent for others in making or pro- 
curing loans on real estate located within one hundred miles of 
the place in which said bank may be located, receiving for such 
services a reasonable fee or commission: Provided, however. That 
no such bank shall in any case guarantee either the principal or 
interest of any such loans or assume or guarantee the payment of 
any premium or insurance policies issued through its agency by 
its principal: And provided further. That the bank diall not 
guarantee the truth of any statement made by an assured in filing 
his application for insurance. (Sec. 13, Act Dec. 23, 1913, as 
amended by Act Sept 7, 1916, 39 Stat L., 752.) 



Digitized by CjOOQ IC 



29 

Bjbbt or ▲ Nauokal Bavx to Wbrb IirtuB^nGB T m ou yH Its Or* 
ficiBS.— Bxoopt M ipecUM abOTe» NaUonAl banks Iuito no ezproM or 
implied power to write Hre, cyclone, liabilitr, or other kinde of in- 
mirance, or to receiTe the proUtt from inmranoe contracts entered into 
hj its cfmcen, (Opinion of Counsel of Board, Jan. 18, 191S.) 

RaouLATiDir or Cqmptbollkb or CirsBKfOT, Dna 1, 1916. — It will be 
seen from the aboTe that in order to ayail Itself of the prorlsions of 
this act relatiTe to actinir as ag«Qt for an insurance oompanj: 

(o) The bank most be located in a i^aoe the population of which 
does not exceed 6000 as shown by the last precedinir decennial 
census. 

(h) The insurance company for which the bank acts as scent must 
have been authorized by the authorities of the State in which 
the bank is located to do business in that State. 

(0) The actiYities of the bank as such agent must be restricted to 
the soliciting and selling of insurance and the collection of 
premiums on policies issued by the insurance company. 

(d) The bank may receive for senrices so rendered such lawful fees 
or commissions as may be agreed upon between the bank and 
the insurance company fbr which it may act as agent 

(e) The bank is prohibited from assuming or guaranteeing the pay- 
ment of any premium on insurance policies issued, through its 
agency, by its prindpaL 

(/) The bank is prohibited from guaranteeing the truth of any state- 
ment made by an assured in tiling his application for insurance. 

(p) The powers conferred are to be exercised under such regulations 
as may be prescribed by the Ck>mptroller of the Currency. 

In pursuance of the foregoing amendment the following regulations 
are hereby prescribed for National banks which may undertake to 
act as agents for insurance companies: 

1« Bach contract of agency must be formally accepted by the board 
of directors of the agent bank by a resolution spread upon the minutes 
In the foUowing form: 

''Be it resolved that the contract of agency entered into on 

192. . between the Insurance Company and the Na- 
tional Bank of .by president (or vice-president) and 

cashier, a copy of which is on file in this bank, is hereby ratified 

and approved." 

1. A certified copy of such resolution, attested by the president or 
Tieei;»resident and by the cashier and by a majority of the directors 
»f the bank, must be forwarded to this office on forms to be furnished 
hy this office. 



Digitized by CjOOQ IC 



30 

8. There ahonld be on file in the hank, available for inspection by 
the Examiner, the following docunuents: 

(a) An authoritative statennent showing the population of the town 

according to the last preceding decennial census. 
(() A proper certificate from the authorities of the State in which 
the bank is located showing as to each insurance company for 
which the bank is acting as agent that such company has re- 
ceived authority from the said State to transact business in 
that State. 
(0) A proper certificate or other writing of each insurance company 
for which the bank acts, authorizing the bank to act as its 
agent, setting forth that the bank does not guarantee the pay- 
ment of any premium on insurance policies issued through its 
agency by its principal, and stating that the bank is not to be 
held responsible for the truth of any statement made by an 
assured in filing his application for insurance. 
(d) Ck>pies of all reports made by the agent bank to each insurance 

company which it represents. 
4. The bank will be required to keep a record as to each company 
tor which it acts as agent, showing: For fire insurance: the amount 
of each policy, the rate and premium, date of commencement, term, 
and date of expiration, as well as a description of property insured, 
with name of assured and to whom loss is payable. As to life in- 
surance: Amount and date of policy, with premium, and a statement 
as to under what form the insurance is written, giving also name 
of assured and beneficiary. As to any and all other forms of insur- 
ance: The fullest possible particulars as to amounts, dates, rates, 
premiums, and what is insured by the policy, and of collections of 
all premiums collected for account of the company, refunds made, the 
proportion of premium credited to the profits of the bank under 
its agreement with the company, the proportion due the company, 
the amounts and dates of all remittances made to the insurance 
company on account of premiunus collected, and the balance^ if any, 
due from the bank to the insurance company. 

6. The bank will be required to carry on its general ledger an 
account which will, at all times, show the amount due to insurance 
companies for which it is acting as agent, on account of premiums 
collected but not remitted, and this liability must be shown in reports 
of condition and in the published statements of the bank under the 
heading "other liabilities— on account of insurance premiums col- 
lected and not remitted," unless specifically provided for in the 
report 

6. The bank should also keep such records as may be required by 
each insurance company in the manner and under the forms pre- 



Digitized by CjOOQ IC 



n 

feribed by the Tarknit rompaalt; all of whleh dhoold be vndMM 
for inspection by the WiMntnw on roQnott. 

7. The agent bank must not aatnme any reaponalbility or liability 
for either the adjnatment, aettlement, or payment of loeaea under 
any policy ittroed by or through its agency. 

8. The records of all profits deriTod from the insnrance agency 
should be carried in a separate account on the books of the bank« 
and the records should be so kept as to enable the Biaminer rsadily 
to trace to the source aU items of profit derired in this connection. 

WHBm ▲ HAHOHii. n4i« AOfs AS ncMOs on AQwan ik MAxnre oa hmxtub- 
nre loans oh bbal isTAn. 

In order to aTail its^ of this pririlege: 

(a) The bank must be located in a place the population of which 
does not exceed 6000 as shown by the last preceding decennial 



(b) The real estate by which the loans negotiated are secured must 
be located within 100 miles of the place In which the negotiating 
bank is located* 

(c) The bank may rec^TC for such senrices a reasonable fee or 
commission. 

(d) The bank shall in no case guarantee either the principal or 
interest of any such loans. 

(e) The powers conferred are to be exercised under such regula- 
tions as may be prescribed by the Comptroller of the Currency. 

The following regulations are prescribed for National banks which 
may undertake to act as agents or brokers in making or procuring 
loans on real estate: 

1. A bank intending to aTail itself of this prorision of the law must 
adopt by its board of directors a resolution in the following form: 

"Be it resolved. That the ofllcers of the ■ National Bank of 

are hereby authorized and empowered on behalf of this bank, 

as broker or agent, to accept from customers of this bank deposits 
of funds to be iuTested for account of said customers, in loiluis secured 
by real estate, and to procure, as broker or agent, for customers of 
this bank loans which shaU be secured by real estate, under the 
proTisions of the Act ai^rovod September 7, 1916: Provide, that the 
investment of such funds as stated, and all such procuring of loans 
or lending of funds for clients shaU be undertaken only under writp 
ten Instructions from the customer for whom this bank, throus^ 
its ofllcers, may act as broker or agent, such written instructions in 
eadi case to be first deliTered to an cMBcer of this bank. Such instruc- 
tions shall, in all cases, state clearly that the bank in acting as broker 



Digitized by VjOOQ IC 



or agent In no way guarantees payment of either the principal or 
intereat of any loan lo negotiated." 

2. A oertilied copy of auch resolution, attested by the president or 
▼ioe-president and cashier and by a majority of the directors of 
the bank, must be forwarded to this attice, on forms to be furnished 
by this office. 

3. No bank shall charge more than one commission or brokerage 
on the making of any loan; that is to say, if it shall charge a broker- 
age or commission to the party borrowing the mioney, it shall not 
charge a brokerage or commission to the party to whom money is 
so loaned, and vice Tersa* 

4. Bach bank acting under this provision of law will be required 
to keep a record showing as to each loan negoliated by the bank — 

(a) The name and address of the principal for whom the bank 

is acting. 
(5) Date of written instructions from the principal. 

(c) Name and address of maker of note. 

(d) Date of note. 

(e) Date of maturity of note. 

(/) Brief description of property securing note, showing location 

and distance from place in which bank is located. 
iff) Character of improvements, etc. 
(ft) Name and address of party to whom note was transferred or 

delivered by the bank, 
(i) Date of such transfer or delivery, 
(i) Amount of principal of note, 
(fc) Rate of interest or discount. 
(I) Rate of commission or brokerage charged by bank for acting 

as broker or agent 
(m) Amount of such commission or brokerage, and whether said 
commission was paid the borrower of the money or by the party 
for whom it was loaned. 
6» A book should be kept showing the date on which each mort- 
gage or deed of trust negotiated by the bank has been admitted to 
record, the court in which the same is recorded, and the recordation 
fees paid in each case. 

6. The recotds of all profits derived from acting as broker or agent 
in negotiating loans on real estate should be carried in a separate 
account on the books of the bank, and the records should be so kept 
as to enable the Etzaminer readily to trace to the source all items 
of profit derived in this connection. 

7. Deposits of money received by the bank as brok«* or agent to 
be invested in loans secured by real estate as prescribed by law, 
must be treated as trust funds and kept separate and apart from the 
other assets of the bank. Such funds must in no case be permitted to 



Digitized by CjOOQ IC 



8S 

from Vbm poitettton of tho bank until tho loan for whloh tbigr 
are to be paid out ia formally aooepted by or In behalf of the party 
for whoee acoount nefotlated. 

8. No bank ahall adTanee or nae ita own fnnda In connection with 
real eatate loana negotiated aa broker or agent. 

9. No loana aecored by real eatate, which the bank haa negotiated 
aa broker or agent, ahoold become a part of the aaaeta of the bank 
ermk temporarily, unleoa anch loana cdnftorm to the prorialona of 
aectlon 24 of the Federal Reaerre Act, aa amended. 

10. There ahonld be ayallable in the bank for inspection by the 
National Bank Bxamlner— 

(a) An anthoritatiye statement showing the population of the town 

according tof the last preceding decennial census. 
(5) All records pertaining to the negotiation of real estate loans as 

broker or agent* 
National banka acting as broker for the placing of loans should 
prq^are blank f oVms of apidlcatlon to be executed by i^vlicants for 
loans. These appUcatlima should show— 
(a) Location of property. 
(5) Acreage. 

(c) AssesBod yaluatlon. 

(d) Sstimated present yalua 

(e) Brief descriptions of buildings therecm and estimated yalue of 



:(/) Whether bufldings are Insured, and, if so, fohr what amounta 

and in what oompanlea. 
{ff} Whether property is already encumbered, and, if so, for what 

amount 
Ih) If property Is term property applicant should state whether or 
not the dwelling is provided with sanitary arrangements ap- 
prared by the local board of health, and. If not, what sanitary 
arrangements there are. 
At the foot of this application should be printed below the signer 
tare of the ^plicant a statement to the effect that "The statements 
In the foregoing application haye been submitted to this bank by 
the applicant for the Icten, but this bank does not undertake to guai^ 
antee the correctness of any of the statements made by the ^plicant" 
If any applicant for a loan makea statements in his application 
which any oflteers of the bank before whom the i^ipllcation may 
oome may hare reason to think are not correct, the attention of the 
applicant should be called to the possible discrepancy. 

§ to. Arnonnt of Capital Xeqnixed. — No association shall be 
oiganized with a less capital than one hundred thousand dollars, 
3 



Digitized by CjOOQ IC 



34 

except that banks with a capital of not less than fifty thousand 
dollars may, with the approval of the Secretary of the Treasury, 
be organized in any place the population of which does not ezce^ 
six thousand inhabitants, and except that banks with a capital of 
not less than twenty-five thousand dollars may, with the sanction 
of the Secretary of the Treasury, be organized in any place the 
population of which does not exceed three thousand inhabitants. 
No association shall be organized in a ciiy the population of 
which exceeds fifiy thousand persons with a capital of less than 
two hundred thousand dollars. (Rev. Stat. U. S. Sec. 5138, as 
amended by Act March 14, 1900, Ch. 41, Sec. 10, 31 Stat L., 48.) 

Detebmikation of Popuiation. — ^Wben there is any question as to the 
population of a place being within the limit of the requirement of the 
law, the Comptroller olstains from the Census Bureau and from other 
sources as fuU information as possible. In case the applicants to 
organize a National bank believe the population reported to the Comp- 
troller not correct, they may furnish such counter evidence as they 
may be able to obtain. A certificate from the mayor of the place or 
other good evidence of actual population probably will be considered. 
Any erroV of the Comptroller as to population can be corrected in 
appropriate legal proceedings. It sometimes happens that banks have 
less than the minimum ci^ital required by law for the population of 
the place. The explanation is that they were either organized when 
the places were smaUer, or were organized in villages afterward ab- 
sorbed by adjacent cities. 

AuTHOBizATioN OF Bankb ITifDEB |100,000 CAPITAL. — ^Whou application 
is made to the ComptroUer for a bank with less than 1100,000 capital, 
he certifies the application, with statement as to population, etc., to the 
Secretary of the Treasury, who thereupon takes action and approves or 
not as he deems best. 

§ 21. Far Value of Stook— -Transfers— Stockholders' B^^hts 
and liabilities. — The capital stock of each association shall be 
divided into shares of one hundred dollars each, and be deemed 
personal property, and transferable on the hoclks of the associa- 
tion in such manner as may be prescribed in the by-kws or articles 
of association. Every person becoming a shareholder by such 
transfer shall, in proportion to his shares, succeed to all the rights 
and liabilities of the prior holder of such shares; and no change 



Digitized by CjOOQ IC 



86 

shall be made in the articles of association by which the ri^ts, 
remedies or security of the existing creditors of the association 
shall be impaired. (R&r. Stat U. S. Sec. 5139.) 

The exception to the diyfslon Into shares of |100 each Is oalj in ease 
of State banks oonrertsd. (See (81.) If a conyertinir bank de- 
sires to diange the denomination of its shares, the new d«iomination 
must be |100. 

See also H 46 and 4$ for the liabtUty of shareholders. 



Stats Statutes.— A State law cannot limit the transferable QuaUty 
of National bank stock. (Doty v. First National Bank of Larimore, S 
N. D., 9.) But a state court may order a new certiflcate to Issue 
though the by-laws require the production of the old certiflcate bef6re 
the issue of a new one. (Letcher v. Gtonnan Nat Bank, 119 S. W. Rep. 
(Ky.), 286.) So, a State statute prescribing the mode of transfer of 
stock by executors wlU apply to the stock of a National bank located in 
such State. (Hobbs v. Western Nat Bank, F^ (3ase No. 6561a.) 
And it is held that a State statute which provides that the stock- 
holders of all priTate corporations shall have the rls^t of aeoees to 
and inspection and examination of the books, records and papers of 
the corporation at all reasonable and proper times, ^plies to Na- 
Uonal banks Ideated within the State. (Winter v. Baldwin, 89 Ala.. 
483; Murray v. Walker, 166 Ky., 686.) And National bank stock U sub- 
ject to seisnre and sale on execution under authority of State laws. 
{In re Braden's SsUte, 166 Pa. St, 184.) 

Tbansrb op Stock— -Brtbt or TaAH SiiJi L ost CxBnnGATSs.— The 
transfer of stock In National banks is not goremed by different rules 
from those which are ordinarily applied to the transfer of stock in 
other corporations. (Johnson v. Laflin, 103 U. S., 800.) The entry 
of the transaction in the books of the bank is required, not for the 
purpotee of passing the title from seller to buyer, but for the protec- 
tion of the parties, and others dealing with the bank, and to enable 
the bank to know who are its stockholders. (Id.) See also Gray v, 
Faolkhauser, 58 Oregon, 428. Accordingly, it has been held by the 
Supreme C^urt of the United States that where the shareholder de- 
lirers his certificates of stock to the purchaser, with a blank power of 
attorney to make the transfer on the books of the bank, and receives 
the purchase-money, the sale is cotaiplete and the title passes from 
seller to buyer. (Id.) And so it has been decided that where a share- 
holder who has sold his stock dellyers the certificates with a proper 
power of attorney to the cashier with a request that the transfer be 
made upon the books, and the cashier promises so to do, the transferror 



) 



Digitized by CjOOQ IC 



86 

has done all that la legally required of him to divest himself of the 
liability of a stockholder, and should the cashier fail to make the trans- 
fer on the books, the transferror can not be held as a stockholder in 
case the bank should afterwards beoome insolvent (Hayes v. Shoe- 
maker, 39 Fed. Rep., 319; Toung v. McKay, 50 Fed. Rep., 397.) When 
a certificate of stock is left with the officers of the bank to be trans- 
ferred on the books, the transfer takes place at the time when it is 
so left, and not at the time of actual entry in the books, provided the 
party leaving it has authenticated to the officers of the bank his in- 
tention to make such transfer in the manner prescribed by the by- 
laws of the bank. (Young v. McKay, 50 Fed. R^., 394.) The rights 
of a transferee of National bank stock, under an unrecorded transfer, 
good at common law, are superior to the rights of a subsequent at- 
taching creditor of the transferror without notice. (Doty v. First 
Nat. Bank of Larimoire, 8 N. D., 9.) 

Fob What Pubposk Tbansfeb on Books Nbgbssabt. — ^Until the trans- 
fer in recorded, the corporation is not bound to recognize the transferee 
as a stcokholder, and he is not entitled to vote upon the stock, or to 
receive the dividends thereon, or, in fact, to have any of the privileges 
of a stockholder. The transferror also has an interest in having the 
transfer registered, because he will not be discharged from his liability 
as a stockholder until this is done. 

The record made of the transfer upon the books of the bank is suf- 
ficient, as between the transferee and the bank, to work a change of 
ownership, and new certificates are not necessary to his becoming the 
owner of the stock so transferred. (Keyser v, Hitz, 133 U. S., 438.) 
Subscription to stock and payment in full and entry of his name on 
the books as a stockhdlder makes the subscriber a shareholder without 
taking out a certificate. (Pacific National Bank v. Baton, 141 U. S., 
227; Thayer v. Butler, 141 U. S., 234; BuUer v. Eaton, 141 U. S., 240.) 

In case of loss of a certificate of stock a bond of indemnity should be 
required before the issue of a duplicate certificate to avoid the possi- 
bility of the bank becoming liable fot an illegal issue. 

Right of Stookholdbbs to Tbansfeb. — A shareholder in a National 
bank, while it is a going concern, has the absolute right, in the ab- 
sence of fraud to make a bona fide and actual sale and transfer of his 
shares at any time, to any person capable in law of purchasing and 
holding the same, and this right is not subject, in such cases, to the 
control of the directors or other stockholders. (Johnson v. Laflin, 5 
Dill, 65.) The directors are authorized to prescribe regulations under 
which the transfer of stock shall be made; but these regulations must 
be reasonable, and under the pretence of prescribing the manner 
thereof, the directors can not clog the transfer with us^ess restrio- 



Digitized by CjOOQ IC 



37 

tlonB. (Johnson v. Laflin, lOS U. S.» 800.) Tho transfer dOM not ro- 
qnlre approral bj the directon, nor can they decline to make it In a 
proper case, (/d.) But where the transfer is sought to be made to 
a person incapable In law of assuming the liabilities df a stockholder 
— as where it is made to an infant, or to a person of unsound mind — 
then the directors might refuse to permit the transfer to be registered* 
for such a transfer is a fraud upon the corporation, the stockholders 
and creditors. And so they might refuse where the transfer is erl- 
dently made merely for the purpose of esciHDing liability, as where a 
Bhareholder in an insohrMit bank neekB to transfer his stock to a 
pauper, or man of straw, or to an insolTont or irresponsible person. 
Where the person intrusted by the directors with the duty of entering 
the transfers on the books of the bank, refuses for insufficient reason 
to note a transfer, the bank will be liable for damages resulting there- 
from. (Case V. Citizens' Bank, 100 U. a, 446, see also Htaard v. Bank, 
26 Fed., 94.) 

SPEcmc PnxroBMAifCB.— A court of equity will not enforce BpeciHe 
performance of an agreement to sell shares in a National bank to 
enable the purchaser to obtain control of the bank, for the reason 
that, (1) equity will not generally enforce specific execution of a 
contract relating to personal chattels, and (2) because a decree en- 
forcing the agreement in question would be against public policy. 
(FoU's Appeal, 21 Alb., L. J.; 2 N. B. C, 411; but see Owinge v. 
Lehman, 190 111. App., 432.) 

National Bakk Stock Not aiv Intsbsst-Bsabihg Sbouutt.— -While 
the shares of stock in a National bank are securities, they are not in- 
terest-bearing, and hence a proyision in a will directing the executors 
to inTest the funds of the estate in interest-bearing securities does 
ndt authorise an investment in National bank stock. (Williams v. 
Ck>bb, 219 FM. Rep., 663.) 

§ 22. When Capital Stock Must be Paid In.— At least fifty per 
centum of the capital stock of every association shall be paid 
in before it shall be authorized to commence business; and the 
remainder of the capital stock of such association shall be paid 
in installments of at least ten per centum each^ on the whole 
amount of the capital as frequently as one installment at the end 
of each succeeding month from tiie time it shall be authorized by 
the Comptroller of the Currency to commence business; and the 
payment of each installment shall be certified to the Comptroller, 



Digitized by CjOOQ IC 



88 

under oath, by the president or caahier of the association. (Ber. 
Stat. U. 8. Sec. 5140,) 

Payment of Subscbiptioits.— The Comptroller now requires that 
each shareholder listed in the Organization Certificate, or his assignee, 
shall have paid in fifty per cent on stock h^d bj him, and further 
that the list of shareholders in the aforesaid certificate shall include 
all subscribers to the stock and not be a list of a few subscribers tak- 
ing the full stock in their names and paying for it, while an under- 
standing or agreement exists with other parties that they are to 
transfer a certain amount to them on payment for the shares. But 
where there is no subscription paper, and parties in order to expedite 
charter are listed as the entire original shareholders in Organization 
Certificate and pay in their pro rata fifty per cent on the ci^ital, this 
would meet the requirements of the law, and if the corporators later 
should wish to distribute some of their holdings there could be no 
legal objection. The Comptroller's purpose is to avoid speculation in 
the original stock of banks organizing. 

The Comptroller's ofilce furnishes blanks for certifying payments on 
capitaL For form, see H 897 and 398, 

§ 23. Failure to Fay Installments on Stock— Sale of Stock— 
Bestoring Capital so Bednced. — Whenever any shareholder, or his 
assignee^ fails to pay any installment on the stock when the same 
is required by the preceding section to be paid, the directors of 
such association may sell the stock of such delinquent shaieholdei* 
at public auction, having given three weeks' previous notice thereof 
in a newspaper published and of general circulation in the city or 
couniy where the association is located, or if no newspaper is 
published in said city or county, then in a newspaper published 
nearest thereto, to any person who will pay the highest price there- 
for, to be not lees than the amount then due thereon, with the 
expenses of advertisement and sale; and the excess, if any, shall be 
paid to the delinquent shareholder. If no bidder can be found) 
who will pay for such stock the amount due thereon to the as- 
sociation, and the cost of advertisement and sale, the amount pre- 
viously paid shall be forfeited to the association, and such stock 
shall be sold as the directors may order within six months from 
the time of such forfeiture, and if not sold it shall be cancelled 
and deducted from the capital stock of the association. If any such 



Digitized by CjOOQ IC 



89 

oaiusellation and reduction shall reduce the capital of the 
elation helow the Tninimnm of capital required by law, the capital 
stock shall, within thirty days from the date of snch cancellation, 
be increased to the required amount; in default of which a re- 
odver may be appointed, according to the provisions of section 
fifty-two hundred and thirty-four, to close up the business of the 
association. (Bev. Stat U. S. Sec. 5141.) 

liBQAL Status or Stock. — It most be ranamlMred that from th« time 
of his subecriptlon a person becomes a shareholder, and that aU the 
shareholders have entered into a contract among themselves, and are 
mutually responsible to each other. The slock doubtless has a legal 
standing before a single payment is made, and the association may be 
legally organized and become a body corporate before a single dollar 
of the capital is paid in by anyone. Thus sales or transfers of stock 
may take place before any capital is paid in. This is in line with the 
decision of the United States Supreme Court in Van Allen v. Assessors 
(3 Wall., 573), which holds a share of stock to be an entity distinct 
from capital. The actual holder or subscriber, in whose name the 
stock stands o^ the books of the bank at the time the directors caU 
for the payment of the first installment of 60 per cent, must pay it, 
and payment can doubtless be compelled by legal proceedings. The 
section under consideration does not ref^r to this first installment, but 
to the subsequent installments, the dates of pajrment of which were 
fixed by the preceding section. The whole tenor of section 5141 im- 
plies a pervious payment of 60 per cent, which Is in the nature of a 
forfeit, if the stock has to be sold on account of failure to meet the 
subsequent installments. 

Zjmit or TnfE iob Patikg in CAFiTAL.-nA new association would 
strictly, under this section, have the following time to make good its 
capital before a receiver could be appointed; First, the time until the 
installment became due; then three weeks for notice by publication: 
then six months from forfeiture to cancellation; and, finally, thirty 
dajrs longer in which to bring up capital to required amount How 
capital is to be made gotod in such case is not distinctly stated, but 
probably by assessment on remaining stockholders. 

State Statute kot Appucablx. — ^A State statute which prescribes a 
mode of procedure in favor of judgment creditors against delinquent 
shar^olders is not applicable to National banks, though by its terms 
it purports to apply to all corporations. (MoQuiddy v. King, 191 AUu. 
206.) 



Digitized by CjOOQ IC 



40 

§ 24. Comptroller to Betermiiie if Auociation is Entitled to 
Commence Business. — Whenever a certificate is transmitted to 
the Comptroller of the Oarrency^ as provided in this Title^ and 
the association transmitting the same notifies the Comptroller that 
at least fifty per centum of its capital stock has been duly paid in^ 
and that such association has complied with all the provisions of 
this Title required to be complied with before an association shall 
be authorized to commerce the business of bankings the Comp- 
troller shall examine into the condition of such association^ as- 
certain especially the amount of money paid in on account of its 
capital, the name and place of residence of each of its directors, 
and the amount of the capital stock of which each is the owner in 
good faith, and generally whether such association has complied 
with all the provisions of this Title required to entitle it to en- 
gage in the business of banking; and shall cause to be made and 
attested by the oaths of a majority of the directors, and by the 
president or casher of the association, a statement of all the facts 
necessary to enable the Comptroller to determine whether the 
association is lawfully entitled to commence the business of bank- 
ing. (Rev. Stat IT. S. Sec. 5168.) 

Pbeliminabt BzAHnrATioN.^The ComptroUer orders an examination 
of lobal conditions and the status of the organizers and proposed offi- 
cers to be made by the nearest available examiner prior to approving 
the application to organize and this preliminary examination suffices 
in practicaUy all cases. 

See Chi4>ter 1, Part IV, for fuU details. 



§ 25. Certificate of Authority to Oommenoe Business.— If, upon 
a careful examination of the facts so reported, and of any other 
facts which may come to the knowledge of the Comptroller, 
whether by means of a special commission appointed by him for 
the purpose of inquiring into the condition of such association, or 
otherwise, it appears that such association is lawfully entitled to 
commence the business of banking, the Comptroller shall give to 
such association a certificate, under his hand and <^cial seal, that 
such association has complied with all the provisions required to 
be complied with before commi^cing the business of banking; 



Digitized by CjOOQ IC 



41 

tod that such aBsociation is authorized to commenoe such biuiiiesfl. 
But the Comptroller may withhold from an association his cer- 
tificate authorizing the commencement of business, whenerer he 
has reason to suppose that the shareholders have formed the same 
for any other than the legitimate objects contemplated by this 
Title. (Rev. Stat U. S. Sec. 5169.) 

See note to preceding section. The certificate named in this section 
is the bank's charter, that is, its anthcMty to do business. 

§ 26. Publication of Comptroller's Certiiloate.— The association 
shall cause the certificate issued under the preceding section to 
be published in some newspaper printed in the city or county 
where the association is located for at least sixty days next after 
the issuing thereof; or^ if no newspaper is published in such city 
or county, then in the newspaper published nearest thereto. (Bev. 
Stat U. S. Sec. 6170.) 

This refers to the certificate of authority to begin business. An in- 
sertion in a weekly newspi4>er or in a weekly edition of a daily news- 
paper during the sixty days is sufllcient The Comptroller requires the 
publisher's oath of publication and a copy of the paper containing 
the notice as eridence of publication for the time required. 

§ 87. Inorease of Capital Stock. — Any National banking asso- 
ciation may, with the approval of the Comptroller of the Currency, 
by the vote of shareholders owning two-thirds of the stock of such 
association, increase its capital stock, in accordance with existing 
laws, to any sum approved by the said Comptroller, notwithstand- 
ing the limit fixed in its original articles of association and deter- 
mined by said Comptroller; and no increase of the capital stock of 
any National banking association, either within or beyond the 
limit fixed in its original articles of association, shall be made 
except in the manner herein provided. (Act May 1, 1886, Ch. 73, 
Sec 1 ; 24 Stat L., 18.) 

Obsoixtb Provisions in AmoLxs or Association.— Prior to the Act 
of 1SS6, the statute provided that "Any association formed under this 
title may, by its articles of association, provide for an increase of its 
capital from time to time, as may be deemed expedient, subject to the 



Digitized by CjOOQ IC 



42 

limitattoiui ot this title. But the maTlmiim of Sttch increase to be pro- 
vided in the articles of association shall be determined by the Comp- 
troller of the Currency." (Rev. Stat. U. S., Sec. 6142.) Many banks, 
therefore, have a provision of this character in their articles of asso- 
ciation« But this is no^ obsolete. It is no longer necessary to insert 
in the articles of association provisions for an increase of ci4>ital stock; 
for shareholders owning two-thirds of the shares may increase the 
capital stock at any timie and to any amount, subject only to the ap- 
proval of the Comptroller of the Currency, and this notwithstanding 
that the articles of association contain a provision fixing a maximum 
limit 

Bt Whom Incbeasb Axtthobizsd. — ^The increase must now be made 
by the shareholders, and not by the directors, and all provisions in 
the articles of association of banks organized prior to May 1, 1886, au- 
thorizing directors to increase the stock, have become wholly nugatory. 

Right of Shabeholdebs to Sxtbscbibe fob New Shabbs. — It is a gen- 
eral rule of law that where the capital stock of a corporation is in- 
creased each shareholder has a right of preemption to the new stock 
in proportion to his shares in the original stock. (Stokes i;. Con- 
tinental Trust Co., 186 N. Y., 286.) 

§ 28. When Increase of Capital Stock Becomes Valid. — No in- 
crease of capital shall be valid until the whole amount of such 
increase is paid in^ and notice thereof has been transmitted to 
the Comptroller of the Currency, and his certificate obtained 
specifying the amount of such increase of capital stock, with his 
approval thereof, and that it has been didy paid in as part of the 
capital of such association. (Bev. Stat IT. S. Sec. 5142.) 

Comptboixeb's Apfboval — ^Reoovebt of Monet Paid Whebb Incbease 
Not Made.— -The stock of a National bank can not be lawfully increased 
before the entire amount of the new capital has been paid in and the 
Comptroller of the Currency has certified to the increase and to the 
fact of pasrment in the mode prescribed by Section 5142» Rev. Stat 
U. S. (McFarlin v. National Bank of Kansas City, 68 Fed. Rep., 868; 
Charleston v. People's Nat Bank, 5 S. C, 103.) And the provision of 
the statute as to payment does not create a condition, express or im- 
plied, that shares subscribed and paid for in full are not valid unless 
the entire amount of the proposed increase is subscribed and paid for 
in full. (Scott V, Latimer, 89 Fed. Rep., 843.) Where money paid in 
on subscriptions to an increase of capital is received by a bank as 



Digitized by CjOOQ IC 



48 

a trait fund to be ^nHied to that pmpot^ and btflnv the incirtiw If 
•M>roTed by the Ooiiic>tit>Uer and hie oertiflcate laeaed, the bank teile, 
the money so paid may be reoovered by the eubecriben. (/d.) 

Wbkme Wboim Amount ov IvcBEksm » Nor TAXiif.— The U. 8. 8a- 
xnreme Court in the cmee of Aepinwall v. Butler, 1S3 U. &, 666, has held 
that where an increase of the capital stock Is authorised In a certain 
sum there is no implied condition that a subscription shall be Told 
if the whole amount so authorized Is not subscribed. (See also Delano 
I'. Butler, 118 U. S., 634.) Therefore^ where a shareholder subscribes 
his additional share towards doubling the capital and pays his sub- 
Bcrlptions, the fact that the stockholders, with the assent of the Comp- 
troller, reduce the amount of the stock they had proposed to Issue, 
does not permit him to repudiate his subscription and recover the 
mdney paid on it. (Pacific NaUonal Bank v. Baton, 141 U. 8., 227.) 
(But If there were a large and material deficiency in the amount of 
capital contemplated, equity might Interfere to protect subscribers. 
(Aspinwall v. BuUer, 183 U. 8., 696; Matthews v. Columbia Nat Bank, 
79 Fed. Rep., 668.) 

In an action to recover money deposited with a National bank the 
plaintiff may show that stock issued by the bank in his name was Is- 
sued to him merely as collateral security for such deposit. (Williams 
V, American National Bank of Arkansas CHty, 86 Fed. Rep., 876.) And 
It is no defense to the bank that the stock was Issued without au- 
thority of law. (2d.) 

§ 28. Xednotion of Capital StoclL— Any association formed un- 
der this title may, by the vote of shar^olders owning two-thirds 
of its capital stock, reduce its capital to any sum not below the 
amount required by this title to authorize the formation of associa- 
tions; but no such reduction shall be allowable which will reduce 
the capital of the association below the amount required for its 
outstanding circulation, nor shall any reduction be made until the 
amount of the proposed reduction has been reported to the Comp- 
troller of the Currency and such reduction has been approved by 
Ihe said Comptroller of the Currency and by the Federal Beserve 
Board, or by the organization committee pending the organization 
of the Federal Beserve Board. (Bev. Stat TI. S. Sec. 5143, as 
amended by Sec. 28, Act Dec. 23. 1913; 38 Stat L., 274.) 

Rnyncnoif or Cafital to Mkbt Impaibmsht.— In reduction to me«t 
Impairment of capital there can be no withdrawal of assets; for, prima 



Digitized by CjOOQ IC 



u 

facie, any further withdrawal of assets would result in still further im- 
pairment of the capital. (McCann i;. First National Bank of Jefferson- 
ville, 112 Ind.» 354.) But the stockholders have a right to proYide that 
the assets charged off shall be set aside as a trust fund for the benefit 
of the stockholders. (Jerome v. Ck>gswell, 78 Ck>nn.» 75; 204 U. S. 1.) 
and in each case the right to participate in the distribution: ot such 
fund is vested in those who are stockholders at the time of the re- 
duction. (Id,) 



§ 30. Depositariei of Public Honeys.— All National bankrog 
associations, designated for that purpose by the Secretary of the 
Treasury, shall be depositaries of public money, under such r^ula- 
tions as may be prescribed by the Secretary; and they may also 
be employed as financial agents of the Government; and they 
shall perform all such reasonable duties, as depositaries of public 
money and financial ag^its of the Govemmjent, as may be required 
of them. The Secretary of the Treasury shall require tiie asso- 
ciations thus designated to give satisfactory securily, by the de- 
posit of United States bonds and otherwise, for the safe-keeping 
and prompt payment of the public money deposited with them, 
and for the faithful performance of their duties as financial agents 
of the (Jovemment: Provided, That the Secretary shall, on or 
before the first of January of each year, make a public statement 
of the securities required during that year for such deposits. And 
every association so designated as receiver or depositary of the 
public money shall take and receive at par all of the national cur- 
rency bills, by whatever association issued, which have been paid 
into the Government for internal revenue, or for loans or stocks : 
Provided, That the Secretary of the Treasury shall distribute the 
deposits herein provided for, as far as practicable, equitably be- 
tween the different States and sections. (Eev. Stat. IT. S. Sec. 
5153, as amended by Act Mlarch 3, 1901, Ch. 871; 31 Stat. L., 
1448; Act March 4, 1907, Ch. 2913, Sec. 3; 34 Stat L., 1290.) 



See Section 15 of Federal Reserve Act^ page 275, requiring the de- 
posit of Government funds in either Federal Reserve banks or member 
banks. For additional information as to Government depoBitoriee see 
Part III» Cb. III. 



Digitized by CjOOQ IC 



45 

§ 81. CoaTendon of State into Vational Bankt^^Any bank in- 
ooiporated by special law of any State or of the United States 
or organized under the general laws of any State or of the United 
States and haying an unimpaired capital sufficient to entitle it to 
become a National banking association under the provisions of the 
egristing laws may, by the vote of the shareholders owning not less 
than fiffy-one per centum of the capital stock of such bank or 
banking association, with the approval of the Comptroller of the 
Currency be converted into a National banking association, with 
any name approved by the Comptroller of the Currency : 

Provided, however. That said conversion shall not be in contra- 
vention of tiie State law. In such case the articles of association 
and organization certificate may be executed by a majority of the 
directors of the bank or banking institution, and the certificate 
shall declare that the owners of fifty-one per centum of the capital 
stock have authorized the directors to make such certificate and to 
diange or convert the bank or banking institution into a National 
association* A majority of the directors, after executing the ar- 
ticles of association and the organization certificate, shall have 
power to execute all other papers and to do whatever may be re- 
quired to make its organization perfect and complete as a National 
association. The diares of any such bank may continue to be for 
the same amount each as they were before the conversion, and the 
directors may continue to be directors of the association until 
others are elected or appointed in accordance with the provisions 
of the statutes of the United States. When the Comptroller has 
given to such bank or banking association a certificate that the 
provisions of this Act have been complied with, such bank or 
ImTiVifig association, and all its stockholders, officers, and em- 
ployees, shall have the same powers and privileges, and shall be 
subject to the same duties, liabilities, and regulations, in all re* 
spects, as shall have been prescribed by the Federal Reserve Act 
and by the K'ational banking Act for associations originally or- 
ganized as National banking associations. (Rev. Stat. U. S. Sec. 
5154, as amended Sec. 8, Act. Dec. 23, 1913; 38 Stat. L., 258.) 

Wot fortber Information on this subject see Ch. IV., Part lY, 



Digitized by CjOOQ IC 



46 

AuTHOBiTY Reqxtibed. — ^Many States have passed enabling acts, both 
to enable State banks to become National banks and to enable National 
banks to become State banks. 

Ck>BPoiuTB Relation to -Old BANK.^^Tlie ccfnversion of a State bank 
into a National bank does not destroy its identity or its corporate ex- 
istence; it is not a closing of business^ but simply a continuation of 
the same body, with the same officers and stockholders, the same prop- 
erty» assets and business of banking under a changed jurisdiction. 
(Metropolitan Nat Bank v. Clagett, 141 U. S., 520.) The conversion 
and change of name do not aifect its right to sue on liabilities incurred 
to it under its fdrmer name. (Michigan Insurance Bank v. Eldred, 143 
U. S., 293; City Nat Bank v. Phelps, 97 N. T., 44.) And conversely 
the National bank is liable after the conversion for all the obligations 
of the old institution. (Coffee v. National Bank of Missouri, 46 Mo;, 
140; Kelsey i;. National Bank of Crawford, 69 Pa. St, 426; Atlantic 
Nat Bank i;. Harris, 118 Mass., 147.) A National bank, organized as 
the successor of a State bank, may take and hold the assets of the 
bank whose place it takes, though there was not in form a conversion 
from a State to a National corporation, but the organization of a new 
corporation. (Bank v. Mclntyre, 40 Ohio St, 528.) And such bank 
will be liable to the depositors of the fdrmer bank. (Bans v. Exchange 
Bank, 79 Mo., 182.) 

Assets of Converting Bank. — ^The (3omptroller of the Currency has 
ruled that a bank entering the National system' by conversion will be 
allowed to carry over to and include in its assets as a National bank 
only such assets as are allowed by the National Bank Act, excluding 
any assets prohibited by Sections 5136 and 5200, Revised Statutes, 
excepting that under certain circumstances and an assurance of speedy 
liquidation a small portion of pn^bited assets is sometimes permitted 
to be taken over. 

DiBBOTOBS, Name, Eto.— -All of the directors of the State bank at the 
time of conversion will continue to be direictors of the National bank 
until others are appointed or elected, though some of them may not 
have joined in the execution of the articles of assckdation and organiza- 
tion certificate. (Lockwood v. The American National Bank, 9 R 
I., 308.) A State law authorizing National banks which have been 
converted from State banks to use the name of the original corpora- 
tion for the purpose of prosecuting and defending suits is not in 
conflict with the National banking law, and therefore proceedings bssed 
upon a judgment obtained before the conversion may be instituted by 
such association in its former corporate name. (Thomas v. Farmers' 
Bank of Maryland, 46 Md., 43.) When a bank has been converted, new 



Digitized by CjOOQ IC 



47 



oertilloates of stodL ar» not naoeeMrj, bot tbo old oertllloAleo should 
be stata&ped to show the oonTonloii, (Keyeer v. Hits, ISS U. a, 118.) 
Vor tall Information, Instructions and forais see Chai»ter lY.. Part IT. 

§ 82. Same Snbjeot— 8tate Banks HaTin^ Branehes.— It shall 
be lawful for any bank or banking association^ organised under 
State laws, and having branches, the capital being joint and as- 
signed to and used by the mother-bank and branches in definite 
proportions, to become a National banking association in conform- 
ity with exiBting laws, and to retain and keep in operation its 
branches, or such one or more of them as it may elect to retain; 
the amount of the circulation redeemable at the mother-bank, and 
each branch to be rq^ted by the amount of capital assigned to 
and used by eacL (Bev. Stat XT. S. Sec. 5165.) 

The authority conferred by this section appears to exclude by Impli- 
cation the rls^t to establish domestic branches In any other case; and 
this has been the Tlew uniformly held by the Cotaiptrollers of the Cur- 
rency. (See opinion of Attorney General regardlna Lowry Nat Bank, 
29 Op. Atty. Qen., 81.) 

FOr the limit of liability to any one person of a State bank with 
branches converted Into a National bank see note to fllS, page 105. 

§ 38. Consolidation of Vational Banking Associations. — That 
any two or more National banking associations located within the 
same county, city, town, or village, may with the approval of 
the Comptroller of the Currency, consolidate into one association 
under the charter of either existing banks, on such terms and con- 
ditions as may be lawfully agreed upon by a majority of the board 
of directors of each association proposing to consolidate, and be 
ratified and confirmed by the aflBrmative vote of the shareholders 
of each such association owning at least two-thirds of its capital 
stock outstanding, at a meeting to be held on the call of the 
directors after publishing notice of the time, place, and object of the 
nveeting for four consecutive weeks in some newspaper published 
in the place where the said association is located, and if no news- 
paper is published in the place, then in a paper pubUshed nearest 
thereto, and after sending such notice to each shareholder of 
record by registered mail at least ten days prior to said meeting: 



Digitized by CjOOQ IC 



48 

Provided, That the capital stock of such consolidated association 
shall not be less than that required under existing law for the 
organization of a national bank in the place in which it is located : 
And provided further. That when such consolidation shall have 
been effected and approved by the Comptroller any shareholder 
of either of the associations so consolidated who has not voted 
for such consolidation may give notice to the directors of the 
association in which he is interested within twenty days from the 
date of the certificate of approval of the Comptroller that he 
dissents from the plan of consolidation as adopted and approved, 
whereupon he shall be entitled to receive the value of the shares 
so held by him, to be ascertained by an appraisal made by a com- 
mittee of three persons, one to be selected by the shareholder, 
one by the directors, and the third by the two so chosen ; and in 
case the value so fixed shall not be satisfactory to the shareholder 
he may, witiiin five days after being notified of the appraisal, ap- 
peal to the ComjptroUer of the Currency, who shall cause a re- 
appraisal to be made, which shall be final and binding; and if 
said reappraisal shall exceed the value fixed by said committee, 
the bank shall pay the expenses of the reappraisal; otherwise, the 
appellant shall pay said expenses, and the value so ascertained 
and determined shall be deemed to be a debt due and be forth- 
with paid to said shareholder from said bank, and the share so 
paid shall be surrendered and after due notice sold at public 
auction within thirty days after the final appraisement provided 
for in this Act. 

Sbc. 2. That associations consolidating with another association 
xmder the provisions of this Act shall not be required to deposit 
lawful money for their outstanding circulation, but their assets 
and liabilities shall be reported by- the association with which 
they have consolidated. And all the rights, franchises, and in- 
terests of the said national bank so consolidated in and to every 
species of property, personal and mixed, and choses in action 
thereto belonging, shall be deemed to be transferred to and vested 
in such national bank into which it is consolidated without any 
deed or other transfer, and the said consolidated national bank 
shall hold and enjoy the same and all rights of property, fran- 



Digitized by CjOOQ IC 






49 

chiseBy and interetts in iiie same nunner and to the same extent 
as was held and ^oyed by the national bank so ooneolidated 
therewith. (Act Nor. 7, 1918.) 

For farther Information on this mibjeet eoe Chap. YI, Part IT. 

§ S4. Change of Vaae and Loeation.— That any National bank- 
ing association may change its name or the place where its opera- 
tions of disconnt and deposit are to be carried on to any other 
place within the same State^ not more than thirty miles distant, 
with the approval of the Comptroller of the Currency, by the vote 
of shareholders owning two-thirds of the stock of such association. 
A dnfy authenticated notice of the vote and of the new name or 
location selected shall be sent to the office of the Comptroller of the 
Currency; but no change of name or location shall be valid until 
the Comptroller shall have issued his certificate of approval of 
the same. (Act May 1, 1886, Ch. 73, Sec. 2 ; 24 Stat h., 18.) 

Wkebb Removal is to a LABoxa Place. — This act Is to be construed 
with reference to the other provisions of law govemlaa the National 
banks; and, therefore, where the removal is to be made to a larger 
place, the ci^ital stock must first be increased to the amount required 
for banks in such place. It is important for the stockholders to bear 
this in mind when determining the Question of removaL See First 
Kat Bank v. Murray, 212 Fed. Rep., 140. 

§ S0. Same Subject— €ontinuanoe of liabilities.— That all 
debts^ liabilities^ rights^ provisions^ and powers of the association 
under its old name shall devolve upon and inure to the associa- 
tion under its n^w name. (Act May 1, 1886, Ch. 73> Sec. 3; 24 
Stat L.> 19.) 

§ 36. Same Sobjeet.— That nothing in this act contained shall 
be so construed as in any manner to release any National banking 
aaaociation under its old name or at its old location from any 
liability or affect any action or proceeding in law in which said 
association may be or become a party or interested. (Act May h 
1886, Ch. 73, Sec. 4; 84 Stat L., 19.) 
4 



Digitized by CjOOQ IC 



60 

§ 87. Ertemion of Coipontte Eziftenee.— That any lii ational 
banking association organized under the Acts of Febmarj tw^ity- 
fifth^ eighteen hundred and sixiy-three^ June thirds eighteen hun- 
dred and siiiy-f our, and February fourteenth, eighteen hundred 
and eighty, or under sections fifty-one hundred and thirty-three, 
fifty-one hundred and thirty-four, fifty-one hundred and thirty-five, 
fifty-one hundred and thirty-six, and fifty-one hundred and fifty- 
four of the Eevised Statutes of the United States, may, at any 
time within the two years next previous to the date of the expira- 
tion of its corporate existence under present law, and with the 
approval of the Comptroller of the Currency, to be granted as 
hereinafter provided, extend its period of succession by amending 
its articles of association for a term of not more than twenty years 
from the expiration of the period of succession named in said ar- 
ticles of association, and shall have succession for such extended 
period, unless sooner dissolved by the act of shareholders owning 
two-thirds of its stock, or unless its franchise becomes forfeited 
by some violation of law, unless hereafter modified or repealed. 
(Act July 12, 1882, Ch. 290, Sec. 1; 22 Stat. L., 162.) 

For .procedure to be foUowed and forms, see Chap. IX, Part IV. 

§ 38. Same Subject— Further Extension.— That the Comp- 
troller of the Currency is hereby authorized, in the manner pro- 
vided by, and under the conditions and limitations of, the Act of 
July twelfth, eighteen hundred and eighty-two, to ext^d for a 
further period of twenty years the charter of any National bank- 
ing association extended under said Act which shall desire to con- 
tinue its existence after the expiration of its charter. (Act April 
12, 1902, Ch. 603; 32 Stat L., 102.) 

The regulatidns of the ComptroUer's office for re-extension of charter 
are the same as for original extension. (See Ch. IX, Part IV.) The 
Comptroller should be notified sixty days before expiration of old 
charter of intention to extend or to close out the business of the bank» 
in order that he may satisfy hinuself that the bank is solvent 

§ 39. Same Subject — ^Amendment of Articles in Case of Change. 

— ^That such amendment of said articles of association shall be au- 



Digitized by CjOOQ IC 



51 

tluvriied by fbe ocmtait in writing of aharehokian owning not hm 
thin two-thiids of the capital stock ci the association; and the 
board of directors shall cause sudi consent to be certified under the 
seal of file association, by its president or cashier, to the Comp- 
troller of file Corrency, accompanied by an application made by 
the president or cashier for the approval of the amended articles of 
association by the Comptroller; and such amended articles of asso- 
ciation shall not be valid until the Comptroller shall give to such 
association a certificate, under his hand and seal, that the associa^ 
tion has complied with all the provisions required to be complied 
with, and is authorized to have succession for the extended period 
named in the amended articles of association. (Act July 12, 1882, 
Ch. 290, Sec. 2; 22 Stat. Jx, 162.) 

§ 40. Special Ttyaariiation of Brtended Bank— Certificate of 
Comptroller. — That upon the receipt of the application and cer- 
tificate of the association provided for in the preceding section, 
file Comptroller of the Currency shall cause a special examination 
to be made, at the expense of the association, to determine its 
condition; and if after such examination or otherwise it appears 
to him that said association is in a satisfactory condition, he shall 
grant his certificate of approval provided for in the preceding 
section, or if it appears that the condition of said association is 
not satisfactory, he shall withhold such certificate of approval. 
(Act July 12, 1882, Ch. 290, Sec. 3; 22 Stat L., 1«3.) 

Where a National bank continues its existence and performs the 
fanctlons of such an association after the expiration of its original 
oerporate existence for a long period of time, it will be presumed to 
have accepted the benefit of a certificate executed by the Comptrollsr 
of the Currency extending its corporate existence. (Clement v. United 
States, 149 Fed. Rep., S06.) The certificate of the Comptroller is con- 
dnsive evidence of a compliance by the bank with all necessary condi- 
tiona precedent to the extengion. (Id.) The Comptroller requires that 
the certificate of approval be published. 

§ 41. PriTileges, liabilities, etc., of Extended Banks.— That any 
association so extending the period of its succession shall continue 
ito enjoy all the rij^ts and privileges and immunities granted, and 



Digitized by CjOOQ IC 



69 

shall continue to be subject to all the duties^ liabilities and re- 
strictions imposed by the Bevised Statutes of the United States 
and other Acts having reference to National banking associations^ 
and it shall continue to be in all respects the identical association 
it was before the extension of its period of succession. (Act Jidy 
12, 1882, Chap. 290, Sec. 4; 22 Stat L., 163.) 

A bond glyen to a National bank by the indlTidual members of a cor- 
poration to secure such paper as the bank may discount for the ocnr- 
poration does not expire with the termination of the twenty years for 
which the bank was originally incorporated, and the obligors are liable 
for discounts made after the bank has extended the period of its ex- 
istence. (National Bxchange Bank of Hartford v. Guy, 67 Ck>nn., 224.) 

§ 42. Withdrawal of Shareholders; Preference in Allotment. — 
That when any National banking association has amended its ar- 
ticles of association as provided in this Act, and the Comptroller 
has granted his certificate of approval, any shareholder not assent- 
ing to such amendment may give notice in writing to the directors, 
within thirty days from the date of the certificate of approval, of 
his desire to withdraw from said association, in which case he shall 
be entitied to receive from said banking association the value of 
the shares so held by him, to be ascertained by an appraisal made 
by a committee of three persons, one to be selected by such share- 
holder, one by the directors, and the third by the first two; and in 
case the value so fixed shall not be satisfactory to any such share- 
holder, he may appeal to the Comptroller of the Currency, who 
shall cause a reappraisal to be made, which shall be final and bind- 
ing; and if said reappraisal shall exceed the value fixed by said 
committee, the bank shall pay the expenses of said reappraisal, and 
otherwise the appellant shall pay said expenses ; and tiie value so 
ascertained and determined shall be deemed to be a debt due, and 
be forthwith paid, to said shareholder, from said bank; and the 
shares so surrendered and appraised shall, after due notice, be sold 
at public sale, within thirty days after the final appraisal pro- 
vided in this section: Provided, That in the organization of any 
banking association^ intended to replace any existing banking asso- 
ciation, and retaining the name thereof, the holders of stock in the 



Digitized by CjOOQ IC 



53 

expiring aBflociation dudl be entitled to preference in the allot* 
ment of the shares of the new association in proportion to the nom- 
ber of shares held hj them respectivelj in the expiring association. 
(Act July 12, 1882, Ch. 290, Sec. 6; 22 Stat L., 163.) 

Fbom What Date Nonoi BSnvcnrs. — ^The notice of withdrawal glren 
within 30 days after the extension Is effactlTe as of the date of the 
expiration of the original charter. (Smith v, Phillips Nat Bank, 114 
Me., 297.) And where a shareholder has glTen the notice, and ap- 
pointed an appraiser, and has refused to accept diridends on the stock, 
he can not be held liable as a stockholder becanse of delay on the part 
of the bank. (KimbaU v. Aspey, 164 Fed. Rep., 830; Aspey v. Whltte- 
more, 199 Mass., 66.) 

Waives oy Rioht to WrrHDBAW. — It after the extension of the diar- 
ter a dividend Is declared, a shareholder who demands and receives the 
dividend waives the right to withdraw. (Smith v. PhlUips NaUonal 
Bank, 114 Me., 297.) 

§ 43. Banks Hot Extending— ^liontinaanoe of Franchise for Pur- 
pose of Liqnidation.— That National banking associations whose 
corporate existence has expired, or shall hereafter expire^ and 
which do not avail themselves of the provisions of this Act, shall be 
required to comply with the provisions of sections fifty-two hundred 
and twenty-one and fifty-two hundred and twenty-two of the Be- 
vised Statutes in the same manner as if tiie shareholders had voted 
to go into liquidation^ as provided in section fifty-two hundred and 
twenty of the Revised Statutes ; and the provisions of sections fifty- 
two hundred and twenty-four and fifty-two hundred and twenty-five 
of the Bevised Statutes shall also be applicable to such associa- 
tions, except as modified by this Act; and the franchise of such 
association is hereby extended for the sole purpose of liquidating 
their a&irs until such affairs are finally closed. (Act July 12^ 
1882, Ch. 290, Sec. 7; 22 Stot. L., 164.) 

The Comptroller sends blanks to expiring asaodatlons to enable them 

to give the notice to his ofllce required by Section 5222, Revised 

Statutes, aee page 91. Such expiring associations must, within six 

months from the date of expiration of the charter, deposit lawful 

money to retire their drcnlation. . 



Digitized by CjOOQ IC 



CHAPTER III. 

Officbbs and Sha&eholdsbs. 

Section 44. Rights of Shareholders at Election— Proxies. 
45. Liability of Shareholders — ^National Bank Act 
4j6. Same— Rrovisions of Fed^al Beserye Act 

47. Executors, Trustees, etc., not personally liable. 

48. Directors — ^Election of — ^Termi of Office. 

49. Qualification of Directors. 

50. Oath Required of Directors. 

51. Vacancies — How Pilled. 

52. Proceedings Where no Election held at appointed time. 

53. President. 

§ 44. Bights of Shareholders at Elections— Proxies. — In all 

elections 'of directors, and in deciding all questions at meetings of 
shareholders, each shareholder shall be entitled to one Tote on 
each share of stock held by him. Shareholders may vote by 
proxies duly authorized in writing; but no officer, clerk, teller, or 
book-keeper of such association shall act as proxy; and no share- 
holder whose liability is past due and unpaid shall be allowed to 
vote. (Rev. Stat. TI. S. Sec. 5144.) 

Shareholdebs' MEBTmos.— sphere is nothing in the National Bank 
Act regarding notice of the annual meeting of shareholders at the 
time specified in the articles of association. The articles of association 
or by-laws of the bank usually provide for such a notice, but if they 
are silent the better and safer course would be to give the usual thirty 
days' notice, and this should certainly be given if any unusual or 
extraordinary business is to be considered, such as amending the ar- 
ticles. Unless provision is made in the articles of association special 
meetings of shareholders should be called on thirty days' notice, which 
should state the business to be transacted. For want of due notice the 
proceedings, unless acquiesced in or ratified by all shareholders, may 

54 



Digitized by CjOOQ IC 



55 

be tot Slide ae inTaUd. See (62, pege 19, for prooedure when 
so election of dlrecton Is made at the time ai»polnted« 

A majority TOte of all the stock of the bank is neressary to amend 
the artlcdes of association and the afBrmntlTe rote of two-thirds of the 
oitire ci^ital stock is necessary to increase or reduce the capital, 
consolidate the bank with another or liquidate the association. 

When an act requires the assent of the shareholders their assent 
nnlees unanimous must be giren at a duly called mating. The in- 
dividual assent in writing of a majority no matter how large is not 
binding upon any non-assenting shareholder. The only exception to 
this rule is in the case of the amendment of the articles of association 
extending the period of corporate existence, which the law states the 
shareholders may authorize in writing. 

The mistake is frequently made of supposing that business requiring 
the action of the stockholders can be transacted at a meeting of the 
board of directors when the directors own a majority of the stock, or 
the amount of stock necessary to determdne the actions of the share- 
holders, but erery stockholder has a right id be present and to express 
his assent or dissent; and this he has, of course, no opportunity of 
doing when the business is considered at a meeting of the directors. 

Where the articles of association of a National bank proTide that 
meetings of the stockholders may be called by the board of directors 
or by any three stockholders, a meeting called by the President and 
Cashier is not lawfully conyened. (Matthews v. Golumbia National 
Bank, 79 Fed. Rep., 558.) 

CuMVLATm VoTiNO — ^VoTiiTo Tedst. — The laws of some of the States 
authorize stockholders at meetings held to elect directors to cumulate 
their Totee; that is, if a stockholder is entitled to one Tote on each 
Bhare of stock held, he may cast his entire Yote for one candidate, in- 
stead of casting an equal numlber for all candidates. But this method 
of voting is nolt authorized by the National Bank Act. Nor can the 
atodkholders enter Into a voting trust agreement (Bridgers v. First 
Nat. Bank, 152 N. C, 293.) 

Faoxns.— The Comptroller has ruled that a director is an oficer and 
can not act as a proxy at a shareholders' meeting, and this seems to 
carry out the spirit of the law, as the bank is under the control of the 
directors and they have in many cases a great personal interest in 
the action of the meeting, especially where the meeting is held for the 
election of directors, and they are candidates for reelection. In all 
cases it is best for the proxy to be a person in no way connected with 
the management of the bank. (For form of proxy for elections of di- 
rectors, see page 66, ^48.) 

A proxy, liowever, while it must be in writing, need not be in any 



Digitized by CjOOQ IC 



56 

particular form, nor need it be acknowledged or prored, but it must 
be in such shape as reasonably to satisfy the inspectors of election as 
to its genuineness; and validity, and to this end the corporate officers 
may insist upon reasimable evidence of the regularity and the genuine- 
ness of the proxy before allowing it to be voted. The proxy should 
be dated. 

When certificates of proCsy are destroyed after use, parol evidence 
is admissible to prove their foVmer existence and sufficiency. A stock- 
holder who signs a form of proxy in blank and hands it over to an- 
other to be used in the ordinary way impliedly authorizes that other 
to fill up the blank with his own namie. Although a proxy contains 
blanks as tor the hour and day of the meeting, yet this may be filled 
in by the party using the proxy. 

The ordinary proxy being intended for an election merely, does not 
enable the proxy to vote to increase the ci4>ital stock of the bank, to 
consolidate it with another National bank, or to' place it in liquidation, 
unless the proxy itself in general or special terms gives the proxy 
the power to vote on such question. The proxy can not vote when the 
owner of the stock is present and votes. A proxy is always revocable, 
even when by its terms it is made "irrevocable," and the law allows 
a stockholder to revoke it. Frequently an attempt is made to per- 
manently unite the voting power of several stockholders and thus con- 
trol the corpoWktion by giving irrevocable proxies to specified persons, 
but the oommon law allows a stockholder to revoke a proxy at any 
time. 

Whrbe BiKETiNo Not LukwruxxT Caxxbd. — ^A proxy can not bind his 
principal by attending, and participating in, a meeting of stockholders 
not lawfully called. (Matthews v. Columbia Nat. Bank, 79 Fed. Rep., 
558.) 

What Liabiutt Disquautibs Shabbholdd to Vote.— ^The provision 
of this section which disqualifies shareholders "whose liability is past 
due and unpaid" iq;>plies only where the liability is tcfr unpaid sub- 
scriptions for stock, and was not intended to disqualify shareholders 
otherwise indebted to the bank. (United States ex rel. Ck>nd. v, Barry, 
86 F^d. Rep., 246.) 

§ 45. Individnal liability of Stookholden— Provision of na- 
tional Bank Aet. — ^The shar^olders of every National banking 
association shall be held individually responsible, equally and 
ratably^ and not one for another, for all contracts, debts, and en- 
gagements of such association, to the extent of the amount of their 



Digitized by CjOOQ IC 



67 

stock themiiy at tlie par valtie thereof^ in addition to the amount 
invested in such shares; except that shareholders of anj banking 
association now ftxisting under State laws^ haying not less than five 
millions of dollars of capital actuaUy paid in, and a surplus of 
twenty per centum on hand, both to be determined by the Comp- 
troller of the Currency, shall be liable only to the amount invested 
in their shares; and such surplus of twenty per centum shall be 
kept undiminished, and be in addition to the surplus provided for 
in this Title; and if at any time there is a deficiency in such sur- 
plus of tw^ity per centum, such association shall not pay any 
dividends to its shareholders until the deficiaicy is made good; 
and in case of such deficiaicy, the Comptroller of the Currency 
may compel the association to close its business and wind up its 
affairs under the provisions of chapter four of this Title. (Bev. 
Stat F. S. Sec. 5151.) 

§ 46. Same — Proriiion of Federal Xesenre Aotv— The stockhold- 
ers of every National banking association shall be held indi- 
vidually responsible for all contracts, debts, and engagements of 
such association, each to the amount of his stock therein, at the 
par value thereof in addition to the amount invested in such stock. 
The stockholders in any National banking association who shall 
have transferred their shares or roistered the transfer thereof 
within sixty days next before the date of the failure of such asso- 
ciation to meet its obligations, or with knowledge of such impend- 
ing failure, shall be liable to the same extent as if th^ had made 
no such transfer, to the extent that the subsequ^t transferee fails 
to meet such liability; but this provision shall not be construed to 
affect in any way any recourse which such shareholders might other- 
wise have against those in whose names such shares are registered 
at the time of such failure. (Sec. 23, Act Dec. 23, 1913; 38 
Stat L., 273.) 

This section evidentlj repeals so much of See. 6161 U. 8. R. 8. (8ee. 
46 next preceding) as is inconsistent with its provisions. Under the 
old law shareholders were "responsible, equallj and ratably tnd not 
one for another" and the solvent shareholders oould not lie required 
to contribnte mote than their proportion of the deflciencjr- The amount 



Digitized by CjOOQ IC 



68 

which each shareholder was liable to contribute bore the same pro- 
portion to the total deficit as his own stock bore to^ the whole amount 
of ci^ital stock. (United States v. Knox, 102 U. S.» 422.) Under the 
new law solTont shareholders can be required to contribute the pdrtion 
that is not paid by insolvent shareholders up to the full par value 
of their stock and may be assessed 100 per cent if necessary to pay 
the debts of the bank. 

The enactment of the new law in this unsatisfactory form, without 
making it more specific as to applicability and without repealing the 
old law win undoubtedly give rise to much litigation. Does it iq;>ply 
to stock bought before its enactment? Dc^ it apply to debts incurred 
or deficits created prior to iti| passage? The courts will have to deter- 
mine. 

The cases cited in the following notes construe the old law but the 
principles stated therein apply equally well to the new statute. 

Fob What Liabilitibs or thb Bank Shabeholdbbs abe Rbsponsiblb. 
— The liability is not contractual, but exists by force of the statute. 
(Christopher v. Nonrell, 201 U. S., 216; First National Bank of Ck)n- 
cord V. Hawkins, 174 U. 8., 372.) It is restricted to such contracts, 
debts, and engagemients of the bank as have been duly contracted in 
the ordinary course of business. (Richmond v. Irons, 121 U. 8., 27; 
Schrader v. Manufacturers' National Bank, 188 U. S., 67.) The liability 
of the stockholders, therefore, can not be enforced to pay the claims 
of creditors on new contracts made after the bank has been placed in 
voluntary liquidation. {Id.) 

ExTEiTT OF Liabujtixs.— The liability dt the shareholder is for in- 
terest on the debts of the bank as well as for the principal thereof. 
(Richmond v. Irons, 121 U. S., 27.) The assessment Itself bears in- 
terest from the date of the order. (Casey v. CkOli, 94 U. 8., 678.) 

Deceased Stookholdebs.— This liability survives against the repre- 
sentatives of a deceased shareholder, and adheres to his estate after 
giiis death, though he dies before the insolvency of the bank occurs. 
(Richmond t;. Irons, 121 U. 8., 27; Davis v. Weed, 44 Conn., 669; 
Wickham t;. Hull, 60 Fed. Rep., 326.) And the f^ct that the title to 
the stock of a deceased shareholder vests in his administrator does 
not relieve the estate from the burden of an assessment (Davis v. 
Weed, 9upra,) Nor will the f^ict that the administration is complete, 
and all the assets have been distributed, defeat an action brought to 
recover the assessment (Id.) 

Mabbied WoHEN.*-When the law of the 8tate where the contract is 
made permits married women to be<^me ow^m of stodCr they will be 



Digitized by CjOOQ IC 



subject to an the UeblUtfee eC etoddioMere. (Bondr i'. Ooeke^ US U. 
a, 18l»; Keyaer v. Hits, ISS U. 8^ 438; In Be Natlonel Bank of 8t Al- 
bans, 49 Fed. Rep.» 120; Anderson i;. Line, 14 Fed. Rep^ 406.) If a 
married woman is by the State law capable of holding stock In a 
National bank in her own right, she is liable thereon nnder this sec- 
tion, though the law of the State ddes not anthorise married women 
to Und themselves by contract, for the law annexes her liability of its 
own force, and no capacity to act on her part is required. (Christopher 
V. Nonrell, 201 U. a, 216; Wlttors v. Sowles, 85 Fad. Rep^ 040, and 88 
Fed. Rep., 700; Robinson i;. Turrentine, 88 Fed. Rep., 884.) 

AssiGNicKirT roR CBKpr r o BS DpaAxnaaie Gbdrom.— The ftiet that 
one is a stockholder and director in an insolrent National bank, and 
individually liable for the debts of the bank to the amount of his 
stock, will not operate so as to prevent him from maUnc an otherwise 
lawful disposition of his property for the benefit of his creditors. 
(Peters v. Bain, 133 U. S., 670.) Where a stockholder in a National 
bank makes a general assignment after the bank has become insolvent, 
his estate in the hands of the assignee becomes liable for an assess- 
ment upon such stock. (Graham v. Piatt, 28 (Colorado, 421.) 

SuF F icum oY or Te^nsfkb.— A person whose name is put open the 
stock-books without his knowledge or consent can not be held liable 
as a stockholder; but where the transferee is a director concerned in 
the management of the bank he is presumed to have knowledge of the 
f^t that the stock stands in his name, and if he does ndt repudiate 
the transfer, he is liable as the holder. (Brown v. Finn, 142 U. 8., 56.) 
And where one endorses a check payable to his order, which discloses 
upon its face that it is for dividends on stock standing in his name 
on the books of the bank, he is estopped to deny that he is the owner 
of the stock upon which the dividends are declared. (Keyser i;. Hits, 
133 U. S., 138). Where certificates of stock are made out to the holder 
as the absolute owner thereof, and he so i^ypears on the books of the 
bank, he will not be permitted to show in an action against him to 
recover an assessment on the stock that he held the same as trustee. 
(Lewis V. Levitz, 74 Fed. Rep., 381.) 

SuBscBiBKBs TO Nsw SiocK.-— A Stockholder who tf ects to subscribe 
tor shares of an Increase and actually pays for the same, and is regis- 
tered as holding the additional shares on the books of the bank, thereby 
becomes a shareholder, and his failure to call for his certificate of 
stock makes no dllterence in his liability as such. (Thayer v, Butler, 
141 U. S., 234.) But the fact that the subscriber for new shares 
(which were never Issued) received a dividend on old shares trans- 



Digitized by CjOOQ IC 



60 

ferred to him without his knowledge In place of new sharee, does not 
eatop him frobi denying hie liability as a shareholder, where such 
dividend was received in the belief that it was paid to him by virtue 
of his subscription to the new stock. (Stephens v. FoUett, 43 Fed. 
Rep., 842.) But the subscribers may be estopped to dispute the legality 
of increase by accepting certificates for the stock, receiving dividends, 
and giving proxies to vote updn the stock. (Tillinghast t;. Bailey, 86 
Fed. Rep., 46; Latimer i;. Burd, 76 Fed. Rep., 536.) And the certificate 
of the Comptroller of the Currency authorizing the increase of the 
capital stock of a National bank is conclusive upon the subscribers to 
such new stock when sued for an assessment laid upon the same. (Id.) 
(See also McFarlin i;. First Nat Bank, 68 Fed. Rep., 868.) 

LiABiLiTT OF Plbdgeb. — ^A poFson who holds stock merely as collateral 
security is liable as the owner of the stock, if he i^pears upon the 
books of the bank as such. (National Bank v. Case, 99 U. S., 628; 
Moore t^. Jones, 3 Woods, 53; Hale v. Walker, 31 Iowa, 344; Wheelock t;. 
Kost, 77 111., 296; but see Magruder v. Colston, 44 Md., 349.) But a 
pledgee, acting in good faith, and without any fraudulent intention* 
has the perfect right to shun such liability, and may have the control 
of the stock for the purposes of security without being made liable 
as a registered shareholder. (Anderson v. Philadelphia Warehouse 
Company, 111 U. S., 479.) In Beall i;. Essex Savings Bank (67 Fed. 
Rep., 816), it was held by the United States Circuit Court of Appeals, 
that where the stock is transferred as collateral security, and the fact 
that it is held only as such security iq;>pears upon the transfer book 
of the bank, the person by whom it is so' held will not be liable to an 
assessment upon the stock in case of the ftdlure of the bank. And, in 
Pauly V. State Loan and Trust Company (165 U. S., 606), it was held 
by the Supreme (3ourt of the United States that one to whom stock of 
a National bank is transferred upon the bodks of the bank "as pledgee" 
is not liable as a stockholder. 

And, of course, a pledgee who does not appear by the books of the 
bank or otherwise to be the owner is not liable for an assessmient upon 
the shares on the insolvency of the bank. (Welles v. Larrabee et alp 
36 Fed. Rep., 866; Robinson v. Southern National Bank, 94 Fed. Rep., 
964.) If the holder in fact holds the stock merely as collateral se- 
curity, he may list the shares in his own name as pledgee, or in the 
name of another and irresponsible party, even though this be done 
for the purpose of avoiding liability. (Rankin t;. Fidelity Insurance, 
etc., 189 U. S., 242; National Park Bank of N. Y. v, Harmon, 214 Fed. 
Rep., 891; Higgins t^. Fidelity Insurance, T. and S. Dep. Co., 108 Fed. 
Rep., 476.) When proved or admitted that the person in iiiiose name 
the stock stands is a mere pledgee, the burden is upon the receiver 



Digitized by CjOOQ IC 



61 

to ihow that iM knowingly pennitted It to stand In his name on ths 
books of the bank. (Toartelot t;. Stoltenben, 101 FML Rap.* S61.) If 
the peraon who takes stock as pledgee uses the same so as to Test the 
title In himself, he Is liable as a stockholder. (Ohio Valley Nat Bank 
V. Hnlltt, 204 U. 8., 162.) 

PuBOHASs iif Name or Iiifaht.— One who buys stock of a National 
bank In the name of an Infant or transfers stock to an Infant will be 
liable for an assessment, since the Infant Is Incapable of binding him- 
self as a stockholder. (Fbster v. Chase, 75 Fed. Rep., 797; Aldrlch v, 
Bingham, 121 FM. Rep., 262.) And the ratification by the Infant of 
sndi purchase after he beoomes of age will not affect such liability. 
(Foetw V. Wilson, 76 FM. Rep., 797; but see Fowler v, Gowlng, 152 
Fed. Rep., 201.) 

IiiABiLiTT IS woM Bbrsfit ot Aix Cbeditobs.— The liability of the 
stockholders can be enforced only In favor of all the creditors. If, 
therefore, a stockholder gives any security for his liability. It must 
be for the benefit of all the creditors alike. Where a stockholder, after 
the failure of a bank, gave a mortgage for the purpo^ of securing a 
single depositor, such mortgage was held void as against a judgment 
obtained In an action against such stockholder to enforce his Indi- 
vidual liability. (Catch i;. Fitch, 34 Fed. Rep., 566.) 

RBBonrDiifa Pubohass— Fraud of Bank. — ^A. stockholder who has been 
Induced by fraudulent representations to subscribe for stoick In a Na- 
tional bank will not necessarily be precluded from repudiating such 
subscription by reason of the insolvency of the bank. If he has exer- 
cised due diligence In discovering the fraud, and has acted promptly 
after such discovery. (Newton Nat. Bank v. Newbegin, 74 FM. Rep., 
125; Salter v. WllllamB, 244 Fed. Rep., 126.) An Intending purchaser 
of bank stock Is entitled to rely upon a statement ot its president as 
to the bank's condition without inquiring further. (Merrill v, Florida 
Land ft Improvement Co., 60 Fed. Rep., 17.) The receipt by a bank 
of the proceeds of a fraudulent sale of stock belonging to it, and the 
subsequent appointment of a receiver, gives Its creditors no such 
rl^t In the proceeds as will prevent the purchasers from rescinding 
the sale and requiring restitution. (Id.) 

BSsTOPPCL. — A shareholder against whom suit is brought to recover 
the assessment made upon him by the Ck>mptroller will not be per- 
mitted to deny the existence of the association, or that It was legally 
Incorporated. (Casey v. QalU, 94 U. 8., 672; Wheelock v. Kost, 77 ID., 
296.) 



Digitized by CjOOQ IC 



62 

Fbogbdubb.— (The creditors of an insolyent National bank must seek 
their remedy through the Comptroller, in the mode prescribed hj the 
statute; they can not proceed directly in their own names against 
stockholders. It is the duty of the Comptroller of the Currency to 
decide -when, probeedings are necessary against the stockholders of a 
National bank to enforce their personal liability, and to what extent 
such liability shall be enforced; and in an action by a receiver to 
enforce such liability, such prior determination of the Comptroller 
must be distinctly averred and proved. But it is not essential to aver 
and prove that the assessment was necessary, for the decision of the 
Comptroller on this point is conclusive. Kennedy v, Gibson, 8 Wall, 
498; Casey t;. Galli, 94 U. S., 673.) Nor is it necessary to allege that 
the Comptroller had determined that the assessment was necessary; 
it is sufficient to allege that he made the assessment (O'Connor v. 
Whitherby, 111 Cal., 523.) 

Demand Not Necessabt. — ^Demand of, or notice to, stolckholders by 
the Comt>troll6r of the Currency or receiver, is not a prerequisite to 
the maintenance of a suit to enforce the stockholders' statutory lia- 
biUty. (Rankin v. MiUer, 207 Ped. Rep., 602; Weltzel v. Brown, 224 
190.) 



Decision op Coicptboixeb CJonclxjsive. — The decision of the Comp- 
troller of the Currency that it is necessary to enforce the statutory 
liability of the stockholders Is conclusive, and may not be questioned 
by a stockholder in an action to enforce his liability. (Rankin v. 
Miller, 207 Ped. Rep., 602; DeWeese v. Smith, 106 Ped. Rep., 438; 
Aldrich i;. Campbell, 97 Fed. Rep., 668; Rankin v. Ware, 88 Kan., 23.) 
And so as to his decision that a second or further assessment is neces- 
sary. (Rahkin v. Miller, supra). 

PoBH OF Action.— When the full personal liability of shareholders is 
to be enforced the action must be at law. (Kennedy v, Gibson, 8 Wall, 
498; Casey v, Galli, 94 U. S.» 673.) When the assessment is not for 
the full value of the shares, the suit may be in equity. (Kennedy 
V. Gibson, 8 Wall, 498.) And where questions are involved which are 
common to a number of stockholders they may be Joined as defendants. 
(Bailey v. TiUinghast, 99 Ped. Rep., 801.) 

When Right of Action Accbues — Statute of Limitations. — The 
liability of stockholders of National banks is conditional, and the 
right to sue does not obtain until the Comptroller of the Currency has 
acted; his order is the basis of the suit, and the statute of limitations 
does not comsnence to run until assessment is made. (McClain v. Rankin, 



Digitized by CjOOQ IC 



«8 

197 U. a* 1S4: Aldrieh v. TitM^ IS PM. R«p^ 78; McDoiMld t^. Thomp- 
•on, 184 U. a, 71; Dew«6ie t^. Smith, 108 FML Rep., 488.) The 8UU« 
statute of limitations applj to actions to enforce assetsmentk (Mo- 
Claln V. Ranldn, 197 U. a» 164; BnUer v. Pole, 44 Fad. Rep., 886; 
Thompson v. Qerman Insurance Company. 78 Fed. Rep., 892.) The 
statute begins to run as soon as the assessment Is made. Laches on 
the part of the Comptroller of the Currency In faUlng to collect an 
earlier assessment and In undertaking the collection of the one sued 
on Is not a defense, since these matters are committed esduslYely to 
his Judgment and his action nrast be treated as seasonable and regular. 
(Rankin v. HlUer, 2<^ Fed. Rep., 602.) 

ScT-oFF.— A stockholder of an Insolrent NatloDnal bank, who happens 
also to be one of Its creditors, can not cancel or diminish the assess 
ment by ofbiettlng his Individual claim against it. (Hobart, Receiver, 
etc., V. Gtould, 8 Fed. Rep., 57: Sowles v. "Witters, 39 Fed. Rep., 403; but 
see Welles v. Stout, 38 Fed. Rep., 807). The indebtedness on the assess- 
ment of a stockholder who Is Insolvent may be set off against a divi- 
dend, payable <lut of the assets of the bank, on a balance due him on 
his deposit account with the bank at the time of its failure. (King v, 
Armstrong, 60 Ohio St, 222.) 

AoENT May Not B^nroBCE. — ^An agent chosen by stockholders to take 
charge of the business of a National bank In liquidation can not en- 
force the Individual liability of the stockholders, after all the debts 
have been paid. (Church v, Ayer, 80 Fed. Rep., 648; Williamson v, 
American Bank, 109 Fed. Rep., 86.) 

Claju Not EifTirua) to PaBraBENOL — The individual liability of a 
stockholder in an Insolvent National bank is not a preferred claim 
against his estate, and is not entitled to priority of payment even 
though the estate Is Insolvent. (In Re Beard's Estate, 7 Wyoming, 
104.) 

Books of the BAifK as Bvidkncb in Suit to Rboovxb Assesskskt.*— 
The books of a National bank are, among the shareholders, public rec- 
ords and evidence of what they show, and are admissible against a 
shareholder in an action brought against him by the Receiver to re- 
cover an assessment upou his stock. (Brown v. BUis, 103 Fed. Rep., 
834.) 

Successive Assessments. — ^The Comptroller of the Currency has 
power to levy successive assessments upon the stockholders in an in- 
solvent National bank and his power is not exhausted by one assess- 
ment. (Studebaker v. Perry, 184 U. S., 262; Aldrieh i;. Campbell, 97 



Digitized by CjOOQ IC 



64 

Fed. Rep., 668; Stndebaker v. Perry, 102 Fed. Rep.» 947.) And a 
judgment in favor of the Receiver for the recovery of an asseesmient 
does not eatop him from maintaining a second action against the 
same shareholder for another assessment which had not been made 
or was not due when the first action was commenced. (Deweese v. 
Smith* 106 Fed. Rep., 438.) The Ck>mptroller of the Currency h)as 
discretionary power to withdraw an assessment on shareholders before 
it is paid or when partly paid. (Korbley i;. Springfield Inst for Sav- 
ings, 245 U. S., 330.) 

PUBCHASE PBOCUBXD BY FBA^UDULBNT RePBBSENTATIONB OF OFFICEBS. — 

In an action at law by the Receiver of an insolvent National bank to 
enforce the individual liability of a shareholder, the latter can not 
set up as a defense that he was induced to purchase the stock of the 
bank by the fraudulent representations of its officers. (Lantry v. 
Wallace, 182 U. S., 536; Scott v, Latimer, 89 Fed. Rep., 843.) 

Whebe Bane Has Qone Into Liquidation. — ^Where the bank has gone 
into voluntary liquidation, the only authorized procedure for the en- 
forcement of the individual liability of its stockhcflders is by a suit in 
equity in the nature of a creditor's suit brought on behalf of all 
creditors in a court for the district in which the bank is located, in 
which the necessity and extent of the ratable enforcement of the stock- 
holders' liability shall be determined. (Williamson v. American Bank, 
115 Fed. Rep., 793.) Such suit sho^ild be brought against the bank and 
all its stockholders, and, in case ancillary proceedings should be neces- 
sary for the collection from non-resident stockholders of their ratable 
proportion of the amount necessary to pay creditors, such suits should 
be authorized by the court of original jurisdiction, and brought by a 
Receiver or other person appointed by such court. {Id.) 

§ 47. Ezecntors, Tmstees, etc., Not Personally liable. — Persons 
holding stock as executors, administrators^ guardians, or trustees, 
shall not be personally subject to any liabilities as stockholders; 
but the estates and funds in their hands shall be liable in like 
manner and to the sanue extent as the testator, intestate, ward^ or 
person interested in such trust-funds would be, if living and com- 
petent to act and hold the stock in his own name. (Bev. Stat. 
U: S. Sec. 5152.) 

Afpuoation of Section. — This section is of general application and 
is not limited to trustees appointed such by will or by order of some 
court or judge. (Lucas v. Coe, 86 Fed. Rep., 972.) The fact that the 



Digitized by CjOOQ IC 



66 

tmst estate oonsUits entirelj of stock in the Called bank, an4 that the 
tallare of the bank wlpee out the Talne of the trust estate does not 
Impose any liability npon the trustee indlTldoally. (Fowler v. Qowins, 
152 Fed. Rep., 801; 165 Fed. Rep., 891.) 

An ezeentor continues to be liable as such for an assessment upon 
National bank stock left by his testator until he has transferred the 
perwmal property btionging to the estateu (Baker v. Beach, 85 Fed. 
Rep^886.) 

BviDcircB or Ow nasemr .— The fact that the stock is held in a repre- 
sentatiTe capacity must be noted on the stock-book of the bank; if 
a persoih appears there as absolute owner of the stock he will not be 
permitted to deny that he is such. (Daris v. Bssex Baptist Sodetr, 
44 Conn., 569; Lewis v. Swits, 74 Fed. Rep., 1.) But aee MdCahon v. 
Macy (51 N. T., 155). And if a person appears on the stock-book as 
'trustee" he is not penonally liable. (WeUes v. Larrabee, 36 Fed. 
Rep., 866.) 

§ 48. IMreetors— Election of— Term of Office. — ^The afFairs 
of each association shall be managed by not less than five directors, 
who shall be elected by the shareholders at a meeting to be held 
at any time before the association is authorized by the Comptroller 
of the Currency to commence the business of banking; and after- 
ward at meetings to be held on such day in January of each year 
as is specified therefor in the articles of association. The directors 
shall hold ofiSce for one year^ and until their successors are elected 
and have qualified. (Ber. Stat. IT. S. Sec. 5145.) 

For restrictions on interlockins directorates, see Section 8, Clayton 
Anti-Trust Act, (805 ft. 

AifMUAL MCrnNe— Date of— Businsss at AinnTAL MBmros— Rjepbb- 
SEZfTATioN. — The annual meeting must be held in January, but on any 
day of that month, although in the articles of association furnished by 
the Ck>mptroller the second Tuesday is named and commonly adopted. 

At the annual meeting no business but the election of directors can 
be transacted without due notice baring been given, stating that other 
business will be transacted; otherwise the ratiflcation of action taken 
should be obtained from shareholders not present 

No proYlsion is made in the statute for any definite representation 
of stock at annual meetings, and the Ck>mptroller holds that a majority 
is not necessary unless provided in the articles of a ssocia ti on or by- 
laws. 

5 



Digitized by CjOOQ IC 



«6 

FoBic OF Pbozt ittt Use at Shabehouxebs' BfxBmro fob BLionoN of 

DiBBCiOBS.-— Know all men by these presents tliat I, ■ — ^ , 

do hereby constitute and iM;>polnt ■ ■ attorney and agent fo^ 

me, and in my name, place, and stead to vote as my proxy at any and 

all elections of directors of according to the number of 

Totes I shcHild be entitled to TOte if there personally present 

In witness whereof I hare hereunto set my hand this — ^— day of 

■ * , one thousand nine hundred and ■■ , 



Signed in presence of — 



§ 49. Qnaliflcationi of Bireotoit.— Every director must, dui^ 
ing his whole term of seryice, be a citizen of the United States, and 
at least three-fourths of the directors most have resided in the 
State^ Territory, or district in which the association is located, 
for at least one year immediately preceding their election, and 
must be residents therein during their continuance in ofSce. Every 
director must own, in his own right, at least ten shares of the 
capital stock of the association of which he is a director, unless 
the capital stock of the bank shall not exceed twenty-five thousand! 
dollars, in which case he must own in his own right at least five 
shares of such capital stock. Any director who ceases to be the 
owner of the required number of shares of the stock, or who be- 
comes in any otiier manner disqualified, shall thereby vacate his 
place. (Bev. Stat F. S. Sec. 6146 ; Act Feb. 28, 1906, Ch. 1163 ; 
83 Stat L., 818.) 

QuAunoATioNS or DnoBoiOBS.— A director of a National bank must 
be a dtisen of the Uhited States, must own in his own right not less 
than five shares of the stock of the bank when the capital is $26,000, 
and ten shares in other cases, and he must hold the stodL free from 
pledge. In a newly organised bank a director may pay for his stock 
in partial payments on the same terms as the other shareholders and 
need not pay sooner in order to qualify. As the stock must be held 
in the director's own right, no person who holds stock in a merely 
representative capacity--as an executor, administrator, guardian, or 
trustee— can be a director. The number of shares held by a director 



Digitized by CjOOQ IC 



87 

4^ a State bank oonTartlng to a Natioiial bank may remain tha 
until the annual election. Then the nnmber mnat be that required of a 
National bank, but the par Talue of the etock &0m not need to be 
changed. 

A director who owne more than the required number of sharea may 
sell or pledge all of his stock except the requisite number without 
becoming disqualiHed. A person who is not a shartiiolder may be 
elected director but can not quoHfp until he has acquired the requisite 
number off shares. 

A director when elected or within a reascmable time thereafter* 
must take the oath required. On failure to do so, it would M^pmr 
that a vacancy may be declared and a new director elected. 

At least three-fourths of the directors must have resided in the 
State, Territory or di8trl<^ where the bank Is located for one year 
immediately preceding their election, and continue residents while 
directors. It is therefore necessary that in a board of five, four must 
be residents. In a board of seven, six, etc. 

An unmarried woman, whether a widow or q;>inster, can be a di- 
rector; and so may a miuTled woman in States where the laws permit 
her to assume aU the obligations of a stockholder. 

§ 80. Oafh Bequiied of JMrecton. — ^Each director, when ap- 
pointed or elected, shall take an oath that he will, so far as the 
duty devolves on him, dilig<^tly and honestly administer the 
affairs of such association, and will not knowingly violate, or 
willingly permit to be violated, any of the provisions of this Title, 
and that he is the owner in good faith, and in his own right, of 
the number of shares of stock required by this Title, subscribed by 
him or standing in his name on the books of the association, and 
that the same is not hypothecated, or in any way pledged, as 
security for any loan or debt. Such oath, subscribed by the direc- 
tor nmking it, and certified by the officer before whom it is taken, 
shall be immediately transmitted to the Comptroller of the Cur- 
rency, and shall be filed and preserved in his office. (Bev. Stat. 
F. S. Sec. 6147.) 

For liability of directors for violation of act, seei (16S, page 161. 

Oath of Dmccrroiis.— ^The law as regards directors' oaths is fatally 
defective, falling to provide before what officer to be taken. That an 
oath may bare elBcacy, especially In case an indictment for perjury 



Digitized by CjOOQ IC 



68 

is to be sustained thereon, it Is requisite that the oath shall have hemk 
prescribed by law, and taken before an officer duly authoMsed to ad- 
minister It The act of Feb. 26, 1881, which authorises an oath 
to be taken before a notary public, applies only to the oath to 
the report of condition of bank. As regards the other oaths pre- 
scribed by the Natiohal banking law, there does not appear to be any 
officer competent to administer them. (United States v. Curtis, 107 
U. S., 671.) The Comptroller, however, requires them to be taken. 
For formlB of oaths of directors see Chapter I, Part IV. 

DiBBcroBS Can Act Only as a Boabd.— The election of a person as a 
director does not constitute him an agent of the corporation with au- 
thority to act separately and ind^;)endently of his fellow-miembers. It 
Is the board, duly convened and acting as a unit, that is made the 
representative of the bank. (National Bank v. Drake, 35 Kan., 564.) 
Frequently, it is true, a director does have authority to bind the bank 
when acting separately and apart from the others; but he must have 
been authorized by the Board, either expressly or impliedly, to act as 
the agent of the bank. 

What (Constitutes a Boabd. — ^A quorum generally consists of a ma- 
jority of the whole board. A provision to this effect is usually con- 
tained in the articles of association (see form of articles Ch. I, Part IV, 
though this would be the rule in the absence of any provision what- 
ever on the subject. 

"Where a majority is required to constitute a quorum, this means a 
majority of a full board, and not merely a majority of those who 
may be members at the time. Thus, should there be a vacancy in a 
board consisting of ten members, six would still be necessary to make 
a quorum, though five would be a majority of the present meml)er8. 
Sometimes the articles of association do' not provide for any speclUc 
number of directors, but provide ^at the board shall consist of not 
less, or not more, than a certain number, or both, as for instance, 
"The board of directors shall consist of not less than five and not 
more than ten stockholders." This leaves it to the stockholders to 
determine at each annual election the number which shall constitute 
a full board for the ensuing year. It in such a case, the stockholders 
do not manifest their intention by expressly setting it forth in a reso^ 
lution, it is to be gathered from their action in electing a certain 
number of directors, and Jt is to be supposed that the number so 
elected was Intended to constitute the board for the year; and the 
effect is the same as If they had expressly provided for that number 
In the articles of association or otherwise. Vacancies occurring 
through the year should, therefore, be filled as in other cases. 



Digitized by CjOOQ IC 



«9 

DuQUAunoiTioir ahd Rhiohatioh.— It would mmii to be the ^ropor 
eonBtractlon of the law that where a director beoomee dleqwalltled, this 
ipio fado Tacatea hie place in the board, and no remoral hj the other 
directors la neceeearj. The prorislon that the director! are to hold 
office for one year does not require a director to serve for the whole 
term for which he was elected, and prohibit him from resianina dur- 
ing such term, but he may resign at any time during the year. (Briggs 
V, Spalding, 141 U. 8., 132.) The apparent purpose of the prorision, 
in regard to the term of oflffice, is to make it conform to the time of 
the new election, and not to sbsolutely require erery director to senre 
the full term. (MotIus v, Lee, 30 Fed. Rep., 298.) The resignation 
of a director should be tendered to the board, and not to the share- 
holders. As the president is the head of the board, it may be tendered 
to him. (MoYlus v. Lee, 30 Fed. Rep., 298.) It is the more orderly 
and proper way to put the resignation in writing, but an oral resigna- 
tion tendered to the president is sufficient (Briggs v, Spalding, 141 
U. a, 132.) 

§ 61. Yaoaneiet— How Tilled.— Any vacancy in the board shall 
be filled by appointment by the remaining directors, and any di- 
lector 80 appointed shall hold his place until the next election. 
(Bev. Stat U. S. Sec. 5148.) 

It seems to be the proper construction of this section, that the duty 
of filling any vacancy in the board is obligatory on the remaining di- 
rectors, and is not merely discretionary with them. The power is con- 
ferred upon them fOr the benefit of the bank and its stockholders, and 
these have an interest in having the power exercised. 

§ 52. Prooeedingi Where Ho Eleetion Held at Time Appointed. 
— It, from any cause^ an election of directors is not made at the 
time appointed, the association shall not for that cause be dis- 
solved, bnt an election may be held on any subsequent day, thirty 
days' notice thereof in all cases having been given in a newspaper 
published in the city, town, or county in which the association is 
located; and if no newspaper is published in such city, town, or 
county, such notice shall be published in a newspaper published 
nearest thereto. If the articles of association do not fix the day 
on which the election shall be held, or if no election is held on 
the day fixed, the day for the election shall be designated by the 
board of directors in their by-laws, or otherwise; or if the directors 



Digitized by CjOOQ IC 



70 

fail to fix the day, shareholders representing two^thirds of the 
shares may do so. (Bey. Stat U. S. Sec. 5149.) 

Whsit No Election H^u>. — It would seem, therefore, that unless two- 
thirds of the stock were dissatisfied with an existing board of director, 
such board, by neglecting to have elections held, might retain office for 
an indefinite period. The Comptroller might, perhaps, require them to 
renew their oaths each year, or he might construe the law to be man- 
datory as to annual electiohs; in which case the bank would have 
to be guided by the Comptroller's construction, unless it wished to con- 
test the matter in the courts. 

If a shareholders' meeting is held by mistake on the wrong day, 
another meeting must be called, giving the regular thirty-day notice, 
but if all shareholders waive notice and consent to date fixed, the 
Comptroller will not object 

§ 63. President. — One of the directors to be chosen by the board 
shall be the president of the board. (Rev. Stat T7. S. Sec. 5150.) 

For restrictions on commissions, fees, etc., to bank ofUcers, see Sec- 
tion 22 of Federal Reserve Act, page 301. 

Pbebident of Bank. — ^The term "president of the board" is construed 
by the oflice of the Comptroller of the Currency to mean president of 
the bank. 

ESx-Omao Powers.— The president c^ the board of directors is the 
presiding ofilcer of the board, but otherwise his ex^fflcio powers are 
not greater than those of any other director, except that, as the head 
of the board, he may bring suits in behalf of the bank, and in proceed- 
ings against the bank legal process may be served upon him when it 
might not be proper to serve it upon any other director. But usually 
he is also the chief executive ofilcer of the bank, and has large powers 
delegated to him by the board. 

Vested Powers. — ^The president's authority as chief managing agent 
of the bank is derived from the by-laws or vested in him by the board 
of directors, either expressly or by implication. The president has the 
power to ems>loy colinsel and manage the litigation of a bank, in the 
absence of any order of the board of directors depriving him of such 
power. (Citizens' Nat Bank of Kingman v. Berry, 53 Kan.» 696.) And 
he has, by virtue of his office, authority to assign a judgment owned 
by the bank (Guernsey v. Black Diamond Ckfol and Mining Company* 



Digitized by CjOOQ IC 



71 

99 Iowa» 471); or to oompromlM or relosio a debt duo to the tank. 
(FCffmere* Nat Bank v, Temi^eton, 40 8. V/i Rep^ 411.) He has no 
power inherent in his office to bind the bank on the ezecutlon of a note 
in its name; but power to do so may be o on ferred on him by the 
board oi directors, ^ther expressly by resolution to that efltect, or by 
subsequent ratification, or by acquiescence in transactions of a similar 
nature of which the directors haye notice. (National Bank of Gomr- 
merce v. Atkinson* 65 Fed. Rep^ 466.) But it Is within the scope of 
the Implied power of the president to Indorse neaotiable paper in the 
ordinary transaction of the bank's business, and a special authority 
for this purpose need not be conferred by the board of directors. 
(United States National Bank v. First Nat Bank of UtUe Rock, 79 
Fed. Rep., 296.) See also Simons i;. Fisher, 66 Fed. Rep., 906. The 
directors have the ris^t to remove the president at any time eren 
though the bank has nerer legally adopted any by-laws. (Taylor v. 
Hatton, 48 Barb., 196.) 



Digitized by CjOOQ IC 



CHAPTEE IV. 

ISSXJB AND BbDBMPTION OF ClECUULTINO NOTES. 

Section 54. Deposit of Bonds with Treasurer — ^Repeal of Bequire- 
ments for Minimum^ Deposits. 

55. Betirement of National Bank Notes — Sale of Bonds 

to Beserve Banks. 

56. United States Bonds Defined. 

57. Exchange of Coupon Bonds Authorized. 

58. Exchange for Two Per Cent. Bonds Authorized. 

59. Basis of Exchange. 

60. Issue of Two Per Cent Bonds Authorized. 

61. Two Per Cent. Bonds to be Issued at Par — ^How Num- 

bered and Paid — ^Interest. 

62. Bonds Issued under Panama Canal Act may be De- 

posited. 

63. Bonds Issued under Act of 1909 Not Available. 

64. Bonds to be Held as Security for Circulating Notes — 

Interest. 

65. Where Value of Bonds has Depreciated. 

66. Exchange for Other Bonds. 

67. Transfer of Bonds to and by Treasurer. 

68. Begistry of Bond Transfers. 

69. Association to be Advised of Transfers. 

70. Comptroller and Treasurer to Have Access to Books. 

71. Annual Examination of Bonds. 

72. Delivery of Circulation to Associations — Amount of. 

73. Notes May Equal Capital Stock Paid In. 

74. Bank Which Has Eetired Notes may Increase Cir- 

culation. 

75. Denomination and Limitation of Notes. 

76. Printing of Circulating Notes — ^Denominaticms — 

Tenor. 

72 



Digitized by CjOOQ IC 



78 

Section 77. Plates and Diet— Expenses of Bnrean. 

78. Charter Nmnber of Bank to be Printed on its Notes. 

79. Annual Examination of Plates, Dies, etc. 

80. Bepeal of limit of Circulation, etc. 

81. Circulating Notes: for What Becei^able. 

82. Bank Liable Though Notes Not Signed or Signatures 

Forged. 

83. Issue of Other Notes Prohibited. 

84. Destroying and Beplacing Mutilated Notes. 

85. National Gold Banks. 

86* Imitation of National Bank Notes — ^Penalty for. 

87. Penalty for lliutilating Notes, etc. 

88. Bank to Bedeem Its Notes at Its Counter. 

89. Bedemption Fund; Bedemption of Notes at United 

States Treasury. 

90. Bedemption Fund CoTored into Treasury. 

91. Betiring Circulation. 

92. Same Subject. 

93. Circulating Notes of Extended Banks — Lawful Money 

Deposit — ^Expense of New Plates. 

94. Deposit to Bedeem Circulation of Liquidating Banks. 

95. Beassignment of Bonds, Bedemption of Notes, etc., in 

Such Case. 

96. Betum of Notes of Failed or Liquidating Banks. 

97. Destruction of Bedeemed Notes of Liquidating Bank. 

98. Mode of Protesting Notes. 

99. Examination by Special Agent — Forfeiture of Bonds. 

100. Bank Not to Do Business After Protest of Notes. 

101. Bedemption of Notes at Treasury. 

102. Sale of Bonds — ^Lien of United States upon Assets. 

103. Sale of Bonds at Private Sale. 

104. Expense of Transporting and Assorting Notes — Cost 

of Plates. 

105. Same Subject. 

106. Disposition to be Made of Notes Bedeemed by Treas* 

urer. 

107. Cancelation of Notes. 



Digitized by CjOOQ IC 



74 

Section 108. Mode of Destruction. 

§ 64. Depoiit of Bdndt with Treasurer— Sepeal of Beqnire- 
ments for Minimuin Deposit. — So much of the proyisions of sec- 
tion fifty-one hundred and fifty-nine of the Eevised Statutes of 
the Tlnited States, and section four of the Act of June twentieth, 
eighteen hundred and seventy-four, and section eight of the Act 
of July twelfth, eighteen hundred and eighty-two, and of any 
other provisions of existing statutes as require that before any 
National banking association shall be autliorized to commence 
banking business it shall transfer and deliver to the Treasurer of 
the United States a stated amount of United States roistered 
bonds, and so much of those provisions or of any other provisions 
of existing statutes as require any National banking association 
now or hereafter organized to maintain a miTiinrmni deposit of 
such bonds with the Treasurer is hereby repealed. (Sec. 17, Act 
Dec. 23, 1913, as amended by Sec. 9, Act June 21, 1917.) 

Rionr OF a National Bank to Incbbasb thx Aicount of Its Cibcu- 
LATiNO Notes. — There are no provisions of law which prohibit a Na- 
tional bank from increasing the amount of its outstanding drculating 
notes merely because it has withdrawn circulation since the passage 
of the Federal Reserve Act under the provisions of section 18 of that 
Act (Opinion of Counsel of Board, Dec 4, 1915.) 

§ 66. Setirement of ITational Bank ITotes— 43ale of Bonds to 
Beserve Banks.— After two years from the passage of this Act, and 
at any tim!e during a period of twenty years thereafter, any mem- 
ber bank desiring to retire the whole or any part of its circulating 
notes, may file with the Treasurer of the Fnited States an appli- 
cation to sell for its account, at par and accrued interest. United 
States bonds securing circulation to be retired. 

The Treasurer shall, at the end of each quarterly period, fur- 
nish the Federal Eeserve Board with a list of such applications, 
and the Federal Beserve Board may, in its discretion, require the 
Federal reserve banks to purchase such bonds from the banks whose 
applications have been filed with the Treasurer at least ten days 
before the end of any quarterly period at which the Federal Ee- 
serve Board may direct the purchase to be made : Provided, That 



Digitized by CjOOQ IC 



76 

Federal reeerre banks shall not be pennitted to purchase an amount 
to exceed $25^000,000 of such bonds in any one year, and which 
amotint shall include bonds acquired under section four* of this 
Act by the Fed«*al reserre bank. 

Provided further. That the Federal Beserve Board shall allot to 
each Federal reserve bank such proportion of such bonds as the 
capital and surplus of such bank shaU bear to the aggregate capital 
and surplus of all the Federal reserve banks. 

Upon notice from the Treasurer of the amount of bonds so sold 
for its account, each member bank shall duly assign and transfer, 
in writing, such bonds to the Federal reserve bank purchasing the 
same, and such Federal reserve bank shall, thereupon, deposit law- 
ful money with the Treasurer of the United States for the purchase 
price of such bonds, and the Treasurer shall pay to the member 
bank selling such bonds any balance due after deducting a sufficient 
sum to redeem its outstanding notes secured by such bonds, which 
notes shall be cancelled and permanently retired when redeemed. 
(Sec. 18, Act Dec. 23, 1913; 38 Stat L., 268.) 

