Readings in Money and Banking Part 92

(g) Except in so far as they may be secured by a lien on or by transfer of the t.i.tle to the goods to be transported, as under (f), the bills of any person, firm, company, or corporation, drawn on and accepted by any private banking firm, person, company, or corporation (other than a bank or trust company) engaged in the business of discounting and accepting, and discounted by a federal reserve bank, shall at no time exceed in the aggregate a sum equal to 5 per centum of the paid-in capital of such federal reserve bank;

(h) The aggregate of acceptances of any private banking firm, person, company, or corporation (other than a bank or trust company) engaged in the business of discounting or accepting, discounted or purchased by a federal reserve bank, shall at no time exceed a sum equal to 25 per centum of the paid-in capital of such federal reserve bank.

To be eligible for purchase by federal reserve banks under section 14, bankers' acceptances must comply with all requirements and be subject to all limitations hereinbefore stated, except that they need not be indorsed by a member bank: _Provided, however_, That no federal reserve bank shall purchase the acceptance of a "banker" other than a member bank which does not bear the indors.e.m.e.nt of a member bank, unless a federal reserve bank has first secured a satisfactory statement of the financial condition of the acceptor in form to be approved by the Federal Reserve Board.

V

POLICY AS TO PURCHASES

While it would appear impracticable to fix a maximum sum or percentage up to which federal reserve banks may invest in bankers' acceptances, both under section 13 and section 14, it will be necessary to watch carefully the aggregate amount to be held from time to time. In framing their policy with respect to transactions in acceptances, federal reserve banks will have to consider not only the local demands to be expected from their own members, but also requirements to be met in other districts. The plan to be followed must in each case adapt itself to the constantly varying needs of the country.

CHARLES S. HAMLIN, Governor.

H. PARKER WILLIS, Secretary.

FEDERAL RESERVE BOARD

WASHINGTON, April 2, 1915.

ACCEPTANCE BY MEMBER BANKS

By act of Congress approved March 3, 1915, section 13 (paragraphs 3, 4, and 5 of the Federal Reserve Act) was amended and re-enacted so as to read as follows:

Any federal reserve bank may discount acceptances which are based on the importation or exportation of goods and which have a maturity at time of discount of not more than three months and indorsed by at least one member bank. The amount of acceptances so discounted shall at no time exceed one-half the paid-up and unimpaired capital stock and surplus of the bank for which the rediscounts are made, except by authority of the Federal Reserve Board, under such general regulations as said board may prescribe, but not to exceed the capital stock and surplus of such bank.

The aggregate of such notes and bills bearing the signature or indors.e.m.e.nt of any one such person, company, firm, or corporation rediscounted for any one bank shall at no time exceed 10 per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values.

Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation of exportation of goods having not more than six months' sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus, except by authority of the Federal Reserve Board, under such general regulations as said board may prescribe, but not to exceed the capital stock and surplus of such bank, and such regulations shall apply to all banks alike, regardless of the amount of capital stock and surplus.

In order to give effect to the above amendment of the law, the Federal Reserve Board issues the appended Regulation K, series of 1915, stating the conditions under which member banks may accept, up to 100 per cent.

of their capital and surplus, drafts or bills of exchange growing out of transactions involving the importation or exportation of goods and having not more than six months' sight to run.

CHARLES S. HAMLIN, Governor.

H. PARKER WILLIS, Secretary.

FEDERAL RESERVE BOARD

WASHINGTON, May 8, 1915.

CLEARINGS BETWEEN FEDERAL RESERVE BANKS

I

STATUTORY PROVISIONS UNDER SECTION 16

"The Federal Reserve Board shall make and promulgate from time to time regulations governing the transfer of funds and charges therefore 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 may designate a federal reserve bank to exercise such functions, and may also require each such bank to exercise the functions of a clearing house for its member banks."

II

GENERAL PROVISIONS

In the exercise of the functions of the clearing house authorised under the provisions of section 16, quoted above, the Federal Reserve Board and the federal reserve banks will be governed by and subject to the following regulations and the Federal Reserve Board will be the custodian of the funds hereinafter termed the gold settlement fund. The board will appoint a settling agent who shall keep the necessary records and accounts.

III

DEPOSITS IN THE GOLD SETTLEMENT FUND

(a) Each federal reserve bank shall, not later than May 24, 1915, forward to the Treasury or the nearest Sub-Treasury, for credit to the account of the gold settlement fund $1,000,000 in gold, gold certificates or gold order certificates, and, in addition, an amount at least equal to its net indebtedness due to all federal reserve banks.

(b) The Treasurer of the United States or a.s.sistant Treasurer will, in accordance with arrangements made with the Treasury Department, advise the Federal Reserve Board, by mail or telegraph, of the receipt of all funds deposited on account of the gold settlement fund, and the Treasurer will issue and deliver to the Federal Reserve Board gold order certificates made "payable to the order of the Federal Reserve Board"

covering the sum so deposited.

(c) Each federal reserve bank shall maintain a balance in the gold settlement fund of not less than $1,000,000.

(d) Excess balances may, at the convenience of each federal reserve bank, remain deposited with the gold settlement fund.

IV

CUSTODY OF FUNDS

(a) A safe in the Treasury vault will be set apart for the exclusive use of the Federal Reserve Board.

(b) To open the Treasury vault, the presence of two persons designated by the Secretary of the Treasury is required. The combination of the safe set apart for the use of the board will be controlled by two persons designated by the board.

(c) A vault record shall be kept, giving a memorandum of all entrances to the safe, by whom made, for what purpose, and the certificates deposited or withdrawn. Each entry on the vault record book shall be signed by the persons having access to the safe.

V

ACCOUNTS

In its relations with other federal reserve banks each federal reserve bank shall keep an account showing balances "due to" other federal reserve banks representing the proceeds of items which it has actually collected, and payments and transfers which have been made to it for the account of such other federal reserve banks; and an account showing balances "due from" other federal reserve banks representing the proceeds of items which it has sent to such other federal reserve banks, and payments and transfer which have been made to such other federal reserve banks for its account.

VI

PROCEDURE

(a) At the close of business each Wednesday night, each federal reserve bank shall telegraph to the Federal Reserve Board, confirming such telegram by mail, the amounts in even thousands due to each other federal reserve bank as of that date, as indicated by its "due to"

account provided for in Rule V. If Wednesday is a holiday in the State in which a federal reserve bank is located, then such bank shall telegraph as herein provided on Tuesday, at the close of business.

(b) The settling agent shall, on each Thursday, make the proper debits and credits in the accounts of each federal reserve bank with the gold settlement fund, and shall telegraph to each bank the amounts, in even thousands, of credits to its settlement account, giving the name of each federal reserve bank from which each of its credits was received and also its net debit or credit balance in the weekly settlement.