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the respective federal reserve cities within such districts, then the board could by successive changes of cities and boundaries, entirely obliterate existing districts and substitute in their place new districts totally different from those created by the Organization Committee. do not think that Congress intended to confer such a power.

The act provides that each federal reserve bank is to include the name of the city in which the bank is located. It is to be noted that there is no provision in the act by which the Federal Reserve Board may change the name of a federal reserve bank or amend its certificate in this respect. The whole tenor suggests permanency. The omission of Congress to grant by express language, the power to change federal reserve cities is significant. It would have been easy, had Congress desired to grant the power to create new federal reserve cities, to have said so in express terms.

It may be suggested that changes in the "customary course of business" or other changes not foreseen by the Organization Committee may result in inconveniences which the Federal Reserve Board cannot remedy if its power to change the location of federal reserve cities is denied. The answer is that the remedy is in Congress.

It will be observed that the Federal Reserve Act expressly provides that no federal reserve bank shall commence business with a subscribed capital of less than $4,000,000. They were each to be organized when the minimum of capital had been subscribed. Only three-sixths of the capital subscribed is required to be paid in, the remainder being left "subject to call when deemed necessary by the Federal Reserve Board."

The act specifically provides for the decrease of capital stock as member banks reduce their capital stock, and as they cease to be members. Member banks may cease to be members for any of four causes. While the minimum capital had to be subscribed in order to commence business the maintenance of that minimum is nowhere prescribed by the act.

It is plain that a member bank can be a member only of the federal reserve bank of the district in which both are located. Of necessity, when the Federal Reserve Board in the exercise of its power to readjust transfers a member bank from one district to another, such transferred bank must cease to be a member of the federal reserve bank of the district from which it is transferred. When it thus ceases to be a member the capital of the federal reserve bank may be reduced, and there is nothing in the act requiring the reduction to be made subject to the maintenance of a minimum capital.

THE PLAN FOR CHECK CLEARING AND COLLECTION April 29, 1916, the Federal Reserve Board announced the plan for check clearing and collection. The time for the beginning of the operation of the system is June 15, 1916.

The plan is being installed for the reason that pursuant to section 19 within seventeen months the reserves of the member banks will have been entirely withdrawn in the case of country banks and ordinary reserve centers from correspondent banks now carrying them, and will be in possession of the federal reserve banks themselves. This, if it does not abolish the reciprocal relations between banks, will at least make these relations more expensive, since the balances which banks ordinarily carry one with the other will be what might be termed an excess fund, above reserve requirements. The Federal Reserve Board, therefore, proposes meeting the difficulty by instituting a check clearance plan of its own.

As has been stated in the new plan, checks of nonmember as well as member banks will be accepted at par where payment is made at par, but the non-member banks no doubt will prefer to do business with their correspondents as much as possible.

It may be added that many of the small banks protest that the proposed plan will cause a decided curtailment of their revenues. Banks operating in small towns realize from $2,000 to $5,000 a year on collections. Under the federal reserve plan this source of revenue will be destroyed. Following is the official announcement made by the Federal Reserve Board:

TO MEMBER BANKS:

The Federal Reserve Board is empowered, under section 16 of the Federal Reserve Act, to require each federal reserve bank to—

"Exercise the function of a clearing house for its member banks.” After very thorough investigation and many conferences with the governors of the federal reserve banks on this subject, the Federal Reserve Board has determined to exercise its authority and to offer to the member banks, and through them to the public, the machinery of the federal reserve banks for the operation of a check collection and clearing system which it is believed, with the coöperation of member banks, will afford a direct, expeditious and economical system of check collecting and settlement of balances. The date for the inaugu

ration of this system is expected to be June 15, 1916, or as soon thereafter as the federal reserve banks can complete preparations for undertaking this work.

Member banks in each district will in due course receive from their federal reserve bank full information as to the terms and all necessary details of the arrangement, but for the information of all concerned the general terms may be stated to be as follows:

(1) In order that no inconvenience may be experienced the plan will follow as closely as practicable the practice which long experience has developed between country banks and their reserve city correspondents.