Slnoe the outbreak of the world war and the resulting demand for 
circulation of all kinds the Federal Reserve Board has not required 
the Federal Reserve Banks to purchase any bonds under the provisions 
of this act As the present price of all bonds with the circolation 
privilege is above par» and likely td remain so» banks desiring to dis- 
pose of such bonds can sell them to better advantage in the open 
market The publishers specialize in buying and selling bonds of this 
character and win be pleased to receive orders. 

PUBCRASB OF UNIICD STATES BONDS BT FCMBBAL RBSEIVK BaNKS.— FM- 

eral Reserve Banks have an unlimited right to purchase United States 
bonds in the open market Th^ may also, under the provisions of 
Section 18» be permitted ot required, after December 23, 1916, to pur- 
chase bonds bearing the circulation privilege, up to an amount not ex- 
ceeding 125,000,000 a year, from member banks which make proper ap- 
plication to the Treasurer of the United States. In order to deter- 
mine the amount any one reserve bank shaU boy under Section 18 in 
any one year, it is necessary to aUot to each bank its own propor- 
tionate share of the entire sum offered for sale through the Treasurer 

•This is apparently an error in the Act Reference should have been 
made to SecUon 14. 



Digitized by CjOOQ IC 



76 

and deduct therefrom the anuMint of bonds bearing the dreolation 
privilege bought by such bank in the open market within that year. 
(Opinion of Ck>unsel of Board, April 22, 1916.) 

Additional Cibculation Attbb Sale of BomM. — ^A National bank 
which reduced the amount of its circulating notes by the sale of bonds 
may take out additional circulation on the security of other bonds 
bought in the open market. (Informal Ruling of Board, Jan. 6» 1916.) 



§ 66. XTnited States Bonds Defined.— The term '^United States 
bond/^ as used throughout this chapter^ shall be construed to mean 
r^tered bonds of the United States. (EeT. Stat. XJ. S. Sec. 
5158.) 

Bonds issued under the Postal Savings Depositories Law can not be 
deposited as security for circulating notes, nor can Liberty or Victory 
bonds. 

§ 67. Exchange of Coupon Bonds Anthoriied. — The Secretary 
of the Treasury is authorized to receive from any association, and 
cancel, any United States coupon bonds, and to issue in lieu thereof 
registered bonds of like amotmt, bearing a like rate of interest and 
having the same time to run. (Bev. Stat. F. S. Sec. 5161.) 

Coupon bonds, as well as registered bonds properly transferred, are 
usually sent to the office of the C!omptroller of the Currency by regis- 
tered mail or express, and the bond derk in that office takes the neces- 
sary steps to convert the coupon bonds into registered, and to turn 
over the bonds in due course to the custody of the Treasurer of the 
United States in trust for the bank. 

§ 68. Exchange for Two Per Cent. Bonds Authorised.— Under 

r^ulations to be prescribed by the Secretary of the Treasury any 
National banking association may substitute the two per centum 
bonds issued under the provisions of this Act for any of the bonds 
deposited with the Treasurer to secure circulation or to secure 
deposits of public money. (Act Mhrch 14, 1900, Sec. IS; 31 
Stat L., 49.) 



Digitized by CjOOQ IC 



77 

§ 58. Badi of Ttynhange. — Such outstanding bonds may be re- 
ceiTed in exchaifgeat a yaluation not greater than their present 
worth to yield an income of two and one-quarter per centum per 
annum; and in consideration of the reduction of interest effected, 
the Secretary of the Treasury is authorized to pay the holders of 
the outstanding bonds surrendered for exchange^ out of any money 
in the Treasury not otherwise appropriated, a sum not greater than 
the difference between their present worth, computed as afore- 
said, and their par value, and the payments to be made hereunder 
shall be held to be payments on account of the sinking fund created 
by section thirty-six hundred and ninety-four of the Bevised 
Statutes. (Sec. 11, Act Mkrch 14, 1900; 31 Stat. L., 48.) 

§ 60. Issue of Two Per Cent. Bonds Authorised.— The Secretary 
of the Treasury is hereby authorized to receive at the Treasury any 
of the outstanding bonds of the United States bearing interest at 
five per centum per annum; payable February first, nineteen hun- 
dred and four, and any bonds of the United States bearing interest 
at four per centum per annum, payable July first, nineteen hun- 
dred and seven, and any bonds of the United States bearing in- 
terest at three per centum per annum, payable August first, nine- 
teen hundred and eight, and to issue in exchange therefor an equal 
amount of coupon or registered bonds of the United States in such 
form as he may prescribe, in denominations of fifty dollars or any 
multiple thereof, bearing interest at the rate of two per centum per 
annum, payable quarterly, such bonds to be payable at the pleasure 
of the United States after thirty years from the date of their 
issue, and said bonds to be payable, principal and interest, in gold 
coin of the present standard value, and to be exempt from the 
payment of all taxes or duties of the United States, as well as 
from taxation in any form by or under State, municipal, or local 
authority. (Sec. 11, Act March 14, 1900; 31 Stat. L., 48.) 

§ 61. Two Per Cent. Bonds to be Issued at Par— How ITumbered 
and Paid — Interest.— The two per centum bonds to be issued un- 
der the provisions of this Act diall be issued at not less than par, 
and ihey shall be numbered consecutively in the order of their 



Digitized by CjOOQ IC 



78 

iflsae, and when payment is made the last nnmbers issued shall be 
first paid, and this order shall be followed nntil all the bonds 
are paid; and whenever any of the outstanding bonds are called 
for payment, interest thereon shall cease three months after such 
call. (Sec. 11, Act March 14, 1900; 31 Stat L., 48.) 

§ 62. Deposit of Bonds Issued XTnder Panama Canal Act. — The 

two per cent, bonds of the ITnited States authorized by section 
eight of the act entitled "An act to provide for the construction 
of a canal connecting the waters of the Atlantic and Pacific oceans,'^ 
approved June twenty-eighth, nineteen himdred and two, shall have 
all the rights and privil^es accorded by law to other two per cent, 
bonds of the United States. (Sec. 11, Act Dec. 21, 1905; 34 
Stat. L., 5.) 

§ 63. Bonds luued TTnder Aot of 1909 ISot Available. — That 
the Secretary of the Treasury be, and he is hereby, authorized to 
insert in the bonds to be issued by him under section thiriy-nine 
of an Act entitled "An Act to provide revenue, equalize duties, and 
encourage the industries of the United States, and for other pur- 
poses,^' approved August fifth, nineteen himdred and nine, a pro- 
vision that such bonds shall not be receivable by the Treasurer of 
the United States as security for the issue of circulating notes to 
Niational banks; and the bonds containing such provision shall not 
be receivable for that purpose. (Act March 2, 1911, Ch. 195; 
36 Stat. L., 1013.) 

§ 64. Bonds to be Held as Security for Circulating Hotet— 
Interest. — The bonds transferred to and deposited with the 
Treasurer of the United States by any association, for the se- 
curity of its circulating notes, shall be held exclusively for that 
purpose until such notes are redeemed, except as provided in this 
Title. The Comptroller of the Currency shall give to any such 
association powers of attorney to receive and appropriate to its 
own use the interest on the bonds which it has so transferred to 
the Treasurer; but such powers shall become inoperative whenever 
such association fails to rede^n its circulating notes. (Bev. Stat 
U. S. Sec. 6167.) 



Digitized by CjOOQ IC 



w 

§ 65. Wliere TalM of Bondi Htt Depredatad^Wheoefar tlie 
market or cash Yilue of any hondg thua depoaited with the Treaa- 
nrer is reduced below the amount of the circulation issued for 
the same^ the Comptroller may demand and receive the amount of 
such depreciation in other United States bonds at caah value^ or in 
money, from tiie association, to be deposited with the Treasure aa 
long as such depreciation continues. (Ber. Stat U. 8. Sec. 5167.) 

§ 66. Ezehange for Other Bo&ds.^The Comptroller, upon the 
terms prescribed by the Secretary of the Treasury, may permit 
an exchange to be made of any of the bonds deposited with the 
Treasurer by any associations for other bonds of the United States 
authorized to be receiyed as security for circulating notes, if he 
is of opinion that such an exchange can be made without prejudice 
to the TJnited States ; and he may direct the return of any bonds 
to the association which transferred the same, in sums of not less 
than one thousand dollars, upon the surrender to him and the can- 
cellation of a proportionate amount of such circulating notes: 
Provided, That the remaining bonds which shall have been trans- 
ferred by the association ofFering to surrender circulating notes are 
equal to the amount required for the circulating notes not surren- 
dered by such association [and that the amount of bonds in the 
hands of the Treasurer is not diminished below the amount re- 
quired to be kept on deposit with him],'*' and that there has been 
no failure by Ihe association to redeem its circulating notes, nor 
any other violation by it of the provisions of this Title, and that 
the market or cash value of the remaining bonds is not below the 
amount required for the circulation issued for the same. (Bev. 
Stat TJ. S. Sec. 5167.) 

§ 67. Transfer of Bonds to and by Treasurer. — All transfers of 
Fnited States bonds made by any association under the provisions 
of this Title shall be made to the Treasurer of the TTnited States 
in trust for the association, with a memorandum written or printed 
on each bond, and signed by the cashier or some other officer of the 
association making the deposit. A receipt shall be given to the as* 
*See Section 54 wbldi repeals this dauae. 



Digitized by CjOOQ IC 



80 

Bodation by the Comptroller of the Currency, or by a cleric ap- 
pointed by him for that purpose, stating that the bond is held in 
trust for the association on whose behalf the transfer is made, and 
as security for the redemption and payment of any circulating 
notes that have been or may be deliyered to such association. No 
assignment or transfer of any such bond by the Treasurer shall be 
deemed valid unless countersigned by the Comptroller of the Cur- 
rency. (Eev. Stat TI. S. Sec. 5162.) 

For full instructions on the deposit and withdrawal of bonds see 
Chapter V, Part IV. 

§ 68. Segistry of Bond Transfers. — The Comptroller of the 
Currency shall keep in his office a book, in which he shall cause to 
be entered, immediately upon coimtersigning it, every transfer or 
assignment by the Treasurer of any bonds belonging to a National 
banking association presented for his signature. He shall state in 
such entry the name of the association from whose account the 
transfer is made, the name of the party to whom it is made, and 
the par value of the bonds transferred. (Bev. Stat. TJ. S. Sec. 
5163.) 

§ 69. Association to be Advised of Transfers. — The Comptroller 
of the Currency shall, immediately upon countersigning and enter* 
ing any transfer or assignment by the Treasurer of any bonds be* 
longing to a National banking association, advise by mail the 
association from whose accounts the transfer is made of the kind 
and numerical designation of the bonds and the amount thereof 
so transferred. (Rev. Stat. TJ. S. Sec. 5164.) 

§ 70. Comptroller and Treasurer to Have Access to Books.— Thu 
Comptroller of the Currency shall have at all times, during office 
hours, access to the books of the Treasurer of the United States f oi 
the purpose of ascertaining the correctness of any transfer or as^ 
signment of the bonds deposited by an association, presented to the 
Comptroller to countersign ; and the Treasurer shall have the like 
access to the book mentioned in section fifty-one hundred and sixty- 



Digitized by CjOOQ IC 



81 

ihiee, during office honn, to ascertain the correctneia of the entries 
in the same; and the Comptroller shall also at all times have access 
to the bonds on deposit with the Treasurer to ascertain their 
amoont and condition. (Ber. Stat TJ, S. Sec 5165.) 

§ 71. Annual Examination of Bonds. — Every association haring 
bonds deposited in the office of the Treasurer of the United States 
shaU, once or oftener in each fiscal year^ examine and compare the 
bonds pledged by the association with the books of the Comptroller 
of the Currency and with the accounts of the association, and, if 
flwy are found correct, to execute to the Treasurer a certificate 
setting forth the different kinds and the amounts thereof, and that 
the same are in the possession and custody of the Treasurer at the 
date of the certificate. Such examination shall be made at such 
a time or times during the ordinary business hours as the Treasurer 
and the Comptroller, respectively, may select, and may be made by 
an officer or agent of such association duly appointed in writing for 
that purpose; and his certificate before maitioned shall be of like 
force and validity as if executed by the president or cashier. A 
duplicate of such certificate, signed by the Treasurer, shall be re- 
tained by the association. (Rev. Stat. TJ. S. Sec. 5166.) 

This section throws upon the association the direct responsibility of 
ascertaining the safety and actual presence on deposit of the bonds 
held in tmst for it by the Treasurer. The examination is made in 
practically aU cases by the bank's accredited agent, and we render this 
service for a large number of banks. For fuU details see Chapter 
V, Part IV. 

72. DeliYexy of Circulation to Associations— Amount of. — 
Upon the deposit with the Treasurer of the United States, by any 
NVitional banking association, of any bonds of the United- States 
in the manner provided by existing law, such association shall be 
entitled to receive from the Comptroller of the Currency circulating 
notes in blank, registered and countersigned as provided by law, 
equal in amount to the par value of the bonds so deposited ; and 
any National banking association now having bonds on deposit for 
the security of circulating notes, and upon which an amount of 
6 



Digitized by CjOOQ IC 



drcnlating notes has been issued less than the par value of the 
bonds, shall be entitled, upon due application to the Comptroller 
of the Currency, to recdve additional circulating notes in blank 
to an amount which will increase the circulating notes held by 
such association to the par value of the bonds deposited, such ad- 
ditional notes to be held and treated in the same way as circu- 
lating notes of National banking associations heretofore issued, 
and subject to all the provisions of law affecting such notes : Pro- 
vided, That nothing herein contained shall be construed to modify 
or repeal the provisions of section fifty-one hundred and sixty- 
seven of the Sevised Statutes of the United States, authorizing 
the Comptroller of the Currency to require additional deposits of 
bonds or of lawful money in case the market value of the bonds 
held to secure the circulating notes shall fall below the par value 
of the circulating notes outstanding for which such bonds may be 
deposited as security. (Act March 14, 1900, Ch. 41, Sec. 12; 31 
Stat. K, 49.) 

§ 73. ITotei Hay Equal Capital Stook Paid In.— The total 
amount of such notes issued to any such association may equal at 
any time but shall not exceed the amount at such time of its 
capital stock actually paid in. (Act March 14, 1900, Sec. 12; 
31 Stat. K, 49.) 

§ 74. Bank WUdh Has Setired Hotes Hay Increase Ciroulation. 

— So much of an Act entitled ^^An Act to enable National bank- 
ing associations to extend their corporate existence, and for other 
purposes,*^ approved July twelfth, eighteen hundred and eighiy- 
two, as prohibits any National bank which makes any deposit of 
lawful money in order to withdraw its circulating notes from re- 
ceiving any increase of its circulation for the period of six months 
from the time it made such deposit of lawful money for the pur- 
pose aforesaid, is hereby repealed, and all other Acts or parts of 
Acts inconsistent with the provisions of this section are hereby 
repealed. (Act March 14, 1900, Sec. 12; 31 Stat. L., 49.) 

§ 76. Denomination and limitation of ITotei. — That the Act 
of June third, eighteen hundred and sixty-four, Bevised Statutes, 



Digitized by CjOOQ IC 



88 

section fifty-one hundred and seyenty-fiTe, which prohibits national 
banks from being furnished with notes of less denomination than 
$5, be, and it is hereby, repealed. 

Ssc. 2. That that part of the Act of March fourteenth, nine- 
teen hundred, which provides '^that no National banking associa- 
tion shall, after the passage of this Act, be entitled to receive from 
the Comptroller of the Currency, or to issue or reissue, or place 
in circulation more than one-third in amoimt of its circulating 
notes of the denomination of $5,'' be, and it is hereby, repealed. 

Sbc. 3. That from and after the passage of this Act any Nap 
tional banking association, upon compliance with the provisions 
of law applicable thereto, shall be entitled to receive from the 
Comptroller of the Currency, or to issue or reissue, or place in 
circulation notes in denominations of $1, $2, $5, $10, $20, $50, and 
$100 in such proportion as to each of said denominations as the 
bank may elect: Provided, however. That no bank shaU receive 
or have in circulation at any one time more than $25,000 in notes 
of the denominations of $1 and $2. 

Sbc. 4. That all Acts or parts of Acts which are inconsistent 
with this Act are hereby repealed. (Act Oct 5, 1917, repealing 
Bev. Stat IT. S. Sec. 5175 and part of Sec. 12, Act March 14, 
1900.) 

§ 76. Printing of Circulating ITotes— Denominations— Tenor« — 

That in order to furnish suitable notes for circulation, the Comp- 
troller of the Currency shall, under the direction of the Secretary 
of the Treasury, cause plates and dies to be engraved, in the best 
maimer to guard against counterfeiting and fraudulent alterations, 
and shall have printed therefrom and numbered such quantity 
of circulating notes in blank, or bearing engraved signatures of 
o£5cers as herein provided, of the denominations of $1, $2, $5, 
$10, $20, $50, $100, $500, and $1,000, as may be required to 
supply the associations entitled to receive the same. Such notes 
shall express upon their face that they are secured by United States 
bonds deposited with the Treasurer of the United States, by the 
written or engraved signatures of the Treasurer and Kegister, 
and by the imprint of the seal of the Treasury; and shall also 



Digitized by CjOOQ IC 



84 

express upon their face the promise of the association reoeiying 
the same to pay on demand, attested by the written or engrayed 
signatures of tiie president or vice president and cashier; and 
shall bear such devices and such other statements and shall be 
in such form as the Secretary of the Treasury shall, by regula- 
tion, direct. (Bey. Stat XJ. S. Sec. 5172, as amended by Sec. 4, 
Act March 3, 1919.) 

§ 77. Flatei and Biet— Ezpeniei of Bureau.— The plates and 
special dies to be procured by the Comptroller of the Currency for 
the printing of such circulating notes shall remain under his con« 
trol and direction, and the expenses necessarily incurred in execut- 
ing the laws respecting the procuring of such notes, and all other 
expenses of the Bureau of tiie Currency, shall be paid out of the 
proceeds of the taxes or duties assessed and collected on the circula- 
tion of National banking associations under this Title. (Bey. 
Stat U. S. Sec. 5173.) 

§ 78. Charter Number of Bank to te Printed on Its ITotei.— ' 
That the Comptroller of the Currency shall, under such rules and 
r^ulations as the Secretary of the Treasury may prescribe^ cause 
the charter numbers of the' association to be printed upon all 
National bank notes which may be hereafter issued by him. (Act 
June 20, 1874, Ch. 343, Sec. 6; 18 Stat L., 124.) 

§ 79. Annual Examination of Plates, Bies, etc.— The Comp- 
troller of the Currency shall cause to be examined, each year, the 
plates, dies, but-pieces (bed-pieces), and other material from which 
the National bank circulation is printed, in whole or in part, and 
file in his office annually a correct list of the same. Such ma« 
terial as shall haye been used in the printing of the notes of 
associations which are in liquidation^ or haye closed business, shall 
be destroyed under such regulations as shall be prescribed by the 
Comptroller of the Currency and approyed by the Secretary of the 
Treasury. The expenses of any such examination or destruction 
shall be paid out of any appropriation made by Congress for the 



Digitized by CjOOQ IC 



8S 

special examination of National banks and bank-note plates. (Ber. 
Stat XJ. S. Sec. 5174; Act Feb. 27, 1877, c. 69; 19 Stat L., 250.) 

§ 80. Bepeal of limit of Circulation, etc.— That section five 
thousand one hundred and seventyHseyen of the Bevised Statutes, 
limiting ihe aggregate amount of circulating notes of National 
banking associations, be, and is hereby, repealed; and each exist- 
ing banking association may increase its circulating notes in ac- 
cordance with existing law witiiout respect to said aggregate limit; 
and new banking associations may be organized in accordance with 
existing law witiiout respect to said aggregate limit; and the pro- 
visions of law for the withdrawal and redistribution of National 
bank currency among the several States and Territories are hereby 
repealed. (Act Jan. 14, 1876, Ch. 15, Sec. 3; 18 Stat L., 296.) 

§ 81. droulatinr Hotet— For What SeoeiTable.— Any assoda^ 
tion receiving circulating notes under this tide may, if its promise 
to pay such notes on demand is expressed thereon attested by the 
written or engraved signatures of the president or vice president 
and the cashier thereof in such manner as to make them obliga- 
tory promissory notes payable on demand at its place of business, 
issue, and circulate the same as money. Such written or engraved 
signatures of the president or vice president and the cashier of 
such association may be attached to such notes either before or 
after the receipt of such notes by such association. And such 
notes shall be received at par in all parts of the United States in 
payment of taxes, excises, public lands, and all other dues to the 
United States, except duties on imports; and also for all salaries 
and other debts and demands owing by the United States to indi- 
viduals, corporations, and assodations within the United States, 
except interest on the public debt, and in redemption of the Na- 
tional currency. (Bev. Stat Sec. 5182, as am^ded by Act ap- 
proved Jan. 13, 1920.) 

§ 82. Bank Liable Though Hotes Hot Signed or Signatures 
Forged. — That the provisions of the Bevised Statutes of the 
United States, providing for the redemption of National bank 



Digitized by CjOOQ IC 



86 

notes^ shall apply to all National bank notes that haye been or may 
be issued to, or received by, any National bank, notwithstanding 
such notes may have been lost or stolen from the bank and put in 
circulation without the signature or upon the forged signature of 
the president or vice president and cashier. (Act July 28, 1892, 
Ch, 317; 27 Stat L., 322.) 

§ 83. lisne of Other Hotes Prohibited. — No National banking 
association shall issue post-notes or any other notes to circulate as 
money than such as are authorized by the provisions of this Title. 
(Rev. Stat. U. S. Sec. 6183.) 

Applies to Csbcui^tisq Notes.— This section applies only where 
the instruments are issued to "circulate as money/' and where this is 
not the purpose they are not within the prohibition. (Hunt, Appellant, 
141 Bfass., 616; Riddle v. First Nat Bank, 27 Fed. Rep., 503.) Thus, 
it has been held, that this section does not forbid the issue of cer- 
tificates of deposit (See cases cited above.) Nor does it forbid the 
certification of checks, although the purpose of a certification, by 
making the check primarily the obligation of the bank, is to give it 
currency so that it may pass freely from hand to hand. (See Mer- 
chants' National Bank i;. State National Bank, 10 Wallace, 604.) 

§ 84. Destroying and Replacing Mutilated Hotes.— It shall be 
the duty of the Comptroller of the Currency to receive worn-out or 
mutilated circulating notes issued by any banking association, and 
also, on due proof of the destruction of any such circulating notes, 
to deliver in place thereof to the association other blank circulating 
notes to an equal amoimt Such worn-out or mutilated notes, 
after a memorandum has been entered in the proper books, in ac- 
cordance with such regulations as may be established by the Comp- 
troller, as well as all circulating notes which shall have been paid 
or surrendered to be cancelled, shall be burned * to ashes in pres- 
ence of four persons, one to be appointed by the Secretary of the 
Treasury, one by the Comptroller of the Currency, one by the 
Treasurer of the United States, and one by the association, under 
such regulations as the Secretary of the Treasury may prescribe. 
A certificate of such burning, signed by the parties so appointed, 

*See Section 108, which provides for destruction by maceration. 



Digitized by CjOOQ IC 



87 

shall be made in the books of the Comptroller, and a duplicate 
thereof forwarded to the aaeodation whose notes are thus cancelled. 
(Bey. Stat IT. S. Sec 5184.) 

This section makes it mandatory for National banks with elrenla- 
tion to appoint a representatlTe to witness the destmctlon of multUated 
notes. We act In this capacity for a targe nmnber of banks. For foU 
details and forms see Chapter V, Part IV. 

§ 8S. Hational Ctold Banks.— As no Nktional gold banks are 
now in existence the provisions of the National Bank Act rdating 
thereto are omitted. 

g 86. Imitation of Hational Bknk Hotet— Punishment for. — 
See Chapter on Crimes and Misdemeanors, page 182. 

§ 87. Penalty for Mntilating Votes, ete.— See Chapter on 
Crimes and ]iGsdemeanor8> page 183. 

§ 88. Bank to Redeem Its Votes at Its Oovnter^— This section 
shall not relieye any association from its liability to redeem its 
drcnlating notes at its own counter^ at par, in lawful money on 
demand. (Bev. Stat. V. S. Sec. 5195.) 

The other proTlaloiui of the aectlon required the selection of banks 
in certain cities as redemption agents, lliese prorlslona were repealed 
by the act of June 30, 1874. See next section. 

§ 89. Bedemption Fond; Sedemption of Votes at ITnited States 
Xreasniy. — ^That every association organized^ or to be organized^ 
under tiie provisions of the said act^ and of the several acts amen- 
datory thereof 9 shall at all times keep and have on deposit in the 
Treasury of the United States^ in lawful mxmey of the United 
States^ a sum equal to five 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 two of this act] ;* and when the circulating notes of any 
such associations^ assorted or unassorted, shall be presented for re- 
demption, in sums of one thousand dollars or any midtiple thereof, 

^Bepealed by Section 20 of Federal Reserve Act 



Digitized by CjOOQ IC 



88 

to the Treastuer of the United States^ the same shall be redeemed 
in United States notes. All notes so redeemed shall be charged 
by the Treasurer of the United States to the respective associations 
issuing the same^ and he shall notify them severally on the first 
day of each month, or of tener, at his discretion, of the amoimt of 
such redemptions; and whenever such redemptions for any associa- 
tion shall amount to the sum of five hundred dollars, such asso- 
ciation so notified shall forthwith deposit with the Treasurer of 
the United States a sum in United States notes equal to the 
amount of its circxdating notes so redeemed. And all notes of 
Ifational banks, worn, defaced, mutilated, or otherwise unfit for 
circulation, shall, when received by any Assistant Treasurer, or at 
any designated depository of the United States, be forwarded to 
the Treasurer of the United States for redemption, as provided 
herein. And when such redemptions have been so reimbursed, the 
circulating notes so redeemed shall be forwarded to the respective 
associations by which they were issued ; but if any of such notes are 
worn, mutilated, defaced, or rendered otherwise unfit for use, 
they shall be forwarded to the Comptroller of the Currency and 
destroyed, and replaced as now provided by law.* . . . And 
provided further. That so much of section thirty-two of said Na- 
tional Bank Act requiring or permitting the redemption of its 
circulating notes elsewhere than at its own counter, except as 
provided for in this section, is hereby repealed. (Act June 20, 
1874, Ch. 343, Sec. 3; 18 Stat L., 123.) 



For full particulars on the five per cent fund and on the redemp- 
tion of currency see Chapter V, Part IV. 



§ 90. Bedemption Fund Covered into Treasury. — That upon 
the passage of this act the balances standing with the Treasurer 
of the United States to the respective credits of National banks 
for deposits made to redeem the circulating notes of such banks, 
and all deposits thereafter received for like purpose, shall be cov- 

•The provision omitted requires the banks to reimburse the Treamiry 
the expense Incurred. 



Digitized by CjOOQ IC 



89 

ered into the Treasuiy as a misoeUaneotiA reoeipty and the Treat- 
urer of the United States Bhall redeem from the general cash in 
the Treasury the eircubting notes of said banks which may come 
into his possession subject to redemption, and upon the certifi* 
cate of the Comptroller of the Currency that such notes have been 
received by him and that they have been destroyed and that no 
new notes will be issued in tixeir place, reimbursement of their 
amoimt shall be made to the Treasurer, under such regulations as 
the Secretary of the Treasury may prescribe, from an appropria- 
tion hereby created, to be known as National bank notes Bedemp- 
tion account, but the provisions of this act shall not apply to the 
deposits received under section three of the Act of June twentieth, 
eighteen hundred and seventy-four, requiring every National bank 
to keep in lawful money with the Treasurer of the United States 
a sum equal to five per centum of its circulaticm, to be held and 
used for the redemption of its circulating notes; and the balance 
r^naining of the deposits so covered shall, at the close of each 
month, be reported on the monthly public debt statanent, as debt 
of the United States bearing no interest (Act July 14, 1890, 
Ck 708, Sec. 6; 26 Stat. L., 289.) 

§ 91. Setiring Ciroulation. — That any association organized 
under this act, or any of the acts of which this is an amendment, 
desiring to withdraw its circulating notes, in whole or in part, may, 
upon the deposit of lawful money with the Treasurer of the United 
States [in sums of not less than nine thousand dollars],* take up 
the bonds which said association has on deposit with the Treasurer 
for the security of such circulating notes, which bonds shall be as- 
signed to the bank in the manner specified in the nineteenth sec- 
tion of the National Bank Act; and the outstanding notes of said 
association, to an amount equal to the legal tender notes deposited, 

*The clauses of this section endosed In brackets were repealed by 
Section 17 of the Federal Reserve Act as amended by Section 9 of the 
act of June 21. 1917. (See Section 54 ante). National banks are there- 
fore no longer required to make deposit of bonds as a condition pre- 
cedent to the commenoement of business, or to make or maintain 
mtnimum deposits. 



Digitized by CjOOQ IC 



90 

fihall be rede^ned at the Treasniy of the TTnited States, and de- 
stroyed as now provided by law: [Provided, That the amount of 
the bonds on deposit for circulation shall not be reduced below 
fifty thousand dollars,] ♦ An association which is in good faith 
winding up its business for the purpose of consolidating with an- 
other association shall not be required to deposit lawful money for 
its outstanding circulation; but its assets and liabilities shall be 
reported by the association with which it is in process of consolida- 
tion. (Act June 20, 1874, CSl 343, Sec 4; 18 Stat. IT. S. 124; 
Bev. Stat IT. S, 6223.) 

§ 92. Same Subject— Betiring OiroulatioB.— That any National 
banking association, now organized or hereafter organized, desiring 
to withdraw its circulating notes, upon a deposit of lawful money 
with the Treasurer of the United States, as provided in section 
four of the Act of Jime twentieth, eighteen hundred and seveniy- 
four, or as provided in this Act, is authorized to deposit lawful 
money and, with the consent of the Comptroller of the Currency 
and the approval of the Secretary of the Treasury, withdraw a 
proportionate amount of bonds held as security for its circulating 
notes in the order of such deposits : Provided, That not more than 
nine millions of dollars of lawful money shall be deposited during 
any calendar month for this purpose: And provided further. That 
the provisions of this section shall not apply to bonds called for 
redemption by the Secretary of the Treasury, nor to the with- 
drawal of circulating notes in consequence thereof. (Act July 12, 
1882, Ch. 290, Sec. 9; 22 Stat. L., 164; Act March 4, 1907, Sec. 
4; 34 Stat. L., 1290.) 

The provision omitted provided that '^o National bank which makes 
any deposit of lawful money in order to withdraw its circulating notes 
shall be entitled to receive any increase of its circulation for the period 
of six months from the time it made such deposits of lawful money for 
the purpose aforesaid." This was repealed by Act March 14, 1900. 

§ 93. Circulating Kotes of Extended Banks— lawful Money 
Deposit — ^Expense of Hew Plates. — That the circulating notes of 
any association so extending the period of its succession, whidi 

* Repealed. See $64 Ante, 



Digitized by CjOOQ IC 



M 

shall haye been iasned to it prior to such extension, shall be re* 
deemed at the Treasury of the Ulnited States, as proTided in section 
three of the Act of June twentieth, eighteen hundred and seyenty* 
f our, entitled ''An Act fixing the amount of United States notes, 
providing for redistribution of National bank currency, and for 
other purposes,'' and such notes when redeemed shall be forwarded 
to the Comptroller of the Currency and destroyed, as now pro- 
vided by law; and at the end of three years from the date of the 
extension of the corporate existence of each bank the association 
so extended shall deposit lawful money with the Treasurer of the 
United States sufficient to redeem the remainder of the circulap 
tion which was outstanding at the date of its extension, as pro- 
vided in sections fifty-two hundred and twCTty-two, fifty-two hun- 
dred and tweniy-four, and fifty-two hundred and twenty-five of 
the Bevised Statutes; and any gain that may arise from the fail- 
ure to present such circulating notes for redemption shall inure 
to the benefit of the United States; and from time to time, as such 
notes are redeemed or lawful money deposited therefor as pro- 
vided herein, new circulating notes shall be issued as provided for 
by this act, bearing such devices, to be approved by the Secretary 
of the Treasury, as shall make them readily distinguishable from 
the circulating notes heretofore issued: Provided, however. That 
each banking association which shall obtain the benefit of this Act 
shall reimburse to the Treasury the cost of preparing the plate 
or plates for such new circulating notes as shall be issued to it. 
(Act July 12, 1883, Ck 290, Sec. 6 ; 22 Stat L., 163.) 



§ M. Deposit to Redeem Oireulation of liquidatinir Banks.— 
Within six months from the date of the vote to go into liquidation, 
the association shall deposit with the Treasurer of the United 
States lawful money of the United States sufficient to redeem all 
its outstanding circulation. The Treasurer shall execute duplicate 
receipts for money thus deposited, and deliver one to the associa- 
tion and the other to the Comptroller of the Currency, stating the 
amount received by him, and the purpose for which it has been 
received; and the money shall be paid into the Treasury of the 



Digitized by CjOOQ IC 



ITnited States^ and placed to the credit of such associatioii upon 
redemption account. (Rev. Stat. U. S. Sec. 5222.) 

Limit of Time. — If not otherwise determined, the vote to liquidate 
takes effect immediately, and the six months run from that date; but 
if the vote itself is that the liquidation shall take place at a future 
date, then that future date is the actual date on which the vote takes 
effect, and the six moliths run therefrom. 

Lawful Monet. — ^Lawful money is United States gold coin, silver 
dollars or legal-tender notes. See (846 fl. 

How Deposit IiCAJ>E.--^rhe usual method is to make the deposit either 
directly or through a correspondent or agent with the Treasurer of 
the United States at Washington, or an Assistant Treasurer. When 
the depctoit is made with an Assistant Treasurer, he Issues a certificate 
of deposit which is sent to Washington. When the deposit is made, 
and the bank has paid to the United States Treasurer all amounts due 
for taxes on circulation and all amounts due for expenses of redeem- 
ing notes, its bonds on deposit will be surrendered td it We are al- 
wa3rs glad to sell such bonds for liquidating banks and can arrange 
to make the deposit so that the bank will not put up any money. 

§ 9S. Beass^fnment of Bonds, Bedemption of Notes, etc., in 
Sncli Case. — Whenever a sufScient deposit of lawful mon^ to re- 
deem the outstanding circulation of an association proposing to 
close its business has been made, the bonds deposited by the asso- 
ciation to secure payment of its notes shall be reassigned to it in 
the maimer prescribed by section fifty-one hundred and sixty-two. 
And thereafter the association and its shareholders shall stand dis- 
charged from all liabilities upon the circulating notes, and those 
notes shall be redeemed at the Treasury of the United States. And 
if any such bank shall fail to make the deposit and take up its 
bonds thirty days after the expiration of the time specified, the 
Comptroller of the Currency shall have power to sell, the bonds 
pledged for the circulation of said bank, at public auction in New 
York city, and after providing for the redemption and cancella- 
tion of said circulation, and the necessary expenses of the sale, to 
pay over any balance remaining to the bank or its legal repre8eiit&- 
tive. (Rev. Stat. U. S. Sec. 5224; Act Feb. 18, 1876, c. 80; 18 
Stat. L., 320.) 



Digitized by CjOOQ IC 



98 

§ 96. Betim of Kotos of Failed or liquidating Banki^'And it 
shall be the duty of the Treasurer, assistant treasor^v^ designated 
depositaries and National bank depositaries of the United States 
* * * to assort and return to the Treasury for redemption the 
notes of such Niational banks as have failed^ or gone into volun- 
tary liquidation for the purpose of winding up Iheir afEairs, and 
of such as sliall hereafter so fail or go into liquidation. (Act 
June 20, 1874, Sec. 8; 18 Stat. L., 126.) 

§ 97. DestmotioB of Bedeemed Notes of liquidating' Bank.-* 

Whenever the Treasurer has redeemed any of the notes of an asso- 
ciation which has commenced to close its afFairs under the five 
preceding sections, he shall cause the notes to be mutilated and 
charged to the redemption accoimt of the association ; and all notes 
so redeemed by the Treasurer shall, every three months, be certi- 
fied to and burned * in the manner prescribed in section fifiy-one 
hundred and eighty-four. (Bev. Stat. U. S. 5225 ; Act Feb. 27, 
1877, c. 69; 19 Stat. L., 252.) 

§ 99. Mode of Protesting Botes.— Whenever any National 
banking association fails to redeem in the lawful money of the 
United States any of its circulating notes, upon demand of pay- 
ment duly made during the usual hours of business, at the office of 
such association, [or at its designated place of redemption] f the 
holder may cause the same to be protested, in one package by a 
notary public, unless the president or cashier of the association 
whose notes are presented for payment, or the president or cashier 
of the association at the place at which they are redeemable f 
offers to waive demand and notice of the protest, and, in pursuance 
of such offer, makes, signs, and delivers to the parly making such 
demand an admission in writing, stating the time of the demand, 
the amount demanded, and the fact of the non-payment thereof. 

* See Section lOS, which provides that such notes be destroyed by 
maceration. 

t Circulation is redeemable only at the Treasury or over the counter 
of the association. Designated places of redemption have not existed 
since June 20« 1874. 



Digitized by CjOOQ IC 



94 

The notaiy public^ on making such protest, or upon receiving such 
admission, shall forthwith forward such admission or notice of 
protest to the Comptroller of the Currency, retaining a copy 
therof . If, however, satisfactory proof is produced to the notary 
public that the payment of the notes demanded is restrained by 
order of any court of competent jurisdiction, he shall not protest 
the same. When the holder of any notes causes more than one 
note or package to be protested on the same day, he shall not re- 
ceive pay for more than one protest. (Rev. Stat. IT. S. Sec. 5226.) 

Redemption Afixb Lawful Momnr Deposit. — ^It i8» perhaps, open to 
dispute whether a bank, after it has deposited lawful money to retire 
a portion of its circulation under the act of June 20, 1874, is obliged to 
redeem its notes at its own counter until the deposit of lawful money 
is exhausted by presentation oT notes at the Treasury. In other words, 
it is held by some that while lawful money remains on deposit in the 
Treasury the bank might refuse to redeem a note presented at its own 
counter, and refer the presenter to the Treasury. However this may 
be, while Section 6227 is in force, a bank might place itself in a very 
disagreeable position, and perhaps injure its credit, by refusing to re- 
deem any of its notes at its own counter, that is, so long as it continues 
a going bank. 

§ 99. Examination by Special Agent— Forfeitnre of Bonds. — 
On receiving notice that any !N^ational banking association has 
failed to redeem any of its circulating notes, as specified in the pre- 
ceding section, the Comptroller of the Currency, with the con- 
currence of the Secretary of the Treasury, may appoint a special 
agent, of whose appointment immediate notice shall be given to 
snch association, who shall immediately proceed to ascertain 
whether it has refused to pay its circulating notes in the lawful 
money of the United States, when demanded, and shall report to 
the Comptroller the fact so ascertained. If from such protest, 
and the report so made, the Comptroller is satisfied that such asso- 
ciation has refused to pay its circulating notes and is in default, he 
shall, within thirly days after he has received notice of such fail- 
ure, declare the bonds deposited by such association forfeited to the 
United States, and they shall thereupon be so forfeited. (Bev. 
Stat. U. S. Sec. 5227.) 



Digitized by CjOOQ IC 



96 

§ 100. Buk Vot to Bo BoiiMM JdNor Prataft tf Hotatw— After 
a default on the part of an association to paj any of its circulating 
notes has been ascertained bj the Comptroller^ and notice thereof 
has been giyen by him to the association^ it shall not be lawful 
for the association suffering the same to pay out any of its notes, 
discount any notes or bills or otherwise prosecute the business of 
banking; except to receiye and safely keep money belonging to it, 
and to deliver special deposits. (Ber. Stat. IT. S. Sec. 5228 ; Act 
Feb. 18, 1876, c 80; 18 Stat L., 320.) 

§ 101. XedemptioA of Hotes at Treasury. — ^Immediately upon 
declaring the bonds of an association forfeited for non-payment of 
its notes, the Comptroller shall give notice, in such manner as the 
Secretary of the Treasury shall, by general rules or otherwise, 
direct, to the holders of the circulating notes of such association, 
to present them for payment at the Treasury of the United States; 
and the same shall be paid as presented in lawful monqr of the 
United States; whereupon the Comptroller may, in his discretion, 
cancel an amount of bonds pledged by such association equal at 
current market rates, not exceeding par, to the notes paid. (Bev. 
Stat. U. S. Sec. 6229.) 

§ 102. Sale of Bondfr— lien of Vnited States ITpon Assets.— 

Whenever the Comptroller has become satisfied, by the protest oi* 
the waiver and admission specified in section fifty-two hundred 
and twentyndx, or by the report provided for in section fifty-two 
hundred and twenty-seven, that any association has refused to 
pay its circulating notes, he may, instead of cancelling its bonds, 
cause so much of them as may be necessary to redeem its outstand- 
ing notes to be sold at public auction in the city of New York, 
after giving thirty days' notice of such sale to the association. 
For any deficiency in the proceeds of all the bonds of an associa* 
tion, when thus sold, to reimburse to the United States the amount 
expended in paying the circulating notes of the association, the 
United States shall have a paramount lien upon all its assets; 
and such deficiency shall be made good out of such assets in 
preference to any and all other claims whatsoever, except the 



Digitized by CjOOQ IC 



96 

neceesaiy costs and expenses of administering the 'same. (Bev. 
Stat U. S. Sec. 5230.) 

§ 103. Sale of Bonds at Private Sale. — The Comptroller may, 
if he deems it for the interest of the United States, sell at priyate 
sale any of the bonds of an association shown to have made default 
in paying its notes, and receive therefor either money or the cir- 
culating notes of the association. But no such bonds shall be sold 
by private sale for less than par, nor for less than the market value 
thereof at the time of sale; and no sales of any such bonds, either 
public or private, shall be complete tmtil the transfer of the 
bonds shall have been made with the formalities prescribed by sec- 
tions fifty-one hundred and sixly-two, fif iy-one hundred and sixty- 
three, and fifty-one hundred and sixty-four. (Bev. Stat. IT. S. 
Sec. 5231.) 

§ IM. Ei^ense of Transporting and Assorting Hotes — Cost of 
Plates. — That each of said associations shall reimburse to the 
Treasury the charges for transportation and the costs for assorting 
such notes; and the associations hereafter organized shall also 
severally reimburse to the Treasury the cost of engraving such 
plates as shall be ordered by each aSBociation respectively; and the 
amount assessed upon each association shall be in proportion to 
the circulation redeemed, and be charged to the fund on deposit 
with the Treasurer. (Act June 20, 1874, Ch. 343, Sec. 3; 18 
Stat L., 124.) 

§ 105. Same Subject.— -That the National banks which shall 
hereafter make deposits of lawful money for the retirement in 
full of their circulation shall, at the time of their deposit, be as- 
sessed for the cost of transporting and redeeming their notes then 
outstanding a sum equal to the average cost of the redemption of 
National bank notes during the preceding year, and shall there- 
upon pay such assessment; and all National banks which have 
heretofore made, or shall hereafter make, deposits of lawful money 
for the reduction of their circulation, shall be assessed and shall 
pay an assessment in the manner specified in section three of the 



Digitized by CjOOQ IC 



»7 

Act approred June twentieth, eighteen hundred and serenly-fonr, 
for the coet of transporting and redeeming their notes redeemed 
from soch deposits subsequently to June thirtieth, eighteen hun- 
dred and eighty-one. (Act Julj 12, 1882, Ch. 290, Sec. 8; 22 
Stat L., 164.)* 

§ 106. BispoiitioA to be Xade of Hotes Bedeemed by Treasurer. 
— ^The Secretary of the Treasury may, from time to time, make 
such r^ulations respecting the disposition to be made of circu- 
lating notes after presentation at the Treasury of the United 
States for payment, and respecting the perpetuation of the evi- 
doice of the payment thereof, as may seem to him proper. (Rer. 
Stat F. S. 6232.) 

Notes or Fahjbd Banks^— This section was orlginaUj part of Section 
47 of tlie Act of June 8, 1864, and bad application only to notes of 
banks in defitult, the bonds of which were forfeited, and which notes 
were redeemed, under a further prorlsion of the same SeetiMi 47 (now 
tSeeUon 5829, Rer. Stat U. a) at the Treasury of the United States. 

GiaxiixoA!!DBS OT DiBTKUOTioif.— ^Tho diQKHdtion to he made of this 
particular class df notes is left to the discretion of the Secretary of 
the Treasury. If Section 6282 as it now stands is construed to apply 
solely to the notes of banks in default redeemed at the Treasury, then 
a eertiflcate of destruction of aU other cltssos of notes redeemed at 
the Treasury, whether of banks in liquidation or df banks retiring cir- 
eolation, must be furnished to the respective associations issuing the 
notes, as the ntt>de of destruction of all other classes of notes Is fixed 
In the various sections df the law regarding the same. (See Section 
(885, R. a U. a; Section 8 of the Act of June 80, 1874; Sections 6 
and 7 of the Act of July 12, 1882, and Section 5184, Rer. Stat U. a 
See Sections 84, 89, 98 and 97.) 

§ 107. Oaneellation of Hotes«— -All notes of National banking 
associations presented at the Treasury of the United States fon 
IMtyment shall, on being paid^ be cancelled. (Bev. Stat IT. S. 
Bee 5283.) 

^This section shoald be read in connection with Section 9, Act of 
June 21, 1917, Section 54 ante, repealing previous requirements that 
Mtntmwm deposits of bonds be maintained by Nationsl banks with the 
U. S. Treasurer. 
7 



Digitized by CjOOQ IC 



98 

This proTlBion is mMlfied m to noteg fit for circulation redeemed 
frotai ttie 6 per cent redemption fund by the Act of June 20, 1874, Sec- 
tion 8» which permits such notes to be returned to the banks for 
reissue. 

§ 108. Mode of Destraetion^— For the maceration of National 
bank notes, United States notes, and other obligations of the 
United States authorized to be destroyed, ten thousand dollars; 
and that all such issues hereafter destroyed may be destroyed by 
maceration instead of burning to ashes, as now provided by law; 
and that so much of sections tweniy-four and foriy-three of the 
National Currency Act as requires National bank notes to be 
burned to ashes is hereby repealed. (Act June 23, 1874, Ch. 455^ 
Sec. 1 ; 18 Stat. L., 206.) 

By Act June 20, 1874, Ch. 348, Sec. 8 (18 Stat U. 8., 124) it is made 
the duty "of the Treasurer, Assistant Treasurers, designated deposit- 
aries, and National bank depositaries of the United States, * * to 
assort and return to the Treasury, for redemption, the notes of such 
National banks as have failed, or gone into voluntary liquidation, for 
the purpose of winding up their affairs." 



Digitized by CjOOQ IC 



CHAPTBE V. 
Bmuultion or ths Bavkiko Businms. 

Section 109. Flaoe of Boiiiieis. 

110. Beeerre Cities — Coitral Beienre Cities. 

111. Bank Betenres. 

112. Bedemption Fond with Treatnrer Not Pert of Be- 

•erre. 
lis. limit of Liability of any Person to Bank. 

114. limit on Total Indebtedness of Banks— Bzoeptions. 

115. Check Not to be Certified Unless Drawer Has 

Amoont Thereof on Deposit 

116. Banks Not to Lend Upon Their Own Stock. 

117. Enforcing Payment of Capital Stock. 

118. Withdrawal of Capital— Dividends— Bad Debts. 

119. Dividends and Surplus Funds. 

120. Circulating Notes Not to be Hypothecated. 

121. Each Bank to Beceive Notes of Other Banks. 

122. Banks Not to Pay out Uncurrent Notes. 

123. Stamping Counterfeit Notes. 

124. List of Shareholders. 

125. Bate of Interest Which Bank M&y Charge. 

126. Penalty for Taking Usurious Interest 

§ 109. Place of Business.— The usual business of each National 
banktng association shall be transacted at an ctBce or banking 
house located in the place specified in its organization certificate. 
(Bev. Stat U. S. Sec. 5190.) 

For the provision authorising National banks having a capital and 
sorplus of 11,000,000 or more to establish branches in for«ign coun- 
tries see Sec 2( of the IMeral Reserve Act pase 304. 

99 



Digitized by CjOOQ IC 



100 

Place of Buanness. — ^ThlB proviBion must be construed reasonably; 
and where a part of the legitimate business of the bank can not be 
transacted at the banking-house it may be done elsewhere. (Mer- 
chants Nat Bank v. State Nat Bank, 10 Wallace, 604.) 

Beanch Banks.— It is settled beyond doubt that a National bank, 
independently oT the National Bank Act, is not under its charter 
authorized to establish a branch bank for the purpose of carrying on 
a general banking business in the place designated in its certificate 
of organization or anywhere in the United States, and furthermore, 
that Section 5190, U. S. R. S., pro^perly construed, restricts the carnring 
on of a general banking business by a National bank to one office or 
banking house in the place designated in the association certificate of 
organization, except in so far as that section is amended by Section 25 
of the Federal Reserve Act, as amended, which permits foreign 
branches under certain cohditions. (See opinion of Attomey-Ctoneral 
regarding Lowry National Bank of Atlanta, Georgia, 29 Op. A. G., 81.) 
And the Solicitor of the Treasury in an opinion rendered July 25, 1910, 
held that a National bank could not establish a branch or agency for 
the purpose of receiving deposits and cashing checks. See also Arm- 
strong V. SeccAid National Bank (38 Fed. Rep., 883.) 

Aabncibs.— There is a clear distinction between a branch bank and 
an agency. (29 Op. Atty. Qem., 81.) A National bank may establish an 
agency for a specific purpose such as dealing in bills of exchange. 
(Bank of Augusta v. Barle, 13 Pet, 519; Bank v. Beach, Fed. Case No. 
2736.) 

§ 110. Besenre Cities— Central Beserve Cities. — The power to 
designate Reserve and Central Reserve cities is now vested in the 
Federal Beserve Board, see section 11 (e) of Federal Beserve Act» 
page 230, and note thereto for a list of the Beserve and Central 
Beserve cities. 

§ 111. Bank Beserres. — '(This subject is now governed by Sec- 
tion 19 of the Federal Beserve Act. See page 294 if.) 

§ 112. Bedemption Fnnd with Treasurer Not Part of Beserre. 

— (Sections two and three of the Act of June 20, 1874, which pro- 
vided that the red^nption fund deposited with the Treasurer 
might be counted as a part of the reserve was repealed by Section 
20 of the Federal Beserve Act. See page 300.) 



Digitized by CjOOQ IC 



101 

§ lis. limit of litUmy of Any Penon to Buk.— The total 
liabilitieB to any association of any person or of any company, cor- 
poration, or firm for money borrowed, including in the liabilities 
of a company or firm the liabilities of the several members thereof, 
shall at no time exceed 10 per centum of the amount of the capital 
stock of such association, actually paid in and unimpaired, and 
10 per centum of its unimpaired surplus fund: Provided, honh 
ever. That (1) the discount of biUs of exchange drawn in good 
faith against actually existing values, including drafts and bills of 
exchange secured by shipping documents conveying or securing 
titie to goods shipped, and including demand obligations when se- 
cured by documents covering commodities in actual process of ship- 
ment, and also including bankers' acceptances of the kinds de- 
scribed in Section 13 of the Federal Reserve Act, (2) the dis- 
count of commercial or business paper actually owned by the per- 
son, company, corporation, or firm negotiating the same, (3) the 
discount of notes secured by shipping documents, warehouse re- 
ceipts, or other such documents conveying or securing titie cover^ 
ing readily marketable nonperishable staples, including live stock, 
when the actual market value of the property securing the obliga- 
tion is not at any time less than 115 per centum of the face 
amount of the n<rbes secured by such documents and when such 
property is fully covered by insurance, and (4) the discount of 
any note or notes secured by not less thaii a like face amount of 
bonds or notes of the United States issued since April 24, 1917, 
or certificates of indebtedness of the United States, shall not be 
considered as money borrowed within the meaning of this section. 
The total liabilities to any association, of any person or of any cor- 
poration, or firm, or company, or the several members thereof 
upon any note or notes purchased or discounted by such associa- 
tion and secured by bonds, notes, or certificates of indebtedness 
as described in (4) hereof shall not exceed (except to the extent 
permitted by rules and r^ulations prescribed by the Comptroller 
of the Currency, with the approval of the Secretary of the Treas- 
ury) 10 per centum of such capital stock and surplus fund of 
such association and the total liabilities to any association of any 
person or of any corporation, or firm, or company, or the several 



Digitized by CjOOQ IC 



103 

members thereof for money borrowed, indnding the liabilities upoiv 
notes secured in the manner described under (3) hereof, except 
transactions (1), (2), and (4), shall not at any time exceed 25 
per centum of the amount of the association's paid-in and unim*^ 
paired capital stock and surplus. The exception made under (3) 
hereof shall not apply to the notes of any one person, corporation 
or firm or company, or the several members thereof for more than 
six months in any consecutive twelve months. (Bey. Stat. U. S. 
Sec. 5200, as amended by Act Jan. 22, 1906; by Sec. 6, Act Sept 
24, 1918, and by Sec. 1, Act Oct 22, 1919.) 

CIRCULAR OF THB COBIFTROrAjBR OF THB CURRBNCT 
OF OCTOBER 26, 1919. 

LoAiraiTo Powers or National BAirKS Uniab tbb AiOBirDicsNT to Sbohoh 
5200» U. S. R. 8., Which Bwoamr Bmcnvs Ooiobb 22, 1919. 

(Section 6200 as set out above is omitted to avoid repetition.) 
The amounts wliich a Naticmal bank may properly lend to any <Aie 
person, company, corporation, or firm (including in the liability of a 
company or firm, the liabilities of the several members thereof) under 
the various clauses of Section 6200, as amionded by the Act o< October 
22, 1919, are stated in terms of the percentage of the paM^9 mnd WHr 
impaired capital Mtoch ana surplus of the lending bank 

Character of loans. 

(A) Accommodation or straight loans, whether or not singto name. 
Loans secured by stocks, bonds, and authorised real estate mortp 

gages. 

(B) "BiUs of exchange drawn in good faith against actuaUy existing 

values." 
The law expressly provides that this phrase shaU also include: 

(a) Drafts and bills of exchange secured by shipping documents 

conveying or securing title to the goods shipped. 

(b) Demand obliffations, when secured by documents covering 

commodities in actual process of shipment, 

(c) Bankers' acceptances of the kinds described In Section 13 

of the Federal Reserve Act. 

(C) Coitaomercial or business paper (of other makers) actuaUy owned 

by the person, company, corporation, or firm negotiating the 



Digitized by CjOOQ IC 



108 

(D) Not«i Metired by ■Mppliic docnmenti, warehonae roc^pu, or 
other such docaments, oonyejing or aecnrlna title oorerina read- 
ily marketable nonperishable ataplee, Indading lire atock. 
No bank may make any loan under (D), howerer, 

(a) Unleea the actual market yalue of the property eecuring the 

obligation is not at any time leea than 115 per cent of 
the face amount of the note, and 

(b) Unleea the property is fully covered by insurance, and in 

no event shall the prlrileae afforded by (D) be exercised 
fbr any one customer for more than six months in any 
consecutire twelve months. 

(B) Notes secured by not less than a like face amount of bonds or 
notes' of the United States issued since April 24, 1917, or by 
certiUcates of indebtedness of the United States. 

(F) Notes secured by United States Government obligations of the 
kinds described under (B), the f^u^e amount of which is at least 
equal to 105 per cent of the amount of the customer's notes. 

Amounts loonodle. 

(A) Maximum limit, 10 per cent of bank's paid-up and unimpaired 

capital and surplus. 

(B) No limit imposed by Uw. 

(C) No limit imposed by law. 

(D) Fifteen per cent of bank's capital and surplus, in addition to the 

amount allowed under (A) ; or if the full amount allowed under 
(A) is not loaned, then the amdunt which may be loaned in the 
manner described under (D) is increased by the loanable amount 
not used under (A). In other words, the amount loaned under 
(A) must never be more than 10 per cent, but the aggregate 
of (A) and (D) may equal, but not exceed, 25 per cent 

(B) Ten per cent of bank's capital and surplus, in addition to the 
amount allowed under (A), or if the full amcrunt allowed under 
(A) is not loaned, then the amount which may be loaned in the 
manner described under (B) is increased by the loanable amount 
not used under (A). In other words, the amount loailed under 
(A) must never be more than 10 per cent, but the aggregate of 
(A) and (B) may equal, but not exceed, 20 per cent 



Digitized by CjOOQ IC 



104 

(F) No limit, hut tM$ privUeffe, under reffuUUiom of the OemptroUer 
of the Currency, expiret December Zl, 1920. 

Some examples of what a National Umk vwy lend oX any one time ta 
any one customer under the amendment to Section 6200, of 
October 22, 1919, expressed in terms of percentage of the banl^s 
capital and surplus. 

Bx. 1 Bhc 2 Bz. 3 IBSxA 

(A) Accommodation or Btraii^t loans, or loans 

secured by shares of stock, bonds, or au- 
thorized real estate mortgages 10% 5% 5% 

(D) Notes secured by warehouse receipts, etc. 15% 20% 15% 26% 

(B) Notes secured by a like face amcKint of 

Government obligations 10% 10% 16% 10% 

Total 86% 26% 86% 86% 

(B) Bills of exchange drawn against actually 

existing values. . . . ^ No limit imposed by law. 

(C) Commercial or business peeper Do. 

(F) Notes secured by at least 106 per cent of 

United States Government obligations. . . Do. 

The time within which lolms secured by Government obligations may 
be granted in excess of 10 per cent of the capital and surplus has been 
extended from January 1, 1920, to December 31, 1920. 

Section 6202, as amended by the Act effective October 22, 1919, per- 
mits a National bank to be liable without limit as indorser on accepted 
bills of exchange payable abroad actually owned by the indorsing bank 
and discounted at home or abroad. 

The Comptroller rules that the surplus of a National bank referred 
to above does not include "undivided profits," and that therefbre the 
latter can not be included as a basis fdr loans unless carried to the 
surplus fund by a vote of the Directors. 

iNixiTT OF RESTBicnoN. — The general purpose of this section is ob- 
vious. It is to prohibit any bank from hazarding a large amount of its 
funds in loans to any one person, and to require such a distribution of 
the risks among a large number of persons that the failure of any one 
or two customers will not so seriously involve the bank as to endanger 
its solvency. But the transaction of the banks would be unduly ham- 
pered if this rule applied in the case of all discounts, and so greater 
latitude is permitted in certain cases and no limitations imposed la 
others. 



Digitized by CjOOQ IC 



105 

When AmjCAStM, — Numeroiui QQestioni arise under thli section 
whloh cause bank officers niiidi perplexitj. The qoestton that should 
always be answered is, who Is the borrower? 1. e^ Who procured 
the nuAiey from the bank? The llabllltlee of a person to a bank as 
indorser, guarantor or surety should not be considered in computing 
the ten per cent limit unless such person actually negotiated the 
loan with the bank and reoeiyed the proceeds derived therefrom. The 
Comptn^er of the Currency holds that the liabilities of an accom- 
modation maker should be included in estimating the ten per cent, 
limit The legality of this position, however, is doubtful as such maker 
incurs the liability for the accommodation of another and, as he does 
not reeeive the proceeds, would not seem to be the borrower. 

But it is to be remembered that the question, who is the borrower? 
Is not always to be determined from the positions of the parties as 
they appear on the paper. The borrower may be the maker, or he may 
be an indorser. It is the person who negotiates the paper with the 
bank, who procures the money upon it, that is the borrower, irrespee- 
tive of whether he appears thereon as indorser or guarantor or maker. 

Another questioh which often arises is, When one person is a partner 
in two tIrmB, will a loan of the maximum amount to one of these firms 
preclude a loan to the other firm? The Comptroller of the Currency 
holds that the liability of the common partner is to be deemed the 
liability of each of the two firms. But as to the correctness of this 
ruling there may be some doubt It is the individual indebtedness of 
the different parties which is mentioned in the statute. Nothing 
Is said about including the liabilities of any other partnership, nor is 
such an intention necessarily to be inferred. As each partner is liable 
for all the debts of the firm, it is reasonable that his indiridual lisr 
billty to the bank should be Included in the liabilities of the partner- 
ship; but the fact that there is a common partner will n<yt make one 
partnership liable for the debts of the other, and there would, there- 
fore, be no reason why the liabilities of one firm should affect the right 
of the bank to make loans to the other firm. 

SiATB Bank With Beakohes Co wvairi ' BD Into Nationai..— There Is no 
restriction oT law prohibiting the Comptroller of the Currency tram 
permitting a National bank, having a lawfully established branch, to 
make loans at either place, based on the total amount of the capi- 
talization and surplus of the corporation. The only restriction in law 
in that respect is that the aggregate loans made by the mother bank 
and all of its branches shall not at any olie tiniie exceed the limitations 
expressed in Section 6200 Revised Statues, as amended. (27 Op. Atty. 
Gen., 601.) 



Digitized by CjOOQ IC 



106 

Penaltt.— The cmly penalty tor rlolatioii of this fection ia the Ubt 
bility which the bank Incars of a forfeiture of its franchises, as pre- 
scribed in Sec. 6239, Rey. Stat U. S., and though the loan is in ezoees 
of the amount here prescribed, the bank can recover the full amount 
from the borrower. (Gold Mining Company v, Aocky Mountain Nat. 
Bank, 96 U. S., 640; Corcoran v. Batchelder, 147 Mass., 641. CHare v. 
Second Nat. Bank of TitusrUle, 77 Pa. St, 96; Wyman v. Citizens' Nat 
Bank of FaribauU, 29 Fed. Rep^ 734; Smith v. Pirst Nat Bank, 46 
Neb., 444.) And a court of equity will not enjoin the bank from trans- 
ferring to innocent third persons notes and securities, on the ground 
that the notes represent part of a loan made in excess of 10 per cent 
of the capital of the bank. (Elder v. First Nat Bank of Ottawa, 12 
Kans., 238.) Where a State bank loans to one person an amount in: 
excess of one-tenth of its capital, and is afterwards conyerted into a 
National bank, it may, after conversion, extend tne time tor payment 
without violating this section. (Allen v. First Nat Bank of Xenia, 23 
Ohio St, 97.) A chattel mortgage is not void because the advances 
made exceed one-tenth of the capital of the bank. (The Seattle, 170 
Fed. Rep., 284.) 

Bills of Bxchanob Db^wn in Qood Faith Aoaiust Actuallt Bx- 
isTiifo Valuxs. — ^In determining whether a certain transaction amounts 
to a discount of such paper or should be deemed a loan within the 
10 per cent limitation, the substance rather than the form of the 
transaction is the test (Consequently, bills secured by shipping docu- 
ments, or by the pledge of goods actually sold, may be discounted by 
member banks, before acceptance, without limitation as far as this 
section is cotncemed. If, however, such a bill should first be accepted 
by the drawee who then discounts it with a member bank, the transac- 
tion would be subject to the limitations imposed by the section, 
though the paper is in the form of commercial or business paper. As 
a matter of fact however, the latter transaction is a straight loan. 
The acceptance of the bill by the drawee discharges the drawer and 
while the instrument remains a bill oT exchange in form, it ceases to 
be such in fact The obligation of the drawee is now primary, whereas 
prior to his acceptance it was secondary or collateral, and where the 
bank discounts the accepted paper it is in effect making a direct loan 
to the drawee on his own obligation. 

So also where a bank purchases its cfwn acceptance under authority 
of Section 13 of the Federal Reserve Act it is in effect merely using 
its funds to anticipate the payment of a liability which its customer 
has agreed to pay at a later day and even though the bill were secured 
by shipping documents, etc, the security is only collateral, and the 
bank has made a loan of its funds to its customer and the loan is sub- 



Digitized by CjOOQ IC 



107 

jeet to the Umltttions of Um teetSoii. (QpiniOA oC OooaiH of Board, 
Dec 1, 1916.) 

CoMMxacuJL OB Busmns Papb.— If for any re M o n it ia not doomed 
practicable to diaooimt bOla of ezchance as Indloated, adranoeo may 
be made on "commercial or busineM paper" by banks discounting tbe 
notes giyen in payment for cotton, grain, or other products. Instead 
of advancing motiey in excess of the limit to any party for the pur- 
chase of cotton, grain, etc, the purchaser should be required to give 
his notes in payment for the commodity to the dealers from whom it 
is purchased, and such notes may be discounted for the dealers when 
indorsed by them and accompanied by warebduse receipts assigned 
to the bank. This would be practically an advance to the purchaser, 
and at the same time come within the exception relative to the dis- 
count of commercial or business paper. 

There would seem to be no good reason why the dealers shotuld re- 
fuse to indorse such notes as the bank would hold the warehouse 
receipts until the purchaser paid his notes, which he could do by 
drawing a bill of exchange when ready to make a shipment 

These transactions should not be confused with the purchase or 
discount of a bank's own acceptance. In the latter case the bank 
has actually utilised its own funds in purchasing the rights of the 
holder of the acceptance. But where a bank accepts a draft drawn 
against it and this acceptance is discounted with a third partf, the 
customer procuring the acceptance has not borrowed the money, but 
only the credit, of the accepting bank and the limitaticihs of the 
section does not apply to the bank in so dealing with the customer. 
8o also when a biU of exchange has been accepted by the drawee, and 
the shipping documents have been removed, though the direct obligap 
tion of the drawee to pay such bill at maturity may be said to be 
subsUtuted for the "actual value" against which the biU was originaUy 
drawn, nevertheless, when discounted by a bona fide owner for value, 
its discount would not be subject to the limitations of the section, 
since it would still come within the classification of ''commercial or 
business paper actually owned by the person negotiating the same." 
(Opinion of Counsel of Board, Dec. 1, 1910.) 

§ 114. limitation on Total Lidebtedness of National Banks— 
Ezceptioiis. — No National banking association shall at any time 
be indebted^ or in any way liable, to an amount exceeding fhe 
amount of its capital stock at such time actually paid in and 



Digitized by CjOOQ IC 



108 

Temaining undiminifihed by losses or otherwise^ except on account 
of demands of the nature following: 

First Notes of circulation. 

Second. Moneys deposited with or collected by the association. 

Third. Bills of exchange or drafts drawn against money actually 
on deposit to the credit of the association, or due thereto. 

Fourth. Liabilities to the stockholders of the association for 
dividends and reserve profits. 

Fifth. Liabilities incurred under the provisions of the Federal 
Reserve Act 

Sixth. Liabilities incurred under the provisions of the War 
Finance Corporation Act 

Seventh. Liabilities created by the indorsement of accepted bills 
of exchange payable abroad actually owned by the indorsing bank 
and discounted at home or abroad. (Hev. Stat. U. S. Sec. 5202, 
as amended by Sec. 13, Act Dec. 23, 1913; Act Sept 7, 1916; 
Sec. 20, Act April 5, 1918, and Sec. 2, Act Oct 22, 1919.) 

A National bank may become indebted upon any contract within the 
scope of its powers to the full amount of its capital stock then actuaUy 
paid in, notwithstanding that it has notes of circulation, deposits, 
special funds subject to draft, or funds for the payment of declared 
dividends to stockholders, which either alone or in the aggregate equal 
its paid-in capital stock. (Weber v, Spokane Nat Bank, 64 I^ed. Rep., 
208.) The fact that an indebtedness of a National bank was incurred 
in violation of Rev. Stat U. S., 5202, is no defense to the bank or its 
receiver. {Id, reversing the decision of the United States Circuit 
€k>urt in the same case. See 60 Fed. Rep., 735.) 

§ 115. Checks Not to be Certiiled TTnleu Drawer Has Amonat 
Thereof on Deposit. — It shall be unlawful for any officer, director, 
agent, or employee of any Federal reserve bank, or of any mem- 
ber bank as defined in the Act of December twenty-tiiird, nine- 
teen hundred and thirteen, known as the Federal Beserve Act, 
to certify any check drawn upon such Federal reserve bank or 
member bank unless the person, firm, or corporation drawing 
the check has on deposit with such Federal reserve bank or mem- 
ber bank, at the times such check is certified, an amount of 
money not less than the amount specified in such check. Any 



Digitized by CjOOQ IC 



109 

ehedc so certified bj a duly authorised dBoer, directory agent, 
or employee shall be a good and valid obligation against snch 
Federal reserve bank or member bank ; but the act of any oflScer, 
director, agent, or employee of any such Federal reserve bank 
or member bank in violation of Uiis section shall, in the discre- 
tion of the BMeral Beserve Board, subject such Federal reserve 
bank to the penalties imposed by section deven, subsection (h), 
of the Federal Beserve Act, and shall subject such member bank 
if a national bank to the liabilities and proceedings on the part 
of the Comptroller of the Curraicy provided for in section fifty- 
two hundred and thirty-four, Bevised Statutes, and shall, in the 
discretion of the Federal Beserve Board, subject any other mem- 
ber bank to the penalties imposed by section nine of said Federal 
Beserve Act for the violation of any of the provisions of said Act 
(Bev. Stat U. S. Sec. 5208, as amended by Act Sept 26, 1918.) 

liiABnJTT FOB CEBTDiCATioir.^-The bank will be liable upon ths oer- 
tlflcation, thou^ it is made in violation of this section. (Thompson 
V. St. Nicholas Nat Bank, 146 U. S., 240, s. c 113 N. Y., 325.) See 
also United States t;. Heinxe, 161 Fed. Rep., 425. 

§ 116. Banks Hot to Lend Upon Their Own Stock.— Ko asso- 
ciation shall make any loan or discount on the security of the 
shares of its own capital stock, nor be the purchaser or holder of 
any such shares, unless such security or purchase shall be neces^ 
saiy to prevent loss upon a debt previously contracted in good 
faith ; and stock so purchased or acquired shall^ within six months 
from the time of its purchase, be sold or disposed of at public or 
private sale; or, in default thereof, a receiver may be appointed to 
dose up the business of the association, according to section fifty- 
two hundred and thirty-four. (Bev. Stat IT. S. Sec. 5201.) 

Baitk Can Not Aoquibb Lmr.— A National bank can not acquire a 
lien on its own stock in the hands of its stockholders, and any pro- 
vision in the articles 6t association or by-laws, or in the certificates 
of stock prohibiting a transfer until the liability of the stockholder 
to the bank is paid, is whoUy void. (Bank v. Lanier, 11 WalL, 869; 
Ballard f^. National Bank, 18 Wall., 589; Third Nat Bank v. BufCalo 
German Ins. Co., 193 U. S., 581; s. c, 162 N. T., 163.) A provision of 
this character in the certificate ot stock does not affect the rights ot 



Digitized by CjOOQ IC 



110 

a transferee, or operate as notice to him, since the provision is wholly 
void. (Third Nat Bank v, Bulfalo German Insurance Company, 193 
U. S., 581.) But when a stockholder has pledged his stock to the 
bank, he can dispute the validity of such pledge only while the con- 
tract is executory, and the security still subsists in the possession of 
the bank; if the stock has been sold, and the proceeds a]H>lied to the 
payment of the debt, the court will not aid him to recover the value 
of his stock. (National Bank of Xenia v. Stewart, 107 U. S., 676.) 
Where a bank takes a pledge of its own stock to secure a deposit made 
with another bank, this is a lending upon the security of its stock 
within the meaning of this section. (Bank v, Lanier, 11 Wall., 369.) 
So this section forbids the bank to hdld the stock of the shareholder 
to secure an indebtedness due from him to it on account of collections 
made for its account (Conklin v. Second Nat Bank, 45 N. T., 655.) 
(But this section will not prevent a bank frotao. holding a cash dividend 
as pledged for the indebtedness of the shareholder to the bank. (Hager 
V, Union Nat. Bank, 63 Me., 59.) Nor does it forbid the shares of the 
stockholder to be attached for his indebtedness to the bank. (Id,) 

PuBOHASB Not Void, But Only Voidable. — ^Inasmuch as no penalty 
is imposed either upcfn the bank or the borrower for a violation of 
this section, such violation may not be urged against the validity of 
the transaction by any one except the (government, at least unless the 
objection was made before the contract was executed or while the 
security was in the hands of the bank. (Walden Nat Bank v. Birch, 
130 N. Y., 221.) Nor is the statute available as a defense to one who 
has bought the stock of the bank, when sued by the receiver for an 
assessment upon the same. (Lantry v. Wallace, 182 U. S., 536; Burrows 
t;. Niblock, 84 Fed. Rep., 111.) 

Bank Mat TaANSFEs Title.— As a loan made by a National bank 
upon the security of its own stock is not void, but otily voidable, the 
bank upon being compiled to take the stock, may transfer a good 
title to the purchaser. (Barron i^. McKinnon, 196 Fed. Rep., 933; First 
Nat Bank v. Lanz, 202 Fed. Rep., 117.) 

PuBOHASE A2n> Saub Bt Offigebs of Bank. — ^The sale by an officer 
to himself of the st<^k of the bank owned by the bank may be ratified 
by the bank or its legal representative; but a sale by himself to the 
bank of its own stock, where he acts in the double capacity of seller 
and buyer, cannot be ratified when the purchase of the stock by the 
bank is not necessary to prevent loss upon a debt previously con- 
tracted. (Bundy i;. Jackson, 24 Fed. Rep., 1628.) And where a Na- 
tional bank purchased shares of its own stock, and divided them 
among its directors, the transaction was held void, and the direoton 



Digitized by CjOOQ IC 



Ill 

to haya aoqnired no UUe. (liejreni v. Valley Nat Bank, Fed. Caee No. 
9619.) 



SiooK or Oram NAnoHAL Bakk.— This eection doea not forMd a 
National bank to make a lolui npon the aecnrltT ot the stock of an- 
other National bank. (National Bank v. Caae, »6 U. eu 628.) But it 
may not purchaae audi stock on speculation. (Metropolitan Trust 
Company v. McKinnon, 172 Fed. Hep., 846.) 



§ 117. Enforeing Payment of Capital Stock. — Erery associa- 
tion which shall have failed to pay up its capital stock, as required 
by law^ and every association whose capital stock shall have become 
impaired by losses or otherwise^ shall, within three months after 
receiving notice thereof from the (Comptroller of the Currency, pay 
the deficiency in the capital stock, by assessment upon the share- 
holders pro rata for the amount of capital stock held by each; 
and the Treasurer of the United States shall withhold the interest 
npon all bonds held by him in trust for any such association, upon 
notification from the Comptroller of the Currency, until other- 
wise notified by him. If any such association shall fail to pay up 
its capital stock, and shall refuse to go into liquidation, as pro- 
vided by law, for three months after receiving notice from the 
Comptroller, a receiver may be appointed to close up the business 
of the association, according to the provisions of section fifty-two 
hundred and thirty-four. And provided. That if any shareholder 
or shareholders of such bank shall neglect or refuse, after three 
months' notice, to pay the assessment, as provided in this section, 
it shall be the duty of the board of directors to cause a sufficient 
amount of the capital stock of such shareholder or shareholders to 
be sold at pnblic auction (after thirty days' notice shall be given 
by posting snch notice of sale in the af&ce of the bank, and by 
publishing such notice in a newspaper of the city or town in 
which the bank is located, or in a newspaper published nearest 
thereto), to make good the deficiency; and the balance, if any, 
shall be returned to such delinquent shareholder or shareholders. 
(Bev. Stat. U. S. 5205, as amended by Act June 30, 1876, Ch. 
166, Sec. 4; 19 Stat L., 64.) 



Digitized by CjOOQ IC 



112 

Decision of the CoMFncoxsB Conoldsivs.— Ttie decision of tlus 
Comptroller that the capital is impaired is condusiye. (Thomas i^. 
Gilbert, 101 Pac Rep. (Oregon), 393.) The Comptn^er has discre- 
tionary power to withdraw an assessment on shareholders before it 
is paid or when partly paid and levy a subseciuent assessment (Kor- 
bly V, Springfield Inst, 245 U. S., 330.) 

Assessment bt Shabkhoij)Bb». — The directors have no autliority to 
make an assessment but a miseting ofi the stockholders must be called 
imd they must lay the assessment on themselves. The assessment 
however, is enforceable only by subjecting the stock of the persoiiB 
refusing to pay, and no action will lie against a stockholder per- 
sonally. (Commercial Bank v. Welnhard, 192 U. S., 248; s. c, 41 
Oregon, 359; Hulitt v. Bell, 85 Fed. Rep., 98.) 

§ 118. Withdrawal of Capital— Dividends— Bad Debts.-^No 

association, or any member thereof, shall, during the time it shall 
continue its banking operations, withdraw, or permit to be with- 
drawn, either in the form of dividends or otherwise, any portion of 
its capitaL If losses have at any time been sustained by any such 
association, equal to or exceeding its imdivided profits then on 
hand^ no dividend shall be made; and no dividend shall ever be 
made by any association, while it continues its banking operations, 
to an amount greater than its net profits then on hand, deducting 
therefrom its losses and bad debts. All debts due to any associa- 
tions, on which interest is past due and unpaid for a period of 
six months, unless the same are well secured, and in process of 
collection, shall be considered bad debts within the meaning of 
this section. But nothing in this section shall prevent the re- 
duction of the capital stock of the association imder section fifty- 
one hundred and forty-three. (Rev. Stat. TJ. S. Sec. 5204.) 

To Peevent Impauiment. — This section is intended to guard against 
any impairment of the paid-in capital, especially against that insidiota 
form of impairment so dangerous to stockholders — ^its withdrawal ti^ 
the shape of dividends. 

UNDivmED Pboftts. — Net profits, both in this section and in Section. 
5199, seem to mean profits other than legal surplus which remain at 
the end of each six months after deducting all expenses, loeseSy and 
had debts. 



Digitized by CjOOQ IC 



118 

Bad DBTB.~-Tlie deflnltton of bad debts is as plain as can be made 
of a thing so diffloolt to define. There is one positire sign, ris.. In* 
terest past due and unpaid for six months, and two quaHflcations; 
that Is, even if Interest is due and unpaid for six months, they are 
still not bad debts, if, first, thej are w^ secured, and, second, in 
process oT collectl<m. The indeilniteness of this definition consists in 
the difterence of opinion which may arise as to security. 

§ 119. IMyidends and Surplus Funds. — The directors of any 
association may, semi-annuallyy declare a dividend of so much of 
the net profits of the association as they shall judge expedient; 
but each association shall, before the declaration of a dividend, 
carry one-tenth part of its net profits of the preceding half year 
to its surplus fund until the same shall amount to twenty per 
centum of its capital stock. (Rer. Stat U. S. Sec. 5199.) 

Dividend Pkbiods. — ^This section is permissive, and it is doubtful if 
under it any other than semi-annual dividends are strictly legaL Still 
some banks declare quarterly and a few monthly and bi-monthly 
dividends. 

SuBPLus PcTND.— The surplus fund provided for in this section up to 
twenty per cent, of capital must be maintained. Any amount in ex- 
may be distributed in dividends. 



'WteNOFUL RsrusAL TO DxcLAiE DiviDBiTDS.— ^Whers the earnings prop- 
erly applicable to a dividend are ample for such purpose, and the 
directors, or a majority of them, acting in bad faith and without 
reasonable cause, refuse to declare a dividend, the courts will inter- 
pose on behalf of those stockholders who otherwise would be without 
remedy, and require the directdrs to make a dividend of a reasonable 
amount (Hiscock v. Lacy, 9 Misc. (N. T.)» 578.) An action for this 
purpose may be maintained in a state court (Id.) 

BuiT TO RxoovKB IiXBSAL DivmsNDS. — ^Tho Receiver of an insolvent 
National bank may maintain a suit in equity against the shareholders 
to recover dividends unlawfully paid to them out of the capital stock 
when the bank has earned no net profit, and is in fact insolvent (Hay- 
dw V, Thompson, 71 Fed. Rep., 60.) In such case the remedies pro- 
vided by the National Bank Act are not exclusive, and no special or- 
der of the Comptroller of the Currency is necessary to enable the re- 
ceiver to bring suit {Id,) 
8 



Digitized by CjOOQ IC 



114 

§ 120. Ciroiilatiiig Votes Hot to Bo ^pothooatod.— No asso- 
ciation shall^ either directly or indirectly, pledge or hypothecate 
any of its notes of circulation^ for the purpose of procuring money 
to be paid in on its ci^ital stock, or to be used in its banking opera- 
tions, or otherwise; nor shall any association use its circulating 
notes, or any part thereof, in any manner or form, to create or in- 
crease its capital stock. (Bev. Stat. U. S. Sec. 5203.) 

Notes of circulation are to be issued by the bank in ordinary course 
of business. 

§ 121. Eaoh Bank to Beceive Votes of Other Banks.— Every Na- 
tional banking association formed or existing under this Titie shall 
take and receive at par, for any debt or liability to it, any and all 
notes or bills issued by any lawfully organized National banking 
association. (Bev. Stat U. S. Sec. 6196.) 

By Act July 12, 1882, Gh. 260, Sec 12, it is provided that no National 
bank shaU be a member of any clearing-house in which gold and silver 
certificates are not receiveable in settlement of clearing-house balances, 
and that such certificates may be counted as a part ot the bank's law- 
ful reserve. See also Act March U, 1900, Ch. 41, Sec 6; 31 Stat U. 
S., 48. 

§ 122. Banks BTot to Fay Out TTncurrent Notes. — Nb associa- 
tion shall at any time pay out on loans or discounts^ or in pur- 
chasing drafts or bills of exchange, or in payment of deposits, 
or in any other mode pay or put into circulation the notes of any 
bank or banking association which are not, at any such time, re- 
ceivable at par, on deposit, and in payment of debts by the asso- 
ciation so paying out or circulating such notes; nor shall any 
association knowingly pay or put in circulation any notes issued by 
any bank or banking association which at the time of such paying 
out or putting in circulation is not redeeming its circulating notes 
in lawful money of the United States. (Rev. Stat. TJ. S. Sec. 
6206.) 

This section was inserted in the law at a time when there was still 
a large amount of State bank notes in circulation, and it had reference 



Digitized by CjOOQ IC 



115 

to th6M State btak BOtM m wM m to tb« notot of Nmtloiua baaklnc 
aasodatioiit. 

§ 18S. Staapiiiff Connterfeit Votaf.— That all United States 
(rfScers charged with the receipt or diabnrsements of public moneys, 
and all officers of National banks, shall stamp or write in plain 
letters the word ^^counterfeit,** "altered,*' or '^worthless,** npon 
all frandnlent notes issued in the form of, and intended to circu- 
late as monej which shall be pres^ted at their places of business ; 
and if such officers shall wrongfully stamp any genuine note of 
the United States, or of the National banks, they shall, upon 
inresentatioii, redeem sndi notes at flie face yalue thereof. (Act 
June 30, 1876, Ch. 156, Sec. 5; 19 Stat L., 63.) 

§ 184. list of Shareliolden. — The president and cashier of every 
National banking association shall cause to be kept at all times 
a full and correct list of the names and residences of all the share- 
holders in the association, and the number of shares held by each, 
in the office where its business is transacted. Such list shall be 
subject to the inspection of all the shareholders and creditors of 
the association, and the officers authorized to assess taxes imder 
State authority, during business hours of each day in which busi- 
ness may be l^ally transacted. A copy of such list, on the first 
Monday of Juty of each year, yerified by the oath of such presi* 
d^t or cashier, shall be transmitted to the Comptroller of the 
Currency. (Bev. Stat. U. S. Sec. 6210.) 

Blanks for this list are sent to all banks from the Comptro/ller's office 
each year, in time to comble the bank to make and send the list 

§ 125. Bate of Literest Which Bank May Charge. — Any asso- 
ciation may tak^ receive reserve, and charge on any loan or 
discount made, or upon any note, bill of exchange, or other evi- 
dences of debt, interest at the rate allowed by the laws of the 
State, Territory, or district where the bank is located, and no 
more, except that where by the laws of any State a difFer^it rate 
is limited for banks of issue organized under State laws, the rate 
80 limited shall be allowed for associations organized or existing 



Digitized by CjOOQ IC 



116 

in any etich State under this Title. When no rate is fixed by the 
laws of the State, or Territory, or district, the bank may take, 
receive, reserve, or charge a rate not exceeding seven per centum, 
and such interest may be taken in advance, reckoning the days 
from which the note, bill, or other evidence of debt has to run. 
And the purchase, discount, or sale of a bona-fide bill of exchange, 
payable at another place than the place of such purchase, dis- 
count, or sale, at not more than the current rate of exchange for 
sight-drafts in addition to the interest, shall not be considered as 
taking or receiving a greater rate of interest (Eev. Stat XJ. S. 
Sec. 5197.) 

State Rate LnnT. — ^Thls section aUows National banks to charge 
the rate of interest aUowed by the State to natural persons generaUy, 
-and a higher rate if State banks of issue are authorized to charge a 
higher rate. (Tiffany v. National Bank, 18 Wallace, 409.) Though 
the consequences of acceptance of usurious interest by a National 
bank and the penalties to be enforced are to be determined by the 
prcMslons of the National Banking Act, the ascertainment of the rate 
of interest aUowable is to be according to the State law. (Fanners', etc.. 
Bank v. Dearing, 91 U. S., 29, 32; Haseltine v. Bank, 183 U. S., 132, 
134.) ild.) 

Gknkbal State Rate CIovebnb.— >But it is the rate of interest allowed 
to the banks of the State generally that a National bank may charge; 
and the fact that a few of the State banks are specially authorized to 
take a higher rate does not warrant the National banks in doing the 
samie. (Gruber i;. First National Bank, 87 Pa. St, 468. But see First 
National Bank of Mount Pleasant v, Tinstman, Fed. Case No. 4805.) 
Nor is it to be understood that whatever by the laws of the State is 
lawful for natural persons in acquiring title to negotiable paper is 
lawful foV National banks. (National Bank v. Johnson, 104 U. S., 
271.) Thus, though the State law fixes no limit to the rate which 
natural persons may take for the discount or purchase of business 
paper, this does not authorize the National banks to discount such 
paper at higher than the legal rate. (Johnson v. National Bank of 
GloversviUe, 74 N. T., 329; affirmed in National Bank i;. Johnson, 104 
U. S., 271.) 

Seven Peb Gent. Limit. — ^And where the State law does not limit 
the rate of interest which may be charged on loans to corporations, a 
National bank located in that State can not charge more than seven 



Digitized by CjOOQ IC 



117 

per eeat on tach Unuis. {In re Wild, FM. C«ie No. 417S, 11 Blatob- 
ford, 24S.) But If the statutes of the State expressly authorised 
iMutles to contract for any rate of Interest National banks mar do 
Ukewlse, and are not. In such case, limited to seyen per cent (Daggs 
i;. Fhcenlz Bank, 177 U. S., 549; Hinds v. Marmelejo, 60 CaL, 229; 
National Bank v, Bruhn, 64 Tex., 671; Rockwell v. Farmers' National 
Bank, 4 Colo. App., 662; Wolverton v. Exchange Nat Bank, 11 Wash., 
94.) Where a State statute fixes a certain rate as the legal rate, but 
authorizes parties to agree In writing for a higher rate, the National 
banks are permitted to charge such higher rate hj written agreement. 
(WUey V. Starbuck, 44 Ind., 298; Newell v, NaUonal Bank of Somer- 
set, 12 Bush (K7.), 67.) A National bank in Mississippi Is not al- 
lowed to retain Interest in adyance, but can charge Interest only on 
the sum actually loaned. (Timberlake v. First National Bank, 48 Fed. 
Rep., 281.) 

Attsisy i N T AS TO TiMX or BNmnia Cbxdit.— The bank and its cus- 
tomer have the right to agree as to the time of entering credits, and 
if such agreement is made in good faith tor equalize the interest on 
different items, and not for the purpose of receiving illegal Interest, 
it Is not a violation of the law. (Timberlake v. First National Bank, 
48 Fed. Rep., 28L) (/d.) 

Application or Payments.— Where payments are made generally to 
a National bank on a promissory note which Include unlawful interest, 
they will be i^yplied on the principal. (Hall v. First Nat. Bank of Fair- 
field, 80 Neb., 94; Citizens' Nat Bank v. Forman's Assignee, 111 Ky., 
206.) The fact that the payments made by the debtor have been ap- 
plied by the bank on its books to Interest as such does not authorise 
the presumption that the debtor so applied them, where he had no 
access to the books, and no knowledge of the application made by 
the bank. (Second Nat Bank of Richmond v. Fitspatrick, 111 Ky., 
228.) 

PuBCHASB or Dbaits.— In a case in the United States Circuit 0>urt 
of Appeals it was held that where a National bank purchoies drafts 
at a rate of discount larger than the rate of interest allowed by the 
law of the State, this will be usury. (Danforth v. National State 
Bank, 48 Fed. Rep., 271.) Where the maximum rate of interest al- 
lowed by the State to be taken or reserved is eight per cent per an- 
num, a National bank within the State may discount notes and re- 
serve interest at the rate of eight per cent per annum upon the faoe 
of the notes. (Brans v. National Bank of Savannah, U. S. Sup. Ct, 
Oct Term, 1919.) 



Digitized by CjOOQ IC 



118 

UsuBT Paid bt Oobpoeations.— The inhlMtioii eonUlned in this Mo- 
tion is general and forbids tlie taking of nanrions interest from an 
urtiflcial, as well as from a natural, person* (Albion Bank v. Mont- 
gomery, 54 Neb., 681.) 

Pboiosb of Cashisi to Pat Usubious Intebest. — The promise of the 
cashier to voj interest npon a deposit at an usurious rate will not 
bind the bank; but the bank would be bound to return the amount 
actually received by it (Hansen v. Heard, 69 N. H., 190.) 

Plea of Usxtbt bt National Bank — State Statute.— A State statute 
providing that corporations shall not plead usury implies to National 
banks. (Binghamton Trust Company v. Anten, 68 Ark., 299.) 

§ 126. Penalty for Taking ITsniioni Literest. — The taking, re- 
ceiving, reserving, or charging a rate of interest greater than is 
allowed by the preceding section, when knowingly done, shall be 
deemed a forfeiture of the entire interest which the note, bill, 
or other evidence of debt carries with it> or which has been agreed 
to be paid thereon. In case the greater rate of interest has been 
paid, the person by whom it has been paid, or his legal representa- 
tives, may recover back, in an action in the nature of an action 
of debt, twice the amount of the interest thus paid from the asso- 
ciation taking or receiving the same; provided such action is com- 
menced within two years from the time the usurious transaction 
occurred. (Bev. Stat. TJ. S. Sec. 5198.) 

Intent <mp the Law.— The Supreme Court of the United States has 
analyzed this section as follows: "Two categories are thus defined, 
and the consequences denounced. (1) Where illegal interest has been 
knowingly stipulated for, hut not paid, then only the sum lent, without 
interest, can be recovered. (2) Where such illegal interest ha$ heen 
paid, then twice the amount so paid can be recovered in a penal action 
of debt, or suit in the nature of such action, against the offending 
bank, brought by the persons paying the same, or their legal repre- 
sentatives." (Bamet v. Muncie Nat. Bank, 98 U. S., 855.) 

REBfEDT Where Aoiion is bt the Bank. — Where the bank sues to re- 
cover the loan, it can not, if tjiere has been usury, recover any interest 
at all, but only the principal of the loan. (Bamet v, Muncie N. Bk., 
98 U. S., 855.) Nor can it meet the plea of usury by electing to remit 
the excessive interest (Citizens' N. Bk. t;. Donnel, 195 U. S., 369.) 



Digitized by CjOOQ IC 



119 

But the defendant, if lie hit paid the nmrloas intereit, ean not vtM 
hlnwelf of f nch paymsnt m » set-ott or eonnter claim against the 
principal of the loan sued On; he must bring a separate action therefbr. 
(Bamet v. Munde N. Bk^ 98 U. a, 865; Haseltine v. Central N. B1l« 
183 U. a, 182; Peterboroas^ N. Bk. v. Childs, 133 N. T., 248; Bills v. 
First N. Bk. of Olney, 11 IlL App., 276; R4MacweU v. Farmers' N. Bk^ 
4 Ck>lo. App., 662; Hoggin v. Citizens' N. B1l« 6 Tez. Cir. App., 38; 
Norfolk N. Bk. v, Schwenk, 46 Neb., 881; Ifarion N. Bk« v. Thomnson, 
101 Kj., 277; First N. Bk. v. Hunter, 109 Tenn., 91; Cos v. Beck. 83 
Fed. Rep., 269; Merchants' Nat Bank v. Sharker, 64 Ore., 82; Bank of 
Weston V. Lynch, 69 W. Va., 333.) And usurious interest paid on re- 
newing a series of notes can not, in an action by the bank on the last 
of them, be applied in satisfaction of the debt (Driesbach v. National 
Bank, 104 U. 8., 62; Charieston Nat. Bank v. Bradford, 61 W. Va., 266.) 

No Statdts of Limitations Whob AcnoK is bt Bank. — Where a 
National bank sues upon an usurious contract the debtor may always 
plead usury, for in such an action there is nd statute of limitations. 
(McCarthy v. First Nat Bank, 223 U. a, 493.) The two years men- 
tioned in Section 6198 Rev. Stat applies only to actions brous^t against 
a bank to recorer the penalty prescribed by that section. (Id.) 

What Intebbst FaaFUiU) I ntbbkst Avmt Hatctbttt.— Where the 
instrument carries with it illegal interest, the whole interest is for- 
feited, and not merely that which the party borrowing may agree to 
pay. The usury destroys the interest-bearing power of the obligation, 
and there is no point of time from which it can bear interest Not 
only does it forfeit the interest accruing before maturity, but as well 
that accruing after maturity (Lucas v. Gki^emment Nat Bank, 78 Pa. 
St, 228; Shunk v. First Nat Bank of QaUon, 22 Ohio St, 608; National 
State Bank v, Brainard, 61 Hun., 339; First Nat Bank v. Grimes, 49 
Kans., 219), though the latter rate be lawful (Shafer 17. First Nat 
Bank, 63 Kans., 614), or the interest which otherwise would accrue 
by law upon non-payment after maturity. (Henderson Nat Bank v. 
AlreB, 91 Ky., 142.) And an amount paid on the paper after the 
maturity thereof must be credited on the principal without regard 
to when the interest thereofn accrued. (National State Bank v. Brain- 
ard, 61 Hun., 339.) By charging more than legal interest on over- 
drafts the bank will lose the right to recover any interest at aU. 
(Third Nat Bank of Philadelphia v. Miller, 90 Pa. St, 241.) Though it 
has been held that a National bank by contracting for usurious in- 
terest forfeits interest only to the date of bringing suit on the note, 
and Judgment for the principal should bear interest at the legal rata 
from the date of filing the petition. (Second Nat Bank of Richmond 



Digitized by CjOOQ IC 



120 

V. Fitzpatrlck, 111 Ky., 228.) Where » National beak has redisooonfted 
notes at an osarious rate of interest, the fact that the bank fcfr which 
the rediscoant was made has charged illegal interest on those notes 
to its cnstomers will not affect its right to set up the defense of usury 
in an action by the re-discounting bank. (Id.) As to whether a Na- 
tional bank can discount a note containing a provision to pay an at- 
torney's fee if suit shall be brous^t to enforce payment, see Merchants' 
Nat Bank v. Sevier (14 Fed. Rep., 662). 

RKNKWALS.^-If the note is renewed from time to time, no portion of 
usurious interest included in the renewal note can be recovered. (First 
Nat Bank of Mead Oentre v. OrinuBs, 49 Kans., 219.) And the usury 
is not purged by settlements and renewal notes without additional 
usury. (Pickett i;. Merchants' Nat Bank of Memphis, S2 Ark., 346.) 
In a suit upon the last renewal the bank can recover only the principal 
sum origlnaUy advanced. (Snyder v. Mount Sterling Nat Bank, 94 
Ky., 281.) And any payments made upon any of such notes will be 
applied to the principal. (Id.) And even though the interest upon 
the renewal notes has been reduced to the legal rate, no part of the 
eame can be recovered. (Farmers' and Mechanics' Bank i;. Hoagland, 
7 Fed. Rep., 159.) A note given for already accrued interest in part 
usurious, is without consideration; and suspension of the right of 
collection, between its date and maturity, in no way operates to supply 
the essential element otherwise lacking. (McGhee v. First Nat Bank 
of Tobias, 40 Neb., 92.) But in order to render the bank liable to the 
penalty of doubling the amount of interest paid prescribed by this 
section, the illegal interest nmst have been actually paid; and it is 
not suiElcient that it was carried into renewal notes. (Brown o. 
Marion Nat Bank, 169 U. S., 416; First Nat Bank v. Lavater, 196 
U. S., 115; Osbom v. First Nat Bank, 175 Pa. St, 494.) 

Penalty fob Taking Usxtbt — ^Knowledob of Bank — Alldoations ov 
CJoMFLAiNT. — ^To subjcct the bank to the penalty for taking usurious 
interest there must have been paid not only a larger rate of interest 
than that allowed by law, but that larger rate must have been know- 
ingly received. (Timberlake v. First Nat Bank, 43 Fed. Rep., 231.) 
And the petition or complaint must allege that it was knowingly re- 
ceived. (Henderson Nat Bank 17. Alves, 91 Ky., 142; Schuyler Nat 
Bank 17. Bullong, 24 Neb., 321.) As to when allegations of com{»laint 
are sufficient to sustain a judgment in an action against a National 
bank for exacting usurious interest see First Nat. Bank i;. BCorgan, 132 
U. S., 141; Guild V. First Nat Bank of Deadwood, 4 S. D., 566; Farm- 
ers' Nat Bank i^. McCJoy, 42 Okli^, 420, 



Digitized by CjOOQ IC 



121 

Amount or PBHALrr.— The penmlty Is twice the amount of intereit 
paid and is not limited to twice the ezcees above the legal rate. (Fint 
Nat Bank v. Watt, 184 U. S., 161; Henderson Nat Bank v, Alves, 91 
Kj., 142; Schuyler Nat Bank v. BuUong, 28 Neb., 684; Hill i;. NaUonal 
Bank of Barre, 16 Fed. Rep., 482; Second Nat Bank v. Fitzpatrick, 111 
Ky., 228; Watt v. First Nat Bank, 76 Minn., 458.) But in a suit to 
recover such penalty the plaintiff can not be allowed interest on the 
amount (McCreary 17. First Nat Bank of MoMstown, 109 Tenn^ 128.) 
It has been held, however, that a judgment against a National bank 
for twice the amount of interest paid, as a penalty for taking usury, 
should allow interest from the date of filing the petition to recover the 
penalty, that being the date of the first demand therefor. (Second 
Nat Bank v. Fitspatrick, 111 Ky., 228.) 

USUSIOUS IlfTIBBST MuST HaVK BcEN AcrUALLT PAID— WHAT W^X 

CoNSTiTUTB PATioifT. — ^lu ordsr that the borrower may ma1n*jUn an 
action against the bank to recover the penalty provided by the statute 
for taking usurious interest, such usurious interest must have been 
actually paid, and it is not sufficient that such interest is mtorely 
charged to his account (Hall v. First Nat Bank of Fairfield, 30 
Neb., 99.) Nor is it sufficient that the interest was reserved from the 
original loan by way of discount (McCarthy v. First Nat Bank, 228 
U. a, 498; Smith v. First Nat Bank, 42 Neb^ 687; CiUzens' Nat Bank 
V. Forman's Assignee, 111 Ky., 2(^; cOtaipare National Bank of Rahway 
V, (Carpenter, 62 N. J. Law, 166.) And as the payment contemplated by 
the statute is an actual payment and not a further promise to pay, 
the giving of a renewal note will not sustain a recovery of the penalty. 
(First Nat Bank t;. Latham, 37 Okla., 286.) Nor wiU facU constituting 
an accord and satisfaction, (/d.) 

Whsbb Patmxnt Made in Pbothtt.— The borrower may recover the 
penalty where the usurious interest has been paid by a transfer of 
pro^rty. (First Nat Bank i;. Davis, 136 Oa., 687.) But where prop- 
erty is accepted as payment, its market value at the timie must exceed 
the principal and lawful interest (/d.) And it must appear that the 
transfer and delivery of the property was tendered by the debtor and 
accepted by the bank, not only as payment of the lawful interest but 
also of the illegal interest (/<f.) 

When Risht or Action Aookues — Limitation.— The period of two' 
years within which the action to recover the penalty must be brought 
begins to run from the time the interest is actually paid, and not 
ftom the time it was agreed to be paid. (National Bank of Dainger- 
fleld V. Ragland, 181 U. S., 46.) And if such usurious interest is in- 



Digitized by CjOOQ IC 



122 

dnded in a note, the limitation does not begin to ran until the note is 
paid. (Id.) So, where the interest upon one note is included in the 
amount of another note, which is subsequently paid in fulL (Second 
Nat Bank v. Fitzpatrick, 111 Ky., 228.) And where usurious interest 
has been paid in advance the two-year limitation begins to run when 
such payment is made, and not from the time when the note is paid« 
(McCarthy v. First Nat Bank, 223 U. S., 493.) Bach payment of il- 
legal interest is regarded as "a transaction" within the intent of the 
statute, and when such payment is actually made, or accrues, the two 
years' limitation commences to run. (First Nat Bk. of Dorchester v. 
Smith, 39 Neb., 90; Lynch v. Bank, 22> West Va., 534; Nat Bk. v. Car- 
penter, 52 N. J.. Law, 165; McCarthy v. First Nat Bk., 121 N. W. Rep., 
S53; Bobs v. People's Nat Bank, 21 Fed. Rep., 888.) But the payment 
of the loan is not a condltiOh precedent to the right of the borrower 
to maintain an action to recover the penalty for the usurious interest 
paid. The penalty for all illegal interest paid within two years may 
be recovered in one action, whether the amount was in one payment or 
in several. (Hintermister v. First Nat Bank, 64 N. T., 212.) 

Who Mat Bbinq Action fob PENAJLiT.—Only the party paying the Il- 
legal interest, or his representatives, can recover the penalty therefor. 
(Timberlake v. First Nat Bank, 43 Fed. Rep., 231.) But the person 
making payment may do so, though he is an accommodation maker. 
(Trabue v. Cook, 12 S. W. Rep., 455.) The action can not be brought 
by a guarantor or surety. (Lazear v. National Union Bank, 52 Md., 
73.) And one of the joint makers of a note can not recover the penalty 
where the illegal interest was paid by the other maker. (Timberlake 
V. First Nat Bank, 43 Fed. Rep., 231; First Nat. Bank of Concordia v. 
Rowley, 52 Kans., 394; Trabue v. Cook, 12 S. W. Rep., 455.) But where 
joint makers have paid separately, but from a joint fund, they may 
join in an action for the penalty. (Merchants' and Planters' Nat 
Bank v. Horton, 27 Okla., 689.) Where a bankrupt has paid illegal 
interest, his assignee may bring such action. (Wright v. Blrst Nat 
Bank, Fed. Case No. 18,078, 8 Bliss., 243; Crcteker v. First Nat Bank, 
Fed. Case No. 3397; Henderson Nat Bank v. Alves, 91 Ky., 142. But 
see Osbom v. First Nat. Bank of Athens, 175 Pa. St, 474.) But if the 
trustee in bankruptcy fails to administer such asset the bankrupt 
after discharge, may sue on the clainu (Lasater v. First Nat Bank of 
Jacksboro, 96 Tex., 345.) The right is conferred upon an artificial, as 
well as upon a natural, person. (Albion Nat Bank v. Montgomery, 54 
Neb., 681.) But several of the joint makers of a note on which il- 
legal interest is paid by such parties individually can not unite in one 
action to recover such penalty. (Teague i;. First Nat Bank of Salina, 
6 Kans. App., 300.) The statute confers upon the partleq separate 



Digitized by CjOOQ IC 



Its 

TigtitB, and the ttLCt that thej hare paid egtial amoimta eaa not ehaaft 
the role. The cause of action accrues to the one pajing the nnlawfnl 
interest, and to each one making snch a payment (/d.) 

Bffbot or UsuBT on thb ComnuoT or thb PAsms.— Usonr does not 
render the contract roid (Farmers' and Mechanics' Nat Bank v. Dear- 
in& 91 U. S., 29) ; nor defeat the tttle of the hank to the instrument 
(NeweU v. Somerset First Nat Bank (^.)> IS Kj. L. Rep., 776); nor 
does it aroid an endorsement or guaranty of the paper upon which the 
usurious interest is resenred or paid. (Laxear v. National Union Bank, 
52 Md., 78; Gates v. First Nat Bank, 100 U. 8^ 229.) And the usurious 
character of the transaction between the bank and the payee will not 
affect the liabilities of antecedent parties ta the instrument (Smith 
V, Exchange Nat Bank, 26 Ohio St, 141.) 

State Laws.— The penalties proYided by this section of the National 
Bank Act are ezclusfre; and the usury laws of the State, and the 
penalties therein provided, hare no application to the National banks. 
(Farmers' and Mechanics' Bank v. Dearing, 91 U. S., 29; St^hens v. 
Monongahela Bank, 111 U. S., 197; Bamet v, Muncie Nat Bank, 98 
U. S., 855; Hintermister v. First Nat Bank, 64 N. Y., 212; Central Nat 
Bank v. Pratt 116 Mass., 689; First Nat Bank v. (}arlinghouse, 22 
Ohio St, 492; Wiley v. Starbuck, 44 Ind., 298; SUughter v. First Nat 
Bank of Montgomery, 109 Ala., 157; CSiarleston Nat Bank i;. Bradford, 
61 W. Va., 255.) Nor do the provisions of the Judiciary Acts of March 
8, 1887, and August 13, 1888, have the effect of subjecting NaUonal 
banks to the penalties fixed by the States for exacting unlawful in- 
terest (Norfolk Nat Bank i;. Schwenk, 41 Neb., 381.) Nor is this the 
effect of the proviso to Section 4 of the Act of July 12, 1882. (Lanham 
V. First Nat Bank of Crete. 46 Neb., 663.) But a National bank which 
has succeeded to the business of a private bank may incur the penal- 
ties which attached to the former institution when endeavoring to en- 
force the obligation acquired from it (Bxeter Nat Bank v. Orchard, 
42 Neb., 679.) Where usurious interest is paid to a National bank, 
the transaction is governed by the laws of the United States, though 
the security is taken in the name of the President of the bank in his 
individual nam^ (Schuyler Nat Bank v. Gtedsden, 191 U. S., 461.) 

JuBisDicnoN or Stats Coubtb.— The defense of usury may be set up 
in an action brought in a State court (National Bank of Wlnterset v. 
Byre, 62 Iowa, 114), and State courts have jurisdiction of actions for 
the recovery of the penalty prescribed for taking illegal interest 
(Ordway v. Central Nat Bank, 47 Md., 217; Blets v. Columbia Nat 
Bank, 87 Pa. St, 87; Hade v, McVey, 31 Ohio St, 231; MoCreary t^. 



Digitized by CjOOQ IC 



lU 

First Nat. Bank, 109 Tenn., 128.) Such action may be brought in 
any local court in the county haying Jurisdiction of the amount in- 
yolved. (Schuyler Nat Bank v. Bullong, 28 Neb., 684; First Nat. Bank 
of Tecumfieh v. Overman, 22 Neb., 116; Henderson Nat Bank v, Alves, 
91 Ky., 142; Farmers' Nat Bank 17. McCoy, 42 Okla., 420. But see 
Newell V. National Bank of Somerset (Ky.), 12 Bush, 57.) But the 
courts of one State have no jurisdiction of an action against a National 
bank located in another State to recover the penalty. (Missouri River 
Telegraph Company v. First Nat Bank of Sioux City, 74 111., 217.) 

CoNSTBUonoN OF THE Statuis. — ^The statute will be liberally con- 
strued to effect the ends for which it was passed, but a forfeiture under 
its provisions will not be declared unless the facts upon which it rests 
are clearly established. And since the courts uniformly incline against 
the declaration of a forfeiture, the party seeking such declaration 
should be held to make convincing proof of each essential to forfeiture. 
(Wheeler v. Union Nat Bank, 96 U. S., 785.) A doubt as to whether 
there has been a taking of illegal interest will be resolved in favor of 
the bank. (Timberlake v. First Nat Bank, 48 Fed. Rep., 231; Wheeler 
V. Union Nat Bank of Pittsburg, 96 U. S. 785.) But the statute is not 
a penal statute, and does not require to be strictly construed. (Albion 
Nat Bank v. Montgomery, 54 Neb., 681.) 

Compounding Iktbbbst. — Where interest is compounded in a manner 
prohibited by the State statute, all interest is forfeited, though the 
total is less than the maximum rate allowed by the State. (Citizens*^ 
Nat Bank v. Donnell, 195 U. S., 369.) 

Usurious Loans to Dibbotobs. — A director is not by reason of his 
position, estopped from setting up the defense of usury in an action 
brdught against him by the bank. (Bank of Cadiz v, Slemans, 34 Ohio 
St, 142.) 

When Rule de Minimis Applibs.— Where the illegal interest exacted 
amounts to only five cents, the rule de minimis non curtU lex applies, 
and the bank will not be liable to a penalty therefor. (Slaughter v. 
First Nat Bank of Montgomery, 109 Ala., 157.) 

Waiver.— The forfeiture is not waived by giving a separate note for 
the interest or by giving a renewal note in which is included the 
usurious interest (Brown v. Mariofn Nat Bank of Lebanon, 169 U. 8., 
416.) 



Digitized by CjOOQ IC 



CHAPTER VI. 
Bbpobts and Examinations. 

Section 127. Beports to Comptroller — Publication of. 

128. Beports of Dividends and Net Earnings. 

129. Penalty for Failure to Make Beports. 

130. Verification of Betums of National Banks. 

131. Appointment, Powers, Duties, Salaries, etc., of Ex- 

aminers. 
182. Examiners Not to Disclose Information. 

133. Loans, Gratuities and Commissions to Examiners 

Forbidden. 

134. Examinations by Federal Beserve Board and Federal 

Beeerre Banks. 

135. Limitation of Visitorial Powers. 

§ 1S7. Beports to Comptroller— -Publication of .— Every associa- 
tion shall make to the Comptroller of the Currency not less than 
five reports during each year, according to the form which may be 
prescribed by him, verified by the oath or affirmation of the presi- 
dent or casUer of such association, and attested by the signatures 
of at least three of the directors. Each such report shall exhibit, 
in detail and under appropriate heads, the resources and liabilities 
of the associations at the close of business on any past day by him 
specified; and shall be transmitted to the Comptroller within five 
days after the receipt of a request or requisition therefor from him 
and in the same form in which it is made to the Comptroller shall 
be published in a newspaper published in the place where such 
association is established, or if there is no newspaper in the place, 
then in one published nearest thereto in the same county, at the 
expense of the association; and such proof of publication shall be 
furnished as may be required by the Comptroller. The Comp- 

125 



Digitized by CjOOQ IC 



126 

troller shall also have power to call for special reports from any 
particular association whenever in his judgment the same are 
necessary in order to have a full and complete knowledge of its con- 
dition. (Eev. Stat U. S. Sec. 5211; Act Feb. 27, 1877, Ch, 69; 
19 Stat. L., 252.) 

For power of Federal Reserve Board to examine National banks and 
require reports from them, see Section 11 (a) of Federal Reserve Act* 
$ 225, page 229. 

In the case of Riggs Nat Bank v. GomptroUer of the Currency et al., 
44 Washington Law Reporter, 434, the court upheld the right of the 
Comptroller to call for detailed and special information from a Na- 
tional bank. 

Owing to changes in the form of each report of condition it is im- 
possible to analyze this report in detail. 

Only a few of the requirements in making up such a report can be 
considered. 



FoRic OF Repobt. — ^Banks should always use the latest form of report 
furnished by the Comptroller, and none other will be accepted. 

WoBD "None."— -The word "none" must be inserted on the face of the 
report in the special column provided therefor if no amount is to be 
entered in the item and likewise in all schedules. If there is more 
than one column in a schedule, the word "none" should be so written 
that it covers all columns. Failure to do so will require the bank to 
make up new report. 

Pboof of Publication. — The publisher's certificate must be an exact 
copy of the figures shown in the report of condition. It must be signed 
and sworn to by the same officer and before the same notary that took 
the oath of the report of condition, also bear the autograph signatures 
of the same three directors that attested the report of condition. It 
is required that the report must be published in a newspaper pub- 
lished in the same city cfr town as bank is located, and if no news- 
paper is published, then in the one nearest thereto in the same county. 
The length of time the paper has been in business has no bearing on 
the subject, the only requirement being that it is a newspaper entered 
at the postolBce where issued. 



Digitized by CjOOQ IC 



127 

§ 198. Beports of DiTidendt and Vet Saniiigi.— In addition to 
the reports required by the preceding section, each association shall 
report to the Comptroller of the Currency, within ten days after 
declaring any dividend, the amount of such dividend, and the 
amount of net earnings in excess of such dividend. Such re- 
ports shall be attested by the oath of the president or cashier of 
the association. (Bev. Stai IT. S. Sec. 5212.) 

iNSTBUonoifs AS TO MAKine RiPCMrra.— The reqolranent now is that 
regular reports mutt be made on June 30 and December SI of each 
year whether dividends are declared or not Whenever a dividend is 
dedared between these dates a complete report imist be made show- 
ing the am<mnt of the dividend and net eaminga on the day the divi- 
dend is declared, regardless of the date of payment, and forwarded 
to the OomptroUer within ten days from date of declaration. The 
ComptroUer mails blanks for regular semi-annual reports to banks in 
time for making retoms on June 80 and December 81. 

FORM OP 8PSCIAL NOTIFICATION OF DIVIDEND DBCLARED 

Charter No 

The , located at 

in the State oT 



Capital Stock Pab) nf, | ; Subflus Fukd,* | 

Date of declaration, •••!•» 192 

Date payable, .-., 192 

Net earnings on hand at date of declaration of dividend (including 
earnings of this period and balance of earnings remaining from 
previous periods) I 

Liss: 

Losses sustained and not charged off I 

Bad debts on hand, as defined by Sec. 5204, Rev. Stat 

Net profits carried to surplus fund (see Sec 5199, 

Rev. Stat) 

Net earnings available fo^ dividend I 

Amount of dividend declared ( per cent on capital) 

Net earnings available in excess of dividend | 



I, ^ cashier of the above-named 

bank, do solemnly swear that the above statement is true, and that the 

* Surplus after payment of dividend should be entered here. 



Digitized by CjOOQ IC 



128 

lawful reserve of this bank on the date of the declaration of the divi- 
dend herein reported conformed to the requirements of Section 19 of 
the Federal Reserve Act, to the best of my knowledge and beliet 



State of 



}.... 



COUWTT OF 

Sworn to and subscribed before me this day of , 198 

• ••••• .••••].• •••. .«• 

[SEAL.] Notary Public. 

§ 129. Penalty for Failure to Make Beports. — Bvery association 
which fails to make and transmit any report required under either 
of the two preceding sections shall be subject to a penalty of one 
himdred dollars for each day after the periods, respectively, therein 
mentioned, that it delays to make and transmit its report. When- 
ever any association delays or refuses to pay the penalty herein 
imposed, after it has been assessed by the Comptroller of the 
Currency, the amount thereof may be retained by the Treasurer of 
the United States, upon the order of the Comptroller of the Cur- 
rency, out of the interest, as it may become due to the associa- 
tion, on the bonds deposited with him to secure circulation. All 
sums of money collected for penalties under this section shall be 
paid into the Treasury of the United States. (Bev. Stat U. S. 
Sec. 6213.) 

§ 130. Yeriflcation of Betums of National Banks. — That the 
oath or affirmation required by section fifty-two hundred and eleven 
of the Revised Statutes, verifying the returns made by National 
banks to the Comptroller of the Currency, when taken before a 
notary public properly authorized and commissioned by the State 
in which said notary resides and the bank is located, or any other 
officer having an official seal, authorized in such State to administer 
oaths, shall be a sufficient verification as contemplated by said 
section fifty-two himdred and eleven: Provided, That the officer 
administering the oath is not an officer of the bank. (Act Feb. 
26, 1881, Ch. 82; 21 Stat L., 352.) 



Digitized by CjOOQ IC 



129 

§ 181. Appomtment, Powen, Datiet, SaUrieiy etc., of Exam- 
inert. — The Comptroller of the Currency, with the approval of the 
Secretary of the Treasury, shall appoint examiners who shall ex- 
amine every member bank at least twice in each calendar year and 
oftener if considered necessary : Provided, however. That the Fed- 
eral Beserve Board may authorize examination by the State au- 
thorities to be accepted in the case of State banks and trust com- 
panies and may at any time direct the holding of a special ex- 
amination of State banks or trust companies that are stockholders 
in any Federal reserve bank. The examiner making the exami- 
nation of any National bank, or of any other member bank, shall 
have power to make a thorough examination of all the aflEairs of 
the bank and in doing so he shall have power to administer oaths 
and to examine any of the ofiScers and agents thereof under oath 
and shall make a full and detailed report of the condition of said 
bank to the Comptroller of the Currency. 

The Federal Reserve Board, upon the recommendation of the 
Comptroller of the Currency, shall fix the salaries of all bank 
examiners and make report thereof to Congress. The expense of 
tiie examinations herein provided for shall be assessed by the Comp- 
troller of the Currency upon the banks examined in proportion to 
assets or resources held by the banks upon the dates of examina- 
tion of the various banks. (Sec. 5240, U. S. Bev. Stat, as amended 
by Sec. 21 of the Federal Reserve Act) 

BxAMCTEB Dors Not Rkpbb8K5t Bank.— A National bank examiner 
is in no sense an agent or officer of the bank he examines. He can 
bind it in no way and can contract for it in no war- (Carlon v. First 
Nat Bank, 157 Pac Rep., 809.) 

§ 132. Examiners Not to Disclose Information. — (For the pro- 
vision of law forbidding examiners to disclose the names of bor- 
rowers or the collateral for loans, see Section 22 of Federal Be- 
serre Act §2B8.) 

§ 183. Loans, Oratnities and Commissions to Ezaminers For* 
bidden^— (For the provision of law forbidding banks to make loans 
or grant gratuities to bank examiners, see Section 22 of Federal 
Beserve Act, §288.) 
9 



Digitized by CjOOQ IC 



130 

§ 134. Examinatioiii by Federal Seseire Board and Federal 
Seserre Banki. — (For the power of a Federal Beeerve Bank to 
examine a member bank^ see Section 21 of Federal Reserve Act, 
page 300 ; for the like power of the Federal Beserve Board, see Sec- 
tion 11 (a) of Federal Reserve Act> §225.) 

§ 135. Limitation of Visitorial Powers.— No association shall be 
subject to any visitorial powers other than such as are authorized 
by this Titie, or are vested in the courts of justice. (Rev. Stat 
U. S. Sec. 5241.) 

For a somewliat similar pixMslon see Section 21 of Federal Reeenre 
Act, (286. 

Inspection or Books bt Stockholdbbs.— A stockholder has the right, 
for proper purposes, and under reasonable regulations as to time and 
place, to examine the books of the bank; and this right may be en- 
forced by a State Court (Outhrie v. Harkness, 199 U. S^ 148.) And a 
State statute authorizing stockholders of a corporation to inspect the 
books thereof applies to a National bank located in the State. (People 
ex rel. Lorge i;. Consolidated Nat Bank, 105 App. Div. (N. Y.), 409.) 
The Court has power to deny an inspection if demanded for an illegiti- 
mate purpose, and may regulate the time when the inspection may be 
made; but if the inspection is sought for a legitimate purpose and 
application is made to the corporation during business hours the right 
is mandatory. (Id.) See also Woodward v. Old Second Nat Bank, 164 
Mich., 469, and Murray i;. Walker, 166 Ky., 636. 



Digitized by CjOOQ IC 



CHAPTEB Vn. 

Tazatiok. 

Section 136. Tax on Circnlating Notes Secured by Deposit of 
Other Than 2 Per Cent Bonds. 

187. Tax on Circulating Notes Secured by Deposit of t 

Per Cent Bonds. 

188. Same Subject — Panama Canal 2 Per Cent. Bonds. 

139. Betums of Outstanding Circulation. 

140. Assessment if Betum is Not Made. 

141. Collection of Tax Where Bank Fails to Pay. 

142. Befunding Excess Tax Paid. 

143. Tax on Notes of Insolvent Bank Abated. 

144. State Taxation of Shares of Stock and Beal Estate. 

145. State Taxation of National Bank Nbtes. 

146. United States Bonds Exempt from Taxation. 

147. Tax on Circulation of State Banks^ etc. 

148. Tax on Notes of State Banks, etc.. Used for Circula- 

tion and Paid Out by National Banks, State 
Banks, etc. 

§ 136. Tax on Circulating Votes Seoured by Deposit of Other 
Than Two Per Cent. Bonds. — In lieu of aU existing taxes, every 
association shall pay to the Treasurer of the United States, in the 
months of January and July, a duty of one-half of one per centum 
each half-year upon the average amount of its notes in circulation. 
(Bev. Stat. U, S. Sec. 6214.) 

§ 137. Tax on Circulating Votes Seoured by Deposit of Two 
Per Cent. Bonds. — Every National banking association having on 
deposit as provided by law bonds of the United States, bearing 
interest at the rate of two per centum per annum, issued imder 

131 



Digitized by CjOOQ IC 



138 

the proyisions of this Act, to secure its drculatmg notes^ shall pay 
to the Treasurer of the United States^ in the months of January 
and July^ a tax of one-fourth of one per centum each half year 
upon the average amount of such of its notes in circulation as are 
based upon the deposit of said two per cent bonds; and such taxes 
shall be in lieu of existing taxes on its notes in circulation imposed 
by section fifty-two hundred and fourteen of ihe Bevised Statutes. 
(Bey. Stat. IT. S. Sec. 5214, as amended by Act March U, 1900, 
Sec. 13; 31 Stat. L., 49.) 

§ 188. Same Subject— Panama Canal Two Per Cent. Bonds. — 
Every National banking association having on deposit, as pro- 
vided by law, such bonds issued under the provisions of said section 
eight of said Act, approved June twenty-eight, nineteen hundred 
and two, to secure its circulating notes, shall pay to the Treasurer 
of the United States, in the months of January and July, a tax 
of one-fourth of one per cent, each half year upon the average 
amount of such of its notes in circulation as are based upon the 
deposit of said two per cent, bonds; and such taxes shall be in lieu 
of existing taxes on its notes in circulation imposed by section fifty- 
two hundred and fourte^i of the Bevised Statutes. (Act Dec. 21, 
1905 ; 34 Stat. L., 6.) 

§ 189. Betums of Outstanding Ciroulation. — In order to en- 
able the Treasurer to assess the duties imposed by the preceding 
section, each association shall, within ten iajs from the first days 
of January and July of each year, make a return, imder the 
oath of its president or cashier, to the Treasurer of the United 
States, in such form as the Treasurer may prescribe, of the average 
amount of its notes in circulation,! * * * * for the six months 
next preceding the most recent first day of January or July. 
Every association which fails so to make such returns shall be 
liable to a penalty of two hundred dollars, to be collected either 
out of the interest as it may become due such association on the 

t The prohrisions omitted here required a return of the average 
amount of capital stock and deposits. These have been rendered ob- 
solete by the repeal of the tax on those items. 

For full details and instructions see Ch. V, Part IV. 



Digitized by CjOOQ IC 



133 

bonds deposited with the Treasarer, or^ at his option, in the man- 
ner in which p^ialties are to be collected of other corporations un- 
der the laws of the United States. (Bev. Stat U. S. Sec 5215.) 

§ 140. Assessment if Betnn is Vot Kade*— Whaiever any asso- 
ciation fails to make the half-yearly return required by the preced- 
ing section, the duties to be paid by such association shall be 
assessed upon the amount of notes delivered to such association by 
the Comptroller of the Currency. (Bev. Stat. TJ. S. Sec. 5216.) 

It iB beet for the bank to make up its own average, as that made bj 
the Treasurer would necessarily include notes of the bank not actually 
in circulation. 

§ 141. Collection of Tax Where Bank Vails to Pay.— Whenever 
an association fails to pay the duties imposed by the three * pre- 
ceding sections^ the sums due may be collected in the manner pro- 
vided for the collection of United States taxes from other corpora- 
tions; or the Treasurer may reserve the amount out of the interest, 
as it may become due, on the bonds deposited with him by such 
defaultii^ association. (Bev. Stat U. S. Sec. 5217.) 

§ 142. Refunding Ssoess Tax Paid. — In all cases where an as- 
sociation has paid or may pay in excess of what may be or has been 
found due from it, on account of the duty required to be paid to 
the Treasurer of the TTnited States, the association may state an 
account therefor, which, on being certified by the Treasurer of the 
United States and found correct by the first Comptroller of the 
Treasury, shall be refunded in the ordinary manner by warrant on 
the Treasury. (Bev. Stat. U. S. 6218.) 

§ 148. Tax on Hotes of Insolvent Bank Abated.— That when- 
ever and after any bank has ceased to do business by reason of 
insolvency or bankruptcy, no tax shall be assessed or collected, or 
paid into the Treasury of the United States, on account of such 

^The reference here is to Rev. Stat U. 8., SecUons 5214, 5215 and 
S216. See above sections. 



Digitized by CjOOQ IC 



134 

bank, which shall diminish the assets thereof necessary for the full 
payment of all its depositors; and such tax shall be abated from 
such N'ational banks as are found by the Comptroller of the Cur- 
rency to be insolv«it; and the Commissioner of Internal Bevenue^ 
when the facts shall so appear to him, is authorized to remit so 
much of said tax against insolvent State and savings banks as shall 
be found to affect the claims of their depositors. (Act March 1, 
1879, Ch. 125, Sec. 22; 20 Stat L., 351.) 

§ 144. State Taxation of Shares of Stock and Beal Estate.— > 

N'othing herein shall prevent all the shares in any association from 
being included in the valuation of the personal property of the 
owner or holder of such shares, in assessing taxes imposed by 
authority of the State within which the association is located; but 
the L^slature of each State may determine and direct the manner 
and place of taxing all the shares of National banking associations 
located within the State, subject only to the two restrictions, that 
the taxation shall not be at a greater rate than is assessed upon 
other moneyed capital in the hands of individual citizens of such 
State, and that the shares of any National banking association 
owned by non-residents of any State shall be taxed in the city or 
town where the bank is located, and not elsewhere. Nothing herein 
shall be construed to exempt the real property of associations from 
either State, county or municipal taxes, to the same ext^it, accord- 
ing to its value, as other real property is taxed. (Bev. Stat. XT. S. 
See. 5219.) 

Taxes Authobized bt This SBonoif BSxclusivx. — ^The taxes which the 
States are authorized by this section to impose are exclusive, and the 
National banks are not liable to any other tax in4>osed under State 
authority. (National State Bank of Oskaloosa v. Young, 25 Iowa, Sll; 
Owensboro Nat Bank v, Owensboro, 173 XT. S., 664.) Thus, a State 
may not tax the intangible property or franchise of a National bank. 
(Owensboro Nat Bank v, Owensboro, supra,) 

Taxes Ufon the Shabes — ^Ddtebencb Between Shabes aitd CAPirAi. 
Stock. — The personal property of a National bank can not be directly 
assessed for taxation by State authority. (City and CSounty of San 
Francisco v, Crocker-Woolworth Nat Bank, 92 Fed. R^., 278.) Tlie 



Digitized by CjOOQ IC 



186 

taxes which the States are authoiiied to impose are taxes upon the 
shares of stock in the hands of the stockholders. Such taxes are not 
the same as taxes upon the capital of the hank. (Van Allen v. The 
Assessors, 3 WalL, 673.) Where new shares are issued they can not he 
taxed until the increase is approTed bj the Comptroller of the Cur- 
rencj. (Charleston v. People's Nat Bank, 6 S. C, 103.) The shares 
are taxable without regard to their ownership, and where a National 
bank owns stock in another National bank, it may be taxed thereon. 
(Bank of Redemption v, Boston, 126 U. S., 00; see ahk>, Bank of Call! 
V. Richardson, 248 U. S., 476.) 

T6 W&OM AssissiD.— As the tax can be only on the shares they must 
be assessed to the shareholders in their names, and not in the name of 
the bank. (MiUer v. First Nat Bank of CincinnaU, 46 Ohio St, 424.) 
And an assessment of the capital stock as the personal property of the 
bank without m^ention of the shareholders is void. (Farmers' it 
Traders' Nat Bank v. Hoftman, 93 Iowa, 119.) And the shares can not 
be assessed in tolido against the bank. (First Nat Bank of Leoti v. 
Usher, 45 Kan., 726; National Bank of Virginia v. City of Richmond, 
42 Fed. Rep., 877; Citizens' Bank of Louisiana v. Board of Assessors, 
62 Fed. Rep., 73; Whitney Nat. Bank v. Parker, 41 Fed. Rep., 402. But 
see First Nat Bank ot Aberdeen i;. (Thehalis County, 6 Wash., 64.) But, 
as we shall see hereafter, the bank may be required to pay the tax 
for its shareholders. 

Mbanino 07 THB ToM 'IfoinBTXD Cafxtal."— The proTision that the 
taxation shall not be at a greater rate than is assessed upon other 
moneyed capital in the hands of individual citizens is to be construed 
in the light of the purpose and object of 0>ngress. The main purpose 
was to render in^possible for the States, in leyying taxes, to create and 
foster an unequal and unfriendly competition, by faToring institutions 
or indlTiduals carrying on a similar business, and operations and in- 
vestments of a like character. The business of banking, as defined by 
law and custom, consists in the issue of notes payable on demand, in- 
tended to circulate as money, where the banks are banks of issue. In 
receiving depdsits payable on demand, in discounting commercial paper, 
making loans of money on collateral security, buying and selling bills 
of exchange, negotiating loans, and dealing in negotiable securities is- 
sued by the €k>Temment, State, National and municipal and other cor- 
porations. These are the operations in whldi the capital invested in 
National banks is employed, and it is the nature oT that employment 
which comstitutee it in the eye of this statute "moneyed capital." Cor- 
porations and Individuals carrying on these operations do come into 
eompetition with the business of National banks, and capital thus em- 



Digitized by CjOOQ IC 



136 

ployed is wliat is intended to be described by the act of Congress. 
(Mercantile Nat Bank v. New York, 121 U. S., 138; TalboU i;. SUver 
Bow County, 139 U. S., 438; Palmer i;. McMahon, 133 U. S., 660; Bank 
of Redemption v. Boston, 125 U. S., 60; First Nat. Bank v. Chapman, 
173 U. S., 206; Commercial Nat Bank v. Chambers, 182 U. S., 556.) 

Ajccordingly, it has been held by the United States Supreme Court 
that the exemption from taxation of shares of stock in ccfrporations, the 
business of which does not come into competition with that of the 
National banks, is not a discrimination against National banks within 
the intendment of the law. (Mercantile Nat Bank v. New York, 121 
U. S., 138.) Trust companies operating under the laws of New York 
are not in any proper sense banking institutions within the intend- 
ment of this section. (Jenkins i;. Neif, 186 U. S., 280; s. c, 163 N. Y., 
320.) 

What is Mbajtt bt "Gbeateb IUtb." — ^Any system of assessment of 
taxes which exacts from the owner of the shares of a National bank 
a larger sum in proportion to the actual value of those shares than it 
does from other moneyed capital, valued in like manner, taxes the 
shares at a greater rate, notwithstanding that the percentage of tax on 
the valuation is the same as that applied to other moneyed capitaL 
(Pelton V, Commercial Nat Bank, 101 U. S., 143; see also Whitbeck v. 
Mercantile Bank, 127 XJ. S., 193.) But the prohibition against dis- 
crimination applies to stockholders of National banks as a class, and 
not as individuals, and a scheme of taxation that is fair to the class 
will not be held invalid because of a particular case arising from cir- 
cumstances personal to the individual alfected. (Anuoskeag Savings 
Bank v. Purdy, 231 U. S., 378.) And where there is no discrimination 
against National bank stock in favor of other personal prcfperty, the 
^act that the assessment for taxation upon personal estate is at a 
higher ratio of valuation than upon real estate is no ground for the 
intervention of a court of equity at the instance of a National bank. 
(MercanUle Nat Bank v. Mayor, 172 N. Y., 35.) 

VALUATioir OF Shabbs — What BIit Be Included is BsTncATmo Val- 
VEB. — In estimating the value of the shares, all the property and assets 
of the bank may be taken into consideration unless such property is 
taxed separately. (St Louis Nat Bank i;. Papin, Fed. Case No. 12,239; 
Stafford Nat Bank v. Davis, 59 N. H., 38.) And it has been b^d that 
where shares are taxed at their par value, the surplus fund may be 
taxed separately if it is not invested in Federal securities. (lilrst Nat. 
Bank v. Peterborough, 56 N. H., 38; North Ward Nat Bank v. City of 
Newark, 39 N. J. Law, 380. But see National State Bank v, YoNing, 25 
Iowa, 311; County O>mmis8ioners v. Farmers' and Mechanics* Nat, 



Digitized by CjOOQ IC 



137 

Bank, 48 Md., 117.) If the shares are assessed at their actual caKh 
▼aliie without any deduction for real estate, the latter should not be 
taxed separately. (Commissioners of Rice County v, Cltisens' Nat 
Bank of Faribault, 23 Minn., 280.) As the tax is upon the shares and 
not upon the capital stock, it is not necessary that any deduction 
should be made for that portion of the capital which is iuTested in 
United States bonds or other non-taxable securities. (Van Allen v. 
The Assessors, 8 Wall., 573; Mechanics' Nat Bank 17. Baker, 65 N. J. 
Law, 113.) In making a return of the value of its own stock for the 
purposes ot taxation a National bank can not deduct the stock which 
it holds in the Federal Reserre Bank. (First Nat Bank of Cincinnati 
V, Durr, 246 Fed. Rep., 163; Same v. Beaman, 257 Fed. Rep., 729.) 

Same Subject— How Real Estate Tbbated. — In iixing the actual 
Talue* of shares of bank stock for the purpose of taxation, the real 
estate of the bank is to be taken at its actual value, notwithstanding 
it is assessed at a lower yaluation. (Jenkins v, NeCT, 163 N. T., 320.) 
Under the statutes of Indiana the real estate owned by a National 
bank is not to be included in the yaluation of the shares of stock for 
purposes of taxation. (Board of Cotaimissioners of Morgan County v. 
First Nat Bank, 57 N. B. Rep., 728.) But where the real estate has 
been so included, and the bank has also paid a tax upon the real 
estate as such, the latter tax can not be recovered by the bank; for the 
wrong done was in the over-valuation of the stock, and not in the 
assessment of the real estate to the bank. (Id.) As to the rule in 
New Jersey, see Bank 17. Williams (58 N. J. Law, 45) ; Mechanics' Nat 
(Bank v. Baker (65 N. J. Law, 113). 

BxEifPTioNS.— In Adams v, Nashville (96 U. 8., 19) it was said by 
the Supreme Court, "the act of 0>ngress was not intended to curtail 
the State power on the subject of taxation. It simply required that 
capital invested in National banks should not be taxed at a greater 
rate than like property similarly invested. It was not intended to cut 
off the power to exempt particular kinds df property if the legislature 
chose to do so." Accordingly, it has been held by that court that a 
partial exemption of other moneyed capital will not deprive the State 
of the power to levy a tax on National bank stobk. (Hepburn v. School 
Directors, 23 'W^U., 480; see also Washington Nat Bank v. King Co., 9 
Wash., 607.) Thus bonds issued by a State, or under its authority, by 
its public municipal bodies, although they undoubtedly represent mon- 
eyed capital, may be exempted without this effect since they are not 
ordinarily the subject df taxation. (Mercantile Bank v. New York, 121 
IT. 8.9 IZS.) So the State may exempt savings4>ank deposits (Id.), or 
tbe eredlta of individuals such as accounts, promissory notes, and 



Digitized by CjOOQ IC 



138 

mortgagw. (First Nftt Buik v. Chehalis Co.» 6 Wash., 64.) But an 
ezemptionB must be founded upon Just reason, and not operate as an 
unfriendly discrimination against InYestments in National bank shares. 
(Id.) Wliere the exemptions in fayor of other moneyed capital are so 
palpable as to show that there is a serious discrimination against 
capital invested in the shares of National banks, the tax upon such 
shares will be declared invalid. (Boyer v. Boyer, 113 U. S., 690.) And 
where a tax is imposed on the market value of the shares of a National 
bank without allowance of any deduction for the non-taxable securities 
and specifically taxed property held by the bank, and where it is also 
80 assessed that the owners of shares thus taxed are deprived of the 
privilege allowed other moneyed capitalists of deducting from the 
amount of securities held by them the amount ctf bonds, securities, 
liquidated claims and demands due from them respectively to others, 
such a tax violates the provisions of the Statutes of the United States, 
and is void. (The First Nat Bank of Richmond v. The City of Hich- 
mond, 39 Fed. Rep., 389.) If in the practical execution of a State tax 
law it is found impracticable to list more than a small portion of the 
property subject to taxation, other than National bank shares, the 
National banks may demand such fdrms of relief as will protect the 
shareholders from paying a greater rate of taxation than is imposed 
on individual citizens. (First Nat Bank v. Lindsay, 45 Fed. R^., 
619.) 

DnmonoNS. — Stockholders of the National banks must be allowed 
the same deductions from the assessment against them upon their 
shares of stock that are allowed to the other taxpayers in the State on 
their moneyed capital. (People v. Weaver, 100 U. S., 539, reversing 67 
N. Y., 516, and overruling People v. Dolan, 86 N. Y., 59.) And if the 
owners of other moneyed capital are permitted to deduct from the 
assessed value thereof the amount of debts which they owe, the same 
privilege must be allowed to the holders of National bank stock. (Peo- 
ple 17. Weaver, 100 U. S., 539; Britton i;. BvansvlUe Nat Bank, 105 U. 
S., 322; Supervisors v, Stanley, 105 U. S., 305; First Nat Bank of 
Leoti V. Fisher, 45 Kans., 726; Mercantile Nat. Bank v. Shields, 59 Fed. 
Rep., 952.) And the nnode of assessment must be such that these de- 
ductions can be made; and, therefore, an assessment of all the shares 
against the bank in soUdo which would preclude such deductions, would 
be void. (First Nat Bank v. City of Richmond, 39 Fed. Rep., 309.) 
But it is immaterial that such deductions are allowed to holders of 
stock in railroad, insurance and manufacturing corporations, since 
such stock is not regarded as "moneyed capital." (Mercantile Nat 
Bank v. Shields, 59 Fed. Rep., 952.) 

Where the State laws require National bank shares to be 



Digitized by CjOOQ IC 



189 

at their real yalue, it is not a discrimlnalioii against theae banks that 
private banks are permitted to deduct their d^;K)sits from their taxable 
assets, and this privilege is withheld from National banks, for the 
d^KMBits are debts against the bank, and the real value of the shares 
depends upon the value of the bank's franchise, capital and property 
of all kinds, lees its debts. (Engelke v. Schlender, 75 Tex., 559.) Un- 
der the statutes of Virginia a stockholder in a National bank is not 
entitled to have his indebtedness deducted from the value of his stock 
before it is assessed. (Burrows v. Smith, 95 Va.. 694.) As the tax is 
on the shares and not on the capital, deductions can not be made for 
capital invested in U. S. bonds or other non-taxable securities. (Van 
Allen 17. Assessors, 3 Wall., 578.) 

Flat Rate Without Deductions. — ^Though the State law maj allow 
deductions to persons and corporations generally, yet a low flat rate, 
imposed upon the shares of all bcmks, both State and National, without 
the right to make deductions for debts, does not discriminate against 
National banks and is not invalid under the National Bank Act 
(Amoskeag Savings Bank v, Purdy, 281 U. S.» 878; People v. Feitner, 
191 N. Y., 88.) 

Non-Taxabli Pbopebtt.— The intention of (Congress was that the rate 
of taxation should be the same as, or not greater than, the tax upon 
moneyed capital, which is subject and liable to taxation, and which 
the State has the capacity to tax. (People v. Commissioners, 4 WalL, 
241; Lionberger v. Rouse, 9 WalL, 468.) It is, therefore, no objection 
to a tax on National bank stock that, while deductions are made from 
the personal estates of Individuals and the capital of State corpora- 
tions for the €k>vemment bonds owned by them, no such deduction is 
made on account of the capital of National banks so invested, or that 
private bankers are allowed to deduct legal tender notes, and no such 
deduction allowed to National banks. (Adair v, Robinson, 6 Tex., Civ. 
App., 275; People v. Commissioners, supra,) And where a State had 
previously contracted with banks chartered by it that they should not 
be taxed above a certain rate, it was held by the Supreme Court that 
a tax on National bank stock at a greater rate was not invalid, if this 
rate was not greater than that assessed upon all other moneyed capital 
within the State. (Lionberger 17. Rouse, 9 WalL, 468.) 

Real Estate in Other States.— The National Bank Act does not re- 
quire that real estate situated outside of the State in which the bank 
is located shall be excluded in estimating the value of the shares for 
purposes of taxation. ((Commercial Nat Bank v, (Thambers, 182 U. S., 
556.) 



Digitized by CjOOQ IC 



140 

Mode m Which State Banks Must Be Taxed.— Where the State 
banks are taxed upon the capital, no tax can be Imposed upon the 
shares of National banks, for as the capital of the State banks may 
consist of bonds of the United States which are exempt from taxation, 
a tax on capital is not equivalent to a tax on shares. (Van Allen v. 
The Assessors, 3 Wall., 573; Bradley v. The People, 4 WalL, 459.) But 
though the tax upon the State banks is not eo nomine a tax on shares, 
yet if it is equivalent to such a tax, the shares in the National banks 
located in that State may be taxed. (Fraser i;. Seibem, 16 Ohio St, 
614; Van Slyke v. State, 26 Wis., 655; Boynoll v. SUte, 25 Wis., 112.) 
But Congress meant no more than to require of the States, as a condi- 
tion to the exercise of the power to tax the shares in National banks, 
that they should, as far as they had the capacity, tax in like manner 
the shares of banks of their own creation. (Lionberger v. Rouse, 9 
Wall., 468.) Therefore, where a State has previously contracted with 
the banks which it has chartered that they should not be taxed above 
a certain rate, a tax upon National bank shares at a greater rate is 
not invalid, if this rate is not greater than that assessed upon all the 
moneyed capital within the State, except that of the State banks. {Id.; 
The City of Des Moines, 205 U. S., 503; Marion Nat Bank of Lebanon 
V. Burton, and The Citizens' Nat Bank of Lebanon v. Burton, 90 S. W. 
944.) 

State CoNSTrrunoN.— The taxation upon National bank shares by 
State must be characterized by such equality and uniformity as Is re- 
quired by the State constitution for the protection of individual dti- 
sens having moneyed capital. (First Nat Bank v. Lindsay, 45 Fed. 
Rep., 619.) National and State banks in Kentucky are subject to 
county and municipal taxation. (Deposit Bank of Owensboro v, Davles 
County, 102 Ky., 174.) And the acceptance by the banks of the act 
known as the "Hewitt Law" does not preclude the State from subject- 
ing them to other modes of taxation. (Id,) 

Taxation bt TEBBrroBiBs.— Although the word "territonr^ Is not men- 
tioned specifically in the statute, the Territories have the same power 
of taxation of National banks that the States have. (Talbott v. SUvitf 
Bow Co., 139 U. S., 441.) 

Insolvent National Bank.— The personal property of an insolvent 
National bank in the hands of a receiver appointed by the Comptroller 
of the Currency is exempt from taxation under State laws. (Rosen- 
blatt V. Johnson, 104 U. S., 462; see Woodward v, Ellsworth, 4 Colo., 
580.) And where a National bank has become insolvent and the prop- 
erty representing the capital stock has been swept away, no tax on the 



Digitized by CjOOQ IC 



141 

sharei can be collected from the recetrer under a statute requiring a 
tax to be paid by the bank. (City of Boston v. Beal, 55 Fed. Rep., 26; 
8. c 51 Fed. Rep., 806.) 

REPOBT to COMFmOLLKE NoT BVIOEKCB OF VALUE OF SHABX8.— The 

written report of the offloere of a National bank to the €k)mptroller of 
the Currency, made pursuant to Section 5211, Rev. St U. S., does not 
purport to glTe the actual or estimated value of the bank's property, 
and is incompetent, alone, as a basis from which to deduce the actual 
Talue of the bank's stock. (Patterson v. Plummer, 10 N. D., 95.) 

LiCENSB Tax. — Neither the State nor its municipalities can impose a 
liooiae or privilege tax upon the National banks. (State v, (dement 
Nat Bank, 84 Vt, 167; Mayor v. First Nat Bank, 59 Cku, 648; City of 
Carthage v. First Nat Bank, 71 Mo., 508; National Bank of Chattanooga 
V. Mayor, 8 Heiskell (Tenn.), 814.) 

Collection of Taxis. — ^While the tax is upon the shares it is usually 
collected from the banks, they paying for their shareholders. The 
right of the States to collect the tax in this manner has been sustained 
by the United States Supreme Court (National Bank v. Common- 
wealth, 9 Willi., 353.) But the bank is not absolutely liable for the tax 
upon the shares; to render it liable it must be shown to have, or have 
had, dividends or other property belonging to the shareholders. (Far- 
mers' and Traders' Nat Bank t;. Hoffman, 93 Iowa, 191.) A State may 
require the officers of National banks located within its territory to 
transmit lists of its stockholders to the taxing officers of the various 
towns and villages in which the stockholders who are residents reside. 
(Waite V. Dowly, 94 U. S., 527; First Nat Bank of Youngstown v. 
Hughes, 6 Fed. Rep., 737.) And State courts have jurisdiction to com- 
pel the officers of National banks by mandamus to exhibit to the county 
assessors the list of the shareholders in their banks; and to this end 
it is not necessary the statute should be supplemented by State legis- 
lation. (Paul V. McQrau, 8 Wash. St, 296.) Where a National bank 
has become insolvent and the property representing the capital stock 
has been swept away, no tax on the shares can be collected from the 
receiver under a statute requiring the tax to be paid by the bank. {City 
of Boston V. Beal, 51 Fed. Rep., 306; s. c, 55 Fed. Rep., 26.) 

A0BEB1CSNT OF BANK TO Pat Taxes.^Au agreement by a National 
bank to pay taxes on its stock to it, and assessed at the time against 
the sellers, in consideration of being allowed to retain the dividends 
and surplus. Is not illegal, although the taxes are not properly \ 
(LnU V. Anamosa Nat Bank, 110 Iowa, 537.) 



Digitized by CjOOQ IC 



143 

Tax Upoit Depositb. — The rale that a State can exercise no control 
over a National bank, except as Congress may permit, does not prevent 
the States from taxing the deposits therein against the depositors; and 
the State may make the bank its agent to collect the tax. (State v. 
Clement Nat Bank, 84 Vt, 167; Clement Nat Bank t;. Vermont 231 U. 
S., 120.) And the contract of a National bank, voluntarily made in 
pursuance of the State Statute, to pay to the State the tax deposits, Is 
a contract designed to promote the bank's interests in an authorized 
branch of its business, and is not ultra viret, (Id.) 

Rkmeot fob Illegal Taxation. — If the tax is illegal the bank may, on 
behalf of its stockholders, maintain a suit to enjoin the collection 
thereof. (Cummilngs v. National Bank, 101 U. S., 153; Hills v. Ex- 
change Bank, 105 U. S., 319; Pelton v. Commercial Nat Bank, 101 U. S., 
143; Boyer v. Boyer, 113 U. S., 143; Third Nat Bank v. Hughes, 76 Fed. 
Rep., 385.) But there must be more than a mere apprehension that 
the National Bank Act wiU be violated. (First Nat. Bank v, Albright 
208 U. S., 548.) The discrimination must be aifirmatively shown. 
(Amoskeag Savings Bank v. Purdy, 231 U. S., 373.) Two banks against 
the stock of which separate assessments have been made can not join 
in such a suit (Jones v, Rushville Nat. Bank, 138 Ind., 87.) Where 
there is a tribunal empowered to grant full relief in such cases, an 
injunction will not ifisue until application shall have been made to 
such tribunal. (Albuquerque Nat Bank i;. Perea, 147 U. S., 87; First 
Nat Bank v. Bailey, 15 Mont, 301. See Eaton v. Union (bounty Nat 
Bank, 141 Ind., 136; Castles v. City of New Orleans, 46 La. Ann., 542; 
First Nat Bank v, Brodhecker, 137 Ind., 693.) Where a National bank 
seeks an injunction on the ground of excessive valuation of its shares, 
the sum admitted to be due must be first paid or tendered. (Albuquer- 
que Nat. Bank v, Perea, 147 U. S., 87.) A court of equity may restrain 
the sale of the property of the bank for taxes assessed upon the stock 
of its shareholders. (Brown v. French, 80 Fed. Rep., 166.) Such an 
action may be maintained by a receiver. (Id.) 

§ 14S. State Taxation of National Bank Notes.— That dreu- 
lating notes of National banking associations and United States 
legal-tender notes and other notes and certificates of the United 
States, payable on demand and circulating or intended to circulate 
as currency, and gold, silver, or other coin shall be subject to 
taxation as money on hand or on deposit under the laws of any 
State or Territory: Provided, That any such taxation shall be 
exardsed in the same manner and at the same rate that any such 



Digitized by CjOOQ IC 



us 

state or Territory shall tax money or currency drcnlating as money 
within its jurisdiction. 

That the provisions of this act shall not be deemed or held to 
change existing laws in respect of the taxation of ITational banking 
associations. (Act August 13^ 1894, Ch. S81, Sees. 1 and 2; S8 
Stat L., 278.) 

This does not apply to the tMUik tasulng the noites, but to the holders 
thereof. 

§ 146. United States Bonds Xzempt from Taamtton.— All stocks, 
bonds. Treasury notes, and other obligations of the United States 
shall be exempt from taxation by or under State or municipal or 
local authorily. (Eev. Stat. TJ. S. 3701.) 

So far as this section prohibits State taxation of Isgal-teoder notes it 
was repealed hy Act August 18, 1894. (See preceding section.) 

§ 147. Tax on Ciroulation of State Banks, etc.— That cTery 
person, firm, association, other than National bank associations, 
and every corporation. State bank, or State banking association 
shall pay a tax of ten per centum on the amount of their own notes 
used for circulation and paid out by thenu (Act Feb. 8, 1875, 
Sec. 19; 18 Stat.!/., 311.) 

§ 148. Tax on Hotes of State Banks, etc., Used for Ciroulation 
and Paid Out by National Banks, State Banks, etc.— That every 
such person, firm, association, corporation. State bank, or State 
banking association, and also every National banking association, 
shall pay a like tax of ten per centum on the amount of notes of 
any person, firm, association other than a National banking asso- 
ciation, or of any town, city, or municipal corporation, used for 
circulation and paid out by them. (Act Feb. 8, 1875, Sec. 20; 
18 Stat. L, 311.) 



Digitized by V^jOOQ IC 



CHAPTER Vin. 
Dissolution and Bbobitsbship. 

Section 149. YoltmtaTy Liquidation. 

150. Notice of Intention to Go into Liquidation. 

151. Mode of Enforcing Stockholders' Liability. 

15J&. Appointment of Beceiver for Failure of Bank to Pay 
Its Notes. 

153. Appointm^it of Beceiver Where Franchise Forfeited 

— ^In Cases of Insolvency. 

154. Duties and Powers of Beceiver — ^Deposit of Funds. 

155. Advertisement of Comptroller to Creditors. 

156. Dividends to Creditors. 

157. Injunction upon Beceivership. 

158. Expenses of Protest^ Examination and Beceivership. 

159. Equities in Beal Estate, etc. — Protection of — ^Becom- 

mendation of Beceiver. 

160. Same Subject — Approval of Comptroller and Secre- 

tary of Treasury. 

161. Same Subject — ^Mode of Paying for Property. 

162. Disposition of Assets After Payment of Creditors — 

Agent for Stockholders — Mbde of Distribution. 

163. Violation of National Bank Act — How Determined 

— Penalty for — Liability of Directors. 

164. Transfers in Contemplation of Insolvency — Prefer- 

ences. 

§ 149. Voluntary Liquidation.— Any association may go into 
liquidation and be closed by the vote of its shareholders owning 
two-thirds of its stock. (Bev. Stat. U*. S. Sec. 5220.) 

For full particulars and forms see Ch. VIII» Part IV* 

144 



Digitized by CjOOQ IC 



145 

s' MBnifo.— The ownen of two-thirds of the stock maj 
inote to liquidate the bank, thoni^ they are the directors and executiTo 
officers thereof, since they owe no duty to dissenting minority stock- 
holders to continue the bank. (Oreen v. Bennet, 110 N. W. Rep., 108.) 

The action must be taken at a meeting of stockholders duly assem- 
bled. The notice of meeting should clearly indicate the business to 
be transacted. The TOte in faTor of the liquidation must represent 
two-thirds of att the stock. But shareholders owning two-thirds of the 
stock may place the bank in liquidaticAi, though this may be contrary 
to the wishes, and against the interests, of the owners of the remainder 
of the stock. (Watkins v. National Bank of Lawrence, 61 Kans., 264.) 

A person who, with full knowledge of all the steps taken in placing 
a bank in liquidation, receiTes and retains a dividend paid by the 
officers in control of the liquidating bank, will not be heard to deny 
the TaUdity of the liquidation. (Id,) See also First Nat Bank of 
Centralia v. Marshall, 26 lU. Ai^., 440, and Blwood v. First Nat Bank, 
41 Kans., 475. 

New Goutbacts.— After a National bank has been placed in liquida- 
tion, its officers have no authority to transact any business in its name, 
esc^t such as is implied in the duty of winding up its affairs. (Rich- 
mond V. Irons, 121 U. 8., 27; Schroder v, Manufac Nat. Bank of Chi- 
cago, 133 U. S., 67; Moss v. Whitsel, 108 Fed. Rep., 679.) 

TBAVsncBS or Stock — ^InsPKcnoif of Books.— A National bank in 
liquidation can not be compelled to enter subsequent transfers of stock 
on its books and issue new certificates therefor. (Mulr v. Citizens' 
NationaT Bank, 39 Wash., 67.) The stockholders may in a proper case 
by mandamus require the officers and directors to exhibit to them the 
books, papers and assets of the bank, and permit them to examine the 
same. (Matter of Tuttte v. Iron Nat Bank, 170 N. T., 9.) 

CoBPOBATB BziSTiNOE.— The placing of the bank in liquidation does 
not dissolve it as a corporation; but it will continue to exist as a body 
corporate for the purpose of suing and being sued until its affairs are 
finally closed. (Natl. Bank v. Insurance Co., 104 U. S., 64; Ordway v. 
Central Nat Bank, 47 Md., 217; Farmers' Nat Bank v. Suther, 28 Okla., 
806; Planten v. Nat Nassau Bank, 174 App. Div. (N. T.), 264. But see 
Hodgson V. McKinstry, 3 Kans. App., 412.) > 

AsssTS Bkcx>ick Tbiust Fund.— The assets of a bank in liquidation 

become a trust fund to be administered for the benefit of all creditors 

pro rata, and while the bank retains its corporate existence and may 

be sued, the effect of a Judgment obtained against it by a creditor is 

10 



Digitized by CjOOQ IC 



146 

only to fix the amount of the debt, and the Judgment plaintiff can ao- 
quire no lien which will give him an adrantage oyer other creditonk 
(Merchants' Nat Bank v. National Bank of Llllington, 281 Fed. Rep., 
666.) 

RscBiYBa.— Where the hank Is insolvent the Com|>troller of the Cur- 
rency may i^point a receiTer therefor, notwithstanding the sto>ck- 
holders have voted to place the bank in liquidation. (Washington 
Nat Bank of Taooma v. Bckels, 67 Fed. Rep., 870.) And a court of 
competent Jurisdiction may appoint a receiver for a liquidating bank, 
where the bank is insolvent, or its affairs are being mismanaged. 
(Irons V, Manufacturers' Nat Buik, Fed. CSase No. 7068; Blwood v. 
^First Nat Bank, 41 Kans., 476. But see Watklns v. National Bank of 
Lawrence, 61 Kans., 264.) 

IiiQim>ATiNo Bank as Gabnisheb.— The right of a creditoY* of a de- 
positor to make the bank a garnishee is not affected by the Utit that 
the bank has gone into voluntary liquidation. (Birm4ngham Nat Bank 
V. Mayer, 104 Ala., 684.) 

DiviDBNDB.— ^Liquidation dividends of a National bank belong to tho 
holders of shares, whether those shares be recorded upon the books of 
the bank or not, and must be paid to the holders of such shares on de- 
mand. The negotiability or transferrable character of the stock of a 
National bank depends upon the laws of the United States, and is not 
affected by State laws. (Bath Savings Institution v. Sagadahoc Nat 
Bank, 89 Maine, 600.) 

Suits Aoaiust Dibbctobs— DsifAin).— ^Where a National bank gKMe 
into voluntary dissolution, and a resolution is adopted by more than 
two-thirds of the shareholders authorizing the appointment by the 
stockholders of a committee to liquidate the affairs of the bank, a 
stockholder, in an action in the name of the corporation for an ao> 
counting by directors for losses resulting from their mismanagement 
wrongful acts and negligence, need ndt show a demand upon, and a 
refusal by the liquidating committee to bring the action. (Planten v. 
National Nassau Bank, 174 App. Div. (N. T.), 264.) Nor is the plain- 
tiff in such action required to show a demand on the stockholders, (/tf.) 

§ 16A« Votioe of Intention to Go into liquidation.— Whenever 
a vote Ii taken to go into liquidation it shall be the duly of the 
board of directors to cause notice of this fact to be certified^ under 
the seal of the association, by its president or cashier^ to the Comp- 
troller of the Currency, and the publication thereof to be made for 



Digitized by CjOOQ IC 



147 

a period of two months in a newspaper published in the city of 
New York^ and also in a newspaper published in the city or town 
in which the association is located, or if no newspaper is there 
published, then in the newspaper published nearest thereto, that 
the association is closing up its affairs, and notifying the holders 
of its notes and other creditors to present the notes and other 
claims against the association for payment (Bev. Stat XT. S. 
Sec. 5221.) 

F6r full iMurticulan see Clu VIII, Part IV. 

Date of Liquidatioh. — ^The liqaidation takes affect on the date sped- 
fled in the shareholders' resolution and, if no time is mentioned therein 
then on the date of the vote and not on the receipt of the notice by 
the ComirtroUer. 

§ 151. Mode of Enforcing StooUioldeii' liability.— That when 
any National banking association shall have gone into liquidation 
under the provisions of section five thousand two hundred and 
twenty of said Statutes, the individual liability of the shareholders 
provided for by section fifty-one hundred and fifty-one of said 
Statutes may be enforced by any creditor of such association, by 
bill in equity in the nature of a creditor's bill, brought by such 
creditor on behalf of himself and of all other creditors of the as- 
sociation, against the shareholders thereof, in any court of the 
United States having original jurisdiction in equity for the dis- 
trict in which such association may have been located or estab- 
lished. (Act June 30, 1876, Ch. 156, Sec. 3 ; 19 Stat. L., 63.) 

This is the only authorized procedure for enforcing the individual 
liability of the shareholders of a National bank which has gone into 
voluntary liquidation. (Williamson v. American Bank, 109 Fed. Rep., 
86; 115 Fed. Rep., 793.) The liability may be enforced to pay notes is- 
sued by the bank for money borrowed by it (Wyman v. Wallace, 201 
U. 8., 230.) And the creditor need not obtain judgment on the notes. 
(Id.) 

§ 152. Appointment of Eeceiyer for Failnre of Bank to Pay Its 
Hotes. — On becoming satisfied, as specified in sections fifiy-two 



Digitized by CjOOQ IC 



14t 

htrndred and tweniy-six and fiffy-two hundred and twenty-seven, 
that any association has refused to pay its circulating notes as 
therein mentioned, and is in default, the Comptroller of the Cur- 
rency may forthwith appoint a receiver, and require of him such 
hond and securily as he deems proper. (Bev. Stat XT. S. Sec. 
6234.) 

§ 153. Appointment of SeoelTer Where Franchise Forfeited— 
la Cases of Insolvenoy. — That whenever any National hanking 
association shall be dissolved, and its rights, privileges, and fran- 
chises declared forfeited, as prescribed in section fifty-two hundred 
and thirty-nine of the Bevised Statutes of the United States, ot 
whenever any creditor of any National banking association shall 
have obtained a judgment against it in any court of record, and 
made application, accompanied by a certificate from the clerk of 
the court stating that such judgment has been rendered and has 
remained unpaid for the space of thirty days, or whenever the 
Comptroller shall become satisfied of the insolvency of the Na^ 
tional banking association, he may, after due examination of its 
affairs, in either case, appoint a receiver, who shall proceed to 
close up such association, and enforce the personal liability of the 
shareholders, as provided in section fifiy-two hundred and thirly- 
four of said statutes. (Act June 30^ 1876, Ch. 156, Sec. 1; 19 
Stat L., 63.) 

This section is not unooHstitutionaL (BushneU t;. Leland,' 164 U. S., 
684.) Congress had power to apply it to banks in the District of 
Columbia. (Lyons t;. Bank of Discount, 164 Fed. Rep., 891.) A debtor 
of the bank cannot question the authority of the receiver. (Jaoobeoiki 
1^. Berry, 185 IlL App., 415.) 

Dboisioks of CoMFROixis. — The decision of the C<»nptroUer that 
the bank is insolvent is final, and is not reviewable by the courts. 
(Washington Nat Bank of Tacoma t;. Eckels, 57 Fedv Rep., 870; Piatt 
V. Beebe, 57 N. T., 339; Wheelock v. K(^t, 77 lU., 296.) Nor is the 
Comptroller's power in this respect limited by the authority given 
to this stockholders under Rev. Stat U. S., Sec 5220, to place the bank 
in liquidation (Id,) ; nor by the act of 1876, authorising tha appoint- 
ment of an "agent" for the stockholders, (/tf.) 



Digitized by CjOOQ IC 



149 

JuKDuncnoir or Ooubtb to Appoivt Bacsnm.— It hM beea IMOi in 
Bereral cases that the power of the Comptroller to appoint a recelTer is 
not exclusiye, and that a court of equity of competent Jurisdiction maj 
direct a receivership where, aooordinir to the rules of equity, it may dd 
so in the case of other corporations. (Irons v. Manufacturers' Hat 
Bank. Fed. Case No. 7068; Wriitht v. Merchants' Nat Bank, IM. Case 
No. 18,084; King i;. Pomeroy, 121 Fed. Rep., 287.) A receiTer so ap- 
pointed may enforce the individual liability of the stockholders for the 
debts of the bank. (King v. Pomeroy, 121 Fed. Rep., 287.) A receiver 
may be appointed in a proper case by a Federal court for a bank which 
has gone into voluntary liquidation. (Richmond v. Irons, 121 U. &, 
27.) But the expenses of such a receiver can not be charged to the 
stockholders as a part of their statutory liability. (Id.) 

JBrwwct or AFPonmcan or Rbgeivb.— Tho fUlure of a bank and the 
seizure by the Comptroller ot the Currency ends the exercise of volition 
by the oiBcers of the bank, suspends the payment of checks, matures all 
demand notes held by the bank, and applies to the payment of such 
notes, all balances on the books of the bank, standing to' the credit of 
the makers of the notes. (Park Nat Bank of (Chicago v. Neblack, 67 
DL App., 683.) But the aK)Ointment of a receiver for a National bank 
by the Comptroller of the Chirrency does not dperate to dissolve the 
corporation. (CHiemlcal Nat Bank v. Hartford Deposit Company, 161 
U. S^ 1; Bank of Bethel v. Pahquioque Bank, 14 Wall., 388; Chemical 
Nat Bank v. Hartford Deposit Company, 166 IlL, 622.) 

PsBssNTacKiTT OT PAnn.— Where a National bank has been placed in 
the hands of a receiver pi^per payable at the bank sho/hld be presented 
at the office of the Receiver. (Hutchison v, Crutcher, 88 Tenn., 421.) 
Where a bank examiner is in charge the paper should be presented 
to him. (Auten i^. Manistee Nat Bank. 67 Ark., 248.) 

BA N KBUPTcnr Law Dobs Not Apply. — ^Insolvent National banks can 
be wound up only in the mode provided by the National Bank Act; the 
Federal laws on bankruptcy do not apply. (Cook CcNmty Nat Bank v. 
United States, 107 U. 8., 446.) 

QuESTioNiNo VALTOirT OF ApponmooTr.— fTho legality of the i^^point- 
ment of a receiver can not be inquired into by the debtors or stock- 
holders of the bank when sued by him; as to them, the action of the 
C<taiptroller in making the appointment is conclusive until set aside 
on the application of the bank. ((3adle t^. Baker, 20 WalL, 660; Weitael 
f. Brown, 224 Mass., 190; Peters v. Booster, 66 Hun., 607; Young v. 
Wempke, 46 Fed. Rep.. 864.) 



Digitized by CjOOQ IC 



160 

SuFBKvnKttT Fown or CoKPTBOixnu— The reoeiyer is the instrument 
of the Comptroller, and is subject to the general direction of that 
officer (Kennedy v, Gibson, 8 WalL, 506), and may be renuAred by the 
Comptroller at any time. (Kennedy v. Gibson, 18 WalL, 505.) But 
the langus^ of the statute that the receiver shall act under the di- 
rection of the (Comptroller means no more than that the receiver shall 
be subject to the direction of the Comptroller; it does not mean that 
he shall do no act without special instructions. Thus, he may bring 
an action to recover an ordinary debt due to the bank without having 
received special instructions* from the Comptroller to do so. (Bank v, 
Kennedy, 17 Wall., 19.) Specific authority given to a receiver to bring 
an action against a stockholder to recover an assessment is not with- 
drawn or affected by a subsequent general authority tor compromise or 
sell all the claims or assets of the bank. (McLain v, Rankin, 119 Fed. 
Rep., 110.) 

§ 154. Duties and Powiers of BeoeiTer— Deposit of Funds. — 

Such receiver^ under the direction of the Comptroller^ shall take 
possession of the books^ records^ and assets of every description of 
such association, collect all debts, dues and claims belonging to it, 
and, upon the order of a court of record of competent jurisdiction, 
may sell or compound all bad or doubtful debts, and, on a like 
order, may sell all the real and personal property of such associa- 
tion, on such terms as the court shall direct; and may, if necessary 
to pay the debts of such association, enforce the individual liabilily 
of the stockholders. Such receiver shall pay over all money so 
made to the Treasurer of the United States, subject to the order 
of the Comptroller, and also make report to the Comptroller of all 
his acts and proceedings: Provided, That the Comptroller may, 
if he deems proper, deposit any of the money so made in any 
r^ular Government depositary, or in any State or National bank 
eitiier of the city or town in which the insolvent bank was located, 
or of a ciiy or town as adjacent thereto as practicable; if such de- 
posit is made he shall require the depositary to deposit United 
States bonds or other satisfactory securities with the Treasurer of 
the United States for the safe-keeping and prompt payment of the 
money so deposited. Such depositary shall pay upon such money 
interest at such rate as the Comptroller may prescribe, not less, 
however, than two per c^itum per annum upon the average monthly 



Digitized by CjOOQ IC 



161 

•moimt of such depodtt. (Ber. Strt. XT. 8. See. 6284, m amndei 
I7 Act May 15, 1916; 39 Stat L., 122.) 

OoRTBAon or Rionvii.— The ReoelTer can not charge the eatate of 
the bank hy anjr executory contract, unlen anthorlsed so to do hy the 
proTiaiona of the law and the order of a court of competent JariadlcUon 
obtained npon the tenna of the law. (JEBllla v. Uttle, 27 Kana., 701. 
SeealBO People'a State Bank of Lakota v. Franda, 8 N. D.. 169.) 

Saub bt BacBmBL— Before the recdTer can wM any of the ur o perty 
of the bank he shoold hare the approfral of the Ck>niptroUer and mnet 
hare an order from a court of comji^etent Jurladictlon; a mUo made 
without such an order Is TOld. (Schofleld 1^. Baker, 212 Fed. Rep., 504; 
IBUIs V, Little, 27 Kans., 707. See also In re Barle, 92 Fed. Rep., 22.) 
Where the order dlrecta him to sell* he can not exchange or trade the 
property fc^ other property. (EUIs 1^. Little, 27 Kans., 707.) And an. 
order to sell the personal and chattel property of the bank will not 
anthorlse him to assign a contract with respect to realty. (Baker v. 
Schofleld, 221 Fed. Rep., 822.) ▲ sale made by a Reoelyer under order 
of a court Is to all intents and purposes a Judicial sale. (In re Third 
National Bank, 4 Fed. Rep., 775); and the approval thereof by the 
courts has the force and effect of n Judgmient, and such proceedings 
are not subject to collateral attack. (Schaberg's Estate 1^. McDonald, 
60 Neb., 498.) For a case where action was brought against a Re- 
ceirer for making a wrongful sale of the bank's assets, see Moss v. 
Goodhart, 209 Fed. Rep., 102. 

CoMPOUirDiHo Debts.— -Bad or doubtful debts due to a National bank 
can not be compounded upon the order of the Comptroller of the Cur- 
rency; but for this purpose the order of some court of competent Juris- 
diction Is also required. (Case 9. Small, 10 Fed. Rep., 722.) It Is 
questionable whether the court has power to authorize the compound- 
ing of the statutory liability of a stockholder In a National bank. (In 
re certain stockholders of the California National Bank of San Diego, 
53 Fed. Rep., 88; Butler v. Poole, 44 Fed. Rep.* 586.) And It has been 
held that a JudguKent recoTcred against a stockholder on an assessment 
made by the Comptroller, although uncollectible, Is not a "bcul or 
doubtful debt," which a court may authoHze the Receiver to compound, 
under Rer. St, Section 5284. (In re Barle, 96 Fed. Rep., 678.) But a 
reoeHer meay enforce a compromise agreement entered Into for the 
setttement of a sto<ddiolders' llablUty. (McClain v, Rankin, 119 Fed. 
Rep., 110.) And with the approval of the Court that appointed him, 
he may compromise a Judgment debt of two Joint debtors, where he 



Digitized by CjOOQ IC 



152 

has been unable to find any pr<q[>erty of either of them, by releasing 
the debtors on reeelTing from- one of them a sum of money less than 
the amount of the Judgmeiit (Brooks v. Neal, 228 MSass^ 467.) 

Suits bt Aifo AoAnrsT RaanvEB.— ^The Receiver may sue either in 
his dwn name or in the name of the bank. (National Bank t;. Ken- 
nedy, 17 Wall., 19.) And a creditor may bring suit either against the 
receiver or the bank. (Bank of Bethel v. Pahquioque Bank, 14 WlalL, 
833; Chemical Nat Bank of Chicago t;. Hartford Deposit Co., 156 111., 
522.) In the case of ordinary debts due to the bank the Receiver may 
bring a suit to recover them without' special directions from the Cknnp- 
tnftler. (Id.) But when the individual liability of the stockholders 
is to be enforced, the Receiver, before beginning suit, nxust have the 
direction of the Comptroller. (Kennedy v, Gibson, 8 Wall., 505; Bank 
V, Kennedy, 17 Wall., 19.) As to the sufficiency of the Comptroller's 
directions see Weitzel v. Brown, 224 Mass., 190; Bowden v. Johnson, 
107 U. S., 251. 

JuBisDionoif OF Fedebal Coubt.— The receiver of an inscAvent Nsr 
tional bank may bring suit in a Federal court to collect assets of the 
bank regardless of the citizenship of the parties. (Fisher v. Toder, 58 
Fed. Rep., 565; Linn County Nat. Bank t;. Crawford, 69 Fed. Rep., 582.) 
So, a suit by the Receiver to enforce the individual liability of the 
stockholders in a case arising under the laws df the United States, and 
where the amount involved exceeds |2,000, is within the jurisdiction of 
the United States Circuit Court (Thompson t;. German Insurance Ok, 
76 Fed. Rep., 892.) See also Hot Springs Independent School District v. 
First Nat Bank of Hot Springs, 61 Fed. Rep., 417; Auburn Savings 
Bank v, Hayes, 61 Fed. Rep., 911. The Receiver is an officer of the 
United States within the meaning of Section 668, Rev. Stat U. S., 
which gives the District Courts jurisdiction of "all suits at common 
law brought by the United States, or any officer thereof authorized by 
law to sue." (Stephens v. Bemays, 41 Fed. Rep., 401.) Where the 
Receiver takes a case by appeal or writ of error to^ the Supreme C^ourt 
of the United States, he is not required to give a bond td answer in 
damages and costs. (Pacific Nat Bank v, Mixter, 114 U. S., 462; Pep- 
per V. Fidelity and C^ualty Co., 125 Fed. Rep., 822.) 

State Cottrts — Stats Statutks.— /The Receiver may sue in the State 
courts. (Fish v. Clin, 76 Vt, 120.) He wiU not be treated by the State 
courts as a foreign Receiver, and can sue therein to recover an assess- 
ment levied on the shareholders of a bank located in another State. 
(Peters v. Foster, 56 Hun., 607.) An action by a Receiver against the 
stockholder is governed by the State statute of limitations. (Butler v, 
Poole, 44 Fed. Rep., 586.) 



Digitized by CjOOQ IC 



163 

Dnmcr ATTotanrr^^BtATm Statutis.— As the Reeelrer is the scent 
of the United States, suits instituted by him should, under Section S80, 
Revised Statutes, be conducted by the United States district attorney 
for the district, but this proTision is only directory, and if the ReceiTer 
employs other counsel in a suit against a debtor of the bank, the de- 
fendant can not be heard to make the objection that this duty of the 
local officer of the Goyemment has been devolved upon another. (Ken- 
nedy V. Gibson, 8 Wkll., 498.) But United States district attorneys are 
not entitled to any compensation, in addition to their salaries, for 
conducting suits brought by Receivers of National banks. (Gibson v. 
Peters, 150 U. S., 842.) The Receiver may at any time dismiss an 
attorney employed by him, regularly or otherwise, to prosecute claims 
of the bank, and employ another in his place, whom the court will, by 
order, substitute in the place of the dismissed attorney, except as to 
such cases as the latter may have commenced and finished. (In re 
Herman, 60 Fed. Rep., 517.) 

RacamrKB Oocupics Samb Positioh as thb Bakk.— Where a Receiver 
is placed in charge of the assets of a National bank, he stands, as to 
such assets, in the place of the bank, and is chargeable with knowledge 
of all facts known to the bank affecting the character of such assets. 
(People's State Bank of Lakota v, Francis, 8 N. D., 869.) And he may 
bot appropriate to the use of the bank or its creditors any seeming 
asset that in equity and good conscience belongs to another, or enforce 
against another any claim which ought not to be enforced. (Skud t^. 
TillinsMst, 195 Fed. Rep., L) 

Suits Aoaiic st Dibsctobs.— Suits against the directors for neglect or 
mismanagement of the affairs of the bank should usually be brought 
by the Receiver, but if the Receiver refuses to act, such suit may be 
brought by any shareholder on behalf of himself and the other share- 
holders. (Brinkerhofl t;. Bostwick, 88 N. T., 62w) See note to fl68, 
page 163. 

FowEB or Bakk BzAicnnEB nr C!habob or Bank.— A. bank examiner, ^ 
who takes charge of the assets of a National bank under the directions 
ot the Comptroller, is not the agent for the bank in such negotiations 
as the bank may be permitted to enter into with a view to the re- 
sumption of the business. (Tecumseh Nat Bank v. Chamberlain Bank- 
ing House, 68 Neb., 168.) 

DCTT or DiBEOTOBs TO PusgBVB AssBTS.— The duty of the directors 
to take the necessary steps to preserve the assets of the bank does not 
end merely because a bank examiner has taken possession of the bank 
by direction of the Gomptrdller of the Currency. (Robinson v. Hall, 



Digitized by CjOOQ IC 



164 

^S Fed. Rep^ 222.) Their duties as directors in this regard do not 
ceaae until a Receiver has been appointed. (Id.) Thus, it would be 
their duty to see that a mortgage giyen to the bank was duly recorded, 
notwithstanding a bank examine was in charge. (Id,) 

§ 155. Advertisement of Comptroller to Creditors.— The Comp- 
troller shall, upon appointing a receivery cause notice to be given, 
by adyertisement in such newspaper as he may direct for three 
consecutiye months, calling on all persons who may have claims 
iBgainst such association to present the same, and to make leggl 
proof thereof. (Bev. Stat IT. S. Sec. 5235.) 

§ 156. Dividends to Creditors. — From time to time, after full 
provision has been first made for refunding to the United States 
any deficiency in redeeming the notes of such association, the 
Comptroller shall make a ratable divid^id of the money so paid 
over to him by such receiver on all such claims as may have been 
proved to his satisfaction or adjudicated in a court of competent 
jurisdiction, and, as the proceeds of the assets of such association 
are paid over to him, shall make further dividends on all claims 
previously proved or adjudicated; and the remainder of the pro- 
ceeds, if any, shall be paid over to the shareholders of such asso- 
ciation, or tiieir legal representatives, in proportion to the stock by 
them respectively held. (Bev. Stat. XT. S. Sec. 5236.) 

How CL^ncs BsTABLisHBD. — The claims of creditors may be proved 
before the Receiver acting under the supervision of the Oomptroller, 
or established by suit against the bank. But creditors must seek their 
remedy through the Comptroller in the mode prescribed by the statute; 
they can not proceed directly in their own names against the stock- 
hdlders or debtors of the bank. (Kennedy v. Gibson, 8 WalL, 505; 
Bank of Bethel t;. Pahquioque Bank, 14 WML, 383.) The decision of 
the Receiver rejecting a daim is not final, but the creditor still has 
the right to sue therefor. (Bethel v, Pahquioque Bank, 10 WalL, 388.) 
But a Judgment only detennlnes the validity of the claim, and the 
creditor must await the pro-rata distribution by the Comptroller, and 
can not have execution <Jn his Judgment. (Id.) A Judgm^it against 
the Receiver directing the manner in which the assets of the bank 
shall be distributed should be certified by the Receiver to the Comp- 
tndler of the Currency and be paid in due course of distribution. 
(HerrOl v. NaUooia Sank of Jacksonville, 178 U. a, 181.) 



Digitized by CjOOQ IC 



165 

iHinEwr.— Claims when prored to tlia ntiiftietloii of tbiB Cctai)Hroll«r 
are upon the same footing as If thej had been pat la Judgment, and 
bear interest the same as a Judsment (National Bank of Common- 
wealth V. Mechanics' National Bank, H U. a, 4S7.) Bnt a creditor 
who has obtained a Judgment against the bank is not entitled to in- 
terest upon the face of the Judgment^ but only upon the amount of the 
claim at the date of the faUure. (White v. Knox, 111 U. 8., 784.) In 
estimating the dividends to be paid out of the assets, the value of the 
claims at the time the insolyency is dedared is to be taken as the basis 
of distribution. (White v. Knox, 111 U. 8., 784.) Interest should be 
allowed during the period of administration if the sum realised from 
the assets is sufficient t6 pay both principal and interest to all creditors 
who have established claims. (National Bank of Commonwealth v. 
Mechanics' Nat Bank, 94 U. 8., 437; White t;. Knox, 111 U. 8^ 784.) 
See also Chemical Nat. Bank t;. Armstrong; 59 Fed. Rep., 872. 

SscuBBD CixDiTots— CocuLTxaALS.— A socuTed creditor of an Insolvent 
National bank may prove and receive dividends upon the face of his 
daim as it stood at the time of the declaratidn of insolvency, without 
crediting either his collaterals, or his collections made afterwards, sub- 
ject always to the proviso that dividends must cease whexk from them 
and the collaterals realized the claim has been paid in full. (MerriU v. 
National Bank of Jacksonville, 173 U. 8., 181; Chemical Nat Bank v. 
Armstrong, 69 Fed. Rep., 372. Bee also People v. RemingtoHi, 121 N. 
Y., 328.) 

Priobitt— Ciaucs Dub thk Urubd BxATCs.^The priority of the 
United Btates is only for the deficiency in redeeming the notes of the 
bank. (Ck>ok County Nat Bank v. United Btates, 107 U. 8., 445.) 8eo- 
tion 3466, U. 8. Rev. Stat, which gives the United States a priority 
for all claims due it from insolvent debtors, dc^ not apply. (Id.) As 
against the proceeds of the bonds deposited to secure the notes of the 
bank, the United States can set off no claim except for such deficiency. 
{Id.) And the five per cent redemption fund can not be retained by 
the Treasurer to pay taxes due to the United States. (Jacksoh t;. 
United States, 20 Ct Cls., 298.) The mere fact that a deposit of public 
moneys was wrongful, and known to be so by the bank, does not give 
a claim therefor priority. (Lucas Ck>unty v. Jamison, 170 Fed. Rep., 
338.) 

Atttrobxtt of thx CV>ifFnuiLLKB.— Under Sections 5284 and 5286 of 
the Revised Statutes, the assets of an insolvent National bank so col- 
lected by the receiver are entirely within the control and disposition 
of the Comptroller of the Chirrency, and the Receiver is without power 



Digitized by CjOOQ IC 



156 

in respect to the pasrment of diyidends. The RecelTer is the mere in- 
strument of the Comptroller, and is subject in all respects to his in- 
structions. (Merrill t;. Natiolial Bank of Jacksonyille, 173 U. S., 131.) 

Suits on Rejected Claims.— Notwithstanding the insolvency of a Na- 
tional bank, and the appointment of a Receiver by the Comptroller of 
the Currency, the corporation continues as a legal entity, and an action 
may be maintained against it on a claim rejected by the Receiver. 
(Denton v. Baker, 79 Fed. Rep., 189.) 

AocEPTAKCB OF DIVIDENDS— BsTOPPSL.-^The accsptauce of dividends 
upon a claim against an insolvent National bank as allowed by the 
Comptroller of the Currency does not estop the depositor from after- 
wards maintaining an action against such bank upon a claim not oorv- 
ered by such allowance of the Comptroller. (Chemical Nat Bank of 
Chicago V. World's Columjbian Exposition, 170 111., 82.) 

§ 157. Injnnction upon Beceiyenliip.- Whenever an association 
against which proceedings have been instituted, on account of any 
alleged refusal to redeem its circulating notes as aforesaid, denies 
having failed to do so, it may, at any time within ten days after it 
has been notified of the appointment of an a^fflit, as provided in 
section fifty-two hundred and twenty-seven, apply to the nearest 
circuit, or district, or territorial court of the United States to 
enjoin further proceedings in the premises; and such court, after 
citing the Comptroller of the Currency to show cause why furth^ 
proceedings should not be enjoined, and after the decision of the 
court or finding of a jury that such association has not refused to 
redeem its circulating notes, when legally presented in the lawful 
money of the United States, shall make an order enjoining the 
Comptroller, and any receiver acting under his direction, from all 
further proceedings on account of such alleged refusal. (Bev. Stat. 
U. S. Sec. 5237.) 

This section gives a bank opportunity to disprove mistaken charges, 
and a method of stopping unwarranted proceedings. (See Moss v. 
Whitzel, 108 Fed. Rep., 579.) 

§ 158. Ezpeniei of Proteft^ Examination and BeoeiTenhip.-H 

All fees for protesting the notes issued by any National banking 
association shall be paid by the person procuring the protest to be 



Digitized by CjOOQ IC 



167 

made, and anoh sisociatiGn shall be liable therefor; but no part of 
the bonds deposited by such aasociation shall be applied to the pay- 
ment of such fees. All expenses of any preliminaTy or other ex- 
aminations into the conditions of any association shall be paid by 
Boch association. All expenses of any receivership shall be paid 
out of the assets of snch association before distribution of the 
proceeds thereof. (Be?. Stat. U. S. Sec. 5238.) 

§ 169. Equities in Beal Estate, etc.— Proteoiion of— Seoom- 
mendation of BeoeiTer.— That whenever the receiver of any Na- 
tional bank duly appointed by the Comptroller of the Currency^ 
and who shall have duly qualified and entered upon the discharge 
of his tmsl^ shall find it in his opinion necessary^ in order to fully 
protect and benefit his said trust, to the extent of any and all 
equities that such trust may have in any properiy, real or personal, 
by reason of any bond, mortgage, assignment, or other proper l^al 
daim: attaching thereto, and which said property is to be sold under 
any execution, decree of foreclosure, or proper order of any court 
of jurisdiction, he may certify the facts in the case, together with 
his opinion as to the value of the property to be sold, and the value 
of the equity his said trust may have in the same, to the Comp- 
troller of the Currency, together with a request for the right and 
authority to use and employ so much of the money of said trust as 
may be necessary to purchase such property at such sale. (Act 
March 29, 1886, Ch. 28, Sec. 1; 24 Stat. L., 8.) 

§ 160. Same Subject— Approral of Comptroller and Secretary 
of Treasury. — That such request, if approved by the Comptroller 
of the Currency, shall be, together with the certificate of facts in 
the case, and his recommendation as to the amount of money which, 
in his judgment, should be so used and employed, submitted to the 
Secretary of the Treasury; and if the same shall likewise be ap- 
proved by him, the request shall be by the Comptroller of the Cur- 
rency allowed, and notice thereof, with copies of the request, cer- 
tificate of facts, and indorsement of approvals, shall be filed with 
the Treasurer of the United States. (Act March 29, 1886, Ch. 28, 
Sec. 2; 24 Stat L., 8.) 



*^ ^ 



Digitized by CjOOQ IC 



168 

§ 161. Same Subject— Xode of Paying for Property. — That 
whenever any such requests shall be allowed as hereinbefore pro- 
vided^ the said Comptroller of the Currency shall be, and is, em- 
powered to draw npon and from such funds of any such trust as 
may be deposited with the Treasurer of the United States for the 
benefit of the bank in interest to the amount as may be recom- 
mended and allowed and for the purpose for which such allowance 
was made: Provided, however, Thsit all payments to be made for 
or on accoimt of the purchase of any such properiy and under 
any such allowance shall be made by the Comptroller of the Cur^ 
rency direct, with the approval of tiie Secretary of the Treasury, 
for such purpose only and in such manner as he may determine and 
order. (Act March 29, 1886, Ch. 28, Sec. 3; 24 Stat L., 8.) 

§ 162. Disposition of Assets After Payment of CreditonHHikgent 
for Stockholders — Xode of Distribution.-- That whenever any as- 
sociation shall have been or shall be placed in the hands of a re- 
ceiver, as provided in section fifty-two hundred and thiriy-foui* 
and other sections of the Bevised Statutes of the United States, 
and when, as provided in section fifty-two hundred and tiiirty-six 
thereof, the Comptroller of the Currency shall have paid to each 
and every creditor of such association, not including shareholders 
who are creditors of such association, whose claim or claims as 
such creditor shall have been proved or allowed as therein pre- 
scribed, the full amount of such claims, and all expenses of the 
receivership and the redemption of the circulating notes of such 
association shall have been provided for by depositing lawful 
money of the United States with the Treasurer of the United 
States, the Comptroller of the Currency shall call a meeting of 
the shareholders of such association by giving notice thereof for 
thirty days in a newspaper published in the town, city, or county 
where the business of such association was carried on, or if no 
newspaper is there published, in the newspaper published nearest 
thereto. At such meeting the shareholders shall determine whether 
the receiver shall be continued and shall wind up the affairs of such 
association, or whether an agent shall be elected for that purpose, 
and in so determining the said shardiolders shall vote by ballot, 



Digitized by CjOOQ IC 



159 

in person or by proj^, each share of stodL entiiling the holder to 
one Tote, and ihe majority of the stock in yahie and number of 
shares shall be necessary to determine whether the said reoeiyer 
shall be continned, or whether an agent shall be elected. In case 
such majority shall determine that the said receiyer shall be con- 
tinned, the said receiyer shall therenpon proceed with the ezecu- 
tion of his trusty and shall sell, dispose of, or otherwise collect 
the assets of the said association, and shall possess all the powers 
and anthority, and be subject to all the duties and liabilities origi- 
nally conferred or imposed upon him by his appointment as such 
receiyer, so far as the same remain applicable. In case the said 
meeting shall, by the yote of a majority of the stock in yalue and 
number of shares, determine tiiat an agent shall be elected, the 
said meeting shall thereupon proceed to elect an agent, yoting by 
baUoty in person or by proxy, each share of stock entitling the 
holder to one yote, and the person who shall receiye yotes repre- 
senting at least a majority of stock in yalue and number shall be 
declared the agent for tiie purposes hereinafter proyided; and 
wheneyer any of the shareholders of the association shall, after the 
election of such agent, haye executed and filed a bond to the satis- 
faction of the Comptroller of the Currency, conditioned for the 
payment and discharge in full of each and eyery claim that may 
thereafter be proyed and allowed by and before a competent court, 
and for the faithful performance of all and singular the duties of 
such trusl^ the Comptroller and the receiyer shall thereupon trans- 
fer and deliyer to such agent all the undiyided or uncollected or 
other assets of such association then remaining in the hands or 
subject to the order and control of said Comptroller and said re- 
ceiyer, or either of them; and for this purpose said Comptroller 
and said receiyer are hereby seyerally empowered and directed to 
execute any deed, assignment, transfer, or other instrument in writ- 
ing that may be necessary and proper; and upon the execution and 
deliyery of such instrument to the said agent the said Comptroller 
and the said receiyer shall by yirtue of this act be discharged from 
any and all liabilities to such association and to each and all the 
creditors and shareholders thereof. Upon receiying such deed, 
assigimient, transfer, or other instrument the person elected such 



Digitized by CjOOQ IC 



160 

agent ehall hold^ control^ and dispose of the assets and property of 
such association which he may reeeiye under the terms hereof for 
the b^iefit of the shareholders of such association, and he may in 
his own name, or in the name of such association, sue and be sued 
and do all other lawful acts and things necessary to finally settle 
and distribute the assets and property in his hands, and may sell, 
compromise, or compound the debts due to such association, with 
the consent and approval of the circuit or district court of the 
United States for the district where the business of such associa- 
tion was carried on, and shall at the conclusion of his trust render 
to such district or circuit court a full account of all his proceedings, 
receipts, and expenditures as such agent, which court shall, upon 
due notice, settle and adjust such accounts and discharge said agent 
and the sureties upon said bond. And in case any such agent so 
elected shall refuse to serve, or di^ resign, or be removed, any share- 
holder may call a meeting of the shareholders of such association 
in the town, city, or village where the business of the said asso- 
ciation was carried on, by giving notice thereof for thirty days in 
a newspaper published in said town, city or village, or if no news- 
paper is there published, in the newspaper published nearest 
thereto, at which meeting the shareholders shall elect an agent, 
voting by ballot, in person or by proxy, each share of stock en- 
titling the holder to one vote, and when such agent shall have 
received votes representing at least a majority of the stock in value 
and number of shares, and shall have executed a bond to the share- 
holders conditioned for the faithful performance of his duties, in 
the penalty fixed by the shareholders at said meeting, with two 
sureties, to be approved by a judge of a court of record, and file 
said bond in the office of the clerk of a court of record in the 
couniy where the business of said association was carried on, he 
shaU have all the rights, powers, and duties of the agent first 
elected as hereinbefore provided. At any meeting held as here- 
inbefore provided administrators or executors of deceased share- 
holders may act and sign as the decedent might have done if 
living, and guardians of minors and trustees of other persons may 
so act and sign for their ward or wards or cestui qui trust. The 
proceeds of the assets of property of any such association whidi 



Digitized by CjOOQ IC 



161 

may be undistubed at the time of aiich meeting or may be subee- 
qnently recdTod shall be diftribated as follows : 

^JPtrsi. To pay the expenses of the execution of the trust to the 
date of such payment 

'^Second. To repay any amount or amounts which hare been 
paid, in by any shardiolder or shardiolders of such association 
upon and by reason of any and all assessments made upon the stock 
of auch association by the order of the Comptroller of the Cur- 
rency in accordance with the provisions of the Statutes of the 
United States; and, 

^'Third. The balance ratably among such stockholders, in pro- 
portion to the number of shares held and owned by each. Such 
distribution shall be made from time to time as the proceeds shall 
be received and as shall be deemed advisable by the said Comp- 
troller or said agent'' (Act June 30, 1876, Ch. 156, Sec. 3, as 
amended by Act Harch 2, 1897, Ch. 354; 29 Stat L., 600.) 

Suit bt Aasirr Aoain sr DmoioBS.— A stockholder's agent may main- 
tain an action against the former directors of the tank to recover 
damages for losses occasioned by their violations of law. (IfcKlnnon 
V. Morse, 177 Fed. Rep., 67S.) 

§ m. Tiolation of Vatienal Bknk Act— How Determined- 
Penalty For— liability of lMreetors«— If the directors of any Na- 
tional banking association shall knowingly violate, or knowingly 
pennit any of the oQoers, agents, or servants of the association to 
violate any of the provisions of this Title, all the rights, privil^ee, 
land franchises of the association shall be thereby forfeited. Such 
violation shall, however, be determined and adjudged by a proper 
drenit, district, or territorial court of the United States, in a 
suit brought for that purpose by the Comptroller of the Currency, 
in his own name^ before the association shall be declared dissolved. 
And in cases of such violation, every director who participated in 
or assented to the same shall be held liable in his personal and 
individual capacity for all damages which the association, its 
shareholder, or any other person, shall have sustained in con- 
sequence of such violation. (Bev. Stat V. S. Sec. 5839.) 
11 



Digitized by CjOOQ IC 



162 

Whxn Bank Liablb to Fo m - eitume .— To render a Natltikial bank 
liable to a forfeiture of its franchises for riolation of law, the acts 
must have been comtmitted by the directors, or have been knowingly 
permitted by them. (Trenholm, Comptroller of the Currency v. Com- 
mercial Nat Bank of Dubuque, aS Fed. Rep., 323.) Violations of law 
by the executive officers or agents of the bank, without the knowledge 
and consent of the directors, do not constitute grounds for forfeiting 
the franchises. (Id,) Such a suit is within Section 1047, Rev. Stat 
U. S., and must be brought within Ave years. (Welles v. Graves, 41 
Fed. Rep., 459.) 

Liability of Dibkctobs. — Directors who violate any of the provisions 
of the law can be held personally liable for the loss resulting to the 
bank therefrom. Thus, where they make a loan in excess of one-tenth 
of the capital stock of the bank, in violation of Section 5200, Revised 
Statutes, they will be liable to the bank for all damages sustained by 
it in consequence of such loan. 

The degree of care required of the directors is that which m^n of 
ordinary prudence would exercise under similar circumstance6, and in 
determining this the restrictions of the banking law and the usages 
of business should be taken into acoount The question is ultimately 
one of fact, to be determined under all the circumstances. (Briggs v. 
Spalding, 141 U. S., 132; Movius v. Lee, 30 Fed. Rep., 298.) They are 
entitled under the law to commit the banking business, as defined, to 
their duly authorized officers, but this does not absolve them from the 
duty of reasonable supervision, and they will not be permitted to be 
shielded from liability because of igndranoe of wrong-doing, if such ig- 
norance is the result of gross inattention. (Bowerman v. Hanmer, U. 
S. Supreme Court, Oct, 1918). 

The directors of a National bank should require officers of their bank 
to give bond, and are personally liable for loilBses caused by neglect in 
leaving the management wholly to a cashier who had but little property 
and of whom they required no bond. (Robinson v. Hall, 63 Fed. R^., 
222.) A National bank having suspended payment the directors issued 
a circular stating that the bank was entirely solvent, and invited its 
customers to make deposits with it, to be held as special deposits. 
Afterwards a Receiver was appointed by the Comptrodler of the Cur- 
rency, and the special deposits made in pursuance of such invitation 
were turned over to him: Held, That the directors were individually 
liable for the amount of such deposits. (HlUer v. Hdwmrd, 95 Tmul, 
407.) 



Digitized by CjOOQ IC 



168 

It directors who art dtpoiltors tad whsf know tome Unto btfort i 
pentlon that that erent it tntrltable, and that the tank can pay only a 
percentage of its depotitt, and ytt dieck for the whole of their own 
balances, thereby dlmlntohlnf the peroentace to which the other 
creditort would be entitled, they defraud to this extent the creditors 
whoee interests they were relied upo(h to protect, and will be held to 
strict accountability. (Robinson v. Hall, 68 Fed. Rep., 222.) For cir- 
cumstances under which directors would not be liable for the acts of 
the cashier in violation of the banking law done without their partid- 
pation or knowledge^ see Clews v, Barden, 86 Fed. Rep., 617. 

It is within the power ot the board to giro a director a leare of ab- 
sence on account of ill health, and if frauds are committed during his 
absence and without his knowledge, he will not be liable for them. 
(Briggs V. Spanlding, 141 U. a, U2.) 

AonoKS AoAiiftT Dmoiont— How Bbouqht.— An action to record 
damages from the directors for lottet retulting from a violation of 
law may be brought, though the Comptroller of the Currency has not 
procured a forfeiture of the charter. (Allen v. Luke, 141 Fed. Rep., 
694; Stephens v. Orerstols, 48 Fed. Rep., 465. But see Welles v, 
Orares, 41 Fed. Rep., 469.) Where a Receiver hat been appointed for 
the bank, the actioli should be brought by him; for the personal liabil- 
ity of the officers and directors is an asset of the bank belonging equally 
to all creditors, and must therefore be enforced by the Receiver fOr 
their benefit in proportion to the amount of their claims; and the 
action can not be brought by a creditol'. (Boyd v, Schneider, 124 Fed. 
Rep., 289; Bailey v. Mother, 68 Fed. Rep., 468; Bhrohange Bank v. 
Peters, 45 Fed. Rep., 18) ; nor by the individual stockholders. (Howe 
V. Barney, 45 Fed. Rep., 668.) But where the Receiver refuses to bring 
an action against negligent directors to recover the amount wliioh the 
shareholders have been oompelled to oontribute to pay the debts dt the 
association, an action against such directors may be brought by a 
shardiolder on behalf of himself and the othv shareholders. (Zinn v. 
Baxter, 66 Ohio St, 841.) And where the receiver is a director, and 
one of the parties charged with misconduct and against whom a 
remedy is sought, the action may be brought by a shareholder on be- 
half of himself and the other shareholders. (Brinkerhoft v. Bostwick, 
S8 N. Y., 52.) Such an actiolh may be brought in a State court. (Id.) 
But a stockholder can not bring an action against the directors fOr 
losses caused by their negligence, unless he was a stockholder when 
the acts complained of were committed, and also is such when the 
action is brought. (Hanna v. Lyon, 179 N. Y., 107.) And, as in the 
case of other stockholders' actions, the stockholders bringing the ao- 



Digitized by CjOOQ IC 



164 

Uon must show a denDnnd upon the directors, or upon the ReoelYer 
as the case may be, or must show that such a demand would have been' 
useless. (Moss v. Qoodhart, 47 Mont, 257.) But see Planten v. Nat 
Nassau Bank, 174 App. Div. (N. T.), 254, for prdcedure where the 
bank is in liquidation. 

It has also been held that the depositors in a National bank may 
maintain an action against the directors to recorer for losses caused 
by the negligent performance of their duties as such directors. (Boyd 
V. Schneider, 131 Fed. Rep., 223; WWes v. Graves, 41 Fed. Rep., 459.) 

Right or AcnoK Aoautst Dubctob Subvives .— ^he liability of a di- 
rector for violations of the provisions of the National Bank Act does 
not expire with his death, but survives against his estate. The cause 
of action is ex contractu and not ex delicto. (Williams v. Brady, 282 
Fed. Rep., 740; Stevens v. Overstolz, 48 Fed. Rep., 465; All^i v, Loike, 
141 Fed. Rep., 694; Bates t7. Dresser, 229 Fed. Rep., 772.) 

Whxtheb Action in Bquitt <m at Law — Statotoby Rkicedt Not Ex- 
clusive. — ^As to whether the suit against the directors should be 
brought in equity or at law, the authorities are not agreed. (Free- 
man V, Jackson, 227 Fed. Rep., 688; Stephens v, Overstolz, 43 Fed. 
Rep., 771; National Exchange Bank of Baltimore v, Peters, 44 Fed. 
Rep., 13; Welles v. Graves, 41 Fed. Rep., 459; Rankin v. Cooper, 149 
Fed. Rep., 1010; Hirsh v. Jones, 56 Fed. Rep., 137.) The remedy of 
a creditor's suit given by the statute is cumulative and not exclusive, 
(King V. Pomeroy, 121 Fed. Rep., 287.) But see Tates v. Jones Nat. 
Bank, 206 U. S., 198; 240 U. S. 541. Thus, it does not preclude a 
common law action against the directors for false and fraudulent 
representations made by Miem. (Prescott v. Haughey, 65 Fed. Rep., 
663.) 

AcnoN TO Rkoovkb wrou Dibeotobs fob Excesstvb Loans.— /The issues 
of fact in such actions are (1) whether the 16feuis made were made at 
the time when the person to whom they were made was already in- 
debted to the bank in a sum equal to one-tenth of the capital surplus; 
(2) whether such loans were knowingly made or assented to by such 
directors; and (3) what portions of the nuoneys so lobned were lost 
(City National Bank of Mangum v. Crow et al., 27 Okla., 107.) 

LiABiLiTT OF Dibeotobs fob Making False Refobts. — ^The making and 
publishing by a National bank of the reports required by statute are 
not merely for the information of the Comptroller, but are td guide 
so much of the public as may have occasion to act thereon, and one 
who buys from another stock In the bank in reliance upon a falie 



Digitized by CjOOQ IC 



165 

TepcfH of Its condition, and raffers damase tlierebf has a right of 
jaetlon against any offlcar or director who, knowing its falsity, aathor- 
Ises such report, under Rev. St, 8ec 5239, which makes them in- 
diYidually liable for damiiges sustained by the association, its stock- 
holders, "or any other person." (Chesborough v, WooCdworth, 196 Fed. 
Rep., 875.) The liability of the directors is sereral, and plaintiff may 
sue one or more, but must make out a sufficient case against each one 
to authorize a recovery against him, and, in general, the detailed his- 
tory of the entire transacti<Ai and of each defendant's connection with 
the same is admissible. {Id.) But the statute (Rer. Stat U. S. Sec 
5239) afiFords the only test of liability, and hence it must be shown 
that the director sought to be held liable acted knowingly; and it is 
not sufficient that he might, by the exercise of ordinary diligence, have 
acquired knowledge of the true condition of the bank. (Tates v. Jones 
Nat Bank, 206 U. S., 158, orerruling Smalley v. McOraw, 148 Mich., 
394; Jones Nat Bank v. Tates, 240 U. S., 541.) See also Taylor v, 
Thomas, 124 App. Div. (N. T.), 53. But although the common law 
Vu^on of deceit does not lie and the nueasure of responsibility is laid 
down in the National Bank Act, an action may be maintained in the 
State cohrt regardless of the form of pleading, if the pleading itself 
satisfies the rule of responsibility declared by that act (Thomas v, 
Taylor, 224 U. S., 73.) 

There is in effect an intentional violation of a statute when one 
d^berately refuses to examine that which it is his duty to examine. 
The fact that a statemient of the condition of a National bank is not 
made voluntarily, but under order <it the Comptroller of the Currency, 
does not relieve the directors from liability for false statements know- 
ingly made therein. Notice from the Comptroller of the Currency to 
the directors to collect or charge off certain assets is a warning that 
tholM assets are doubtful; and to disregard such a notice and represent 
the assets in a statement to be good is a violation of the law and ren- 
ders the directors making the statement liable for damages to one 
deceived thereby. (Thomas v. Taylor, 224 U. S., 73.) 

Liability fob Nbglbot. — ^But there is a liability on the part of Na- 
tional bank directors for failure to perform the duties which the gen- 
eral principles of the law cast upon them when they become directors, 
distinct from, and in addition to, the duties and liabilities expressly 
imposed by the statutes. (Williams v, Brady, 232 Fed. Rep., 740.) 

§ 164. Transfers in Contemplation of InsolTenoy— -Preferences. 

— All transfers of the notes, bonds, bills of exchange, or other evi- 
dence of debt owing to any National banking association, or of 
deposits to its credit, all assignments of mortgagee, sureties on 



Digitized by CjOOQ IC 



166 

real estate^ or of judgments or decrees in its faTor; all deposits 
of money, bullion, or other valuable thing for its use, or for the 
use of any of its shareholders or creditors, and all payments of 
money to either, made after the commission of an act of insolv^icy, 
or in contemplation thereof, made with a view to prevent the ap* 
plication of its assets in the manner prescribed by this chapter, or 
with a view to the preference of one creditor to another, except in 
payment of its circulating notes, shall be utterly nuU and void. 
(Bev. Stat U. S. Sec. 6242.) 

MKUfnro OF "INSOLVKNOT."— The term in this section has the same 
meaning as in the National bankrupt law; it does not mean absolute 
inability to iMty at some future time, upon a settlement and winding 
up of the bank's aflkirs, but a present inability to pay in the ordinary 
course of business. (Case v. Citixens* Bank of Louisiana^ Fed. Case 
No. 2489; BCarket Nat Bank v. Paciflc Nat Bank, 80 Hun. (N. Y.) SO.) 

What CoNSTmrras a PBXFBBXifCB.— To bring a transfer of assets 
within the operation of this section, it is not necessary that the person 
to whom they are transferred should know of the insolveui^, but it Is 
sufficient if the insolvency is in the contemplation of the bank only. 
(Natidnal Security Bank v, Butler, 129 U. 8., 223.) But it should Bp- 
pear that the money was paid in contemplation of in80lven<7, for the 
purpose of giving a preference, and with a view to preventing the 
application of the assets to the claims of creditors generally. (Hays v. 
Beardsley, 136 N. T., 299.) It wiU be presumed that any transfer of 
assets, made after the closing of the bank has been determined upon, 
whereby any creditor obtains a preference over other creditors, was 
made with the intent to prefer. (National Security Bank v. Price, 82 
Fed. Rep., 697.) See also Armstrong v. Chemical Nat Bank, 41 Fed. 
Rep., 234; Roberts v. Hill, 23 Fed. Rep., 81; Bell v. Hanover Nat Bank, 
57 Fed. Rep., 821; Price v. Coleman, 22 Fed. Rep., 694; McDonald v. 
Chemical Bank, 174 U. S., 610; In re Armstrong, 41 F^ Rep., 881; 
Hayden v. Chemical Nat Bank, 80 Fed. Rep., 587. 