Each federal reserve bank will receive at par from its member banks checks drawn on all member banks, whether in its own district or other districts. It is also proposed to accept at par all checks drawn upon non-member banks when such checks can be collected by the federal reserve banks at par.

Each federal reserve bank will receive at par from other federal reserve banks checks drawn upon all member banks of its district and upon all non-member banks whose checks can be collected at par by the Federal reserve bank.

It is the purpose of the Federal Reserve Board to have the collection system developed so as to embrace the collection of all checks on non-member banks and private banks, and while this cannot be done immediately, steps will be taken to afford these facilities as rapidly as possible. The federal reserve banks will prepare a list of all nonmember banks, to be revised from time to time, which will be furnished to member banks.

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 reserve nor become available to meet checks drawn until actually collected, in accordance with the best practice now prevailing.

(2) Checks received by a federal reserve bank on its member banks will be forwarded direct to such member banks and will not be charged to their accounts until advice of payment has been received or until sufficient time has elapsed within which to receive advice of pay

ment.

(3) In the selection of collecting agents for handling checks on non-member banks member banks will be given the preference.

(4) Under this plan federal reserve banks will receive at par from their member banks checks on all member banks, and on non-member banks whose checks can be collected at par by any federal reserve bank. 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 bank may ship lawful money or federal reserve notes 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 items to offset checks received from or for the account of its federal reserve bank.

(5) Section 19 of the Federal Reserve Act provides that—

"The reserve 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 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 unless and until the total reserve required by law is fully restored."

It is manifest that items in process of collection cannot lawfully be counted as reserve either by a member bank or by a federal reserve bank. Therefore, should a member bank draw against such items the draft would be charged against its reserves if such reserve were sufficient in amount to pay it; but any resulting impairment of reserves would be subject to all the penalties provided by the act.

Inasmuch as it is essential that the law in respect to the maintenance of required reserves by member banks shall be strictly complied with, the Federal Reserve Board will fix a penalty to be imposed upon member banks for encroaching upon their reserves.

Member banks can at all times arrange to keep their reserves intact by rediscounting with their federal reserve bank.

(6) 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 member bank to enable it to determine the time at which any item sent to its federal reserve bank will be counted as reserve and become available to meet any checks drawn.

(7) In handling items for member banks a federal reserve bank will act as agent only. It will require that each member bank authorize it to send checks for collection to banks on which checks are drawn, and, except for negligence, will assume no liability. Any further requirements that the board may deem necessary will be set forth by the federal reserve banks in their letters of instruction to their member banks. (8) The cost of collecting and clearing checks must necessarily be borne by the banks receiving 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 Federal Reserve Board will, by rule, 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.

BANK ACCEPTANCES DO NOT REQUIRE STAMPS

April 30, 1916, the Acting Commissioner of Internal Revenue decided that revenue stamps are not required on bank acceptances, and the Federal Reserve Board instructed the banks of the reserve system that stamps are no longer needed on drafts, acceptances, overdrafts and post-dated checks. The text of the decision follows:

In view of the decision made by the Supreme Court of the United States in the case of the United States vs. Isham (17 Wall. 496), that "the liability of an instrument to a stamp duty, as well as the amount of such duty, is determined by the form and face of the instrument, and cannot be affected by proof of facts outside of the instrument itself," this office is of the opinion that drafts, acceptances, overdrafts and postdated checks are not taxable under the above act as promissory notes, even though they are used in such a way as to perform some of the functions of a promissory note.

COMPTROLLER OF THE CURRENCY TO FURNISH REPORTS OF BANK EXAMINATIONS

May 1, 1916, the Comptroller of the Currency decided to furnish thereafter, beginning June 1, 1916, to each examined bank, after an examination, a report of the bank's condition as made by the National bank examiners. These reports will set forth the actual condition of the bank as ascertained from its books and from statements to the examiner by its officers, as well as from other sources.

In addition to the examiner's main report, a copy of which will be furnished to the bank, the examiners will make to the comptroller's office a supplementary report, containing confidential data. The receiving of these reports from the comptroller's office twice a year will relieve banks of an expense which some incur for examinations by public ac

countants.

The National banks of the country have been subject to periodical examinations under the direction of the comptroller's office, and no portion of the reports has been furnished to the examined banks.

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