DEPosrrs Madk Whkn Baivk lifsoLVKNrr— Rxcovbt op.— A depositor 
in a National bank may recover funds deposited after the bank has 
become hopelessly insolvent He merely reclaims his own pnfj^ertj ob- 
tained by fraud. (Cragie v. Hadley, 99 N. T., 131.) And the fact that 
the money deposited was not marked, and, by a mins^ng with the 
other funds of the bank, lost its identity, does not affect the ris^t of 
the depositor to recover in full, if it can be traced into the vault of 



Digitized by CjOOQ IC 



167 

the bftnk, and it appeftn tliat ft tiini •qalnlMit thereto remftined ccm- 
tlnuoQBly on hand in the bank until remored by the receiver. (Maeiey 
V, Flflher, 62 Fed« Rep., 958.) But tlie moners or paper deposited or 
thm proceeds thereof most be traced into the hands of the receirer. 
(Multnomah County v. Oregon Nat Bank, 61 Fed. Rep., 912; Spokane 
County V. Clark, 61 Fed. Rep., 538; Lake Brie, etc., R. R. Co. v. In- 
dianapolis Nat Bank, 65 F^ Rep., 690. Compare San Diego County 
V. California Nat Bank, 52 Fed. Rep., 59; Boone County Nat Bank v, 
Latimer, 67 Fed. Rep., 27; Citixens* Nat Bank v, Dowd, 35 Fed. Rep., 
840.) 

AcnoN (HT RxPLKYiK . — ^A porsou claiming title to property in the pos- 
session of a receiver which has come into his possession with the pro- 
perty belonging to the bank, may maintain an action of replevin 
therefor. (Com Exchange Bank v, Blye, 101 N. T., 303; Flaber v. Ste- 
phens, 35 Fed. Rep., 17.) 

Scr-orr. — This section does not prohibit the allowance of any valid 
set-olf, legal or equitable, which a debtor of a bank may have against 
any obligation owing by him to it at the time of its insolvency. (Arm- 
strong, Receiver, v, Warner, 49 Ohio St, 376; Scott v. Armstrong, 146 
U. S., 499.) A depositor may therefore setoff the amount of his deposit 
against his liability as maker oT a note, or as indorser of a note if sued 
separately, held by the receiver, though such note had not matured 
when the bank was closed, and the receiver appointed. (Soott v. Arm- 
strong, 146 U. S., 499; Tardley v. Clothier, 49 Fed. Rep., 337; 51 Fed. 
Rep., 506; Adams v. Spokane Drug Co., 57 Fed. Rep., 888; Mercer v. 
Dyer, 15 Mont, 317; Hughitt v, Hayes, 136 N. T., 163.) If, however, 
the maker and indorser are sued jointly, the indorser can setoff the 
amount of his deposit only upon proof that the maker is insolvent 
(Id.) But the debtor of the bank will not be permitted to setoff 
against his liability a claim against the bank assigned to him after 
the bank had closed its d6Sors. (Venango Nat Bank v, Taylor, 56 Pa. 
St, 14.) 

Against the proceeds of the bonds deposited to secure circulation the 
United States can setofP no claim, except for money advanced to re- 
deem notes. (C!ook County Nat Bank v. United States, 107 U. S., 445.) 

State Statute— Debt Due Savuvgs Bank.— A State statute directing 
that deposits made by savings banks shall be first paid out of the assets 
of an insolvent bank can have no application to an insolvent National 
bank, since such statute is in conflict with the provisions of the Na- 
tional Bank Act (Davis v. The Blmira Savings Bank, 161 U. S., 275, 
reversing s. c. 142 N. T., 590.) A State statute forbidding conveyances 



Digitized by CjOOQ IC 



168 

by inflolrent debtors for the purpoie of giving a preference applieg to 
such conveyance made to a National bank. (Traders' National Bank v. 
Chlpman, 164 U. S., 847.) Such a statute Is not In conflict with any 
provisions of the National bank act {Id.) 

FftDBBAL QuBSTioN.— /The question whether a savings bank which was 
a depositor with a National bank which has become lns(Avent shall be 
paid in full persuant to State statute is a question arising under the 
laws of the United States, and entitles the receiver of the bank when 
sued for such deposit to remove the case into the United States Cir- 
cuit Court. (Auburn Savings Bank v. Hayes, 61 Fed. Rep.» 911; see 
also First Nat Bank v. Selden, 120 Fed. Rep., 212.) 



Digitized by CjOOQ IC 



CHAPTER IX. 

CSUCSS AND MtSDSlCSANORS. 

Section 165. Unlawfully Countersigning Notes. 

166. Beoeipt of United States or National Bank Notes as 

Security. 

167. Embezzlement^ Abstraction and Misapplication of 

Bank Funds— False Entries. 

168. Illegal Certification of Check. 

169. Obligations of the United States Defined. 

170. Forging and Counterfeiting National Bank Notes. 

171. Wrongful Use of Plates, False Plates, Notes, etc 

172. Passing, Selling, etc., Counterfdts. 

173. Taking Impressions of Plates, etc. 

174. Persons Having Impressions, etc., in their Possession. 
176. Bujring, Selling, etc.. Counterfeits. 

176. Issuing, etc.. Notes of Closed Banks. 

177. Beceipt of Public Money When Not Authorized De- 

positary. 

178. Political Contributions. 

179. Bestrictions on Checks Less Than One Dollar. 

180. Imitation of National Bank Notes — ^Penalty for. 

181. Penalty for Mutilating Notes, etc. 

182. Use of Title "National.'* 

§ 165. Unlawfully Countenigning Votei.— No officer acting 
under the provisions of this Title shall countersign or deliver to 
any association, or to any other company or person, any circulating 
notes contemplated by this Title, except in accordance with the true 
intent and meaning of its provisions. Every officer who violates 
tliis section shall be deemed guilty of a high misdemeanor, and 
ahall be fined not more than double the amount so countersigned 

169 



Digitized by CjOOQ IC 



170 

and delivered^ and imprisoned not lees than one year and not more 
than fifteen years. (Rev. Stat. XJ. S. Sec. 6187.) 

This applies to officers of the Goyemment No cases have arisen un- 
der It since the National banking law went Into force. 

§ 166. Beoeipt of TTnited States or Kational Bank Kotes As 
Security.— No association shall hereafter offer or receive United 
States notes or National bank notes as security or as collateral 
security for any loan of money, or for a consideration agree to 
withhold the same from use, or offer or receive the custody or 
promise of custody of such notes as securiiy, or as collateral se* 
curity, or consideration for any loan of money. Any association 
offending against the provisions of this section shall be deemed 
guilty of a misdemeanor, and shall be fined not more than one 
thousand dollars and a further sum equal to one-third of the 
money so loaned. The officer or (^cers of any association who 
shall make any such loans shall be liable for a further sum equal 
to one-quarter of the money loaned; and any fine or penalty in- 
curred by a violation of this section shall be recoverable for the 
benefit of the party bringing such suit. (Bev. Stat. U. S. Sec. 
6207.) 

The provision of this section was designed to prevent the locking up 
of money. It was aimed at a favorite method of accomplishing this at 
ohe time put In practice In New York city, and, perhaps, elsewhere. 

§ 167. Embesslementi Abstraction and lEisappIication of Banks' 
Vonds — ^False Entries. — Any officer, director, agent, or employee 
of any Federal reserve bank, or of any member bank as defined 
in the Act of December twenty-third, nineteen hundred and thir- 
teen, known as the Federal Beserve Act, who embezzles, abstracts, 
or wilfully misapplies any of the moneys, funds or credits of such 
Federal reserve bank or member bank, or who, without authority 
from the directors of such Federal reserve bank or member bank, 
issues or puts in circulation any of the notes of such Federal 
reserve bank or member bank, or who, without such authority, 
issues or puts forth any certificate of deposit, draws any order 



Digitized by CjOOQ IC 



171 

cr bill of exchange, makes any aooeptanoe^ assigns any note, 
bond^ drafts bill of exchange, mortgage, judgment, or decree, or 
who makes any false entry in any book, report, or statement of 
sach Federal reserve bank or member bank, with intent in any 
case to injure or defraud such Federal reserve bank or member 
bank, or any other company, body politic or corporate, or any 
individual person, or to deceive any officer of such Federal re* 
serve bank or member bank, or the Comptroller of the Currency, 
or any agent or examiner appointed to examine the affairs of 
sudi Federal reserve bank or member bank, or the Federal Be- 
serve Board; and every receiver of a National banking associa- 
tion who, with like intent to defraud or injure, embezzles, ab- 
stracts, purloins, or wilfully misapplies any of the moneys, funds, 
or assets of his trust, and every person who, with like intent, 
aids or abets any officer, director, agent, employee, or receiver 
in any violation of this section shall be deemed guilty of a mis- 
demeanor, and upon conviction thereof in any district court of 
the United States shall be fined not more than $5,000 or shall be 
imprisoned for not more than five years, or both, in the discre- 
tion of the court. 

Any Federal reserve agent, or any agent or employee of such 
Federal reserve agent, or of the Federal Beserve B6ard, who em- 
bezzles, abstracts, or wilfully misapplies any moneys, funds, or 
securities intrusted to his care, or without complying with or in 
violation of the provisions of the Federal Reserve Act, issues or 
puts in circulation any Federal reserve notes shall be guilty of 
a misdemeanor and upon conviction in any district court of the 
United States shall be fined not more than $5,000 or imprisoned 
for not more than five years, or both, in the discretion of the 
court. (Bev. Stat. U. S. Sec. 5209, as amended Act Sept. 26, 1918.) 

QmNSK Must Ooms Within thb Statutb. — Gross maladministration 
and Inexcusable breach of duty on the part of the officers of a National 
bank in its management, however disastrous to its stockholders, are 
not punishable unless in violation of this section. (Prettyman v. 
United States, 180 Fed. Rep., 80.) 

Ihtbnt. — The wrongful intent is 6t the essence of the ofFense, and 
most be proved as laid. (Richardson v. United SUtes, 181 FM. Rep., 



Digitized by CjOOQ IC 



172 

H.) Therefore, a mere mistake in making an entry is not a violation 
of this section. (United States v. Wilson, 176 Fed. Rep., 806.) An 
intent to defraud or injure the bank is an essential ingredient of every 
ofTense specified in this section. (MoKnight v. United States, 115 Fed. 
Rep., 972; United States v. Breese, 131 Fed. Rep., 916; United States v, 
Wilson, 176 Fed. Rep., 806.) The intent is inferred from the act, and 
while such inference is not conclusive, it thrcTws the burden of proot 
upon the defendant (United States v. German, 115 Fed. Rep., 987; 
United States v. Corbett, 215 U. S., 233.) Evidence of a uniform sys- 
tem of falsification similar to that charged in the indictment is ad- 
missible to show intent (Kettenbach v. United States, 202 Fed. Rep., 
377.) Where the intent with which the accused aided a clerk to ab- 
stract is material the accused may testify to his intent (Cummins v. 
United States, 232 Fed. Rep., 844.) 

WtLruL MiSAPPucATioK AKD Abstbagtion. — ^Tho words "wilfully 
misapplies" are new in statutes creating ofPenses, and they are not 
used in describing any ofFense at common law. (United States v, 
Britton, 107 U. S., 655.) To constitute the offense the misapplication 
must have been for the use or benefit of the party charged, or of some 
|)erson or company other than the bank, with intent to injure and 
defraud the bank, or some other body corporate, or some natural 
person. It is something different from the acts of oflicial maladminis- 
tration referred to in Section 5289. (United States v, Britton, 107 
U. S., 655.) When the funds or assets of the bank are unlawfully 
taken from its possession, and afterward willfully misapplied by con- 
verting them to the use of any person other than the bank, with intent 
to injure and defraud, the offense, as described in the statute, is com- 
mitted. (United States v. Harper, 33 Fed. Rep., 471; United States v. 
Breese, 131 Fed. Rep., 915; Walsh i;. United States, 174 Fed. Rep., 615.) 
The act may be done directly and personally, or indirectly through 
the agency of another. (United States v. Harper, 33 Fed. Rep., 471; 
United States v. Fish, 24 Fed. Rep., 585.) For specific examples of the 
applicability of this section see Flickner v. United States, 150 Fed. 
Rep., 1; United States v. Heinze. 161 Fed. Rep., 425; 183 Fed. Rep., 
907; Coffin v. United States, 162 U. S., 664; Dow v. United States, 82 
Fed. Rep., 904; United States v. Steinman, 172 Fed. Rep., 913; United 
States V. Norton, 188 Fed. Rep., 256; United States v, Britton, 108 U. 
S., 199; United States v. MarUndale, 146 Fed. Rep., 280; Pearce i;. 
United States, 192 Fed. Rep., 561.) It is no defense that the money 
was afterwards refunded. (United States v. Morse, 161 Fed. Rap., 429; 
Norton v. United States, 205 Fed. Rep., 593.) 

Falsb BNTBii».--Any entry tin. the books of the bank which is inten- 



Digitized by CjOOQ IC 



173 

Honally made to represent what le not true, with Intent either to de- 
fraud the bank or to .deceiTe anj of those epecilled in the act, ii a 
false emtrf within the meanina of this seetion. (Aanew v. United 
SUtes, 166 U. 8., 86; United States v. Harper, 88 Fed. Rep., 471.) The 
entries may be made either personaUy or by direction. (Agnew v. 
UUted States, 166 U. S., 86; Horse v. United States, 174 Fed. Rep., 639; 
United States v, Wilson, 176 Fed. Rep., 806; Richardson v. United 
Statea, 181 Fed. Rep., 1; United States v. Harper, 83 Fed. Rep., 471; 
United States v. AUen, 47 Fed. Rep., 696; ScoU v. United States, 130 
Fed. Rep., 429.) For speciflc examples of the manner in which the 
courts hare applied this law, see United States v. Means, 42 Fed. Rep., 
599; United States v. Britton, 107 U. S., 666; United States v. CreceUus, 
34 Fed. Rep., 30; United States v. Graves, 63 Fed. Rep., 700; Graves v. 
United States, 166 U. S., 323; BiUingsley v. United States, 178 Fed. 
Rq>., 644; United States v. HcClarty, 191 Fed. Rep., 623; Cochran v. 
United States, 167 U. S., 286; United States v. Bge, 49 Fed. Rep., 862; 
Dow V. United States, 82 Fed. Rep., 904; Cross v. North Carolina, 132 
U. S., 181.) And the statute does not require that any person should 
have been in f^u;t defrauded or actually deceived by the false entry in 
order to make the crime complete; if there was an attempt to deceive, 
and the f^dse entry was knowingly entered, and was a false entry 
which was naturally and necessarily calculated to mislead, this would 
be sufficient, in the absence of cdntravening proof, to authorize a find- 
ing that the person making it made it with intent to deceive. (United 
States V. Graves, 68 Fed. Rep., 700.) False entries in a report to the 
Comptroller of the Currency constitute this offense. (United States v. 
Hus^itt, 46 Fed. Rep., 47; Harper v. United States, 170 Fed. Rep., 886; 
United States v. Corbett, 216 U. S., 238.) And to leave a blank un- 
filled which calls for an answer being equivalent to a statement that 
there is nothing to report under this heading nmy constitute a false 
entry. (Kettenbach v. United States, 202 Fed. Rep., 377. But see 
United SUtes v, Herrig, 204 Fed. Rep., 124.) 



FoiK or Repobt.— iBut where the form cff report, as prescribed by 
the Comptroller, contains headings of "Loans and Discounts," and also 
of "Overdrafts," it is the duty of the bank officer to make his entries 
in such report in such manner that each of these headings shall truth- 
fully state the condition of his bank as to such heading. (United 
States V. Graves, 63 Fed. Rep. ,634.) The "liabiUUes," which are re- 
quired to be stated in the repcTrts to the Comptroller, include con- 
tingent as well as absolute liabilities; and hence an unmatured note, 
payment of which at maturity is guaranteed by the bank, should be 
included. (Cochran v. United States, 167 U. S., 286.) A schedule on 



Digitized by CjOOQ IC 



174 

the back of a report covered by the same affidavit, is a part of the re- 
port (Harper v. United States, 104 S. W. Rep., 673.) 

Aiding A2n> Abettino Commission op Offense. — ^Persons who are not 
officers or agents of the bank may be aiders and abettors in the vidlar 
tion of this section. (Coffin v. United States, 162 U. S., 664; Keliher v. 
United States, 193 Fed. Rep., 8.) But the words "any person," as 
used in the statute, are not limited to persons not connected with the 
bank, but include as well officers and agents of a bank; and, therefore, 
one officer may be properly convicted of aiding and abetting another 
officer. (Kettenbach v. United States, 202 Fed. Rep., 377.) See also 
Richardson v. United States, 181 Fed. Rep., 1; United States v. Hillegas, 
176 Fed. Rep., 444. 

W^EN Criminal Laws of Stats Apflt.— Ab the oftense of embezzle- 
ment of the funds and property of the bank is provided for in the 
National banking law, an officer of the bank can not be indicted there- 
for under State laws, nor have the State courts jurisdiction of such 
oftense. (Commonwealth v. Ketner, 92 Pa. St« 372; Commonwealth v. 
Felton, 101 Mass., 204.) But where the property fraudulently con- 
verted belongs to the customers of the bank, as, for instance, property 
left on special deposit, the criminal laws of the State apply. (State v, 
TuUer, 34 Conn., 280; (Commonwealth v. Tanney, 97 Mass., 50.) 

Larceny of the funds or property of the bank is punishable under 
State laws. (Commonwealth v. Barry, 116 Mass., 1.) And an officer 
of a National bank may be indicted for forgery under State laws. 
(Cross 17. State of North Carolina, 132 U. S., 131.) 8cf an officer of the 
bank may be indicted under a State statute for making false and 
fraudulent entries in the books of the bank, such offense amounting 
to forgery at common law. (Luberg v. Commonwealth, 94 Pa. St, 85.) 
But the State courts have no jurisdiction oT the crime of ''false en- 
tries" as defined by this section. (In re Bno, 54 Fed. Rep., 669.) A 
State statute forbidding banks to receive deposits when the bank Is in- 
solvent, and making such action a penal ofPense on the part of the 
officers of the bank, can have no application to National banks loteated 
in such State. (Baston v. State of Iowa* 188 U. S., 220; Slaughter v. 
First Nat. Bank, 109 Ala., 167.) 

Indictment — ^Fobm of— -Misafpucation of Assets.— An indictment 
for a misapplication of the funds of a National bank must specify the 
particulars of the application, so as to show the applicatlo*h charged 
to be a criminal misapplication as distinguished from applications that 
are unlawful, but not criminal. (United States v. Bno, 56 Fed. Rep., 
218; United States t;. Warner, 26 Fed. Rep., 616; Batohelor i;. United 



Digitized by CjOOQ IC 



176 

States, lU U. 8., 42$.) Bat If the indlctmant deterlbat q^editeaUy the 
lands misapplied, and the manner of the mlsi^plication, it need not 
negntlve ereiy possible theory eonsistent with an honest porpotoe in 
the disposition of the fands specified. (Brans t^. United States, 163 
U. S., 608.) See also Coffin v. United SUtes, 162 U. 8^ 664; Qeiger v. 
United SUtes, 162 Fed. Rep^ 844; United States t^. Northway, 129 U. 
S., 827; Breese v. United States, 106 Fed. Rep., 680; United SUtes v. 
Smith, 152 Fed. Rep., 642; Kellher v. United States, 193 Fed. Rep., 8; 
United States v. Heinse, 218 U. S., 632; Stoat v. United SUtes, 227 
Fed. Rep., 799; United SUtes t^. Jewett, 84 Fed. Rep., 142w) 

iKmcnccfT worn Hakhto Falsk Bhtbhs. — ^In an indictment for mak- 
ing: a false entry in a report to the Comptroller it is sufficient to ayer 
that the defendant made such false entry in a certain report of the 
condition of the bank, . . . made to the Coimptroller of the Cur- 
rency in accordance with the prorisions of Section 5211. (Cochran v. 
United SUtes, 157 U. S., 286.) See also United States t^. French, 57 
Fed. Rep., 382; United SUtes t^. Potter, 56 Fed. Rep., 83; Richardson v. 
United States, 181 Fed. Rep., 1; Billingsley v. United States, 178 Fed. 
Rep., 654. 

iNDiOTifxifT-^DiFinEirT Counts. — Bmbecslement, abstraction, and 
wlUfnl misapplication of the moneys, funds, etc, as described in this 
seotion, constitute three separate crimes or oVenses, which, under 
Rev. St., Sec 1024, may be Joined in one indictment, but must be 
stated in separate counts. (United States t^. Cadwallader, 59 Fed. Rep., 
677.) See also United SUtes t^. Jewett, 84 Fed. Rep., 142; Simpson v. 
United SUtes, 229 Fed. Rep., 940; Prettyman v. United SUtes, 180 
Fed. Rep., 30; United States v. Norton, 188 Fed. Rep., 256; United 
SUtes V. Jewett, 84 Fed. Rep., 142. 

AoEiiT nr LiQuiDATi(»r. — This section ^plies to an agent in liquida- 
tion appointed by the stockholders. (United SUtes v. Jewett, 84 Fed. 
Rep., 142.) But not to a receiyer appointed by the Ckyknptroller of the 
Currency under R. S., 5234. He is an officer of the United States, not 
an agent of the bank. (U. S. v. Weitzel, 246 U. S^ 583.) 

§ 168. Illegal CertiHoation of Check.— Any ofiBcer^ director, 
agent, or employee of any Federal reserve bank or member bank 
who shall wilfully violate the provisions of tliis section, or who 
shall resort to any device, or receive any fictitious obligation, di- 
rectly or collaterally, in order to evade the prorisions thereof, or 
who shall certify a check before the amonnt thereof shall have 



Digitized by CjOOQ IC 



176 

been regularly entered to the credit of the drawer upon the books 
of the bank, shall be deemed guilty of a nusdemeanor and shall, 
on conviction thereof in any district court of the United States, 
be fined not more than $5,000, or shall be imprisoned for not 
more than five years, or both, in the discretion of the court. ( Act 
July 12, 1882, Ch, 290, Sec. 13; 22 Stat. L., 162, as superseded 
by Act Sept. 26, 1918.) 

It is not neoessary that the officer should himself deliver the check 
to some person outside of the bank, or that he should take any part 
in such delivery; but the offense would be complete if, after he had 
^written the certification, the actual delivery is made by sotaie clerk or 
other officer without his knowledge. But the certification must have 
been willful. (Potter v. United States, 155 U. S., 438.) But it is not 
essential to prove that the defendant had knowledge that the fUse 
certification was in violation of the statute; if he knew the facts, the 
criminal intent is presumed. (Chadwick t^. United States, 141 Fed. 
Rep., 226.) 

§ 169. Obligations of the United States Defined.— The words 
"obligation or other security of the United States** shall be held 
to mean all bonds, certificates of indebtedness, National bank cur- 
rency, coupons. United States notes. Treasury notes, gold certifi- 
cates, silver certificates, fractional notes, certificates of deposit, 
bills, checks or drafts for money, drawn by or upon authorized 
officers of the United States, stamps and other representatives of 
value, of whatever denomination, which have been or may be issued 
under any act of Congress. (Bev. Stat. U. S. Sec. 5413; Act 
March 4, 1909, Sec. 147; 35 Stat. L., 1115.) 

Punishment fob Fobgino ob CouNTKBFBiTiNa Sb cubituc s. — ^Whoever, 
with intent to defraud, shall falsely make, forge, counterfeit, ot alter 
any obligation or other security of the United States, shall be fined not 
more than five thousand dollars and imprisoned not more than fifteen 
yeiars. (Rev. Stat U. S. Sec. 5414; Act March 4, 1909, Sec. 148; 85 Stat 
U. S., 1115.) 

§ 170. Forging and Counterfeiting National Bank Notes.— ^ 
Whoever shall falsely make, forge, or counterfeit, or cause or pro- 
cure to be made, forged or counterfeited, or shall willingly aid or 



Digitized by CjOOQ IC 



177 

assiat in faliely makings forging or counterfeiting, any note in 
imitation of, or purporting to be in imitation of, the circnlating 
notes issued by any banking association now or hereafter author- 
ized and acting under the laws of the United States; or whoever 
shall pass, utt^, or publish, or attempt to pass, utter, or pubUsh, 
any false, forged, or counterfeited note, purporting to be issued 
by any such association doing a banking business, knowing the 
same to be falsely made, forged, or counterfeited; or whoever 
shall falsely alter, or cause or procure to be falsely altered, or shall 
willingly aid or assist in falsely altering any such circulating notes, 
or shall pass, utter, or publish, or attempt to pass, utter, or pub- 
lish as true, any falsely altered or spurious circulating note is- 
sued, or purporting to have been issued, by any such banking 
association, blowing the same to be falsely altered or spurious, 
shall be fined not more than one thousand dollars, and imprisoned 
not more than fifteen years. (Rev. Stat. L., 5415; Act March 4, 
1909, Sec. 149; 85 Stat L., 1115.) 

§ 171. Wrongful Use of Plates— False Plates, Hotes, etc.— » 
iWhoever haying control, custody, or possession of any plate, stone, 
or other thing, or any part thereof, from which has been printed, 
or which may be prepared by direction of the Secretary of the 
Treasury for the purpose of printing, any obligation or other 
security of the United States, shall use such plate, stone, or other 
thing, or any part thereof, or knowingly suffer the same to be used 
for the purpose of printing any such or similar obligation, or other 
security, or any part thereof, except as may be printed for the use 
of the United States by order of the proper officer thereof; or 
whoever by any way, art or means shall make or execute or cause 
or procure to be made or executed, or shaU assist in making or 
executing any plate, stone or other thing in the likeness of any 
plate designed for the printing of such obligation or other security, 
or whoever shall seU any such plate, stone, or other thing, or bring 
into the United States or any place subject to the jurisdiction 
thereof, from any foreign place any such plate, stone, or other 
thing, except under the direction of the Secretary of the Treasury 
or other proper officer, or with any other intent, in either case, 
12 



Digitized by CjOOQ IC 



178 

fhan that such plate^ stone^ or other thing be used for the printing 
of the obligations or other securities of the United States; or who- 
ever shall have in his control, custody, or possession any plate> 
stone, or other thing in any manner made after or in the similitude 
of any plate, stone, or other thing from which any such obliga- 
tion or other security has been printed, with the intent to use 
such plate, stone, or other thing, or to suffer the same to be used 
in forging or counterfeiting any such obligation or other secunty, 
or any part thereof; or whoever shall have in his possession or 
custody, except imder authority from the Secretary of the Treas- 
ury or other proper officer, any obligation or other security, made 
or executed, in whole or in part, after the similitude of any obliga- 
tion or other security issued under the authority of the TTnited 
States, with intent to sell or otherwise use the same; or whoever 
shall print, photograph, or in any other manner make or execute, 
or cause to be printed, photographed, made or executed, or shall 
aid in printing, photographing, making, or executing any engrav- 
ing, photograph, print, or impression in the likeness of any such 
obligation or other security, or any part thereof, or shall sell any 
such engraving, photograph, print, or impression, except to the 
United States; or shall bring into the United States, or any place 
subject to the jurisdiction thereof, from any foreign place any 
such engraving, photograph, print, or impression, except by di- 
rection of some proper officer of the United States; or whoevOT 
shall have or retain in his control or possession, after a distinctive 
paper has been adopted by the Secretary of the Treasury for the 
obligations and other securities of the United States, any similar 
paper adapted to the making of any such obligation or other se- 
curity, except under the authority of the Secretary of the Treas- 
ury or some other proper officer of the United States, shall be 
fined not more than five thousand dollars, or imprisoned not more 
than fifteen years, or both. (Bev. Stat. U. S. See. 6430; Act 
March 4, 1909, Sec. 160; 35 Stat. L., 1116.) 

Notes issued by a State bank are not obligations issued under au- 
thority of the United States within the meaning of this section. (U. 
S. V. Ck>nner8» 111 Fed. Rep., 734.) 



Digitized by CjOOQ IC 



in 

S 171. TiMbftf , Selliaffi ete., Oouterfeiti.— Whoerer, with in- 
tent to defraud, shtU pats, utter, publiih, or Bell, or attempt to 
peaa, utter, publish, or aell, or shall bring into the United States, 
or any place subject to the jurisdiction thereof, with intent to 
pass, publish, utter, or sell, or shall keep in possession or conceal 
with like intent any falsely made, forged, counterfeited, or altered 
obligation, or other security of the United States, shall be fined 
not more than five thousand dollars, and imprisoned not more 
than fifteen years. (Bey. Stai U. S. Sec. 5481 ; Act Maroh 4, 
1909, Sec. 151; 85 Stat. L., 1116.) 

§ ITS. Taking Lnpresiions of Plates, etc. — Whoever, without 
authority from the United States, shall take, procure, or make, 
upon lead, foil, wax, plaster, paper, or any other substance or 
(material, an impression, stamp, or imprint of, from, or by the 
use of any bed-plate, bed-piece, die, roll, plate, seal, type, or other 
tool, implement, instrument, or thing used or fitted or intended to 
be used in printing, stamping, or impressing, or in making other 
tocds, implements, instruments, or things, to be used, or fitted or 
intended to be used, in printing, stamping, or impressing any kincE 
or description of obligation or other security of the United States, 
now authorized or hereafter to be authorized by the United States, 
or circulating note or evidence of debt of any banking association 
under the laws thereof, shall be fined not more than five thousand 
dollars, or imprisoned not more than ten years, or both. (Bev. 
Stat U. S. Sec. 5432; Act March 4, 1909, Sec. 152; 35 Stat 
L., 1117.) 

§ 174. Persons Having Impressions, etc., in Their Pos- 
session. — Whoever, with intent to defraud, shall have in his pos- 
session, keeping, custody, or control, without authority from the 
United States, any imprint, stamp, or impression, taken or made 
upon any substance or material whatsoever, of any tool, imple- 
ment, instrument, or thing, used or fitted or intended to be used, 
for any of the purposes mentioned in the preceding section; or 
whoever, with intent to defraud, shall sell, give, or deliver any 
such imprint, stamp, or impression to any other person, shall be 



Digitized by CjOOQ IC 



180 

fined not more than five thousand dollars^ or imprisoned not more 
than ten years, or both. (Bev. Stat. U. S. Sec. 5433; Act March 
4, 1909, Sec. 153; 35 Stat L., 1117.) 

§ 176. Buying, Selling, etc., Connterfeits, etc. — Whoever shall 
buy, sell, exchange, transfer, receive, or deliver, any false, forged, 
counterfeited or altered obligation or other security of the United 
States, or circulating note of any banking association organized 
or acting under the laws thereof, which has been or may hereafter 
be issued by virtue of any act of Congress, with the intent that 
the same be passed, published, or used as true and genuine, shall 
be fined not more than five thousand dollars, or imprisoned not 
more than ten years, or both. (Eev. Stat. U. S. Sec. 5434; Act 
March 4, 1909, Sec. 154; 35 Stat. L., 1117.) 

§ 176. Issuing, etc.. Notes of Closed Banks. — In all cases where 
the charter of any corporation which has been or may be created 
by act of Congress has expired or may hereafter expire, if any 
director, oflScer, or agent of the corporation, or any trustee thereof, 
or any agent of such trustee, or any person having in his possession 
or under his control the property of the corporation for the pur- 
pose of paying or redeeming its notes and obligations, shall know- 
ingly issue, reissue, or utter as money, or in any other way know- 
ingly put in circulation any bill, note, check, draft, or other security 
purporting to have been made by any such corporation whose 
charter has expired, or by any oflScer thereof, or purporting to 
have been made under authority derived therefrom, or if any per- 
son shall knowingly aid in any such act, he shall be fined not 
more than ten thousand dollars, or imprisoned not more than five 
years, or both. But nothing herein shall be construed to make it 
unlawful for any person, not being such director, oflScer, or agent 
of the corporation, or any trustee thereof, or any agent of such 
trustee, or any person having in his possession or under his con- 
trol the properly of the corporation for the purpose hereinbefore 
set forth, who has received or may hereafter receive such bill, note, 
check, draft, or other securiiy, bona fide and in the ordinary trans- 
actions of business, to utter as money or otherwise circulate the 



Digitized by CjOOQ IC 



181 

same. (Ber. Stat. U. S. Sec. 5437; Act MATch 4, 1909, Sec 174; 
35 Stat. L., 1122.) 

This section was an act oiiglnallj passed In 1887 to ^plj to the 
Second Bank of the United States* the charter of which had Just 
expired. Fbr some reason or other the compilers embodied this old act 
in the Revised Statutes. 

§ 177. Seceipt of Public Xoney When Hot Authorised De- 
positaiy. — Every banker, broker, or oilier person not an authorized 
depositary of public moneys, who shall knowingly receive from any 
disbursing officer, or collector of internal revenue, or other agent 
of the United States, any public money on deposit, or by way of 
loan or accommodation, with or without interest, or oilierwise 
than in pajrment of a debt against the United States, or shall use, 
transfer, convert, appropriate, or apply any portion of public 
money for any purpose not prescribed by law, and every president, 
cashier, teller, director, or other officer of any bank or banking as- 
sociation, who shall violate any provision of this section, is guilty 
of embezzlement of the public money so deposited, loaned, trans- 
ferred, used, converted, appropriated, or applied, and shall be 
fined not more than the amount embezzled, or imprisoned not more 
than ten years, or both. (Bev. Stat. TJ. S. Sec. 5497; Act March 
4, 1909, Sec. 96; 35 Stat L., 1106.) 

It will be seen from this section that all banks other than public 
depositaries are put on notice in regard to dealings with disbursing 
officers, etc., of the United States. If the provisions of tbds section are 
violated, such violation constitutes embeszlement. Sections 8689 and 
3661 of the Revised Statutes are also of importance to bankers in this 
connection as having reference to public moneys. 

§ 178. Politioal Contribntionf.— That it shall be unlawful tot 
any National bank, or any corporation organized by authoriiy of 
any laws of Congress, to make a money contribution in connection 
with any election to any political office. It shall also be unlaw- 
ful for any corporation whatever to make a money contribution in 
connection with any election at which Presidential and Yice-Presi- 
dential electors or a Bepresentative in Congress is to be voted for 
or any election by any State legislature of a United States Sena- 



Digitized by CjOOQ IC 



18» 

tor. Errery corporation which shall make any contribution in 
violation of the foregoing provisions shall be subject to a fine not 
exceeding five thousand dollars, and every officer or director of any 
corporation who shall consent to any contribution by the corpora^ 
tion in violation of the forgoing provisions shall upon conviction 
be punished by a fine not exceeding one thousand and not less 
than two hundred and fifty dollars, or by imprisonment for a term 
of not more than one year, or both such fine and imprisonment in 
the discretion of the couri (Act Jan. 26, 1907 ; 34 Stat. L., 864.) 

§ 179. Bestriotions on Cheeki less Than One Dollar. — No per- 
son shall make, issue, circulate, or pay out any note, check, memo- 
randunt, token or oiher obligation for a less sum than one dollar, 
intended to circulate as money or to be received or used in lieu of 
lawful money of the United States; and every person so offending 
shall be fined not more than five hundred dollars or imprisoned 
not more than six months, or both. (Bev. Stat. 17. S., Sec. 8583; 
Act March 4, 1909, Sec. 178; 36 Stat L., 1122.) 

This section does not prohibit the issue of checks in any amount, no 
matter how small, for ordinary purposes. It ^plies only to those 
cases where the checks are intended to drcnlate as money. 

§ 180. Imitation of National Bank Notes— Penalty for.— It 

shall not be lawful to design, engrave, print, or in any manner 
make or execute, or to utter, issue, distribute, circidate, or use, any 
business or professional card, notice, placard, circidar, hand-bill, or 
advertisement, in the likeness or similitude of any circulating note 
or other obligation or securiiy of any banking association organized 
or acting under the laws of the United States which has been or 
may be issued under any act of Congress, or to write, print, of 
otherwise impress upon any such note, obligation, or securiiy, any 
business or professional card, notice, or advertisement, or any 
notice or advertisement of any matter or thing whatever. Who- 
ever shall violate any provision of this section shall be fined not 
more than one hunted dollars, or imprisoned not more than six 
months, or both. (Bev. Stat XT. S. Sec. 5188; Act l£arch 4, 
1909, Sec. 176; 36 Stat. L., 1122.) 



Digitized by CjOOQ IC 



183 

§ 181. Penalty for Xutilatiiif Hotet, etc.— Whoerer shall ma- 
tilate^ cuty deface^ diafigurey or perforate with holee, or unite or 
cement together, or do any other thing to any bank bill, draft, note, 
or other eyidence of debt, issued by any National banking associa- 
tion, or shall cause or procure the same to be done with intent to 
render such bank bill, drafts note or other evidence of debt unfit to 
be reissued by said association, shall be fined not more than one 
hundred dollars, or imprisoned not more than six months, or both. 
(Bev. Stat U. S. Sec. 5189; Act March 4, 1909, Sec. 176; 35 
Stat. L., 1122.) 

§ 182. Uie of Title 'OTational.''— All banks not organized and 
transacting business under the National currency laws, or under 
this Title, and all persons or corporations doing the business of 
bankers, brokers, or savings institutions, except savings banks au- 
thorized by Congress to use the word ^'NationaP as a part of their 
corporate name, are prohibited from using the word "National** 
as a portion of the name or title of such bank, corporation, firm, 
or partnership; and any violation of this prohibition committed 
after the third day of September, eighteen hundred and seventy- 
three, shall subject the party chargeable therewith to a penalty of 
fifty dollars for each day during which it is permitted or repeated. 
(Bev. Stat. U. S. Sec. 5243.) 

UsB or Word "Federal."— The Federal Reserve Board discourages 
the use of the word "Federal" as part of the tltte of member banks. 
(Informal Ruling of Board, July 21, 1917.) 



Digitized by LjOOQ IC 



CHAPTEB X. 

SUITS^ JUBISDIOnON AND EviDBNOB. 

Section 183. Jurisdiction of Suits by and Against National Banks. 

184. Same Subject — Federal Courts. 

185. Original Jurisdiction of District Court 

186. Attachment^ etc.^ Before Final Judgment Prohibited. 

187. Proceedings to Enjoin Comptroller— Where Had, 

188. United States District Attorney to Conduct Suits. 

189. Instruments Certified by Comptroller as Evidence. 

190. Certified Copy of Organization Certificate as Evi- 

dence. 

§ 183. Turifdiotion of Suits by and Against National Banks.— 

That the jurisdiction for suits hereafter brought by or against any 
association established under any law providing for National 
banking associations^ except suits between them and the United 
States^ or its officers and agents^ shall be the same as^ and not oth^ 
than^ the j'urisdiction for suits by or against banks not organized 
imder any law of the United States which do or might do banking 
business where such National banking associations may be doing 
business when such suits may be begun. And all laws and parts 
of laws of the United States inconsistent witii this proviso be, and 
the same are hereby, repealed. (Act July 12, 1882, Ch. 290, Sec. 
4; 22 Stat. L., 162.) 

Statutb Applibs to State Coxtbts.— The Act of 1SS2 providing that 
Jurisdiction should be the same as in actions against other than Na- 
tional banks was not superseded or repealed by 24 Stat L., 664 as 
amended by Act of August 13, 188S, 26 Stat Jm, 436. Nor does the 
former statute refer only to the Jurisdiction of Federal courts; it ap- 
plies to actions instituted in the courts of the State in which the de- 
fendant is a resident (Levltan v. Houghton Nat Bank, 174 Biioh., 
666.) 

184 



Digitized by CjOOQ IC 



185 

§ 184. Same Subject— FMenl Courts.— That all National bank- 
ing aasociations established under the laws of the Ulnited States 
shall, for the purposes of all actions by or against them^ real^ 
personal, or mixed^ and all suits in equiiy^ be deemed citizens of 
the States in which they are respectively located; and in such cases 
the circuit and district courts shall not have jurisdiction other than 
such as they would have in cases between individual citizens of the 
same State. The provisions of this section shall not be held to 
affect the jurisdiction of the courts of the United States in cases 
commenced by the United States or by direction of an officer 
thereof^ or cases for winding up the affairs of any such bank. (Act 
Aug. 13, 1888, Ch- 866, Sec. 4; 25 Stat. L., 436.) 

OxzTKBAL BFncT or This Ssctioit.— National banks are on precisely 
the same footing as individuals or other corporations with respect to 
the right to sue or be sued in the federal courts. (Peters v. Com- 
mercial Nat Bank, 142 U. 8., 614.) A cause in which a National bank 
is a party defendant can not be removed into a Federal court on the 
m^e ground that the defendant is a National bank. (Leather Mfr. 
Nat. Bank t;. Cooper, 120 U. S., 77S; WichiU Nat. Bank v. Smith, 72 
Fed. Rep., 668.) And a Receiver of the bank who is substituted as a 
party in place of the bank has no greater rlghtc^ in this respect than 
the bank itself. (WichiU Nat Bank v. Smith, 72 Fed. Rep., 568.) The 
Assets of an insolvent National bank are not brought under the control 
or protection of the Federal courts by the transfer of such assets to 
an agent of the stockholders. (Snohomish Ck>unty v. Puget Sound Nat 
Bank, 81 Fed. Rep., 618.) And in the absence of diverse citizenship 
the Federal courts have not jurisdiction of a suit by a stockholder 
jsgainst directors of a National bank and the bank to compel the 
directors to reimburse the bank for wrotigfuUy investing its funds, 
nor has the District 0>urt any jurisdiction of such a suit under para- 
graph 16 of Section 24, Judicial Code. (Herrmann v. ISdwards, 288 
U. S., 107.) 

Fedkbal Qussnoirs — ^Ditebsk Citizbnship. — ^But these enactments do 
not place National banks under any disadvantage with reference to 
raising Federal questions in Federal courts. (Walker v. Windsor Na- 
Uonal Bank, 66 Fed. Rep., 76.) A suit which may be brought in a 
Federal court by or against a citizen of a SUte because it arises under 
the laws of the United States, may, for the same reason, be brought 
Ixjr or ayaimit a National bank located in the same State. ((George v. 



Digitized by CjOOQ IC 



186 

W«Uace, 136 Fed. Rep., 286. See also Witters v. Foster, 28 Fed. Rep., 
737; Hot Springs School Dlst v. First Nat Bank, 61 FW. Rep., 417; 
MetropoUtan Nat Bank i;. Claggett, 141 U. S., 620; Logan Bank v. 
Townsend, 139 U. S., 67.) Tbe Federal courts have Jurisdiction of an 
action between a National bank located in one State and a citizen of 
another State. (First Nat Bank t;. Forest 40 Fed. Rep., 706. See ahK> 
Wickham v. HuU, 60 Fed. Rep., 826: Rankin v. Barton, 199 U. S., 228.) 

Aonozrs bt and Against Rbgbivkbs— These enactments do not affect 
the Jurisdiction of the Federal courts in cases brought for winding up 
affairs of insolyent National banks; and the Receiyer may bring an 
action in Federal courts to collect the asseU of the bank without regard 
to the citizenship of the parties. (Bates v. Dresser, 229 Fed. Rep., 772; 
Murray v. Chambers, 161 Fed. Rep., 142; Rankin v. Herod, 140 Fed. 
Rep., 661; Fisher t;. Yoder, 63 Fed. Rep., 666; Linn Ck>unty Nat Bank 
t;. Crawford, 69 Fed. Rep., 632; Hendee v. Connecticut etc, R. R. 0>., 
26 Fed. Rep., 677; Bumham t;. First Nat Bank, 68 Fed. Rep., 163.) 
Thus, a suit brought by a Receiver to enforce a liability due to the 
bajik, and to secure a sale under the order of the court of pledged 
securities, is one for winding up the aff^drs of the bank, and within 
the Jurisdiction of the Circuit Ck>urt without regard to the citizen* 
ship of the parties. (McCartney t^. Barle, 116 Fed. Rep., 462; Gilbert v. 
McNulta, 96 Fed. Rep., 83.) But the Circuit Ck>urt has no Jurisdiction 
of a suit in equity against a Receiyer appointed by the Comptroller 
where the amount in controyersy is less than $2,000 (now |3,000). 
(Smithsoli V, Hubbell, 81 Fed. Rep., 693.) 

Agent of Stockholdebs. — The Federal courts haye Jurisdiction of an 
action by or against the agent of the shareholders, chosen under the 
Act of June 30, 1876, regardless of the question of citizenship. (Guar- 
anty 0>. V. Hanway, 104 Fed. Rep., 869; International Trust Ck>. v. 
Weeks, 203 U. S., 364; see also (George v. Wallace, 136 Fed. Rep., 286.) 

JuBiSDionoN or State Goubts.— For Jurisdictidbal purposes, a Na- 
tional bank is a citizen of the State in which it is located. (Hasen v. 
Lyndonyille Nat Bank, 70 Vt, 648; Dayis v. Cook, 9 Mo., 134.) The 
State courts haye Jurisdiction of an action brought by a shareholder 
on btiialf of himself and other shareholders td recoyer of the directors 
of an insolyent National bank damages for injuries resulting from 
their negligence and misconduct (Brinckerhoff t;. Bostwick, 88 N. T., 
62.) And State courts haye Jurisdiction of actions against National 
banks to recoyer the penalty prescribed by 0>ngresi for taking usu- 
rious interest (Schuyler t;. Bullong, 28 Neb., 684; Henderson Nat 
iBank v. Alyes, 91 Ky., 142; Ordway v. Central Nat Bank, 47 Md., 217; 



Digitized by CjOOQ IC 



187 

BMi V. ColQinbU Nat Bank, 87 Pa. St, 87; Hade v. IfoYer, tl Ohio 
St, 281.) They alao have powBr to iBsne a writ of numdamna requlrlnc 
the directors of a National bank in liqaidation to exhibit the booka 
to the atoickholdera. (Matter of Tnttle t^. Iron Nat Bank, 170 N. Y., 
9.) And where the period of corporate eziatence of a National bank 
baa expired, and its affairs are being wound up, a Receiver for its 
property maj be ^n>ointed by a State court upon the implication of 
a stockholder. (Ck>g8well i;. Second Nat Bank, 66 AtL Rep., S74.) But 
State courts have no Jurisdiction in criminal cases arising under the 
National Bank Act (In re Bno, 54 Fed. Rep^ 669; Commonwealth t^. 
Felton, 101 Mass., 204; Commonwealth v. Ketner, 02 Pa. St, 872.) 

The State statute of limitations applies to a suit brought by the 
receiver of a National bank against a shareholder to recorer an assess 
ment upon his stock to pay the debta of the bank. (Butler v. Poole, 
44 Fed. Rep., 686.) 

§ 186. OrigriiLal Jnriidiotion of District Court- Tbe district 
court shall have original jurisdiction as follows: ♦ ♦ ♦ ♦ 

Sitteenth. Of all cases commenced by the United States, or 
by direction of any o£Scer thereof, against any National banking 
association, and cases for winding up the afbirs of any such bank; 
and of all suits brought by any banking association established in 
the district for which the court is held, nnder the provisions of 
title 'National Bank,'^ Bevised Statutes, to enjoin the Comptroller 
of the Currency, or any receiver acting nnder his direction, as pro- 
vided by said title. And all National banking associations estab- 
lished nnder the laws of the United States shall, for the purposes 
of all other actions by or against them, real, personal, or mixed, 
and all suits in equiiy, be deemed citizens of tiie States in which 
they are respectively located. (Act March 3, 1911, Sec. 34; 36 
Stat L., 1092.) 

Proceedings to enjoin Com|»troller are those authorised by section 
6237, United SUtes Revised Statutes. Until the passage of the Act 
of March 3, 1911, the circuit coXirts had this Jurisdiction under section 
629, United States Revised Statutes. 

§ 186. Attachment, etc., Before Final Judgment ProUbited.--i 
Ko attachment, injunction, or execution shall be issued against such 
association or its properly before final judgment in any suit, action 



Digitized by CjOOQ IC 



188 

or proceeding, in any State, coimly, or municipal court. (Bey. 
Stat. U. S. Sec. 5242.) 

This section is oonstitutionaL (Dennis v. First Nat Bank of Seattle, 
127 CaL, 453.) 

Attachmeitts.— In Pacific Nat Bank v. BdUxter (124 U. S., 721 It was 
held that the effect of this proyision is to write into all State attach- 
ment laws an exception in ftiYor of National banks, and all such laws 
must be read as if they contained an exception in fCiyor ot National 
banks. As the attachment is yoid, a bond glyen by a National bank 
to dissolye such attachments, senred by summons of garnishment, is 
also void. (Planters' Bank v. Berry, 92 CkL, 264.) Where service is 
made on a National bank only by attachment and publication or ser- 
vice o*ut of the State, the attachment being prohibited by this section 
will be vacated and the service set aside. (Van Reed t^. People's Nat 
Bank, 198 U. S., 654; Gamer i;. Second Nat Bank, 66 Fed. Rep., 369.) 
The provision of this section prohibiting attacdunents is not repealed 
by the Act of Ck>ngress of July 12, 1882, providing that the Jurisdiction 
for suits thereafter brought against National banks shall be the same 
as for suits against State banks, and repealing laws inconsistent there- 
with. (Raynor v. Padflc Nat Bank, 93 N. Y., 871.) The prohibition 
applies whether the bank is solvent or insolvent (Van Reed v. 
People's Nat Bank, 173 N. T., 314.) But it does not apply where 
the bank Intervenes in an attachment suit and claims the property. 
(Wlllard Mfg. Co. v. Tiemey, 130 N. C, 611.) And an attachm^it 
sued out against a National bank as garnishee is not an attachment 
against the bank or Its property, within the meaning ot this section. 
{Earle v. Pennsylvania, 178 U. S., 449; Barle i;. CJonway, 178 U. S., 
456.) The motion to dissolve the attachmients may be made at any 
tlmie before the attached property has been applied to payment of 
the judgment (McBride v. Illinois Nat Bank, 128 App. Div. (N. T.), 
503.) 

Injunctions. — ^This section forbids State courts to grant injunctions 
against Natiolial banks before final Judgment; and the prohibition is 
not repealed by Stat L. 1882, C. 290, Sec. 4» or Stat. L. 1887, C, 
373, Sec. 4, or Stat L. 1888, C. 866, Sec. 4. (Freeman Manufactur- 
ing CJompany i;. National Bank of the Republic, 160 Mass., 398.) But 
this section does not deprive the Federal courts of the power to issue 
such an injunction. (Hoover i;. Weiss Malting and Elevator Cof., 65 
Fed. Rep., 356. But see Baker t;. Ault, 78 Fed. Rep., 374.) 



Digitized by CjOOQ IC 



189 

§ 187. Prooeedingi to Enjoin Comptroller— Where Had.— All 
proceedings by any National banking aasociaticm to enjoin the 
Comptroller of the Currency, under the proviaions of any law re- 
lating to National banking associations, shall be had in the district 
where such association is located. (Bev. Stat. U. 3. Sec. 736.) 

§ 188. United States District Attorney to Conduct Suits.— AH 
suits and proceedings arising out of the provisions of law govern- 
ing National banking associations, in which the United States or 
any of its oflScers or agents shall be parties, shall be conducted by 
the district attorneys of the several districts under the direction 
tuid supervision of the Solicitor of the Tr^^asury. (Bev. Stat U. S. 
Sec. 380.) 

GoMPcrsATiON or Distbiot Attobhet.— 'If a District Attorney of the 
United States, acting under the provisions of this section, conducts 
m suit or proceeding arising out of the provisions of law governing Na- 
tional banking associations, he Is entitled to no remuneration other 
than that coming from his salary, from the compensation and fees 
authorized to^ be taxed and allowed, and such additional compensation 
MM is expressly allowed by law, speclflcally, on account of services 
named. (Gibson v. Peters, 160 U. S., 342.) 

RacEivxR AS OmcEB OB Agent. — ^The receiver of a National bank is 
an offloer or agent of the United States within the meaning of those 
terms as used in this section. (Id.) (See also United States v. Twin- 
ing, 182 Fed. Rep., 129.) 

§ 189. Instruments Certified by Comptroller as Evidenoe. — 

lEJvery certificate^ assignment, and conveyance executed by the 
Comptroller of the Chirrency, in pursuance of law, and sealed with 
his seal of office, shall be received in evidence in all places and 
courts; and all copies of papers in his office, certified by him and 
authenticated by the said seal, shall in all cases be evidence equally 
with the originals. An impression of such seal directly on the 
paper shall be as valid as if made on wax or wafer. (Bev. Stat. 
XT. S. Sec. 884.) 

Ckbtificd CopnES as Eivwemck in State Coxtbt. — 'Under U. S. Rev. Sts. 
•eetions 178, 327, 884, copies of papers oli file in the office of the 



Digitized by CjOOQ IC 



190 

Comptroller of the Currency, certilled by his deputy and autlienticated 
by Ms seal of office, are competent eyidence, in an action by a reoeiyer 
of a National bank to recover the amount of an ■aaessment upon a 
shareholder, to prove the charter of the bank, its extension, the adjudi- 
cation of insolvency by the Comiptroller, the appointment of the plain- 
tiff as receiver, the assessment and the authorizing and directing of 
the receiver to bring suit for its collection. (Weitsel v. Brown, 224 
B., 190.) 



JunioiAi. NoncB. — ^The court will take Judicial notice that a person, 
who' signed as "Acting Comptroller of the Currency" a certificate bear- 
ing the seal of the Comptroller of the Currency of the United States 
and asserting the truth of copies of originals on file in that office, 
held that office and will assume that at the date of his certificate he 
was authorized to exercise the powers and discharge the duties of the 
Comptroller, and was therefore, at the time acting Con^itroller. 
(Weitzel V. Brown, 224 Mass., 190; Keyser v. Hltz, 138 U. S., 488; 
Aspinwall v. Butler, 188 U. S., 696.) 

How Copoa Obtainxd.— Certified copies of pi^i^ers are furnished by 
the Comptroller's office when such copies could be obtained upon an 
order of court An order of court is not usually required, but the 
2>arUes sho^d set forth in detail the purpose for which the copies 
lire desired. 

§ 190. Certifled Copy of Organisation Certifioate as Evidence. — 

— Copies of the organization certificate of any National banking 
association^ duly certified by the Comptroller of the Currency, and 
authenticated by his seal of office, shall be evidence in all courts 
and places within the jurisdiction of the ITnited States of the exist- 
ence of the association, and of every matter which could be proved 
by the production of the original certificate. (Rev. Stat TJ. S. 
Sec. 885.) 

Bffbot or CxBTiFiOATV AS BvuxBiTCB.— This certificate^ together with 
proof that the bank has been acting as a National bank for a long 
time, is amply sufficient evidence to establish, at least prima faole, the 
existence of the corporation. (Mix v. National Bank of Bloomington, 
91 111., 20. See also Thatcher v. West River Nat Bank, 19 Mich., 196; 
Merchants' Nat Bank v, Qlendon, 120 Mass., 97.) And such certificate 
is competent evidence in a State court (TiME>ley v. Martin, 116 Mass., 
276.) In a suit against the bank or its stockholders this certificate 



Digitized by CjOOQ IC 



191 

is condmlTtt erldcnee of tho orgaaiflUion. (Omoj v, 0*111, 94 U. 8., 
67S.) 

Pboof bt Othbb Bvumcngb.— In an action by a National bank It Is 
competent to prove by parol that It was carrying on a general banking 
businesa aa a National bank authorised by the general laws of the 
United States under the name by which It had toed. (Taklma Nat 
Bank i;. Knlpe, e Wash^ 348.) 



Digitized by CjOOQ IC 



193 




Digitized by VjOOQIC 



PART TWO 

THE TEDSBAI BBSEKVI ACT, WITH AIX AMSMBKEMTS 
TO APBIL 1, 1990. 

Section 191. Passage of Act 

192. Title of Act and Definition of Terms. 

193. Powers Beserve Bank Organization Committee— Fed- 

eral Besenre Cities and Districts. 

194. Incidental Powers of Organisation Committee. 

195. Capital Stock of Beserre Banks — Subscription by 

National Banks. 

196. Liability of Shareholders of Beserve Banks. 

197. Penalties for Failure of National Banks to Signify 

Acceptance of Terms of Act, etc. 

198. Capital Stock of Beserve Banks — Public Subscrip- 

tion. 

199. Same Subject — Allotment to United States. 

200. Same Subject — ^Transfers. 

201. Minimum Capital Stock of Beserve Bank — Status of 

Beserve and Central Beserve Cities — Expenses of 
Organization Committee. 

202. Branch OfSces of Beserve Banks. 

203. Organization of Beserve Banks. 

204. Corporate Powers of Beserve Banks. 

205. Duties of Directors of Beserve Banks. 

206. Classification of Directors of Beserve Banks. 

207. Qualifications of Directors of Beserve Banks. 

208. Election of ''Class A^ and ''Class B'* Directors. 

209. Appointment of "Class C Directors— Designation of 

Federal Beserve Agents and Deputy Federal Be- 
serve Agents^ and Assistants. 

210. Compensation of Directors of Beserve Banks. 

193 
13 



Digitized by CjOOQ IC 



194 

Section 211. Powers of Organization Committee— Reserve Bank 
Directors. 

212. Terms of Directors of Reserve Banks — Filling of Va^ 

cancies. 

213. Stock Issues — Increase, Decrease and Cancellation of 

Capital of Reserve Banks. 

214. Dividends and Surplus of Reserve Banks. 

215. Exemption from Taxation — ^Reserve Banks. 

216. Conversion of State into National Banks. 

217. State Banks as Members — ^Admission, Restrictions, 

Suspension and Withdrawal. 

218. Creation of Federal Reserve Board — Salaries of 

Members. 

219. Organization of Board. 

220. Assessment to Meet Bxpenses of Board. 

221. Qualifications of Miembers of Board— filing Va- 

cancies. 

222. Supervision of Secretary of Treasury Over Board. 

223. Annual Report of Board to Congress. 

224. Bureau for Issue and Regulation of National Bank 

Notes and Federal Reserve Notes. 

225. Yisitorial Powers of Board — ^Publication of Weekly 

Statements. 

226. Power of Board — Rediscount by Reserve Bank of 

Discounted Paper of Other Reserve Banks. 

227. Power of Board to Suspend Reserve Requirements — 

Tax on Deficiency. 
Power of Board — ^Issue^ Delivery and Retirement of 

Federal Reserve Notes. 
Power of Board — Reserve and Central Reserve Cities. 
Power of Board — Suspension or Removal of Officer 

or Director of Reserve Bank. 

231. Power of Board— WHting OS of Doubtful or Worth- 
less Assets by Reserve Banks. 

232. Power of Board — Suspension, liquidation or Reor- 
ganization of Reserve Bank. 



Digitized by CjOOQ IC 



195 

Section S33. Power of Board— Bonding of Federal Beserve Agents 
— ^Performance of Duties, Functions and Services 
of Act 

234. Power of Board — General Supervision Ovot Beserre 

Banks. 

235. Power of Board — Grant of Trustee Powers to Na- 

tional Banks. 

236. Power of Board— Employment of Assistants, Ckrks, 

etc. 

237. Power of Board — ^Permission to Discount Paper in 

Excess of Limitation When Secured bj War Time 
Securities. 

238. Federal Advisory Council. 

239. Powers of Reserve Banks — ^As Depositary and Col- 

lecting Agent — Collection Charges. 

240. Powers of Beserve Banks — ^Discount of Notes, Drafts, 

and Bills of Exchange. 

241. Limitation on Aggregate of Paper of One Borrows 

Bediscounted for Any One Bank. 

242. Powers of Beserve Banks — ^Discount of Acceptances. 

243. Foreign and Domestic Acceptances by Member Banks. 

244. Powers of Beserve Banks — ^Advances to Miember 

Banks. 

245. Limitation on Total Indebtedness of National Bank 

— ^Exceptions. 

246. Power of Board — ^Dealings of Beserve Banks in Ne- 

gotiable Paper. 

247. Power of National Banks as Insurance Agents. 

248. Acceptance by Member Banks of Drafts and Bills 

of Elchange Drawn to Furnish Dollar Exchange. 

249. Powers of Beserve Banks — Open Market Purchases 

of Bills of Exchange, Trade Acceptances and 
Bankers Acceptances. 

250. Powers of Bes^re Banks — Gold Coin and Bullion in 

Open Market 

251. Powers of Beserve Banks — ^Notes, Bonds and War- 

rants in Open Miarket 



Digitized by CjOOQ IC 



196 

Section 252. Powers of Beserre BankB— Bills of Ekehange in Open 
Market 

253. Powers of Beserre Bank»— Bates of Discount 

254. Powers of Beserve Banks — Foreign Accounts^ Agen- 

cies, and Correspondents. 

255. Goyemment Deposits in Beserre B^uoks. 

256. Federal Beserve Notes. 

257. Collateral Security for Fed^al Beserve Notes. 

258. Federal Beserve Notes— Beserve Against, Issue, Ex- 

change^ and Bedemption. 

259. Federal Beserve Notea— Bedemption Fond— Para- 

monnt lien on Assets of Beserve Bank. 

260. Beduction of Outstanding Federal Beserve Notes. 

261. Exchange of Federal Beserve Notes for Gold, Gold 

Certificates or Lawful Monqr. 

262. Federal Beserve Notes — Substitution of Collateral 

to — ^Betirement of — ^liability of Federal Beserve 
Agent for. 

263. Printing of Federal Beserve Notes. 

264. Beserve Banks as Collecting Agents for Membei^ 

Banks. 
965. Transfer of Funds Among Beserve Banks — ^Board as 
Clearing House for Beserve Banks — ^Beserve Banks 
As Clearing Houses for Member Banks. 

266. Deposits of Gold Coin and Gold Certificates with 

Treasurer by Federal Beserve Banks and Agents. 

267. Deposit of Bonds by National Banks with Treasurer 

— ^Bepeal of Minimum Deposit Bequirements. 

268. Betirement of National Bank Notes — Sale of Bonds 

to Beserve Banks. 

269. Federal Beserve Bank Notes — Similarity to National 

Bank Notes. 

270. Exchange by Beserve Banks of Two Per Cent Bonds 

for Three Per Cent Bonds and One-Year Notes. 

271. Issue of 0(ne-Year Three Per Cent Gold Notes and 

Thirty-Year Three Per Cent. Gold Bonds. 

272. Exchange of One-Year Notes for Thirty-Year Bonds. 



Digitized by CjOOQ IC 



197 

Section 273. Definition of Demand and Time Deposifs. 

274. Beeerves Carried by llember Banks Not in Beserve 

or Central Beserre Cities. 

275. Bes^rea Carried by Member Banks Located in Be- 

serre Cities. 

276. Beserves Carried by MIember Banks Located in Cen- 

tral Beeerve Cities. 

277. Eligible Paper as Beserre. 

278. Limit of Deposit of Member with Non-Member 

Bank — ^Member as Agent of Non-Member Bank in 
Discoxmting with Beserre Banks. 

279. Withdrawal of Bequired Beterres — ^Penalties. 

280. Calcnhtion of Beserres. 

281. Membership of National Banks Located in United 

States/ but Outside of Continental United States. 

282. Five Per Cent Bedemption Fund as Beserre. 

283. Appointment of Ebcaminers — Examinations of Mem- 

ber Banks. 

284. Salaries of Examiners — ^Expense of Examinations. 

285. Special Examination of Members by Beserre Banks. 

286. Limitation of Yisitorial Powers. 

287. Examination of Beserre Banks by Board. 

288. Fees^ Commissions, Oifts, etc., Prohibited to Officers, 

Employees, etc., of Member Banks, and to Bank 
Examiners — ^Exceptions. 

289. Liability of Stockholders of National Banks. 

290. Loans on Beal Estate by National Banks. 

291. Foreign Branches of National Banks. 

292. Power of National Bank to Take Stock in Corpora- 

tions Transacting Foreign Business. 

293. Beports and Examinations of Foreign Branches, etc. 

294. Powers of Board Over Corporations in Which Na- 

tional Banks Own Stoek. 

295. Accounts of Foreign Branches. 

296. Exception to Prohibition of Clayton Act 

297. Banking Corporations Authorized to do Foreign 

Banking Business (the Edge Bill). 



Digitized by CjOOQ IC 



198 

Section 298. Maintenance of Standard of Value — ^Parity of Forms 
of Money — Gold Beserve. 

299. Emergency Currency. 

300. Beduction of Capital Stock of National Banks. 

301. Saving Clause. 

302. Beservation of Bight to Amend, Alter, or BepeaL 

303. Opinions of Counsel of Board on Negotiable Instru- 

ments Law, etc. 

§ 191. Passage of Act. — An Act entitled ^^An Act to provide 
for the establishment of Federal reserve banks, to furnish an 
elastic currency, to afford means of rediscounting commercial 
paper, to establish a more effective supervision of banking in the 
United States, and for other purposes,*' was approved Decembei* 
23, 1913. (38 Stat L., 251.) 

§ 192. Title of Act and Definition of Terms. — Be it enacted by 
the Senate and House of Representatives of the United States 
of America in Congress assembled. That the short title of this 
Act shall be the "Federal Beserve Acf 

Wherever the word *T)ank'' is used in this Act, the word shall 
be held to include State bank, banking association, and trust 
company, except where National banks or Federal reserve banks 
are specifically referred to. 

The terms "National bank*' and "National banking association*' 
used in this Act shall be held to be synonymous and interchange- 
able. The term "member bank*' shall be held to mean any National 
bank. State bank, or bank or trust company which has become a 
member of one of the reserve banks created by this Act. The 
term *T)oard" shall be held to mean Federal Beserve Board; the 
term "district" shall be held to mean Federal BeserVe district; the 
term "reserve bank" shall be held to mean Federal reserve bank. 
(Sec. 1, Act Dec. 23, 1913; 38 Stat. L., 251.) 

§ 193. Powers Beienre Bank Organisation Oonunittee— 'Fedaral 
Beserve Cities and Districts. — As soon as practicable, the Secre- 
taiy of the Treasury, the Secretary of Agriculture and the Comp- 
troller of the Currency, aoting as "The Beserve Bank Organizac 



Digitized by CjOOQ IC 



199 

tion Committee^'* shall designate not less than eight nor more than 
twelve cities to be known as Federal reserve cities^ and shall divide 
the continental United States, excluding Alaska, into districts, 
each district to contain only one of snch Federal reserve cities. 
The determination of said organization committee shall not be 
subject to review except by the Federal Beeerve Board when or- 
ganized: Provided, That the districts shall be apportioned with 
due r^ard to the convenience and customary course of business 
and shall not necessarily be coterminous with any State or States. 
The districts thus created may be readjusted and new districts may 
from time to time be created by the Federal Reserve Board, not 
to exceed twelve in all. Such districts shall be known as Federal 
reserve districts and may be designated by numb^. A majority of 
the organization committee shall constitute a quorum with author- 
ity to act. (Sec. 2, Act Dec. 23, 1913.) 

On April 2, 1914, the Reserve Bank Organization Committee rendered 
a decision designating twelve Federal reserve cities and determining 
the twelve Federal reserve districts. (See map on page 192.) The 
Federal reserve cities were designated as follows: No. 1, Boston; 
No. 2, New York; No. 3, Philadelphia; No. 4, Cleveland; No. 6, Rich- 
mond; No. 6, Atlanta; No. 7, Chicago; No. 8, St Lo\iis; No. 9, Min- 
neapolis; No. 10, Kansas City; No. 11, Dallas; No. 12, San Francisco. 

Aboutioh or Rxssbve Dibtiicts and Rxsebvs Banks. — ^The Federal 
Reserve Board has no power to abolish existing Federal Reserve Dis- 
tricts or Federal Reserve Banks. (Opinion of Attorney General, Nov. 
22, 1915.) 

Changs of Location of Rxsebve Bank— Minimttm Capctalization. — 
The Federal Reserve Board does not possess power to change the pre- 
sent location of any Federal Reserve Bank and the minimum capitalisa- 
tion of 14,000,000 required as a condition precedent to commencing 
business is not a continuing requirement (Opinion of Attorney 
General, April 14, 1916.) 

Reduction of Federal Resebve Disnucns.^The Federal Reserve Act 
does not give to the Federal Board the power to reduce the number 
of Federal Reserve districts determined by the Reserve Bank organiza- 
tion committee. (Opinion of Counsel of Board, Nov. 22, 1916.) 



Digitized by CjOOQ IC 



200 

§ IM. Inoideiitel Powers of OrganiBatioii Oommittee.— Said 
organizatian committee shall be authorized to emfloj cotmsel and 
expert aid, to take testimonyy to send for persons and papers, to 
administer oaths, and to make such investigation as may be 
deemed necessary by the said committee in determining the re- 
serve districts and in designating the cities within such districts 
where such Federal reserve banks shall be severally located. The 
said committee shall supervise the organization in each of the cities 
designated of a Fedend reserve bank, which shall include in its 
title the name of the city in which it is situated, as '^Federal Be- 
serve Bank of Chicago,'* (Sec, 2, Act Dec. 23, 1913.) 



§ 196. Capital Stock of Seterre Banks— Subsoription by Va^ 
tional Banks. — Under regulations to be prescribed by the organi- 
zation committee, every National banking association in the United 
States is hereby required, and every eligible bank in the United 
States and every trust company within the District of Columbia, 
is hereby authorized to signify in writing, within sixty days after 
the passage of this Act^ its acceptance of the terms and provisions 
hereof. When the organization committee shall have designated 
the cities in which Federal reserve banks are to be organized, and 
fixed the geographical limits of the Federal reserve districts, every 
National banking association within that district shall be required 
within thirty days after notice from the organization committee, to 
subscribe to the capital stock of such Federal reserve bank in a 
sum equal to six per centum of the paid-up capital stock and sur- 
plus of such bank, one-sixth of the subscription to be payable on 
call of the organization committee or of the Federal Beserve Board, 
one-sixth within three months and one-sixth within six months 
thereafter, and the remainder of the subscription, or any part 
thereof, shall be subject to call when deemed necessary by the 
Federal Beserve Board, said payments to be in gold or gold certifi- 
cates. (Sec. 2, Act Dec. 23, 1913.) 



§ 196. liability of Shareholden of Beserve Banks.— The share- 



Digitized by CjOOQ IC 



SOI 

holders of every Federal resenre bank shall be held indiyidnally 
responsible, equally and ratably, and not one for another, for all 
contracts, debts, and engagements of such bank to the extent of 
the amount of their subscriptions to such stock at the par value 
thereof in addition to the amount subscribed, whether such sub- 
scriptions have been paid up in whole or in party under the pro- 
visions of this Act (Sec 2, Act Dec. 23, 1913.) 



§ 197. Penalties for Failure of National Bank to Signify Ac- 
ceptanoe of Terms of Aet, eto. — Any National bank failing to sig- 
nify its acceptance of the terms of this Act within the sixty days 
aforesaid, shall cease to act as a reserve agent, upon thirty days' 
notice, to be given within the discretion of the said organisation 
committee or of the Federal Beserve Board. 

Should any National banking association in the Fnited States 
now organized fail within one year after the passage of this Act 
to become a member bank or fail to comply with any of the pro- 
visions of this Act applicable thereto, all of the rights, privilq;es, 
and franchises of such association granted to it under the National 
bank Act, or under the provisions of this Act, shall be thereby for- 
feited. Any non-compliance vrith or violation of this Act shall, 
however, be determined and adjudged by any court of the United 
States of competent jurisdiction in a suit brought for that purpose 
in the district or territory in which such bank is located, under di- 
rection of the Federal Reserve Board, by the Comptroller of the 
Currency in his own name before the association shall be declared 
dissolved. In cases of such non-compliance or violation, other than 
the failure to become a member bank under the provisions of this 
Act, every director who participated in or assented to the same 
shall be held liable in his personal or individual capacity for all 
damages which said bank, its shareholders, or any other person 
shall have sustained in consequence of such violation* 

Such dissolution shall not take away or impair any remedy 
against such corporation, its stockholders or cheers, for any lia- 
bility or penalty which shaU have been previously incurred. (Sec 
2, Aet Deo. 23, 1913.) 



Digitized by CjOOQ IC 



SOS 

§ 198. Capital Stook of Xoienra Baiikt— Public Subieriptioiu— 

Should the subscriptions by banks to the stock of said Federal 
reserve banks or any one or more of them be, in the judgment of 
the organization committee, insuflSK^ient to provide the amount of 
capital required therefor, then and in that event the said organiza- 
tion committee may, under conditions and regulations to be pre- 
scribed by it, offer to public subscription at par such an amount of 
stock in said Federal reserve banks or any one or more of them, 
as said committee shaU determine, subject to the same conditions 
as to pajrment and stock liability as provided for member banks. 

Ko individual, copartnership, or corporation other than a mem- 
ber bank of its district shall be permitted to subscribe for or to 
hold at any time more than $25,000 par value of stock in any 
Federal reserve bank. Such stock shall be known as public stock 
and may be transferred on the books of the Federal reserve bank 
by the chairman of the board of directors of such bank. (Sec. 2, 
Act Dec. 23, 1913.) 



§ 199. Same Subject— Allotment to TTnited States. — Should the 
total subscriptions by banks and the public to the stock of said 
Federal reserve banks, or any one or more of them, be, in the 
judgment of the organization committee, insufficient to provide the 
amount of capital required therefor, then and in that event the 
said organization committee shall allot to the United States such 
an amount of said stock as said committee shall determine. Said 
TTnited States stock shall be paid for at par out of any money 
in the Treasury not otherwise appropriated, and shall be held by 
the Secretary of the Treasury and disposed of for the benefit of 
the United States in such manner, at such times, and at such 
price, not less than par, as the Secretary of the Treasury shall 
determine. 

Stock not held by member banks shall not be entitled to voting 
power. (Sec. 2, Act Dec. 23, 1913.) 



§ 900. Same Subject— Trantf en.— The Federal Reserve Board 



Digitized by CjOOQ IC 



S08 

is hereby empowered to adopt and promulgate mlea and regulations 
governing the transfers of said stocks. (Sec 2, Act Dec. 23> 1913.) 



§ 201. ICnimnm Capital Stock of Beier^e Bank— Status of Ke- 
serve and Central Beser^e Cities— Expenses of Organisation Com- 
mittee.— No Federal reserve bank shall commence business with a 
subscribed capital less than $4,000>000. The organization of re- 
serve districts and Federal reserve cities shall not be construed as 
changing the present status of reserve cities and central reserve 
cities> except in so far as this Act changes the amount of reserves 
that may be carried with approved reserve agents located therein. 
The organization committee shall have power to appoint such assis- 
tants and incur such expenses in carrying out the provisions of this 
Act as it shall deem necessary, and such expenses shall be payable 
by the Treasurer of the United States upon voucher approved by 
the Secretary of the Treasury, and the sum of $100,000, or so 
much thereof as may be necessary, is hereby appropriated, out of 
any moneys in the Treasury not otherwise appropriated, for the 
payment of such expenses. (Sec. 2, Act Dec. 23, 1913.) 

§ 902. Branoh OAces of Seserre Banks.— The Federal Be- 
serve Board may permit or require any Federal reserve bank 
to establish branch banks within the Federal reserve district in 
which it is located or within the district of any Federal reserve 
bank which may have been suspended. Such branches, subject 
to such rules and regulations as the Federal Beserve Board may 
prescribe, shall be operated upon the supervision of a board of 
directors, to consist of not more than seven nor less than three 
directors, to whom a mlajority of one shall be appointed by the 
Federal reserve bank of the district, and the remaining directors 
by the Federal Beserve Board. Directors of branch banks shall 
hold office during the pleasure of the Federal Beserve Board. (Sec. 
Z, Act Dec. 23, 1913, as amended by Act June 21, 1917; 40 
Stat Im, 232.) 



Digitized by CjOOQ IC 



M4 



Bbajtchxs of Fbdsial Rxskkyb Banks.— Ldst of at date <ft this pobU- 
cation. 



Federal Re- 


BrandheB o^ 


Federal Be- 


Bran6he9 at 


serve Bank of 




^serveBankof 




New York 


Buffalo 


Minneapolis 


Helena 


Cleyelawl 


Cincinnati k Pitta- 


Kansas City 


Omaha» Denver 4 




burgh 




Oklahoma City. 


Richmond 


Baltimore 


Dallas 


m Paso 4 Houston 


Atlanta 


New Orleans, Jack- 


'^an Francisco 






sonville, Bir- 




Los Angeles, Port- 




mingham and 




land, Salt Lake 




Nashville 




City.SeatUe* 


Chicago 


Detroit 




Spokane 


St LoulB 


I^uisville, Memphis 
and UtUe Rock 







§ 203. Organisation of Beserve Banks.^ When the organization 
committee shall have established Federal reserve districts as pro- 
vided in section two of this Act, a certificate shall be filed with 
the Comptroller of the Currency showing the geographical limits 
of such districts and the Federal reserve city designated in each 
of such districts. The Comptroller of the Currency shall there- 
upon cause to be forwarded to each National bank located in 
each district, and to such other banks declared to be eligible by 
the organization committee which may apply therefor, an applica^ 
tion blank in form to be approved by the organization committee, 
which blank shall contain a resolution to be adopted by the board 
of directors of each bank executing such application, authorizing 
a subscription to the capital stock of the Federal reserve bank 
organizing in that district in accordance with the provisions of 
this Act. 

Wlien the minimum amount of capital stock prescribed by this 
Act for the organization of any Federal reserve bank shall have 
been subscribed and allotted, the organization committee shall 
designate any five banks of those whose applications have been re- 
ceived, to execute a certificate of organization, and thereupon the 
banks so designated shall, under their seals, make an organization 



Digitized by CjOOQ IC 



205 

certificate which ahall gpedfically state the name of such Federal 
reeerre bank^ the territorial extent of the district oyer which the 
operations of such Federal reserve bank are to be carried on^ the 
city and State in which said bank is to be located, the amount of 
capital stock and the number of shares into which the same is 
divided, the name and place of doing busiuess of each bank exe- 
cuting such certificate, and of all banks which have subscribed to 
the capital stock of such Federal reserve bank and the number of 
shares subscribed by each, and the fact that the certificate is made 
to enable those banks executing same, and all banks which have 
subscribed or maj thereafter subscribe to the capital stock of 
such Federal reserve bank, to avail themselves of the advantages 
of this Act. 

The said organization certificate shall be acknowledged before a 
judge of some court of record or notary public; and shall be, to- 
gether with the acknowledgment thereof, authenticated by the seal 
of such court, or notary, transmitted to the (Comptroller of the 
Currency, who shall file, record and carefully preserve the same 
in his office. (Sec. 4, Act Dec. 23, 1913.) 

§ 204. Corporate Powen of Sesenre Banks.— Upon tiie filing 
of such certificate with the Comptroller of the Currency as afore- 
said, the said Federal reserve bank shall become a body corporate 
and as such, and in the name designated in such organization cer- 
tificate, shall have power — 

First, To adopt and use a corporate seaL 

Second. To have succession for a period of twenty years from its 
organization unless it is sooner dissolved by an Act of Congress, 
or unless its franchise becomes forfeited by some violation of law. 

Third. To make contracts. 

Fourth. To sue and be sued, complain and defend, in any court 
of law or equity. 

Fifth. To appoint by its board of directors, such officers and 
employees as are not otherwise provided for in this Act, to define 
their duties, require bonds of them and fix the penalty thereof, and 
to dismiss at pleasure such officers or emplojrees. 

Sixth. To prescribe by its board of directors, by-laws not in- 



Digitized by CjOOQ IC 



206 

consistent with law, regulating the manner in which its general 
business may be conducted, and the privileges granted to it by law 
may be exercised and enjoyed. 

Seventh. To exercise by its board of directors, or duly author- 
ized officers or agents, all powers specifically granted by the pro- 
Tisions of this Act and such incid^ital powers as shall be necessary 
to carry on the business of banking within the limitations pre- 
scribed by this Act. 

Eighth. Upon deposit with the Treasurer of the United States 
of any bonds of the United States in the manner provided by ex« 
isting laws relating to National banks, to receive from the Comp- 
troller of the Currency circulating notes in blank, registered and 
countersigned as provided by law, equal in amount to the par 
value of the bonds so deposited, such notes to be issued under the 
same conditions and provisions of law as relate to the issue of 
circulating notes of National banks secured by bonds of the United 
States bearing the circulating privilege, except that the issue of 
such notes shall not be limited to fhe capital stock of such Federal 
reserve bank. 

But no Federal reserve bank shall transact any business except 
such as is incidental and necessarily preliminary to its organiza- 
tion until it has been authorized by tiie Comptroller of the Cur- 
rency to commence business under the provisions of this Act. (Sec. 
4, Act Dec. 23, 1913.) 

OmcEBS AiTD CuciKS OF Rkskevs Baitks. — ^Appointments of clerks 
of Federal Reserve Banks may be for an indefinite period, provided 
they are subject to the pleasure of the board of directors. Officers 
should, however, be appointed from year to year and their salaries, 
as well as those of clerks, are subject to the annual approval of the 
Federal Reserve Board. (Informal Ruling of Board, Jan. 6, 1916.) 

MoNST Obdks BusnoBss.— There is no authority under the law for 
FMeral Reserve Banks to engage in the money order business. (In- 
totmaX Ruling of Board, June 17, 1915.) 

§ 805. Duties of Directors of Beserre Banks.— Every Federal 
reserve bank shall be conducted under the supervision and control 
of a board of directors. 



Digitized by CjOOQ IC 



807 

The board of directon ahall perform the duties OBually q>per- 
taining to the office of directors of bankiiig associations and all 
such duties as are prescribed bj law. 

Said board shall administer the affairs of said bank fairlj and 
impartially and without discrimination in f ayor of or against any 
member bank or banks and shall, subject to the provisions of law 
and the orders of the Federal Beeerve Board, extend to each mem- 
ber bank such discounts, advancements and accommodations as 
nmy be safely and reasonably made with due regard for the claims 
and d^nands of otiier member banks. (Sec. 4, Act Dec. 23, 1913.) 

§ 206. Classiiofttion of IMreoton of Sesenre Banks. — Such 
board of directors shall be selected as hereinafter specified and 
shall consist of nine members, holding ctBce for three years, and 
divided into three classes, designated as classes A, B, and G. 

Class A shall consist of three members, who shall be chosen by 
and be representative of the stock-holding banks. 

Class B shall consist of three members, who at the time of their 
election shall be actively engaged in their district in commerce, 
agriculture or some other industrial pursuit. 

Class C shall consist of three members who shall be designated 
by the Federal Beserve Board. When the necessary subscriptions 
to the capital stock have been obtained for the organization of any 
Federal reserve bank, the Federal Beserve Board shall appoint tiie 
class C directors and shall designate one of such directors as chair- 
man of the board to be selected. Pending tiie designation of such 
chairman, the organization committee shall exercise the powers 
and duties appertaining to the c^Sce of chairman in the organiza^ 
tion of such Federal reserve bank. (Sec. 4, Act Dec. 23, 1913.) 

Class A Duiotobs— RssmENTs or Distkiot.— /The words "representa- 
tive of the stock holding banks" mean that Class A directors must 
reside In the district for which they are elected. (Informal Ruling 
of Board, Oct 16, 1916.) 

§ 807. Qualifications of Biieetors of Federal Seserre Banks.— 
No Senator or Bepresentative in Congress shall be a member of 



Digitized by CjOOQ IC 



208 

the Federal Reserve Board or an officer or a director of a Federal 
reserve bank. 

No director of class B shall be an oScer, director, or employee 
of any bank. 

No director of class G shall be an officer, director, employee, or 
stockholder of any bank. (Sec. 4, Act Dec. 23, 1913.) 

National Bank Bzaminxbs as Dibectobs. — ^Election or appointment 
of National bank examiners to directorships in Federal Reserve Banks 
is against the policy of the Bollard. (Resolution of Board, Dec 28, 
1915.) 

§ 208« Election of ''Class A" and ''Class B'' Directors.— Direc- 
tors of class A and class B shall be chosen in the following manner: 

The Federal Reserve Board shall classify the member banks of 
the district into three general groups or divisions, designating 
each group by number. Each group shall consist as nearly as 
may be of banks of similar capitalization. Each member bank 
shall be permitted to nominate to the chairman of the board of 
directors of the Federal reserve bank of the district one candidate 
for director of class A and one candidate for director of class 
B. The candidates so nominated shall be listed by the chairman, 
indicating by whom nominated, and a copy of said list shall, 
within fifteen Asljs after its completion, be furnished by the 
chairman to each member bank. Each member bank by a resolu- 
tion of the board or by an amendment to its by-laws shall author- 
ize its president, cashi^, or some other officer to cast the vote of 
the member bank in the elections of class A and class B directors. 

Within fifteen days after receipt of the list of candidates the 
duly authorized officer of a member bank shall certify to the 
chairman his first, second, and other choices for director of class 
A and class B, respectively, upon a preferential ballot upon a 
form furnished by the chairman of the board of directors of the 
Federal reserve bank of the district Each such officer shall make 
a cross opposite the name of the first, second, and other choices 
for a director of class A and for a director of class B, but shall 
not vote more than one choice for any one candidate. No officer 
or director of a member bank shall be eligible to serve as a class 



Digitized by CjOOQ IC 



IS09 

A director unless nominated and elected by banks which are 
members of the same group as the member bank of which he is an 
o£Bcer or director. 

Any person who is an offiber or director of more than one mem- 
ber bank shall not be eligible for nomination as a class A director 
except by banks in the same group as the bank having the largest 
aggr^ate resources of any of those of which snch person is an 
ofScer or director. 

Any candidate having a majority of all votes cast in the column 
of first choice shall be declared elected. If no candidate has a 
majoriiy of all the votes in the first column^ then there shall be 
added together the votes cast by the electors for such candidates in 
the second column and the votes cast for the several candidates 
in the first column* If any candidate then has a majority of 
the electors votings by adding together the first and second choices^ 
he shall be declared elected. If no candidate has a majority of 
electors voting when the first and second choices shall have been 
added^ then the votes cast in the third column for other choices 
shall be added together in like manner^ and the candidate then 
having the highest number of votes shall be declared elected. An 
immediate report of election shall be declared. (Sec. 4, Act Dec. 
23, 1913, as amended by Sec. 1, Act Sept. 26, 1918; 40 Stat. 
L., 967.) 

NoMHiATioN or D mc ioi MH -<toTincATttwr OF Choiobb.— The right 
of a member bank to nominate a candidate for director is permissive 
under the terms of section 4 and not mandatory. 

It is the duty of every duly authorized officer, after receipt of 
the list of candidates, to certify to the chairman his first, second, and 
other choices. The law in this connection is mandatory and not per- 
missive, it evidently being spedfled in order that there may be no 
possibility of a failure to elect Inasmuch, however, as member banks 
are not obliged to nominate a candidate, it is possible that there 
may be less than three nominees, and in such case vote can be made 
for only first and second choices, or if only one nominee only first 
choice. There is no Inooihsistency, however, in requiring a first, second, 
and third choice vote when there are three or more candidates. Both 
the spirit and the letter of the act require this. (Ruling of Board, 
Oct 13, 1916.) 
14 



Digitized by CjOOQ IC 



210 

§ 209. Appointment of ''Clan C' Direoton-^Deiignation of 
Federal Beserve Agents, Deputy Federal Seienre Agents and 
Assistants. — Class G directors shall be appointed by the Federal 
Eeserve Board. They shall have been for at least two years resi- 
dents of the district for which tiiey are appointed, one of whom 
shall be designated by said board as chairman of the board of 
directors of the Federal reserve bank and as "Federal reserve 
agent/^ He shall be a person of tested banking experiences, and 
in addition to his duties as chairman of the board of directors 
of the Federal reserve bank he shall be required to maintain, under 
regulations to be established by the Federal Beserve Board, a local 
office of said board on the premises of the Federal reserve bank. 
He shall make regular reports to the Federal Beserve Board and. 
shall act as its official representative for the performance of the 
functions conferred upon it by this Act. He shall receive an an« 
nual compensation to be fixed by the Federal Beserve Board and 
paid monthly by the Federal reserve bank to which he is desig- 
nated. One of the directors of class G shall be appointed by the 
Federal Beserve Board as deputy chairman to exercise the powers 
of the chairman of the board when necessary. In case of the 
absence of the chairman and depuiy chairman, the third class C 
director shall preside at meetings of the board. 

Subject to the approval of the Federal Beserve Board, the 
Federal reserve agent shall appoint one or more assistants. Such 
assistants, who shall be persons of tested banking experience, 
shall assist the Federal reserve agent in the performance of his 
duties and shall also have power to act in his name and stead 
during his absence or disability. The Federal Beserve Board! 
shall require such bonds of the assistant Federal reserve agents 
as it may deem necessary for the protection of the United States. 
Assistants to the Federal reserve agent shall receive an annual 
compensation, to be fixed and paid in the same manner as that 
of the Federal reserve agent. (Sec 4, Act Dec. 23, 1913, as 
amended by Sec. 2, Act June 21, 1917; 40 Stat. L., 232.) 

Patments to Deputy Federal Rebebvb Aqbhts.— No payment should 
be made to Deputy Federal Reserve Agents except for official servioes 



Digitized by CjOOQ IC 



211 

to the banks at tlie request, in writing, of the Federal Reeerre Agent 
or board of directors. This does net affect directors' fees. (Informal 
Ruling of Board, Oct 6, 1916.) 

QUALIFICAT102V8 OF FsDEBAL Resebts Bank Dubctdbs. — A diroctor 
possessing necessary qualifications at the time of his election is not 
made ineligible to serve out his term by a change in the geographical 
limits of his district which results in making him a resident of another 
district (Opinion of Counsel ot Board, Biay 11, 1916.) 

Class C Dibkctobs — Bxecutivb CJommitteb. — There is no objection to 
Class C directors serving as members of the executive committees of 
Federal Reserve Banks. (Informal Ruling of Board, July, 1916.) 

Blioibilitt or Class C Dibectobs roB All ApponfncBifTS.— Class C 
directors of Federal Reserve Banks are eligible to the same appdlnt- 
ment and duties as Class A and Class B directors. (Informal Ruling 
of Board, Jan. 14, 1916.) 

§ 210. Compensation of Directors of Sesenre Banks.— Directors 
of Federal reserve banks shall receive, in addition to any compensa- 
tion otherwise provided, a reasonable allowance for necessary ex- 
penses in attending meetings of their respective boards, which 
amount shall be paid by the respective Federal reserve banks. Any 
compensation that may be provided by boards of directors of 
Federal reserve banks for directors, officers or employees shall be 
subject to the approval of the Federal Reserve Board. (Sec. 4, 
Act Dec. 23, 1913.) 

§ 211. Powers of Organisation Committee — ^Beserre Bank IM- 
rectors.— The Reserve Bank Organization Committee may, in or- 
ganizing Federal reserve banks, call such meetings of bank direc- 
tors in the several districts as may be necessary to carry out the 
purposes of this Act, and may exercise the functions herein con- 
ferred upon the chairman of the board of directors of each Federal 
reserve bank pending the complete organization of such bank. 
(Sec. 4, Act Dec. 23, 1913.) 



Terms of Directors of Beserve Banks— Filling of Va- 
oandes.— At the first meeting of the full board of directors of 



Digitized by CjOOQ IC 



312 

each Federal reserve bank, it shall be the duty of the directors 
of classes A, B, and G, respectively, to designate one of the mem- 
bers of each class whose term of office shall expire in one year 
from the first of January nearest to date of such meeting, one 
whose term of office shall expire at the end of two years from said 
date, and one whose term of office shall expire at tiie end of three 
years from said date. Thereafter every director of a Federal re- 
serve bank chosen as hereinbefore provided shall hold office for a 
term of three years. Vacancies that may occur in the several 
classes of directors of Federal reserve banks may be filled in Ihe 
manner provided for the original selection of such directors, such 
appointees to hold office for tiie unexpired terms of their prede- 
cessors. (Sec. 4, Act Dec. 23, 1913.) 

Holding Over of FcDEBiX Rssebvs Bank Dibsctoss.— tA. director of 
H Federal Reserve Bank has no autliority to continue to serve as such 
after the expiration of his term even though his successor has not 
been elected. (Opinion of Ck>an8el of Board, March 28, 1917.) 

§ 218. Stock Issnei— Xncrease, Decrease and Cancellation of 
Capital of Sesenre Banks.— The capital stock of each Federal re- 
serve bank shall be divided into shares of $100 each. The out- 
standing capital stock shall be increased from time to time as 
member banks increase their capital stock and surplus or as ad- 
ditional banks become miembers, and may be decreased as member 
banks reduce their capital stock or surplus or cease to be members. 
Shares of the capital stock of Federal reserve banks owned by 
member banks shall not be transferred or hypolhecated. When a 
member bank increases its capital stock or surplus, it shall there- 
upon subscribe for an additional amoxmt of capital stock of the 
Federal reserve bank of its district equal to six per centum of the 
said increase, one-half of said subscriptien to be paid in the man- 
ner hereinbefore provided for original subscription, and one-half 
subject to call of the Federal Beserve Board. A bank applying 
for stock in a Federal reserve bank at any time after the or- 
ganization Ihereof must subscribe for an amount of the capital 
stock of the Federal reserve bank equal to six per centam of the 
paid-up capital stock and surplus of said applicant bank, paying 



Digitized by CjOOQ IC 



318 

therefor its par Talue plus one-half of one per oentnm a month 
from the period of the last diridend. When the capital stock of 
any Federal reserve bank shall have been increased either on ac- 
count 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 shaU cause to be executed a certificate to the Comp- 
troller of the Currency showing the increase in capital stock, the 
amount paid in, and by whom paid. When a member bank re- 
duces 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 yolimtarily 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 cancelled and the mem- 
ber bank shall receive in payment therefor, under r^ulations to be 
prescribed by the Federal Beserve 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 diridend, not to 
exceed the book value thereof, less any liability of such member 
bank to the Federal reserve bank. 

If any member bank shall be declared insolvent and a re- 
ceiver appointed therefor, the stock held by it in said Federal 
reserve bank shall be cancelled, 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 Ihe 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 Comp- 
troller of the Currency showing such reduction of capital stock and 
the amount repaid to such bank. (Sec. 5 and 6, Act Dec S3, 1913.) 



RnuuLTioH I or FtenuL Rniani Boabd, Bmtm or 1S17 ( 
DTQ Km. I or 1S16).— 



Digitized by CjOOQ IC 



814 

XNOBAas or oapital stook. 

Whenerer the ci4»ital stock of any Federal Resenre Bank shall 6e 
lacreased bj 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 Re- 
serve Bank shall certify such Increase to the Ck>mptroller of the Cur- 
rency on Form 58» which is made a part of this regulation. 

DBOIBASB or CAPITII. STOCK. 

I. "WlieneTer a member bank reduces its capital stock or surplus, 
and, in the case of reduction of its cmiital, such reduction has been 
approred by the Comptroller of the Currency and by the Federal Re* 
serve Board in accordance with the provisions of section 28 of the 
Federal Reserve Act, it shall file with the Federal Reserve Bank of 
which it is a member an application on Form 60, which is 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 pagrments made on its subscription and shall issue 
in lieu thereof a new receipt after refunding to the member bank the 
S^roportionate 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 re- 
ceiver appointed by the proper authorities, such reoeiver shall file 
with the Federal Reserve Bank of which the ins<^vent bank is a 
member an application on Form 87, which is made a part of this regu- 
lation, for the surrender and cancellation of the stock held by, and 
for the refund of all balances due Xxf such insolvent member bank. 
Upon approval of this application by the Federal Reserve Agent the 
Federal Reserve Bank shall accept and cancel the stock surrendered, 
and shall adjust accounts between the member bank and the Federal 
Reserve Bank by applying to the indebtedness of the insolvent member 
bank to such Federal Reserve Bank all cash-paid subscriptions made 
by it on the stock canceled with one-half of 1 per centum per mdhth 
from the period of last dividend, if earned, not to exceed the book 
value thereof, and the balance, if any, shall be paid to the duly au- 
thorised receiver of such insolvent member bank. 

III. Whenever a member bank goes into voluntaty liquidation and 
a liquidating agent is appointed, such agent shall file with the Federal 
Reserve Bank of whidi it is a member an application on Form 86, 
.which is made a part of this regulation, for the surrender and can* 



Digitized by CjOOQ IC 



815 

oeUatlon of the stock held by and for the refund of aU balances due 
to such liquidating member bank. Upon approval ot this application 
by the Federal Reserve Agent the Federal Reserve Bank shall accept 
and cancel the stock surrendered, and shall adjust accounts between 
the liquidating member bank and the Federal Reserve Bank by apply- 
ing to the indebtedness of the liquidating member bank to such Fed- 
eral Reserve Bank all cash-paid subscriptions made by it on the stock 
canceled with one-half of 1 per centum per month from the period 
of last dividend, if earned, not to exceed the book value thereof, and 
the balance, if any, shall be paid to the duly authorised liquidating 
agent of such liquidating member 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 accord- 
ance with the provisions oT section 6, file with the Comptroller of the 
Currency a certificate of such reduction on Form 69, which is made 
a part of this regulation. 

Forms 68 and 69 apply only to Federal reserve banks. Forms 60 
and 87 are for use by member banks and will be fbrwarded by their 
respective reserve banks upon request. 

Su aai wpga or Stock bt a IAcmbke Bank RB>uonre Its Subplus.— The 
Federal Reserve Act does not require that a member bank neecessarily 
surrender a proi);K>rtionate part of its stock in the Federal Reserve Bank 
of which it is a member when it reduces its surplus. Such surrender is 
left to the discretion of the Federal Reserve Bank, subject to the ap- 
proval of the Federal Reserve Board. (Opinion of Counsel of Board, 
June 17, 1916.) 

LiQTTiDATioK OT A Mbmbbb Bank.— A v6te of moro than two-thirds 
of the stockholders of a National bank ratifying a sale of its assets to 
(another corporation is not a vote to go into liquidation as required 
by the Revised Statutes of the United States. A Federal Reserve Bank 
can not, under those facts, cancel the shares of its stock held by such 
member bank, nor can it refund to the member bank the amount of 
its cash-paid subscriptions to such stock. (Opinion of Ck>unsel of 
Board, Jan. 20, 1916.) 

Apfuoations to Reduob Stock.— When a ntember bank desires to 
reduce its capital stock, the application should be sent to the Federal 
Reserve Bank of the district which will present the matter to the 
Comptroller of the Currency and the Federal Reserve Board. (In- 
formal Ruling of Board, June 2, 1916.) 



Digitized by CjOOQ IC 



S16 

DuPLioAiB Cebtifioatbs.— <:;ertiflcate8 of increase and decrease of 
capital stock in member banks are to be made in duplicate and copies 
mailed both to the Federal Resenre Board and the Comptroller of the 
Currency. (Informal Ruling of Board» July, 1916.) 

Identification of Bank as MmnacE, — A member bank becomes ao- 
tiyely identified with the Federal Reserve System when its stock in 
the Federal Reserve Bank has been issued and paid for, and the re- 
quired reserve deposited. (Informal Ruling of Board, Aug. 11, 1916.) 

Appuoation fob ADDinoNAi^ Stock — Cehtificate of CJomptbollsb of 
Cdbbengt. — ^In considering applications of member banks for addi- 
tional stock in Federal Reserve Banks, the Federal Reserve Board will 
not hereafter require a certificate from the Comptroller of the Cur- 
rency as to the amount of capital and surplus of the applying bank. 
(Informal Ruling of Board, Nov. 27, 1916.) Applications should be 
filed with the proper Federal Reserve Bank and will be considered 
quarterly, i. e., ofn the first of January, April, July and October. (In- 
formal Ruling of Board, March 13, 1916.) 

Tbansfeb of Fedebai. Rbseeve Bank Stock. — ^A National bank acquir- 
ing assets of another National bank in liquidation is not entitled to 
have transferred to it the Federal Reserve Bank stock held by the 
liquidating bank. (Opinion of Counsel of Board, Feb. 8, 1917.) 

CONVEBSION OF A STATE BaNK INTO A NATIONAL BANK. — llL ViOW Of 

the fact that the conversion of a State into a National bank does not 
destroy the corporate identity of the bank, it is hardly necessary for 
the State baok to file an application for the surrender of its stock ot 
for the National bank to file an application for new stock. (Informal 
Ruling of Board, Aug. 2, 1917.) 

§ 214. Dividends and Surplus of Beserve Banks.— After all 
necessary expenses of a Federal reserve bank have been paid or 
provided for, the stockholders shall be entitled to receive an an- 
nual dividend of six per centum on the paid-in capital stock, 
which dividend shall be cumulative. 

After fhe aforesaid dividend claims have been fnUy met, the 
net earnings shall be paid to the United States as a franchise 
tax except that the whole of such net earnings, including those 
for the year ending December thirty-first, nineteen hundred and 
eighteen, shall be paid into a surplus fund until it shall amount 



Digitized by CjOOQ IC 



817 

to one hundred per centum of the subscribed capital stock of 
such bank^ and that thereafter ten per centum of such net earn- 
ings shall be paid into the surplus. 

The net earnings derived by the United States from Federal re- 
serve banks shall^ in the discretion of the Secretary^ be used to 
supplement the gold reserve held against outstanding United States 
notes, or shall be applied to the reduction of the outstanding 
bonded indebtedness of the United States under regulations to be 
prescribed by the Secretary of the Treasury. Should a Federal re- 
serve bank be dissolved or go into liquidation, any surplus remain- 
ing, after the payment of all debts, dividend requirements as here- 
inbefore provided, and the par value of the stock, shall be paid to 
and become the property of the United States and shall be 
similarly applied. (Sec. 7, Act Dec. 23, 1913, as amended by 
Sec. 1, Act March 3, 1919; 40 Stat. L., 1314.) 

PATMX2TT or Divu>BNDB TO TsAiTSFEBBED Mbmbeb Bakks. — ^Wfetero mem- 
ber banks have been transferred from one district to another, the Re- 
serve Bank of the district from which the transfer is made is liable 
to such member banks for unpaid dividends up to the date of transfer. 
(Informal Ruling of Board, Oct 31, 1916.) 

Divn>EiTD8 oir Subb3endbkb!d Stock. — ^Member banks surrendering stock 
on account of liquidation o^ reduction in capital or surplus are entitled 
to cash-paid subscriptions plus one-half of 1 per cent per month from 
date of subscription, not to exceed the book value thereof. If surren- 
dered because of transfer to another district member banks are en- 
titled to accrued dividend certificates. (Opinion of (>>unsel of Board, 
Dec 20, 1916.) 

Rights or LiQumATmo Nation ai. Bank to Aockcted DivmENDS. — Any 
National bank which liquidates and reorganizes as a State bank for- 
feits its rights to accrued dividends from its Federal Reserve Bank. 
Such rights do not sunrive in favor of such State bank even though 
it immediatelj becomes a member bank. (Opinion of Counsel of 
Board, Dec. 28, 1916.) 

SuBRENDSB OF Stock bt LxQtTiDATnrG BANK.— When a member bank 
voluntarily liquidates, or when it is declared insolvent and a receiver 
appointed, the stock held by it in the Federal Reserve Bank must be 
surrendered for cancellation. (Informal Ruling of Board, Hay 14, 
1917.) 



Digitized by CjOOQ IC 



S18 

§ 815. Sxes^tim tnm Tazatim— Saierf e Btiiki.- Federal 
reserve banks, including the capital stock and surplus therein, and 
the income derived therefrom shall be exempt from Federal, Stat^ 
and local taxation, except taxes upon real estate. (Sec. 7, Act 
Dec 23, 1913.) 

DEDTTonoN OF Rubull RmiTB B^inc Stock ibdm Tax Assxssmknts 
LdBvxn) ON Skabxkoldibs of F«»f«"^ Banks.— Where the State imposes 
a tax on the shares of a bank, whether State or National, as the pro^ 
erty of the shareholder, and such tax is not assessed against the cor- 
iporatlon as such, the right to deduct nontaxable securities in making 
the return of the value of the shares for taxation has not been recolg- 
nised bj the courts. (Opinion of Counsel of Board, Sept 14, 1915; First 
Nat Bank t^. Beaman, 267 Fed. Rep., 729.) 

Stamp Tax on CnrriFiCATBS of Stook.— Stock issued to member banks 
bj Federal Reserve Banks is exempt from the stamp tax imposed in 
Schtodule A of the Act of October 22, 1914 (88 Stat, 759). (Opinion 
of Attorney General, March 10, 1916.) 

Stamp Tax on Instbumsnts Issubd bt Rxsbbvx Banks.— All Instru- 
ments and things mentioned in Schedule A of act approved October 22, 
1914, when issued bj Federal Reserve Banks are subject to tax. This, 
however, has no connection with opinion of November 28, 1914, that 
capital stock of Federal Reserve Banks is exempt from these special 
taxes. (Opinion of Solicitor of Internal Revenue, Feb. 15, 1915.) 

§ 216. Oonyenion of State into National Banks.-See Sec, 31, 
page 45^ Part I. 

§ 217. State Banks as Members — Admission, EestriotionSy 
Sni^ension and Withdrawal. — Any bank incorporated by special 
law of any State^ or organized under the general laws of any State 
or of the United States^ desiring to become a member of the Fed- 
eral Reserve System, may make application to the Federal Reserve 
Board, under such rules and r^ulations as it may prescribe, for 
the right to subscribe to the stock of the Federal reserve bank 
organized within the district in which the applying bank is lo- 
cated. Such application shall be for the same amount of stock 
fliat the applying bank would be re(|uired to subscribe to as a 



Digitized by CjOOQ IC 



219 

national bank. The Federal Beeenre Board, subject to such condi- 
tions as it maj prescribe, may permit the applying bank to be- 
come a stockholder of such Federal reserve bank. 

In acting upon such applications the Federal Beserve Board 
shall consider the financial condition of the applying bank, the 
general character of its managooient, and whether or not the 
corporate powers exercised are consistent with the purposes of 
this Act. 

Whenever the Federal Beserve Board shaU permit the apply- 
ing bank to become a stockholder in the Federal reserve bank of 
the district its stock subscription shall be payable on call of the 
Federal Beserve Board, and stock issued to it shall be held sub- 
ject to the provisions of this Act. 

All banks admitted to membership under authority of this 
section shall be required to comply with the reserve and capital 
requirements of this Act and to conformi to those provisions of 
law imposed on national banks which prohibit such banks from; 
lending on or purchasing their own stock, which relate to the 
withdrawal or impairment of their capital stock, and which re- 
late to the payment of unearned dividends. Such banks and the 
officers, agents, and employees thereof shall also be subject to the 
provisions of and to the penalties prescribed by section fifty-two 
hundred and nine of the Bevised Statutes, and shall be required 
to make reports of conditions and of the payment of dividends 
to the Federal reserve bank of which they become a member, 
not less than three of such reports shall be made annually on 
call of the Federal reserve bank on dates to be fixed by the Federal 
Beserve Board. Failure to make such reports within ten days 
after the date they are called for shaU subject the offending bank 
to a penalty of $100 a day for each day that it fails to transmit 
such report; such penalty to be collected by the Federal reserve 
bank by suit or oth^wise. 

As a condition of membership such banks shall likewise be 
subject to examinations made by direction of the Federal Beserve 
Board or of the Federal reserve bank by examiners selected or 
approved by the Federal Beserve Board. 

Whenever the directors of the Federal reserve bank shall ap- 



Digitized by CjOOQ IC 



prove the examinations made by the State authorities^ such ex- 
aminations and the reports thereof may be accepted in lieu of 
examinations made by examiners selected or approved by the Fed- 
eral Beserve Board: Provided, however. That when it deems it 
necessary the board may order special examination by examiners 
of its own selection and shall in all cases approve the form of 
the report. The expenses of all examinations, other than those 
made by State authorities, shall be assessed against and paid by 
the banks examined. 

If at any time it shall appear to the Federal Beserve Board 
that a member bank has faded to comply with the provisions of 
this section or the regulations of the Federal Beserve Board made 
pursuant thereto, it shall be within the power of the board after 
hearing to require such bank to surrender its stock in the Fed- 
eral reserve bank and to forfeit all rights and privileges of mem- 
bership. The Federal Beserve Board may restore membership 
upon due proof of compliance with the conditions imposed by 
this section. 

Any State bank or trust company desiring to withdraw from 
membership in a Federal reserve bank may do so, after six 
months' written notice shall have been filed with the Federal 
Beserve Board, upon the surrender and cancellation of all of its 
holdings of capital stock in the Federal reserve bank: Provided, 
however. That no Federal reserve bank shall, except under ex- 
press authority of the Federal Beserve Board, cancel within the 
same calendar year nwre than twenty-five per centum of its capi- 
tal stock for the purpose of effecting voluntary withdrawals dur- 
ing that year. All such applications shall be dealt with in the 
order in which they are filed with the board. Whenever a mem- 
ber bank shall surrender its stock holdings in a Federal reserve 
bank, or shall be ordered to do so by the Federal Beserve Board, 
under authority of law, all of its rights and privil^es as a 
member bank shall thereupon cease and determine, and after due 
provision has been made for any indebtedness due or to become 
due to the Federal reserve bank it shall be entitled to a refund 
of its cash paid subscription with interest at the rate of one-half 
of one per centum per month from date of last dividend, if 



Digitized by CjOOQ IC 



221 

earned, the amotint refunded in no event to exceed the book value 
of the stock at that time, and shall likewise be entitled to repay- 
ment of deposits and of any other balance due from the Federal 
reserve bank. 

No applying bank shall be admitted to membership in a Federal 
reserve bank unless it possesses a paid-up, unimpaired capital suffi- 
cient to entitle it to become a national banking association in the 
place where it is situated under the provisions of the national 
bank Act 

Banks becoming members of the Federal Beserve System under 
authority of this section shall be subject to the provisions of this 
section and to those of this Act whidi rdate specifically to mem- 
ber banks, but shall not be subject to ezaminaticm imder the pro- 
visions of the first two paragraphs of section fifty-two himdred 
and forty of the Revised Statutes as amended by section twenly- 
one of Ihis Act."^ Subject to the provisions of this Act and to 
the regulations of the board made pursuant thereto, any bank 
becoming a member of the Federal Beserve System shall retain 
its full charter and statutory rights as a State bank or trust com- 
pany, and may continue to exercise all corporate powers granted 
it by the State in which it was created, and shall be entitled to 
all privileges of member banks: Provided, however. That no Fed- 
eral reserve bank shall be permitted to discount for any State 
bank or trust company notes, drafts, or bills of exchange of any 
one borrower who is liable for borrowed money to such State 
bank or trust company in an amount greater than ten per centum 
of the capital and surplus of such State bank or trust company, 
but the discount of bills of exchange drawn against actually ex- 
isting value and the discount of commercial or business paper 
actually owned by the person n^otiating the same shall not be 
considered as borrowed money within the meaning of this sec- 
tion. The Federal reserve bank, as a condition of the discount of 

^Thls amends See. 21 of the Reserve Act; $ 181, page 129, which 
read as foUows: 

'The GomptroUer of the Currency, with the approval of the Secre- 
tary of the Treasury, shAU appoint examiners who shall examine every 
inember bank at least twloe in each calendar year and ottener if oon- 
tfdered necessary; etc" 



Digitized by CjOOQ IC 



note8> draf ts, and bills of exchange for such State bank or trust 
com/pany^ shall require ti certificate or guaranty to the effect that 
the borrower is not liable to such bank in excess of the amount 
provided by this section, and will not be permitted to become 
liable in excess of this amount while such notes, draf t8> or bills 
of exchange are under discoimt with the Federal reserve bank. 

It shall be imlawful for any officer, clerk, or agent of any bank 
admitted to membership under authority of this section to certify 
any check drawn upon such bank imless the person or company 
drawing the check has on deposit therewith at the time such 
check is certified an amount of money equal to the amoimt speci- 
fied in such check. Any check so certified by duly authorized 
officers shall be a good and valid obligation against such bank, 
but the act of any such officer^ clerk, or agent in violation of this 
section may subject such bank to a forfeiture of its membership in 
the Federal Beserve System upon hearing by the Federal Beserve 
Board. (Sec. 9, Act Dec. 23, 1913, as amended by Sec. 3, Act 
June 21, 1917; 40 Stat. L., 232.) 

The provisions of this section are in no way affected by Sec. 6200 
of the Revised Statutes as amended. See i 113, page 101. 

BBQULATION H OF THE FEDERAL BESERVE BOABD, 
SEBIES OF 1917. 

(Superseding Begulation H of 1916.) 
MBBCBBRSHIP OF STATB BANKS AND TRUST COBfPANIBS. 

I. STATUTOBT RBQUntKiaENTS. 

(The provisions of Section 9 of the Federal Reserve Act as amended 
are omitted to avoid repetition.) 

II. Banks Bugibia fob Mbhbebship. 

A State hank or a trust company to be eligible for membership in 
a Federal Reserve Bank must comply with the foUowing conditions: 

1. It must have been incorporated under a special or general law of 
the State or district in which it is located. 

2. It must have a minimnm paid-up unimpaired oi^^ital stock as 
foUows: 



Digitized by CjOOQ IC 



In dtiet or towns not «xceoding 8,000 inliabltanti» |1S,000. 

In eitiet &t towns ezoesdinc S,000 but not CKoesdlng 6,000 Inhsbi- 
tsnts, 160,000. 

In cities or towns ezceodins 6,000 but not ezcesdlnf (0,000 inhsbi- 
tsnts, 1100,000. 

In ciUes ezosodinf (0,000 inbsMtsnts, $200,000. 

III. AfrUOATIOHS POB BlSMflnSHIP. 

Any sliflble State bank or trust company may mAke i^yplication on 
F. R. B. Form 88a, made a part of tbis regulation, to tbie Federal Re- 
senre Board for an amount of capital stock in tbe Federal Resenre 
Bank of its district equal to 6 per cent of tbe paid-up capital stock 
and surplus of sucb State bank or trust company. Tbis application 
must be forwarded direct to tbe Federal Resenre Agent of tbe district 
in wbicb tbe appljring bank or trust company is located and nnust 
be accompanied by Bzbibits I, II and III, referred to on page 1 of tbe 
application blank. 

IV. AmxTfAL or Aptucatioh. 

In passing upon an application tbe Federal Reserre Board will con- 
sider especially — 

1. Tbe financial condition of tbe applying bank or trust oomiMUiy 
and tbe general cbaracter of its management 

2. Wbetber tbe corporate powers eserdsed by tbe i^yplying bank or 
trust company are consistant witb tbe purposes of tbe Federal Reserve 
Act 

3. "Wbetber tbe laws of tbe State or district in wbicb tbe applying 
bank or trust company is located contain proTisions likely to prevent 
proper compliance witb tbe provisions of tbe Federal Reserve Act and 
tbe regulations of tbe Federal Reserve Board made in conformity 
tberewitb. 

It in tbe judgment of tbe Federal Reserve Board, an applying bank 
or trust company conforms to all tbe requirements of tbe Federal 
Reserve Act and tbese regulations, and is otberwise qualified for mem- 
bersbip, tbe Board will issue a certificate of approval subject to sucb 
conditions as it may deem necessary to insure compliance witb tbe 
act and tbese regulations. Wben tbe cdbdiUons imposed by tbe Board 
bave been accepted by tbe applying bank or trust company tbe Board 
will issue a certificate of approval, wbereupon tbe applying bank or 
trust company sball make a payment to tbe Federal Reserve Bank of 
its district of one-balf of tbe amount of its subscription, t. e.* 3 per 
cent of tbe amount of its paid-up capital and surplus, and upon re- 
ceipt of tbis payment tbe appropriate certificate of stock will be issued 
by tbe Federal Reserve Bank. The remaining balf of the subscription 



Digitized by CjOOQ IC 



224 

of the applying bank or trust company shall be subject to call when 
deemed necessary by the Federal Reserve Board. 

y. POfWIBS AND RBSTBICTIONS. 

Bhreiy State bank or trust company while a member of the Federal 
Resenre Systemr— 

1. Shall retain its full charter and statutory rights as a State bank 
or trust coms»any, subject to' the provisions of the Federal Reserve Act 
and to the regulations of the Federal Reserve Board, including any 
conditions embodied in the certificate of approval. 

2. Shall maintain such improvements and changes in its banking 
practice as may have been specifically required of it by the Federal 
Reserve Board as a condition of its admissiofn and shall not lower the 
standard of banking then required of it; and 

3. Shall enjoy all the privileges and observe all those requirements 
of the Federal Reserve Act and of the regulations of the Federal Re- 
serve Board made in conformity therewith which are i^plicable to 
State banks and trust cotaipanies which have become member banks. 

VI. BZAMINATIONS AND RepOBTS. 

Bvery State bank or trust company, while a member of the Federal 
Reserve System, shall be subject to examinations made by direction 
of the Federal Reserve Board or of the Federal Reserve Bank by ez- 
aminers selected or approved by the Federal Reserve Board. 

In order to avoid duplication, examinations of State banks and trust 
companies made by State authorities will be accepted in lieu of ex- 
aminations by examiners selected or approved by the Board wherever 
these are satisfactory to the directo'rs of the Federal Reserve Bank 
and where, in addition, satisfactory arrangements for cooperation in 
the matter of examination between the designated examiners of the 
•Board and those of the States already esist or can be effected with 
State authorities. Examiners from the staff of the Board or of the 
Federal Reserve Banks will, whenever desirable, be designated by the 
Board to act with the examination staff of the State in order that 
uniformity in the standard of exmination may be assured. 

Bvery State bank or trust company, while a member of the Federal 
Reserve System, shall be required to make in each year not less than 
three reports of co'ndition and of the pairment of dividends. Such 
reports shall be made to the Federal Reserve Bank of its district on 
call of such bank on dates to be fixed by the Federal Reserve Board. 

Loans in Excess or 10 fbb cent Ldotation. — State member banks 
are not subject to the limitations of section 6200 but are subject only 



Digitized by CjOOQ IC 



%26 

to such limitation aa are imposed by State laws. Loans to one person 
in eioess of 10 per cent are, howeyer, ineligible tor rediscount with a 
Federal Resenre Bank. (Informal Ruling of Board, Oct 20, 1917; 
opinion of CSounsel ot Board, July 26, 1917.) Where the excess is re- 
discounted with a correspondent bank the remaining 10 per cent is 
eligible foi^ rediscount (Opinion of Counsel of Board, June 21, 1918.) 

Ta^HSAonoHS or Beahoh Bahks.— Transactions and mem])er8hip of 
a branch bank should be treated with those of the parent bank as 
one corporation, eren though the branch is located in another district 
(Informal Ruling of Board, May 22, 1916; opinion of Counsel of Board, 
April 24, 1918.) 



AmJOATioNs worn BIbmbbship bt Btatb Banks Bdobb Commsncshg 
Busnms.— A State bank may make application for membership in 
the Federal Reserve System as soon as it has been granted a charter 
land is authorised to commence business, but not before. (Opinion of 
Counsel o>f Board, Not. 10, 1917.) 



or IfuTUAL Satin OS Banx.-^ mutual sarings bank with- 
out capital stock or stockholders is not eligible under the law tor 
membership in the Federal Resenre Systems. (Intormal Ruling of 
Board, Oct 80, 1917.) 



PBi?An BANxns as IflkxMss.— The Federal Reserre Act does not 
permit a prirate banker to become a member bank, nor does it permit 
Federal Reserre Banks id extend clearing priTileges to such a banker. 
(Opinion of Counsel of Board, July 80, 1917.) 



BsANOBiB or TmsT Coxfant Mbmbbbs.— Trust companies baring 
branches are digible for membership in the Federal Resenre System 
and may continue to maintain such branches. (Intormal Ruling of 
Board, June 12, 1916.) 

Opbnxno or Nbw Bbanohbs.— It is not the intent of the Board to 
deny an institution baring branches at the date it becomes a member 
of the Federal Resenre System the right to add additional branches, 
moeifit tor reasons similar to those which mii^t influence a State 
banking department in withholding its consent (Informal Ruling of 
Board, July 29, 1916.) 

LunxjiT C9 SiocxHOfUiiBS or Btatb Banks Whksh Havb Bbooicb 
MkicBBB Banks.— There Is no provision In the FMeral Reserre Act 
Imposing double liability on the stockholders of State banks or trust 
15 



Digitized by CjOOQ IC 



companies which become members of a Federal Resenre Bank. (Opin- 
ion of Counsel of Board, June 5, 1915.) 

INBLIOIBILITT OF BUILDINO AND LOAN ASSOCIATIONS. — ^BuUding and 

loan associations may not become members of the Federal Reserve 
System. (Informal Ruling of Board, July, 1915.) 

Use of Wobd "Fedebal."— The Federal Reeerre Board discourages the 
use of the words "Federal" and "Resenre" as part of the title of 
member banks but approves the following words on letterheads and 
in advertisements: "Member of the Federal Reserve System." (In- 
formal Ruling of Board, July 21, 1917, and M^ 18, 1918.) 

§ S18. Creation of Federal Beserre Board— Salaries of Hem- 
bcrs.— A Federal Reserve Board is hereby created which shall con- 
sist of seven members, including the Secretary of the Treasury 
and the Comptroller of the Currency, who shall be members ex 
oflScio, and five members appointed by the President of the United 
States, by and with the advice and consent of the Senate. In se- 
lecting the five appointive members of the Federal Reserve Board, 
not more than one of whom shall be selected from any one Federal 
reserve district, the President shall have due regard to a fair rep- 
resentation of the different commercial, industrial and geograph- 
ical divisions of the country. The five members of the Federal 
Beserve Board appointed by the President and confirmed as afore- 
said shall devote their entire time to the business of the Federal 
Reserve Board and shall each receive an annual salary of $12,000, 
payable monthly together with actual necessary traveling expenses, 
and the Comptroller of the Currency, as ex oflScio member of the 
Federal Reserve Board, shall, in addition to the salary now paid 
him as Comptroller of the Currency, receive the sum. of $7,000 
annually for his services as a member of said Board. (Sec. 10, 
Act Dec. 23, 1913.) 

§ 219. Organisation of Board.— The Secretary of the Treasury 
and the Comptroller of the Currency shall be ineligible during 
the time they are in oflSce and for two years thereafter to hold 
any office, position, or employment in any member bank. The ap- 
pointive mjembers of the Federal Beserve Board shall be ineligible 



Digitized by CjOOQ IC 



227 

during the time they are in ofBce and for tvro years thereafter to 
hold any office^ position, or employment in any member bank, ex- 
cept that this restriction shall not apply to a member who has 
served the full term for which he was appointed. Of the five mem- 
bers thus appointed by the President at least two shall be persons 
experienced in banking or finance. One shall be designated by 
the President to serve for two, one for four, one for six, one for 
eight, and one for ten years, and thereafter each member so ap- 
pointed shall serve for a term of ten years imless sooner removed 
for cause by the President Of the five persons thus appointed, 
one shall be designated by the Presidait as governor and one as 
vice governor of the Federal Beserve Board. The governor of the 
Federal Beserve Board, subject to its supervision, shall be the active 
executive <^cer. The Secretary of the Treasury may assign offices 
in the Department of the Treasury for the use of the Federal Be- 
serve Board. Each member of Uie Federal Beserve Board shaU 
within fifteen days after notice of appointmient make and sub- 
scribe to the oath of office. (Sec. 10, Act Dec. 23, 1913, as amended 
by Sec. 2, Act March 3, 1919; 40 Stat L., 1315.) 



§ 290. Anewmcnt to Xeet Kq^eniCi of Boaid.- .The Federal 
Beserve Board shall have power to levy semi-annually upon the 
Federal reserve banks^ in proportion to their capital stock and 
surplus, an assessment sufficient to pay its estimated expenses and 
the salaries of its members and employees for the half year suc- 
ceeding the levying of such assessm^it, together with any deficit 
carried forward frcun the preceding half year. (See. 10^ Act Dec. 
23, 1913.) 

ItePABATioN or Fbomal RnovB Nan Aooounr.— ^The coat of Fadaral 
Reserve notes should be charged to the Federal Reserve Banks as a 
separate account and paid as bills are rendered by the Treasury De- 
partment This note account should notl>e included in the semiannual 
assessment against Federal Reserve Banks. (Informal Ruling of 
Board, March 24, 1915.) 

§ 221. Qnalilloations of Xembers of Board— Filling Vacancies. 
— ^The first meeting of the Federal Beserve Board shall be held in 



Digitized by CjOOQ IC 



Washingtan^ District of Columbia, as soon as may be after the 
passage of this Act^ at a date to be fixed by the Reserve Bank Or- 
ganization committee. The Secretary of the Treasury shall be ex 
officio chairman of the Federal Beserve Board. No member of 
the Federal Beserve Board shall be an officer or director of any 
bank^ banking institution^ trust company^ or Federal reserve bank 
nor hold stock in any bank^ banking institution, or trust company; 
and before entering upon his duties as a member of the Federal 
Beserve Board he shall certify under oath to the Secretary of the 
Treasury that he has complied with this requirement. Whenever 
a vacancy shall occur, other than by expiration of temL, among 
the five members of the Federal Beserve Board appointed by the 
President, as above provided, a successor shall be appointed by the 
President, with the advice and consent of the Senate, to fill such 
vacancy, and when appointed he shall hold office for the unex- 
pired term of the nKember whose place he is selected to filL 

The President shall have power to fill all vacancies that may 
happen on the Federal Beserve Board during the recess of the 
Senate, by granting commissions which shall expire thirty days 
after the next session of the Senate convenes. (Sec. 10, Act Dec. 
23, 1913.) 

§ S22. Snpervisioii of Secretary of Treasury Over Board. — 

Nothing in this Act contained shall be construed as taking away 
any powers heretofore vested by law in the Secretary of the Treas- 
ury which relate to the supervision, management, and control of 
the Treasury Department and bureaus under such department, and 
wherever any power vested by this Act in the Federal Beserve 
Board or the Federal reserve agent appears to conflict with the 
powers of the Secretary of the Treasury, such powers shall be ex- 
ercised subject to the supervision and control of the Secretary. 
(Sec. 10, Act Dec. 23, 1913.) 

§ S23. Annual Seport of Board to Congresi.— The Federal Be- 
serve Board shall annually make a full report of its operations to 
the Speaker of the House of Bepresentatives, who shall cause the 
same to be printed for the information of the Congress. (Sec. 10, 
Act Dec. 23, 1913.) 



Digitized by CjOOQ IC 



§ 224. Bureau for Ime and Begnlation of Vational Bank 
Hotel and Federal Xetenre Votes. — See § 2, page 1, Part I. 

§ 226. Yititorial Powen of Board— Publication of Weekly 
Btatementt.— The Federal Reserve Board shall be authorized and 
empowered : 

(a) To examine at its discretion the accounts^ books and affairs 
of each Federal reserve bank and of each member bank and to re- 
quire such statements and reports as it may deem necessary. The 
said board shall publish once each week a statement showing the 
condition of each Federal reserve bank and a consolidated statement 
for all Federal reserve bonks. Such statements shall show in de- 
tail the assets and liabilities of the Federal reserve banks^ single 
and combined, and shall furnish full information regarding the 
character of the money held as reserve and the amount, nature 
and maturities of the paper and other investments owned or held 
by Federal reserve banks. (Sec. 11, Act Dec. 23, 1913.) 



Power of Board— Bediicount by Xeterve Bank of Dis- 
counted Paper of Other Beserve Banks. — (b) To permit, or, on 
the aflSrmative vote of at least five members of the Reserve Board 
to require Federal reserve banks to rediscount the discounted paper 
of other Federal reserve banks at rates of interest to be fixed by 
the Federal Reserve Board. (Sec. 11, Act Dec. 23, 1913.) 

§ 227. Power of Board to Suspend Besenre Bequirementfr— Tax 
on Deficiency. — (c) To suspend for a period not exceeding thirty 
days, and from time to time to renew such suspension for periods 
not exceeding fifteen days, any reserve requirement specified in 
this Act: Provided, That it shall establish a graduated tax upon 
the amjounts by which the reserve requirements of this Act may 
be permitted to fall below the level hereinafter specified: And 
provided fvrther. That when the gold reserve held against Fed- 
eral reserve notes falls below forty per centum, the Federal Re- 
serve Board shall establish a graduated tax of not more than one 
per centum per anmmi upon such deficiency imtil the reserves fall 
to thirty-two and one-half per c«itum, and when said reserve f alb 



Digitized by CjOOQ IC 



S30 

below thirty-two and one-half per centum^ a tax at the rate in- 
creasingly of not less than one and one-half per centum per an- 
num upon each two and one-half per centum or fraction thereof 
that such reserve falls below thirty-two and one-half per centum. 
The tax shall be paid by the reserve bank^ but the reserve bank 
shall add an amount equal to said tax to the rates of interest and 
discount fixed by the Federal Beserve Board. (Sec. 11^ Act Dec. 
23, 1913.) 



Power of Board— latne, Deliyery and Setixement of 
Federal Beserve Kotes.^ (d) To supervise and regulate through 
the bureau under the charge of the Comptroller of the Curr^icy 
the issue and retirement of Federal reserve notes, and to prescribe 
rules and regulations imder which such notes may be delivered by 
the Comptroller to the Federal reserve agents applying therefor. 
(Sec. 11, Act Dec. 23, 1913.) 

§ 229. Power of Board— Beserve and Central Beterve Cities. — 

(e) To add to the number of cities classified as reserve and central 
reserve cities under existing law in which National banking asso- 
ciations are subject to the reserve requirements set forth in section 
twenty * of this Act; or to reclassify exiflting reserve and central 
reserve cities or to terminate their designation as such. (Sec. 11^ 
Act Dec. 23, 1913.) 

RsQuimaaENTS roB Resbbvk Cmxa.— -The requirements to be observed 
before any city is designated by the Board as a reserve city are: Pop- 
ulation, 50,000; capital and surplus of National banks, $3,000,000; 
deposits, not less than $10,000,000; and the indorsement of the applica- 
tion by at least 60 National banks located outside the applying city. 
(Statement of Board, March 22, 1915.) 

CsirTBAL RxsKBVK CiTiBs — ^LisT OF.-— ThoTe are only three central 
reserve cities, namely: New York, Chicago and St Louis. 

Reserve Cities — ^List or.— The following were the reserve cities on 
the date of this publication: Boston, Albany, Brooklyn and Bronx, 

^ This reference to Section 20 is an error in the Act The reference 
should be to Section 19. 



Digitized by CjOOQ IC 



SSI 

Buffalo, Philadelphia, Pittsburgh, Baltimore, Washington, Richmond, 
Charleston, Atlanta, Jacksonyllle, Birmingham, New Orleans, Dallas, 
Bl Paso, Fort Worth, Galveston, Houston, San Antonio, Waco, Little 
Rock, LoulsYllle, Chattanooga, Memphis, Nashville, Cincinnati, Clere- 
land, Columbus, Toledo, Indianapolis, Peoria, Detroit, Grand Rapids, 
Milwaukee, Minneapolis, St Paul, Cedar Rapids, Des Moines, Dubuque, 
Sioux City, Kansas City, Mo., St Joseph, Lincoln, Omaha, Kansas City, 
Kans., Topeka, Wichita, Denver, Pueblo, Muskogee, Oklahoma City, 
Tulsa, Seattle, Spokane, Taooma, Portland, Ore^ Los Angeles, Oakland, 
San Francisco, Ogden, Salt Lake City. 

§ 230. Power of Board — Suspension or Semoyal of Offloer or 
IMreotor of Beserve Bank.— (f ) To suspend or remove any oflBcer 
or director of any Federal reserve bank, the cause of such removal 
to be forthwith communicated in writing by the Federal Beserve 
Board to the removed o£Scer or director and to said bank. (Sec. 
11, Act Dec. 23, 1913.) 

§ 231. Power of Board— Writing Off of Donbtfnl or Worthless 
Assets by Beserve Banks.— (g) To require the writing off of doubt- 
ful or worthless assets upon the books and balance sheets of Fed- 
eral reserve banks. (Sec. 11, Act Dec. 23, 1913.) 



Power of Board — Snspensioiii liquidation or Seoxgan- 
isation of Beserve Bank.— (h) To suspend, for the violation of 
any of the provisions of this Act, the operations of any Federal 
reserve bank, to take possession thereof, administer the same during 
the period of suspension, and, when deemed advisable, to liquidate 
or reorganize such bank. (Sec. 11, Act Dec. 23, 1913.) 

§ 233. Power of Board— Bonding of Federal Besenre Agents-^ 
Performance of Duties, Functions and Services of Act. — (i) To 

require bonds of Federal reserve agents, to make regulations for 
the saf^uarding of all collateral, bonds. Federal reserve notes> 
money or properiy of any kind deposited in the hands of such 
agents, and said board shall perform the duties, functions, or ser- 
rices specified in this Act, and make all rules and regulations 
necessary to enable said board effectively to perform the same. 
(Sec 11, Act Dec. 23, 1918.) 



Digitized by CjOOQ IC 



232 

§234. Power of Board — Gkneral Snperriiion Oyer Beserre 
Banks. — (j) To exercise general supervision over said Federal Be- 
serve Banks. (Sec. 11, Act Dec. 23, 1913.) 



Power of Board — Orant of Tmitee Powers to Hational 
(Banks. — (k) To grant by special permit to National banks ap- 
pljdng therefor, when not in contravention of State or local law, 
the right to act as trostee, executor, administrator, registrar of 
stocks and bonds, guardian of estates, assistant receiver, com- 
mittee of estates of lunatics, or in any other fiduciary capacity 
in which State banks, trust companies, or other corporations 
which come into competition with National banks are permitted 
to act under ihe laws of the State in which the National bank is 
located. 

Whenever the laws of such State authorize or permit the exer- 
cise of any or all of the foregoing powers by State banks, trust 
companies, or other corporations which compete with National 
banks, the granting to and the exercise of such powers by Na- 
tional banks shall not be deemed to be in contravention of State 
or local law within the meaning of this Act. 

National banks exercising any or all of the powers enumerated 
in this subsection shall s^;regate all assets held in any fiduciary 
capacity from the general assets of the bank and shall keep a 
separate set of books and records showing in proper detail all 
transactions engaged in under authority of this subsection. 
Such books and records shall be open to inspection by the State 
authorities to the same extent as the books and records of cor-* 
porations organized under State law which exercise fiduciary pow- 
ers, but nothing in this Act shall be construed as authorizing the 
State authorities to examine the books, records, and assets of the 
National bank which are not held in trust under authority of this 
subsection. 

No National bank shaU receive in its trust department deposits 
of current funds subject to check or the deposit of checks, drafts, 
biUs of exchange, or other items for collection or exchange pur- 
poses. Funds deposited or held in trust by the bank awaiting 
investment shall be carried in a separate account and shall not 



Digitized by CjOOQ IC 



233 

be used bj the bank in the conduct of its business unless it shall 
first set aside in the trust department United States bonds or other 
securities approved by the Federal Eeserve Board. 

In the event of the failure of such bank the owners of the funds 
held in trust for investment shall have a lien on the bonds or 
other securities so set apart in addition to their claim against the 
estate of the bank. 

Whenever the laws of a State require corporations acting in 
a fiduciary capaciiy^ to deposit securities with the State authori- 
ties for the protection of private or court trusts. National banks 
so acting shall be required to make similar deposits and securities 
so deposited shall be held for the protection of private or court 
trusts, as provided by the State law. 

National banks in such cases shall not be required to execute 
the bond usually required of individuals if State corporations un- 
der similar circumstances are exempt from this requirement. 

National banks shall have power to execute such bond when 
so required by the laws of the State. 

In any case in which the laws of a State require that a corporar 
iton acting as trustee, executor, administrator, or in any capaciiy 
specified in this section, shall take an oath or make an a£Sdavit, 
the president, vice president, cashier, or trust oflScer of such Na^ 
tional bank may take the necessary oath or execute the necessary 
affidavit 

It shall be unlawful for any National banking association to 
lend any oflScer, director, or employee any funds held in trust 
under the powers conferred by this section. Any officer, director, 
or employee making such loan, or to whom such loan is made, 
may be fined not more than $5,000, or imprisoned not more than 
five years, or may be both fined and imprisoned, in the discretion 
of the court. 

In passing upon application for permission to exercise the pow- 
ers enumerated in this subsection, the Federal Beserve Board 
may take into consideration the amount of capital and surplus 
of the applying bank, whether or not such capital and surplus 
is sufficient imder the circumstances of the case, the needs of 
the community to be served, and any other facts and circumstances 



Digitized by CjOOQ IC 



284 

that seem to it proper^ and may grant or refose the application 
accordingly: Provided, That no pennit shall be issued to any Na- 
tional banking association having a capital and surplus less than 
the capital and surplus required by State law of State banks, trust 
companies, and corporations exercising such powers. (Sec. 11, 
Act Dec. 23, 1913, as arn^ded by Sec. 2, Act Sept. 26, 1918; 
40 Stat. L., 968.) 

The Supreme Court of Illinois, in the case of People v, Brady, (271 
IlL, 100), and the Supremje Court of Michigan in the case of Fellows 
V. First Nat Bank (Mich. 169 N. B., 335), held that section 11 (k) 
was unconstitutional and void. The latter case, however, was taken 
to the Supreme Court of the United States and reversed, the court 
holding that the section was constitutional and valid. (First Nat 
Bank i;. FeUo^s, 244 U. S., 416.) 

On March 27, 1920, Judge Van Valkenburgh of the U. S. District 
Court at Kansas City, Mo., held that a National bank, duly authorized 
to exercise trust powers, could, with the Ck)mptroller'8 approval, use 
the words "trust company" as part of its corporate title even though 
the state law prohibited such use, 

BBGUIiATION F OP THE FEDERAL EESEBVE BOAED, 
SEBIES OF 1919. 

(Superseding Beguktion F of 1917.) 

I. Statutoby Pbovisioics. 
See (285 above. 

II. Applioations. 

A National bank desiring to exercise any or all of the powers au- 
thorized by section 11 (k) of the Federal Reserve Act, as amended by 
the Act of September 26, 1918, shaU make application to the Federal 
Reserve Board, on a form approved by said Board, for a special permit 
authorizing it to exercise such powers. In the case of an original 
application — that is, where the applying bank has never been granted 
the right to exercise any of the powers authorized by section 11 (k), 
the application should be made dn. Form 61. In the case of a supple- 
mental application— ^hat is, where the applying bank has already been 
granted the right to exercise one or more of the powers authorized 
by section 11 (k), the application should be made on Form 61b. Both 
forms are made a part of this regulation and may be obtained trow 
the Federal Reserve Board or any Federal Reserve Bank. 



Digitized by CjOOQ IC 



286 

III. Bepaeats Dbpabtickiits. 

BT0IT National bank permitted to act under this eeetlon shaU ea- 
tabllah a separate tmat department, and shall place such department 
under the management of an officer or officers, whose duties shall be 
prescribed by the board of directors of the bank. 

IV. CUSTODT OrTKTST SbCUBITIBS and IlfTSSnOEirTS. 

The securities and Inyestments held In each trust shall be kept 
separate and distinct from the securities owned by the bank and 
separate and distinct oikie from another. Trust securities and invest- 
ments shall be placed in the Joint custody of two or more officers or 
other employees designated by the board of directors of the bank and 
all such officers and employees shall be bofhded. 

V. Deposit or Funds AwAimro IiiTEsncEifT ob DisniBunoir. 

Funds recelTed or held in the trust department of a National bank 
awaiting inrestment or distribution may be deposited In the com- 
mercial department of the bank to the credit of the trust department, 
provided that the bank flrst delirers to the trust department, as col- 
lateral security, United States bonds, dr other readily marketable 
securities owned by the bank, equal In market yalue to the amount of 
the funds so deposited. 

VI. IlfTESnOENT or TbUST FUITDS. 

(a) Private truttt.— Funds held In trust must be Inrested in strict 
accordance with the terms of the will, deed, or other instrument 
creating the trust Where the instrument creating the trust contains 
provisions authorizing the bank, its officers, or its directors to exercise 
their discretion in the matter of investments, funds held in trust 
may be invested only in those classes of securities which are approved 
by the directors of the bank. Where the instrument creating the trust 
does not specify the character or class of investments to^ be made and 
does not expressly vest in the bank, its officers, or its directors a 
discretion in the matter of investments, funds held in trust shall be 
Invested In any securities in which corporate or individual fiduciaries 
In the State in which the bank is located may lawfully invest. 

(b) Court truit9. — Bxcept as hereinafter provided, a National bank 
acting as executor, administrator, or in any other fiduciary capacity, 
under appointment by a court of com3;>etent Jurisdiction, shall make 
all investments under an order of that court, and copies of all such 
orders shall be filed and preserved with the records of the trust d^iMtrt- 
ment of the bank. If the court by general order vests a discretion In 



Digitized by CjOOQ IC 



S36 

the National bank to Invest funds held In trust, or, if under the laws 
of thfi State In which the bank Is located corporate fldndaries 14^ 
pointed by the court are permitted to exercise sudi discretion, the 
National bank so appointed may invest such funds in any securities 
In which corporate or Individual fiduciaries in the State in which the 
bank is located may lawfully Invest. 

yil. Books and Aocoxjutb. 

All books and records of the trust departnuent shall be kept separate 
and distinct from other books and records of the bank. All acobunts 
opened shall be so kept as to enable the National bank at any time 
to furnish information or reports required by the Federal or State 
authorities, and such books and records shall be opened to the in- 
spection of such authorities. 

YIIL BXAMUTATIONS; 

Bzaminers appointed by the Ck>mptroller of the Curroicy or desig- 
nated by the Federal Reserve Board will be Instructed to make 
thorough and complete audits of the cash, securities, accounts, and 
investments of the trust department of the bank at the same time 
that examination is made of the banking department 

IX. CkHCFOBinTT WITH Stats Laws. 

Nothing in these regulations shall be construed to give a National 
bank exercising the powers permitted under the provisions of section 
11 (k) of the Federal Reserve Act, as amended, any rights or privileges 
in contravention of the laws of the State in which the bank is located 
within the meaning of that Act. 

X. Revocation of Pttiare. 

The FMeral Reserve Board reserves the right to revoke permits 
granted under the provisions of section 11 (k), as amended, in any 
case where in the opinion of a Board a bank has wilfully violated 
the provisions of the Federal Reserve Act or of these regulations or 
the laws of any State relating to the operations of such bank when 
acting in any of the capacities permitted under the provisions of 
section 11 (k), as amended. 

XI. Changes in Resulations. 

These regulations are subject to change by the Federal Reserve 
Board; provided, however, that no such change shall prejudice any 



Digitized by CjOOQ IC 



237 

obligatloii undertaken in good faith under regulations in effect at the 
time the obligation was assumed. 

(Note. — ^The above regulation F took effect April 15, 1919.) 

BoABD's PowKB TO Geaitt. — The board in the last analysis must de- 
termine whether it will or will not grant fiduciary powers and whether 
State law permits them to be exercised. (Informal Ruling of Board, 
June 4, 1916.) 

(Under the proyisions of section 11 (k), as amended by the Act of 
September 26, 1918, the Federal Reserve Board may properly permit 
any National bank to exercise any of the fiduciary powers authorised 
by that section, unless there is some express provision of the laws of 
the State in which such bank is located which either directly or by 
necessary implication prohibits National banks from exercising such 
powers and even if there is such an express statute, the Board may 
issue its permit if any State bank, trust comfiany, or other competing 
corporation in that State is permitted to exercise the powers applied 
for by the National bank. (Opinion of Ck>unsel of Board, March 31, 
1919.) 

§ 236. Power of Board— Employment of Assistants, Clerki, etc. 
— (i) To employ such attom^s, experts, assistants, clerks, or 
other employees as may be deemjed necessary to conduct the busi- 
ness of the board. All salaries and fees shall be fixed in advance 
by said board and shall be paid in the same manner as the salaries 
of the members of said board. All such attorneys, experts, assis- 
tants, clerks, and other employees shall be appointed without re- 
gard to the provisions of the Act of January sixteenth, eighteen 
linndred and eighty-three (volume twenty-two. United States 
Statutes at Large, page four hundred and three), and amendments 
thereto, or any rule or regulation made in pursuance thereof: 
Provided, That nothing herein shall prevent the President from 
placing said employees in the classified service. (Sec 11, Act 
Dec. 03, 1913.) 

§ 287. Power of Board— Permission to Disoonnt Paper in Ez- 
oeis of Idmitation When Secured by War-Time Securities.— 
(m) TTpon the affirmative vote of not less than five of its mem- 



Digitized by CjOOQ IC 



238 

bers, the Federal Reserve Board shall have power to permit Fed- 
eral reserve banks to discount for any member bank notes, drafts, 
or bills of exchange bearing the signature or endorsement of any 
one borrower in excess of the amount permitted by section nine 
and section thirteen of this Act, but in no case to exceed twenty 
per centum of the member bank's capital and surplus: Provided, 
however. That all such notes, drafts, or bills of exchange dis- 
counted for any member bank in excess of the amount permitted 
under such sections shall be secured by not less than a like face 
amount of bonds or notes of the United States issued since April 
twenty-fourth, nineteen hundred and seventeen, or certificates of 
indebtedness of the United States: Provided further. That the 
provisions of this subsection (m) shall not be operative after De- 
cember thirty-first, nineteen hundred and twenty. (Sec. 11, Act 
Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by 
Sec. 3, Act March 3, 1919; 40 Stat L., 1315.) 

§ 238. Federal Adviiory Counoil. — There is hereby created a 
Federal Advisory Council, which shall consist of as many members 
as there are Federal reserve districts. Each Federal reserve bank 
by its board of directors shall annually select from its own Federal 
reserve district one member of said council, who shall receive such 
compensation and allowances as may be fixed by his board of 
directors subject to the approval of the Federal Eeserve Board. 
The meetings of said advisory council shall be held at Washington, 
District of Columbia, at least four timjes each year, and of tener if 
called by the Federal Eeserve Board. The council may in addition 
to the meetings above provided for hold such other meetings in 
Washington, District of Columbia, or elsewhere, as it may deem 
necessary, may select its own oflBcers and adopt its own methods 
of procedure, and a majority of its members shall constitute a 
quorum for the transaction of business. Vacancies in the coimcil 
shall be filled by the respective reserve banks, and members selected 
to fill vacancies, shall serve for the unexpired term. 

The Federal Advisory Coimcil shall have power, by itself or 
through its ofiScers, (1) to confer directly with the Federal Re- 
serve Board on general business conditions; (2) to make oral or 



Digitized by CjOOQ IC 



289 

written representations concerning matters within the jurisdiction 
of said board; (3) to call for information and to make recom* 
mendations in regard to discount rates, rediscount business, note 
issues, reserve conditions in the various districts, the purchase and 
sale of gold or securities by reserve banks, open-market operations 
by said banks, and the general afihirs of the reserve banking sys- 
tem. (Sec. 12, Act Dec. 23, 1913.) 

TtuM or BLBcnoir.— Elections of members of the advisory council 
should be made at the first meeting after the Ist of January each year 
which It attended by the new directors of F^eral Reserve Banks, (lo^ 
formal Ruling of Board, Dec. 16, 1915.) 

ATTBifDAZf oc AT DiBKCioBS' MxTnifos. — ^Members of the advisory coun- 
cil should sit with boards of directors of the Federal Reserve Banks 
only by Invitation, and not as a matter of course. (Informal Ruling 
of Board, Feb. 16, 1916.) 



}. Powers of Seserve Banks— As DepositoTy and CoUeot- 
ing Agent — CoUeotion Charges.— Any Federal reserve bank may re- 
ceive from any of its member banks^ and from the United States, 
deposits of current funds in lawful money, National bank notes. 
Federal reserve notes, or checks, and drafts, payable upon presen- 
tation, and also, for collection, maturing notes and bills ; or, solely 
for purposes of exchange or of collection, may receive from other 
Federal reserve banks deposits of current funds in lawful money. 
National bank notes, or checks upon other Federal reserve banks, 
and checks and drafts, payable upon presentation within its dis- 
trict, and maturing notes and bills payable within its district; 
or, solely for the purposes of exchange or of collection, may re- 
ceive from any nonmember bank or trust company deposits of 
current funds in lawful money. National bank notes. Federal re- 
serve notes, checks and drafts payable upon presentation, or matur- 
ing notes and bills: Provided, Such nonmember bank or trust 
company maintains with the Federal reserve bank of its district 
a balance sufficient to offset the items in transit held for its ac- 
count by the Federal reserve bank : Provided further. That noth- 
ing in this or any other section of this Act shall be construed as 
prohibiting a member or nonmember bank from making reason- 



Digitized by CjOOQ IC 



240 

able charges^ to be determined and regulated by the Federal Be- 
serve Boards but in no case to exceed 10 cents per $100 or fraction 
thereof^ based on the total of checks and drafts presented at any 
one time, for collection or payment of checks and drafts and re- 
mission therefor by exchange or otherwise; but no such charges 
shall be made against the Federal reserre banks. (Sec. 13, Act 
Dec. 23, 1913, as amended by Act March 3, 1915, and further 
by Act Sept. 7, 1916, and by Sec. 4, Act June 21, 1917; 40 Stat 
L. 234.) 

See Regulation J of the Federal Reserve Board, Series of 1917 after 
$ 265, on page 284. 

Deposits bt Nonmembeb Banks in Federal Reseivs Banks.— That 
part of section 13 as amended by the act approved June Zl, 1917, which 
authorizes Federal Reserve Banks to receive deposits from nonmember 
banks Is merely permissive and not mandatory, and In accepting any 
deposit authorized by that section a Federal Reserve Bank may prop- 
erly require the depositing bank to maintain a balance sufficient to 
cover checks drawn against the depositing bank as well as Items re- 
ceived from that bank. (Opinion of Ck>unsel of Board, July 10, 1917.) 

Deposits or Unfft CuBBBNor.-^Any Federal Reserve Bank may prop- 
erly refuse to accept deposits of unfit currency which are offered to 
It for the purpose of Imposing on It the expense of shipment to Wash- 
ington for redemption. (Opinion of Counsel of Board, Jan. 31, 1916.) 

EkcHANOB CJhabqe on Bankeb's Acobftance.— a banker's acceptance 
is a draft within the meaning of this section and a member bank has 
no legal right to deduct exchange In accounting to a Federal Reserve 
Bank for one of its own acceptances forwarded to it for collection by 
the Federal Reserve Bank. (Ruling of Board, Feb., 1920.) 

§ St40. Powers of Besenre Bankft-^Diseonnt of KoteSi Drafts 
and Bills of Exchange. — Upon the indorsement of any of its 
member banks, which shall be deemed a waiver of demand, notice 
and protest by such bank as to its own indorsement exclusively, any 
Federal reserve bank may discount notes, drafts, and bills of ex- 
change arisiug out of actual commercial transactions; that is, 
notes, drafts, and bills of exchange issued or drawn for agricul- 



Digitized by CjOOQ IC 



241 

toral^ industrial, or commercial purposes, or the proceeds of which 
have been used, or are to be used, for such purposes, the Federal 
Beserve Board to have the right to determine or define the char- 
acter of the paper thus eligible for discount, within the meaning 
of this Act Nothing in this Act contained shall be construed 
to prohibit such notes, drafts, and bills of exchange, secured by 
staple agricultural products, or other goods, wares, or merchandise 
from being eligible for such discount; but such definition shall not 
include notes, drafts, or bills covering m^arely investments or is- 
sued or drawn for the purpose of carrying or trading in stocks, 
bonds, or other investment securities, except bonds and notes of 
the Government of the United States. Notes, drafts, and bills 
admitted to discount under the terms of this paragraph must have 
a maturity at the time of discount of not more than ninety days, 
exclusive of days of grace: Provided, That notes, drafts, and bills 
drawn or issued for agricultural purposes or based on live stock 
and having a maturity not exceeding six months, exclusive of days 
of grace, may be discoimted in an amount to be limited to a per- 
centage of the assets of the Federal reserve bank, to be ascertained 
and fixed by the Federal Reserve Board. (Sec. 13, Act Dec. 23, 
1913, as amended by Act Sept 7, 1916.) 

RBouiATioir A or Federal Resbbvb Boaed, Skbies or 1917 (Supeb- 
CBoniG Res. A or 1916) — ^Rediscounts Undeb SBcnoir 13. 

A. 

Notes, ]>mAiTS akd Bills or Bzchanob. 

I. General Btatutort Provisions. 

Any Federal Reserve Bank may discount for any of its member 
banks any note, draft, or bill of exchange provided — 

(a) It has a maturity at the time of discount of not more than 90 
days, exclusire of days of grace; but if drawn, or issued for agricul- 
tural purposes or based on live stock, it may hare a maturity at the 
time of discount of not more than six months, exclusive of days of 
grace. 

(ft) It arose out of actual commercial transactions; that is, it must 
be a note, draft, or bill of exchange which has been issued or drawn 
16 



Digitized by CjOOQ IC 



249 

for agricultural, Induatrlal, or commercial purpoaee, or the proceeds 
of which have been used or are to be used for such purposes. 

(c) It was not issued for carrying or trading in stocks, bonds, or 
other investment securities, except bonds and notes of the Qovemment 
of the United States. 

(d) The aggregate of notes, drafts, and bills bearing the signature 
or Indorsement of any one borrower, whether a person, company, firm, 
or corporation rediscounted fo^ any one member bank shall at no 
time exceed 10 per cent of the unimpaired capital and surplus of such 
bank; but this restriction shall not apply to the discount of bills 
of exchange drawn in good faith against actually existing yalues. 

ie) It is indorsed by a member bank. 

if) It cotiforms to all applicable proYlslons of this regulation. 



II. OxinBAL CHABA.OTBB OT NOTBS, DBAITS, JLKD BlXXS OV BXGHAITQB 

BUGIBLX. 

The Federal Reserve Board, exercising its statutory rights to define 
the character of a note, draft, or bill of exchange eligible for redis- 
count at a Federal Reserve Bank, has determined that — 

(a) It must be a note, draft, or bill of exchange the proceeds of 
which have been used or are to be used in producing, purchasing, carry- 
ing, or marketing goods* in one or more of the steps of the process 
of production, manufacture, or distribution. 

(ft) It must not be a note, draft, or bill of exchange the proceeds 
of which have been used or are to be used for permanent or fixed in- 
vestments of any kind, such as land, buildings, or machinery. 

(c) It must ndt be a note, draft, or bill of exchange the proceeds 
of which have been used or are to be used for Investments of a purely 
speculative character. 

(d) It may be secured by the pledge of goods or collateral, provided 
it Is otherwise eligible. 

III. AfFUCATIONS rC» RxDI8CX>I71TT. 

All applications for the rediscount of notes, drafts, or bills of ex- 
change must contain a certificate of the member bank, in form to be 
prescribed by the Federal Reserve Bank, that, to the best of its knowl- 
edge and belief, such notes, drafts, or bills of exchange have been 
Issued for one or more of the purposes mentioned in II (a). 

* When used in this regulation the word "goods" shall be construed 
to Include goods, wares, merchandise, or agricultural products^ in- 
cluding live stock. 



Digitized by CjOOQ IC 



MS 
IV . PioKisaoBr Nons. 

(a) D^niliofi.— A promiBflory not«, within the meaning of this ref- 
nlation, is defined as an unconditional promise, in writing, signed by 
the maker, to pay, in the United States, at a fixed or determinable 
future time, a sum certain in dollars to order or to bearer. 

ib) Evidence of elioiWity and requirement of itatementi.—A Fed- 
eral Reserve Bank must be satisfied by reference to the note or other- 
wise that it is eligible for rediscount Ck>mpliance of a note with II 
(b) may be evidenced by a statement of the borrorwer showing a 
reasonable excess of quick assets over current liabilities. The member 
bank shall certify in its application whether the note olfered for re- 
discount has been discounted for a depositor or another member bank 
or whether it has been purchased from a nondepoeltor. It must also 
certify whether a financial statement of the borrower is on file. 

Such financial statements nvust be on file with respect to all notes 
offered for rediscount which have been purchased from sources other 
than a depositor or a member bank. With respect to any other note 
offered for rediscotmt, if no statement is on file, a Federal Reserve 
Bank shall use its discretion in taking the steps necessary to satisfy 
itself as to eligibility. It is authorised to waive the requirement of 
a statement with respect to any note discounted by a member bank 
for a depositor or another member bank — 

(1) If it is secured by a warehouse, terminal, or other similar re- 
ceipt covering goods in storage. 

(2) If the aggregate of obligations of the borrower redisoounted and 
offered for rediscount at the Federal Reserve Bank is less than a 
sum equal to 10 per cent of the paid-in capital of the member bank 
and does not exceed |6,000. 

V. DB41T8, BnXS OF BXOHANGK, AHD ThADB ACOKFTANOBS. 

(a) Definiiion.—A, draft or bill of exchange, within the meaning of 
this regulation, is defined as an unconditional order in writing, ad- 
dressed by one person to another, other than a banker as defined under 
B (b), signed by the person giving it, requiring the person to whom 
it is addressed to pay, in the United States, at a fixed or determinable 
future time, a sum certain in dollars to the order of a specified person; 
and a trade acceptance is defined as a draft or bill of exchange drawn 
by the seller on the purchaser of goods sold and accepted by such 
purchaser. 

(5) Evidence of elioihiUty.—A Federal Reserve Bank shall take such 
steps as it deems necessary to satisfy itself as to the eligibility of the 
draft or bill offered for rediscount, unless it presents prima fade evl- 



Digitized by CjOOQ IC 



844 

deuce thereof or bears a stamp or certificate aflbced bj the aoeeptttr or 
drawer showing that it is a trade acceptance. 

VI. Six Months' Asbioultubal Papbb. 

(a) Definition, — Six months' agricultural paper, within the meaning 
of this regulation, is defined as a note, draft, bill of exchange, or trade 
acceptance drawn or issued for agricultural purp6iBes, or based on lire 
stock; that is. a note, draft, bill of exchange, or trade acceptance the 
proceeds of which have been used, or are to be used, for agricultural 
purposes, including the breeding, raising, fattening, or marketing of 
live stock, and which has a maturity at the time of discount of not 
more than six mohth^, exclusive of days of grace. 

(5) BligiHlityr^To be eligible for rediscount six months' agricul- 
tural paper, whether a note, draft, bill of exchange, or trade accept- 
ance, must comply with the respective sections of this regulation whtoh 
would apply to it if its maturity were 90 days or less. 

YII. CoMM<»>iTT Pafkb. 

(a) DefiniHan.--^Ccmmo&ity paper within the meaning of this reg- 
ulation is defined as a note, draft, bill of exchange, or trade acceptance 
accompanied and secured by shipping documents or by a warehouse, 
terminal, or other similar receipt covering approved and readily mar- 
ketable, nonperishable staples properly insured. 

(ft) EligiHUty, — To be eligible for rediscount at the special rates 
authorised to be established for commodity paper, such a note, draft, 
bill of exchange, or trade acceptance must also comply with the re- 
spective sections of this regulation applicable to it, must conform to 
the requirements of the Federal Reserve Bank relating to shipping 
documjents, receipts, insurance, etc., and must be a note, draft, bill 
of exchange, or trade acceptance on which the rate of Interest or 
discount— including commission— K^harged the maker, does not exceed 
6 per cent per annum. 

(c) Suspension of commodity niie.-nAs the special rate on com- 
modity paper is intended to assist actual producers during crotHnoving 
periods and is not designed to benefit speculators, the Board reserves 
the right to suspend the special rates herein provided whenever it is 
apparent that the movement of crops, which this rate Is Intended 
to facilitate, has been practically completed. 

B. 

Bahkbb's Axkbptanobs. 

(a) Oenena statutory provisionsr-^Anj Federal Reserve Bank may 
discount for any of its member banks bankers' acceptances which have 



Digitized by CjOOQ IC 



245 

a loftturlty at the time of discount of not mote than three months' 
sight, ezduslye of days of grace, which are indorsed by at least one 
member bank, and which grow oat of transactions inyolying the im- 
portation and exportation of goods; or, which grow out of transactions 
InyoMng the domestic shipment of goods, provided shilling docn- 
ments are attached at the time of acceptance; or, which are secured 
at the time of acceptance by a warehouse receipt or other such docu- 
ment conveying or securing title covering readily marketable staples. 
Any Federal Reserve Bank may also acquire drafts or bills of ex- 
change drawn on member banks by banks or bankers in foreign 
countries or dependencies or insular possessions of the United States 
for the purpose of furnishing dollar exchange. 

(5) Definition. — ^A. banker's acceptance within the meaning of this 
regulation is defined as a draft or bill of exchange of which the ac- 
ceptor is a bank or trust company, or a firm, person, company, or 
corporation engaged in the business of granting bankers' acceptance 
credits. 

(c) BligiUliiy.--^o be eligible for rediscount the bill must have 
been drawn under a credit opened for the purpose of conducting, or 
settling accounts resulting from, a transaction or transactions involv- 
ing (1) the shipment of goods between the United States and any 
foreign country, or between the United States and any of its de- 
pendencies or insular possessions, or between foreign countries, or (2) 
the domestic shipment of goods, provided shipping documents are 
attached at the time of acceptance; or it must be a bill which is se- 
cured at the time of acceptance by a warehouse receipt or other such 
document conveying or securing title covering readily marketable 
staples. Any Federal Reserve Bank may also acquire drafts or bills 
drawn by a bank or banker in a foreign country or dependency or 
insular possession of the United States for the purpose of furnishing 
dollar exchange and accepted by a member bank in accordance with 
the provisions of Regulation C, page 262. Such drafts or bills may be 
acquired prior to acceptance provided they have the indorsement of 
a member bank. 

(d) Evidence of eligiMIUy.—A Federal Reserve Bank must be satis- 
fled, either by reference to the acceptance itself or otherwise, that it 
is eligible for rediscount Satisfactory evidence of eligibility may 
consist of a stamp or certiflcate aiflxed by the acceptor in form satis- 
factory to the Federal Reserve Bank. 

Redisoount of Dkaits Patablb on CoKnrnoN.— a draft made *'pay- 
able on arrival of car" is nonnegotiable, not being pajrable at a deter- 
minable future time, and is therefore ineligible for rediscount by a 
Federal Reserve Bank. (Opinion of Counsel of Board, Feb. 13, 1915.) 



Digitized by CjOOQ IC 



846 

HxDisoouiiT OF THB AsflumcKifT ov Opbn Aoc wrK tB^^^The ■ttfrtriimfflit 
of an open account is not negotiable paper and la not eleglble for re- 
discount by a Federal Reserve Bank under the terms of section' 13 of 
the Federal Reserve Act (Opinion et Goonsel of Board, April 17, 
1916.) 

AoBicuLTUEix Pboduoib OS Ikpibmbhts.— ^Tho purchase or sale of an 
agricultural product, or of implements or other commodities used In 
agriculture, constitutes a commercial transaction. Where the proceeds 
of a note made by a merchant are used to purchase seed to be later 
retailed or sold, such a note can not be treated as one given for an 
agricultural purpose and can not be discounted by a Federal Reserve 
Bank if it has a maturity at tinw of discount of more than 90 days. 
(Opinion of Counsel of Board, Sept 16, 1916.) 

Tbadb Acobptanobs or Rxtailebs.— A bill of exchange drawn by the 
seller of goods and accepted by the purchaser of those goods is a trade 
acceptance, regardless of whether or not the purchaser intends to resell 
the goods or to use them for his own purpose. (Informal Ruling of 
Board, Dec 24, 1917.) 

Dbavts Dbawh on Sales Cobp<»at!I0N8.— A draft drawn by a corporsr 
tion upon a sales corporation whidi it and a number of other con- 
cerns have organized will, when accepted, become a trade acceptance, 
even though the selling corporation is a stockholder of the sales cor- 
poration, provided the latter is organized in good faith and not merely 
to act as an agent for the purpose of evading the law. (Opinion of 
Ck)un8el of Board, Dec 12, 1917.) 

NoTBB FOB Fabm Tools. — ^Notos of farmers or consumers given for 
the purchase price of farm tools, agricultural machinery, or other 
farm-operating equipment are discountable under section 13 of the 
Federal Reserve Act, which provides for notes, bills, or drafts drawn 
or issued for agricultural purposes. 

Presentation of notes of farmers or consumers for the purchase 
prioe of farm tools or agricultural machinery by the dealer, with his 
indorsement for rediscount, does not change their classification as for 
agricultural purposes. (Informal Ruling of Board, Dec 30, 1916.) 

Ghattbl Mobtoaobs XlNNBcaBSSABT. — ^The act does not require the 
taking of chattel mortgages as security for loans based on agricultural 
operations. The direct primary purpose of the loan should be for 
the ordinary operations of agriculture. The words 'Imsed on" are not 
(Considered synonymous with "secured by." Agricultural paper need 



Digitized by CjOOQ IC 



M7 

not be directlj leeured by agricultural produeta, but ihould be gen- 
uinely based upon transactions entered upon for agricultural operar 
tions. (Informal Ruling of Board, Jan. 9, 1915.) 

R1DI8OOU11T OF PAsnoiPATioif CsBTinoATB.— There is no proyision In 
the Federal Resenre Act which authorizes a Federal Reserve Bank to 
rediscount a certificate of participation in a note, because even though 
the original note is eligible for rediscount, a participation certificate 
nevertheless is nothing more than the evidence of an equitable interest 
in that original note, and does not in any way represent a legal claim 
against the maker of the uote. (Informal Ruling of Board, Nov. 1, 
1917.) 

iHDOBSKBgENT 'WITHOUT RsoouBSB."— -If a ttoto is Otherwise eligible 
for rediscount, the fact that it bears a "without recourse" indorsement 
of a nonmember bank will not affect its eligibility. (Oi^nion of Ck>un- 
sel of Board, July 8, 1918.) 

Note or Dkaib. — A note made by dealer in agricultural implements 
or in live stock is not agricultural paper. (Informal Ruling of Board, 
July, 1916.) 

Papeb or BCkbchants and Othcbs. — ^^CJommodity paper^ Includes not 
only paper originating with the producer, but also paper of merchants 
and others when the commodity is not carried for speculative or purely 
investment purposes. (Informal Ruling of Board, Sept 8, 1915.) 

PuBCHASES raoM Memwicb Bauks. — ^Purchases by Federal Reserve 
Banks from member banks of commodity loans without the member 
banks' indorsement would not be open-market purchases, because such 
commodity loans are in the form of ordinary promissory notes or one- 
name pi4>er. (Informal Ruling of Board, Nov. 16, 1915.) 

DisoouifT BT Mebcantile Fibms with Federal Reserve Banks. — 
Federal Reserve Banks can not discount commodity paper direcUy 
for mercantile firmB. (Informal Ruling of Board, Feb. 1, 1916.) 

FnrAifCB OB Cbedit Companies, Notes or. — ^The note of a finance or 
credit company which is drawn either directly or indirectly to finance 
some industrial or commercial concern in the transaction of its busi- 
ness is not eligible for rediscount, even though it may be secured by 
paper which is Itself eligible for rediscount (Informal Ruling of 
(Board, Feb. 11, 1918.) 



Digitized by CjOOQ IC 



ua 

Bnxa Rboeivabls as CkniATESAi.— The note ot a mannteotarer ee* 
cured hj his bills recelTable Is desirable pi4»er, and should oertainlsr 
not be debarred as a collateral trust note. When issued for the purpose 
of carrying collateral for a speculatire purpose or collateral in the 
nature of stocks and bonds other than the securities of the United 
States, the note would not be eligible for rediscount. (Informal Ruling 
of Board, June 17» 1915.) 

CoLLATBBAL NoTis.— The fact that paper otherwise eligible has the 
additional security of collateral or is secured by real estate mortgage, 
in no way affects its eligibility. (Informal Ruling of Board, Aug. 12, 
1915; Opinion of Counsel of Board, May 3, 1917.) 

No LiMiTATioir ON REDiscouirTB.— Under section 5202, Rerised Sta- 
tutes, a National bank may not borrow as bills payable in excess of 
its capital stock. Under the Federal Reserve Act it may rediscount 
actual items of paper in its posseasion to any amount in the discretion 
of the Federal Reserve Bank of its district (Informal Ruling of 
Board, Jan. 29, 1916.) 

Loans Diudotlt to Individuals.— 'Federal Reserve Banks do not 
make loans directly to individuals, but rediscount the paper of mem* 
ber banks which are all National banks and such State banks as may 
have Joined the Federal Reserve System. (Infomijal Ruling of Board, 
May 2, 1916.) 

Dbavts Patablb on OB BntMEE CJebtain Datb.— Drafts payable "ninety 
days from date or before on five days after demand (i. e., on five days' 
notice) by the holder hereof are negotiable and eligible for discount 
with a Federal Reserve Bank. (Opinion of (Counsel of Board, Feb. 
23, 1917.) 

Notes Patablb "On ob Bbfobb."— ^otes payable "on or before" a 
certain date are eligible for rediscount with Federal Reserve Banks 
provided they conform to the law and regulations of the Board in 
other respects. (Informal Ruling of Board, June 28, 1916.) 

DmcAND NoTBS.-— A demand note or bill is not eligible for rediscount 
since it is not in terms payable within 90 days, but at the option of 
the holder may not be presented for payment until after that time. 
t( Informal Ruling of Board, April 19, 1917.) A note payable "on de- 
mand, and if no demand is made thereon ^' is eligible for redis> 
count if the date filled in the blank is not more than 90 days from the 
date of discount (Informal Ruling of Board, June 15, 1917.) 



Digitized by CjOOQ IC 



249 

19TAFLB8" DKmnED.— "Staples'* as used in Reg. A, series of 1917, 
include manufactured goods as well as raw materials, provided the 
goods are nonperishable and have a wide ready market. (Informal 
Ruling of Board, Sept 7, 1916.) 

A readily marketable staple may be defined as an article of com- 
merce, agriculture, or industry of sucb. uses as to make it the subject 
of constant dealings in ready markets with such frequent quotations 
of prices as to make (a) the price easily and definitely ascertainable 
and (b) the staple itself easy to realize upon by sale at any time. 
(Ruling of Board, July, 1919.) 

Ratb of ImvBXST. — State law gorems the rate of interest which 
National banks may charge. Board approves the rate of rediscount 
which may be charged by Federal Reserve Banks. (Informal Ruling 
of Board, Nov. 21, 1916.) 

Indob8Bmsi?t8 of Nigotiable Papkb. — ^An indorsement of negotiable 
paper which is made upon a separate piece of paper attached to the 
original instrument is a valid indorsement of such instrument, and 
paper so indorsed may be rediscounted by reserve banks. (Opinion 
of Ck>unsel of Board, July 12, 1916.) 

Tbadb Aoceptancb Pbovidiko fob Disootmr if Paid at Matdbitt.— X 
trade acceptance which consists of an order to pay a certain amount, 
which is the amount of the debt minus a discount for prompt pay- 
ment at maturity, or, if not paid at maturity, to pay a greater amount, 
which is the amount of the debt without any discount, is an order to 
pay a sum certain and is negotiable. (Opinion of Counsel of Board, 
Jan. 26, 1918.) 

DisoouNT OF Papeb Sbcubed bt ob Issued fob Pubposes of Tbadino 
IK B(H7DS OB Notes of the Unitid States. — Any member bank may 
rediscount with its Federal Reserve Bank a note, draft, or bill drawn 
for the purpose of carrying or trading in bonds or notes of the United 
States (Opinion of Counsel of Board, Feb. 16, 1917.); War Savings 
Stamps, however, are not included in this category of bonds or notes 
of the United States. (Opinion of Counsel of Board, June 8, 1918.) 

§ 241. Idmitation on Aggregate of Paper of One Borrower Se- 
disconnted for Any One Bank. — The aggregate of such notes, 
drafts^ and bills bearing the signature or indorsement of any one 
borrower, whether a person, company, firm, or corporation, redis- 
connted for any one bank shall at no time exceed ten per centum 



Digitized by CjOOQ IC 



S60 

of the mnimpaired capital and surplus of said bank; but this re- 
striction shaU not apply to tiie discount of bills of exchango drawn 
in good faith against actually existing values. (Sec. 13^ Act Dec. 
23, 1913, as amended by Act Sept 7, 1916.) 

Limit of 10 Feb Gbnt. to Onb Maker ob Indobseb. — ^If any particular 
paper presented by a member bank to a Federal Reserve Bank for 
rediscount, singly or added to the paper of the same makers or in- 
dorsers which the Federal Reserve Bank has already rediscounted for 
said member bank, amounts to a total of more than 10 per cent of 
the unimpaired capital and surplus of that bank, the Federal Reserve 
Bank has no authority for such rediscount. (Informal Ruling of 
Board, April 17, 1916.) Such limitations, however, do not refer to 
the Indorsement of a non-member bank on paper rediscounted with 
a member bank. (Informal Ruling of Board, May 1, 1918.) 

Ldot or REDisooimTS of Cohmsbcial ob Business Pafeb.— ^vniUe 
a member bank may acquire commercial or business paper such as 
trade acceptances from the same person in excess of 10 per cent of 
its unimpaired capital and surplus (sec. 5200, U. S. R. S.), its Federal 
Reserve Bank can not rediscount such paper bearing the signature 
or indorsement of the same person in excess of that amount unless 
they can be classified also as "bills of exchange drawn against actually 
existing values." (Opinion of Counsel of Board, Aug. 21, 1918.) 

Section 13, Federal Reserve Act does not amend section 6200, United 
States Revised Statutes. (Opinion of Counsel of Board, May 9, 1916.) 

Tbadb AocEPTAifCBs AS BiLLs Dbawn Aoaikst Aotuaixt BxisTnre 
YaIiTtbs. — ^BiUs drawn by the seller against the purchaser and accepted 
before the sale or delivery of the goods should not be treated as bills 
drawn against actually existing values, since such goods are not in 
the possession of the drawee either in the original form or in the 
shape or the proceeds of their sale; except where the goods have 
passed out of the possession of the drawer and have been placed in 
storage subject to the control or order of the drawee. (Opinion of 
Counsel of Board, Aug. 21, 1918.) 

What a Fedebal Rssebve Baitk Mat Ducomrr iob Its Mejcbeb 
Banks. — ^The limitations imposed upon the amounts of rediscounts 
which a Federal Reserve Bank may make for a member bank, whether 
State or National, are determined by the provisions of the Federal 
Reserve Act and are not in any way aftected by the amendment to 
Section 6200. 

In the opinion of the Federal Reserve Soar4 this phrase "blUs of 



Digitized by CjOOQ IC 



«61 

exchange drawn against actually existing ralues*' includes, among 
other kinds of paper "drafts or bills of exchange secured by shipping 
documents oonreying or securing title to goods shipped" and "bankers' 
acceptances of the kinds described in Section 13 of the Federal Re- 
serve Act" even though Section 13 (unlike the amendment to Section 
5200) does not expressly state that those two classes of paper are 
bills of exchange drawn against actually existing values. In the 
opinion of the Board, however, accepted demand bills on which the 
drawer is released from liability are not "bills of exchange" within 
the meaning of Section 13 and must, therefore, be included in deter- 
mining the limits on the amount of paper any one borrower which a 
Federal Reserve Bank may rediscount for any member bank. (Ruling 
of Board, Nov., 1919.) 

Bills of BxoHAifoi Da^wif Aoainst Aotuaixt Bxismro Vaujb.— • 
A bill of exchange discounted before acceptance may be said to be 
drawn against actually existing value, within the meaning of Section 
13 of the Federal Reserve Act, when and only when it is accompanied 
by shipping documents, warehouse receipts, or other papers securing 
title to the goods sold. An accepted bill of exchange, unaccompanied 
by shipping documents or other such papers, may be considered as 
drawn against actually existing value if drawn against the drawee 
at the time of, or within a reasonable time after, the shipment or 
delivery of the goods sold. In this latter case there must be reason- 
able grounds to believe that the goods are in existence in the hands 
of the drawee either in their original form or in the shi^^e of the 
proceeds of their sale. (Opinion of Counsel of Bdard, Nov. 27, 1916.) 



RXDUOOUITTS OF COMMXBOIAL OB BUSINESS PAPIE FOB ▲ MBMBKE STATB 

Bank. — ^Under the terms of Section 13 no Federal Reserve Bank may 
properly rediscount for any State member bank the paper of any one 
borrower in excess of 10 per cent of the capital and surplus of that 
member bank. Bills of exchange which are drawn against actually 
existing values are expressly excepted from this limitation but com- 
mercial or business paper must be included within it. (Opinion of 
Counsel of Board, Dec, 1919.) 

Limitation Upon thx Aoobiqatb Rxdisoounts of thb Pafie of One 
BoBsowxB MAPI FOB DiFFBBENT MwfiiBB BANKS.— A Federal Reserve 
Bank may properly decline to discount for a member bank the paper 
of sihy one borrower on the ground that the Federal Reserve Bank 
has theretofore discounted for other member Jbanks what it deems to 
be a suflLdent amount of that particular borrower's paper. (Opinion 
of Ck>unsel of Board, March, 1920.) 



Digitized by CjOOQ IC 



258 

§ 242. Powen of Baierve Banbh-Diiooimt of Aoceptaneei .— 

Any Federal reserve bank may discount acceptances of the kinds 
hereinafter described^ which have a maturity at the time of dis- 
count of not more than three months' sight, exclusive of days of 
grace, and which are indorsed by at least one member bank. (Sec. 
13, Act Dec. 23, 1913, as anvended by Act Sept. 7, 1916.) 

DiSOOUKT OF AOCEPTANCSB IirDOlOXD BT MKlfBlCa BANKS LOCATED VX 

Anotheb Distbict. — ^In the discount of acceptances by Federal Reserve 
Banks In accordance with the provisions of Section 13. It Is Immaterial 
whether the member bank Is located In the district of the Federal 
Reserve Bank which la making the discount or in any other districts 
the term "meml>er bank" being broad enough to Include member banks 
wherever located. 

Such discounts, being made under the provisions of Section 13, are 
eligible as coUateral security for Federal Reserve notes Issued under 
the provisions of Section 16. (Opinion of Ck>un8el ot Board, April 30, 
1915.) 

BiBMBEB Banks' Aoceptanoes, Status of.— An acceptance which has 
been purchased by the accepting bank and subsequently redlscounted 
with its Federal Reserve Bank Is not subject to the limitations of 
Section 5200 of the Revised Statutes. (Opinion of Ck>un8el of Board, 
July 26, 1917.) 

Discount of Renewals. — The acceptance business of Federal Re- 
serve Banks Is not restricted *^ the original transaction only." 
When the first acceptance matures the member bank may renew the 
acceptance, and there Is no reason why a Federal Reserve Bank may 
not discount such renewed acceptance although a Federal Reserve 
Bank mmst not engage In advance to make such discount of a renewal. 
(Informal Ruling of Board, June 16, 1916.) 

CoNDmoNs Attached to and Aitectino NBoonABiUTT of Bills of 
ElxcHANGE AND AooEPTANGBS. — A bill of exciuuige, In order to be ne- 
gotiable, must be an unconditional order to pay, on demand or at a 
fixed or determinable future time, a certain sum of money to order 
to bearer. If pajrment Is dependent upon the happenings of a cer- 
tain contingency, the bill is conditional and nonnegotlable. If pay- 
ment is confined to the proceeds of a particular fund and is not 
chargeable to the general credit of the drawer, the bill la conditional 
and nonnegotlable. 

A general acceptance of a conditional bill or a conditional acceptance 



Digitized by CjOOQ IC 



253 

of aa anoondiUonal bill nuOces the aooepUnce a conditional one and 
destroya Ita negotiability. 

THere la some doubt In the courta whether the mere r^erence to a 
paitlcalar oonalgnnnent of gooda makea the bill conditional, aome 
ooorta atatlng that It la merely an indication of the fund out of which 
the drawee la to reimburse himself; other courta holding that It makea 
the bill conditional because limiting payment to the proceeda of the 
particular ahipment referred to. There Is no doubt, however, that 
a reference, in general terms, on the face of an accepted bill to the 
fact that it la baaed on the exportation or importation of goods, would 
not make it conditional and nonnegotiable, and it would not, therefore, 
be Ineligible for dlacount under the provialona of Section 13 of the 
Federal Resenre Act (Opinion of Counael of Board, Feb. 2, 1916.) 

DiFFKBBiiTiAL Aa TO AocEFTAiTcis.— -There la no objection to a mod- 
erate differential to apply between the discount by the reserve bank of 
member bank acceptances and those of noh-member Institutions. (In- 
formal Ruling of the Board, Dec. 4, 1916.) 

§ 243. Foreigii and Domeatio Aoceptanoea by ICember Banks. — 
Any member bonk may accept drafts or bills of exchange drawn 
upon it having not more than six months' sight to run^ exclusive 
of days of grace^ which grow out of transactions involving the 
importation or exportation of goods ; or which grow out of trans- 
actions involving the domestic shipment of goods provided ship- 
ping documents conveying or securing title are attached at the 
time of acceptance; or which are secured at the time of accept- 
ance by a warehouse receipt or other such document conveying 
or securing title covering readily marketable staples. No mem- 
ber bank shall accept, whether in a foreign or domestic transaction, 
for any one person, company, firm, or corporation to an amount 
equal at any time in the aggr^ate to more than ten per centum 
of its paid-up and unimpaired capital stock and surplus, unless 
the bank is secured either by attached docimienta or by some other 
actual security growing out of the same transaction as the ac- 
ceptance; and no bank shall accept such biUs 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: Provided, however. 
That the Federal Reserve Board, under such general regulations 
aa it may prescribe, which shall apply to all banks alike regard- 



Digitized by CjOOQ IC 



264 

lees of the amount of capital stock and surplus^ may authorize 
any member bank to accept such bills to an amount not exceed- 
ing at any time in the aggregate one hundred per centum of its 
paid-up and unimpaired capital stock and surplus: Provided fW' 
ther. That the aggregate of acceptances growing out of domestic 
transactions shall in no event exceed fifty per centum of such 
capital stock and surplus. (Sec. 13^ Act Dec. 23, 1913, as amended 
by Act Sept 7, 1916, and further by Sec. 5, Act June 21, 1917; 
40 Stat L., 235.) 

AccEPTAiTOBS TO FiNAiTCB FuTUBB lMP(»TATioirs.'^rafta dntwu for 
the purpose of importing goods are properly acceptable by member 
banks whether or not the sale of the goods has actually been made 
at the time ef acceptance. It is not even necessary that the goods to 
be sold be identified at the time of acceptance. The accepting bank 
must be reasonably sure, however, that the proceeds wiU be used for 
the purpose specified. (Informal Ruling of Board, June 14, 1917.) 

Acceptances nr Bkcbss of 10 Pebcbnt. — ^The acceptance by a bank 
of unsecured drafts to an amotint exceeding 10 per cent of the capital 
and surplus of the bank would constitute a violation of the limitation 
contained in this section, whether or not the customer of the bank 
guaranteeing the acceptance is the drawer of the draft, or some other 
person. (Opinion of Counsel of Board, Dec. 28, 1918.) A member 
bank may accept either in a domestic or foreign transaction for one 
person in an amount in excess of 10 per cent, proTided the acceptance 
remains secured throughout the life of the draft It can not accept 
in domestic transactions without being secured at the time of accept- 
ance, but may release the security after acceptance upon the execu- 
tion of a trust receipt or an agreement by the customer that so mnch 
of the proceeds of the sale of the gotods covered by the security as 
may be necessary to pay the draft will be deposited with the accepting 
bank when available and wiU not be used for other purposes. (Ruling 
of Board, Jan. 7, 1919.) 

Bankebs' Acceptances Against Open Accounts or Fobbion Pub- 
CHASEBS.— National banks can not accept drafts for the purpose of 
enabling domestic concerns to extend credits on open account to 
foreign purchasers. (Opinion of Counsel of Board, Jan. 29, 1919.) 

Domestic Acoeptanobs — Sbcubitt and Limitations. — ^Although Sec- 
tion 18 of the Federal Reserve Act authorizes member banks to ao- 



Digitized by CjOOQ IC 



255 

oept dratti drawn in domestic transactionB only when secured at 
the time of acceptance by attached shipping documents or warehouse 
receipts or other such documents, nevertheless the security may 
properly be released after acceptance; provided, however, that in any 
case where the total amount accepted for any one customer exceeds 
10 per cent of the capital and surplus of the accepting bank the se- 
curity can not be released unless atime other actual security growing 
out of the same transaction is substituted therefor. A trust receipt 
which permits the customer for whom the draft is accepted to obtain 
control of the goods is not actual security for the purpolses of this 
section of the law. (Opinion of Counsel of Board, Feb. 28, 1919.) 

SicuBiTT Covcanio Aogeptangbb in Bzcess or 10 Feb Cbkt. Lxmtta- 
TioN OF SBonon 13. — ^Under the provisions of Sectidn 18 a member 
bank may accept for any one customer in excess of 10 per cent, of 
its capital and surplus, provided it is secured by attached documents 
or by some other actual security growing out of the same transaction 
as to all acceptances in excess of that 10 per cent limitation. (Opin* 
ion of Counsel of Board, April 1, 1919.) 

Rbnswal of Dbatts Drawn bt the Pubchaseb of Goods and Sfr 

CUBED AT THE TiMS OF ObIGINAL AOGEPTANOE BT WaBBHOUSB RECEIPTS 

OB Bnxs OF Ladino.— As defined in an opinion published on page 380 
of the May 1917, Bulletin, a draft drawn by the purchaser of goods 
is not eligible for acceptance merely because it is secured at the time 
of acceptance by a bill of lading covering the gobds bought It must 
be established that the proceeds of the draft are applied to the pay- 
ment of those goods. No National bank may properly accept the re- 
newal of a draft drawn by the purchaser of goods and secured at the 
time ot original acceptance by a bill of lading or warehouse receipt 
unless the renewal acceptance complies with the terms of the law 
and the rulings and regulations of the Board applicable to the original 
acceptance. (Opinion of Counsel of Board, Jan., 1920.) 

Acceptance of Dbafts Dbawn Abboad and Secubbd bt Fobeign Wabb- 
HOUSE Receipts. — A draft drawn abroad, payable in the United States 
in dollars and secured by a warehouse receipt covering readily markets 
able staples stored in a warehouse located in a foreign country, is 
eligible for acceptance by a member bank and after acceptance is 
eligible for rediscount by a Federal Reserve Bank under the provisions 
of Section 13 of the Federal Reserve Act, but, under the terms of 
the Board's present regulations, is not eligible for purchase by a 
Federal Reserve Bank in the open market, under the provisions of 
SecUon 14 of the Federal Reserve Act (Opinion of (Counsel of Board, 
July 26, 1919.) 



Digitized by CjOOQ IC 



256 

AoGBPTAKOE OF DsAFTs Sboubed bt Wabkhousb Rbobifts.— ^Tlie Fed- 
eral Reserve Board is of the opinion that no draft which is secured 
by a warehouse receipt should properly be considered eligible for 
acceptance under the terms of Section 13 unless the goods covered 
by the warehouse receipt are being held in storage pending a reason- 
ably immediate sale, shipment, or distribution into the process of 
manufacture. Any draft therefore which is drawn to carry goiods 
for speculative purposes or for any indefinite period of time without 
the purpose to sell, ship, or manufacture within a reasonable time, 
should not be considered eligible for acceptance under the provisions 
of Section 13. Such a draft would be merely a cloak to evade the 
restrictions of Section 5200 of the Revised Statutes and is not one 
of the kinds which Congress intended to make eligible for acceptance. 
(Ruling of Board, Sept, 1919.) 

Drafts wi*h Documents Attachki>— Conveyance of Tttlb.— Under 
the provision of Section 13, which authorizes any member bank to ac- 
cept drafts based upon domestic shipment of goods, provided shipping 
documents conveying or securing title are attached, such documents 
must be made out or indorsed so as to convey or secure title to the 
accepting bank. (Opinion, of Counsel of Board, Jan. 31, 1918.) 

Bankers' Export Acoeftanoes Defined.— Where a dealer is engaged 
in purchasing the same character of goods for export and for do- 
mestic use, a member bank accepting his draft drawn to finance an 
export transaction should require proper assurances that proceeds 
of draft are to be used in connection with such export transaction 
and that the acceptance will be paid out of pnybeeds of sale of goods 
exported. (Opinion of Counsel of Board, April 1, 1918.) 

Drafts with Documents Attached — ^Definition.— A. provision of 
Section 13 which authorizes any member bank to accept drafts based 
upon the domestic shipment of goAods, provided shipping documents 
are "attached," should not be construed so as to require that the 
documents be physically fastened to the draft It is suflicient if the 
accepting bank has possession of the documents at the time of accept- 
ance. (Opinion of Colinsel of Board, Sept 14, 1917.) 

Acceptances of Mbmbes Banks. — (a) The limitations imposed by 
Section 6202, Revised Statutes, on the liabilities incurred by any Na- 
tional bank do not apply to acceptances of such banks. 

(b) A member bank may legally purchase its own acceptances, but 
such a transaction is equivalent to a loan or advance to the custokner 
for whom the acceptance was made and the liability of such customer 



Digitized by CjOOQ IC 



257 

beeomes labjeot to the Umitstioiui of Section 5200, Rerited Statutes. 

(o) The limitations Imposed by Section 5200, Rerlaed Statutes, on 
the amount of money which may be borrowed by any indlTldual from 
a member bank do not apply to acceptances of such bank. 

(d) The power of member banks to accept drafts or bills ot ex- 
change should not be confused with the power to discount the ac- 
ceptances of others. (Opinion of Ck>unsel of Board, Oct 27, 1916.) 

AocEPTAifcis BT CouBSPoinisifTS— -Wheh ▲ Dubot Liabiutt.— Drafts 
acqepted by fd^ign correspondents at the request, and under the 
guarantee of a National bank in the United States, should be re- 
ported as a direct liability of such National bank, and should be 
treated as subject to the limitations imposed by the Federal Resenre 
Act on the acceptance power of National banks. (Opinion of CouumI 
ot Board, March 1, 1918.) 

Trust Rbceifts as Aotual Sboubitt woat Aoobptanob TEAHSAcnoirs. — 
If an acceptflCnce is secured by shipping documents which are sur- 
rendered by the acceptor for a trust receipt which permits the pur- 
chaser of the goods to retain control of the goods, the accepting bank 
can not be said to be secured "by some other actual security" as pro- 
vided in Sectiob 18 of the Federal Reserve Act A trust receipt, how- 
ever, which does not permit the purchaser to procure control of the 
goods, may properly be said to be actual security within the nueaning 
of the act (Opinion of Ck>unsel of Board, Oct 12, 1917.) 

WABEHOusn Rbckipts.— Warehouse receipts offered as security for 
bills accepted by member banks under authority of Section 13 of the 
Federal Reserve Act must be issued by warehouses which are inde- 
pendent of the borrower. The corporation issuing such receipt must 
be organist in good faith as an independent corporation, and its 
aflairs must be administered by duly authoVised officers and agents 
independent of the borrower in order to comply with the rulings of 
the Board referred to. (Informal Ruling of Board, Nov. 30, 1917.) 

AoBEBHEKTS TO ACCEPT.— While a letter of credit or credit agreement 
may lawfully be made by a National bank which will extend by its 
terms for a period exceeding six months, the agreement must not be 
of such a character as will impose upon the holders of drafts accepted 
thereunder any obligation to renew such drafts so that the period of 
acceptance shall exceed six months in duration as to any spedfled 
draft (Informal Ruling of Board, August, 1915.) 

ImENTDncATioN OF Spioifio Ckx>D8. — It is not necessary that the 
spedflc goods covered by an acceptance based upon an import or 
17 



Digitized by CjOOQ IC 



258 

export tranBaction most be identified at tlie time of the acceptance. In 
interpreting the word 'involyed" in connection with the importatioti 
or exportation of goods, upon which an acceptance has been based, it 
is held that goods may be purchased and shipped subsequent to the 
time of the first acceptance, proyided that there is a definite bona 
fide contract for the shipment of the goods within a specified and 
reasonable timie. (Informal Ruling of Board, Nor. 9, 1915.) 

AssuaiLirois to Bauks.— Member banks may best protect themselTea 
in determining whether acceptances are based upon the exportation or 
Importation of goods by stipulating the right at times to ask for sub- 
stantiation of assurances from a customer. (Informal Ruling of Board, 
Nov. 9, 1915.) 

AOCEPTANCB BT MBMBIB BAICKS OF DbAFTS DbAWIT Df 'RUlfSAOTKNfS 

InvoLViivo BxPOBT or Goods.— A dealer having drawn drafts accepted 
by a member bank in an export transaction should be given the option, 
with the consent of the accepting bank, to secure such drafts in the 
manner required of those drawn in domestic transactions if he wishes 
to use the proceeds derived from the sale of the goods exported for 
purposes other than the pasrment of such acceptances. (Opinion of 
Counsel of Board, April 11, 1918.) 

ACGEPTANCBS CJovxBiNO DoMBSTio Shipmknts OF Gkx>D8.— A draft 
drawn upon a National bank covering current domestic shipments of 
goods is not eligible for acceptance by such bank under the pro- 
visions of Section 13 of the Federal Reserve Act unless shipping docu- 
ments are attached at the time of acceptance. (Opinion of Counsel 
of Board, April 29, 1919.) 

Mebb Acoeptancb Ain> Tbn Feb Cejxt. LnoTATioK.— The 10 per cent 
limitation imposed by Section 6200 of the Revised Statutes is not in- 
tended to apply to the mere acceptance of a bill of exchange, but the 
provisions of Section 6200 would apply to the indebtedness arising 
between the drawer of the bill and the accepting bank in case the 
drawer fails to furnish funds with which to meet the acceptance at 
maturity. (Informal Ruling of Board, Jan. 3, 1916.) 

Acceptances and Stamp Tax.— Drafts, acceptances, overdraiKs, and 
post-dated, checks are not taxable under the Act approved October 22, 
1914, as promissory notes. (Ruling of Commissioner of Internal 
Revenue, April 3, 1916.) 

Chabacteb of Bills That BfAT Bb Aooepted bt Membeb Banks.— A 
member bank can not legally accept a bill drawn upon it by an ao- 



Digitized by CjOOQ IC 



259 

oeptance house tor the purpose of relmimrslng itself and seenred co^ 
latersUj by an acceptance based upon the in^wrtatlon or exportation 
of goods. Such an acceptance does not grow out of a transaction in- 
YOlving the importation or exportation of goods, nor does it grow out 
of a transaction inrolTing the domestic shipment or storage of goods. 
(Informal Ruling of the Board, December 8, 1916.) 

SuBSTZTunoN or Sscubitt lOB AocspTAiTcsui.— During the life of an 
acceptance other warehouse receipts may be substituted for those 
pledged as security for the acceptance. (Informal Ruling of the 
Board, Dec 16, 19ie.) 

Dbicahd and Bioht Bnxs.— Demand and sight bills of exchange 
must be presented for paymient by the holder within a reasonable 
time. Demand and sight bills become due and payable on the date 
on which they are presented for acceptance. 

If a member bank holds demand and sight drafts for more than a 
reasonable time after acoeptance, they must be classed as overdue 
paper and considered in substance as promissory notes of the acceptor 
subject to the limitations imposed by Section 5200. (Opinion of Coun- 
sel of Board, Nor. 28, 1916.) 

Dbatt AfiumrsT SHmoufT bt CoarcmLTum to Aosirr.— iA. member 
bank may properly accept a draft drawn against the shipment of 
goods from a corporation to its agent or branch eren thous^ no sale 
of the goods is iuTolyed in the transaction. (Informal Ruling of 
Board, Aug. 24, 1917.) 

WABEHOUSS AOGEFTANGBS CoVBBDf J QOODS UlfDBB GONTBAOT TOB SaUB 

AND Dklivkbt At a Rbmoib Pbbkm>.— Althouf^ a National bank may 
accept drafts drawn upon it having not more than six months' sight 
to run which are secured at the time of acceptance by a warehouse 
receipt conveying or securing title covering readily marketable staples, 
nevertheless, such an acceptance must not be made subject to any 
renewals. (Opinion of Oounsel of Board, March, 1920.) 

§ 844. Powers of Kesenre Banks^-AdTtaces to ICember Banks. 
— ^Any Federal reserve bank may make advances to its member 
banks on thdr promissory notes for a period not exceeding fifteen 
days at rates to be established by such Federal reserve banks^ sub- 
ject to the review and determination of the Federal Reserve Board, 
provided such promissory notes are secured by such notes, drafts, 
bills of exchange, or bankers^ acceptances as are eligible for re- 



Digitized by CjOOQ IC 



260 

diacoimt or for purchase by Federal reserve banks under the pro- 
visions of this Acty or by the deposit or pledge of bonds or notes 
of the United States. (Sec. 13^ Act Dec. 23, 1913, as amended 
by Act Sept 7, 1916.) 

Pbdmissobt Notes of Mevbee Banks.— Member banks In procuring 
advances from tbeir Federal Resenre Bank on their promissory note 
must secure such notes by paper eligible for rediscount or for pur- 
chase by Federal Reserve Banks or by bonds or notes of the United 
States. County warrants are not eligible as security. (Opinion of 
Ck>unsel of Board* Oct 6, 1916.) 

Advancbs to Mbmbeb Banks.— Eligible paper pledged as security for 
a promissory note of a member bank on which an advance is being 
made by a Federal Reserve Bank need not be indorsed by such mem- 
ber bank if such eligible paper is already in negotiable form. (Opinion 
of Ck>unsel of Board, Oct 26, 1916.) 

Advancbs on Bonds ob Notks of United STATK8.-^Any member bank 
may procure advances from its Federal Reserve Bank on its own prom* 
issory note secured by a deposit of or pledge of bonds or notes of the 
United States. (Opinion of Counsel of Board, Feb. 16, 1917.) Farm 
loan bonds, however, are not obligations of the United States and are 
not eligible as coUateral. (Opinion of Ck>un8el of Board, Nov. 26, 1917.) 

Renewal of 15-Dat Notes of Mbmbeb Banks.— A Federal Reserve 
Bank may properly renew the 16-day notes of its member banks if 
properly secured, provided that the Federal Reserve Bank does not 
obligate itself in advance to make any such renewaL (Opinion of 
Counsel of Board, Sept 13, 1917.) 

§ 245. Limitation on Total Indebtedness of Kational Bank — 
Exceptions. — See § 114, page 107, under Part I. 

§ 246. Powers of Board— Dealings of Besenre Banks in H^io- 
tiable Paper.— The discount and rediscount and the purchase and 
sale by any Federal reserve bank of any bills receivable and of 
domestic and foreign bills of exchange, and of acceptances au- 
thorized by this Act, shall be subject to such restrictions, limita- 
tions, and regulations as may be imposed by the Federal Beserve 



Digitized by CjOOQ IC 



261 

Board. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 
7, 1916.) 

§ 247. Power of Kational Banks as Insurance Aj^ents.— See § 
19, page 28, Part I. 

§ 218. Aooeptanoe by Kember Banks of Drafts and Klls of 
Exchange Drawn to Famish Dollar Exchange.— Any member 
bank may accept drafts or bills of exchange drawn upon it having 
not more than three months' sight to run, exdusive of days of 
grace, drawn tmder r^^tions to be prescribed by the Federal 
Beserve Board by banks or bankers in foreign countries or depend- 
encies or insular possessions of the Fnited States for the purpose 
of furnishing dollar exchange as required by the usages of trade 
in the respectire countries, dependencies, or insular possessions. 
Such drafts or bills may be acquired by Federal reserve banks in 
such amounts and subject to such regulations, restrictions, and 
limitations as may be prescribed by the Federal Reserve Board: 
Provided, however. That no member bank shall accept such drafts 
or bills of exchange referred to [m] this paragraph for any one 
bank to an amount exceeding in the aggregate ten per centum of 
the paid-up and unimpaired capital and surplus of the accepting 
bank unless the draft or bill of exchange is accompanied by docu- 
ments conveying or securing title or by some other adequate 
security: Provided further. That no member bank shall accept 
such drafts or bills in an amount exceeding at any timo the aggre- 
gate of one-half of its paid-up and unimpaired capital and surplus. 
(Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) 



Digitized by CjOOQ IC 



26S 

EEGULATION C OP PEDEEAL BESEBVB BOABD, SBBIBS 

OP 1917. 

(Superseding Begtdation G of 1916.) 

ACXSBPTANCB BT MBMBBR BANKS OF DRAFTS AND BILLS OF 

BXGHANOB. 



AOOEPTANOE or Dft^lTS OB BIIX8 OF KLOHAJXiXE INUWH AOAIKBT D0MI8TIO 

om woMMmvi shifmbiits of goods <» sioum bt wAMtBovam bb o mp ts 

OOVKBUrO BBAOILT MABXBTABUB aTAPlSI. 
I. STATUTQBT PBOYIBIOlfS. 

Under the proYlslons of the fifth pangn^^h of Section IS of the 
Federal Reserve Act, as amended by the acts of September 7, 1916» 
and June 21, 1917, any member bank may accept drafts or bills of 
exchange drawn upon it, having not more than six months' si^t to 
run, exclusive of days of grace, which grow out of transactions in- 
volving the importation or exportation of goods; or which grow out 
of transactions involving the domestic shipment of goods, provided 
shipping documents conveying or securing title are attached at the 
time of acceptance; or which are secured at the time of acceptance 
by a warehouse receipt or other such document conveying or securing 
the title covering readily marketable staples. This paragraph limits 
the amount which any bank shall accept for any one person, company, 
flm^ or corporation, whether in a foreign or domestic transaction, to 
an amount not exceeding at any time, in the aggregate, more than 10 
per centum of its paid-up and unimpaired ciq;)ital stock and surplus. 
This limit, however, does not apply in any case where the accepting 
bank is secured either by attached documents or by seme other actual 
security growing out of the same transaction as the acceptance. The 
law also provides that any bank may accept such bills up to an 
amount not exceeding at any time, in the aggregate, more than one- 
half of its paid-up and unimpaired capital stock and surplus; or, with 
the approval of the Federal Reserve Board, up to an amount not ex- 
ceeding at any time, in the aggregate, more than 100 per centum of 
its paid-up and unimpaired capital stock and surplus. In no event, 
however, shall the aggregate amount of acceptances growing out of 
domestic transactions exceed 50 per centum of such capital stodL and 
surplus. 



Digitized by CjOOQ IC 



263 

II. Rbgulatioivs. 

1. Under the i>roTisioii8 of the law referred to above the Federal 
Resenre Board has determined that any member bank, having an un- 
impaired surplus equal to at least 20 per centum of its paid-up capital, 
which desires to accept drafts or bills of exchange drawn for the 
purposes described above, up to an amount not exceeding at any time, 
in the aggregate, 100 per centum of its paid-up and unimpaired capital 
stock and surplus, may file an application for the purpose with the 
Federal Reserve Board. Such application must be forwarded through 
the Federal Reserve Bank of the district in which the applying bank 
is located. 

2. The Federal Reserve Bank shall report to the Federal Reserve 
Board upon the standing of the applying bank, stating whether the 
business and banking conditions prevailing in its district warrant the 
granting of such applications. 

3. The approval of any such application may be rescinded upon 90 
days' notice to the bank affected. 

B. 

AOCBPTAirCB OF DSAjrTS OB SnXS OF KXCHANOB DEAWK FCHI THB PUBPOBB OF 
CBEATINO DOLULB KXCHANGS. 

I. STATUTOBT PSOVISIOIfS. 

Section 13 of the Federal Reserve Act also provides that any mem- 
ber bank may accept drafts or bills of exchange drawn upon it having 
not more than three months' sight to run, exclusive oC days of grace, 
drawn, under regulations to be prescribed by the Federal Reserve 
Board, by banks or bankers in foreign countries or dependencies or 
insular possessions of the United States for the purpose of furnish- 
ing dollar exchange as required by the usages of trade in the respeo- 
tive countries, dependencies, or insular possessions. 

No member banks shall accept such drafts or bills of exchange for 
any one bank to an amount exceeding in the aggregate 10 per centum 
of the paid-up and unimpaired capital and surplus of the accepting 
bank unless the draft or bill of exchange is accompanied by documents 
conveiring or securing title or by some other adequate security. No 
member bank shall accept such drafts or bills in an amount exceed- 
ing at any time in the aggregate one^alf of its paid-up and unimpaired 
capital and surplus. This 50 percent limit is separate and distinct 
from and not included in the limits placed upon the acceptance of 
drafts and bills of exchange as described under Section A of this 
regulation. 



Digitized by CjOOQ IC 



264 

II. RnULATIONS. 

Any ULember Iwnk desiring to accept drafts drawn by banks or 
bankers in foreign countries or dependencies or insular possessions of 
the United States for the purpose of furnishing dollar exchange shall 
first make an application to the Federal Reserve Board setting forth 
the usages of trade in the respective countries, dependencies or in* 
sular possessions in which such banks or bankers are located. 

If the Federal Reserve Board should determine that the usages of 
trade in such countries, dependencies, or possessions require the 
granting of the acceptance fktcHltles i4>plied for, it will notify the 
applying bank of its approval and will also publish in the Federal 
Reserve Bulletin the name or names of those countries, dependencies, 
or possessions in which banks or bankers are authorized to draw on 
member banks whose applications have been approved for the pur- 
pose of furnishing dollar exchange. 

The Federal Reserve Board reserves the rifi^t to modify or on 90 
days' notice to revoke its approval either as to any particular member 
bank or as to any foreign country or dependency or insular possession 
ofi the United States in which it has authorised banks or bankers to 
draw on member banks for the purpose of furnishing dollar exchange. 

Micifngtt Bank Aggeptahois.— When a member bank purchases its 
own acceptance before maturity such acceptance need not be included 
in the aggregate of acceptances authorised by Setion 18. (Opinion of 
Counsel of Board, July 26, 191tf.) 

Bankkb's "Dollab Bxchahob" Aggbptakobs. — ^The 50 per cent limit 
Imposed upon the amount of drafts which a member bank may accept 
for the purpose of furnishing dollar exchange is separate and distinct 
from and not Included in the' limits imposed by Section 13 upon the 
amount of drafts or bills of exchange drawn against the shipment of 
goods or against warehouse receipts covering readily marketable 
staples, which a member bank may accept (Opinion of Counsel of 
Board, June 16, 1917.) 

Bankkbs' Aoceptanobs Without Documbnts, as "Aocomhodatxon." — 
The acceptance of a draft by a member bank against an acceptance 
agreement which purports to assign to the bank certain collateral 
security, but which does not specifically mention any security as as- 
signed, is an ordinary accommodation acceptance, and is not authorized 
by law. (Opinion of Counsel of Board, March 22» 1918.) 

Bankbbs' Dombstic Aocbftakobs, Bugibilitt of. — ^A draft drawn by 
the purchaser of goods against a National bank is not eligible for 



Digitized by CjOOQ IC 



265 

aooeptance by that bank under the proTisions of Section 13 of the 
Federal Reeenre Act merely because it is secured by a bill of lading 
coyering the goods bought. (Opinion of Counsel of Board, April 21, 
1917.) 

§ 848. Powers of Beierve Banks — Open Karket Pnrokases of 
Bills of Ezckangei Trade Acceptances and Bankers' Acceptances.-— 

Any Federal reserve bank may, under rules and regulations pre- 
scribed by the Federal Beserve Board, purchase and sell in the open 
market, at home or abroad, either from or to domestic or foreign 
banks, firms, corporations, or individuals, cable transfers and 
bankers' acceptances and bills of exchange of the kinds and ma- 
turities of this Act made eligible for rediscoimt, with or without 
the indorsement of a member bank. (Sec. 14, Act Dec. 23, 1913.) 

Rbsulatiov B of the Fbdebal Resbbvs Boabd, Sbrixs of 1917 (Su- 
PiBGBDiNO Rbq. B of 1916.) — 

OPKN-MAmKXT PITBCHASES OF BILLS OF EXCHANGE, TRADE AOOBPTAlfGES, AND 
BAlfKEBS' ACCEPTANCES UNDEB SECTION 14. 

I. General Statutory Provisions. 

Section 14 of the Federal Reserve Act permits Federal Reserve 
Banks under rules and regulations to be prescribed by the Federal 
Reserve Board to purchase and sell in the open market from banks, 
Anns, corporations, or individuals, bankers' acceptances and bills of 
exchange of the kinds and maturities made eligible by the Act for 
rediscoimt, with or without the indorsement of a member bank. 

II. QsNSRAL Character of Bills and Acceptances Buoible. 

The Federal Reserve Board, exercising its statutory ris^t to regulate 
the purchase of bills of exchange and acceptances, has determined that 
a biU of exchange or acceptance, to be eligible for purchase by Federal 
Reserve Banks under Section 14 — 

(a) Must not have been issued for canying or trading in stocks, 
bonds, or other investment securities, except bonds and notes of the 
Government of the United States. 

(&) Must not be a bill the proceeds of which have been used or are 
to be used for permanent or fixed investments of any kind, such as 
land, buildings, or machinery, or for investments of a merely specula- 
tive character. 



Digitized by CjOOQ IC 



S66 

(c) Must haye been accepted by the drawee prior to purchase hf m 
Federal Resenre Bank unless it is accompanied and secured by ship- 
ping documents or by a warehouse, terminal, or other similar receipt 
conveying security title. 

(d) May be secured by the pledge of goods* or collateral, provided 
it is otherwise eligible. 

In addition to the above general requirements, each bill of exchange 
and trade acceptance purchased under the terms of this regulation 
must also conform to the more specific requirements set forth under 
III, and each banker's acceptance must also conform to the more 
specific requirements set forth under IV. 

III. Bills of Bzchanoe and Tbadb Aooeptanoes. 

(a) De/lnition.— A bill of exchange, within the meaning of this reg- 
ulation, is defined as an unconditional order in writing, addressed by 
one person to another, other than a banker as defined under IV (a), 
signed by the person giving it, requiring the person to whom it is 
addressed, to pay, in the United States, at a fixed or determinable fu- 
ture time, a sum certain in dollars to the order of a specified person; 
and a trade acceptance Is defined as a bill of exchange drawn by the 
seller on the purchaser of goods sold, and accepted by such purchaser. 

ih) Eligibility, — To be eligible for purchase the bill must have 
arisen out of an actual commercial transaction, domestic or foreign; 
that is, it must be a bill which has been issued or drawn for agri- 
cultural, industrial, or commercial purposes or the proceeds of which 
have been used or are to be used for the purpose of producing, pur- 
chasing, carrying or marketing goods in one or more of the steps 
of the process of production, manufacture, or distribution. It must 
have a maturity at time of purchase of not more than ninety days, 
exclusive of days of grace. 

(c) Evidence of eligibility. -^A Federal Reserve Bank shall take such 
steps as it deems necessary to satisfy itself as to the eligibility of the 
bill offered for purchase, unless it presents prima facie evidence thereof 
or bears a stamp or certificate aflixed by the acceptor or drawer show- 
ing that it is a trade acceptance. 

id) Statements. — ^Unless indorsed by a member bank, a bill is not 
eligible for purchase until a satisfactory statement has been fur- 
nished of the financial condition of one or more of the parties thereto. 

* When used in this regulation the word "goods" shall be construed 
to include goods, wares, merchandise, or agricultural products, In:- 
cluding live stock. 



Digitized by CjOOQ IC 



26T 



IV. BUfKWMB* AOOVTAKCB. 



(a) Da/lnUlon.— A banker's acceptance, within the nueanlng of this 
regalatlon, la a bill of exchange of which the acceptor Is a bank or 
tniat company, or a firm, person, company, or corporation engaged In 
the business of granting bankers' acceptance credits. 

(5) BUgibility,--^o be eligible for purchase, the blU which must 
haye a maturity at time of purchase of not more than three months, 
excluslre of days of grace, must hare been drawn under a credit 
opened for the purpose of conducting, or settling accounts resulting 
from, a transaction or transactions InnyolTlng— 

(1) The shipment of goods between the United States and any 

foreign country, or between the United States and any of Its 
dependencies or Insular possessions, or between foreign coun- 
tries, or 

(2) The shipment of goods within the United States, prorlded the 

bill at the time of Its acceptance Is accompanied by shipping 
documents, or 
(8) The storage within the United States of readily marketable 
goods, proTlded the acc^tor of the bill Is secured by ware- 
house, terminal, or other similar receipt, or 
(4) The storage within the United States of goods which have been 
actually sold, provided the acceptor of the bill Is secured by 
the pledge of such goods; 
or It nuist be a bill drawn by a bank or banker In a foreign country 
or dependency or Insular possession of the United States for the pur^ 
1K>se of furnishing dollar exchange. In this latter case the bank or 
banker drawing the bill must be In a country, dependency, or posses- 
sion whose usages of trade have been determined by the Federal Re- 
senre Board to require the drawing of bills of this character. 

(c) Evidence of eligibility, — A Federal Reserre Bank must be satis- 
fled either by reference to the acceptance Itself, or otherwise, that It 
Is eligible for purchase. Satisfactory eyidence of eligibility may con- 
sist of a stamp or certificate afGbced by the acceptor, in form satis- 
f^tctory to the Federal Reserye Bank. No eyidence of eligibility Is 
required with respect to a bill accepted by a National bank. 

(d) firtateynente.— Bankers' acceptances, other than those accepted 
or Indorsed by member banks, shall be eligible for purchase only after 
the acceptor has furnished a satisfactory statement o0 financial condi- 
tion in form to' be approyed by the Federal Reserve Board and has 
agreed in writing with a Federal Reserve Bank to Inform it upon re- 
quest concerning the transactions underlying such acceptances. 

Bankeb's Aooeptancx Sbcuud bt Bill of Saul— A banker's accept- 
•aoe drawn for the purpose of purchasing goods secured by a bill 



Digitized by CjOOQ IC 



of sale of stock In hand is not eligible for parohmae by Federal Reaerre 
Banks under the proTislons of Regulation B. (Opinion of Ckiunael of 
Board, Not. 4, 1916.) 

AcoKPTAifOB BT Dbawxb.— A draft to be eligible as an acoeptance 
miust be accepted bj the drawee and not hj any one else. A draft 
drawn by a corporation can not be purchased by a Federal Reserve 
Bank in the open market as a banker's acceptance. For the same 
reason such a draft is Ineligible as a trade acceptance. (Informal 
Ruling of Board, Feb. 1, 1916.) 

SmQUB Naics Pafkb.— Any Federal Reeenre Bank may, under the 
provisions of Section 14 of the Federal Reserve Act, purchase accept- 
ances and bills of exchange of certain kinds and maturities in the 
open market, but promissory notes as distinguished from bills of ez* 
change, whether one or more names, are not eligible for such pur- 
chase. (Opinion of €k>unsel of Board, Oct 8, 1916.) 

Bnx. OF BbcGHANQS Dbawk bt the Dbawkb.— An instrument in the 
form of a bill of exchange, drawn by an agent of a corporation upon 
the corporation itself, is not a bill of) exchange such as is eligible for 
purchase in the open market by Federal Reserve Banks. (Opinion of 
Oounsel of Board, Aug. 2, 19f^.) 

Pdbchass of Aockptancbs bt Branch of Rxsebvb Bank. — ^The Board 
has no objections to the purchase of acceptances by a brandi of a re- 
serve bank under the authorization of the reserve bank. (Informal 
RuUng of Board, Nov. 28, 1916.) 

INDOBSBMENT ON BiLL OF ExcHANOB.—- An indorsenueut on a bill of 
exchange which expressly exempts the indorser from any responsibility 
for the validity or genuiness of an accompanying bill of lading or 
other paper or for the quality, quantity, or delivery of goods covered 
thereby, does not render the bill non-negotiable or ineligible for pur- 
chase by a Federal Reserve Bank. (Informal Ruling of Board, May 
16, 1917.) 

§ 280. Powers of Beserre Banks— Oold Coin and Bullion in 
Open Karket— Every Federal reserve bank shall have power: 

(a) To deal in gold coin and bullion at home or abroad, to make 
loans thereon, exchange Federal reserve notes for gold, gold coin, 
or gold certificates, and to contract for loans of gold coin or bul- 
lion, giving therefor, when necessary, acceptable security, including 



Digitized by CjOOQ IC 



269 

the hypothecation of TTnited States bonds or other securities which 
Federal reserve banks are authorized to hold. (Sec. 14^ Act Dec. 
23, 1913.) 

§ 261. Powers of Beserve Banks — ^Botei, Bonds, and Warrants 
in Open Xarket. — (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 dis- 
tricts, such purchases to be made in accordance with rules and 
regulations prescribed by the Federal Beserve Board. (Sec. 14, 
Act Dec. 23, 1913.) 

RaoTTiATioxr B of Fdoul Rbskbvb Boabd, Sebjeb or 1917 (Sutkb- 
CEDDfO Rbo. B of 1916). — 

PuBCHASE OF Wabbaitts. — ^Tho sUtutory provisions are omitted to 
prevent repetition. 

For brevity's sake, the term '^Rrarrant" when used In this regulation 
■hall be ooAiStrued to mean "hills, notes, revenue bonds, and warrants 
with a maturity from date of purchase of not exceeding six months/' 
and term "municipality" shaU be construed to mean "State, county, 
district, political subdivision, or municipality In the continental United 
States, Including Irrigation, drainage, and reclamation districts." 

RsOULATIOlf. 

1. Any Federal Reserve Bank may purchase warrants Issued by a 
municipality In anticipation of the collection of taxes or In anticipa- 
tion of the receipt of assured revenues, provided — 

(a) They are 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 di- 
rectly or ultimately liable: 
(&) They are Issued in anticipation of taxes or revenues which are 
due and payable on or before the date of maturity of such 
warrants; but the Federal Reserve Board may waive this con- 



Digitized by CjOOQ IC 



270 

ditlon in specific cases. 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; 
(c) They are issued by a municipality — 

(1) Which has been in existence* for a period of ten years; 

(2) Which for a period of 10 years previous to the purchase has 

not defaulted* for longer than 16 days in the payment of 
any part of either principal or interest of any funded 
debt authorized to be contracted by it. 
($) Whose net funded Indebtedness* does not exceed 10 per 
centum of the valuation of its taxable property, to be 
ascertained by the last preceding valuation of property 
for the assessment of taxes. 

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 (b) above 
quoted, and actually sold by a municipality. 

III. Except with the api^roval 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. Etxcept 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 60,000 population or over. 
Three per centum of such deposits in warrants of a municipality 

of over 80,000 populatibn, but lesa than 60,000. 
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 recognised counsel on municipal issues or of the 
regularly appointed counsel of the municipality as to the lagality of 
the issue shall be secured and approved in each case by counsel for 
the Federal Reserve Bank. 

*See appendix to Regulation E. 



Digitized by CjOOQ IC 



271 

VII. Axkj Federal Reeenre Bank may purchase from any of Its mem- 
ber bank! warrants of any maniclpality, indorsed by snob m0m2>er 
bank, with waiver of demand, notice, and protest, up to an amount 
not to exceed 10 per oentum of the aggregate capital and surplus of 
such member bank: Provided, however. That such warrants comply 
with proYlsions I and III of these regulations, except that where a 
period of 10 years is mentioned in I (c) hereof a period of 6 years 
shall be substituted for the purposes of this clause. 

AFPBNDIZ to RjDQUULTIOlf 0. 

"Net Funded Indebtedness.''— The term "net funded indebtedness** 
is hereby defined to mean the legal gross indebtedness of the munici- 
pality (including the amount of any school district or other bonds 
which depend for their redemption upon taxes leyied upon property 
within the municipality) less the aggregate of the following items: 

(1) The amount of outstandihg bonds or other debt obligations 

made pasrable from current revenues; 

(2) The amount of outstanding bonds issued for the purpose of 

providing the inhabitants of a municipality with public utili- 
ties, such as waterworks, docks, electric plants, transportsr 
tion facilities, etc: Provided, that evidence is submitted 
showing that the income from such utilities is sufllcient for 
maintenance, for pasrment of interest on such bonds, and for 
the accumulation of a sinking fund for their redemption; 

(8) The amount of outstanding improvement bonds, issued under 
laws which provide for the levying of special assessments 
against abutting property in amounts sufllcient to insure the 
payment of interest on the bonds and the redemption thereof: 
Provided, That such bonds are direct obligations of the mu- 
nicipality 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. 

''existence" and "nondetault." 

"WVirrants will be construed to comply with that part of I (c) of 
Regulation B 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 re- 
quirements of these regulations, will be deemed to be the warrants 



Digitized by CjOOQ IC 



272 

of such political division: Provided that such warrants were assumed 
by such political diyision 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 ul- 
timately, 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 wlilch 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 di- 
vision so succeeded, is equal to a period of 10 years will be deemed to 
be warrants of such succeeding political division: Provided, That dur- 
ing such period none of such political divisions shall have defkuilted 
for a period exceeding 16 days in the payment of any part of either 
principal or 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 ulti- 
mately, 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 UMinldpallty whldL» 
prior to such issuance, became the successor of one or more, or was 
formed by the consolidation or merger of two or more, pre-existing 
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, suo- 
ceedlng, or consolidated political divisions shall have defaulted for 
a period exceeding 16 days in the pasrment of any part of either 
prindpcd or Interest of any funded debt authorized to be contracted 
by it. 

Maturitt of Bonds. — ^That part of Section 14, which provides that 
"revenue bonds • • • with a maturity from date, of purchase 
of not exceeding six months" may be purchased, contemplates that 
such bonds might at the date of issue have a maturity of longer 
than six months. Bonds are eligible for purchase under this sec- 
tion if, at the time of issue, provision is made for the establishment 
of a redemption fund which will be sufficient and available for the 
payment of the bonds at maturity, provided, of course, that at the 



Digitized by CjOOQ IC 



273 

time of pQrcbtBe the bonds hare not more than six months to ran. 
.(Opinion of Ckiunsel of Board, Wb. 9, 1916.) 

Wabeajitb Issxtid nr AimoiPATioif or Assxjbb) Rcvskuk— ^Federal 
Resenre Banfts may, under the proylslons of Section 14 of the Federal 
Resenre Act, purchase warrants Issued in anticipation of the receipt 
of "assured reyenues." The term "revenue^ as applied to the Income 
of a State or other political unit, does not Include the proceeds of a 
sale of public securities. Warrants which are Issued In anticipation of 
the receipt of the proceeds of municipal bonds are not, therefore, 
eligible for purchase under the provisions of this section. (Opinion 
of (Counsel of Board, March 7, 1916.) 

BuomiLiTT OF Wabbai?T8.— The Federal Resenre Board may, under 
the provisions of Regulation B, authorize Federal Reserve Banks to 
Smrchase warrants which are Issued in anticipation of the collection 
of taxes and which mature after the date on whicb such taxes are 
due but before the penalty attaches for their nonpayment, if experi- 
ence has demonstrated that the due date produces sufficient taxes to 
pay the warrants at maturity. (Opinion of Counsel of Board, Dec. 
4, 1916.) 

PuBCHASK OF WABaANTs.—^Federal Reserve Banks should not buy 
non-negotiable warrants. (Informal Ruling of Board, February 18, 
1917.) Warrants should only be purchased by Federal Reserve Banks 
during periods of great ease of money and when rediscounts from 
mmnber banks and offers of bankers' acceptances are not heavy. (In- 
formal Ruling of Board, February 20, 1917.) 

§ 868. Powers of Sesenre Banks— Bills of Ezcliange in Open 
Market. — (c) To purchase from member banks end to sell, with or 
without its indorsement^ bills of exchange arising out of com- 
mercial transactions, as hereinbefore defined. (Sec. 14, Act Dec. 
23, 1913.) 

NozncKMBKB Tbust Company Aooeptangbs.— Acceptances drawn by a 
manufacturer on and accepted by a trust comtpany not a member of 
the Federal Reserve System, the proceeds of which are to be used for 
purchases of raw' material and pajrment for labor where the goods 
had not been sold and no warehouse receipts or other instruments 
could be furnished, are held not to be eligible for purchase by a 
fMeral Reserve Bank. (Informal Ruling of Board, Jan. 8, 1916.) 
18 



Digitized by CjOOQ IC 



274 

§ 268. Powext of Batcrre Bankt— Satet of Bilooimt— (d) To 
establish from time to tune, subject to review and determination 
of the Federal Besenre Boards rates of discount to be charged by 
the Federal reserve bank for each daas of paper^ which shall be 
fixed with a view of accommodating commerce and business and 
which, subject to the approval, review, and determination of the 
Federal Beserve Board, may be graduated or progressed on the 
basis of the amount of the advances and discount accomodations 
extended by the Federal reserve bank to the borrowing bank. (Sec 
14, Act Dec. 23, 1913, as amended by Act April 13, 1920. 

FiDKBAL Reskbve Baitk Disoouitt RATis.-^Congress not only has the 
|>ower 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, sub- 
ject to the approval of such Board. (Opinion of Counsel of Board, 
Nov. 19, 1914.) 

FoBWABD Discount Rates. — ^Federal Reserve Banks may, nndw the 
established right to fix discount rates for acceptances or other eligible 
paper, fix a forward rate; that is, a rate to I4>ply at a future time. 
Such a rate is calculated to accommodate trade and commerce as re- 
quired by the Act, and will tend to obviate speculation due to iiuc- 
tuating rates. (Opinion of Counsel of Board, May 18, 1915.) 

DisoouKT RATBi.-»The rate of discount charged by a Federal Reserve 
Bank should be based upon the maturity of the instrument discounted 
at the time it is discounted and not upon a collateral agreement by 
which the member bank binds itself to repurchase before maturity. 
(Opinion of Ck>unsel of Board, July 81, 1916.) 

Pbetkbbntial Ratvs or DisoouifT oif Mjbmbib Bank Noras.— The 
Federal Reserve Board may, under the terms of Section 14 of the 
Federal Reserve Act, approve a preferential rate of discount upon 
monber bank notes secured by certificates of indebtedness of the 
United States, by Liberty bonds, or by Victory notes. (Opinion of 
(Counsel of Board, Feb., 1920.) 

§ 254. Powers of Seserve Banks— Foreign Aooounts, Af enoies 
and Correspondents. — (e) To establish accounts with other Fed* 
eral reserve banks for exchange purposes and, with the consent 



Digitized by CjOOQ IC 



S75 

or upon the order and direction of the Federal Beeerre Board and 
under regulations to be prescribed by said board, to open and 
maintain accounts in foreign countries, appoint correspondents, 
and establish agencies in such countries, whersoever it may be 
deemed best for the purpose of purchasing, selling, and collecting 
bills of exchange, and to buy and sell, with or without its indorse- 
ment, through such correspondents or agencies, bills of exchange 
(or acceptances) arising out of actual commercial transactions 
which haTO not more than ninety days to run, exclusiTO of days of 
grace, and which bear the signature of two or more responsible 
parties, and, with the consent of the Federal Beserve Board, to 
open and maintain banking accounts for such foreign corres- 
pondents or agencies. Wlhenever any such accoimt has been 
opened or agency or correspondent has been appointed by a Fed- 
eral reserve bank, with the consent of or under the order and 
direction of the Federal Beserve Board, any other Federal re- 
serve bank may, with the consent and approval of the Federal 
Beserve Board be permitted to carry on or conduct, through the 
Federal reserve baoik opening such accoimt or appointing such 
agency or correspondent, any transaction authorized by this sec- 
tion under roles and regulations to be prescribed by' the board. 
(Sec. 14, Act Dec 23, 1913, as amended by Act Sept. 7, 1916, and 
further by Sec. 6, Act June 21, 1917; 40 Stat L., 235.) 

FOBXieif AesNTs.— ^rh« Federal Reserve Board has authorized the 
Federal Reserve Bank of New York to open and maintain banking 
accounts with and for the following: 

Bank of Bngland, London, Bug. Sverlges Rlksbank, Stockholm, 

Sweden. 

Bank of France, Paris, France. Norges Bank, Chrlstlanla, Nor- 

way. 

Philippine Nat Bank, Manila, P. I. De Nederlandsche Bank, Amster- 
dam, Holland. 

Bank of Italy, Rome, Italy. Banqne Natlonale de Belglqne, 

Brussels, Belgium. 

Bank of Japan, Toklo, Japan. Bank of Spain, Madrid, Spain. 

§ 866. OoTexnment Deposits in Beserve Banks. — The monqrs 
held in the general fund of the Treasury, except the five per 



Digitized by CjOOQ IC 



276 

centum fund for the redemption of outstanding National bank 
notes and the funds proTided in this Act for the redemption of 
Federal reserve notes may, upon the direction of the Secretary of 
the Treasury, be deposited in Federal reserve banks, which banks, 
when required by the Secretary of the Treasury, shall act as fiscal 
agents of the United States; and the reveni^es of the Gh)vemment 
or any part thereof may be deposited in such banks, and disburse- 
ments may be made by checks drawn against such deposits. 

No public fimds of the Philippine Islands, or of the postal sav- 
ings, or any Oovemment funds, shall be deposited in the conti- 
nental United States in any bank not belonging to the system es- 
tablished by this Act: Provided, however. That nothing in this 
Act shall be construed to deny the right of the Secretary of the 
Treasury to use member banks as depositories. (Sec. 15, Act 
Dec. 23, 1913.) 

GovKBNMBKT DsposnoiiBS. — There is nothing in the Federal Reserve 
Act which authorises the Secretary of the Treasury to use State banks 
which have become member banks as depositories for public moneys 
generally, though they may be made depositories for postal savings 
funds.— ^(Opinion of Counsel of Board, July 8, 19160 1 

Deposit of Postal Fukds in Nokmembbb Banks. — Section 16 of the 
Federal Reserve Act, which prohibits the deposit of any Oovemment 
funds in nonmember banks, operates as a repeal of so much of Section 
3847, United States Revised Statutes, as amended by the act of May 
27, 1908, as authorizes postmasters to deposit public moneys in State 
as well as National banks. By an act approved May 18, 1916, postal 
saving deposits may, under certain conditions, be deposited in non- 
member banks. (Opinion of Counsel of Board, June 6, 1916.) 

On Nov. 23, 1916, the Secretary of the Treasury appointed the twelve 
Federal Reserve Banks depositories and fiscal agents of the Oovem- 
ment» to act as such on and after January 1, 1916. 

§ 256. Federal Beierye Notes. — Federal reserve notes, to be is- 
sued at the discretion of the Federal Beserve Board for the purpose 
of making advances to Federal reserve banks through the Federal 
reserve agents as hereinafter set forth and for no other purpose, 
are hereby authorized. The said notes shall be obligations of the 
United States and shall be receivable by all National and member 



Digitized by CjOOQ IC 



277 

banks and Federal resenre banks and for all taxes, customs^ and 
other public dues. They shall be redeemed in gold on demand at 
the Treasury Departmjent of the United States, in the cily of 
Washington, District of Columbia, or in gold or lawful money at 
any Federal reserve bank. (Sec. 16, Act Dec. 23, 1913.) 

Federal Resebts Notes aitd Fedebal Resibtb Bank Noim.—Federal 
Reeenre Bank notes are obligations of Federal Resenre Banks and 
secured by United States bonds. Federal resenre notes are obligations 
of the United States. No resenre need be maintained against Federal 
reserve bank notes except the 6 per cent redemption fund with the 
Treasurer of the United States. Federal resenre notes, however, are 
subject to reserves of not less than 40 per cent, in which the 5 per 
cent redemption fund is counted as a part Federal Reserve Bank 
notes bear the words ''national currency" and "Federal Reserve Bank 
note." Federal reserve notes bear the words ''Federal Reserve note." 
(Informal Ruling of Board, May 12, 1916.) 

§ 267. CoUateial Security for Federal Sesenre Notes. — Any 
Federal reserve bank may make application to the local Fed- 
eral reserve agent for such amount of the Federal reserve notes 
hereinbefore provided for as it may require. Such application 
shall be accompanied with a tender to tiie local Federal reserve 
agent of collateral in amount equal to the sum of the Federal 
reserve notes thus applied for and issued pursuant to such ap- 
plication. The collateral security thus offered shall be notes, 
drafts, bills of exchange, or acceptances acquired under the pro- 
visions of section thirteen of this Act, or biUs of exchange in- 
dorsed by a member bank of any Federal reserve district and 
purchased under the provisions of section fourteen of this Act, 
or bankers' acceptances purchased under the provisions of said 
section fourteen, or gold or gold certificates; but in no event shall 
such collateral security, whether gold, gold certificates, or eligible 
paper, be less than the amount of Federal reserve notes applied 
for. The Federal reserve agent shall each day notify the Fed- 
eral Beserve Board of all issues and withdrawals of Federal re- 
serve notes to and by the Federal reserve bank to which he is 
accredited. The said Federal Beserve Board may at any time 
call upon a Federal reserve bank for additional security to protect 



Digitized by CjOOQ IC 



878 

the Federal reserve notes issued to it. (Sec. 16, Act Dec. 2S, 1913, 
as amended by Act Sept 7, 1916, and further by Sec. 7, Act June 
21, 1917; 40 Stat. L., 236.) 

Pledges of Collateral Sboubctt.— -Rediscounts held by the Federal 
Reserve Agent as security for Federal resenre notes, and gold order 
certillcates deposited with a Federal Resenre Agent for the purpose of 
reducing the liability of a Federal Reserve Bank fOr its outstanding 
Federal reserve notes, must be so indorsed as to enable such agent 
to realize on such securities or to convert such certifloates into gold 
if necessary. (Opinion of Counsel of Board, June 28, 1915.) 

QovsBiricEirr QsLNATioirs— Notes axcd Bills Dbawk fob Teabino nr. — 
Notes, drafts, and bills of exchange drawn for the purpose of carrying 
or trading in bonds or notes of the United States and rediscounted 
under the provisions of Section 18 are eligible as collateral security 
for the issue of Federal Reserve notes. (Opinion of 0>unsel of Board, 
May 31, 1917.) 

§ 268. Federal Beserre Votes— Beserye Against, Issue, Ex- 
ohamge and Bedemption. — Every Federal reserve bank sliall main- 
tain reserves in gold or lawful money of not less than thirty-five 
per centum against its deposits and reserves in gold of not less 
than forty per centum against its Federal reserve notes in actual 
circulation: Provided, however. That when the Federal reserve 
agent holds gold or gold certificates as collateral for Federal re- 
serve notes issued to the bank such gold or gold certificates shall 
be counted as part of the gold reserve which such bank is required 
to maintain against its Federal reserve notes in actual circulation. 
Notes so paid out shall bear upon their faces a distinctive letter and 
serial number which shall be assigned by the Federal Beserve 
Board to each Federal reserve bank. Whenever Federal reserve 
notes issued through one Federal reserve bank shall be received 
by another Federal reserve bank, they shall be promptly re- 
turned for credit or redemption to the Federal reserve bank 
through which they were originally issued or, upon direction of 
such Federal reserve bank, they shall be forwarded direct to the 
Treasurer of the United States to be retired. No Federal re- 
serve bank shall pay out notes issued through another under pen- 
alty of a tax of ten per cmtum upon tl^ face value of notes 



Digitized by CjOOQ IC 



279 

so paid out. Notes presented for redemption at the Treasury of 
the ITnited States shall be paid out of tiie redemption fond and 
retomed to the Federal reserre banks through which they were 
originally issued, and thereupon such Federal reserve bank shall, 
upon demand of the Secretary of the Treasury, reimburse such 
redemption fund in. lawful money or, if such Federal reserve 
notes have been redeemed by the Treasurer in gold or gold cer- 
tificates, then such funds shall be reimbursed to the extent deemed 
necessary by the Secretary of the Treasury in gold or gold cer- 
tificates, and such Federal reserve bank shall, so long as any of 
its Federal reserve notes remain outstanding, maintain with the 
Treasurer in gold an amount sufficient in the judgment of the 
Secretary to provide for all redemptions to be made by the 
Treasurer. Federal reserve notes received by the Treasurer other- 
wise than for redemption may be exchanged for gold out of the 
redemption fund hereinafter provided and returned to the re- 
serve bank through which they were originally issued, or they 
may be returned to such bank for the credit of the United States. 
Federal reserve notes unfit for circulation shall be returned by the 
Federal reserve agents to the Comptroller of the Currency for 
cancellation and destruction. (Sec. 16, Act Dec. 23, 1913, as 
amended by Sec. 7, Act June 21, 1917; 40 Siai L., 236.) 

Dxposrr of Fedebal Rksebvx Notes roa Cteorr ob Redemption. — A 
Federal Reserve Bank receiving Federal reserve notes issued by an- 
other Federal Reserve Bank may return such notes to the issuing bank 
either for redemption or for credit. (Opinion of Ck>unsel of Board, 
July 80, 1915.) 

Tbahspobtation CRAaois oic Fbdkbal Resebvb Nomi.— (Bach Fed- 
eral Reserve Bank must pay all expenses incident to the issue and 
retirement of its o'wn Federal reserve notes, including transportation 
charges on notes returned to the bank of issue from any other Federal 
Reserve Bank or from the Treasury of the United States where they 
have been redeemed. (Opinion of Ck>un8el of Board, Jan. IS, 1916.) 

§ 269. Federal Beserve Notes — Kedemption Fund — ^Paramount 
Iden on Assets of Beserve Bank.— The Federal Reserve Board 
shall require each Federal reserve bank to maintain on deposit in 



Digitized by CjOOQ IC 



the Treastuy of the TJnited States a stim in gold raflBcient in the 
judgment of the Secretary of the Treasury for the redemption of 
the Federal reserve notes issued to such bank, but in no ev^it less 
than five per centum of the total amount of notes issued less 
the amount of gold or gold certificates held by the Federal re- 
serve agent as collateral securiiy; but such deposit of gold shall 
be counted and included as part of the forty per centum reserve 
hereinbefore required. The board shall have the right, acting 
through tiie Federal reserve agent, to grant, in whole or in part, 
or to reject entirely the application of any Federal reserve bank 
for Federal reserve notes; but to the extent that such application 
may be granted tiie Federal Eeeerve Board shall, through its local 
Federal reserve agent, supply Federal reserve notes to the banks 
so applying, and such bank shall be charged with the amoimt of 
notes issued to it and shall pay such rate of interest as may be 
established by the Federal Beserve Board on only that amount 
of such notes which equals the total amoimt of its outstanding 
Federal reserve notes less the amount of gold or gold certificates 
held by the Fed^al reserve agent as collateral security. Federal 
reserve notes issued to any such bank shall, upon delivery, to- 
gether with such notes of such Federal reserve bank as may be 
issued under section eighteen of this Act upon security of United 
States two per centum Government bonds, become a first and 
paramount lien on all the assets of such bank. (Sec. 16, Act Dec. 
23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. 
L., 237.) 

INTKBBST Chaboss OH Fedebal Rkssbvx Notes.— -The Federal Reserve 
Board may. In its discretion, fix the amount of Interest which shall 
be charged reserve banks for the use of Federal reserve notes and In 
this manner force their retirement when redundant and so famish 
elasticity. (Informal Ruling of Board, April 26, 1916.) 

§ 260. Seduction of Outstanding Federal Beserre Votes.— ^ 

Any Federal reserve bank may at any time reduce its liability 
for oustanding Federal reserve notes by depositing with the Fed- 
eral reserve agent its Federal reserve notes, gold, gold certificates, 
or lawful money of the United States. Federal reserve notes so 



Digitized by CjOOQ IC 



281 

deposited shall not be reissned, except upon compliance with the 
conditions of an original issue. (Sec. 16^ Act Dec. 23, 1913, as 
amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) 

Dkposit of SiLYia Ckbtificatbs. — ^Inasmuch as sllyer oertlflcates are 
now to all intents and purposes lawful money they may be receiyed by 
Federal Reserve Agents when offered by Federal Reeenre Banks to re- 
duce liability for Federal reserve notes outstanding. (Informal Ruling 
of Board* Jan. 12, 1916.) 

§ 261. Ezohange of Federal Beserre Notes for Ctold, Ctold Cer- 
tiflcates or Lawful Money.— The Federal reserve agent shall hold 
such gold, gold certificates, or lawful money available exclusively 
for exchange for the outstanding Federal reserve notes when of- 
fered by the reserve bank of which he is a director. Upon the re- 
quest of the Secretary of the Treasury the Federal Beserve Board 
shall require the Federal reserve agent to transmit to the Treasurer 
of the United States so much of the gold held by him as collateral 
security for Federal reserve notes as may be required for the ex- 
clusive purpose of the redemption of such Federal reserve notes, 
but such gold when deposited with the Treasurer shall be counted 
and considered as if collateral security on deposit with the Fed- 
eral reserve agent. (Sec. 16, Act Dec. 23, 1913, as amended by 
Sec. 7, Act June 21, 1917; 40 Stat L., 237.) 

Dkposits of Gold ob Lawtul Monst bt ▲ Fkdeeal Rksebtk Aobett 
With thk BtoCBAL Rxskbvx Board. — Oold, gold certificates, or lawful 
money deposited by the Federal Reserve Bank with its Federal Reserve 
Agent for the purpose of redacing its liability for outstanding notes 
may legally be deposited by such agent with the Federal Reserve 
Board. (Opinion of Counsel of Board, June 23, 1915.) 

§ 268. Federal Seserve Notes~8ubstitution of Collateral to— « 
Betirement of— Liability of Federal Beserve Agent for. — Any 
Federal reserve bank may at its discretion withdraw collateral 
deposited with the local Federal reserve agent for the protection 
of its Federal reserve notes issued to it and shall at the same 
time substitute therefor other collateral of equal amount with 
the approval of {he Federal reserve agent under r^^tions to 



Digitized by CjOOQ IC 



382 

be prescribed by the Federal Besenre Board. Any Federal re- 
serve bank may retire any of its Federal reserve notes by deposit- 
ing them with the Federal reserve agent or with the Treasurer 
of the United States, and such Federal reserve bank shall there- 
upon be entitled to receive back the collateral deposited with the 
Federal reserve agent for the security of such notes. Federal 
reserve banks shall not be required to maintain the reserve or the 
redemption fund heretofore provided for against Federal reserve 
notes which have been retired. Federal reserve notes so de- 
posited shall not be reissued except upon compliance with the 
conditions of an original issue. 

All Federal reserve notes and all gold, gold certificates, and 
lawful money issued to or deposited with any Federal reserve 
agent under the provisions of the Federal reserve Act shall here- 
after be held for such agents under such rules and regulations 
as the Federal Beserve Board may prescribe, in the joint cus- 
tody of himself and the Federal reserve bank to which he is ac- 
credited. Such agent and such Federal reserve bank shaU be 
jointly liable for the safe-keeping of such Federal reserve notes, 
gold, gold certificates, and lawful money. Nothing herein con- 
tained, however, shall be construed to prohibit a Federal reserve 
agent from depositing gold or gold certificates with the Federal 
Beserve Board, to be held by such board subject to his order, or 
with flie Treasurer of the United States for the purposes au- 
thorized by law. (Sec. 16, Act Dec. 23, 1913, as amended by 
Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) 

§ 263. Printing of Federal Besenre Notes. — In order to furnish 
suitable notes for circulation as Federal reserve notes, the Comp- 
troller of the Currency shall, under the direction of the Secretary 
of the Treasury, cause plates and dies to be engraved in the best 
manner to guard against counterfeits and fraudulent alterations, 
and shall have printed therefrom and numbered such quantities 
of such notes of the denominations of $5, $10, $20, $50, $100, 
$500, $1,000, $5,000, $10,000 as may be required to supply the 
Federal reserve banks. Such notes shall be in form and tend^ 
as directed by the Secretary of the Treasury under the provisions 



Digitized by CjOOQ IC 



tS9 

of fhig Act and shall bear the distinctiTe numbers of the sereral 
Federal reserve banks through which they are issued. (Sec. 16, 
Act Dec. 23, 1913, as amended by Sec. 3, Act Sept. 26, 1918; 40 
Stat L., 969.) 

§ 864. Besenre Banks as Collecting Agents for Member Banks. 
— ^Ereiy Federal reserve bank shall receive on deposit at par from 
member banks or from Federal reserve banks diecks and drafts 
drawn upon any of its depositors, and when remitted by a Federal 
reserve bank, checks and drafts drawn by any depositor in any 
other Federal reserve bank or member bank upon funds to the 
credit of said depositor in said reserve bank or member bank. 
Nothing herein contained shall be construed as prohibiting a mem- 
ber bank from charging its actual expense incurred in collecting 
and remitting funds, or for exchange sold to its patrons. The 
Federal Beserve Board shall, by rule, fix the charges to be col- 
lected by the member banks from its patrons whose checks are 
cleared through the Federal reserve bank and the charge which 
may be imposed for the service of clearing or collection rendered 
by the Federal reserve bank. (Sec. 16, Act Dec. 23, 1913.) 

Method of CoLLBonifO Bill of Lulduto Dbafts.— Drafts secured by 
bill of lading forwarded to a reserve iMmk for collection by one of 
its member banks may be credited upon receipt and when paid the 
sending bank may be charged interest at the published rate for the 
time the draft is outstanding pins the actual cost of ooUeotion. (In- 
formal Ruling of Board, Dec. 29, 1916.) 

§ 965. Transfer of Funds Anumg Beserve Banki— Soard As 
Clearing House for Beserve Banks^-Beserve Banks As Clearing 
Houses for Member Banks. — The Federal Beserve Board shall 
make and promulgate from time to time regulations governing 
the transfer of funds and charges therefor among Federal reserve 
banks and their branches, and may at its discretion exercise the 
functions of a clearing house for such Federal reserve banks, or 
maj designate a Federal reserve bank to exercise such functions, 
and may also require each such bank to exercise the functions of 
a clearing house tor its member banks. (Sec. 16, Act Dec. 
23, 1913.) 



Digitized by CjOOQ IC 



284 

BEGULATION J OF THE FEDERAL EESERVE BOAED, 
SERIES OF 1917. 

(Superseding Regulation J of 1916.) 

CHECK CLEARING AND COLL^OCTION. 

Section 16 of the Federal Reserve Act authorizes the Federal Re- 
serve Board to require each Federal Reserve Bank to exercise the 
functions of a clearing house for Its member banks, and Section 13 of 
the Federal Reserve Act, as amended by the act approved Jane 21, 
1917, authorizes each Federal Reserve Bank to receive from any 
nonmember bank or trust company, solely for the purposes of ex- 
change or of collection, deposits of current funds in lawful money. 
National bank notes. Federal reserve notes, checks, and drafts payable 
upon presentation, or maturing notes and bills, provided such non- 
member bank or trust company maintains with its Federal Reserve 
Bank a balance sufficient to oftset the item^ in transit held for its ac- 
count by the Federal Reserve Bank. 

In pursuance of the authority vested in it under these provisions of 
law, the Federal Reserve Board, desiring to affiord both to the public 
and to the various banks of the country a direct, expeditious, and 
economical system of check collection and settlement of balances, has 
arranged to have each Federal Reserve Bank exercise the functions 
of a clearing house for such of its member banks as desire to avail 
themselves of its privileges and for such State banks and trust com- 
t^nies as may maintain with the Federal Reserve Bank a balance 
sufficient to qualify it as a clearing member under the provisions. of 
Section 13. 

Each Federal Reserve Bank shall exercise the functions of a clear- 
ing house under Che following general terms and conditions: 

(1) Each Federal Reserve Bank will receive at par from its mem- 
ber banks and from nonmember banks in its district which have 
become clearing members, checks* drawn on all member and clearing 
member banks and on all other nonmember banks which agree to 
remit at par through the Federal Reserve Bank of their district. 

(2) Bach Federal Reserve Bank will receive at par from other 
Federal Reserve Banks and will receive at par from all member and 
clearing member banks, regardless of their location, for the credit of 

*A check is generally defined as a draft or order upon a bank or or- 
der upon a bank or banking house, purporting to be drawn upon a 
deposit of funds, for the payment at all events of a oertajn sum of 
money to a certain person therein named, or to him or his order, or 
to bearer^ and payable instantly on demand. 



Digitized by CjOOQ IC 



S85 

their accoQiiti with their reepective Federal Resenre Banks, cheeka 
drawn upon all member and clearing member banks of its district 
and upon all other nonmember banks of its district whose checks can 
be collected at par by the Federal Reserve Bank. The Federal Re- 
serve Banks will prepare a par list of all nonmember banks, to be 
revised from time to time, which will be furnished to menxber and 
clearing member banks. 

(3) Immediate credit entry upon receipt subject to final payment 
will be made for all such items upon the books of the Federal Reserve 
Bank at full face value, but the proceeds will not be counted as part 
of the minimum reserve nor become available to meet checks drawn 
until actually collected, in accordance vdth the best practice now pre- 
vailing. 

(4) Cheeks received by a Federal Reserve Bank on ita member or 
clearing member banks will be forwarded direct to such banks and 
will not be charged to their accounts until sufficient time has elapsed 
within which to receive advice of payment. 

(6) In the selection of collecting agents for handling checks on non- 
member banks, which have not become clearing members, member 
banks will be given the preference. 

(6) Under this plan each Federal Reserve Bank will receive at 
par from its member and clearing member banks checks on all mem- 
ber and clearing member banks and on all other nonmember banks 
whose checks can be collected at par by any Federal Reserve Bank. 
Member and clearing member banks will be required by the Federal 
Reserve Board to provide funds to cover at par all checks received 
from or for the account of their Federal Reserve Banks: Provided, 
however. That a member or clearing member bank may* ship currency 
or specie from its own vaults at the expense of its Federal Reserve 
Bank to cover any deficiency which may arise because of and only 
in the case of inability to provide itenm to offset checks received from 
or for the account of its Federal Reserve Bank.* 

(7) Section 19 of the Federal Reserve Act provides thatr— 

The required balance carried by a member bank with a Federal 
Reserve Bank may, under the regulations and subject) to such penalties 
as may be prescribed by the Federal Reserve Board, be checked against 
and withdrawn by such mentber bank for the purpose of meeting 
existing liahilities: Provided, however, That no bank shall at any 

*In accordance with instructions issued by the Federal Reserve 
Board on April 24, 1917, the various Federal Reserve Banks have is- 
sued circulars setting forth the conditions under which their respec- 
tive member banks may draw drafts on their Reserve Bank accounts 
payable with or through any other Federal Reserve Bank. 



Digitized by CjOOQ IC 



time make new loans or shall pay any dlTldends unless and until the 
total balance required by law is fully restored. 

It is manifest that items in process of collection can not lawfully 
be counted as part of the minimum reserve balance to be carried by 
a member bank with its Federal Reserve Bank. Therefore, should a 
member bank draw against such items the draft would be charged 
against its reserve balance if such balance were sufficient in amount 
to pay it; but any resulting impairment of reserve balances would 
be subject to all the penalties provided by the Act 

In as much as it is essential that the law in respect to the mainten- 
ance by member banks of the required minimum reserve balance 
shall be strictly complied with, the Federal Reserve Board, under 
authority vested in it by Section 19 of the Act, hereby prescribes as 
the penalty for any deficiency in reserves a sum equivalent to an 
interest charge on the amount of the deficiency of 2 per cent per 
annum above the ninety day discount rate of the Federal Reserve 
Bank of the district in which the member bank is located. The Board 
reserves the right to increase this penalty whenever conditions re- 
quire it 

For the purpose of keeping their reserve balances intact member 
banks may at all times have recourse to the rediscount facilities 
offered by their respective Federal Reserve Banks. 

(8) Each Federal Reserve Bank will determine by analysis the 
amounts of uncollected funds appearing on its books to the credit of 
each member bank. Such analysis will show the true status of the 
reserve held by the Federal Reserve Bank for each member bank and 
will enable it to apply the penalty for impairment of reserve. 

A schedule of the time required within which to collect checks will 
be furnished to each bank to enable it to determine the time at which 
any item sent its Federal Reserve Bank will be counted as reserve 
and become available to meet any checks drawn. 

(9) In handling items for member and clearing member banks, a 
Federal Reserve Bank will act as agent only. The Board will require 
that each member and clearing member bank authorize its Federal 
Reserve Bank to send checks for collection to banks on which checks 
are drawn, and, except for negligence, such Federal Reserve Bank 
will assume no liability. Any further requirements that the Board 
may deem necessary will be sent forth by the Federal Reserve Banks 
in their letters of instruction to their member and clearing member 
banks. Bach Federal Reserve Bank will also promulgate rules and 
regulations governing the details of its operations as a clearing house, 
such rules and regulations to be binding upon all member and non- 
mttmber banks which are clearing through the Federal Reserve Bank. 

(10) The cost of collecting and clearing checks must- necessarily be 



Digitized by CjOOQ IC 



287 

borne by the banks recelTing the benefit and in proportion to the 
service rendered. An accurate account will be kept by each reserve 
bank of the cost of performing this service and the FMeral Reserve 
Board will» by role, fix the charge, at so much per item, which may 
be imposed for the service of clearing or collection rendered by the 
reserve banks, as provided in Section 16 of the Federal Reserve Act 

MKUfiKo OF Pab CosLLfcnov, — It should be sufficiently clear that 
checks, even though oollectible at par and given immediate credit 
entry on the books of the depositing bank, are not funds immediately 
available to be drawn against, and, of course, this applies vdth equal 
force to each deposit account vdth a m^ember bank. Thus, if a customer 
deposits with his bank a number of checks, some of which it will take 
two, four, or six days to collect through a Federal Reserve Bank, it 
is obvious that he is entitled only to be given credit deferred by the 
length of time it takes to collect the items, or, if he asks for im- 
mediate credit in available funds, he should pay something for the 
privilege. 

However, as was heretofore stated, "The Federal Reserve Board has 
not yet laid down any rule as to what charges a bank may make 
against its customers, but there is no intention at all that a member 
bank shall collect its customers' checks at a loss to itself; that is to 
say, without some fee to cover cost of collection." 

The expression printed upon some checks, "Collectible at par through 
Federal Reserve Bank," means that the check is oollectible at full 
face value through the Federal Reserve Bank, but if it is desired to 
use a check as cash the element of time in transit must be paid for. 

Under the principles above enunciated, a member bank will be 
authorised to charge its customers the amount per item charged by 
the Federal Reserve Bank for collecting their checks, say 1^ or 2 
cents per item, plus an interest charge if funds are advanced before 
they have been collected. 

By providing that the Federal Reserve Banks shall act as clearing 
houses for all member banks, the Act in effect establishes 12 local 
points at which all checks can be centered and collected, and it is 
fully expected thereby to create a more efficient machine for check 
collections than has ever existed in the country before. The direct 
routing of items which it is expected to establish in connection with 
this plan, should very considerably reduce time in transit, and last, 
but not least, the actual cost of the service rendered should be less 
to the banks, and, hence, to their customers. (Statement of Board, 
July, 1916.) 

CouAonoN or Itbics on Nonmsmbeb Banks. — ^Understanding of the 
Board that agreement of a member bank to collect items on nonmem- 



Digitized by CjOOQ IC 



288 

ber bonks is yoluntary and tliat upon due notice to the Federal Re- 
serve Bank arrangements would no doubt be made to handle such 
items in some other way. The Board expects a member bank to pay 
items drawn against it when remitted by a Federal Reserve Bank. 
(Informal Ruling of Board* July 28, 1916.) 

Gold SETTLsiiSNT Fukd. — Under the power conferred upon the Board 
to exercise the functions of a clearing house for the reserve banks* 
provision has been made for the establishment of a gold clearance 
fund at Washington, D. C, for the purpose of effecting with as little 
delay and cost as possible settlements between reserve banks. 

Gold Ssitlemxitt Fuivd as RB8Ss;^«.~HQold kept in a clearing fund 
under the control of the Board m^y be counted by reserve banks de- 
positing such gold as part of their reserve against liabilities other 
than Federal reserve notes. 

The gold clearing fund may be kept by the board in the Treasury or 
one of the subtreasurles of the United States. (Opinion of Counsel of 
Board, ApHl 19, 1916.) 

Nbqohabilitt of Bnxs and Notes Made Payable "in Bxohanoe." — 
A bill or note made payable "in exchange^' is not payable "in money," 
and is, therefore, not negotiable. Federal Reserve Banks can not be 
required to receive checks and drafts drawn in this manner for collec- 
tion or credit (Opinion of Counsel of Board, Aug. 10, 1916.) 

§ 266. Deposits of Oold Coin and Oold Certillcates with Treas- 
urer by Federal Reserve Banks and Agents. — That the Secretary 
of the Treasury is hereby authorized and directed to receive de- 
posits of gold coin or of gold certificates with the Treasurer or any 
assistant treasurer of the United States when tendered by any 
Federal reserve bank or Federal reserve agent for credit to its 
or his account vrfth the Federal Reserve Board. The Secretary 
shall prescribe by regulation the form of receipt to be issued by 
the Treasurer or Assistant Treasurer to the Federal reserve bank 
or Federal reserve agent making the deposit^ and a duplicate of 
such receipt shall be delivered to the Federal Reserve Board by 
the Treasurer at Washington upon proper advices from, any as- 
sistant treasurer that duch deposit has been made. Deposits so 
made shall be held subject to the orders of the Federal Reserve 
Board and shall be payable in ^Id coin or gold certificates on 
the order of the Federal Reserve Board to any Federal reserve 



Digitized by CjOOQ IC 



289 

bank or Federal reserve agent at the Treasury or at the Snbtreach 
nry of the United States nearest the place of business of such 
Fed^al reserve bank or such Federal reserve agent: Provided, 
however. That any expense incurred in shipping gold to or from 
the Treasury or Subtreasuries in order to make such payments, 
or as a result of making such payments, shall be paid by the Fed- 
eral Beserve Board and assessed against the Federal reserve banks. 
The order used by the Federal Beserve Board in making such 
pajrments shaU be signed by tiie governor or vice governor, or 
such other oflScers or members as the board may by regulation 
prescribe. The form of such order shall be approved by the Sec- 
retary of the Treasury. 

The expenses necessarily incurred in carrying out these pro- 
visions, including the cost of the certificates or receipts issued 
for deposits received, and all expenses incident to the handling 
of such deposits shall be paid by the Federal Reserve Board and 
included in its assessments against the several Federal reserve 
banks. 

Qold deposits standing to the credit of any Federal reserve 
bank with the Federal Beserve Board shall, at the option of said 
bank, be coimted as part of the lawful reserve which it is re- 
quired to maintain against outstanding Federal reserve notes, 
or as a part of the reserve it is required to maintain against 
deposits. 

Nothing in this section shall be construed as amending section 
six of the Act of Miarch fourteenth, nineteen hundred, as amended 
by the Acts of March fourth, nineteen hundred and seven, March 
second, nineteen hundred and eleven^ and June twelfth, nineteen 
hundred and sixteen, nor shall the provisions of this section be 
construed to apply to the deposits made or to the receipts or cer- 
tificates issued under those Acts. (Sec. 8, Act June 21, 1917; 
40 Stat. L., 238; by which the above provisions were added to 
Sec. 16 of the Act Dec. 23, 1913.) 

§ 267. Deposit of Bonds by National Banks with Treasurer — 
Sepeal of Minimum Deposit Bequirements.— See § 54, page 74, 
Parti. 
19 



Digitized by CjOOQ IC 



290 

§ 268. Setirement of Hational Bank HotH Bale of Bonds to 
Besenre Banks.— See § 55, page 74, Part I. 



i. Federal Beserre Bank Notes— Siniilarity to National 
Bank Notes.-— The Federal reserre banks purchasing such bonds 
shall be permitted to take out an amount of drcidating notes equal 
to the par value of such bonds. 

Upon the deposit with the Treasurer of the United States of 
bonds so purchased, or any bonds with the circulating privilege 
acquired under section four of this Act, any Federal reserve bank 
making such deposit in the manner provided by existing law, shall 
be entitled to receive from the Comptroller of the Currency circu- 
lating notes in blank, registered and countersigned as provided by 
law, equal in amount to the par value of the bonds so deposited. 
Such notes shall be the obligations of the Federal reserve bank 
procuring the same, and shall be in form prescribed by the Secre- 
tary of the Treasury, and to the same tenor and affect as National 
bank notes now provided by law. They shall be issued and re- 
deemed under the same terms and conditions as National bank 
notes except that they shall not be limited to the amount of the 
capital stock of the Federal reserve bank issuing them. (Sec. 18, 
Act Dec. 23, 1913.) 

Far diBtinctlon between Federal Reserve Bank notes and Federal 
reserve notes see Informal Ruling of Board, Miay 12, 1916, under Sea 
16 of the Act, $256. 

§ 270. Bxchange by Beserve Banks of Two Per Cent. Bonds for 
Three Per Cent. Bonds and One Tear Hotes. — Upon application 
of any Federal reserve bank, approved by the Federal Beserve 
Board, the Secretary of the Treasury may issue, in exchange for 
United States two per centum gold bonds bearing the circulation 
privilege, but against which no circulation is outstanding, one- 
year gold notes of the United States without the circulation priv- 
ily, to an amount not to exceed one-half of the two per centum 
bonds so tendered for exchange, and thirty-year three per centum 
gold bonds without the circulation privilege for the remainder of 
the two per centum bonds so tendered : Provided, That at the time 



Digitized by CjOOQ IC 



291 

of such exchange the FMleral leserre bank obtaining such one-year 
gold notes shall enter into an obligation with the Secretary of the 
Treasury binding itself to purchase from the United States for 
gold at the maturity of such one-year notes, an amount equal to 
tiiose delivered in exchange for such bonds, if so requested by the 
Secretary, and at each maturity of one-year notes so purchased by 
such Federal reserve bank, to purchase from the United States 
such an amount of one-year notes as the Secretary may tender to 
such bank, not to exceed the amount issued to such bank in the 
first instance, in exchange for the two per centum United States 
gold bonds; said obligation to purchase at maturity such notes 
shall continue in force for a period not to exceed thirty years. 
(Sec. 18, Act Dec. 23, 1913.) 

ExcHAVGK OF 2 Peb Cxnt. U. 8. Bonds.— /That part of Sectiou 18 width 
provides that the Secretary of the Treasury may, upon application of 
any Federal Reserve Bank approved by the Board, issue in exchange 
for 2 per cent bonds one-year gold notes and 8 per cent bonds, the 
gold notes not to exceed one-half of the 2 per cent bonds offered tor 
exchange, becomes effective at once and not after two years from the 
passage of the Act, as is provided for other paragraphg of Section 18. 
(Opinion of Counsel of Board, Jan. 4, 1916.) 

Onk-Tkab Gold Notes. — ^The obligation of a Federal Reserve Bank to 
renew one-year gold notes which it has received in exchange for 
United States 2 per cent bonds can not be transferred to another 
Federal Reserve Bank. The obligation to renew is binding upon the 
original bank, at the option of the Secretary of the Treasury, for a 
period not to exceed 80 years, though such bank may enter Into a 
contract with another corporation or individual to buy such renewal 
notes from it when Issued. Nothing in the Act prevents the sale of 
one-year notes to a purchaser, who will be entitled to reoeive payment 
from the Qovemment at maturity. (Opiniofn of Counsel of Board, 
March 10, 1916.) 

§ 871. Issne of One Tear Three Per Cent Ctold Notes and Thirty 
Year Three Per Cent. Oold Bonds. — For the purpose of making 
the exchange herein provided for, the Secretary of the Treasury 
is authorized to issue at par Treasury notes in coupon or registered 
form as he may prescribe in denominations of one hundred dollars^ 
or any multiple thereof » bearing interest at the rate of three per 



Digitized by CjOOQ IC 



292 

centum per annnm, payable quarterly^ such. Tieaaniy notes to be 
payable not more than one year from the date of their iasue in 
gold coin of the present standard yalne, and to be exempt as to 
principal and interest from the payment of all taxes and duties of 
the United States except as proTided by this Act^ as well as from 
taxes in any form by or under State, municipal, or local authori- 
ties. And for the same purpose, the Secretary is authorized and 
empowered to issue United States gold bonds at par, bearing three 
per centum interest payable thirty years from date of issue, such 
bonds to be of the same general tenor and effect and to be issued 
under the same general terms and conditions as the United States 
three per centum bonds witiiout the circulation privil^^e now is- 
sued and outstanding. (Sec. 18, Act Dec. 23, 1913.) 

§ 278. Exchange of One Tear Notes for Thirty Tear Bonds. — 

Upon application of any Federal reserve bank, approved by the 
Federal Reserve Board, the Secretary may issue at par such three 
per centum bonds in exchange for the one-year gold notes herein 
provided for. (Sec. 18, Act approved Dec. 23, 1913.) 

§ 273. Definition of Demand and Time Deposits.— Demand de- 
posits within tiie meaning of this Act shall comprise all deposits 
payable within thirty days, and time deposits shall comprise all 
deposits payable after thirty days, and all savings accounts and 
certificates of deposit which are subject to not less than thirty days' 
notice before payment, and all postal savings deposits. (Sec. 19, 
Act Dec. 23, 1913, as amended by Sec. 10, Act approved June 
21, 1917.) 

Rbqulation D €ir BtoKSAL Rbskbvk Boabd, Sxbies of 1917: — 

TiMK DBPosnfs AND SAVINGS ACCOUNTS.— The statutory provisions 
are omitted to save repetition. 

TIMB DEPOSITS, OPEN AOOOUNTS. 

The temU "time deposits, open accounts" shaU be held to include aU 
accounts* not evidenced by certificates of deposit or savings pass 
books, in respect to which a written contract is entered into with the 
depositor at the time the deposit is made that neither the whole nor 



Digitized by CjOOQ IC 



S93 

any part of tnch depotlt may be withdrawn bj cheek or otherwiee, 
except on a given date or on written notice given hy the depoeitor a 
certain specified number of days in advance, in no caee less than 80 
days. 

aAvufoa AooouifTs. 

The term "eavlnga acoonnte" shall be held to include those aoconnts 
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 reoeipt must 
be presented to the bank whenever a deposit or withdrawal 
is made, and 
(5) The depositor may at any time be required by the bank to give 
notice of an Intended withdrawal not less than 80 days before 
a withdrawal is made. 

TDOB CBmWlOATEM OF DDOSIT. 

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 80 

days after the date of the deposit, or 
(5) After the lapse of a certain specified time subsequent to the date 

of the certificate, in no case less than 80 days, or 
(c) Upon written notice given a certain specified number of days, 

not less than 80 days before the date of repayment, and 
id) In all cases only upon presentation of the certificate at each 
withdrawal for proper indorsement or surrender. 

Tms CnmncATXB of Doosit Which Bbooms Patablb Wrranf 
Thibtt Days.— a certificate of deposit which, though originally pay- 
able in 60 or 90 days, and which, though originally a time deposit 
within the meaning of the regulations of the Federal Reserve Board, 
becomies a demand deposit when it becomes payable withiin 30 days. 
(Opinion of Counsel of Board, June 7, 1919.) 

Right of National Banks to Anvsmsc Savings Aooounts.— 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. Ck>n- 
gress having conferred on National banks the power to pay interest 
on time deposits, it is evident that the rli^t to advertise and solicit 
such savings accounts is a necessary incident to the eseroise of that 



Digitized by CjOOQ IC 



294 

power, and that no State law can Interfere with Iti ezerdae. (Opinkm 
of Counsel of Board, Feb. 24, 1915.) 

Savings Aocouhts as Tnq^ DEPosns.— SaTlngs accounts opened un- 
der regulations which do not require the presentation of the pass book 
on withdrawal of deposits, but which merely authorize the member 
bank to require the pres^itation of such book, are not sayings ac- 
counts within the definition of that term in Regulation D, series of 
1916, (Opinion of Counsel of Board, Oct 5, 1916.) 

Tun Deposits — Open Accounts. — ^In order to consider an open ac- 
count a time deposit under the provisions of Regulation D, the bank 
in which the deposit is made must require SO days' notice of an in- 
tended withdrawal. (Opinion of Ck>unsel of Board, Not. 18, 1916.) 

Rbsebve Against Tims Dbpositb. — ^If depositor is led to believe^ by 
advertisemient or printed rule, that savings deposits are not subject 
to the enforcement of 60-day notice before payment, then such de- 
posits take the higher rate of reserve. Notice may be waived as a 
matter of courtesy under the definite understanding that it may be 
applied at any time. (Informal Ruling of Board, July, 1915.) 

§ 274. Beterres Carried by Xember Banks Hot in Beferre or 
Central Besenre Cities. — Every bank> banking association, or 
trust company which is or which becomes a member of any Fed- 
eral reserve bank shall establish and maintain reserve balances 
with its Federal reserve bank as follows: 

(a) If not in a reserve or central reserve city, as now or here- 
after defined, it shall hold and maintain with the Federal re- 
serve bank of its district an actual net balance equal to not less 
than seven per centom of the aggregate amount of its demand 
deposits and three per centum of its time deposits. (Sec. 19, 
Act Dec. 23, 1913, as amended by Sec. 10, Act June 21, 1917; 40 
Stat L., 239.) 

Far form to be used in the computation of reserve see note to i 280, 
page 298. 

Member banks are now permitted to carry with their Federal Re- 
serve Bank the reserve heretofore required to be kept in their own 
vanlts. Section 7 of the act April 24, 1917» provides that no reserve 
need be kept against deposits of public moneys hj the United States 



Digitized by CjOOQ IC 



296 

In datlcnatod depotltarlM. This doet not indmde pottal taTlngi 
depotiti. 

Pnrx Feb Csnt Fuhd as Risiivs.— The 5 per cent redemption fund 
deposited with the Treasurer of the United States can not be counted 
as part of lawful reserve. (See Section 20 of act, page 800.) 

S 275. Beserres Carried by Kember Banks Located in Beserre 
(b) Cities. — If in a reserye city, as now or hereafter defined, it 
shall hold and maintain with the Federal reserve bank of its dis- 
trict an actual net balance equal to not less than ten per centum 
of the aggregate amount of its demand deposits and three per 
centum of its time deposits: Provided, however. That if located 
in the outlying districts of a reserve city or in territory added to 
such a city by the extension of its corporate charter, it may, upon 
the affirmative vote of five members of the Federal Beserve Board, 
hold and maintain the reserve balances specified in paragraph 
(a) hereof. (Sec. 19 of Act Dec. 23, 1913, as amended by Sec. 
10, Act June 21, 1917, and further by Sec. 4, Act Sept. 26, 1918; 
40 Stat. L., 970.) 

For form to be used in the computation of reserve see note to (1S0» 
page 298. 

RxsKBVB OF Banks in Outltino Distucts or Rxskbvs and CxNimAL 
Bssxivs CrnB8.^vrhe fktct that a bank Is located In what may have 
been declared by the Federal Reserve Board to be an outlying district 
of a central reserve dty does not of Itself entitle the bank to carry a 
lower reserve, but the Board should act on each case and determine 
what amount of reserve should be carried against demand deposits 
by each bank so located. (Opinion of Counsel of Board, October 19, 
1918.) 

§ 276. Beserres Carried by Kember Banks Located in Central 
Beserre Cities. — (c) If in a central reserve city, as now or here- 
after defined, it shall hold and maintain with the Federal reserve 
bank of its district an actual net balance equal to not less than 
thirteen per centum of the aggr^ate amount of its demand de- 
posits and three per centum of its time deposits : Provided, how^ 
ever. That if located in the outlying districts of a central reserve 
city or in territory added to sucb city by the extension of its 



Digitized by CjOOQ IC 



29< 

corporate charter, it may, upon the afflrmatiTe Tote of fiye mem- 
bers of the Federal Beserre Board, hold and maintain the reserre 
balances specified in paragraphs (a) or (b) thereof. (Sec. 19, 
Act Dec. 23, 1913, as amended by Sec. 10, Act June 21, 1917, 
and further by Sec. 4, Act Sept 26, 1918; 40 Stat L., 970.) 

For form to be used in the computation of reeenre see note to tl80» 
page 298. 

§ 277. Eligible Paper as Xetenre.— That part of section 19 of 
the Federal Beserve Act, as amended by Act Aug. 16, 1914, which 
provided that any Federal reserve bank may receive from the 
member banks as reserves not exceeding one-half of each install- 
ment, eligible paper as described in section 13, properly indorsed 
and acceptable to the said reserve bank, is repealed. (Act June 
21, 1917.) 

§ 278. limit of Deposit of Kember with Fon-Xember Bank 
— ^Kember as Agent of Hon-Kember Bank in Biseounting with 
Besenre Banks.— No member bank shall keep on deposit with any 
State bank or trust company which is not a member bank a sum 
in excess of ten per centum of its own paid-up capital and sur- 
plus. No member bank shall act as a medium or agent of a non- 
member bank in applying for or receiving discounts from a 
Federal reserve bank under the provisions of this Act, except by 
permission of the Federal Beserve Board. (Sec. 19, Act Dec. 23, 
1913, as amended by Act Aug. 15, 1914, and further by Sec. 10, 
Act June 21, 1917; 40 Stat L., 239.) 

Statb Bank Memiucbs. — ^This section applies also to State bank 
members. 

See Regulation H of Federal Reserve Board, Series of 1916, under 
Section 9 of the Act regarding membership of State banks and trust 
companies. 

EbcoBssrinB Loans.— Law provides that "all deposits of a National 
bank with nonmember banks which are in excess of 10 per cent of its 
Capital and surplus are to be reported as excessive loans." Comp- 
troller has no choice but to enforce this requirement (Informal 
Ruling of Board, June 16, 1915.) 



Digitized by CjOOQ IC 



297 

§ 879. Withdrawal of Bequired Beserret— Penaltiet.— The re- 
quired balance carried by a member bank with a Federal reserve 
bank may^ under the r^ulations and subject to such penalties 
as may be prescribed by the Federal Beserre Board, be checked 
against and withdrawn by such member bank for the purpose of 
meeting existing liabilities: Provided, however. That no bank 
shall at any time make new loans or shall pay any dividends un- 
less and until the total balance required by law is fully restored. 
(Sec. 19, Act Dec. 23, 1913, as amended by Act Aug. 16, 1914, 
and further by Sec. 10, Act June 21, 1917; 40 Stat. L., 239.) 

§ 880. Caleulation of Betenres.— In estimating the balances re- 
quired by this Act, the net difference of amounts due to and from 
other banks shall be taken as the basis for ascertaining the de- 
posits against which required balances with Federal reserve banks 
shall be determined. (Sec 19, Act Dec. 23, 1913, as amended 
by Act Aug. 16, 1914, and further by Sec. 10, Act June 21, 1917; 
40 Stal Ix, 240.) 

RjHnmB or Bake With BmuroHM.— Reserve to be uaintained by 
a bank having branches should be based upon the balance of both 
the parent bank and the branches^ Coital-stock subscriptions and 
dividends should be treated in the same manner. It as a matter of 
bookkeeping, banks desire to cany separate checking accounts, there 
Is no objection. (Informal Ruling of Board, May 22, 1915.) 

GoMFUTAnoar or RmivM.— Under Section 19 as amended banks 
are permitted to count as reserve only actual CiOances carried with 
a Federal Reserve Bank. In estimating the amount against which 
reserve must be carried they are permitted to deduct balances due 
from banks from balances due to banks and to carry reserve only 
against the net balance due to banks and against other deposit 
liabUmes. (Page 614» Aug., 1917, BuUetin.) 

QovDifMSHT Deposits. Rssebves Against.— Under the provisions of 
Section 7 of the act H^proved April 24, 1917, National banks and 
member banks are not required to maintaip reserves against Oovem- 
ment deposits other than postal savings deposits, regardless of the 
source of the funds deposited. This section, however, does not apply 
to Federal Reserve Banks, (Opinion of Oounsel of Board, Msy ^ 
1117.) 



Digitized by CjOOQ IC 



lUuEBfis, DBDuonoHfl iH DnBMiiixiio.— ^iomber IwBki In deter- 
mining the amount asnintt liiidi resenree must be Gtrried* nay 
deduct ftll GoTemment deposits, except postal saTings deposits, from 
the amount of gross demand deposits, and may deduct from the 
amount of balances due to other banks the amount of balances due 
from ether banks, and may include in the amount due from banks 
checks drawn on banks located in the same place and exchanges for 
clearing houses. The law, however, does not permit member banks 
to deduct diecks on other banks located in the same place or ex- 
changes for clearing houses from gross demand d^;M>sit8, nor does it 
permit cash on hand to be deducted from gross demand deposits. 
(Opinion of Counsel of Board, July 19, 1917.) 

Dnosns Wira a Tbomal Rxsnvi Bakk noM raft Satihos Dkpabiv 
icBifT or A Tbust Oompakt Mbmrwi Bahk to Gouirr As Resuvb.— A 
member bank which operates both a savings departnkent and a com- 
mercial banking department may properly deposit funds out of its 
ssTings department with the Federal Reserve Bank to count as reserve 
against its savings deposits even though under the terms of the 
State law such a deposit with the Federal Reserve Bank is not subject 
to any claim by the Federal Reserve Bank against the member bank 
itself as distinct from the savings department (Opinion of Counsel 
of Board, Itfay 29, 1919.) 

FOBM lOB COMFDTATIOH OF RXSOV^— ^ 

(X>MPUTATION OF RBSBRVB TO BB CARRIED WITH THV 
FDDBRAL RBSBRVB BANKS BT NATIONAL BANKa 

DIKA2ni mPOSITS. 

a. Deposits (including Dividends unpaid), other 
than United States (government deposits, pay- 
able within thirty days , |..«....«^ 

S. Balances due to banks, other than 

Federal Reserve Bank I 

t. (Amount due to Federal Reserve 

Bank deferred credits I 

4. Cashier's Checks on own Bank ouIp 

standing ^. ..$ •• 

5. CSertifled Chedn outstanding | 

TOTAL DUB TO BANKS (Items 

S, 8. 4 and 6) 9 •m 



Digitized by CjOOQ IC 



299 



6. Balaacef due from bankf other than 

Federal Reeenre Bank and foreign 

banks I 

7. Itenw with Federal Reaenre Bank in 
proceea of collection u $ 

8. Checks on other banks in same place.. $ 

9. Exchange for clearing house | 

TOTAL DBDUCTIONS (ItenMl 6, 

7, 8 and 9) |. 

10. Net Balance due to banks^.^ 

U. TOTAL DBlfAND DBP0SIT8 
(Itenw 1 and 10) 

TIMB DBPOSITa 

12. SaTlngs Accounts (subject to not leas 

than 30 days' notice before payment) |. 

18. Certificates of deposit (subject to not 
less than 80 days' notice before pay- 
ment) |. 

14. Other deposits payable only after 80 

days |. 

15. Postal Savings deposits I. 

16. TOTAL TIMB DBPOSITS (Itema 

12, 18, 14 and 15) 

RBSBRVB RBQUIRBD. 

Banks in Central Reaenre Cities, 18%; 

Resenre Cities, 10%; elsewhere^ 7% 

of Demand deposits 

(Item 1) .V •• 

8% of time deposits (Item 16) |. 

TOTAL RBSBRVB to be maintained 
with Federal Reeenre Bank 



None. — ^^Balances due to all banks other than Federal Reeenre Bank," 
(Item 2 Demand Deposits) should Include balances due to foreign 
banks. 

* Should the aggregate "due from banks" (Items 6, 7, 8 and 9) ex- 
ceed the aggregate "due to banks" {Iteaxm 2, 8, 4 and 5), both items 
must be omitted from the calculation. 



Digitized by CjOOQ IC 



800 

§ 281. Xembenhip of Bkiiki Looated in Vaitod Stetoi but 
Outside of Oontinental ITnited States.— National banks^ or banks 
organized under local laws^ located in Alaska or in a dep^idenqr 
or insular possession or any part of the TTnited States outside the 
continental United States may remain non-member banks, and 
shall in that event maintain reserves and comply with all the 
conditions now provided by law regulating them; or said banks 
may, with the consent of the Beserve Board, become member banks 
of any one of the reserve districts, and shall in that event take 
stock, maintain reserves, and be subject to all the other provisions 
of this Act. (Sec. 19, Act Dec. 23, 1913, as amended by Act 
Aug. 15, 1914^ and further by Sec. 10, Act June 21, 1917; 40 
Stat. L., 240.) 



I. Five Per Cent. Bedemption Fund As Beserre.— So much 
of sections two and three of the Act of June twentieth, eighteen 
hundred and seventy-four, entitled ''An Act fixing the amount of 
United States notes, providing for a redistribution of the National 
bank currency, and for other purposes,'^ as provides that the fund 
deposited by any National banking association with the Treasurer 
of the United States for the redemption of its notes shall be 
counted as a part of its lawful reserve as provided in the Act afore- 
said, is hereby repealed. And from and after the passage of this 
Act such fund of five per centum shall in no case be counted by 
any National banking association as a part of its lawful reserve. 
(Sec. 20, Act Dec. 23, 1913.) 

§ 283. Appointment of Examiners— Szaminations of Xember 
Banks.— See § 131 and § 217 ante. 

§ 284. Salaries of Ezaminem— Sxpense of Bramination. — 
See § 131, page 129. 

§ 285. Special Examination of Xembers by Beser?e Banks. — 
— In addition to the examinations made and conducted by the 
Comptroller of the Currency, every Federal reserve bank may, 
with the approval of the Federal reserve agent or the Federal 



Digitized by CjOOQ IC 



301 

Beserre Board, provide for special examination of member banks 
within its district The expense of such examinations shall be 
borne by the bank examined. Such examinations shall be so 
conducted as to inform the Federal reserre bank of the condition 
of its member banks and of the lines of credit which are being 
extended by them. Every Federal reserve bank shall at all times 
furnish to the Federal Reserve Board such information as may 
be demanded concerning the condition of any member bank within 
the district of the said Federal reserve bank, (Sec 21, Act Dec. 
23, 1913.) 

See Regulation H of Federal Reserve Board* Series of 1917, under 
Section 9 of the Act 

§ 886. limitation of Visitorial Powen.— No bank shall be 
subject to any visitorial powers other than such as are authorized 
by law, or vested in the courts of justice or such as shall be or shall 
have been exercised or directed by Congress, or by either House 
thereof or by any committee of Congress or of either House duly 
authorized. (Sec. 21, Act Dec. 23, 1913.) 

See Regulation H of Federal Reeerve Board, Series of 1917, under 
Section 9 of the Act 

§ 287. Examination of Beserve Banks by Board.- The Federal 
Beserve Board shall, at least once each year, order an examination 
of each Federal reserve bank, and upon joint application of ten 
member banks the Federal Beserve Board shall order a special 
examination and report of the condition of any Federal reserve 
bank. (Sec. 21, Act Dec. 23, 1913.) 

BxAMiNATioNs OF Fedbsul Rxsibvb Baku.— Board declines to permit 
clearlng4iouse examiners or any examiners representing a member 
bank or group of member banks to examine a Federal Reserve Bank. 
(Informal Ruling of Board, Sept 9, 1916.); 

§ 288. Fees, Commissions, Gifts, etc., Prohibited to Offlcers, 
Employees, eto.| of Xember Banks, and to Bank Examiners — 
Exoeptions. — (a) No member bank and no officer, director, or em« 



Digitized by CjOOQ IC 



302 

ployee thereof fihall hereafter make any loan or grant any gratuity 
to any bank examiner. Any bank (^Bcer, director^ or employee 
violating this proyision shall be deemed guilty of a misdemeanor 
and shall be imprisoned not exceeding one year or fined not more 
than $5^000^ or both; and may be fined a further sum equal to 
the money so loaned or gratuity given. 

Any examiner accepting a loan or gratuity from any bank ex- 
amined by him or from an officer, director, or empbyee thereof 
shall be deemed guilty of a misdemeanor and shall be imprisoned 
one year or fined not more than ^^^OOO, or both, and may be 
fined a further sum equal to the money so loaned or gratuity 
given, and shall forever thereafter be disqualified from holdiog 
office as a national bank examiner. 

(b) No National bank examiner shall perform any other service 
for compensation while holding such office for any bank or officer, 
director, or employee thereof. 

No examiner, public or private, shall disclose the names of 
borrowers or the collateral for loans of a member bank to other 
than the proper officers of such bank without first having obtained 
the express permission in writing from the Comptroller of the 
Currency, or from the board of directors of such bank, except 
when ordered to do so by a court of competent jurisdiction, or by 
direction of the Congress of the United States, or of either House 
thereof, or any committee of Congress, or of either House duly 
authorized. Any bank examiner violating the provisions of this 
subsection shall be imprisoned not more than one year or fined 
not more than $6,000, or both. 

(c) Except as herein provided, any officer, director, employee, 
or attorney of a member bank who stipulates for or recaves op 
consents or agrees to receive any fee, commission, gift, or thing 
of value from any person, firm, or corporation, for procuring or 
endeavoring to procure for such person, firm, or corporaticm, or 
for any other person, firm or corporation, any loan from or the 
purchase or discount of any paper, note, draft, check, or bill of 
exchange by such member bank shall be deemed guilty of a mis- 
demeanor and shall be imprisoned not more than one year or 
fined not more than $5,000, or botilu 



Digitized by CjOOQ IC 



808 

(d) Any member bank may contract for^ or purchase from 
any of its directors or from any firm of which any of its directors 
is a member, any securities or other property, when (and not 
otherwise) such purchase is made in the regular course of busi- 
ness upon terms not less favorable to the bank than those offered 
to others, or when such purchase is authorized by a majority of 
the board of directors not interested in the sale of such securities 
or property, such authority to be evidenced by the afSrmative vote 
or written assent of sudi directors: Provided, however. That 
when any director, or firm of which any director is a member, 
acting for or on behalf of others, sells securities or other properly 
to a member bank, the Federal Beserve Board by regulation may> 
in any or all cases, require a full disclosure to be made, on forms 
to be prescribed by it, of all commissions or other considerations 
received, and whenever such director or firm, acting in his or its 
own behalf, sells securities or other properly to the bank the Fed- 
eral Beserve Board, by r^ulation, may require a full disclosure 
of all profit realized from such sale. 

Any member bank may sell securities or other property to any 
of its directors, or to a firm of which any of its directors is a 
member, in the regular course of business on terms not more favor- 
able to such director or firm than those offered to others, or when 
such sale is authorized by a majority of the board of directors of 
a member bank to be evidenced by their affirmative vote or writ- 
ten assent: Provided, however. That nothing in this subsection 
contained shall be construed as authorizing member banks to pur« 
chase or sell securities or other property which such banks are not 
otherwise authorized by law to purchase or sell. 

(e) No member bank shall pay to any director, officer, at- 
torney, or employee a greater rate of interest on the deposits of 
such director, officer, attorney, or employee than that paid to 
other depositors on similar deposits wit^ such member bank. 

(f) If the directors or officers of any member bank shall 
knowingly violate or permit any of the agents, officers, or direc* 
tors of any member bank to violate any of the provisions of this 
section or regulations of the board made under authority thereof, 
every director and officer participating in or assenting to such 



Digitized by CjOOQ IC 



804 

violation shall be held liable in his personal and indindoal capacity 
for all damages which the member bank, its shareholders, or any 
other persons shall have sustained in consequence of such violation. 
(See. 22, Act Dec. 23, 1913, as amended by Sec. 11, Act June 21, 
1917, and further by Sec. 6, Act Sept 26, 1918; 40 Stat. L., 970.) 

IlflXBPSETATION OF SECTION 22 QT THX FEDKBLAL RxaiOVB AOT. — ADJ 

violation of the provisions of Section 22 of the Federal Reserve Act by 
officers, directors, or employes 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 provision of this section. Whether or not 
Si contemplated transaction comes within the prohibited part of this 
section is a question which should be determined by the counsel for 
the bank in each case. (Opinions of Ck>unsel of Board, April 9, 1915, 
and Aug. 14, 1917.) 

§ 289. liability of Stookholders of Fational Banks.— See § 46, 
page 67, Part I. 

§ 290. Loans on Beal Estate hj Fational Banks.— See § 18, 
page 23, Fart I. 

§ 291. Foreign Branches of Fational Banks. — Any National 
banking association possessing a capital and surplus of $1,000,000 
or more may file application with the Federal Beserve Board for 
permission to exercise, upon such conditions and tinder such r^u- 
lations as may be prescribed by the said board, either or both of 
the following powers : 

First: To establish branches in foreign countries or depen- 
dencies or insular possessions of the United States for the further- 
ance of the foreign commerce of the TTnited States, and to act if 
required to do so as fiscal agents of the TTnited States. (See. 26, 
Act Dec. 23, 1913, as amended by Act Sept. 7, 1916; 40 Stat 
L., 756.) 

Bbanch Baitks.— a foreign branch established by a National bank 
is not an ind^pandant corporation, and the creditors of the branch are 



Digitized by CjOOQ IC 



805 

general credlton of the ptrent bank. (Opinion of Counsel of Board, 
Feb. 8, 1917.) 

Real Bstatk Loaits bt Fobkion BsAiroHie.— A branch bank of a 
National bank established in a foreign oountrj, under authority of 
Section 25, may make loans on real estate located within 100 miles of 
the branch, prorided such loans conform in all other respects to the 
proYlsions of Section 24. (Opinion of Counsel of Board, Not. 17, 
il917.) 

RKSsavxs or Fobkion Bbanohbs. — Section 19 of the Federal Reserve 
Act, which prescribes reserves to be carried by member banks, does 
not apply to foreign branches of National banks; but, under the 
special power vested in the Federal Reserve Board by Section 26 to 
prescribe conditions and regulatloms under which foreign branches 
may be established, it is authorized to prescribe the amount, character, 
and location of reserve to be maintained against deposits received in 
such branches. (Opinion of Counsel of Board, October Iji 1918.) 

§ 282. Power of National Banks to Take Stock in Corporations 
Transacting Foreign Business. — Second. To invest an amount 
not exceeding in the aggregate ten per centum of its paid-in 
capital stock and surplus in the stock of one or more banks or 
corporations chartered or incorporated imder the laws of the United 
States or of any State thereof, and principally engaged in inter- 
national or foreign banking, or banking in a dependency or insular 
possession of the United States either directly or tiirough the 
agency, ownership, or control of local institutions in foreign coun- 
tries, or in such dependencies or insular possessions : 

Until January 1, 1921, any National banking association, with- 
out r^ard to the amount of its capital and surplus, may file ap- 
plication with the Federal Beserve Board for permission, upon such 
conditions and tinder such regulations as may be prescribed by said 
board, to invest an amount not exceeding in tiie aggregate five 
per centum of its paid-in capital and surplus in the stock of one 
or more corporations chartered or incorporated tmder the laws of 
the United States or of any State thereof and, regardless of its loca- 
tion, principally engaged in such phases of international or for- 
eign financial operations as may be necessary to facilitate the ex- 
port of goods, wares, or merchandise from the United States or 
20 



Digitized by CjOOQ IC 



806 

any of its dependencies or insular possessions to any foreign coun- 
try: Provided, however. That in no event shall the total rnyesi- 
ments authorized by this secticm by any one National Bank exceed 
ten per centum of its capital and surplus. 

Such application shall specify the name and capital of the 
banking association filing it> the powers applied for, and the 
place or places where the banking or financial operations proposed 
are to be carried on. The Federal Beserve Board shall have 
power to approve or to reject such application in whole or in part 
if for any reason the granting of such application is deemed in- 
ezpedienty and shall also have power from time to time to increase 
or decrease the number of places where such banking operations 
may be carried on. (Sec. 25, Act Dec. 23, 191Z, as amended by 
Act Sept 7, 1916, and further by Act, Sept 17, 1919; 41 Stat 
L.,-.) 



i. Beports and Examination of Foreign Branches, Etc. — 

Every National banking association operating foreign branches 
shall be required to furnish information concerning the condition 
of such branches to the Comptroller of the Currency upon de- 
mand, and every member bank investing in the capital stock of 
banks or corporations described above shall be required to fur- 
nish information concerning the condition of such banks or cor- 
porations to the Federal Beserve Board upon demand, and the 
Federal Beserve Board may order special examinations of the said 
branches, banks, or corporations at such time or times as it may 
deem best (Sec. 1^5, Act Dec. 23, 1913, as amended by Act 
Sept 7, 1916, and further by Act Sept 17, 1919; 41 Stat L., — .) 

§ 294. Powers of Board Orer Corporations in Whioh Fatlonal 
Banks Own Stock. — Before any National bank shall be permit- 
ted to purchase stock in any such corporation the said corporation 
shall enter into an agreement or undertaking with the Federal 
Beserve Board to restrict its operations or conduct its business in 
such manner or under such limitations and restrictions as the 
said board may prescribe for the place or places wherein such 
business is to be conducted. If at any time the Federal Beserve 



Digitized by CjOOQ IC 



307 

Board shall ascertain that the r^g^tions prescribed by it are not 
being complied with, said board is hereby authorized and em« 
powered to institute an inyestigation of the matter and to send 
for persons and papers, subpoena witnesses, and administer oaths 
in order to satisfy itself as to the actual nature of the transactions 
referred to. Should such inyestigation result in establishing the 
failure of the corporation in question, or of the National bank 
or banks which may be stockholders therein, to comply with the 
r^ulations laid down by the said Federal Beserve Board, such 
National banks may be required to dispose of stock holdings in 
the said corporation upon reasonable notice. (Sec. 25, Act Dec* 
23, 1913, as amended by Act Sept. 7, 1916; 39 Stat L., 755.) 

§ 295. Aeoounts of Foreign Bhuiohes.— Brery such National 
banking association shall conduct the accounts of each foreign 
branch independently of the accounts of other foreign branches 
established by it and of its home office, and shall at the end of 
each fiscal period transfer to its general ledger the profit or loss 
accrued at each branch as a separate item. (Sec. 25, A(^ Dec. 23, 
1913, as amended by Act Sept. 7, 1916; 39 Stat. L., 756.) 

§ 296. Ezoeptlon to Prohibitioni of Clayton Aet.— Any di- 
rector or other o£Scer, agent, or employee of any member bank 
may, with the approval of the Federal Reserve Board, be a director 
or other officer, agent, or employee of any such bank or corporation 
above mentioned in the capital stock of which such member bank 
shall have invested as hereinbefore provided, without being subject 
to the provisions of section eight of the Act approved October 
fifteenth, nineteen hundred and fourteen, entitled ''An Act to sup- 
plement existing laws against imlawful restraints and monopolies, 
and for other purposes.^^ (Sec. 25, Act Dec. 23, 1913, as amended 
by Act Sept 7, 1916; 39 Stet L., 756.) 

§ 297. Banking Corporationf Authorized to do Foreign Bank- 
ing Buiineii (fhe Edge Bill).— Sec. 25 (a). Corporations to be 
organized for the purpose of engaging in iutemational or foreign 
banking or other international or foreign financial operations, or 



Digitized by CjOOQ IC 



808 

in banking or other financial operations in a dependency or in- 
sular poBseesion of the TTnited States, either directly or through 
the agency, ownership, or control of local institations in foreign 
countries, or in such dependencies or insular possessions as pro- 
vided by this section, and to act when required by the Secretary 
of the Treasury as fiscal agents of the TTnited States, may be 
formed by any number of natural persons, not less in any case 
than five. 

Such persons shall enter into articles of association which shall 
specify in general terms the objects for which the association is 
formed and may contain any other provisions not inconsistent 
with law which the association may see fit to adopt for the regula- 
tion of its business and the conduct of its affairs. 

Such articles of association shall be signed by all of the persons 
intending to participate in the organization of the corporation and, 
thereafter, shall be forwarded to the Federal Beserve Board and 
shall be filed and preserved in its office. The persons signing the 
said articles of association shall, under their hands, make an or- 
ganization certificate which shall specifically state: 

First. The name assumed by such corporation, which shall be 
subject to the approval of the Federal Beserve Board. 

Second. The place or places where its operations are to be car- 
ried on. 

Third. The place in the United States where its home office is to 
be located. 

Fourth. The amount of its capital stock and the number of shares 
into which the same shall be divided. 

Fifth. The names and places of business or residence of the per- 
sons executing the certificate and the number of shares to which 
each has subscribed. 

Sixth. The fact that the certificate is made to enable the persons 
subscribing the same, and all other persons, firms, companies, and 
corporations, who or which may thereafter subscribe to or purchase 
shares of the capital stock of such corporation, to avail themselves 
of the advantages of this section. 

The persons signing the organization certificate shall duly ac- 
knowledge the execution thereof before a judge of some court of 



Digitized by CjOOQ IC 



309 

record or notary public^ who shall certify QiiBteto under the eeal of 
such court or notary^ and thereafter the certificate shall be for- 
warded to the Federal Beeerve Board to be filed and preserved in 
its office. Upon duly making and filing articles of association 
and an organization certificate, and after the Federal Beserve 
Board has approyed the same and issued a permit to begin busi- 
ness, the association shall become and be a body corporate, and as 
such and in the name designated therein shall have power to adopt 
and use a corporate seal, which may be changed at the pleasure of 
its board of directors; to have succession for a period of twenfy 
years unless sooner dissolved by the act of the shareholders own« 
ing two-thirds of the stock or by an Act of Congress or unless its 
franchises become forfeited by some violation of law ; to make con- 
tracts; to sue and be sued, complain, and defend in any court of 
law or equity; to elect or appoint directors, all of whom shaU 
be citizens of the United States; and, by its board of directors, to 
appoint such officers and employees as may be deemed proper, 
define their authorily and duties, require bonds of them, and fix 
the penalty thereof, dismiss such officers or employees, or any 
thereof, at pleasure and appoint others to fill their places; to pre- 
scribe, by its board of directors, by-laws not inconsistent with law 
or with the regulations of the Federal Beserve Board regulating 
the manner in which its stock shall be transferred, its directors 
elected or appointed, its officers and employees appointed, its prop- 
erty transferred, and the privileges granted to it by law exerdsed 
and enjoyed. 

Each corporation so organized shall have power, under sudi rulea 
and regulations as the Federal Beserve Board may prescribe: 

(a) To purchase, seU, discount, and negotiate, with or without 
its indorsement or guaranty, notes, drafts, checks, bills of ex- 
change, acceptances, including bankers' acceptances, cable trans- 
fers, and other evidences of indebtedness; to purchase and sell, 
witii or without its indorsement or guaranty, securities, including 
the obligations of the United States or of any State thereof, but 
not including shares of stock in any corporation except as herein 
provided; to accept bills or drafts drawn upon it subject to such 
limitations and restrictions as the Federal Beserve Board may im- 



Digitized by CjOOQ IC 



310 

pose; to iflsue letters of credit; to purchase and sell coin, bullion, 
and exchange; to borrow and to lend numey; to issue debentures, 
bonds, and promissory notes under such gaieral conditions as to 
security and such limitations as the Federal Beserre Board may 
prescribe, but in no erent haying liabilities outstanding thereon 
at any one time exceeding ten times its capital stock and surplus; 
to receive deposits outside of the United States and to receive 
only such deposits within the United States as may be incidental 
to or for the purpose of carrying out transactions in foreign coun- 
tries or dependencies or insular possessions of the United States; 
and generally to exercise such powers as are incidental to the 
powers conferred by this Act or as may be usual, in the determina- 
tion of the Federal Beserve Board, in connection with the trans- 
action of the business of banking or other financial operations in 
the coimtries, colonies, dependencies, or possessions in which it 
shall transact business and not inconsistent with the powers spe- 
cifically granted herein. Nothing contained in this section shall 
be construed to prohibit the Federal Beserve Board, under its 
power to prescribe rules and regulations, from limiting the ag- 
gregate amoimt of liabilities of any or all classes incurred by the 
corporation and outstanding at any one time. Whenever a cor- 
poration organized under this section receives deposits in the 
United States authorized by this section it shall carry reserves 
in such amounts as the Federal Beserve Board may prescribe, but 
in no event less than ten per centum of its deposits. 

(b) To establish and maintain for the transaction of its busi- 
ness branches or agencies in foreign countries, their dependencies 
or colonies, and in the dependencies or insular possessions of the 
United States, at such places as may be approved by the Federal 
Beserve Board and under such rules and regulations as it may 
prescribe, including countries or dependencies not specified in the 
original organization certificate. 

(c) With the consent of the Federal Beserve Board to purchase 
and hold stock or other certificates of ownership in any other cor- 
poration organized under the provisions of this section, or under 
the laws of any foreign country or a colony or dependency tha:eof , 
or under the laws of any State, dependency, or insular possession 



Digitized by CjOOQ IC 



811 

of the United States, but not engaged in the gaieral business of 
buying or selling goods, wares, merchandise or commodities in 
the United States, and not transacting any business in the United 
States except such as in the judgment of the Federal Beserve 
Board may be incidental to its international or foreign business: 
Provided, however. That, except with the approval of the Federal 
Beserre Board, no corporation organized hereunder shall invest 
in any one corporation an amount in excess of ten per centum of 
its own capital and surplus, except in a corporation engaged in 
the business of banking, when fifteen per centum of its capital 
and surplus may be so invested: Provided further. That no cor« 
poration organized hereunder shall purchase, own, or hold stock 
or certificates of ownership in any other corporation organized 
hereunder or imder the laws of any State which is in substantial 
competition therewith, or which holds stock or certificates of own- 
ership in corporations which are in substantial competition with 
Ihe purchasing corporation* 

Nothing contained herein shall prevent corporations organized 
hereunder from purchasing and holding stock in any corporation 
where such purchase shall be necessary to prevent a loss upon a 
debt previously contracted in good faith ; and stocks so purchased 
or acquired in corporations organized under this section shall 
within six months from such purchase be sold or disposed of at 
public or private sale unless the time to so dispose of same is 
extended by the Federal Beserve Board. 

No corporation organized under this section shall carry on any 
part of its business in the United States except such as, in the 
judgment of the Federal Beserve Board, shall be incidental to its 
international or foreign business: And provided further. That 
except such as is incidental and preliminary to its organization 
no such corporation shall exercise any of the powers conferred by 
this section until it has been duly authorized by the Federal Be- 
serve Board to commence business as a corporation organized un- 
der the provisions of this section. 

No corporation organized under this section shall engage in 
commerce or trade in commodities except as specifically provided 
in this section, nor shall it either directiy or indirectly control or 



Digitized by CjOOQ IC 



818 

fix or attempt to control or fix the price of any sncK commodi- 
ties. The charter of any corporation violating this provision shall 
be subject to forfeiture in the manner hereinafter provided in this 
section. It shall be unlawful for any director^ officer^ agent, or 
employee of any such corporation to use or to conspire to use 
the credit, the funds, or the power of the corporation to fix or 
control the price of any such commodities, and any such person 
violating this provision shall be liable to a fine of not less than 
$1,000 and not exceeding $5,000 or imprisonment not less than 
one year and not exceeding five years, or both, in the discretion 
of the court 

No corporation shall be organized under the provisions of this 
section with a capital stock of less than $2,000,000, one-quarter 
of which must be paid in before the corporation may be author- 
ized to begin business, and the remainder of the capital stock of 
such corporation shall be paid in installments of at least ten per 
centum on the whole amount to which the corporation shall be 
limited as frequently as one installment at the end of each suc- 
ceeding two months from the time of the commencement of its 
business operations until the whole of the capital stock shall be 
paid in. The capital stock of any such corporation may be in- 
creased at any time, with the approval of the Federal Beserve 
Board, by a vote of two-thirds of its shareholders or by unani- 
mous consent in writing of the shareholders without a meeting 
and without a formal vote, but any such increase of capital shall 
be fully paid in within ninety days after such approval; and may 
be reduced in like manner, provided that in no event shall it be 
less than $2,000,000. No corporation, except as herein provided, 
shall during the time it shall continue its operations withdraw or 
permit to be withdrawn, either in the form of dividends or others 
wise, any portion of its capital Any National banking associa- 
tion may invest in the stock qf any corporation organized under 
the provisions of this section, but the aggregate amount of stodc 
held in all corporations engaged in business of the kind described 
in this section and in section twenty-five of the Federal Bes^ve 
Act as amended shall not exceed ten per centum of the subsorib* 
ing bank's capital and surplus. 



Digitized by CjOOQ IC 



813 

A majority of the ahares of the capital stock of any such cor- 
poration shall at all times be held and owned by citizens of the 
United States, by corporations the controlling interest in which is 
owned by citizens of the United States, chartered under the laws 
of the United States or of a State of the United States, or by 
firms or companies, the controlling interest in which is owned by 
citizens of the United States. The provisions of section eight of 
the act approved October 15, 1914, entitled ''An Act to supple- 
talent existing laws against unlawful restraints and monopolies, 
and for other purposes, as amended by the Acts of May 15, 1916, 
and September 7, 1916, shall be construed to apply to the direc- 
tors, other officers, agents, or employees of corporations organized 
under the provisions of this section: Provided, however. That 
nothing herein contained shall (1) prohibit any director or other 
officer, agent or employee of any member bank, who has procured 
the approval of the Federal Beserve Board from serving at the 
same time as director or other officer, agent or employee of any 
corporation organized under the provisions of this section in whose 
capital stock such member bank shall have invested; or (2) pro- 
hibit any director or other officer, agent, or employee of any cor- 
poration organized under the provisions of this section, who has 
procured the approval of the Federal Beserve Board, from serving 
at the same time as a director or other officer, agent or employee 
of any corporation in whose capital stock such first-mentioned 
corporation shall have invested under the provisions of this section. 

No member of the Federal Beserve Board shall be an officer or 
director of any corporation organized under the provisions of this 
section, or of any corporation engaged in similar business organ- 
ized under the laws of any State, nor hold stock in any such 
corporation, and before entering upon bis duties as a member of 
the Federal Beserve Board he shall certify under oath to the Sec- 
retary of the Treasury that he has complied with this requirement. 

Shareholders in any corporation organized imder the provisions 
of this section shall be liable for the amount of their unpaid stock 
subscriptions. No such corporation shall become a member of any 
Federal reserve bank. 

Should any corporation organized hereunder violate or fail to 



Digitized by CjOOQ IC 



3U 

comply with any of the proyirions of this section, all of its rights, 
privileges, and franchises derived herefrom may thereby be for- 
feited. Before any such corporation shall be declared dissolved, 
or its rights, privileges, and franchises forfeited, any noncompli- 
ance with, or violation of such laws shaU, however, be determined 
and adjudged by a court of the United States of competent juris- 
diction, in a suit brought for that purpose in the district or ter- 
ritory in which tiie home oflSce of such corporation is located, 
whidi suit shall be brought by the United States at the instance 
of the Federal Beserve Board or the Attorney GeneraL Upon 
adjudication of such noncompliance or riolation, each director 
and otScer who participated in, or assented to, the illegal act or 
acts, shall be liable in his personal or individual capacity for all 
damages which the said corporation shall have sustained in con- 
sequence thereof. No dissolution shall take away or impair any 
remedy against the corporation, its stockholders, or officers for 
any liability or penalty previously incurred. 

Any such corporation may go into voluntary liquidation and 
be closed by a vote of its shareholders owning two-thirds of its stock. 

Whenever the Federal Beserve Board shall become satisfied of 
the insolvency of any such corporation, it may appoint a receiver 
who shall take possession of all of the prop^ty and assets of the 
corporation and exercise the same rights, privileges, powers, and 
authority with respect thereto as are now exercised by receivers 
of National banks appointed by the Comptroller of the Currency 
of the United States: Provided, however. That the assets of the 
corporation subject to the laws of other coimtries or jurisdictions 
shall be dealt with in accordance with the terms of such laws. 

Every corporation organized under the provisions of this section 
shall hold a meeting of its stockholders annually upon a date fixed 
in its by-lawB, such meeting to be held at its home office in the 
United States. Every such corporation shall keep at its home 
office books containing the names of all stockholders thereof, and 
the names and addresses of the members of its board of directors, 
together with copies of all reports made by it to the Federal Be- 
serve Board. Every such corporation shall make reports to the 
Federal Beserve Board at such times and in such form as it may 



Digitized by CjOOQ IC 



815 

require; and shall be subject to examination once a jear and at 
such other times as may be deemed necessary by the Federal Be- 
serve Board by examiners appointed by the Federal Beserve Board, 
the cost of such examinations, including the compensation of the 
examiners, to be fixed by the Federal Beserve Board and to be 
paid by the corporation examined. 

The directors of any corporation organized under the provisions 
of this section may, semiannually, declare a dividend of so much of 
the net profits of the corporation as they shall judge expedient; 
but each corporation shall, before the declaration of a dividend, 
carry one-tenth of its net profits of the preceding half year to its 
surplus fund until the same shall amount to twenty per centum 
of its capital stock. 

Any corporation organized under the provisions of this section 
shall be subject to tax by the State within which its home ofiice is 
located in tiie same manner and to the same extent as other cor- 
porations organized imder the laws of that State which are trans- 
acting a similar character of business. The shares of stock in 
such corporation shall also be subject to tax as the personal prop- 
erly of the owners or holders thereof in the same manner and to 
the same extent as the shares of stock in similar State corporations. 

Any corporation organized under the provisions of this section 
may at any time within the two years next previous to the date of 
the expiration of its corporate existence, by a vote of the share- 
holders owning two-thirds of its stock, apply to the Federal Beserve 
Board for its approval to extend the period of its corporate exist- 
ence for a term of not more than twenty years, and upon certified 
approval of the Federal Beserve Board such corporation shall have 
its corporate existence for such extended period unless sooner dis- 
solved by the act of the shareholders owning two-thirds of its 
stock, or by an Act of Congress or unless its franchise becomes 
forfeited by some violation of law. 

Any bank or banking institution, principally engaged in foreign 
business, incorporated by special law of any State or of the United 
States or organized under the general laws of any State or of the 
United States and having an unimpaired capital sufficient to en- 
title it to become a corporation under the provisi<ms of this sec- 



Digitized by CjOOQ IC 



316 

tion may, by the vote of the shareholders owning not less than 
two-thirds of the capital stock of such bank or banking associa- 
tion, with the approval of the Federal Reserve Board, be con- 
verted into a Federal corporation of the kind authorized by this 
section with any name approved by the Federal Reserve Board: 
Provided, however. That said conversion shall not be in contra- 
vention of the State law. In such case the articles of association 
and organization certificate may be executed by a majority of the 
directors of the bank or banking institution, and the certificate 
shall declare that the owners of at least two-thirds of the capital 
stock have authorized the directors to make such certificate and 
to change or convert the bank or banking institution into a Fed- 
eral corporation. A majority of the directors, after executing 
the articles of association and the organization certificate, shall 
have power to execute all other papers and to do whatever may 
be required to make its organization perfect and complete as a 
Federal corporation. The shares of any such corporation may 
continue to be for the same amount each as they were before the 
conversion, and the directors may continue to be directors of the 
corporation until others are elected or appointed in accordance 
with the provisions of this section. When the Federal Reserve 
Board has given to such corporation a certificate that the pro- 
visions of this section have been complied with, such corporation 
and all its stockholders, officers, and employees, shall have the 
same powers and privileges, and shall be subject to the same du- 
ties, liabilities, and regulations, in all respects, as shall have been 
prescribed by this section for corporations originally organized 
hereunder. 

Every officer, director, clerk, employee, or agent of any cor- 
poration organized under this section who embezzles, abstracts, or 
willfully misapplies any of the moneys, funds, credits, securities, 
evidences of indebtedness or assets of any character of such cor- 
poration; or who, without authority from the directors, issues or 
puts forth any certificate of deposit, draws any order or bill of 
exchange, makes any acceptance, assigns any note, bond, debenture, 
draft, bill of exchange, mortgage, judgment, or decree; or who 
makes any false entry in any book, report, or statement of such 



Digitized by CjOOQ IC 



817 

oorporation with intent^ in either case, to injure or defraud such 
corporation or any other company, body politic or corporate, or 
any individual person, or to deceive any officer of such corpora- 
tion, the Federal Beserve Board, or any agent or examiner ap- 
pointed to examine the affairs of any such corporation; and every 
receiver of any such corporation and every clerk or employee of 
such receiver who shall embezzle, abstract, or willfully misapply 
or wrongfully convert to his own use any moneys, funds, credits, 
or assets of any character which may come into his possession or 
under his control in the execution of his trust or the performance 
of the duties of his employment; and every such receiver or clerk 
or employee of such receiver who shall, with intent to injure or 
defraud any person, body politic or corporate, or to deceive or 
mislead the Federal Beserve Board, or any agent or examiner ap- 
pointed to examine the affairs of such receiver, shall make any 
false entry in any book, report, or record of any matter con- 
nected with the duties of such receiver; and every person who 
with like intent aids or abets any officer, director, clerk, employee, 
or agent of any corporation organized under this section, or re- 
ceiver or derk or employee of such receiver as aforesaid in any 
violation of this section, shall upon conviction thereof be impris- 
oned for not less than two years nor more than ten years, and may 
also be fined not more than $5,000, in the discretion of the court. 
Whoever being connected in any capacity with any corporation 
organized imder this section represents in any way that the United 
States is liable for the payment of any bond or other obligation, 
or the interest thereon, issued or incurred by any corporation or- 
ganized hereunder, or that the United States incurs any liability 
in respect of any act or omission of the corporation, shall be pun- 
ished by a fine of not more than $10,000 and by imprisonment 
for not more than five years. (Act approved December 24, 1919; 
41 Stat L., —.X 



Digitized by CjOOQ IC 



318 

BEGULATION K OP FEDEBAL BESERVE BOARD. 
(Series of 1920.) 

I. Obqanisation. 

Any number of natural persons, not less in any case than five, may 
form a Corporation* under the provisions of Section 26 (a) for the 
purpose of engaging in international or foreign banMng or other in- 
ternational or foreign financial operations or in banlfing or other 
financial operations in a dependency or insular possession of the United 
States either directly or through the agency, ownership, or control 
of local institutions in foreign countries or in such dependencies 
or insular possessions. 

II. AanoLBs of Assooiatioii. 
Any persons desiring to organize a corporation for any of the pur- 
poses defined in Section 25 (a) shall enter into ariidee of association' 
(see Federal Reserve Board Form 151 which is suggested as a satis- 
factory form of articles of association) which shall specify in, general 
terms the objects for which the Corporation is formed, and may 
contain any other provisions not inconsistent with law which the 
Corporation may see fit to adopt for the regulation of its business 
and the conduct of its affairs. The articles of association shall be 
signed by each person intending to participate in the organization 
of the Corporation and wh^m signed shall be forwarded to the Federal 
Reserve Board in whose office they shall be filed. 

III. Obqanization Cebtifioatb. 

All of the persons signing the articles of association shall under 
their hands make an organization certificate (Federal Reserve Board 
Form 152) which shall state specifically: 

First The name assumed by the Corporation. 

Second. The place or places where its operations are to be car- 
ried on. 

Third. The place in the United States where its home office is to 
be located. 

Fourth. The amount of its capital stock and the number of shares 
into which it shall be divided. 

Fifth. The names and places of business or residences of persons 
executing the organization certificate and the number of shares to 
which each has subscribed. 

* Whenever these regulations refer to a Corporation spelled with a 
capital C, they relate to a corporation organized under Section 25 (a) 
of the Federal Reserve Act 



Digitized by CjOOQ IC 



819 

8iztb. The flMt that the eerttlleete it mftde to enehle the penons 
•iibecriblDg the Mme and all other peraona» flnne, oompaniee, and 
corporationt who or which may thereafter subacribe to or imrchaae 
aharea of the capital atoek of auoh Corporation to araU themaelvea of 
the adyantagea of thia aection. 

The peraona aisning the organisation certifleate ahall acknowleige 
the execntion thereof before a ludge of aome court of recotd or notary 
public who ahan certify thereto under the aeal of such court or 
notary. Thereafter the certificate ahall be forwarded to the Federal 
Beaenre Board lo be filed in Ita < 



IV. TiTLB. 

Inaamuch as the name of the Corporation ia subject to the approral 
of the Federal Reaerre Board, a preliminary applicati<m for that i^h 
proval should be filed with the Federal Reaerre Board on Federal 
Reserve Board Fbnn 150. This application should state merely that 
the organisation of a Corporation under the propoaed name is con- 
temjilated and may request the approval of that name and ita reserva- 
tion for a period of 80 days. No Corporation which issues its own 
bonds, debentures, or other such obligations will be permitted to have 
the word "bank" as a part of its title. No Corporation which has 
the word ''Federal" in its title will be permitted also to have the 
word ''bank" as a part of its title. So far as possible the tiUe of the 
Corporation should indicate the nature or reaaon of the business con- 
templated and should in no case resemble the name of any other cor- 
poration to the extent that it might reault in mialeading or deceiving 
the public as to its identity, purpcte, connections or affiliations. 

y. AUTHOBITT TO COMMXHCB BUSniBSS. 

After the artidee of association and organization certificate have 
been made and filed with the Federal Reeerve Board, and after they 
have been approved by the Federal Reserve Board and a preliminary 
permit to begin business has been issued by the Federal Reeerve 
Board, the association shall become and be a body corporate, but 
none of its powers except such as are incidental and preliminary to 
its organization shall be exercised until it has been formally author- 
ized by the Federal Reserve Board by a final permit generally to 
commence business. 

Before the Federal Board will issue its final permit to commence 
business, the president <Ar cashier, together with at leaat three of the 
directors, must certify (o) that each director elected is a dtisen of 
the United States; (5) that a majority of the shares of stock is owned 
by citizens of the United States, by oorporaMona the controlling In- 



Digitized by CjOOQ IC 



820 

terest In which la owned by dtlsens ot the United States, chartered 
under the laws of the United States, or fjj flmui or oomiMinles the 
controlling Interest In which Is owned by dtlsens of the United States; 
and (c) that of the authorised capital stock specified In the articles 
of association at least 25 per cent has been paid In In cash and that 
each shareholder has indlTidually paid In In cash at least 25 per cent 
of his stock subscription. Thereafter the cashier shall certify to the 
payment of the remaining Installments as and when each is paid in. 
in accordance with law. 

VI. Capital Stock. 

No Corporation may be organized under the terms of Section 26 (a) 
with a capital stock of less than |2,000,000. The par value oT eiach 
share of stock shall be specified in the articles of association and no 
Corporation will be permitted to issue stock of no par value. If 
there is more than one class of stock the name and amount of each 
class and the obligations, rights, and priyileges attaching thereto 
shall be set forth fully in the articles of association. Bach class of 
stock shall be so named as to indicate to the investor as nearly as 
iXMwible what is its character and to put him on notice of any unusual 
attributes. 

VII. Tbaitsfebs or Stock. 

Section 26 (a) provides in part that— 

A majority of the shares of the capital stock of any such cor- 
poration shall at all times be held and owned by the citizens of 
the United States, by corporations the controlling interest in 
which is owned by citizens of the United States, chartered under 
the laws of the United States or of a State of the United States, 
or by firms or companies, the controlling Interest in which is 
owned by citizens of the United States. 
In order to insure compliance at all times with the requirements 
of this provision after the organization of the Corporation, shares of 
ptock shall be Issuable and transferable only on the books of the 
porporation. Every application for the issue or transfer of stock 
shall be accompanied by an aflldavit of the party to whom it is desired 
to issue or transfer stock, oV by his or its duly authorized agent, 
stating— 

In the case of an individual, — (a) Whether he is or is not a; citizen 
of the United States and if a citizen of the United States, whether 
he is a natural bom citizen or a citizen by naturalization,, and it 
naturalized, whether he remains for any purpose in the allegiance 
of any foreign sovereign or state; ib) Whether there is or is not 
any arrangement under whicb he is to hold the shares or any of the 
shares which he desires to have Issued or transferred to him, in trust 



Digitized by CjOOQ IC 



321 

for or in any way under the control of any foreign state or any 
foreigner, foreign corporation* or any corporation under foreign control, 
and if so, the nature thereof. 

Jn the case of a carporatUm. — (o) Whether such corporation is or 
la not chartered under the laws of the United States or of a state ot 
the United States. If it is not* no further declaration is necessary, 
but if it is, it must also be stated (5) whether the controlling interest 
in such corporation is or is not owned by citizens of the United States, 
and (c) whether there is or is not any arrangement under which such 
corporation will hold the shares or any of the shares if issued or 
transferred to such corporation, in trust fOr or in any way under the 
control of any foreign state or any foreigner or foreign corporation or 
any corporation under foreign control, and if so, the nature thereof. 

In the coie of a /Irm or company. — (a) "Whether the controlling 
interest in such Arm or company is or is not owned by citizens of the 
United States and, if so, (2») whether there is or is not any arrange- 
ment under which such firm or company will hold the shares or any 
of the shares if issued or transferred to such firm or company in 
trust for or in any way under the control of any foreign state or any 
foreigner or foreign corporation or any corporation under foreign 
control and |f so, the nature thereof. 

The board of directors of the Corporation, whether acting directly 
or through an agent, may, before making any issue or transfer of 
stock, require such further evidence as in their discretion they may 
think necessary in order to determine whether or not the issue or 
transfer of the stock would result in a violation of the law. No issue 
or transfer of stock which would cause 50 per cent or more of the 
total amount of stock issued or outstanding to be held contrary to 
the provisions of the law or these regulations shall be made upon 
the books of the Ck>rporation. The decision of the board of directors 
in each case shall be final and conclusive and not subject to any 
question by any person, firm, or corporation on any ground whatsoever. 

If at any time by reason of the fact that the holder of any shares 
of the Corporation ceases to be a citizen of the United States, or, 
in the opinion of the board of directors, becomes subject to the control 
of any foreign State or foreigner or foreign corporation or corporation 
under foreign control, 50 per cent or more of the total amount of 
capital stock issued or outstanding is held contrary to the provisions 
of the law or these regulations, the board of directors may, when 
apprised of that fact forthwith serve on the holder of the shares in 
question a notice in writing requiring) such holder within two months 
to transfer such shares to a citizen of the United States, or to a 
firm, company, or corporation approved by the board of directors as an 
eligible stockholder. When such notice has been given by the board 
of directors the shares of stock so held shall cease to confto any 
22 



Digitized by CjOOQ IC 



322 

vote nntU they hA?« been transferred as required above and If on the 
expiration of two months after such notice the shares shall not haye 
been so transferred, the shares shall be forfeited to the Corporation. 
The board of directors shall prescribe in the by4aws of the Corpora- 
tion appropriate regulations for the registration of the shares of stock 
In accordance with the terms of the law and these regulations. The 
by-laws must also provide that the certificates of stock issued by 
the Corporation shall contain provisions sufficient to put the holder 
on noticei of the terms of the law and the regulations of the Federal 
Reserve Board defining the limitations upon the ri^^ts of transfer. 

VIII. Opbutknis in tbk UinrsD Statbs. 

No Corporation shall carry on any part of its business in the United 
States except such as shall be incidental to its international or foreign 
business. Agencies may be established in the United States with 
the approval of the Federal Reserve Board for specific purposes, but 
not generally to carry on the business of the Corporation* 

IX. INVKSTMKITTS Ilf THE STOCK OF OtHEB CoBPOBATIONB. 

It is contemplated by the law that a Corporation shall conduct its 
business abroad either directly oV indirectly througli the ownership 
or control of corporations, and it is accordingly provided that a 
Corporation may invest in the stock, or other certificates of ownership, 
of any other corporation organized — 

(a) Under the provisions of section 26 (a) of the Federal Reserve 

Act; 
(5) Under the laws of any foreign country or a colony or 

dependency thereof; 
(c) Under the laws of any State, dependency, or insular possessioh 
of the United States; 
provided, first, that such other corporation is not engaged in the 
general business of buying or selling goods, wares, merchandise, or 
commodities in the United States; and second, that it is not transactr 
ing any businesff in the United States except such as is incidental to 
its international or foreign business. 

S^cept with the approval of the Federal Reserve Board, no Corpora- 
tion shall invest an amount in excess of 15 per cent of its d^pital 
and surplus in the stock of any corporation engaged in i|be business 
of banking, or an amount in excess of 10 per cent of its capital 
and surplus in the stock of any other kind of corporation. 

No Corporation shall purchase any stock in any other corporation 
organized under the terms of section 26 (a) or under tble laws of any 
State, which is in substantial competition therewith, or which holds 
stock or certificates of ownership in corporations which are in sub- 



Digitized by CjOOQ IC 



323 

■tantial competition with the parduurtns Corporatton. This rMtrlctkm, 
however, doee not applj to oorporationi organised under foreifn laws. 

X. Bbahghm. 

No Corporation shall establish any branches except with the swroval 
of the Federal Reserve Board, and in no case shall any branch be 
estabUshed in the United States. 

XI. IssiTK OF Debbntubbs, Bords, akd Pboicissobt Kons. 

Approval of the Federal Reeerve Bo<RTf.— No Corporation shaU make 
any public or private issue of Its debentures, bonds, notes, or otheii 
such obligations without the approval of the Federal Reserve Board, 
but this restriction shall not apply to notes Issued by the Corporanoo 
in borrowing from banks or bankers for temporary purposes not t» 
exceed one year. The spprovsl of the Federal Reserve Board will be 
based solely upon the right of the Corporation to make the issue uiMler 
the terms of this regulation and shall not be understood in any way 
to imply that the Federal Reserve Board has approved or passed upon 
the merits of such obligations as an investment The Federal Reserve 
Board wHl consider the general character and scope of the business of 
the Corporation in determining the amount of debentures, bonds, notes 
or other such obligations of the Corporatioh which may be issued by tt 

Application. — ^E>very application for the spproval of any such issue 
by a Corporation shall be accompanied by (1) a statement of the 
coflidltlon of the Corporation in such form and as of such date as the 
Federal Reserve Board may require; (2) a detailed list of the securi- 
ties by which it is proposed to secure such issue, stating their maturl- 
ties, indorsements, guaranties, or collateral, if any, and in general 
terms the nature of the transaction or transactions upon which they 
were based; and (8) such other data as the Federal Reserve Board 
may from tim^ to time require. 

AdverMemaitt/— No circular, letter, or other document advertising 
the issue of the obligations of a Corporation shall state or contain 
any reference to the fact that the Federal Reserve Board has granted 
Its approval of the issue to which the advertisement relates. This 
requirement will be enforced strictly in order that there may be no 
possibility el the public's misconstruing such a reference to be an 
approval by the Federal Reserve Board of the merits or desirability 
of the obligations as an investment 

XII. 8alb or FoBEioir Sboubixibs. 

Approval of the Federal Reserve Board.— No Corporation shall otter 
f6r sale any foreign securities with its indorsement or guaranty. 



Digitized by CjOOQ IC 



884 

ezoept with the approral of the Federal Rsserre Board, but each 
approval will be baaed aolelj upon the right of the Corporation to 
make such a sale under the terms of this regulation and shall not be 
understood in any way to imply that the Federal Reserve Board has 
approved or passed upon the merits of such securities as an investment. 

Application, — Every application for the approval of such sale shall 
be accompanied by a statement of the character and amount of the 
securities proposed to be sold, their indorsements, guaranties, or col- 
lateral, if any, and such other data aa the Federal Reserve Board may 
from lime to tinne require. 

Adver^itementt.— No circular, letter, or other document advertising 
the sale of foreign securities by a Corporation with its indorsement 
or guaranty shall state or oohtain any reference to the fact that the 
Federal Reserve Board has granted its approval of the sale of the 
securities to which the advertisement relates. 

XIII. AOCEPTANGBS. 

Kindt, — ^Any Corporation may accept drafts and bills of exchange 
drawn upon it which grow out of transactions involving the importa- 
tion or exportation of goods, provided, however, that except with the 
approval of the Federal Reserve Board, and subject to such limitations 
as it may prescribe, no Corporation shall exercise its power to accept 
drafts or bills of exchange if at the time such drafts or bills are pre- 
sented for acceptance it has outstanding any debentures, bonds, notes, 
or other such obligations issued by it 

Ifaturity.— No Corporation shall accept any draft or bill of exchange 
with a maturity in excess of six months except with the approval of 
the Federal Reserve Beard. 

Limitations. — (1) Individual drawers: No acceptances shall be made 
for the account of any one drawer in an amount aggregating at any 
time in excess of 10 per cent of the subscribed capital and surplus 
of the Corporation, unless the transaction be fully secured or r^re- 
sents an exportation or importation of commodities and is guaranteed 
by a bank or banker of undoubted solvency. (2) Aggregates: When- 
ever the aggregate of acceptances outstanding at any time (a) exceeds 
the amount of the subscribed capital and surplus, 50 per cent of 
all the acceptances in excess of the amount shall be fully secured; 
or (2») exceeds twice the amount of the subscribed capital and surplus, 
all the acceptances outstanding in excess of such amount shall be 
fully secured. (The Corporation shall elect whichever requirement 
(a) or (h) caUs for the smaller amount of secured acceptances.) 

iietervet.— -Against all acceptances outstanding which mature in 80 
days or less a reserve of at least 15 per cent shall be m|idntalned, 
and against all acceptances outstanding which mature in more than 



Digitized by CjOOQ IC 



3S6 

80 dayf a reserre of at least 8 per cent shall be mfctntained. Reeerrei 
against acceptances most be In liquid assets of an/ or all of the 
following kinds: (1) cash; (2) balances with other banks; (8) 
bankers' acceptances; and (4) snch securities as the Federal Resenre 
Bocjd may from time to time permit 

Xiy. Deposits. 

In the United Statee.-^No Ck>rporation shall receiTO in the United 
States any deposits except such as are incidental to or for the purpose 
of carrying out transactions in foreign countries or dependencies of 
the United States where the Corporation has established agencies^ 
branches, or where it operates through the ownership or control of 
subsidiary corporations. Deposits of this character may be made by 
individuals, firms, banks, or other corporations, whether foreign or 
domestic and mny be time deposits or on demand. 

Outiide the United Statee.—OntMide the United States a Corporation 
may receive deposits of any kind from individuals, firms, banks, or 
other corporations, provided, however, that if such Corporation has 
any of its bonds, debentures, or other such obligations outstanding 
it may receive abroad only such deposits as are incidctital to the 
conduct of its exchange, discount or loan operations. 

J2e«ert7e«.— Against all deposits received in the United States a re- 
serve of not less than 13 per cent nnist be maintained. This reserve 
miay consist of cash in vault a balance with the Federal Reserve 
Bank of the district in which the head office of the Corporation is 
located, or a balance with any member bank. Against all deposits 
received abroad the Corporation shall maintain such reserves as may 
be required by local laws and by the dictates of sound businesa judg- 
ment and banking principles. 

XV. QSNKBAL LllilTATIOlfS AND RXSTOICTIONS. 

Liahilities of one borrower.'-^he total liabilities to a Corporation 
of any person, company, firm, or corporation for money borrowed, in- 
cluding in the liabilities of a company or firm the liabilities of the 
several miembers thereof, shall at no time exceed 10 per cent of the 
amount of its subscribed capital and surplus, except with the approval 
of the Federal Reserve Board: Provided, however, That the discount 
of bills of exchange drawn in good faith against actually existing 
values and the discount of commercial or business paper actually 
owned by the person negotiating the same shall not be considered 
as money borrowed within the meaning of this paragraph. The 
liability of a customer on account of an acceptance made by the 
Corporation for his account is not a liability for money borrowed 



Digitized by CjOOQ IC 



within the meaning of this paragraph onlees and until he falls to 
place the Corporation in funds to cover the payment of the acceptance 
at maturity or unless the Corporation itself holds the acceptance. 

Aggregate UabiHiiet of the Corpom^ioii.— The aggregate of the 
Corporation's liabilities outstanding on account of acceptances, ayerage 
deposits, domestic and foreign, debentures, bonds, notes, guaranties, 
Indorsements, and other such obligations shall not exceed at any one 
time ten times the amount of the Corporation's subscribed capital 
and surplus except with the approval of the Federal Reserve Board. 
In determining the amount of the liabilities within the meaning of 
this paragraph, indorsements of bills of exchange having not more 
than six months to run, drawn and accepted by others than the 
Corporation, shall not be included. 

Operations abroad. — ^Except as otherwise provided in the law and 
these regulations, a Corporation may exercise abroad not only the 
|K>wers specifically set forth in the law but also such Incidental 
powers as may be usual in the determination of the Federal Reserve 
Board in connection with the transaction of the business of banking 
or other financial operations in the countries in which it shall tran- 
sact business. In the exercise of any of these powers abroad a Cor- 
fK>ration must be guided by the laws of the country in which It is 
operating and by sound business Judgment and banking principles. 

XVI. ICakaokmxnt. 

The directors, officers, or employees of a Corporation shall exercise 
their rights and perform their duties as directors, officers, or em- 
ployees, with due regard to both the letter and the spirit of the law 
and these regulations. For the purpose of these regulations the Cor- 
poration shall, of course, be responsible for all acts of omission or 
oonmiission of any of its directors, officers, employees, or representa- 
tives in the conduct of their official duties. The character of the 
management of a Corporation and its general attitude toward the 
purpose and spirit of the law and these regulations will be considered 
by the Federal Reserve Board in acting upon any application made 
under the terms of these regulations. 

XVII. RSP(»T8 AHD BxAMHIATIONS. 

Aeporft.— Bach Corporation shall make at least two reports an- 
liually to the Federal Reserve Board at such times and In such form 
as it may require. 

Examination$.'^E9uch Corporation shall be examined at least once 
ja year by examiners appointed by the Federal Reserve Board. The 
tost of examinations shall be paid by the Corporation examined. 



Digitized by CjOOQ IC 



327 

XVIII. AMOfDlCDfTB TO RBSULATIOIIS. 

TheM regulations are subject to amendment by the Federal Reeerre 
Board from time to time, prorlded, howerer, that no such amendment 
shall prejudice obligations undertaken in good faith under regulations 
in eftect at the time they were assumed. 

§ 298. Xaintenanoe of Standard of Value— Parity of Forms of 
Xoney — Oold Besenre.— All provisions of law inconsistent with or 
superseded by any of the provisions of this Act are to that extent 
and to that extent only hereby repealed : Provided, Nothing in this 
Act contained shall be construed to repeal the parity provision or 
provisions contained in an Act approved Miarch fourteenth, nine- 
teen hundred entitled ''An Act to define and fix the standard of 
value^ to maintain the parity of all forms of money issued or coined 
by the United States^ to refund the public debt, and for othei* 
purposes,'^ and the Secretary of the Treasury may for the purpose 
of maintaining such parity and to strengthen the gold reserve, 
borrow gold on the security of United States bonds authorized by 
section two of the Act last referred to or for one-year gold notes 
bearing interest at a rate of not to exceed three per centum per 
annum, or sell the same if necessary to obtain gold. When the 
funds of the Treasury on hand justify, he may purchase and re- 
tire such outstanding bonds and notes. (Sec. 26, Act 1913.) 

§ 299. Emergency Onrrenoy^Sec. 27, of Act Dec. 23, 1913, 
as amended by Act August 4, 1914, which made several changes 
in the Act of May 30, 1908, known as the "Aldrich-Vreeland Acf * 
and extended the provisions of that Act to June 30, 1915, has 
expired by limitation. 

§ 300. Eednction of Capital Stook of National Banks.— See § 
29, page 43, Part I. 

§ 801. Saving Clause. — If any clause, sentence, paragraph, or 
part of this Act shall for any reason be adjudged by any court of 
competent jurisdiction to be invalid, such judgment shall not 
affect, impair, or invalidate the remainder of this Act, but shall 
be confined in its operation to the clause^ sentence, paragraph, or 



Digitized by CjOOQ IC 



388 

part thereof directly inTolyed in the controvmy in which anch 
judgment shall have been rendered. (Sec. 29, Act Dec. 23, 1913.) 

§ 302. Besenration of E^ht to Amend, Alter, or SepeaL— 

The right to amend, alter, or repeal this Act is hereby expressly 
resenred. (Sec. 30, Act Dec. 23, 1913.) 



Opinions of Conmd of Board on negotiable Aittni- 
menti, Law, etc. — The following are short digests of opinions by 
the Counsel of the Federal Beserve Board c<m8truing the Nego- 
tiable Instruments, Law, or affecting only National banks. 

Negotiabilitt or Bills of Bxchaitoe.— Negotiability of a biU of ex- 
change is not affected by proTisions which waive demcad, notice, and 
protest, which waive homestead ezenit>tion rights; and which provide 
for the costs of coUection and attorney's fdeo. (Opinion of Ck>tui8el 
of Board, ApHl 13, 1916.) 

A bill, however, made payable with "coUection charges" is non- 
negotiable while one payable with 'Exchange" is negotiable. (OpiniOki 
of Counsel of Board, Oct. 8, 1917.) 

Acceptances— Whebb Patablb.— An acceptanoe to pay at a particu- 
lar place different from the residence of the acceptor is a general ac- 
ceptance, unless it expressly states that the biU is to be paid there 
and not elsewhere, and does not render the bill non-negotiable. (Opin- 
ions of Counsel of Board, Feb. 27, 1917, and Dec. 20, 1918.) 

Waiveb or Demand, Notice and Pbotbst. — ^The acceptor of a biU of 
exchange is the principal debtor. The law requires that notice of de- 
mand and protest be given to parties secondarily liable in case of 
dishonor. This right to receive notice is a personal one which may 
be' waived by the parties entitled thereto — that is» the drawer and in- 
dorsers; but such waiver has no effect on the acceptor or principal 
debtor. (Opinion of Counsel of Board, Feb. 13, 1915.) 

QuALDiRD Acceptances. — ^A bill of exchange drawn payable "at 
sight" and accepted pajrable in three months is a qualified or condi- 
tional acceptance, and the maker and prior indorsers are released. 
The instrument in effect becomes the promissory note of the acceptor, 
and would not come within the exception to Section 6200 as a "bill 
of exchange" drawn in good faith against actuaUy existing value. 
(Opinion of Counsel of Board, July 25, 1916.) 



Digitized by CjOOQ IC 



329 

PusxifTMnfT or Bills fob AooipriKCK.— The drawer and Indoreere 
of a bill of exchange made payable on a date spedfled ia the bill are 
not discharged by a failure to present for acceptance^ unless the bill 
expressly provides that it must be presented for that purpose, or 
unless it is payable elsewhere than at the residence or place of busi- 
ness of the drawee. (Opinion of Counsel of Board, Oct 17, 1916.) 

Bills Patablb With Attobnkt's Fns ob Oauktion Chabob. — ^While 
a bill containing a proTision for payment of the costs of collection 
and attorney's fees, if it is dishonored at maturity, is a valid negotiable 
instrument, a bill drawn for a fixed sum "with collection charges" is 
not a negotiable instrument unless it is so drawn as to show that no 
collection charges are to be included unless the bill is dishonored at 
maturity. (Opinion of Ck>unsel of Board, July 10, 1918.) 

Novs Aim Bills Rbdisoountbd. — ^A note or bill rediscounted in 
good faith by a member bank which is no longer owned or held by 
the bank need not be included as a liability of the maker to the 
bank, within the meaning of Section 6200, Revised Statutes. Notes 
or bills rediscounted undef an agreement to repurchase, or which are 
merely credited to the account of the bank offering them for redis- 
count, are subject to the limitations of Section 5200. (Opinion of 
Ck>unsel of Board, August 7, 1918.) 

Tbadb AccfTTANCB PBoviDiifa FOB BxTBNSiox OT TiMX.— A iiote or 
draft containing a provision for an extension of time should not be 
approved for general use by the^ Federal Reserve BcfiEO'd. (Opinion of 
Ck>unsel of Board, July 25, 1918.) 

Tbadb AooEPTAifCB PBovmnfo fob Discomrr Ir Paid at CteTAm Timb 
Bbfobb Matubitt.^A trade acceptance providing for a fixed discount, 
if paid at a certain time before miaturity, should not be approved for 
general use by the Federal Reserve Board. (Opinion of Oounsel of 
Board, August 1, 1918.) 

Sight Drafts Aocbpted Patablb at a Futubb Datb.— iA sight draft 
which ic( accepted by the drawee, payable at a future date, is a quali- 
fied acceptance which the holder may refuse to take, but if such an 
acceptance is taken by the holder, the drawer and indorsers are re- 
leased unless they have either expressly or impliedly authorised the 
holder to take a qualified acceptance or unless they subsequently as- 
sent thereto. (Opinion of Counsel of Board, May 7, 191J.) 

Bills Payable to thb Obdbb of thb Dbawb. — ^A bill made payable 
to the order of the drawee is not negotiable until the drawee as payee 



Digitized by CjOOQ IC 



880 

bat Iiidontd It Wh«B tt ham teen aoooptod and Indoned by the 
drawee it la a Talld negetlaUe Inatmment In the hands of a third 
partj, and the drawer la not released, ainee the termB of hla order 
have been apedllcally eem p il e d with* (Opinion of Connael of Board. 
Dee. 1S» 1917.) 

Di4tTa Patamjb W^ns IiraiipnT.— A prorlalon In a draft or blU of 
exchange that it la payable "with interest at the rate of — *-* per 
cent per annum after matarity if payment is delayed" does not affect 
the negotiability of the InatruQiint (Opinion of Counsel of Board, 
Feb. 1»» 1917.) 

UsuBious CJHAiQis BT Nauohal Bahks.— ^Whoro a National bank, in 
addition td charging interest at the hia^est legal rate, requires a bor- 
rower to glTO an additional note, accept a certiflcate of d^;K)sit for 
a like amount and put up such certillcate as additional collateral to 
hla entire loan the transaction appeara to be usurious. (Opinion of 
Oounael of Board, March U, 1917.) 

Natidhal Bank Bxamhi ations.— The OmptroUer of the Currency 
instructs National bank examiners to leaye with each National bank 
upon the completion of its examination, a bill covering its assessment 
for the examination, with instructions that the National banks de- 
posit with the Federal Reserre Bank of their district in the name 
of the Comptroller of the Currency, to the credit of the Treasurer of 
the United States, the amount of the MIL (Opinion of Counsel of 
Board, May, 1917.) 

Nauohal Banks as Ihsubancb Asdits.— -Regulations under which 
National banka nmy act aa insurance agents and aa brokers or agents 
in making or procuring loana on real estate under the amendment 
covering such action passed by Congress in 1916, issued from the office 
of the Ck>mptroller of the Chirrency. No such bank shall in any case 
guarantee either the principal or interest of any such loans or assume 
or guarantee the payment of any premium on insurance policies issued 
through its agency by its principal or guarantee the truth of any 
statement made by an assured In filing his application for insurance 
(Opinion of 0>unsel of Board, March, 1917.) 

Loans on Iicfbo?b> Fa!Km Lands.— Section 94 anthoriies any Na- 
tional bank to loan on unencumbered and improved farm land up to 
50 per cent of its actual value. What proportion of the land used as 
security must be improved or cultivated must necessarily depend upotf 
the facta of eadi case. (Opinion of (}ounsel of Board, July 19, 1917.) 



Digitized by CjOOQ IC 



831 

LoAiTB 810UBKD BT Faim Loan Bonds.— A loan on the seeurltsr of a 
fiurm-loan bond should not be classilled as a loan <m real estate, and 
National banks may legally discount notes secured by such bonds. 
(Opinion of Counsel of Board, June 10, 1918.) 

Sbotioh 5200. — If Bank A, which has discounted a note fct one of 
its customers later sells that note without recourse to Bank B, such 
note becomes subject to the limitations imposed by Section 5200 so 
far as Bank B is concerned. (Opinion of Counsel of Board, Dec. 12, 
1917.) 



Digitized by CjOOQ IC 



Digitized by CjOOQ IC 



PART THREE 

Acts of a Gbnrral Natubb, Sbotioks of Bstised Statutss and 

Bbgulations, Not Inoludbd in Parts I and II, 

Affbotino National Banks. 

CHAPTEB I. 

Thb Clayton Aot and thb Exbn Amindmbnt.* 

Section 304. Passage and Title of Act. 

605. Interlocking Directors — ^Banks with Total Besonrces 
of Over Five Ifillion — Private Bankers. 

806. Interlocking Directors — Cities of Over Two Hundred 

Thousand — Eixceptions to Act. 

807. The Eem Amendment — ^Exceptions to Act — Substan- 

tial Competition. 

808. Eligibility to Serve Out Term. 

809. Federal Reserve Board to Enforce Compliance with 

Act When Applicable to Banks. 

310. Method of Einforcing Compliance — Service of Com- 
plaint — Bight to Be Heard — Order to Cease Viola- 
tions. 

811. Application by Board to Circuit Court of Appeals to 
Enforce Order — Procedure Before Court. 

312. Appeal by Injured Party to Circuit Court of Appeals. 

313. Exclusive Jurisdiction of Circuit Court of Appeals. 

314. Expedition of Court Proceedings. 

315. M\ethod of Serving Complaints^ Orders, etc. 

g 801. Passage and Title of Act.— An Act entitled ''An Act to 
supplement existing laws against unlawful restraints and mon- 

*The following is that part of the Clayton Anti-trust Act, as 
amended, which relates to hanks, hanking associations and trust 
companies. 

333 



Digitized by CjOOQ IC 



334 

opolies, and for other purposes" was approved by Congress^ Oc- 
tober 15, 1914. 

§ 305. InterloekiiLg Direotoii— Btaki with Total Xesonroei of 
Orer Five Million — ^Private Bankers.— 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 ofBcer 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 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 ITnited States. The eligibility of a director, 
oflScer, or employee under the foregoing provisions shall be deter- 
mined by the average amount of deposits, capital, surplus, and un- 
divided profits as shown in the official statanents 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. (Sec. 8, Act Oct 
15, 1914.) 

Status ot Statv Mmffim Banks. — State banks or trust companies 
may have common offlcers and directors with other State banks and 
trust companies whether or not any ot such banks or trust companies 
are members of the Federal Reserve Systenk (Opinion of Attorney 
General, Sept 10, 1917.) 

SAvnrea and Loan AssociATioini.— A savings and loHm association is 
a bank within the meaning of that part of Section 8 of the Clayton 
Act which relates to interlocking bank directorates. (Opinion of 
Counsel of Board, Feb. 3, 1916.) So is a Morris plan bank. (Informal 
Ruling of Board, June 13, 1917.) 



Digitized by CjOOQ IC 



336 

NoK-lfBMBii Banks m DnnxoT or Oolombea.— A State btak or trait 
company which Is Inoofrporated under the Uws of a State, but which 
is doing business in the District of Ck>lumbia, subject to limitations 
and restrictions imposed bj the acts of Congress, is subject to the 
provisions of Section 8 of the Clayton Act which relate to banks organ- 
ized or operating under the laws of the United States. (Opinion of 
Counsel of Board, Sept 11, 1919; opinion of Attorney General, Sept 
10, 1917.) 

DEriNmoif AND iNmnsBTATioN or Tmbm *TiivAni Banksb."— The 
Board interprets the term 'private banker^ to include partnerships or 
Individuals who are engaged in the banking business, as that term 
is generally understood,— 4ncluding those partnerships and individuals 
who solicit or receive deposits subject to check, who do a foreign 
exchange, acceptance, loan or discount business, or who purchase 
end sell and distribute issues of securities by which ci^dtal is fur- 
iQiihed for business or public enterprises. 

The term 'private banker" is interpreted not to include the ordinary 
stock, note, or commodity broker, unless a substantial proportion of 
his profits are derived from, or a substantial part of his business con- 
sists in, one or more of the banking activities described, nor is it in- 
terpreted to include partnerships or individuals using only their own 
funds in making loans err investments. 

No private banker whose partnership^ or firm assets aggregate more 
than five million dollars is eligible, under the terms of the Clayton 
Act, to serve as a director of any member bank, and no private banker, 
regardless of the amount of partnership or firm assets, is eligible to 
serve as a director, other ofllcer or employee of any member bank lo- 
cated in a city of more than 200,000 inhabitants, if such firm or partner- 
ship is located in the same city. 

The Kern amendment to the Clayton Act dcABs not authorise the Fed- 
eral Reserve Board to grant permission to such private bankers to 
serve as oiBcers or directors of a member bank even though it appears 
that they are not In substantial competition with such mmnlber bank. 
(Announcement of Board, Oct 0, 1916.) 



Labsb National Bank and Small Statb Bank.— <nayton Act does 
not prohibit an officer or director of a National bank with total assets 
exceeding 15,000,000 from serving at the same time as an officer 
and director in a State bank or trust company with total assets of less 
than 15,000,000, provided the banks in question are not both located 
in the same city of 200,000 or more inhabitants. (Informal Ruling of 
Board, Nov. 1, 1916.) 



Digitized by CjOOQ IC 



336 

Jjiaam Statb Bank and Nationai BAiiK.~-Cla7ton Act prohiMts a 
person who is a director of a State bank with reaouroea of more than 
15,000,000 from aenring at the same time as a director of a National 
bank, regardlees of size or location of the National bank. But see 
Kern amendment (Informal Ruling of Board, ICarch 4, 1916.) 

Laboc Tbubt CouBAur and Small National BANK.^-Under Clayton 
Act a person may not serve as a director of a trust company with a 
capital of 11,000,000 and total resources of oyer 15,000,000 in a city 
of oyer 200,000 inhabitants and at the same time as a director and 
officer of a National bank having a capital of |50,000 and total re- 
sources of 12,000,000 in a municipality of less than 20,000 inhabitants. 
Under the Kern amendment, however, a person may, with the consent 
of the Federal Reserve Board, serve both institutions provided the 
trust company is not in substantial competition with the member 
bank. (Informal Ruling of Board, June 8, 1916.) 

Two Small National Banks. — ^There is nothing in the Clayton Act 
which prohibits a person from serving at the same time as a director 
in two National banks located in a city of less than 200,000 inhabitants 
provided neither bank has deposits, capital, surplus, and undivided 
profits aggregating more than |5,000,000. (Informal Ruling of Board, 
July 6, 1916.) 

Fiscal Teab. — ^"Fiscal Tear" as used in paragraph 1, Section 8, of 
the Clayton Act refers to the fiscal year of the institution of which 
the person in qu^ation is a director. (Informal Ruling of Board, Sept 
13, 1916.) 

§ 306. Interlocking Direoton — Cities of Orer Two Hundred 
Thousand — ^Exceptions to Act. — No bank, banking association or 
trust company, organized or operating under the laws of the United 
States in any cily 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 oflScer or employee any private banker or any director or otfaei' 
ofiieer 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 di- 
rector or other officer or employee of such bank, banking associa- 
tion, or trust company may be a director or other of&c^r or em- 



Digitized by CjOOQ IC 



337 

ployee of not more than one other bank or tnut company organized 
nnder the laws of the United States or any State where the entire 
capital stock of one is owned by stockholders in the other: And 
provided further. That nothing contained in this section shall for- 
bid a director of Class A of a Federal resenre bank^ as defined in 
the Federal Reserve Act> from being an officer or director or both 
an officer and director in one member bank. (Sec. 8^ Act Oct. 
16, 1914.) 

iNittPBBTATiox or Glattoic Antitbust Act. — ^All three paragraphs of 
Section 8 of the Clajrton AntitrtUt Act» relating to interlocking directo- 
rates, become effectiye from and after two years from the date of the 
approral of that act^-that is, October 15, 1916. 

This statnte, being a Federal statute, can not relate to the qualifica- 
tiona of directors of State banks or trust companies, but merely pro- 
vides that persons who are prirate bankers, or directors, officers, or 
ttnployes of such banks or trust companies, shaU, under certain condi- 
tions, be ineligible to serve as directors, officers, or employes of banks 
organized or operating under the laws of the United States. (Opinion 
of Counsel of Board, Nov. 21, 1914.) 

Pbovibos to Clayton Act Cumulative.— An officer, director, or em- 
ploye of a member bank, who would otherwise come within the pro- 
hibitory language of the Clayton Act, may serve as a director, officer, 
or employe of one other bank where the entire capital of one is owned 
by stockholders in the other, and at the same timie, under the Kern 
amendment, may, with the consent of the Federal Reserve Board, serve 
as an officer, director, or employe of not more than two other banks 
wliich are not in substantial competition with the member bank. 
(Opinion of Counsel of Board, July 13, 1*916.) 

Membbb or Bank's Bzbcutivk Committee. — ^Held that nnder the Clay- 
ton Act a person ineligible as a director may not serve as a member 
of a bank's executive conmiittee. Prohibition is not only against di- 
rectors but ''other officers or employes." (Informal Ruling of Board, 
Nov. 18, 1916.) 

Mutual Savings Bank Wiihout Capital Stock.— Olayton Act does 
not prohibit a person, from serving at the same time as a director of 
& mutual savings bank not having a capital stock represented by 
shares and as a director of a member bank, regardless of whether 
the two institutions are in substantial competition. (Informul Ruling 
of Board, July 1, 1916.) 
22 



Digitized by CjOOQ IC 



838 

Bahkb m SUBUBBAH DuiBioTS.— Any bank located within the cor- 
porate limits of any city of more than 200»000 inhabitants comes 
within the prohibitions of the act, eren though it be located in a 
suburban district (Informal Ruling of Board, i^ril, 1919.) 



Adtisobt CoinaroM or Mbubb Banks.— The members of an ad- 
visory committee of a National bank are not necessarily officers, di- 
rectors or employes of such bank within the meaning of Section 8 of 
the Clayton Antitrust Act They can not be directors unless elected 
by the shareholders; and whether they are officers dr employes depends 
entirely on the scope of the rights and duties assigned to them by the 
board of directors. (Opinion of Ck>unsel of Board, Jan. 22, 1916.) 

§ 907. The Ken Amendment— Exceptions to Aet* — Substantinl 
Competition.— 'ilnd provided further. That nothing in this Act 
shall prohibit any oflScer, director^ or employee of any member 
bank or class A director of a Federal reserve bank, who shall first 
procure the consent of the Federal Beserve Boards which board is 
hereby authorized, at its discretion, to grant, withhold, or revoke 
such consent, from being an officer, director, or employee of not 
more than two other banks, banking associations, or trust compa- 
nies, whether organized under the laws of the United States or any 
State, if such other bank, banking association, or trust company 
is not in substantial competition with such member bank. 

The consent of the Federal Reserve Board may be procured be- 
fore the person applying therefor has been elected as a class A 
director of a Federal reserve bank or as a director of any m^nber 
bank. (Sec. 8, Act Oct. 15, 1914, as amended by Act May 
16, 1916.) 

The duty imposed upon the Federal Reserve Board in passing upon 
any application made under authority of this amendment is to de- 
termine whether or not the two banks in question (or either of them) 
are in substantial competition with the member bank. If both are 
nonmember banks the Act dc^es not require that they shall not be in 
substantial competition with each other. 

*For exception to Act in case of member banks and corporations 
transacting foreign business In which member banks hold stock, aes 
Sec 26, Federal Reserve Act, $ 296. 



Digitized by CjOOQ IC 



339 

It should be borne In mind that the Act doee ndt reet an arbitrary 
diaoretion In the Board to permit the aama peraon to aenre on the 
board of directors of an/ two or more banks» when such banks come 
within the restrictive language of the Act as originally passed; but it 
merely confers authority upon the Board to permit interlocking di- 
rectorates when such banks are not in substantial competition, within 
the meaning of the Act 

Substantial Compititioh. — ^It is manifest that no fixed rule can be 
prescribed by which this question can be automatically determined. 
The facts in each case miust be carefully considered and it is the 
duty of the board to withhold its consent in any case in which it 
would defeat the purposes of the Act to permit the same person to 
serve as an officer, director, or employe of more than one bank* 

If the two banks in question are not competitors in any respect, 
no question arises. If they do compete, the very difficult question 
arises whether or not the competition is ''substantiaL" 

In general, two banks coming within the prohibition of the original 
Act would be deemed to be in substantial competition within the mean- 
ing of the language used in the amendment if the business engaged 
In by such banks under natural and normal conditions conflicts or 
Interferes, or if the cessation of competition between the two would 
be Inlurlous to customers, or w<mid-be customers, or would probably 
result in appreciably lessening the volume of business or kinds of 
business of either institution. 

It is realised that some difficulty will be experienced in the H^pli- 
cation of this test 

It is necessary that cctesideration should be given — 

(1) To the sise in aggregate resources of banks involved. 

(2) To the character of business engaged in, L e., the extent of com- 
mercial business and extent of purely investment or trust company 
business of the two institutions. 

(3) Whether the operations of the two banks cover the same geo- 
graphical territoty* 

(4) Whether the two banks actually compete to any appreciable ex- 
tent in any important activity, for example, (a) in soliciting deposits 
on demand or on time from other banks or individuals, (d) in the 
purchase or sale of commercial paper or other securities, (c) in the 
purchase or sale of foreign exchange, id) in soliciting trusteeships, 
etc (Instructions of Board, July 6, 1916.) 

Forms for use in obtaining the consent of the Federal Reserve Board 
will be furnished by the Botfrd upon request. These forms when 
properly executed should be filed with the Federal Reserve Agent of 
the district In which the applicant resides. 



Digitized by CjOOQ IC 



340 

Statbhekt mr Boabd, Sipt. 19, 1916.— The Board has considered eadi 
case on its own merits, but has taken the general position that the 
mere purchase by two banks of commercial paper in the open market, 
or the making of time or demand loans on collateral securities having 
A wide market, or the purchasing of such securities, need not neces- 
sarily or invariably be considered as indicating "substantial competi- 
tion" within the meaning of the Kern Amendment It is, however, 
the view of the Board that "substantial competition" must be held 
to exist in cases where the resources of the banks are of such magni- 
tude, or of such character that the ability of the banks Jointly to grant 
or to withhold credit, or otherwise to influence the conditions under 
which credit may be obtained, might constitute them a dominant factor 
in the general loan market, even though the character of the deposits 
carried by the institutions in question might be quite different 

All applications granted are, in accordance with the terms of the 
Kern amendment, subject to revocation by the Federal Reserve Board. 

DuBATioK OF Permits. — Where the Federal Reserve Board has once 
granted permission to a person to serve at the same time as a di- 
rector of two or more institutions under the provisions of the Kern 
amendment to Section 8 of the Clayton Act, that permission is oon- 
tinuing and good until revoked by the Federal Reserve Board. (In- 
formal Ruling of Board, Oct, 1917.) 

§ 806. Eligibility to Serve Ont Term.— Wlhen any person elec- 
ted or chosen as a director or ofScer 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 capadly his eligibility to act in 
Buch 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 what- 
soever case, 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. (Sec. 8, Act Oct. 15, 1914.) 

The obvious purpose of this provision is to permit a director or of- 
ficer to serve out his term where, at the time of his election, the bank 
has aggregate resources of less than 16,000,000 or the city has less 
than 200,000 inhabitants, but during the succeeding year the reeources 
are increased to an amount in excess of 16,000,000 or the population 
becomes more than 200,000. 



Digitized by CjOOQ IC 



841 

§ SOO. Federtl Saierre Board to Bnfoxoe OompUaiioo with Aot 
When Applicable to Baaki. — That authority to enforce compli- 
ance with sections two, three, seven and eight of this Act by the 
persons respectively subject thereto is hereby vested : in the Inter- 
state Commerce Commission where applicable to common carriers, 
in the Federal Beserve Board where applicable to banks, banking 
associations and trust companies, and in the Federal Trade Com- 
mission where applicable to all other character of commerce, to be 
exercised as follows. (Sec. 11, Act Oct 15, 1914.) 

§ 310. Kethod of Enforcing Complianoe — Service of Compliant 
— Tiigbt to Be Heard — Order to Cease Yiolationi.— 'Whenever the 
commission or board vested with jurisdiction thereof shall have 
reason to believe tiiat any person is violating or has violated any 
of the provisions of sections two, three, seven and eight of this 
Act, it shall issue and serve upon such person a complaint stating 
its charges in that respect, and containing a notice of a hearing 
upon a day and at a place therein fixed at least thirty days after 
the service of said complaint. The person so complained of shall 
have the right to appear at the place and time so fixed and show 
cause why an order should not be entered by the commission or 
board requiring such person to cease and desist from the violation 
of the law so charged in said complaint Any person may make 
application, and upon good cause shown may be allowed by the 
commission or board, to intervene and appear in said proceeding 
by counsel or in person. The testimony in any such proceeding 
shall be reduced to writing and filed in the ofiSce of the commission 
or board. If upon such hearing the commission or board, as the 
case may be, shall be of the opinion that any of the prorisions of 
said sections have been or are being violated, it shall make a report 
in writing in which it shall state its findings as to the facts, and 
shall issue and cause to be served on such person an order requiring 
such person to cease and desist from such violations, and divest 
itself of the stock held or rid itself of the directors chosen contrary 
to the provisions of sections seven and eight of this Act, if any 
there be, in the manner and within the time fixed by said order. 
ITntil a transcript of the record in such hearing shall have been 



Digitized by CjOOQ IC 



848 

filed in a circoit court of appeals of fhe United States^ as herein- 
after provided, the commission or board may at any tim^ upon 
such notice and in such manner as it shall deem proper, modify 
or set aside, in whole or in part, any report or any order made or 
issued by it under this section. (Sec. 11, Act Oct. 15, 1914.) 

Binx>BCEBCKirT or IhuynsioKs or Act. — Section 8 of the Clayton Act as 
to Interlocking bank directorates does not attach any penalty fet non- 
compliance with its proYisions. Section 11, howerer, authorizes the 
Federal Resenre Board to serve a coniplaint upon any person violating 
the provisions of Section 8 with notice of hearing. Board may after 
hearing serve an order requiring the person complained of to desist 
from such violations and resign the directorships held contrmry to 
law. Failure to obey the order may be foUowed by application to the 
Circuit Court of Appeals of the United States for its enforcement. 
(Informal Ruling of Board, Oct 4» 1916.) 

§ 311. Applioation by Board to Cirenit Court of Appeals to En- 
foree Order— Procedure Before Court.— If such person fails or 
n^lects to obey such order of the commission or board while the 
same is in effect^ the commission or board may apply to the circuit 
court of appeals of the United States, within any circuit where the 
violation complained of was or is being committed or where such 
person resides or carries on business, for the enforcement of its 
order, and shall certify and file with its application a transcript 
of the entire record in the proceeding, including all the testimony 
taken and the report and order of the commission or board. Upon 
such filing of the application and transcipt ihe court shall cause 
notice thereof to be served upon such person and thereupon shall 
have jurisdiction of the proceeding and of the question determined 
therein, and shall have power to make and enter upon the plead- 
ings, testimony, and proceedings set forth in such transcript a de» 
cree aflBmiing, modifying, or setting aside the order of the com- 
mission or board. The findings of the commission or board as to 
the facts, if supported by testimony, shall be conclusive. If either 
party shall apply to the court for leave to adduce additional evi- 
dence, and shall show to the satisfaction of the court that such ad- 
ditional evidence is material and that there were reasonable grounds 
for the failure to adduce such evidence in the proceeding before 



Digitized by CjOOQ IC 



U9 

the oonuniBtioii or boards fhe court may order such additional evi- 
dence to be taken before the conmuBsion or board and to be adduced 
upon the hearing in such manner and upon such terms and condi- 
tions as to the court may seem proper. The commission or board 
may modify its findings as to the facts, or make new findings, by 
reason of the additional evidence so taken, and it shall file such 
modified or new findings, which, if supported by testimony, shall 
be conclusive, and its recommendation, if any, for the modification 
or setting aside of its original order, with the return of such addi- 
tional evidence. The judgment and decree of the court shall be 
final, except that the same shall be subject to review by the Su- 
preme Court upon certiorari as provided in section two hundred 
and forty of the Judicial Code. (See. 11, Act Oct. 15, 1914.) 

§ 818. Appeal by Injured Party to Cirouit Court of Appeals. — 

Any party required by such order of the commission or board to 
cease and desist from a violation charged may obtain a review of 
such order in said circuit court of appeals by filing in the court a 
written petition praying that the order of the commission or board 
be set aside. A copy of such petition shall be forthwith served upon 
the commission or board, and thereupon the commission or board 
forthwith shall certify and file in the court a transcript of the 
record as hereinbefore provided. Upon the filing of the transcript 
the court shall have the same jurisdiction to aflBrm, set aside, or 
modify the order of the commission or board as in the case of an 
application by the commission or board for the enforcement of its 
order, and the findings of the commission or board as to the facts, 
if supported by testimony, shall in like manner be conclusive. 
(Sec. 11, Act Oct. 15, 1914.) 

§ 813. Ezolusive Turisdiotion of Cirouit Court of Appeals. — 

The jurisdiction of the circuit court of appeals of the United States 
to enforce, set aside, or modify orders of the commission or board 
shall be exclusive. (Sec. 11, Act Oct. 15, 1914.) 

§ 314. Expedition of Court Proceedings.— Such proceedings in 
the circuit court of appeals shall be given precedence over other 



Digitized by CjOOQ IC 



344 

cases pending therein, and shall be in every way expedited. No 
order of the conunission or board or the judgment of the court 
to enforce the same shall in any wise relieve or absolve any per- 
son from any liability under the antitrust Acts. (Sec. 11, Act 
Oct 15, 1914.) 

§ 316. Kethod of Serving Complaints, Orders, etc.— Com- 
plaints, orders, and other processes of the commission or board 
under this section may be served by anyone duly authorized by 
the commission or board, either (a) by delivering a copy thereof 
to the person to be served, or to a member of the partnership to 
be served, or to the president, secretary, or other executive oflBcer 
or a director of the corporation to be served; or (b) by leaving 
a copy thereof at the principal office or place of business of such 
person ; or (c) by r^stering and mailing a copy thereof addressed 
to such person at his principal office or place of business. The 
verified return by the person so serving said complaint, order, 
or other process setting forth the manner of said service shall be 
proof of the same, and the return post-office receipt for said com- 
plaint, order, or other process registered and mailed as aforesaid 
shall be proof of the service of the same. (Sec 11, Act Oct. 
15, 1914.) 



Digitized by CjOOQ IC 



CHAPTEB n. 

QOVBRNHENT DePOSITOBIES. 

Section 316. Duty of DiBbnrsing Officers. 

317. Provisions for Deposit by Certain Postmasters. 

318. Misappropriating Postal Ponds or Properly — Pun- 

ishment for — Prima Facie Evidence— Deposits, 
etc.. Permitted. 

319. Deposit of Proceeds of Sale of Liberly Bonds. 

320. Beserve Beqnirements not Applicable to Government 

Deposits. 

321. Oovemment Deposits in Federal Land Banks. 

322. Begular and Special Depositories. 

323. Penalty for Unauthorized Deposit of Public Money. 

324. Penalty for Unautiiorized Beceipt or Use of Public 

Money. 

§ 316. Duty of Disbuning Offloers.— It shall be fhe duty of 
every disbursing officer having any public money intrusted to him 
for disbursement to deposit the same with the Treasurer or some 
one of the assistant treasurers of the United States, and to draw 
for the same only as it may be required for payments to be made 
by him in pursuance of law; and draw for the same only in favor 
of the persons to whom payment is made, and all transfers from 
the Treasurer of the United States to a disbursing officer shaU be 
by draft or warrant on the Treasury or an assistant treasurer of 
the United States. In places, however, where there is no Treas- 
urer or assistant treasurer, the Secretary of the Treasury may, 
when he deems it essential to the public interest, specially author- 
ize in writing the deposit of such public money in any other public 
depository, or, in writing, authorize the same to be kept in any 
other manner, and under such rules and regulations as he may 
deem most safe and effectual to facilitate the payments to public 

846 



Digitized by CjOOQ IC 



346 

creditors. (Bey. Stat TJ. S. Sec 3680, as amended by Act Feb. 
27, 1877, Sec. 1; 19 Stat U. S^ 249.) 

[The Act of March 1» ie07, U Stat U. 8^ 1166 anthorlMS army of- 
fleers to keep la their posses si on restricted amounts of pabllc funds.] 

It will be noted that snch deposits can not be made with banks In 
Idaoes where there Is a Snbtreasnry. Second, That the designation 
of a member bank as a Government Depositary under Sec. 5158, R. 
6., as amended by Sec 15 of the Federal Resenre Act, does not author- 
ise It to recelTC such deposits, but In order to become a Depositary 
for such funds, a Regular Depositary must be further designated 
spedaUy for the purpose. Third, The prorlslon that the Secretary 
may 'In writing authsiHse Disbursing Officers' Funds to be kept In 
any other manner, as he may deem most safe and effectual to facilitate 
the payments to public creditors;" up to the present time has only 
been used for Disbursing Officers In out of the way places, permitting 
them to hold their own funds at their own risk, but generally when 
so situated disbursing officers keep their funds In some Depositary In 
New York, and local banks are glad to secure eastern exchange by 
cashing their New York drafts. 

§ 817. Provisions for Beposit hy Certain Postmasters. — Any 
postmaster, having public money belonging to the Goyemment, 
at an oflSce within a cily or town where there is no Treasurer or 
assistant treasurer of the United States, or designated depositary, 
may deposit tiie same temporarily, at his own risk and in his cSSr 
dal capacity, in any National or State bank in the State in which 
the said postmaster resides, or in which his ofSce is located, or 
within a reasonable radius of his post-office in an adjacent State, 
but no authority or permission is or shall be given for tiie pay- 
ment to or receipt by a postmaster or any other person, of int^^ 
directly or indirectly, on any deposit made as herein described. 
(Bev. Stat. IT. S. Sec. 8847, as amended bj Act May 27, 1908; 35 
Stat IT. S., 415.) 

ISvery Postmaster who makes any such deposits shall report quarterly 
to the Postmaster General the name of the bank where such deposits 
have been made, and also state the amount which may stand at the 
time to his credit 

It will be seen from this provlslou of the law that arranfem«nto for 



Digitized by CjOOQ IC 



847 

d^KMlts referred to In this seetlOB are to be made, not with the 
masterOeneral, but with the local Poetmaeter. 

§ 818. Mittppropriatms Poetel Tonds or Piop«rt7— Fimiih- 
m&at for— Brima nude Bfidenee— Sepodtiy ete., Pennitted. — 

Whoever^ being a poetmaster or other person employed in or oon- 
nected with any branch of the postal serricey shall loan, use, pledge, 
hypofhecate, or convert to his own use, or shall deposit in any bank 
or exchange for other funds or property^ except as authorized by 
laWy any mon^ or property coming into his hands or nndor his 
control in any manner whatever, in the execution or under color 
of his oflSce, employment, or service^ whether the same shall be 
the money or property of the United States or not; or shall fail 
or refuse to remit to or deposit in the Treasury of the United States 
or in a designated depository, or to account for or turn over to 
the proper officer or agent, any such money or property, when re- 
quired so to do by law or the regulations of the Post Office Depart- 
mBDt, or upon demand or order of the Postmaster Qeneral, either 
directly or through a duly authorized officer or agent, shall be 
deemed guilty of embezzlement; and every such person, as well as 
every other person advising or knowingly participating therein, 
shall be fined in a sum equal to the amount or value of the money 
or property embezzled, or imprisoned not more than ten years, or 
both. Any failure to produce or to pay over any such money or 
properly, when required so to do as above provided, shall be taken 
to be prima facie evidence of such embezzlement; and upon the 
trial of any indictment against any person for such embezzlement, 
it shall be prima facie evidence of a balance against him to pro- 
duce a transcript from the account books of tiie Auditor for the 
Post Office Department. But nothing herein shall be construed to 
prohibit any postmaster depositing, under the direction of the 
Postmaster General, in a National bank designated by the Secre- 
tary of the Treasury for that purpose, to his own. credit as post- 
master, any fxmds in his charge, nor prevent his negotiating drafts 
or other evidences of debt through such bank, or through United 
States disbursing officers, or otherwise, when instructed or required 
so to do by the Postmaster General, for the purpose of remitting 



Digitized by CjOOQ IC 



348 

Borplus fuBdf) from one port office to another. (Act March 4^ 1909^ 
Sec. 225; 35 Stat. U. S., 1133.) 

The Postofflce Department has foand Teiy little occasliMi for availing 
Itself of this last-mentioned provision, except that In varloas sections 
of the country designated Depositaries have been authorized to receive 
surplus money-order funds fbt the convenience of local Postmasters, as 
otherwise It Is necessary for the Postmasters to purchase exchange to 
transfer such funds. These deposits are reported to the Treasury De- 
partment like other deposits, and the latter credits the Postofflce De- 
partment 

§ 319. Sepodt of Proceeds of Sale of liberty Bonds. — 

That the Secretary of tiie Treasury, in his discretion, is hereby 
authorized to deposit in such banks and trust companies as he may 
designate the proceeds, or any part thereof, arising from the sale 
of the bonds and certificates of indebtedness authorized by this 
Act, or the bonds previously authorized as described in section 
four of this Act, and such deposits may bear such rate of interest 
and be subject to such terms and conditions as the Secretary of 
the Treasury may prescribe: Provided, That the amount so de- 
posited shall not in any case exceed the amount withdrawn from 
any such bank or trust company and invested in such bonds or 
certificates of indebtedness plus the amount so invested by such 
bank or trust company, and such deposits shall be secured in the 
manner required for other deposits by section fifty-one hundred 
and fifly-three, Bevised Statutes, and amendments thereto. (Sec. 
7, Act April 24, 1917.) 



). Beserve Beqnirements Hot Applicable to Ooremment 

Deposits.-* That the provisions of section fifiy-one hundred and 
ninely-one of the Bevised Statutes, as amended by the Federal 
Beserve Act and the amendments thereof, with reference to the 
reserves required to be kept by National banking associations and 
other member banks of the Federal Beserve System, shall not apply 
to deposits of public moneys by the United States in designated 
depositaries. (Sec. 7, Act April 24, 1917.) 

See f 280 under Federal Reserve Act 



Digitized by CjOOQ IC 



349 

§ SSI. Cknr«ni]ii«nt Depodtt in Federal Land Banki. — That all 
Federal land banks and joint stock land banks organized under 
this Act, when designated for tiiat purpose bj the Secretary of 
the Treasury shall be depositaries of public money^ except receipts 
from customs, under such regulations as may be prescribed by said 
Secretary; and ihqr may also be employed as financial agents of 
the Gtovemment; and they shall perform all such reasonable duties, 
as depositaries of public money and financial ag^its of the Gov- 
emment, as may be required of them. And the Secretary of the 
Treasury shall require of the Federal land banks and joint stock 
land banks thus designated satisfactory security, by tiie deposit 
of United States bonds or otherwise, for the safekeeping and 
prompt payment of the public money deposited with them, and 
for the faithful performance of their duties as financial agents 
of the Oovemment No Qovemment funds deposited under the 
provisions of this section shall be invested in mortgage loans or 
farm loan bonds. (Sec. 6, Act July 17, 1916; 39 Stat. L., 365.) 

§ 8SS. Begular and Special Depositariei. — See § 30 under Na- 
tional Bank Act and § 255 under Federal Beserve Act. 

Practically aU of the foUowing annotations are taken from Treasury 
Clrcalar No. 176, dated December 31, 1919, and constitute the regu- 
latlons governing Public Money deposits in regular depositary banks. 

AU previous regulations and Instructions Inconsistent herewith are 
superseded. 

Bxcept as otherwise spedficaUy provided, nothing contained In this 
circular affects deposits by postmasters to the credit of their ot&dal 
disbursing accounts, the deposit of court funds by United States courts 
and their officers, or the deposit of Postal Savings funds, in cases 
where such deposits are not for credit by the depositary in the account 
of the Treasurer of the United States. Unless spedflcaUy extended 
thereto by the Secretary of the Treasury, nothing contained in this 
drenlar applies to or gohrems the deposit of public moneys in Federal 
land banks or Joint stock lanci banks under the act approved July 17, 
1916, as amended, or the deposit of public moneys or the payment of 
Government warrants and checks outside of the continental United 
States, eKcn>t ttf the extent spedficaUy extended by the Secretary of 
the Treasury from time to time. The Secretary of the Treasury may 
withdraw or amend at any time or from time to time any or aU of 
the provisions of this drcular. 



Digitized by CjOOQ IC 



350 

Deposit of Publio Monets.— All public moneys shall be deposited 
with the Treasurer of the United States, Federal ReseiTe Banks and 
branches, Assistant Treasurers of the United States, and regular 
National bank depositaries, and, with special depositaries under the 
act approTOd September 24, 1917, as amended and supplemented. All 
deposits of public moneys hereunder (except with such special de- 
positaries) shall be for credit to the account of the Treasurer of 
the United SUtes. 

Glasses of Defositabibs.— The established policy of the Treasury 
Department is to designate and maintain balances with regular Na- 
tional bank depositaries of public moneys only at points where a 
depositary is necessary to meet the requirements of Qoyemment of- 
ficers for cash for pay-roll or other expenditures, and then only if 
there is no Federal Reserve Bank or branch lo^cated at or near the 
point National banks when designated by the Secretary of the 
Treasury, howcTer, may be depositaries of public moneys with a 
maximum qualification, for the sole purpose of receiving deposits 
made by United States courts and their officers, by postmasters, or 
by other duly authorized Govemment officers, for credit to their 
official disbursing accounts elsewhere than with the Treasurer of the 
United States, provided that such depositaries qualify, b^ore receiv- 
ing lleposits, by pledging as collateral security for such deposits, in- 
cluding interest thereon, securities of the classes hereinafter described 
to an amount, taken at the rates provided, at least equal to such 
deposits. National bank depositaries designated with a mA^riwii^Tn 
qualification for this purpose alone are not thereby authorized to 
accept any other deposits hereunder. Deposits arising from the pro- 
ceeds of salte of bonds, notes, and Treasury certificates of indebtedness 
of the United States, and the payment of income and profits taxes, 
may be made from time to time with special depositaries of public 
moneys under the act of Congress approved September 24, 1917, as 
Amended and supplemented. Other deposits of public moneys are 
maintained with the several Federal Reserve Banks, pursuant to the 
provisions of Section 16 of the Federal Reserve Act, as amended. All 
Inactive National bank depositaries are being discontinued, pursuant 
to action already taken by the Secretary of the Treasury. 

RaouLAB Defositab^es — Cash DEPOsrrs.— All cash received by col- 
lectors of internal revenue, collectors of customs, depository post- 
masters, and other depositors of public moneys shall be deposited, if 
the depositor is located in the same city with a Federal Reserve Bank 
or branch bank, with such Federal Reserve Bank or branch bank, 
and in other cases with the regular National bank depositary or de- 



Digitized by CjOOQ IC 



851 

potitaritit with which the depositor has been maklnf such deposits, 
imlees and until otherwlee Inetmcted by the Secretary of the Treasury: 
Provided, however. That depoeltora located In the District of Columbia 
shall make such depoelta direct with the Treasurer of the United States. 
Payments made by postal or express money order shall be handled, 
subject to ooneetlon, in the same misnner as cash. 

RsBULAa DBFosiTABns— Chkcks and DaAFTS.— All checks received 
by any Goremment officer are recelYed subject to collection, and in 
the event that any check can not be collected or Is lost or destroyed 
before collection, appropriate action must be taken by the depositor 
In the same manner as If no check had been received. Payments 
made by check are not effective unless and until tbe check bas actually 
been duly collected and paid. All checks shall be handled through 
the Federal Reserve Banks. Bank drafts shall be handled in the 
same manner as checks. 

lUouLAB DKFosiTABins— <teTincATBS OT DEPOSIT.— Certificates of de- 
posit shall be Issued, until further notice, on the following forms: 
Internal Revenue, Form 15 (National Banks); Customs, Form 1% 
(National Banks); Public Lands, Surveys and Patent Fees, Form lA 
(National Banks); Army, Navy, Judiciary, and Indian, Form 1 (Na- 
tional Banks); Surplus Money Order Funds, Forms 6694 and 6694 A; 
Surplus Postal Funds, Fbrm 6698; Deposits for official checking ac- 
count with Treasurer of United States, Form 6699; and Sales of 
War-Savings securities, Form 1312. The original of each certificate 
of deposit (unless otherwise specifically instructed, as In cases where 
the funds represented thereby are not to be covered into the Treasury 
by warrant) shall be transmitted to the Secretary of the Treasury 
(Division of Public Moneys), through the office of the Treasurer of 
the United States, with the transcript on Fotm 17 (National Banks), 
on which the credit appears. The otber certificates of deposit In the 
set should be disposed of in accordance with the instructions which 
appear on the certificate, and one copy may be retained by tbe de- 
poeitary for its own records. Federal Reserve Banks and branches 
shall see that the face of each certificate In any set of certificates of 
deposit covering in whole or In part items other than cash for which 
Immediate credit is given, bears a legend reading as follows: "This 
certificate of deposit Issued subject to deduction for uncollectible 
items." It is of the utmost Importance that certificates of deposit 
be properly Issued, and in this connection, depositaries should give 
special attention to two points, viz.: (1) The name and title (if any) 
of thetlepositor, as John Doe, receiver of public moneye, »r, in cases 
where the deposit Is made by one person for account of another per* 



Digitized by LjOOQ IC 



362 

son, John Doe, receiver of public moneys, through Richard Roe; and 
(2) the account or purpose for which the deposit is reoeiyed, as Bala 
of public landi, or Balee of War-Bavinge eecurUiee, with a notation 
of the series, which should be clearly indicated in order to enable 
the Treasury Department to classify the deposit and credit the proper 
receipt account at the same time that the depositary is charged with 
the amount of the deposit Depositaries receiving deposits of Internal 
Reyenue receipts are particularly requested to use great care in 
specifying upon the face of certificates of depOisit on Form 16 (Na- 
tional Banks) deposits of "Income and Profits Taxes" separate and 
distinct in each case fromi deposits of Miscellaneous Internal Revenue 
Collections (formerly called "Ordinary"). It is not necessary, how- 
ever, to make any further separation of classes of Internal Revenue 
deposits on the face of certificates of deposit on Form 16 (National 
Banks). 

National bank depositaries are not authorized to maintain any 
collection account for deposits of public moneys, but are required to 
give immediate credit in the Treasurer's account and to issue certifi- 
cate of deposit for the full amount of all public moneys deposited with 
them for credit in the Treasurer's account in accordance with this 
circular. Except pursuant to specific instructions to that effect from 
the Secretary of the Treasury, no deposits of checks will be made here- 
under with National bank depositaries for credit to the account of the 
Treasurer of the United States. 

Rboulab DEPosrTABiEs— Excess Bai^arobs.— National bank deposi- 
taries, whenever they hold funds to the credit of the Treasurer of the 
United States in excess of the authorised balance, shall make imme- 
diate transfer of such excess funds to the Treasurer or an Assistant 
Treasurer of the United States, or to the Federal Reserve Bank of the 
district, or, in special cases, to branches of Federal Reserve Banks. Na- 
tional bank depositaries, whenever they hold funds to the credit of other 
Government oflicers. In excess of the collateral value of the security 
deposited therefor, shall promptly report the facts to the Secretary 
of the Treasury, Division of Public Moneys, and deposit additional 
security to cover such deposits. 

Rbqulab Depositaries — CJollateral Secubitt fob Deposits. — ^From 
the date of this circular (Dea 31, 1919) and until further notice, 
securities of the following classes, and no others, will be accepted as 
security for deposits of public moneys with regular National bank 
depositaries, and at the rates below provided: 

(a) Bonds, notes, and Treasury certificates of Indebtedness of the 
United States, of any issue, including outstanding interim certificates 
or receipts for payments therefor; all at par. 



Digitized by CjOOQ IC 



863 

(b) Bondi of the Fedenl Land Banks* bonds of the "Wkr Finance 
Corporation* bonds of Porto Rloo and the District of Ck>liunbla, and 
bonds and certUcates of Indebtedness of the Philippine Islands; all 
at par. 

(c) The S)i per cent bonds of the Territory of Hawaii at 90 per 
cent of market Talue; and other bonds of said Territory at market 
Talne» not to exceed par. 

All securities to be deposited as collateral security for such de- 
posits must be deposited with the Treasurer of the United States. On 
or before June SO, 1920, National bank depositaries will be required 
to substitute securities of the classes above described for all securities 
not falling within said classes deposited with the Treasurer of the 
United States as security for such deposits. 



BxavLAM DiPosrrAsns— 'Pathint of GovnincKNT Wabbants and 
Ohboks.— Bach regular National bank depositary with an authorised 
balance to the credit of the Treasurer of the United States, will cash 
OoTemment warrants and checks drawn on the Treasurer of the 
United States when they are presented and properly indorsed by 
responsible holders who guarantee all prior indorsements thereon, in- 
cluding the indorsement of the drawer when the check is drawn in 
his ftiTor. Regular National bank depositaries are not required to 
charge Oovemment warrants and checks cashed by them in the ac- 
count of the Treasurer of the United States, except in cases where 
checks drawn on the Treasurer of the United States are deposited 
for the official credit of the drawer or the credit of other Qoyem- 
ment officers in the account of the Treasurer of the United States and 
in cases where cash is furnished to a Government officer upon the 
warrant or check for pay-roll or other expenditures* 

RmvLAM DxFoscTAsm— 'IimEsssT 09 DgPosiTS.— Eadi National bank 
depositary will be required to pay interest at the rate of 2 per cent 
per annum on daily balances. Interest will be calculated on an actual 
days' basis, and shall be paid semiannually on January 1 and July 1 
in each year, 1 per cent for each six-months' period. 

Spboial DiPosrrAmiBS.— The following annotations are taken from 
Treasury Circular No. 92 and amendments and supplements thereto. 

Any incorporated bank or trust company in the United States desir- 
ing to participate in deposits of public moneys arising from the sale 
of bonds, notes, or profits taxes under Section 8 of the Act Sept 24, 
1917, as amended and supplemented, may make application to the 
Federal Reserve Bank of its district, on Form H 2, hereto attached, 
and accompany such application by a certified copy of resolutions duly 



Digitized by CjOOQ IC 



364 

adopted by its board of directors, in Form J 2, hereto attached. In 
fixing the maTlmnm amount of deposits for which it will apply, the 
applicant bank or trust company should be guided by the amount of 
^e payments which it expects to have to make, for itself and its 
customers, on account of allotments of such bonds and certificates, 
and, as well» by any statutory limitations upon the amount of deposits 
which the applicant bank or trust company may receive from any 
one depositor. Any application may be rejected or the applicant may 
be designated for a smaller maximum amount than that applied for. 
After receiving the recommendation of the Federal Reserve Bank, the 
Secretary of the Treasury will designate approved depositaries. 

Special Dkfositabibs— Oolla.tebal Seoubitt. — Designated depositar- 
ies will be required, before receiving deposits, to qualify by pledging, 
as collateral security for such deposits, securities of the following 
classes, to an amount, taken at the rates below provided, at least equal 
to such deposits: 

(a) Bonds and certificates of indebtedness of the United States 
Government, of any issue, including bonds of the Liberty 
Loans and interim certificates or receipts for payments there- 
for; all at par. 
(h) Bonds issued under the United States farm loan act and bonds 
of the Philippine Islands, Porto Rico and the District of 
Columbia; all at par. 

(c) The 3% per cent bonds of the Territory of Hawaii at 90 i>er 

cent of market value; and other bonds of said Territory at 
market value. 

(d) Bonds of any State of the United States, at market value; and 

approved notes, certificates of indebtedness and warrants is- 
sued by any State of the United States, at 90 per cent of 
market value. 

(e) Approved bonds of any county, city or political subdivision in 

the United States; and approved notes, certificates of indebted- 
ness and warrants issued by any county or city in the United 
States which are direct obligations of the county or city as 
a whole; all at 90 per cent of market value; but not includ- 
ing any such bonds which, at the date of this circular, are at 
a market price to yield more than 6^ per cent per annum, 
nor any such other obligations which at the date of this 
circular are at a market price to yield more than 6 per cent 
per annum, if held to maturity, according to standard tables 
of bond values. 
(/) Approved dollar bonds and obligations of foreign Ctovenunents 
(and df the dependencies thereof) engaged in war against 



Digitized by CjOOQ IC 



8SS 

Germany, iMued since Julj 80, 1914, at 00 per cent of the 
market value thereof in the United States, and improved 
dollar bonds and obligations of any province or city within 
the territory of any such foreign Oovemment or dependency, 
issued since July 30, 1914, at 75 per cent, of the market 
value thereof in the United States, 
(or) Apprcrved bonds, listed on some recognized stock exchange and 
notes, of domestic railroad companies within the United 
States; approved equipment trust obligations of such do- 
mestic railrokkd companies; and approved bonds and notes 
of domestic electric railway and traction companies, telephone 
and telegraph companies, electric lie^t, power, and gas com^ 
panics, and Industrial companies, secured (directly or by the 
pledge of mortgage bonds) by mortgage upon physical pro- 
perties in the United States and listed on s6kne recognised 
stock exchange: all at 76 per cent, of market value; but not 
including any such bonds or obligations which, at the date 
of this circular, are at a market price to yield more than 6^ 
per cent, per annum, nor any such notes which at the date 
of thitt circular are at a market price to yield more than 7^ 
per cent, per annum, if held to maturity, according to stand- 
ard tables of bond values. 
{h) Omunercial paper and bankers' acceptances, having maturity 
at the time of pledge of not to exceed six months, exclusive 
of days of grace, and which are otherwise eligible for re- 
discount 6t purchase by Federal Reserve Banks; and which 
have been approved by the Federal Reserve Bank of the dis- 
trict in which the depositary is located; at 90 per cent, of 
face value. All such comynerdal paper and acceptances must 
bear the indorsement of the depositary bank or trust company. 
No security shall be valued at more than par. No State or municipal 
bolid, obligation, or evidence of indebtedness shall be accepted if the 
State or municipality has made default in payment of principal or 
interest during the past 10 years. 

The right is reserved to caU for additional collateral security at 
any time. 

The approval and valuation of securities is committed to the several 
Federal Reserve Banks, acting under the direction of the Secretary 
of the Treasury. The withdrawal of securities, the pledge of addi- 
tional securities, and the substitution of secuilties shall be made 
from time to time as required or penniitted by the Federal Reserve 
Banks acting under like direction. 

SrXCIAL DEPOSITAaiXS — SSCUSFTIES COMMITTEBS AND CUSTOOT OF SK- 

cuums.— 'Bach Federal Reserve Bank is authorized to designate a 



Digitized by CjOOQ IC 



366 

committee, or committees, to be composed of experienced bankers, in 
such city or cities in its district as may be deemed necessary, to be 
known as the securities committee. Bach securities cotaimlttee shall 
consist of not more than three nor less than two members, who shall 
serve without compensation. It shall be the duty of sudi securities 
committee to examine the lists of securities tendered as collateral 
security foV deposits and to transmit them promptly to the Federal 
Reserve Bank of the district with the committee's recomsnendation. 
All securities accepted as collateral security for deposits hereunder 
must be deposited with the Federal Reserve Bank of the district in 
which the depositary is located or, by the direction and subject to 
the order of such Federal Reserve Bank, with a custodian c^ custod- 
ians designated by it, and under rules and regulations prescribed 
by it 

Special DEPOsiTAUxs—rlLLKiHO and WrrHDRAWAi* of Dcpoerrs.— Bach 
qualified depositary will be required to open and maintain for the 
account of the Federal Reserve Bank of its district, as fiscal agent 
of the United States, a separate account for deposits to be made 
hereunder, to be knoWn as the "War Loan Deposit Account" 

Qualified depositaries will be permitted to make payment by credit 
when due of amounts payable on subscriptions made by or through 
them/ for Treasury certificates of indebtedness and for Liberty Bonds. 
In order to make pajonent by credit the depositary must notify the 
Federal Reserve Bank of the district by letter or telegram to reach 
it on or before the date when such payment is due, and must on 
said date issue a certificate of advice to such Federal Reserve Bank 
stating, that a sum specified (in addition to all other amounts stand- 
ing to the credit of said fiscal agent with such depositary) has been 
deposited with such depositary for the account ot such Federal Re- 
serve Bank, as fiscal agent of the United States, in the War Loan 
Deposit Account 

The unexpended cash proceeds, if any, of the sale of any issue of 
certificates or bonds will be deposited among the qualified depositaries 
as nearly as may be in protK>rtion to the subscriptions made by and 
through them for such issue. 

All deposits and withdrawals will be made by the Federal Reserve 
Banks by direction of the Secretary of the Treasury. 

The amount deposited with any depositary shall not in the aggre- 
gate exceed at any one time (o) the maximum amount for which it 
shall have been designated as a depositary, nor (5) the aggregate 
amount of the collateral security pledged by it taken at the rates 
hereinbefofe provided. All deposits will be payable on demand with- 
cmt previous notice. 



Digitized by CjOOQ IC 



367 

Spsoial D1PO6ITAB118 — Intebbst on DEP08IT8.— ASach depositary win 
be required to pay interest at the rate of 2 per cent per annum on the 
average daily balance maintained during the period of the deposit. 
Interest payments must be made when deposits are finally withdrawn, 
but not less frequently than quarterly. 

Special Depositaries — ^Formb.- 
Form H-2— Public Moneys. 

APPUCATION FOR DEPOSITS. 



To iht Federal Re$erve Bank of...,, fiscal agent of the United States: 
The undersigned bank or trust company, in accordance with the 
provisions of Treasury Department Circular No. 92, dated October 6, 
1917, as amended and supplemented April 10, 1918, and pursuant to 
due action of its board of directors, hereby makes application for 
the deposit of public moneys with it from time to time under the 
itct of Congress approved September 24, 1917, as amended by the act 
approved April 4, 1918, the aggregate amount of such deposits not 

to exceed at any one time I ; and assigns and agrees to 

pledge, from time to time, to and with the Federal Reserve Bank of 

, as fiscal agent of the United States, as collateral 

security for such deposits as may be made from time to time pursuant 
to this application, securities of the character and amount required 
by said circular. 

I » 

By 

President {Vice President). 

Street 

City or totcn 

State 

Form J-2 — ^Public Monesrs. 

RESOLUTIONS AUTHORIZING APPLICATION FOR DEPOSITS. 

I hereby certify that the following resolutions were duly adopted at 
a meeting of the board of directors of the below-named bank (trust 

company), which meeting was duly called and duly held on the 

day of , 192.., a quorum being present, and that the said 

resolutions were spread upon the minutes of said meeting: 

Resolved, That, in accordance with the provisions of Treasury De- 
partment Circular No. 92, dated October 6, 1917, as amended and 
supplemented April 10, 1918, this bank (trust company) make appli- 
cation for the deposit of public moneys with it from time to time 



Digitized by CjOOQ IC 



868 

under the act of Congress a:pp^o^red September U, 1917, as amisaded 
hy the act approved April 4, 1918, the aggregate amount of such de- 
posits not to exceed at any one time |. 4 ; and assign and 

agree to pledge from time to time to and with the Federal Reserve 

Bank of >. . . ., as fiscal agent of the United States, as 

collateral security for such deposits as may be made from time to 
time pursuant to such application, securities of the character and 
amount required by said circular; and 

Resolved, That the president, or any rice president, or cashier, or 
secretary, of the undersigned bank (trust company) is her^y author- 
ised to make application, assignment, and agreement as aforesaid and 
from time to time to deliver to and pledge with said Federal Reserve 
Bank, or any custodian or custodians appointed by it, securities of 
the undersigned bank (trust company) of a character and amount at 
least sufficient to secure such deposits according to the terms of said 
Treasury Department circular, and from time to time to* withdraw 
securities and to substitute other securltiesr and to pledge and deposit 
additional securities. 

In witness whereof I have hereunto signed my name and affixed 

the seal of the of 

• \ 

Ooihier (Becretary). 

Form K— Public Moneys. 

C^ERTIFICATB OF ADVICB. 



(Title of bank or trust company.) 
(Location.) 



, 191.. 

(Date.) 

I hereby certify that there has been deposited this day with the 
above bank (trust company), to the credit of the Federal Reserve 

Bank of , as fiscal agent of the United States, 

War Loan Deposit Account, to be held subject to withdrawal on de- 
mand, the sum of .dollars, consisting of payment tor 

fprindpal | ^, 

** •' I accrued interest . . .. | 

, principal $ • 

Certificates of indebtedness {.^jerued interest ... | 



Total I. 



. . • •» • H • 

Ooihier or Vice Fre$ideHt 



Digitized by CjOOQ IC 



859 

(The depoUtaiy will forward this to the Federal Res^rre Bank of 
) 



lUflOLUnON FOB WlTHmUWAL OF BOTHW HELD TO SeCUUB PUBLIO MoITCTS. 

At a meeting of the Board of Directors of the Bank of 

held at the Banking House, , 192. . the following resolution 

was adopted: 

RBSOLVED, that the Treasurer of the United States be, and he 

is hereby, authorized to withdraw | U. S. Bonds, held for 

account of this Bank as security for public moneys, and described as 
follows: 

I H. . of the Loan of 

and that be, and is hereby, authorized to' sell, assign, and 

transfer the same, and to appoint one or more attorneys for that 
purpose, 

I hereby certify that the above is a true extract from the minutes 
of said meeting. 
[Seal of bank] 

Cashier, and Secretary of the Board of Directors. 

Nora. — ^No^ official of the Treasury can sell or assign fOr the bank. 
The bank's agent or other person must be appointed. 

The Treasurer's receipts for the bonds to be withdrawn must be 
forwarded to the Treasurer with this resolution. 

CotTBT Bankbuftct aih) Post-Offige FuifDS. — ^Proyision is made in 
Sections 995 and 996, Revised Statutes, that "all moneys paid into 
any court oY the United States or received by the officers thereof, in 
any case pending or adjudic^tted is such court, shall be forthwith 
deposited with the Treasurer, an Assistant Treasurer, or a Designated 
Depositary of the United States, in the name and to the credit of 
such court: Provided, That nothing therein shall be construed to pre- 
vent the delivery of any such money upoh security, according to 
agreement of parties, under the direction of the court" But that 
(Sec. 996, R. S.) no monejr deposited as aforesaid shall be withdrawn 
except by order of the Judge or Judges of said courts respectively, in 
term or in vacation, €cf be signed by such Judge or Judges, and to be 
entered and certified of record by the clerk; and every such order 
shall state the cause in or on account of which it is drawn. 

But moneys in court deposited in a designated depositary of the 
'United States are not public moneys of the United States and a 
court cannot order such bank to pay to a party to a suit interest 
on a deposit made by the clerk of the court. (Chatham 4b Phosnix 
Nat Bank v. Guaranty Trust Co.» 266 Fed« Rep., 90.) 



Digitized by CjOOQ IC 



360 

A Court of Bankniptcy shall designate by order hanlrtng Inetttn- 
tions as depositaries for the money of bankrupt estates, as convenient 
as may be to the residences of trustees; and shall require bonds to 
the United States subject to their approval (Bankruptcy Act, July 1, 
1898, Vol 30, Sec. 61. Chap. 7, page 662.) 

National bank depositaries designated with a maximum qualifica- 
tion for the sole purpose of receiving deposits made by United States 
Courts and their officers, by postmasters for credit to their official 
disbursing accounts, and by other Government officers authorized to 
maintain disbursing accounts elsewhere than with the Treasurer of 
the United States are not authorized to receive deposits for credit 
to the account of the Treasurer of the United States. Such deposi- 
taries are required to forward to the Treasurer of the United States 
at the end of each week, and at the end of each month, a report on 
Form 17 (National Banks), showing the aggregate amounts of such 
deposits, and to the Secretary of the Treasury, Division of Public 
Moneys, at the end of each week, and at the end of each month, a 
report on Form 7 (National Banks), showing in detail the deposits 
to the credit of the local postmaster, the United States court ot its 
officers, and other authorized special accounts. Bankruptcy funds 
and postal savings deposits should not be included in these reffortB, 

§ 323. Penalty for TTnanthoriied Deposit of Pnblio Koney.— 
Whoever, being a disbursing o£Bcer of the United States, or a 
person acting as such, shall in any manner convert to his own use, 
or loan with or without interest, or deposit in any place or in any 
manner, except as authorized by law, any public money intrusted 
to him; or shall, for any purpose not prescribed by law, withdraw 
from the Treasurer or any assistant treasurer, or any authorized 
depositary, or transfer, or apply, any portion of the public money 
intrusted to him, shall be deemed guilty of an ^nbezzlement of the 
money so converted, loaned, deposited, withdrawn, transferred, or 
applied, and shall be fined not more than the amount embezzled, 
or imprisoned not more than ten years, or both. (Act March 4, 
1909, Sec. 87; 36 Stat TJ. S., 1106.) 

§ 384. Penalty for TTnanthorized Beoeipt or Use of PuUio 
Money. — See § 177 under National Bank Act^ page 181. 



Digitized by CjOOQ IC 



CHAFfER in. 

Postal Savings Dbpositobibs. 

Section 326. Deposit of Postal Savings Funds in Bank*— Mini- 
mum Rate of Interest — Security Furnished by 
Banks, etc. 

326. Repeal of Conflicting Laws. 

327. Prohibition Against Charge of Exchange, etc., by 

Banks. 

328. Postal Savings Bonds Not Receivable As Security for 

Circulating Notes. 

§ 326. Deposit of Postal SaTings Funds in Banks— Minimum 
Bate of Interest — Security Furnished by Banks, etc. — That postal 
savings funds received under the provisions of this act shall be 
deposited in solvent banks, whether organized under National or 
State laws^ and whether member banks or not of the Federal re- 
serve system established by the act approved December twenty* 
third, nineteen hundred and thirteen, being subject to National or 
State supervision and examination, and the sums deposited shall 
bear interest at the rate of not less than two and one-fourth per 
centum per annum, which rate shall be uniform throughout the 
United States and Territories thereof; but five per centum of such 
funds shall be withdrawn by the board of trustees and kept with 
the Treasurer of the United States, who shall be treasurer of the 
board of trustees, in lawful money as a reserve. The board of 
trustees shall take from such banks such security in public bonds 
or other securities, authorized by act of Congress, or supported by 
the taxing power, as the board may prescribe, approve, and deem 
sufScient and necessary to insure the safety and prompt payment 
of such deposits on demand. The funds received at the postal 
savings depository ofBces in each city, town, village, and other lo- 
calilj shall be deposited in banks located therein (substantially in 

361 



Digitized by CjOOQ IC 



863 

prcqportion to the capital and surphiB of each such bank) willing 
to receive such deposits ondCT the terms of this act and the r^nla- 
tions made by authority thereof: Provided, however. If one or 
more member banks of the Federal reserve system established by 
the act approved December twenty-third, nineteen hundred and 
thirteen, exists in the ciiy, town, village, or locality where the 
postal savings deposits are made, such deposits shall be placed in 
such qualified member banks substantially in proportion to the 
capital and surplus of each such bank, but if such member banks 
fail to qualify to receive such deposits, then any other bank located 
therein may, as hereinbefore provided, qualify and receive the same. 
If no such member bank and no other qualified bank exists in any 
city, town, village, or locality, or if none where such deposits are 
made will receive such deposits on the terms prescribed, then such 
funds shall be deposited under the terms of this act in the bank 
most' convenient to such locality. If no such bank in any State or 
Territory is willing to receive such deposits on the terms prescribed, 
then such funds shall be deposited with the treasurer of the board 
of trustees and shall be counted in making up the reserve of five 
per centum. Such funds may be withdrawn from the treasurer of 
said board of trustees, and all other postal savings funds, or any 
part of such funds, may be at any time vdthdrawn from the banks 
and savings depository offices for the repayment of postal savings 
depositors when required for that purpose. If at any time the 
postal savings deposits in any State or Territory shall exceed the 
amount which the qualified banks therein are willing to receive im- 
der the terms of this act> and such excess amoimt is not required 
to make up the reserve fund of five per centum hereinbefore pro- 
vided for, the board of trustees may invest all or any part of such 
excess amount in bonds or other securities of the TJnited States. 
When, in the judgment of the President, the general welfare and! 
interests of the United States so require, the board of trustees may 
invest all or any part of the postal savings funds, except the reserve 
fund of five per centum herein provided for, in bonds or other 
securities of ttie United States. The board of trustees may in its 
discretion purchase from the holders thereof bonds which have 
been or may be issued under the provisions of section ten of the 



Digitized by CjOOQ IC 



MS 

act of June twenty-fifth, nineteen htmdred and ten. Interest and 
profit accruing from the deposits or investment of postal savings 
funds shall be applied to the payment of interest due to postal 
savings depositors, as hereinbefore provided, and the excess thereof, 
if any, shall be covered into the Treasury of the United States as 
a part of the postal revenue: Provided further, That postal sav- 
ings funds in the treasury of said board shall be subject to dis- 
position as provided in this act, and not otherwise: And provided 
further. That the board of trustees may at any time dispose of 
bonds held as postal savings investments and use the proceeds to 
meet withdrawals of deposits by depositors. For the purpose of 
this act the word 'Territory^' as used herein shall be held to include 
the District of Columbia, the District of Alaska, and Porto Rico, 
and the word '^bank^ shall be held to include savings banks and 
trust companies doing a banking business. (Sec. 2, Act May 
18, 1916.) 

BLionnLiTT or Bahks.— Tbe Act of May 18, 1916 (amending See. 9 
of the act of June 26, 1910), prescribes that the funds received at 
p6(ital savings depositary offices in each city, town, viUage, or other 
locality shaU be deposited in solvent banks located therein, whether 
organized under National or State laws, and whether member banks 
or not of the Federal Reserve System established by the Act approved 
December 23, 1913, being subject to National or State supervision and 
examination, willing to receive such deposits under the terms of the 
Act and the regulations made by authority thereof. The word "bank" 
as used in the law includes savings banks and trust companies doing 
a banking business. 

If one or more member banks of the Federal Reserve System exist 
in any city, town, village, or locality where postal savings deposits 
are made, such deposits are required to be placed in such member 
banks, provided they qualify to receive them, substantially in propor- 
tion to the capital and surplus of each such bank; but if such member 
banks fail to qualify to receive the deposits, then any other banks 
located therein and eligible as hereinbefore provided may qualify to 
receive them, and the deposits shaU be placed in such qualifying 
banks substantially in proportion to their capital and surplus. If 
no bank eligible to qualify exists in any city, town, village, or locality, 
or If none where such deposits are maUe wiU receive them on the 
terms prescribed, then such funds shall be deposited under the terms 
of said act In the bank most convenient to such locality. If no such 



Digitized by CjOOQ IC 



364 

bank in any State or Tsrritory Is willing to reoelTB aueh depoalta on 
the terms prescribed, then the same are reQolred to b« deposited with 
the Treasurer of the Board of Trustees. The law requires that 5 per 
centum of the postal savings funds shall be withdrawn by the Board 
of Trustees and kept with the Treasurer in lawful money as a reserve. 

QuALDiOATioH ov Bahks.— Any eligible bank desiring to qualify for 
deposits of postal savings funds shall transmit to the Third Assistant 
Postmaster General, Division of Postal Savings, Washington, D. C, an 
application accompanied by a report showing fully the condition of 
the bank on a day not more than one month prior to the date of such 
application. Such report shall be sworn to by the president or cashier 
and attested as correct by two members of the board of directors, who 
shall also certify the amount of paid-in capital and unimpaired surplus, 
exclusive of undivided profits. Blank application forms may be ob- 
tained from the Third Assistant Postmaster General, Division of Postal 
Savings, Washington, D. C. No deposits win be made in any bank 
until it shall have complied with these provisions and deposited securi- 
ties which meet the requirements. 

Upon receipt of the application, properly completed, from a bank 
authorized to qualify under the law, the Third Assistant Postmaster 
General will inform such bank of the initial amolmt of bonds or other 
securities which it will be required to deposit as security for postal 
savings funds. 

A minimum initial deposit of bonds of the total par value of $6000 
will be required from a bank qualifying at a first-class postcHBce; of 
the total par value ot flOOO at a second or third class office; and of 
the total par value of |600 at a fourth class oiBce; but no deposit ot 
bonds of a total par value less than |500 will be accepted. If war- 
ranted by the anticipated deposits, greater initial amounts of securities 
than those above specified may be required. 

Bonds or securities conforming to the requirements and in the 
amount specified in the notification of the Third Assistant Postmaster 
General shall be forwarded by the bank directly to the Treasurer of 
the United States, Washington, D. C* 

Either registered or coupon bonds will be aocepted, but all regUtered 
bonds shall be registered in the name of "The Treasurer of the 

*To fitcilitate examination as to legal acceptability of securities, 
banks are requested to forward, at the time the securities are tendered, 
for the use of the Solicitor for the Postofflce Department, certified 
copies of final legal opinions as to the validity of such securities, or, 
if such opinions are not available, certified transcripts of the recorded 
proceedings, including certificates covering the due execution and sale 
of sudi bonds. 



Digitized by CjOOQ IC 



365 

United States, in trnat for the Bank, ol ■ v «• eecuritf 

for postal savings funds." The Treasurer of the United States will 
dispose of maturing coupons and checks covering interest accruing on 
registered bonds as directed bj the banks. 

The Third Assistant Postmaster General will inform the Treasurer 
of the United States of the amounts of securities which the respective 
banks are required to deposit Upon receipt of such securities, the 
Treasurer shall determine, as matter of fact, whether the securities 
conform to the requirements of these regulations. He shall then 
submit a statement of his findings to the Solicitor for the Postofflce 
Department, who shall determine, as matter of law, whether such 
securities are legally acceptable under the Ax^ of May 18, 1916, and 
the regulations herein set forth, and who for that purpose shall 
have access to the securities. No securities shall be accepted until 
their legal acceptability has been determined by the Solicitor for the 
Postofflce Department 

If such bonds are accepted, the Treasurer shall issue his receipt 
therefor in duplicate, forwarding the original to the Third Assistant 
Postmaster General with advice of his action, and the duplicate to 
the bank depositing the securities. If the bonds are held not to 
conform to the requirements of the law or these regulations, they 
shall be retained subject to the order and at the risk ot the bank for 
whose account they were tendered, and the bank so notified. If the 
bonds are insufficient in amount, the bank shall be requested by the 
Treasurer to furnish additional bonds. 

On receipt of notice from the Treasurer of the United States that 
the securities required of any bank have been received and accepted, 
the Third Assistant Postmaster General will notify such bank that 
it has qualified to receive deposits of postal savings funds. He will 
state the amount fixed as the maximmm balance which may be held 
by such bank, and will instruct the proper postmaster to make de- 
posits therein. 

Sbouutt loi DEPosrro. — ^The Board of Trustees prescribes and ap- 
proves such security in public bonds or other securities, authorized by 
act ot Congress or supported by the taxing power, as it deems sufficient 
and necessary to insure the safety and prompt payment on demand of 
postal savings deposits, and fixes the value at which the securities so 
prescribed and approved shall be accepted for the purposes named. 
Such securities, in the amount so specified, shall be deposited with 
the Treasurer of the Board of Trustees. 

The Board of Trustees will accept as security for postal savings 
deposits, at the respective values herein fixed, negotiable interests 
bearing bonds or securities, issued under express constitutional or 
statutory provisions, of the following classes, viz.: 



Digitized by CjOOQ IC 



(a) Bonds of the United States, of the Philippine Islands, ot the 
District of Colunit>ia, and of Porto Rico, will he accepted at their 
par Talue. 

(5) Bonds of any State of the United States and of the Territory of 
Hawaii will he accepted at their market value, hat if snch market 
yalue is ahove par, they will he accepted at their par valne. 

(c) Bonds of any city or county in the United States having a 
population of over 80,000 as shown hy the latest reports of the Bureau 
of the Census, and bonds of any school district in the United States 
in which the whole or the major portioh of any such city Is in- 
cluded, which city, county, or school district has been in existence 
for a period of ten years, which for a period of ten years previously 
has not defaulted in the payment of any part df either principal or 
interest of any funded debt authorized to be contracted by it, and 
whose net funded indebtedness does not exceed 10 per cent, of the 
valuation of its taxable property, to be ascertained by the last pre- 
ceding valuation for the assessment of taxes, win be accepted at 90 
per cent of their market value, but if such market value is above 
IMtr, they will be accepted at 90 per cent of their par value. 

(d) Bonds of any city, town, borough, or village in the United 
States, having a population of over 20,000 and not exceeding 30»000, 
as shown by the latest reports of the Bureau of the Census, and bonds 
of any school district in the United States in which the whole or 
the major portion of any such municipality is included, which city, 
town, borough, village, or school district has been in existence for 
a period of ten years, which for a period of ten years previously has 
not defaulted in the payment of any part of either principal or 
interest of any funded debt authorized to be contracted by it, and 
whose net funded indebtedness does not exceed 10 per cent of the 
valuation of its taxable property, to be ascertained by the last pre- 
ceding valuation for the assessment of taxes, will be accepted at 80 
per cent of their market value^ but if such market value is above 
par, they will be accepted at 80 per cent, of their par value. 

(e) Bonds of any other city, town, county, or other legally consti- 
tuted municipality or district in the United States, which has been 
in existence for a period of ten years, which for a period of ten 
years previously has not defaulted in the pasrment of any part of 
either principal or interest of any funded debt authorized to be con- 
tracted by it, and 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 for the assessment oT taxes, will be 
accepted at 75 per cent of their market value, but if such market 
value is above par, they will be aoo^ted at 76 per cent of their 
par value. 



Digitized by CjOOQ IC 



867 

The tenn **net funded indehtedne$$,*' for the porpofes of (c), ((!)« 
and (e) ahore, is hereby defined to be the difference between the 
legal gross indebtedness of a city, town, county, or other legally 
constituted municipality or district (including the amount of the 
bonds of any civil division whose territorial limits are approximately 
coterminous therewith) and the aggregate of the following items, 
when included in such legal gross indebtedness: 

(a) The total of all sinking funds accumulated for the redemption 
of such gross indebtedness, except sinking funds applicable to bonds 
hereafter described in this section. 

(h) The amount of outstanding bonds or other debt obligations, 
made payable f rotn current revenues. 

(c) The amount of outstanding bonds Issued for the purpose of 
providing the inhabitants of a municipality with public utilities: Pro- 
vided, That evidence is submitted showing that the income from such 
utilities has proved to be sufficient fbr maintenance, for payment of 
interest on such bonds, and for the accumulation of a sinking fund for 
their redemption. 

id) The amount of outstanding improvement bonds, issued under 
laws which provide for the levying of special assessments against 
abutting property: Provided, That evidence is submitted showing that 
assessments are levied in sufficient amounts to insure the payment of 
interest on the bonds and the redemption thereof. 

The Board of Trustees reserves the right td reclassify the secu- 
rities acceptable for deposits and to change the valuation at which 
they will be accepted. Under no circumstances will securities of other 
classes than those above named be accepted. 

Bonds of the several classes described in (5), (c), (<f), and (e), to 
be acceptable as security, shall be the general obligations of the 
States, Territories, counties, cities, towns, or other political divisions 
by or in behalf of which they are issued, and payable, either directly 
or ultimately, without limitation to a special fund, from the proceeds 
of taxes authorized to be levied upon all the taxable real and personal 
property within the territorial limits of such political divisions: Prfh 
vided, That in any case where the rate of tax may be subject to a con- 
stitutional or statutory limit, the Solicitor for the Postoffice Depart- 
ment may require satisfactory evidence that, notwithstanding such 
limit, the interest and principal of the bonds can be paid after 
making due provision for current expenses, interest and principal 
of outstanding debts, and other necessary charges. 

Obligations of the general class embracing what are commonly 
known as "revenue bonds," "temporary bonds," '^mporary notes," 
"certificates of indebtedness," "warrants," and the like obligations, 
whether issued in anticipation of the collection of taxes, assessments. 



Digitized by CjOOQ IC 



368 

or other rorennes, or of the sale ot bonds or other obligations, or for 
similar purposes, will not be accepted as security fOr postal savings 
deposits: Provided, That, in applying this regulation, consideration 
will be given to the legal status of the obligations submitted rather 
than to the nomiendature employed in designating such obligations. 

Bonds which in all other respects are found to be legaUy acceptable 
as security under the postal savings act and these regulations will 
be construed, as a matter of law, to conform to those provisions men- 
tioned above which relate to term of existence and nondefault, under 
the following conditions: 

(a) Bonds issued by or in behalf of any dty, town, county, or 
other legally constituted municipality or district in the United States 
which was, subsequently to the issuance of such bonds, consolidated 
with, or merged into, an existing political division which meets the 
requirements of these regulations, will be deemed to be the bonds of 
audi political division: Provided, that such bonds were assumed by 
such political division under the statutes and iq;>prolpriate proceedings 
the effect of which is to make such bonds 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. 

(5) Bonds issued by or in behalf of any city, town, county, or other 
legally constituted municipality or district of the United States which 
was, subsequently to the issuance of such bonds, wholly succeeded by 
a newly organized political division, whdse 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 Ixmds of such succeeding political division: Provided, That 
during such period none of such political divisions shall have de- 
faulted in the payment of any part of either principal or interest of 
any funded debt authorized to be contracted by it And provided fur- 
ther. That such bonds were assumed by such new political division 
under statutes and appropriate proceedings the effect of which is to 
make such bonds general obligations of such assuming political divis- 
ion, and payable, either directly or ultimately, without limitation to 
a special fund, from the proceeds oC taxes levied upon all the taxable 
real and personal property within its territdrial limits. 

(c) Bonds issued by or in behalf of any city, town, county, or other 
legally constituted municipality or district in the United States 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, to 



Digitized by CjOOQ IC 



369 

equml to a period of 10 yean, will be deemed to be bonds of a pe> 
Htlcal dlTlelon which has been In existence M a period of 10 years: 
Provided, That during such period none of such orls;lnal, suoceedlng, 
or consolidated political dlTlslons shall haye defaulted In the pay- 
ment of any part of either principal or Interest of any funded debt 
authorised to be contracted by it 

The Treasurer of the Board of Trustees shall make examinations 
semiannually, or oftener if he deems it necessary, of the securitlee 
which have been accepted from quallfled banks, and whenerer, in his 
Judgment, any of such securities have so far depreciated in value 
as to make desirable the deposit of additional or new securities, he 
Shan inttfm the Third Assistant Postmaster General of the name 
of the bank, the kind and amount of the securities, and the amount 
of the depreciation. The Third Assistant Postmaster General will 
notify the Treasurer and the bank of the amount of additional or 
new securities which the bank shall deposit, and upon their receipt 
by the Treasurer, the procedure provided as to their acceptance or 
rejection, and as to the return of the original securities, if new secu- 
rities are reguired, shall be followed. 

AppoBnoNicxNT c/r Dxposrrs.— When more than one bank in any 
city, town, village, or locality has qualified to receive postal savings 
funds, deposits, of such funds shall be apportioned substantially upon 
the basis of capital and surplus as required by the Act of May 18, 
1910, and shall be made to the credit of the Board of Trustees in 
such rotation and amounts as will effect such apportionment, until 
the deposits reached the maximum balance authorized for any bank. 
The banks concerned will be fully Informed in thb premises. 

An appoVtionment of postal savings funds will apply in the case 
of each qualified bank only to funds deposited after the date as of 
Which the bank qualified. 

After any apportionment of funds has been made in a given locality, 
no other bank will be allowed to qualify to receive postal savings 
deposits except as of the 1st day of January, April, July, or October, 
unless the maximum amount of deposits applied for by the banks 
already qualified has been reached and such banks have not qualified 
for additional funds. When a qualified member bank of the Federal 
Reserve System in which the deposits have reached the maximum 
authorised balance declines or fails to furnish additional collateral 
and a local nOhmember bank qualifies to receive deposits, the member 
bank must await the next quarterly reapportionment date before qual- 
ifying for additional funds. Applications to qualify under a reappor- 
tionment of the funds of any depository office shall be forwarded 
In sufficient time to reach the Third Assistant Postmaster General, 
24 



Digitized by CjOOQ IC 



870 

DlTislon of PobUI Savliigi, before the 15th day of December, Bftrch. 
June, or September. 

When the capital or surplus of a depository bank is increased or 
reduced after it has qualified as a depository, the president or cashier 
shall promptly certify to the Third Assistant Postmaster General, Di- 
vision of Postal SavingB, the amount of such bank's paid-in capital 
and unimpaired surplus, exdusiye of undivided profits, after such in- 
crease or reduction, in order that proper rei^portionment of the de- 
posits may be made amohg the banks affected as of the dates first 
above named. 

iNiSEEST. — ^Until further notice, banks which have qualified to receive 
deposits of postal savings funds will be required to credit the Board 
of Trustees with interest at the rate of two and one-half per cent per 
annum, as of January 1 and July 1 in each year, upon the average 
daily balances of postal savings funds deposited with such banks, as 
shown by the audited accounts of postmasters and other agents of 
the Postal Savings System. Such interest shall be computed and 
entered as required by instructions on the back of Form PS 510. 

The Board of Trustees will, from time to time, make such changes 
in the rate of interest to be paid by qualified banks as it may deem 
proper, subject to the minimum rate prescribed by the Act of May 18, 
1916, the rate adopted being uniform throughout the United States 
and Territories thereof. 

Deposits or Funds m Banks.— Postmasters whtf deposit in qualified 
banks will be instructed to make all such deposits to the credit of 
the Board of Trustees, Postal Savings System, and will be required 
to make daily deposits of all excess postal savings receipts amounting 
to $10 or more, except on the 25th day eft each month, when all cash 
on hand amounting to %1 or more shall be deposited. 

On receipt of a deposit of such funds the bank shall issue a cer- 
tificate of deposit, in duplicate, on Form PS 400, in the name of the 
postmaster or other officer or agent making the deposit The duplicate 
shall be immediately delivered or forwarded to the postmaster or 
other officer or agent making the deposit and the original certificates 
shall be forwarded by the bank at the close of each calendar week 
to the Third Assistant Postmaster General, Division of Postal Savings. 
All original certificates on hand at the end of a month, even though 
covering only part dt a week, shall be forwarded. Qualified banks 
will be supplied with blank certificates, Form PS 400. 

BxoBSB Deposits. — If any postmaster shall deposit in a qualified 
bank an amount in excess of the maximum balance authorised, such 
bank shall immediately notify the Third Assistant Postmaster Qeneral, 



Digitized by CjOOQ IC 



371 

DiTlBlon of Postal SaTings, and, until othonrlae directed* shall tranfer 
Bueh excess at the close of business each day to the Treasurer 6f the 
United States at Washington or to the Assistant Treasurer of the 
United States In one of the following cities: New York, Philadelphia* 
Boston, Baltimore, Cincinnati, Chicago, St Louis, New Orleans, or 
San Francisco. Such transfer shall be made to the credit of the "Board 
of Trustees, Postal Savings System, on account of returnable deposits." 
Should additional funds beyoihd the amount for which a bank has 
gualifled become ayallable for deposit, the bank, in order to recdye 
further deposits, will be required to furnish additional securities in 
the manner heretofore provided. When the volume of deposits lA 
a qualified bank approaches the maximum balance which it is au^ 
thdHzed to receive, and it appears that funds wHl be available in the 
near future for deposit in excess of such balance, the bank may, if it 
so desires, forward additional bonds directly to the Treasurer of the 
United States without awaiting instructions from the Third Assistant 
Postmaster General, who should, however, be promptly notified of such 
action. 

Withdrawals bt Postmastkbs. — All postal savings funds are re- 
quired to be deposited to the credit of the Board of Trustees. In 
order to provide a postmaster whof deposits in bank with funds for 
meeting withdrawals by depositors, one bank, especially designated 
for the purpose, will be authorized to honor his oflicial checks, drawn 
against the Board of Trustees' account, and not exceeding a specified 
amount in any one calendar month. The amount of the credit thus 
fixed may be added to the proportion of deposits assigned to the desig- 
nated bank, but shall be secured by bonds, subject to the payment 6f 
interest, and Included in the maximum balance which such bank is 
authorized to receive. Such credit may be increased from time to 
time by the Third Assistant Postmaster General. 

Withdrawals by Board of Trustees. — ^Whenever postal savings 
funds are to be withdrawn from a qualified bank by the Board of 
Trustees for investmient in bonds or other securities of the United 
States, dr for other purposes, the Third Assistant Postmaster General 
will draw a draft on the bank, ol* will direct the bank to deposit the 
required amount to the credit of the ''Board of Trustees, Postal Sav- 
ings System," with the Treasurer or an assistant treasurer of the 
United States, or other authorized agent 

On receipt of such deposit the Treasurer, assistant treasurer, ot* 
other agent shall issue a certificate of deposit in duplicate in the name 
of the depositing bank, and forward the original certificate to the 
Third Assistant Postmaster General, Division of Postal Savings, and 
the duplicate to the bank. 



Digitized by CjOOQ IC 



372 

WITHDRAWALS cw S1CUBITIB8 BT Bakkb.— WhoiieTer a bank destres 
to rellnqalsh the whole or a part of its postal sayings deposits or to 
withdraw such of its securities as do not coyer deposits, it shall notify 
the Third Assistant Postmaster General, Diyision of Postal Sayings, 
and shall forward to him the duplicate receipt or receipts issued bj 
the Treasurer of the United States at the time the securities were 
decMMited, together with a duly attested and certified copy of a resolu- 
tion of its board of directors authorizing such withdrawal and sped- 
tying the disposition to be made of the securities. 

The Third Assistant Postmaster General will direct the bank as to 
the disposition to be made of the relinquished deposits, and after such 
disposition will transmit both the original and duplicate receipts to 
the Treasurer of the United States, who shall then dispose of the 
bonds as directed by the bank. 

If the entire amount of securities deposited is nc^ withdrawn, the 
Treasurer shall return the receipts to the Third Assistant Postmaster 
General, indorsing thereon the amount of securities withdrawn, and 
the Third Assistant Postmaster General will transmit the duplicate 
receipt to the bank. If the entire amount of securities deposited is 
withdrawn, the receipts shall be cancelled and retained by the 
Treasurer. 

Registered bonds withdrawn for any reason shall be assigned by 
the Treasurer directly to the bank for whose account they were pre- 
yiously held, except in the cases hereafter mentioned, and except 
where United States bonds are called for redemption, in which case 
they shall be assigned directly to the Secretary of the Treasury. 

If the duplicate receipt issued to a bank coyering securities deposited 
shall be lost, stolen, or destroyed, and can not be produced when a 
withdrawal of bonds is to be made, an affldayit setting forth the facts 
shall be executed by an officer of the bank and forwarded to the Third 
Assistant Postmaster General, who may authorise the Treasurer of 
the United States to accept such affldayit in lieu of the missing receipt 

When a bank desires to substitute securities in lieu of those already 
deposited, it shall notify the Third Assistant Postmaster General, Di- 
yision of Postal Sayings, inclosing the Treasurer's duplicate receipt 
for the bonds to be withdrawn, and a duly certified and attested copy 
of a resolution of its board of directors authorizing; such substitution. 
The Third Assistant PoiStmaster General will then forward to the 
Treasurer both the original and duplicate receipts for the bonds to 
be withdrawn and direct the bank to forward to the Treasurer the 
securities to be substituted. If they are accepted, the Treasurer shall 
issue new receipts to the Third Assistant Postmaster General and to 
the bank and dispose of the securities withdrawn as requested by 
the bank. 



Digitized by CjOOQ IC 



373 

When banks desire to exehaage with one another securities de- 
IKMrited by them, they shmU forward to the Third Assistant Postmaster 
General lists of such securities, accompanied by duly attested and 
oertlfled copies of resolutions of their boards of directors authorizing 
such exchanges and the Treasurer's duplicate receipts covering such 
securities. If the exchanges are approved, the Third Assistant Post- 
master General will so inform the Treasurer, who shall simultaneously 
withdraw from deposit and assign the securities and redeposit them 
for account of the respective banks, issuing new receipts in duplicate 
therefor. 

BsSOLUnON lOB WiTHDBAWAL OF BONDS HKLD AS SBO0BITT FOB POSTAL- 

Savings Fimos. — 

At a meeting of the Board of of the Bank 

of Jield at their banking hou9e 192.., the following 

reiolutione were adopted: 

Resolved, that the Board of Trusteee of the Poetai Savings System 

(e, and they are hereby, authorized to withdraw % bonds^ held 

by the Treasurer of the United States in trust, as security for postah 
savings funds, and described as follows: 



t of the Loan of... 

I of the Loan of... 

I of the Loan of..). 

I of the Loan of..\. 



and that the Treasurer of the United States is hereby OMthoriMed to 
forward said bonds to 

Resolved, That be, and is hereby, awthor- 

ized to sell, assign, and transfer the same and to appoint one or more 
attorneys for that purpose, 

I thereby cretify that the oibove is a true extract from the mlfiwutes 
of said meeting. 

IMPBESS 

OQBPOBATB SEAL Secretary of the Board of 



N. B. — ^This resolution should be properly executed and certified, with 
the seal of the bank impressed, and fotwarded to the Board of Trus- 
tees of the Postal Savings System, Washington, D. C, whenever bonds 
held as security for postal-savings funds are to be withdrawn, to- 
gether with the Treasurer's receipt covering the bonds to be with- 
drawn. 



Digitized by CjOOQ IC 



374 

The penon authorised to assign the bonds should ndt be the person 
who certifies to the aboye resolution. 

Fajlvbe or Bakks to Rkpat Diposrrs oa OrHmwisa 10 Obskbyb Rbo- 
ULATIONB. — ^Any qualified bank which shall tail to comply with these 
regulations shall be liable to be disqualified. In the eyent of such 
disqualification the Third Assistant Postmaster General will direct 
the bank as to the disposition to be made of its postal sayings deposits. 
^ If a qualified bank shall fail or decline to repay postal sayings de- 
posits and accrued interest thereon, when so required by the Third 
Assistant Pobtmaster General, he will authorise and direct the Treas- 
urer of the United States to inyite bids fOr the purchase of securities 
deposited by such bank and to sell such portion thereof as may be 
necessary to reimburse the Board of Trustees in the amount which 
the bank has failed or declined to pay, and to assign and deliyer such 
securities to the purchaser upon payment therefor. The proceeds from 
such sale shall be deposited by the Treasurer to the credit of the Board 
of Trustees as directed by the Third Assistant Postmaster GeneraL 
Any portion of such securities or the proceeds thereof remaining 
after the Board of Trustees has been fully reimbursed shall be 
returned to the bank or to its receiyer or other legal representatiye. 

If it shall appear to the Treasurer that the immediate sale of such 
securities as aboye proyided would not realize a sufllcient amount to 
reimburse fully the Board of Trustees he shall so inform the Third 
Assistant Postmaster General, who may direct that such sale be 
defefredi 

Repobts.— At the dose olf each month, or oftener if required, each 
qualified bank shall render to the Third Assistant Postmaster General, 
Diyision of Postal Sayings, a statement on Form PS 510 of the postal 
sayings fund account as shown by its books, giying all information 
called for by said tcfrm, a supply of which will be furnished to each 
bank. This report is necessary for the audit of the accounts of 
postmasters and banks, and shall be rendered in eyery case when funds 
are on deposit, eyen though no transactions occurred during the month. 
Each bank shall forward all paid checks or drafts with the monthly 
statement of account in which credit is claimed for their pajrment 

Bach bank shall furnish at any time to a duly authorized repreeenta^ 
tiye of the Board of Trustees any information requested as to its postal 
sayings transactions. 

AoyEBTisEMEifTs BT BANKS. — ^A qualified bank may adyertise that it 
is a "United States depository for postal sayings funds," but no other 
form ot adyertisement is authorized by the Board of Trustees. 



Digitized by CjOOQ IC 



375 

§ S96. Sepeal of Conflieting Lawi.— That all laws or parts of 
laws in conflict with the provisions of this act are hereby repealed. 
(Sec. 17, Act May 18, 1916.) 

§ S87. Prohibition Againit Charge of Exchange, etc., by Banks. 

— No bank in which postal savings funds shall be deposited shall 
receive any exchange or other fees or compensation on account of 
the cashing or collection of any checks or the performance of any 
other service in connection with the postal savings depository 
system. (Sec. 8, Act June 25, 1910.) 

§ 328. Postal Savings Bonds Not Beoeiyable As Security for 
Cironlating Notes.— That no bonds authorized by this act shall be 
receivable by the Treasurer of the United States as security for the 
issue of circulating notes by National banking associations. (Sec. 
10, Act June 25, 1910.) 



Digitized by CjOOQ IC 



CHAPTBB IV. 

CUBRBNCT AND MONBT. 

Section 329. Gold Dollar As Standard Unit of Value. 

330. Maintenance of Qold Beserve of One Hundred and 

Fifty Million — Sale of Bonds to Beplenish Be- 

serve. 
831. Establishment of Divisions of Issue and of Bedemp* 

tion. 

332. Cancellation of Treasury Notes and Issue of Silv^ 

Certificates. 

333. Issue of Oold C^tificates. 

334. Issue of Silver Certificates, 

335. Subsidiary Silver Coinage. 

836. Becoinage of Uncurrent Subsidiary Silver Coin. 

837. Melting of Silver Dollars— Sale of Bullion. 

838. Purchase of Silver Ore. 

339. Sales of Silver BuUion — ^Purposes of. 

340. Beimbursement for Loss in Melting Silver Dollars. 

341. Federal Beserve Bank Notes — ^Issuance of to Prevent 

Contraction of Currency. 

342. Federal Beserve Bank Notes — ^Betirement of — ^Tax 

on. 

343. Ebrportation of Silver Coin or Bullion. 

344. International Bimetallism. 

345. Issue of Treasury Notes. 

846. L^al Tender — Foreign Coins. 

847. L^ Tender— Gold Coin. 

348. Legal Tender— Standard Silver Dollars. 
849. Legal Tender — Subsidiary Silver Coins. 

350. Legal Tender — ^Minor Coins. 

351. Legal Tender— United States Notes. 
862. Legal Tender— Demand Treasuiy Notes. 

376 



Digitized by CjOOQ IC 



377 

853. Legal Tender — Interest-Bearing Notes. 

354. Legal Tender — National Bank Notes — Federal Be- 

serve Notes. 

355. Legal Tender — Gold and Silver Certificates. 

356. Legal Tender— Gold Certificates. 

357. L^l Tender— Act Iforch 14, 1900. 

358. Begulations Governing the Issue, Exchange and Be- 

demption of Money. 

§ S29. Odd Dollar Ai Standard ITnit of Valne.-^That the dol- 
lar consisting of twenty-five and eight-t^iths grains of gold nine- 
tenths fine, as established by section thirty-five hundred and eleven 
of the Bevised Statutes of the United States, shall be the standard 
unit of value, and all forms of money issued or coined by the 
United States shall be maintained at a parity of value with this 
standard, and it shall be the duty of the Secretary of the Treas- 
ury to maintain such parity. (Act March 14, 1900, Sec. 1; 31 
Stat U. S., 45.) 

§ 880. Kaintenanoe of Oold Beserve of One Hundred and Ktty 
IQIlion— Sale of Bonds to Beplenish Besenre.— That United 
States notes, and Treasury notes issued under the Act of July 
fourteenth, eighteen hundred and ninety, when presented to the 
Treasury for redemption, shall be redeemed in gold coin of the 
standard fixed in the first section of this Act, and in order to 
secure the prompt and certain redemption of such notes as herein 
provided it shall be the duty of the Secretary of the Treasury to 
set apart in the Treasury a reserve fund of one hundred and fifty 
million dollars in gold coin and bullion, which fund shall be used 
for such redemption purposes only, and whenever and as of t^i as 
any of said notes shall be redeemed from said fund it shall be the 
duty of the Secretary of the Treasury to use said notes so redeemed 
to restore and maintain such reserve fund in the manner follow- 
ing, to wit: First, by exchanging the notes so redeemed for any 
gold coin in the general fund of the Treasury; second, by accepting 
deposits of gold coin at the Treasury or at any subtreasury in ex- 
change for the United States notes so redeemed; third, by procur- 



Digitized by CjOOQ IC 



378 

ing gold coin by the use of said notes^ in acoordanoe with the pro- 
yisions of section thirty-seven hundred of the Beriaed Statutes of 
the United States. If the Secretary of the Treasury is unable to 
restore and maintain the gold coin in the reserve fund by the fore- 
going methods, and the amount of such gold coin and bullion in 
said fund shall at any time fall below one hundred million dollars, 
then it shall be his duty to restore the same to the maximum sum 
of one hundred and fifty million dollars by borrowing money on 
the credit of the United States, and for the debt thus incurred to 
issue and sell coupon or r^stered bonds of the United States, in 
such form as he may prescribe, in denominations of fifty dollars or 
any multiple thereof, bearing interest at the rate of not exceeding 
three per centum per annum, payable quarterly, such bonds to be 
payable at the pleasure of the United States after one year from 
the date of their issue, and to be payable, principal and interest, 
in gold coin of the present standard value, and to be exempt from 
the payment of all taxes or duties of the United States, as well 
as from taxation in any form by or under State, municipal, or local 
authority; and the gold coin received from the sale of said bonds 
shall first be covered into the general fund of the Treasury and 
then exchanged, in the manner hereinbefore provided, for an equal 
amount of the notes redeemed and held for exchange, and the 
Secretary of the Treasury may, in his discretion, use said notes in 
exchange for gold, or to purchase or redeem any bonds of the 
United States, or for any other lawful purpose the public interests 
may require, except that they shall not be used to meet deficiencies 
in the current revenues. That United States notes when redeemed 
in accordance with the provisions of this section shall be reissued, 
but shall be held in the reserve fund until exchanged for gold, as 
herein provided ; and the gold coin and bullion in the reserve fund, 
together with the redeemed notes held for use as provided in this 
section, shall at no time exceed the maximum sum of one hundred 
and fifty million dollars. (Act March 14, 1900, Sec. 2; 31 Stat. 
U. S., 45.) 

Section 7 of the Federal Reserve Act provides that the net earnings 
derived by the United States from Federal reserve hanks shall* in the 
discretion of the Secretary, be used to supplement the (p>ld reaerve 



Digitized by CjOOQ IC 



379 

h^d agftliuit outstanding United States notes, or shall be applied to the 
redaction of the outstanding bcfnded indebtedness of the United States 
under regulations to be prescribed by the Secretary of the Treasury. 

§ SSI. Establishmeiit of UTisions of Issue and of BedemptioiL 

— ^That tliere be established in the Treasury Department, as a part 
of the office of the Treasurer of the United States, diyisions to be 
designated and known as the division of issue and the division of 
redemption, to which shall be assigned, respectively, nnder such 
regulations as the Secretary of the Treasury may approve, all 
records and accounts relating to the issue and redemption of United 
States notes, gold certificates, silver certificates, and currency cer- 
tificates. There shall be transferred from the- accounts of the gen- 
eral fund of the Treasury of the United States, and taken up on 
the books of said divisions, respectively, accounts relating to the 
reserve fund for the redemption of United States notes and 
Treasury notes, the gold coin held against outstanding gold cer* 
tificates, the United States notes held against outstanding cur* 
rency certificates, and the silver dollars held against outstanding 
silver certificates, and each of the funds represented by these ac- 
counts shall be used for the redemption of the notes and certificates 
for which they are respectively pledged, and shall be used for no 
other purpose, the same being held as trust funds. (Act March 
14 1900, Sec. 4; 31 Stat. U. S., 46.) 

§ SS8. Oanoellation of Treasury Notes and Issue of SHver Oep> 
tiftcates.— That it shall be the duty of the Secretary of the Treas- 
ury, as fast as standard silver dollars are coined under the pro- 
visions of the Acts of July fourteenth, eighteen hundred and 
ninety, and June thirteenth, eighteen hundred and ninety-eight, 
from bullion purchased under the Act of July fourteenth, eighteen 
hundred and ninety, to retire and cancel an equal amount of 
Treasury notes whenever received into the Treasury, either by ex- 
change in accordance with the provisions of this Act or in the or- 
dinary course of business, and upon the cancellation of Treasury 
notes silver certificates shall be issued against the silver dollars so 
coined. (Act March 14, 1900, Sec. 5; 31 Stat. U. S., 47.) 



Digitized by CjOOQ IC 






380 

§ 333. Issue of Ctold Certiiloatef.— That the Secretary of the 
Treasury is hereby authorized and directed to receive deposits of 
gold coin with the Treasurer, or any assistant treasurer of the 
United States, in sums of not less than twenty dollars, and to 
issue gold certificates therefor in denominations of not less than 
ten dollars, and the coin so deposited shall be retained in the 
Treasury and held for the payment of such certificates on demand, 
and used for no other purpose. Such certificates shall be receivable 
for customs, taxes, and all public dues, and when so received may 
be reissued, and when held by any National banking association 
may be counted as a part of its lawful reserve: Provided, That 
whenever and so long as the gold coin and bullion held in the 
reserve fund in the Treasury for the redemption of United States 
notes and Treasury notes shall fall and remain below one hundred 
million dollars the authority to issue certificates as herein provided 
shall be suspended: And provided further. That whenever and so 
long as the aggregate amount of United States notes and silver 
certificates in the general fund of the Treasury shall exceed sixty 
million dollars the Secretary of the Treasury may, in his discre- 
tion, suspend the issue of the certificates herein provided for: And 
provided further. That of the amount of such outstanding certifi- 
cates one-fourth at least shall be in denominations of fifty dol- 
lars or less: And provided further, That the Secretary of the 
Treasury may, in his discretion, issue such certificates in denomina- 
tions of ten thousand dollars, payable to order : And provided fur* 
ther. That the Secretary of the Treasury may, in his discretion, re- 
ceive, with the assistant treasurer in New York and the assistant 
treasurer in San Francisco, deposits of foreign gold coin at their 
bullion value in amounts of not less than one thousand doUars in 
value and issue gold certificates therefor of the description herein 
authorized: And provided further. That the Secretary of the 
Treasury may, in his discretion, receive, with the Treasurer or any 
assistant treasurer of the United States, deposits of gold bullion 
bearing the stamp of the coinage mints of the United States, or the 
assay office in New York, certifying their weight, fineness, and 
value, in amounts of not less than one thousand dollars in valae, 
and issue gold certificates therefor of the description herein author- 



Digitized by CjOOQ IC 



381 

ized. But the amount of gold bullion and foreign coin so held 
shall not at any time exceed two-thirds of the total amount of gold 
certificates at such time outstanding. And section fifty-one hun- 
dred and ninety-three of the Bevised Statutes of the United States 
is hereby repealed. (Act March 14, 1900, Sec. 6; 31 Stat- TJ. S., 
47; Act March 4, 1907, Sec. 1; 34 Stat. U. S., 1289; Act March 2, 
1911; 36 Stat. TJ. S., 966, as amended by Act June 12, 1916; 39 
Stat- L., 225.) 

§ 334. Issue of Silver Certifleates.— That hereafter silver cer- 
tificates shall be issued only of denominations of ten dollars and 
under, except that not exceeding in the aggregate t^i per centum 
of the total volume of said certificates, in the discretion of the 
Secretary of the Treasury, may be issued in denominations of 
twenty dollars, fifty dollars, and one himdred dollars; and silver 
certificates of higher denomination than ten doUars, except as 
herein provided, shall, whenever received at the Treasury or re- 
deemed, be retired and cancelled, and certificates of denominations 
of ten dollars or less shall be substituted therefor, and after such 
substitution, in whole or in part, a like volume of Fnited States 
notes of less denomination than ten dollars shall from time to 
time be retired and cancelled, and notes of denominations of ten 
dollars and upward shall be reissued in substitution therefor, with 
like qualities and restrictions as those retired and cancelled. (Act 
March 14, 1900, Sec. 7; 31 Stat. F. S., 47.) 

The act of Febroary 28, 1878, authorized the lasne of silver cer- 
tiftcates in surna of not less than ten dollars. The act of March 3, 
18S7, authorized the iasue of one, two, and five dollar certificates. The 
aectioli Buperaedes these acts as to all new issues. 

§ 880. Subsidiary Silver Coinage.— That the Secretary of the 
Treasury is hereby authorized to use, at his discretion, any silver 
bullion in the Treasury of the United States purchased under the 
Act of July fourteenth, eighteen hundred and ninety, tor coinage 
into iuoh denominations of subsidiary silver coin as may be neces- 
sary to meet the public requirements for such coin: Provided, 
That the amount of subsidiary silver coin outstanding shall not 



Digitized by CjOOQ IC 



382 

at any time exceed in the aggregate one hundred millions of dol- 
lars. Whenever any silver bullion purchased under the Act of 
July fourteenth, eighteen hundred and ninety, shall be used in 
the coinage of subsidiary silver coin, an amount of Treasury notes 
issued under said Act equal to the cost of the bullion contained 
in such coin shall be cancelled and not reissued. (Act March 14, 
1900, Sec. 8; 31 Stat. U. S., 47.) 

§ 386. Beooinage of XTnoorrent Subsidiary SilTer Coin. — That 
the Secretary of the Treasury is hereby authorized and directed 
to cause all worn and uncurrent subsidiary silver coin of the 
United States now in the Treasury, and hereafter received, to 
be recoined, and to reimburse the Treasurer of the United States 
for the difference between the nominal or face value of such 
coin and the amount the same will produce in new coin from any 
moneys in the Treasury not otherwise appropriated. (Act March 
14, 1900, Sec. 9; 31 Stat. U. S., 48.) 

§ 337. Melting of Silver Dollars^— Sale of Bullion.— That the 

Secretary of the Treasury is hereby authorized from time to time 
to melt or break up and to sell as bullion not in excess of three 
hundred and fifty million standard silver dollars now or here- 
after held in the Treasury of the United States. Any silver cer- 
tificates which may be outstanding against such standard silver! 
dollars so melted or broken up shall be retired at the rate of $1 
face amoimt of such certificates for each standard silver dollar 
so melted or broken up. Sales of such bullion shall be made at 
such prices not less than $1 per ounce of silver one thousand fine 
and upon such terms as shall be established from time to time 
by the Secretary of the Treasury. (Act April 23, 1918, Sec. 1.) 

§ 338. Purchase of Silver Ore.— That upon every such sale of 
bullion from time to time the Secretary of the Treasury shall 
immediately direct the Director of the Mint to purchase in the 
United States, of the product of mines situated in the United 
States and of reduction works so located, an amount of silver equal 
to three himdred and sevenfy-one and twenty-five hundredths grains 



Digitized by CjOOQ IC 



383 

of pore silyer in reepect of every standard silver dollar so melted 
or broken up and sold as bullion. Such purchases shall be made 
in accordance with the then existing regulations of the Mint and 
at the fixed price of $1 per ounce of silver one thousand fine, 
delivered at the option of the Director of the Mint at New York, 
Philadelphia, Denver, or San Francisco. Such silver so purchased 
may be resold for any of the purposes hereinafter »pecified in sec- 
tion three of this Act, under rules and regulations to be established 
by the Secretary of the Treasury, and any excess of such silver so 
purchased over and above the requirements for such purposes, shall 
be coined into standard silver dollars or held for the purpose of 
such coinage, and silver certificates shall be issued to the amount of 
such coinage. The net amount of silver so purchased, after making 
allowance for all resales, shall not exceed at any one time the 
amount needed to coin an aggregate number of standard silver 
dollars equal to the aggregate number of standard silver dollars 
theretofore melted or broken up and sold as bullion under the pro- 
visions of this Act, but such purchases of silver shall continue until 
the net amount of silver so purchased, after making allowance for 
all resales, shaU be sufficient to coin therefrom an aggregate num- 
ber of standard silver dollars equal to the aggregate number of 
standard silver dollars theretofore so melted or broken up and 
sold as bullion. (Act April 23, 1918, Sec. 2.) 

§ 889. Sales of SHver Bullion— Purposes of.— That sales of 
silver bullion under authority of this Act may be made for the 
purpose of conserving the existing stock of gold in the United 
States, of facilitating the settlement in silver of trade balances 
adverse to the TTnited States, of providing silver for subsidiary 
coinage and for commercial use, and of assisting foreign govern- 
ments at war with the enemies of the United States. The alloca- 
tion of any silver to the Director of the Mint for subsidiary coin- 
age shall, for the purposes of this Act, be regarded as a sale or 
resale. (Act April 23, 1918, Sec. 3.) 

§ 340. BeimbuTsement for Loss in Kelting Stiver Dollars. — 
That the Secretary of the Treasury is authorized, from any moneys 



Digitized by CjOOQ IC 



384 

in the Treasury not otherwise appropriated, to reimburse the 
Treasurer of the United States for the difference between the 
nominal or face value of all standard silver dollars so melted or 
broken up and the value of the silver bullion, at $1 per ounce of 
silver one thousand fine, resulting from the melting or breaking 
up of such standard silver dollars. (Act April 23, 1918, Sec. 4.) 

§ 341. Federal Seserve Bank Notes— ImaBoe of to Prevoit 
Contraction of Currency. — That in order to prevent contraction of 
the currency, the Federal reserve banks may be either permitted 
or required by the Federal Eeserve Board, at the request of the 
Secretary of the Treasury, to issue Federal reserve bank notes, in 
any denominations (including denominations of $1 and $2) auth- 
orized by the Federal Beserve Board, in an aggregate amount not 
exceeding the amount of standard silver dollars melted or broken 
up and sold as bullion under authority of this Act, upon deposit 
as provided by law with the Treasurer of the United States as 
security therefor, of United States certificates of indebtedness, or 
of United States one-year gold notes. The Secretary of the 
Treasury may, at his option^ extend the time of payment of any 
maturing United States certificates of indebtedness deposited as 
security for such Federal reserve bank notes for any period not 
exceeding one year at any one extension and may, at his option, pay 
such certificates of indebtedness prior to maturity, whether or not 
so extended. The deposit of United States certificates of indebted- 
ness by Federal reserve banks as security for Federal reserve bank 
notes tmder authority of this Act shall be deemed to constitute an 
agreement on the part of the Federal reserve bank making such 
deposit that the Secretary of the Treasury may so extend the time of 
payment of such certificates of indebtedness beyond the original 
maturity date or beyond any maturity date to which such certificates 
of indebtedness may have been extended, and that the Secretary 
of the Treasury may pay such certificates in advance of maturity, 
whether or not so extended. (Act April 23, 1918, Sec. 5.) 

§ 848. Federal Seserve Bank Notes — ^Retirement of— Tax on. — 
That as and when standard silver dollars shall be coined out of 



Digitized by CjOOQ IC 



886 

bidlion purchaaed under authority of this Act, the Federal resenre 
banks shall be required by the Federal Beserve Board to retire 
Federal reserve bank notes issued under authorily of section five of 
this Act, if then outstanding, in an amount equal to the amount of 
standard silver dollars so coined, and the Secretary of the Treasury 
shall pay off and cancel any United States certificates of indebted- 
ness deposited as security for Federal reserve bank notes so retired. 

That the tax on any Federal reserve bank notes issued under 
authority of this Act, secured by the deposit of United States cer- 
tificates of indebtedness or United States one-year gold notes, 
shall be so adjusted that the net return on such certificates of 
indebtedness, or such one-year gold notes, calculated on the face 
value thereof, shall be equal to the net return on United States two 
per cent bonds, used to secure Federal reserve bank notes, after 
deducting the amount of the tax upon such Federal reserve bank 
notes so secured. 

That except as herein provided. Federal reserve bank notes 
issued under authority of this Act, shall be subject to all existing 
provisions of law relating to Federal reserve bank notes. (Act 
April 23, 1918, Sees. '6, 7, and 8.) 

§ 343. Exportation of Silver Coin or Bullion.— That the pro- 
visions of Title VII of an Act approved June fifteenth, nineteen 
hundred and seventeen, entitled ^^An Act to punish acts of inter- 
ference with the foreign relations, the neutrality, and the foreign 
commerce of the United States, to punish espionage, and better to 
enforce the criminal laws of the United States, and for other pur- 
poses,** and the powers conferred upon the President by subsection 
(b) of section five of an Act approved October sixth, nineteen 
hundred and seventeen, known as the '^Trading with the Enemy 
Act,^ shall, in so far as applicable to the exportation from or ship- 
ment from or taking out of the United States of silver coin or 
silver bullion, continue until the net amount of silver required by 
section two of this Act shall have been purchased as therein pro- 
vided. (Act April 23, 1918, Sec. 9.) 

§ 344. International Bimetallism.— That the provisions of this 
Act are not intended to preclude the accomplishment of intema- 
25 



Digitized by CjOOQ IC 



886 

tional bimetallism whenever conditions shall make it expedioit 
and practicable to secure the same by concurrent action of the 
leading commercial nations of the world and at a ratio which 
shall insure permanence of relatiye value between gold and silver. 
(Act March 14, 1900, Sec. 14; 31 Stat. U. S. 49.) 

§ 645. Issue of Treasury HotM.— That whenever and so long as 
the outstanding silver certificates of the denominations of one 
dollar, two dollars, and five dollars, issued under the provisions 
of section seven of an Act entitled ^'An Act to define and fix 
the standard of value, to maintain the parity of all forms of 
money issued or coined by the United States, to refund the public 
debt, and for other purposes,*' approved March fourteenth, nine- 
teen hundred, shall be, in the opinion of the Secretary of the 
Treasury, insufBcient to meet the public demand therefor, he is 
hereby authorized to issue United States notes of the denomina^ 
tions of one dollar, two dollars, and five dollars, and upon the 
issue of United States notes of such denominations an equal 
amount of United States notes of higher denominations shall be 
retired and cancelled: Provided, however. That the aggregate 
amount of United States notes at any time outstanding shall re- 
main as at present fixed by law: And provided further. That 
nothing in tiiis Act shall be construed as affecting the right of 
any National bank to issue one-third in amount of its circulating 
notes of the denomination of five dollars, as now provided by law. 
(Act March 4, 1907, Sec. 2; 34 Stat. U. S. 1389.) 

§ 846. Legal Tender-— Foreign Coins.- No foreign gold or 
silver coins shall be a legal tender in paymait of debts. (Bev. 
Stat. U. S. 3584.) 

The coinage by the Government of Philippine Islands of the various 
silver and minor coins for use in the islands is authorised and the 
legal-tender quality of such coins as well as of the gold coins of the 
United States in the islands is prescribed by the Act of July 1, 1902, o. 
1869, sees. 76-88, 88 Stat L., 710, and the Act of March 8, 1908, c 
080, sec 4, 82 Stat L., 968. 



Digitized by CjOOQ IC 



387 

§ 847. legal Tender— Gold Ooui.- The gold coins of the 
United States shall be a l^al tender in all payments at their 
nominal value when not below the standard weight and limit of 
tolerance provided bj law for the single piece^ and when reduced 
in weight below such standard and tolerance shall be a legal 
tender at valuation in proportion to their actual weight. (Bev. 
Stat. U. S. 3686.) 

§ S48. legal Tender— Standard CttlTer DoUan.— That there 
shall be coined at the several mints of the United States^ silver 
dollars of the weight of 412^^ grains Troy of standard silver 

* * *; which coins together with all silver dollars hereto- 
fore coined by the United States^ of like weight and fineness^ shaU 
be a legal tender, at their nominal value, for all debts and dues, 
public and private, except where otherwise expressly stipulated in 
the contract (Act Feb. 28, 1878, Sec. 1; 20 Stat. U. S. 26.) 

§ 849. Legal Tender— SubsidiaTj SilTer Coins.— That the pre- 
sent silver coins of the United States of smaller denominations 
than one dollar shall hereafter be a legal tender in aU sums not 
exceeding ten dollars in full payment of all dues public and pri- 
vate. (Act June 9, 1879, Sec. 3; 21 Stat U. S. 8.) 

§ 850. Legal Tender— IQnor Coins.— The minor coins of the 
United States shall be a legal tender, at their nominal value, for 
any amount not exceeding twenty-five cents in any one payment 
(Bev. Stat U. S. 3587.) 

§ 8S1. Legal Tender— ITnited States Notes.- United States 
notes shall be lawful money, and a legal tender in payment of all 
debts, public and private, within the United States, except for 
duties on imports and interest on the public debt (Rev. Stat. 
U. S. 3588.) 

§ 852. Legal Tender— Demand Treasury Hotes.— Demand 
Treasury notes authorized by the Act of July 17, 1861, chapter 5, 
and the Act of February 12, 1862, chapter 20, shall be lawful 



Digitized by CjOOQ IC 



3S8 

money and legal tender in like manner as United States notes. 
(Rev. Stat. U. S. 3589.) 

§ 353. Legal Tender— Intereft-Bearing Hotel. — Treasury notes 
issued under the authority of the Acts of March 3^ 1863, chapter 
73, and June 30, 1864', chapter 172, shall be legal tender to the 
same extent as United States notes, for their face value, excluding 
interest: Provided, That Treasury notes issued under the act last 
named shall not be a legal tender in payment or redemption of any 
notes issued by any bank, banking association, or banker, calculated 
and intended to circulate as money. (Eev. Stat U. S. 3590.) 

§ 364. Legal Tender—- National Bank Hotes— Federal Beserve 
Hotes.— See § 81 for reference to National bank notes and § 256 
for reference to Federal Reserve Notes. 

§ 3S5. Legal Tender— Ctold and Silyer Certiiloatei.— That the 
Secretary of the Treasury is authorized and directed to receive de- 
posits of gold coin with tiie Treasurer or assistant treasurers of the 
United States, in simis of not less than twenty dollars, and to 
issue certificates therefor in denominations of not less than twenty 
dollars each, corresponding with the denominations of United 
States notes. The coin deposited for or representing the certifi- 
cates of deposit shall be retained in the Treasury for the payment 
of the same on demand. Said certificates shall be receivable for 
customs, taxes, and all public dues, and when so received may be 
reissued ; and such certificates, as also silver certificates, when held 
by any National banking association, shall be counted as part of 
its lawful reserve; and no National banking association shall be a 
member of any clearing house in which such certificates shall 
not be receivable in the settlement of clearing-house balances: 
Provided, That the Secretary of the Treasury shall suspend tiie 
issue of such gold certificates whenever the amount of gold coin 
and gold bullion in the Treasury reserved for the redemption of 
United States notes falls below one hundred million dollars; and 
the provisions of section fifty-two hundred and seven of the Re- 
vised Statutes shall be applicable to the certificates herein authcnr- 



Digitized by CjOOQ IC 



389 

ized and directed to be issued. (Act July 12, 1882, Sec. 12; 22 
Stat U. S. 166.) 

See the following section for additional and more recent pro- 
yisions relating to gold certificates. See also § 333. 

§ S56. Legal Tender— Ck)ld Certifloates.-That gold certificates 
of the United States payable to bearer on demand shall be and are 
hereby made legal tender in payment of all debts and dnes, pabUc 
and private. That all Acts or parts of Acts which are inconsistent 
with this Act are hereby repealed. (Act December 24, 1919.) 

§ SS7. Legal Tender— Act Xarok 14, 1900.— That nothing con- 
tained in this Act shall be construed to affect tiie l^al-tender 
quality as now provided by law of the silver dollar, or of any other 
money coined or issued by the United States. (Act March 14, 1900, 
Sec. 3; 31 Stat. U. S. 46.) 

§ 858. Segulationi OoYeniing the Iiiiie, Earchange and Bedemp- 
tion of Koney. — 

The following regulations govern the issue, exchange, and redemp- 
tion of the paper money and the gold, silver, and minor coin of the 
United States, and the redemption of National bank notes, Federal re- 
serve notes, and Federal reserve bank notes by the Treasurer of the 
United States. 

I. — Issux OF United States Pafeb Cubbbnot. 

1. New United States paper currency is issued upon request in re- 
turn for United States paper currency unfit for circulation. Federal 
reserve notes, Federal reserve bank notes, National bank notes, sub- 
sidiary silver coin, or minor coin, received for redemption or exchange. 

2. Qold certificates are Issued by the Treasurer or any AJssistant 
Treasurer upon a deposit of gold coin. 

3. Silver certificates are issued by the Treasurer or any Assistant 
Treasurer upon a deposit of standard silver dollars. 

II. — Issue of Gold Ck>iN. 

4. Gold coin is issued by the Treasurer or any Assistant Treasurer 
for gold certificates, United States notes, or Treasury notea of 1880, 



Digitized by CjOOQ IC 



390 

and will be sent bj mall (poetace and insuranoe deducted), unlets 
otherwise requested, In which case the charges tor transportatton are 
to be paid by the consignee oih deUvery of the coin. 

III.— ISSUI or STANDABD SILTOL DOLLABS, SUBSIDUST SiLTKa OOIN, AND 

MiNoaCoiif. 

5. Standard silver dollars are issued by the Treasurer or any Assist- 
ant Treasurer in redemption of silver certiflcates or Treasury notes of 
1890, and will be sent by mail (postage and Insurance deducted), un- 
less otherwise requested, in which case the charges for transporta- 
tion are to be paid by the consignee on delivery cV the coin. 

6. Subsidiary silver coin (halves, quarters, and dimes) and minor 
coin (1-cent bronze and 5H)ent nickel) are issued upon a deposit of 
United States currency, national bank notes. Federal reserve notes 
or Federal reserve bank notes, with the Treasurer or any Assistant 
Treasurer ot National bank depositary, and the coin will be sent from 
the nearest subtreasury by mail (postage and insurance deducted), 
unless otherwise requested, in which case the charges tor transporta- 
tion are to be paid by the consignee on delivery of the coin. 

Subsidiary silver coin and minor coin are also Issued tor drafts 
on New York, Baltimore, Boston, Chicago^ C^cinnati, New Orleans, 
Philadelphia, St Louis, or San Francisco, payable to the order of the 
Assistant Treasurer of the United States In the city on which drawn, 
or tor drafts drawn on Washington, payable to the order of the Treas- 
urer of the United States. The drafts should be torwarded directly to 
the office to whose order they are payable, with advice of the kind 
and denominations of coin desired. 

7. Application for new coin must be made to the Treasurer of the 
United States. When such coin is available tor issue, and after de- 
posit of an equivalent amount in other funds has been made as directed 
by the Treasurer, the coin will be sent from the mints by mall (postage 
and Insurance deducted), unless otherwise requested. In which case 
the charges tor transportation are to be paid by the consignee on de- 
livery of the coin. 

IV.— ^iKMEMPTioN or Papb Cubikiot. 

8. United States notes and gold certiflcates are redeemable in gold 
ooin; Treasury notes of 1890 in gold coin or silver dollars and silver 
certiflcates in silver dollars by the Treasurer and Assistant Treasurers, 

National bank notes and Federal reserve bank notes are redeemable 
in lawful money of the United States by the Treasurer, but not by 
the Assistant Treasurers. 



Digitized by CjOOQ IC 



391 

Federal reeenre notei are redeemable in gold by the Treasurer, but 
not by the Assistant Treasnrers. 

United States notes. Treasury notes of 1890, fractional currency notes. 
Federal reserve notes. Federal reserre bank notes. National bank notes, 
gold certiflcates, and sliver certificates, unfit for circulation, when not 
mutilated so that less than three-fifths of the original proportions re- 
mains, will be redeemed at their face value in new currency. 

9. United States notes. Treasury notes of 1890, fractional currency 
notes, gold certificates, silver certificates, Natiohal bank notes. Fed- 
eral reserve notes, and Federal reserve bank notes, when mntllated so 
that less than three-fifths, but clearly more than two-fifths of the orig- 
inal proportions remains, are redeemable by the Treasurer only, at 
one-half the face value of the whole note cfr certificate. Fragments 
not clearly more than two-fifths are not redeemed, unless accompanied 
by the evidence required in paragraph 10. 

10. Fragments less than three-fifths are redeemed at the face value 
of the whole note when accbmpanied by an aflldavit of the owner or 
other persoih) having knowledge of the facts that the missing portions 
have been totally destroyed. The affidavit must state the cause and 
manner of the mutilation, and must be subscribed and sworn to before 
an officer qualified to administer oaths, who must aflix his official seal 
thereto, and the character of the afliant must be certified to be gooO 
by such officer or some one having an official seal. Signatures by mark 
(X) must be witnessed by two persons who can write, and who must 
give their places of residence. The Treasurer will exercise such dis- 
cretion under this regulation as may seem to him needful to protect 
the United States from fraud. Fragments not redeemable are returned. 
Blank forms for affidavits are not furnished. The department can not 
fnake reimltmr$ement pr currency totally deetroyed. 

v.— RcTUBifs FOB Pafbb Cubbbnot. 

11. Tar remittances received far redemption,— For remittances from 
a place where there is no subtreasury, returns will be made in new 
United States paper currency by mail (postage and insurance de- 
ducted), unless otherwise requested, in which case the charges for 
transportation are to be paid by the consignee; or, if d^ired, in sub- 
sidiary silver coin or in minor coin by mail (postage and insurance 
deducted), unless otherwise requested, in which case the charges for 
transportation are to be paid by the consignee on delivery of the 
coin. 

For remittances from a place where there is a subtreasury, returns 
will be made in new United States paper currency by mail (postage 
and insurance deducted), unless otherwise requested, in which case 



Digitized by CjOOQ IC 



89S 

the charges for transportation are to be paid by the consignee, or 
subject to the convenience of the Treasury, by the Treasurer's checks. 
Bbcchange, subject to the convenience of the Treasury, will be fur- 
nished for currency or coin received for redemption on which the 
transportation charges have been prepaid. 

VI. — RBDBMPTION OB BXCHAHOB OF SlLVKS AlTD MUTOB CODT. 

12. standard silver dollars may be presented for exchange into silver 
certificates only. Subsidiary silver coin (halves, quarters, and dimes) 
and minor coin (1-cent bronse and 5-oent nickel), assorted by denomina- 
tions, in separate packages, may be presented in sums or multiples 
of 120 to the Treasurer or any Assistant Treasurer for redemption in 
lawful money. The words "sums or multiplies of |20" apply to sub- 
sidiary silver and minor coin separately. When coin is forwarded the 
charges must be prepaid. 

13. Coins should be shipped loose in ddth bags. Shipments put up 
in wrappers, envelopes, or rolls of paper will not be received. Not 
more than |1,000 in silver coin, |800 in 6-cent pieces, or |100 in cents 
should be shipped in one bag or package. 

14. No foreign or mutilated silver coin, or coin to which paper or 
any other substance is attached, or upon which any name or adver- 
tisement is stamped or impressed, will be received. Coin is mutilated 
when punched, clipped, chipped, or otherwise appreciably reduced in 
weight by any means except natural abrasion. Silver coin so mutilated 
or reduced will be stamped by the receiving officer with a distinguish- 
ing mark before it is returned to the depositor. Silver coin not mu- 
tilated, but defaced otherwise than as above described, where it can 
be clearly and readily identified as to denomination and genuineness, 
will be redeemed. 

15. Minor coin that is so defku^ as not to be readily identified, or 
that is punched or dipped, will not be redeemed. Pieces that are 
stamped, bent, or twisted out of shape, or otherwise imperfect but 
showing no material loss of metal, will be redeemed. 

16. When gold, silver, or minor coin is shipped for credit of the 
5 per cent redemption fund or as a transfer of funds, it should be 
stated on the shipping tag attached to the bag as well as in the letter 
of advice. 

VIX.— TlAlfSMISSION OF PaPB CuBBEHOT TO THB TUASUBKB. 

17. Paper currency for redemption must be assorted by kinds and 
denominations, and each 100 notes or less indosed in a paper strap 
marked with the amount Bach 1,000 notes, as nearly as convenient, 
in straps, should be indosed in a paper band likewise marked. In 



Digitized by CjOOQ IC 



393 

large conslgnmenU, two such parcels laid flat, face to back, with 
two others directly upon them, never more than 4,000 notes in one 
package, should be firmly Ued with two cords and sealed up in stout 
pi4)er, forming a compact package about 6 by 8 by 12 inches. With 
each package should be inclosed a memorandum giving an inventory 
of the contents, the sender's name and address, and the disposition 
to be made of the proceeds. 

VIII.— Addbess on Packages Sent to Washinqton. 

18. All packages should be addressed to the Treasurer of the United 
States only. If addressed otherwise, it involves delay and risk. They 
should be double wrapped, the outside wrapper bearing the owner's 
name and address and the inside package being marked with the 
amount and kind of currency. 

19. United States notes. Treasury notes of 1890, gold certificates, 
and silver certificates may be sent in the same package and should 
be marked 'Unfit United States currency for redemption." National 
bank notes. Federal reserve notes, and Federal reserve bank notes 
may be sent in the same package marked 'National and Federal 
reserve currency for redemption," but each kind should be under 
separate straps. The failure to indicate on packages the kind of 
notes inclosed causes delay in making returns. A letter of advice 
should be mailed for each day's consignment of United States cur- 
rency, and a separate one for National and Federal reserve currency. 
No package should contain more than 4,000 notes. 

IX. — Shipicent of Unfit Notes to Washington. 

20. Charges are paid by the Government on unfit National bank 
notes. Federal reserve notes, and Federal reserve bank notes when 
sent to the department at Washington, charges collect No charges 
are paid by the Government on any other kind of currency sent for 
redemption. 

21. All diarges must be prepaid by the sender on shipments for 
exchange or redemption of gold coin, standard silver dollars, sub- 
sidiary silver coin, and minor coin. 

22. National bank depositaries must pay all charges incurred by 
them on account of transfer of public funds. 

23. In order to save time and expedite shipments in return for 
currency redeemed when the amounts are large, orders should be for 
original packages of 4,000 notes each of the same denomination, that 
is, ones in packages of |4,000; twos, |8,000; fives, $20,000; tens 
140,000; and so on. 

24. The Government has no contract for cariying money or other 



Digitized by CjOOQ IC 



8M 

Mcuritiet, and Bhipm«&U will be made as herein proTided unlets 
specific Instructions are reoeired designating the particular manner 
in which the same is desired. 

X — Shiphkhts of MomcTS noic WASHnraioiT. 

25. For shipments of paper currency from Washington and from 
and between subtreasuHes, arrangements have been made with the 
Postoffloe Department for ones, twos, and fires to more at parcel-post 
rates with the usual parcel-post weight limits. On each package of 
ones, or twos, there is a ten-cent registration fee, and on flyes the 
registration fee Is twenty-five cents. These packages are treated and 
handled In the same manner as flrst-dass registered malL Tens, 
twenties, and above, move at flrst-dass rates with ten^cent registra- 
tion fee. Shipments are Insured for full value. 

26. The law provides f6r free registration of United States currency 
sent to the Treasurer of the United States for redemptl<Ai. There 
will, therefore, be no registration fee In that case, but before ship- 
ment the local postmaster should be consulted as to the requirements 
under section 914 of the Postal Laws and Regulations. National 
bank notes, Federal reserve notes, and Federal reserve bank notes, 
require the registration fee. 

27. On all shipments of money by mail from banks or others to 
the Treasurer of the United States, postage must be prepaid at flrst- 
dass rates. The limit of weight is four pounds for each package. 

28. As to Insurance for full value on currency In transit by regis- 
tered mall, details pertaining to the Government's contract for same, 
and Instructions to banks whereby they may avail themselves of the 
privileges and beneflts of this new method of transportation of cur- 
rency, together with the rate for insurance between their locality and 
the Treasury In Washington, will be furnished upon Inquiry addressed 
to the Secretary of the Treasury, Division of Public Moneys (Biail 
Insurance). 

XI.— <teNnAL InVMMATION. 

29. Paper currency presented for redemption, or for credit of the 
Treasurer at the oflices of the Assistant Treasurers, must be assorted 
by kinds and denominations and Inclosed in paper straps. The straps 
must not cotitain more than 100 notes each, and the amount of the 
contents must be plainly marked thereon. 

80. The Act of June 80, 1876 (19 Stats. U. S., 64), requires that aU 
United States oflicers diarged with the receipt or disbursement of pub- 
lic moneys, and all oflloers of National banks, shall stamp or write In 
plain leUers the word ''counterfeit," "altered," or ''worthless" upon all 
fraudulent notes Issued In the ft>rm of and Intended to dreulate as 



Digitized by CjOOQ IC 



395 

money which shall be preeented at their plaoea of businees; and if 
such oiBcera ihall w r on g f u lly stamp any genuine note of the United 
States or of the National banks, they shall, upon presentation, redeem 
such notes at their face value. 

81. Counterfeit notes found In remittances from banks are canceled 
and returned for the purpose of enabling the owner to make reclama- 
tion, and after such use they must be returned to the Treasurer of 
the United States for transfer to the Secret Service Division of the 
Treasury Department 

32. Counterfeit notes found in remittances from individuals are 
canceled and sent to the Secret Service Division. The sender is ad- 
vised of the fact and informed that, if he will communicate with 
the chief of that division, arrangements may be made to have such 
notes submitted for reclamation. 

33. Counterfeit coins found in remittances to the Treasurer are can- 
celed and sent to the Secret Service Division, a receipt for the same 
being returned to the sender, who may communicate with the chief 
of that division if he desires to have such coin submitted for reo- 
lamation. 

34. Counterfeit coin received at the subtreasuries is retained, to be 
called for by agents of the Secret Service at certain stated periods. 
▲ receipt is issued to the sender or depositor, when desired, to enable 
him to make reclamation for coin so retained. 

35. In case of the loss Or destruction of a Treasury warrant or one 
of the Treasurer's checks, payment of the original warrant or check 
is stopped upon notification of loss, and a form of bond of idemnity 
is furnished for the issue of a duplicate upon application therefor. 



Digitized by CjOOQ IC 



CHAPTEB V. 

BE0ITLATI0H8 07 TBEASVBT DEPAETMENT BELAHNO 
TO mnTED STATES BOHSS 

Section 359. Begulations of Treasury Department Begarding U. S. 
Bonds. 

§ 359. BegnlatioiLB of Treatnry Department Begarding United 
States Bonds.— 

Bonds or thx UNmD Staixs. — The original issues of bonds of the 
United States under the several authorizing acts of Congress are di- 
vided into coupon and registered bonds. Of these issues the following 
are the bonds outstanding and bearing interest. May 1» 1920: 



TltU of loan and daU of author- 




Rateof 


When redeemable or 


Islnc act. 


Donomlnations. 


Int. 


payable 


rwa p«r MBl. Low of ISMs 




PerCt. 




Jul7 14, 1170. and Jan. 14, 








lt7fi— CouDon 


260: tlOO: 2600: 21000.. 


4 


Redeemable at ple«Mure 
of the United States 


Av I m x^^ri«ar*^aa •••••••■•••■•• 

Rofflaterod 


$60; $100; $600; $1000; 






$6000; 110.000 




after Feb. 1. 1026. 


CoBM»la of ISMt 








Mar. 14. l»00--iCoui>on : . 


160; 1100; $600; $1000.. 


2 


Payable at pleasure 


Rerlttorod .... 


$60; $100; $600; $1000; 




of the UnlUd States 




16000; $10,000; $60,000 




after 20 yoars trom 


Paaama Caaal Ixnui, 191S-19SS: 






Apr. 1. 1900. 


June 28. 1902. and Dec 21. 








1906— Coupon 


$20; $100; $1000 


2 


of the United States 


Registered 


$20; $100; $1000; $10,000 










after 10 years from 








Aug. 1. 1906. and pay- 








able 20 years from 


r— ma Canal Ixnui, 1918-1918: 






that date. 


June 28. 1902. and Deo. 21. 








1906— Coupon 


$20; $100; $1000 

120; $100; $1000; $10,000 


2 


Redeemable at pleasure 


Registered 


of the United States 




after ten years from 








Nov. 1. 1908. and pay- 








able 20 years from 








that date. 


Paaama Canal Loan, 19«li 








Aug. 6. 1909. Feb. 4. 1910. and 








Mar. 2. 1911— Coupon 


$100; $600: $1000 


2 


Payable 60 years from 


Registered.... 


$100; $600; $1000; 
$10,000 




June 1. 1911. 


Postal Savings Bondst 








June 26, 1910 — Coupon 


$20; $100; $600 


2H 


Redeemable at pleasure 


Registered 


$20; $100; $600 




of the United States 


New series issued July 1 and 






after 1 year from 


Jan. 1 of each year; first 






date of issue, and 


series issued July 1. 1911. 






payable 20 years from 
that dato. 



Digitized by CjOOQ IC 



397 

Interest on the Consols of 1980 is payable on the first days of Jan- 
nary, April, July and October; on the Panama Canal Loan, 1961, on 
the first days of March, June, September and December; on the Postal 
Savings Bonds on the first days of January and July; on the other 
loans listed above Interest is payable on the first days of February, 
May, August and Novemben 

TrrLEs OF Libebtt Bonds akd Viotobt Notes, Denominations, Intebxst 

Payment Dates, and Pebiods Dubinq Which Transfer 

Books of Rboistebed Bonds and Notes Abb Closed. 

Firgt Liberty Loan. 
First Liberty Loan 3% per cent bonds of 1932-1947 (First 3%'s). 
Coupon bonds: |5o, |loo, |5oo, |l,ooo. 

Begistered bonds: |loo, |5oo, |l,ooo, |5,ooo, |lo,ooo, |5o,ooo, 
|loo,ooo. 
Interest payable semdannually on June 15 and December 15. 
Transfer books closed from close of business May 15 to opening 
of business June 16, and from close of business November 15 
to opening of business December 16. 
First Liberty Loan Converted 4 per cent, bonds of 1932-1947 

(First 4's). 
First Liberty Loan Converted 4% per cent, bonds of 1932-1947 

(First 4%'s). 
First Liberty Loan Second Converted AV^ per cent, bonds of 1932-1947 
(First Second 4%'s). 

Coupon bonds: $5o, |loo, |5oo, $l,ooo, $5,ooo, $lo,ooo. 
Registered bonds: |5o, |loo, $5oo, $l,ooo, $5,ooo, $lo,ooo, |5o,ooo, 
|loo,ooo. 
Interest payable semiannually on June 15 and December 15. 
Transfer books closed from close of business May 15 to opening 
of business June 16, and from close of business November IS 
to opening of business December 16. 

Becand Liberty Loan, 
Second Liberty Loan 4 per cent bonds of 1927-1942 (Second 4's). 
Second Liberty Loan Converted 4% per cent bonds of 1927-1942 
(Second iWB). 
Coupon bonds: $5o, |loo, |5oo, $l,ooo, $5,ooo, $lo,ooo. 
Registered bonds: |5o, $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo, $5o,ooo, 
|loo,ooo. 
Interest payable semiannually on May 15 and November 15. 
Transfer books closed from close of business April 15 to open- 
ing of business May 16, and from close of business October 15 
to opening of business November 16. 



Digitized by CjOOQ IC 






398 

Third Liberty Loan. 
Third Liberty Loan 4^ per cent bonds of 1928 (Third 4^'b). 
Coupon bonds: |5o» |loo, |6oo, |l,ooo» |5,ooo, |lo»ooo. 
Registered bonds: |5o, |loo, |6oo, $l»ooo, |5,ooo, $lo,ooo, |5o/>oo, 

llOO/KK). 

Interest payable September 16, 1918» and thereafter semlannnally 
on UMTch 15 and September 15. 

Transfer books closed from dose of business February 15 to 
opening of business March 16, and fronn close of business 
August 15 to opening of business S^tember 16. 

Fourth Liberty Loan. 

Fourth Liberty Loan 4^ per cent bonds of 1988-1988 (Fourth 
4%'s). 
Coupon bonds: |5o» |loo, |5oo, |l,ooo, |5,ooo, |lo,ooo. 
Registered bonds: |5o» |loo» |5oo, |l,ooo, $5,ooo, |lo,ooo, |5o,ooo» 
|loo,ooo. 
Interest payable April 15» 1919, and thereafter semiannually 

on April 15 and October 15. 
Transfer books closed from close of business March 15 to open- 
ing of business April 16, and from close of business September 
15 to opening of business October 16. 

Victory Liberty Loan. 
Victory Liberty Loan 4% per cent, conyertible notes of 1922-1928 

(Victory 4%'s). 
Victory Liberty Loan 8% per cent conyertible notes of 1922-1928 
(Victory 8%'s). 
Coupon notes: |5o, |loo, |5oo, $l,ooo, $5,ooo, $lo,ooo. 
Registered notes: |5o, |loo, |5oo, |l,ooo, $5,ooo, |lo,ooo, |5o,ooo, 
|loo,ooo. 
Interest payable December 15, 1919, and thereafter semiannually 
on June 15 and December 15, and on May 20, 1928. Regis- 
tered notes have coupons attached thereto for interest pay- 
able December 15, 1919. 
Transfer books closed from dose of business May 16 to open- 
ing of business June 16, and from dose of business November 
15 to opening of business December 16, in each of the years 
1920, 1921, and 1922; transfer books will also be dosed from 
dose of business April 20, 1928, in preparation f6r IntM-est 
payment May 20, 1928. 

Bonds op thb Distsiot of Colombia and of the Insulab Possessions 
OF THE XJNrrED Staies.— -The Treasury Department acts as registering 



Digitized by CjOOQ IC 



899 

and tnuiifer acent fo^ oertmin Lwues of bonds of the Dtitrict of Co- 
lumbia and of the Qovemments of Porto Rloo and the Philippine la- 
lands. The regolations in regard to transacti<ms in United States 
bonds are applicable to similar transactions in District of Colombia 
or insular bonds registered by the Treasury Department 

Rules akd Rbouiatiors Coroduono Ta^RSAcnoNS ni Ldost Bonds 
▲RD VicTOBT Noras.— These Rules and Regulations, with the ezcep- 
tions noted, gc^em also transactions in United States bonds issued 
pHor to April 24, 1917. 

Obrdull PBOTisioRs.^^bcchanges and transfers of Liberty bonds and 
Victory notes may be made only as between bonds and notes of the 
same issue and series. Bonds or notes presented for exchange or 
transfer must be delivered to the Secretary of the Treasury, Dirision 
of Loans and Currency, Washington, or to a Federal Reserve Bank, 
at the risk and expense of the respective owners, with all transporta- 
tion charges prepaid. No charge for interchange or transfer is im- 
posed by the United States. Deliveries of coupon bonds or notes 
Issued upon exchange, unless made in person to the owner or his 
duly authorized representative, will be made at the expense and risk 
of the owner. Deliveries of registered bonds or notes issued upon 
exchange or transfer, unless made in pers6h to the registered owner 
or his duly authorized representative, will be made by registered 
mail without expense to, but at the risk of, the registered owner. 
Full information as to transportation charges and risks upon bonds 
and notes presented for exchange or transfer, or issued upon exchange 
or transfer, and as to special arrangements for the shipment of coupon 
bonds and notes by registered mail insured when transactions are 
submitted through incorporated banks and trust companies to the 
appropriate Federal Reserve Bank, will be found in the latter part of 
this chapter under the caption "Transportation Charges and Risks 
Upon Bonds and Notes." 

Bxchanges of coupon bonds or notes of different denominations may 
be effected immediately at any Federal Reserve Bank, or at the Treas- 
ury Department, Washington, at any time. Transactions involving 
exchanges of registered bonds or notes of different denominations, 
exchanges of coupon and registered bonds or notes, or transfers of 
registered bonds or notes, and other transactions involving the issue, 
cancellation, or transfer of registered bonds ot notes, may be pre- 
sented to a Federal Reserve Bank, as well as to the Treasury Depart- 
ment, Washington, but can be effected only at the Treasury Depart- 



Digitized by CjOOQ IC 



400 

uient, and when presented to a Federal Resenre Bank will be referred 
to the Department In order to prepare for the payment of interest, 
the transfer books of registered bonds and notes close at the Treasury 
Department, Washington, one month in advance of each date for the 
payment of registered interest and reopen on the day following such 
interest payment date.* No exchange as between coupons and regis- 
tered bonds or notes, nor transfers of registered bonds or notes, may 
be effected for a particular loan while the transfer books of that loan 
are closed, and bonds or notes presented for such exchange or transfer 
must actually have been receiyed at the Treasury Department in 
Washington before the transfer books close.! If the bonds or notes 
presented for such exchange or transfer are receiyed at the Treasury 
Department after the transfer books dose, the transaction will be 
effected only upon the reopening of the books. Interest on registered 
bonds and notes, unless coyered by coupons appertaining thereto, 
will be paid on each interest payment date to the registered holders 
of record on the date when the transfer books closed in anticipation 
of such interest payment date. 

The Treasury Department and the Federal Reserve Banks handle 
each class of transaction and each issue and series of bonds and notes 
separately. The transactions can not be intermingled, and should 
be submitted separately and so far as possible in the forms hereinafter 
set forth. Tranaactiont will he expedited if submitted to Federal Re- 
serve Banks^ fiscal agents ot the United States. Persons submitting 
bonds and ncftes for interchange or transfer are earnestly requested 
to observe the instructions and suggestions contained in this circular, 
and to use the respective forms hereto attached. 

In case any date for the closing of the transfer books taXLs on a 
Sunday or legal holiday, the bdoks will be closed on the day pre* 
ceding such date, and in case any date for the opening of the transfer 
books falls on a Sunday or legal holiday, the books will reopen on 
the day following such date. 

Registered bonds or notes which have coupons attached thereto for 
the interest payable on any interest payment date will be treated, in 
respect of such coupons, like coupon bonds or notes; that is to say, 
the interest payable on such interest payment date will be paid upon 

*This applies to transfer books of the 2 per cent Consols of 1930, 
but books on all other "cfld loans" close 15 days previous to pajrment 
of interest. 

tTransfers to the Treasurer of the United States in trust for a 
National bank to secure its circulation is permitted, however. 



Digitized by CjOOQ IC 



401 

presentation and surrender of such coupons and n'ft by check to the 
holders of record, the transfer books will not close in anticipation 
of snch interest payment date, and such coupons when unmatured must 
be attached to the registered bonds or notes presented for exchange 
or transfer. Such coupons are payable to bearer and are not pro- 
tected, in the course of transportation or otherwise, by the regis- 
tration of the bond or note to which they appertain. Insurance ar- 
rangements may be effected in respect of such coupons as for coupon 
bonds and notes. 

iNTnCHANOB OF BOIfllS AND NOTBS OF DiFFnKNT DSlfOMIirATIOlfS — ^Bx- 
OHANOKS OF COUPOlf Boif DS OB NOTES FOB GOUFOIT BONDS (tt NonS OF OTHKR 

Denominations. — Coupon bonds or notes may be presented at any time 
f6r exchange for an equal face amount of coupon bonds or notes in 
any other authorized denomination of the same issue and series. 
Coupon bonds or notes so' presented must have all matured coupons 
detached and all unmatured coupons attached, and the coupon bonds 
or notes deliyered on exchange will have corresponding matured 
coupons detached and unmatured coupons attached. Specific instruc- 
tions ftfr the issue and delivery of the new coupon bonds or notes 
must accompany the bonds or notes presented for exchange. (Use 
Form L. ft C. 227, copies of which, or of a substantially similar form, 
may be obtained from any Federal Reserve Bank or from the Treasury 
Department.) 

Same — ^Exchanges of Rsoistebed Bonds ob Notes fob Reqijtered 
Bonds ob Notes of Otheb Denominations. — ^Registered bonds or notes 
may be presented at any time for exchange fdr an equal face amount 
of registered bonds or notes inscribed in the same name in any other 
authorized denomination of the same issue and series. Inasmuch 
as such exchanges involve no change of ownership, no assignment of 
registered bonds or notes so presented is necessary, and such ex- 
changes may be made even during the periods when the transfer books 
are closed. Specific instructions for the issue and delivery of the 
new registered bonds or notes must accompany the bonds or notes 
presented for exchange. (Use Form L. ft C. 227, copies of which, or 
of a substantially similar form, may be obtained from any Federal 
Reserve Bank or from the Treasury Department.) 

Intebohange of Coupon and Reoistebed Bonds and Notes — ^Bx- 

CHANGES of COTJPON BONDS OB NOTES FOB RBOISTEBED BONDS OB NOTES. — 

Coupon bonds or notes may be presented for exchange for an equal 
face amount of registered bonds or notes in any authorized denomi- 
nation of the same issue and series. Such exchanges may not be 

26 



Digitized by CjOOQ IC 



402 

effected daring any period when the transfer books df the loan in 
question are closed, but the coupou bonds or notes maj nevertheleBS 
be presented for exchange daring any such period. Matured interest 
ooupon8 fMi9t be detached from, and ail unmatured coupons must be 
attached to, the bonds or notes presented for exchange; proYided^ 
however, that if presented during a period when the transfer books 
are closed, the coupon maturing at the end of such period should be 
detached. Registered bonds or notes issued upofn exchange requested 
while the transfer books are open will bear interest from the last 
preceding interest payment date. Registered bonds or notes re- 
quested while the transfer books are closed but issued upon the open- 
ing of the transfer books following the interest payment date will 
bear interest from such date. Full instructions for the issue and 
deliyery of the registered bonds or notes to be issued upon exchange 
should accompany the coupon bonds or notes presented. (Use Form 
L. ft C. 142, copies of which, or of a substantially similar form, may 
be obtained frcjm any FMeral Reserve Bank or from the Treasury 
Department) 

SAMB— ESXCHANOBS OF RXQISTEBED BONDS OB NOTES FOB COXTPON BONDS 

OB Notes.* — ^Registered bonds or notes may be presented for exchange 
for an equal face amount of coupon bonds or notes in any authorized 
denomination of the siynd issue and series. Registered bonds or 
notes so presented for exchange should be assigned to "The Secretary 
of the Treasury for exchange for coupon bondsy^notes," and such as- 
signments must be witnessed and acknowledged and will be governed 
otherwise by the same regulations as provided in the case of trans- 
fers. Assignments must not be made to "The Secretary of the Treas- 
ury*' or to "The Secretary of the Treasury fot exchange." SpeciAo 
instructions for the issue and delivery of the coupon bonds or notes 
to be issued upon exchange must accompany the registered bonds 
or notes presented. (Use Form L. ft C. 143, copies of which, or of a 
substantially similar form, may be obtained from any Federal Reserve 
Bank or from the Treasury Department.) Such exchanges may not 
be made during any period when the transfer books of the loan In ques- 
tion are closed. Coupon bonds or notes delivered upon such exchange 
will have all matured coupons detached, and if registered bonds or 
notes are presented for exchange during a period when the transfer 
books are closed the exchange will be made only after the transfer 
books reopen following the interest payment date, and interest on 
the registered bonds or notes will be paid to the holders of record 

* Registered bonds of issues authorized prior to April 24, 1917» 
can not be exchanged for coupon bonds. 



Digitized by CjOOQ IC 



403 

lU the time the transfer books cloeed next preceding each interest 
payment date. If the registered bonds or notes are presented to a 
Federal Reserve Bank, deliyerr of the coupon bohds or notes to be 
issued upon exchange may be made by the Federal Reserve Bank, 
when so authorized by the Secretary of the Treasury, Division ot 
Xioans and Currency, but only after the registered bonds or notes 
have been transmitted to the Treasury Department and the registra- 
tion discharged. 

TkANSFEBs 07 REoiSTmcD 6oin)8 AND NoTU — ^ASSIGNMENTS. — In Or- 
der to effect the transfer of a registered bond or note, the registered 
holder thereof, or some one duly authorized to act for him, must go 
before one of the officers authorized by the Secretary of the Treasury 
to witness assignments, must establish his identity, and in the pres- 
ence of such witnessing officer must execute an assignment on the 
form appearing on the back of the bond or note. No alterations or 
erasures should be made in assignments; assignments bearing altera- 
tions or erasures not explained to the satisfaction of the Treasury 
Department will be rejected. DetacTied asHgnmenta tDill not he ac- 
cepted. Assignments of registered bonds and notes should be made 
to the transferee, or, if desired, to the Secretary of the Treasury for 
transfer into the name of the transferee, who should be named. As- 
signments must not be made to "The Secretary of the Treasury for 
transfer," or to "The Secretary of the Treasury." Registered bonds 
and notes may be assigned In blank, but when so assigned are in 
effect payable to bearer and lack the protection which registration 
bffords. If the assignment Is made by any one other than the reg- 
istered owner, appropriate evidence of the authority of such person 
must be produced and must accompany the bond or note, unless 
already on file with the Secretary of the Treasury. Powers of at^ 
tomey to assign registered bonds or notes must be acknowledged in 
the presence of one of the officers authorized to witness assignments. 
Registered bonds or notes presented for transfer or exchange with 
assignments which are imperfect or not supported by the required 
authority, will be passed for transfer or exchange only when the 
imperfections have been corrected or the required authority furnished; 
if in the meantime the transfer books close in anticipation of an 
interest payment, action with respect to any such transfer or ex- 
change will not be taken until the transfer books reopen, and Interest 
accordingly will be paid to the holder of record at the time the 
transfer books closed. 

Where a bond fs to be divided among two or more parties, the assign- 
ment should state the name of each and the amount to be issued to 



Digitized by LjOOQ IC 



404 

him. If only a part of a bond U aislfnod a now Imo for the ro- 
malndor will be made to the former payee of the whole bond: Pro- 
vided, however. That the amount assigned shall correspond with one 
or more of the denominations In which the bonds are Issued. 

In aiBxlng his slgnatore to an assignment the assignor should sign 
In the exact form In which his name appears on the face of the bond, 
or If the assignor Is other than the payee of the bond he should sign 
In the oxact fon.^ In which his name appears In the power of authority. 
If the bond be Issued to a firm, the assignment must be subscribed In 
the name of the firm by a member thereof who Is possessed of au- 
thority to sign for the firm, of which authority the officer witnessing 
the signature must be satisfied; If Issued to Joint owners, co-trustees, 
joint executors, administrators, or guardians, each person must sign 
for himself; If to a corporation or company, the authority of the person 
who assigns the bonds should be granted by a resolution of the board 
of directors, designating the officer or other person by name, and a 
certified copy of such resolution, under seal, should be furnished 
the department. This resolution should be certified by some officer 
of the corporation or company other than the one authorized to ex- 
ecute assignments. In case an officer Is not designated by name a 
certificate under seal must be furnished setting f6rth the name of 
the person In such office. 

Where the charter or by-laws of a corporation or company, or a 
resolution of Its board of directors, authorises the holder of a par- 
ticular office to execute assignments of bonds, a certified copy of 
charter, by-laws, or resolution should be furnished, together with a 
certificate under seal giving the namo of the person holding sudi 
Office. When on account of death, or from any other cause, such per- 
son ceases to act, before the bonds held by him are assigned. It will 
be necessary f6r the successor In said office to file evidence of his 
election or appointment 

All such evidence of authority will be placed on file In the depart- 
ment, and. If general and permanent In Its character, need not be 
reproduced In subsequent transactfons undor the same power. If proper 
reference be made thereto. 

An assignment made by mark (x) must be witnessed by at least 
one person besides the Officer verifying the assignment 

A bond standing In the maiden name of a woman who has married 
since Its Issue should be assigned In such a manner that both maiden 
name and married name will appear In her signature to the assign- 
ment 1. e., Umtj Jones, now by marriage Mary Brown. Bonds should 
be assigned to a married woman In her personal name and not In the 
name of her husband, L e., Mrs. Mary Brown, not Mrs. John Brown. 



Digitized by CjOOQ IC 



406 

JumomaanB bt ATranriT ni Fact.— A penon enUtled to tMign 
bonds may, by a duly ezoonted power of attorney, appoint an attorney 
In fact for that purpose. By virtue of the authority so conferred, the 
attorney can execute the assignments in the same manner as the prin- 
cipal and» provided the power of attorney authorizes him to do so, 
he may appoint one or more substitutes to act in his place. An assign- 
ment by an attorney in fact or his substitute to himself Indiyldually 
is void unless sanctioned by a court of competent Jurisdiction; in 
which case a certified copy of the cotirt order must be filed with the 
department 

Where in a foreign country it is the custom to file powers of a^ 
tomey In public offices and furnish certified copies therefrom, a certi- 
fied copy, properly authenticated by a United States diplomatic or 
consular officer, or commercial agent, may be accepted; but in all 
other cases the original power of attorney nmst be filed with the 
department. 

No officer of the Treasury of the United States should be selected 
as such attorney. 

Powers of attorney authorizing the assignment of bonds should be 
sent, for record, to the Secretary of the Treasury, Division of Loans 
and Currency. 

Powers of attorney to assign or transfer registered bonds must be 
acknowledged in the presence of one of the officers authorized to 
witness assignments. 

The following form may be used: 

FOBM or POWn or ATtOVXEt 

Know all men hy these pre$enU: 

That I, , do hereby appoint my a^ 

tomey to sell and assign any and all United States bonds now standing 
(or which may hereafter stand) in my name, or which may be assigned 
to me, granting to' said attorney full power to appoint one or more 
substitutes for that purpose, hereby ratifying and confirming all that 
may be lawfully done by virtue hereof. 

Witness my hand and seal this the day of A. D. 192. . . 

[SEAL] 

Bzecuted before me this the day of A. D., 192. . . 



[omOXAL SEAL.] 

Note.— To be verified in accordance with instructions contained under 
head of acknowledgments. 



Digitized by CjOOQ IC 



406 

The above form is tor general authority. If it is desired to grant 
specific authority only, the form should be modified by striking out 
the words "any and all" and write after the word "assign" the amount 
and description of the bonds. 

FoBMs or RssoLtmoirs QiAimNo AtrrHOBrrr to Assign Rbqistbbkd 
BomMi. — 

Form 2405. 

assoLunoN. 

Permanent and fuTl authority to a$Hon registered hondi that are 
transferable on the hooks of the Treasury Department 

At a regular meeting of the board of directors of the , held at 

» on the day of » A. D., 192. ., it was 

Resolved that , the president, and the be, and 

they are hereby. Jointly and severally, authorized and empowered to 
sell, assign, and transfer all or any United States beoibtebed bonds, or 
registered bonds of any description now standing, or which may here- 
after be registered in the name of upon the books of the United 

States Treasury Department, and to appoint one or more attomesrs for 
that purpose; and also, all or any United States begistebid bonds, or 
registered bonds of any description which are transferable on the 

books of the Treasury Department which this now owns and 

holds, or may hereafter acquire, by assignment or mesne assignments 
from the party in whose name the same is inscribed, with full iMwer to 

appoint a substitute; and also, as the representative of this , 

all or any United States bbgtstebed bonds, or registered bonds of any 
description which are transferable on the books of the Treasury De- 
partment which this is, or shall be, authorized and empowered 

to sell, assign, and transfer as attorney for the owners and holders 
thereof, with full power to appoint a substitute. 

I certify the foregoing to be a true copy from the minutes. 

[SEAL] 

Secretary of the Board of 

This resolution should be certified by some oflicer of the institution 
other than the one empowered to assign the bonds. 

It is recommended that resolutions be adopted only at regular meet- 
ings. But when passed at a specfial meeting, the certificate must be 
signed by tioo officers. 



Digitized by CjOOQ IC 



407 

FdBK 2406. 
■EBOLunoir won asbionbcent of uihtbd states bonds. 
At a regular meeting of the board of , of the 



held , 192. ., it was, on motion resolved that be, and 

hereby authorized and empowered to sell and assign* United 

States SEOisTKBED BONDS now standing, or which may hereafter stand, 

in the name of this , and to appoint one or nu>re attorneys for 

that purpose. 

I certify that the above is a true copy from the minutes. 

[SEAL] , 

Secretary of Board of 

*N. B. — To make this authority general and permanent, write after 
the word "assign'' any or all. 

To make this authority special or specific, write after the word 
"assign'' the amount and description of the bonds to be assigned. In 
the foruLor case the authority remains In force until revoked, and 
covers all present or future assignments; in the latter it ceases and 
terminates with the transaction specified. 

This resolution should be certified by some ofllcer of the institution 
other than the one empowered to assign the bonds. 

It is recommended that resolutions be adopted only at regular meet- 
ings. But when passed at a special meeting the certificate must be 
signed by two officers. Form No. 2407. 



FoBM 2407. 

BBSOLUnON FOB ASSIGNMENT OF UNITED STATES BONDS. 

We certify that at a special meeting of the board of of 

held at on the day of , 192.. •, at o'clock 

.... m, the following resolution was adopted and is now in full 
force, viz.: 

Resolved that be, and hereby authorized and 

empowered to sell and assign* United States begistered bonds 

now standing, or which may hereafter stand, in the name of this , 

and to appoint one or more attorneys for that purpose; and we certify 
that notice was duly given personally to all members of the said board 

of of the said time and place of said meeting, and of the object 

thereof, for more than days prior thereto, and in time to enable 



Digitized by CjOOQ IC 



408 

all to attend said meeting; and that at such meeting so held a quorum 
of all the members of said board was present and voted for the adop- 
tion of said resolution. 

(Signature) , 

(TiUe) 

(Signature) , 

(TiUe) 

[SEAL] 

*N. B.— To make this authority general and permanent, write after 
the word "assign" any or all. 

To make this authority special or specific, write after the word 
"assign" the amount and description of the bonds to be assigned. 
In the former case the authority remains in force until revoked, and 
covers all present or future assignments; in the latter it ceases and 
terminates with the transaction specified. 

Use form No. 2406 for resolutions adopted at regular meetings. 

FOBM OF AnTHOSITT UKDEB BT-IAW8. 

At the annual meeting of the stockholders of the of 

, held 192. ., was duly elected president, and 

was duly elected cashier; and as such they are Jointly or sev- 
erally empowered by the by-laws (a certified copy of which is hereto 
annexed) to sell and assign any and all United States bonds now stand- 
ing (or which may hereafter stand) in the name of this bank (or 
institution). 

, Becretary. 

[OOBPORATB SEAL.*] 

*If the bank or institution has no corporate seal, an aflldavit of 
one of the ofllcers to that effect should accompany the authority. 

Officebs Authobized to witness Assignments. — ^The following ofll- 
cers are authorized to witness the execution and acknowledgment of 
the assignment of United States registered bonds and notes: 

Judges and clerks of United States courts; 

United States district attorneys; 

United States collectors of customs; 

United States collectors of internal revenue; 

Assistant treasurers of the United States at Boston, New York, 
Philadelphia, Baltimore, Cincinnati, Chicago, St Louis, New Or- 
leans, and San Francisco; 

Sfacecutive ofllcers of the Federal Reserve Banks located in Boston, 
New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, 



Digitized by CjOOQ IC 



409 

St. LoulB, Mlniiei4K>liB, Kaiunui City, Dallas* and San Franolsoo^ 
and of the branches thereof; 
Bbcecutiye offlcers (authorized to perform acts attested under the 
seal of their respectiye institutions) of incorporated banks and 
trust companies in the United States (including Inoorporatjdd 
sayings banks) » whether or not members of the Federal Reserye 
System, and the branches thereof, domestic and foreign, and of 
incorporated banks and trust companies in Alaska and the insular 
possessions of the United States doing business under Federal 
charter or organized under Federal law; and, in addition, man- 
agers of branches of such incorporated banks and trust companies 
whose signatures are certified to the Treasury Department under 
the seal of the parent institution; 
Commanding officers of the Army, Nayy, and Marine 0>rps of the 
United States (for members of the military and nayal establish- 
ments of the United States); 
Diplomatic and consular representatiyes and commercial agents of 

the United States on duty abroad; 
Registered bonds and notes may also be assigned at the Treasury 
Department, Washington. If in a foreign country, assignments should 
be made before a diplomatic or consular representatiye or commercial 
agent of the United States; if no such officer is accessible, the assign- 
ment may be made before a notary public, or other competent officer, 
but his official character and jurisdiction must be duly certified to the 
Treasury Department 

A NoTABT Punuo, A Jusnos or the Piaob, on a OoicmssioinEB or 
Deeds is Not Attthobized to Wmness an Assignment. — In the eyent 
that none of the officers authorized to witness assignments is readily 
accessible, the Secretary of the Treasury will, upon application, make 
special proyision for the particular case. In all cases the witnessing 
officer must affix to the assignment his ofllclal signature, title, address, 
and seal, and the date of the assignment; officers of incorporated 
banks and trust companies must affix the seal of the bank or trust 
company. If the officer does not possess an official seal that f^ct 
should be made known and attested. Witnessing officers mnst require 
positiye identification of assignors as known and responsible persons. 
No officer of the United States, at home or abroad, is authorized to 
charge a fee for witnessing the assignment of United States registered 
bonds or notes, and banks and trust companies generally impose no 
charge for the seryice. 

Powns or Subs t i t u t io n.— Powers of substitution must be acknowl- 
edged in the same manner as powers of attorney and should likewise 
Mlow the same general form. 



Digitized by CjOOQ IC 



410 

Fnof or Pown or Substrdtion to Siu. akd Amun Borm.— 

Know att men by the$0 preienU, That , by Tirtue oC 

authority conferred upon in and by the letter of attorney of 

dated do hereby substitute and appoint 

Attomer f6r , and in name to sell and assign 

(I ) U. 8. % Registered Bonds, Act now 

standing in the name of 

on the books of the Treasury Department; hereby ratifying and con- 
firming all that may be lawfully done by virtue hereof. 
Witness hand and seal this day of , 19... 



Bxecuted in the presence of of the 

in the SUte of 

(The seal should always be impressed. ) 



ABSioHMBifTs nr Cask or Dbath w RmsmsD Owncb.— In case of 
the death of the holder of registered bonds or notes, if the decedent 
leare a will which is duly admitted to probate, or die intestate and 
the estate is administered in a court of competent jurisdiction, assign- 
ment may be made only by the duly appointed representatire of the 
estate. Assignments made by executors or administrators, or other 
duly appointed representatives, must be supported by a duly executed 
certificate under seal from the court appointing such representative, 
dated not more than 90 days prior to the execution of the assignments, 
showing the appointment and qualification of such representative and 
that the appointment is still in force, or, in the absence of such a 
certificate, by duly certified copies of the representative's letters of 
appointment If the decedent die intestate and the gross value of 
the estate, both real and personal, does not exceed |250 in value, or 
the estate of such decedent is expressly exempt from administration 
under the laws of the State of the decedent's domicile, assignments 
by the person or persons entitled to the bonds or notes under the laws 
of the State of the decedent's domicile may be recognized, without 
administration, upon presentation of proof satisfactory to the Secretary 
of the Treasury that the funeral expenses and debts of the decedent 
have been paid or provided for, and that such person or persons are 
entitled to the bonds or notes. Such proof will, in general, include 
aflidavits of the persons claiming to be entitled, setting forth all the 
ftu^ in detail, supported by aflidavits of at least two disinterested 
fiersotis, and by the official certificate or other proof of death of the 
registered holder; and in cases where any of the persons entitled are 



Digitized by CjOOQ IC 



411 

mlnon or under diiabllity no Mttgnmont wUl bo permitted nnleet to 
them, or upon compliance with the TreMnrr Department regulations 
•a to assignments by or for such persons. The Secretary of the 
Treasnrj may also require in any such case a bond of indemnity 
with satisfactory sureties. 

FoBnoN SiTocEssoiSHip AssmmctaiTS.— "Where a payee, at the time 
of his death, was a resident of a foreign country, the party claiming 
to direct and execute the transfer must furnish an exemplified copy of 
the will or other instrument conyeylng the requisite authority, duly 
certified under the hand and seal of the proper officer, attested by the 
certificate of a United States diplomatic or consular officer or com- 
mercial agent or, if there be none such accessible (which fact shall, 
in such case, be certified), by that of a notary public or other com- 
petent officer, to the effect that such exemplified copy is executed and 
granted by the proper tribunal or officer and is in due f6rm and 
according to the laws of that country. ThiB assignment should be ex- 
ecuted as hereinbef6re directed. 

AssiGNMEKTs nf CASK OP DisABiLiTr OF RsaisTKBED OwmEB.— In csse 
of mental disability or other legal incompetency of the holder of 
registered bonds or notes, assignments may be m^tde by the guardian 
or other legally appointed representative of the holder upon presenting 
(proof satisfactory to the Secretary of the Treasury of his appointment 
and authority to assign such bonds or notes. 

A8sioNM:fcxTs FOB MiNOBS.— Bouds or notes registered in the name of 
a minor or of a guardian for a minor may be assigned during minority 
only by the guardian legally appointed by a court of competent 
Jurisdiction, or otherwise legally qualified, or pursuant to order or 
decree of a court of competent Jurisdiction; proYlded, however, that 
in cases where such bonds or notes have been purchased by the natural 
guardian of the minor out of his own funds as a gift to the minor, 
or otherwise purchased for the benefit of the minor, and registered 
in the name of the minor, or in the name of such natural guardian for 
the minor, and the entire gross value of the minor's estate, both real 
and personal, does not exceed |250, assignments by the natural guar- 
dian for transfer or for exchange into coupon bonds or notes, may be 
recognized upon presentation of proof satisfactory to the Secretary of 
the Treasury that the proceeds of the bonds or notes so assigned 
are necessary, and are to be used for, the support or education of the 
minor. The Secretary of the Treasury may also require in any such 
case a bond of indemnity with satisfiu^ry sureties. 



Digitized by CjOOQ IC 



412 

Bonds ob Notes RnisTEBD in thb Naiobs or Two ob Mobb Pbbsons.— 
When bonds or notes are registered in the names of two or more 
persons. In substantially the form "John Jones and Mary Jones," 
or "John Jones or Mary Jones," or "John Jones and Mary Jones, or 
the surylYor," the bonds or notes are deemed to be held in joint 
ownership, with right of surviTorship, and during 1{he liyes of the 
co-owners the Treasury Department will require assignments by all 
In cases of transfer. Interest will bei paid to any one of such co- 
owners. In case of the death of any such co-owner, the Department 
will, upon satisfactory proof of death and sunrivorship, recognize the 
survivor or surviyors as owners, and win honor assignments by such 
sunrivor or suryiTors without regard to any administration of the es- 
tate of the deceased co-owner. Bonds and notes should not be registered 
in the form "John Jones or Mary Jones, or either of them," but, if so 
registered, assignments by all the co-owners will be required in cases 
of transfer, and no right of suryiyorship win be recognized. 

Pbbsentation of RBGismiED BoifDS OB Notes itm Tbaksfeb.— After 
the assignment of a registered bond or note has been duly executed, 
the bond or note should be forwarded, at the risk and expense of the 
owner, direct to the Secretary of the Treasury, Diyision of Loans and 
Currency, Washington, D. C, or to a Federal Reseye Bank, accompanied 
by specific Instructions for the issue and deliyery of the new bond 
or note, which must in all cases be in accordance with the assignments. 
(Use Form L. ft C. 144, copies of which, or of a substantiaUy similar 
form, may be obtained from any Federal Resenre Bank or from the 
Treasury Department) 

New Bonds.— Registered bonds receiyed for transfer are canceled, 
and new bonds in their stead are issued in the name of the assignee. 
These bear interest from the first day of the interest period in which 
the transfer shall haye been made. The Department endeayors to make 
returns on the same day that the bonds are receiyed, but since the 
issuance of the several Liberty issues it usually takes several days 
to complete the process. The Department makes no charge for trans- 
ferring bonds. When bonds are sent or returned by express the entire 
expense thus incurred must be borne by the party sending or 
receiving the bonds. Bonds received for transfer during the period 
the books are closed against such transfers will be reissued as soon as 
the books reopen. 

CHANOB of NlMll OB OOBBECnON OF NAICE OF OWNBBS OF RbQISTEBBD 

BoifDS OB Notes. — ^Assignments to cover change of name or correction 
of name of the owner must be witnessed and acknowledged as pro- 
ivided in the case of transfers. If a bond or note stands in the 



Digitized by CjOOQ IC 



413 

maiden name of a woman who has since married and it is desired 
(1) to transfer the bond or note to another person, or (2) to correct 
the registration record, the bond or note should be appropriately 
assigned in snch manner that both uLaiden name and married name 
appear in the signature to the assignment; e. g.. Bliss Mary Jones, now 
by marriage, Mrs. Mary Brown. A married woman's personal (legal) 
name must be used and not her husband's. If an error has been 
made in inscribing the name of the owner of a registered bond or 
note, the owner should return the bond or note to the Secretary of 
the Treasury, Division of Loans and Currency, for correction. If the 
directions for the issue of such bond or note were transmitted by 
a bank or trust company or through a Federal Reserre Bank, the bond 
or note should be returned by the owner through such bank or trust 
company, or Federal Reserve Bank, accompanied by full explanation 
and Instructions. Bonds or notes so returned for correction should 
be assigned to the owner in the correct name and assigned by him in 
the name as It appears on the face of thei bond or note. If tiie 
correction involves a substantial change in name, the Department 
may require additional certification. 

Change of Addiess or Ownebs of Rbgistebed Boitds ob Notes. — 
Checks Issued in payment of Interest on United States registered 
bonds or notes are mailed to registered holders at their addresses 
of record. Notification of any change in address of any registered 
holder should be sent immediately to the Secretary of the Treasury, 
Division of Loans and Currency, Wlashington, D. C. In giving such 
notification, the serial muDbefr, denomination, and title of the bonds or 
notes Involved must be given, the old and new addresses set forth, 
and the request signed in same manner as the bonds or notes are 
inscribed. (Use Form L. Jk C. 228, copies of which, or of a substan- 
tially similar form, may be obtained from any Federal Reserve Bank 
or from the Treasury Department.) Ordinarily it will not be possible 
to take notice of a change in address during any period when the 
transfer books of the loan in question are dosed. 

NoNBEOEiFT OB LoBs OF Iniebest Cheoks. — If an interest check is 
not received within a reasonable period after an interest payment 
date, or if the check is lost after receipt^ the fact of non-receipt or 
loss should be reported to the Secretary of the Treasury, Division 
of Loans and Currency, Washington, D. C, with request that payment 
of such check be stopped. This notification should include a descrip- 
tion of the registered bonds or notes, the title of the loan, and the 
serial numbers and denominations of the bonds or notes. If the check 
subsequently is recovered, request for thid removal of the stoppage 



Digitized by CjOOQ IC 



414 

should likewise be sent the Secretary of the Treasury, Division of 
Loans and Currency. Duplicates for lost Interest checks may be 
secured upon compliance with the Treasury D^>artmeiit regulations* 
as to which full information may be obtained upon application to the 
Secretary of the Treasury, Division of Loans and Currency. 

Addbiss wob CoMiruiac^TUOTS.— All communications relating to 
United States registered bonds or notes and interest thereon should 
be addressed to Ths Ssoutabt or thk Tbeasubt, Division of Loans 
AND CuBBENOT, WASHINGTON, D. C, ozcopt that communicatious relat- 
ing to bonds or notes presented to a Federal Reserve Bank should 
be addressed to that bank. 



Lost, Stolen, ob Destbotkd Bonds ob Notes.— ^o«pon hands and 
notet are payable to bearer and title thereto passes by delivery; if 
they are lost or stolen the Treasury Department can grant no relief 
under existing law, but if destroyed, duplicates may be issued. In 
case of the loss, theft, or destruction of registered bonds or notes, the 
bonds or notes may be replaced, unless assigned in blank. All cases 
of lost, stolen, or destroyed bonds or notes should be reported to the 
Secretary of the Treasury, Division of Loans and Currency, Wash- 
ington, D. C. The Treasury Department assumes no responsibility 
whatever with respect to coupon bonds or notes so reported, but if 
subsequently the coupon bonds or notes are presented for exchange 
or otherwise, attempt will be made to advise the person who reported 
the loss. In cases of registered bonds or notes reported lost, stolen, or 
destroyed, caveats will be entered against the transfer, exchange, or 
payment of such bonds or notes. In the event that bonds or notes 
reported lost, stolen, or destroyed subsequefeitly are recovered, report 
thereof should be made to the Secretary of the Treasury. The law 
requires with respect to claims for the issue of duplicates of destroyed 
coupon bonds or notes that the bonds or notes shall be identified by 
number and description; accordingly, all holders of coupon bonds or 
notes should keep a careful and authentic record of their holdings. 
Full information with respect to submitting claims for the issue of 
duplicate bonds or notes may be had upon application to the Secretary 
of the Treasury, Division of Loans and Currency, Washington, D. C. 

Mtjtilated or Defaced Bo7n>8 ob Notes. — ^If through accident, inad- 
vertence, or otherwise, bonds or notes have become mutilated or de- 
faced, the bonds or notes may be forwarded to the Secretary of the 
Treasury, Division of Loans and Currency, Washington, D. C, prefer- 
ably through the appropriate Federal Reserve Bank, accompanied by 



Digitized by CjOOQ IC 



415 

aiBclaTlU fornliblng proof of the ownership of the bonds or notes and 
setting forth the circumstances under which the mutilation or deface- 
ment occurred. The Department will give appropriate consideration 
to each case and adyise the owner whether relief can be given by 
the issue of new bonds or notes. 

CoNVEBSioifs or LiBEBTT BoifDS OB ViCTOBT NoTBS. — ^Holdcrs of First 
Liberty Loan Converted 4 per cent, bonds of 1932-1947 and of Second 
Liberty Loan 4 peqr cent, bonds of 1927-1942 have the privilege of 
converting their bonds into 4% per cent, bonds pursuant to the etz- 
tension of the conversion privilege, in accordance with the provisions 
of Treasury Department Circular No. 137, dated March 7, 1919, as 
amended and supplemented June 10, 1919, to which reference is hereby 
made. There is no other conversion privilege now open to holders of 
Liberty Bonds. Reference is also made to Treasury Department Cir- 
cular No. 158, dated September 8, 1919, which prescribes further rules 
and regulations as to the exchange and conversion of 4 per cent, 
coupon Liberty bonds. Under the terms of said Department Circular 
No. 137, as amended and supplemented, bonds of the First Liberty 
Loan Converted and of the Second Liberty Loan Converted Issued upon 
conversion of 4 per cent bonds pursuant to the extension of conversion 
privilege, bear interest at the rate of 4% per cent, per annum from 
the semi-annual Interest payment date next succeeding the date of 
presentation for conversion. Anything herein to the contrary not- 
withstanding, (a) coupon bonds Issued upon such conversions may 
be exchanged for coupon bonds of other denominations or for registered 
bonds before the date when they begin to bear Interest at 4% per 
cent, per annum, and in that event the bonds issued upon exchange 
will not begin to bear interest until such date, and (b) no transfers 
of registered bonds heretofore or hereafter Issued upon such con- 
versions, nor exchanges of such registered bonds for coupon bonds, 
will be effected in advance of the semi-annual interest payment date 
from which the respective bonds bear interest at the rate of 4% per 
cent per annum. In case such registered bonds are presented for 
transfer or exchange in advance of such semi-annual Interest pa3rment 
date, the transfer or exchange will be effected as of such date. De- 
livery of the bonds to be Issued upon such transfer or exchange may 
be made in advance of such date, but the interest at the rate of 4 
per cent, per annum to such semi-annual interest payment date shall 
be paid as if such delivery had not been made. 

Treasury Department Circular No. 139, dated May 20, 1919, to which 
reference is hereby made, prescribee rules and regulations under which 
the two series of Victory notes may be converted. 



Digitized by CjOOQ IC 



416 

TiAKfiFOBTATioif CHABon AND RISKS ON BoKDS OB NoRS.— Trans- 
portation charges and risks upon bonds and notes presented to the 
Treasury Department, Washington, or a Federal Resenre Bank, for 
exchange or transfer,