must remain actually secured throughout the life of the acceptance. In the case of acceptances of member banks this security must consist of shipping documents, warehouse receipts or other such documents, or some other actual security growing out of the same transaction as the acceptance.

Although a Federal Reserve Bank may legally rediscount an acceptance having a maturity at the time of not more than three months, exclusive of days of grace, it may decline to rediscount any acceptance the maturity of which is in excess of the usual or customary period of credit required to finance the underlying transaction or which is in excess of that period reasonably necessary to finance such transaction.

Special conditions of eligibility for rediscount by the Federal Reserve Bank are laid down in greater detail by the Federal Reserve Board.

III

Bills of exchange, trade acceptances, and bankers' acceptances purchased in the open market by the Federal Reserve Bank

The Federal Reserve Banks may, under rules and regulations prescribed by the Federal Reserve Board, purchase and sell in the open market, at home or abroad, from or to domestic or foreign banks, firms, corporations, or individuals, bankers' acceptances and bills of exchange of the kinds and maturities made eligible by the Federal Reserve Act for rediscount, with or without the indorsement of a member bank. As a matter of fact, the bulk of the Federal Reserve Banks' transactions in paper of this sort consists in sales and purchases in the open market, under the section of the Act so permitting.

The Federal Reserve Board has determined that a bill of exchange or acceptance to be eligible for purchase by Federal Reserve Banks under this provision of the Federal Reserve Act must

(a) Conform to the relative requirements of the Board's Regulation A. (Reviewed briefly but not completely in Section I of this Chapter, "Notes, drafts, bills of exchange," etc.) Exception:

A banker's acceptance growing out of a transaction involving the storage within the United States of goods which have been actually sold, may be purchased, providing that the acceptor is secured by the pledge of such goods and, providing further, that the bill conforms in other respects to the relative requirements of Regulation A.

(b) Must have a maturity at the time of purchase of not more than 90 days, exclusive of days of grace, unless it is a bill drawn on a banker, when it may have a maturity of three months, exclusive of days of grace.

(c) Must have been accepted by the drawee prior to purchase by a Federal Reserve Bank, unless it is either accompanied and secured by shipping documents, or by a warehouse, terminal, or other similar receipt conveying security title, or bears a satisfactory banking endorsement.

ACCEPTANCE BY MEMBER BANKS OF

DRAFTS AND BILLS OF EXCHANGE

NDER the Federal Reserve Act any member bank may ac

UNDE

cept drafts or bills of exchange drawn upon it having not more that six months to run, exclusive of days of grace, which grow out of a transaction, or transactions, involving any one of the following:

(a) The importation or exportation of goods.

(b) Domestic shipment of goods, providing shipping documents conveying or securing title are attached at the time of acceptance.

(c) The storage of readily marketable staples,' providing that the bill is secured at the time of acceptance by a warehouse receipt, or other such document conveying or securing title.

The Act limits the aggregate which any bank shall accept without security for any one person, company, firm, or corporation to an amount not exceeding at any time 10% of the bank's paid-up and unimpaired capital stock and surplus. This limit, however, does not apply in any case where the accepting bank remains secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance.

Such bills may be accepted by a member bank up to an amount not exceeding at any time more than one-half of the bank's paid-up and unimpaired capital stock and surplus; or, with the approval of the Federal Reserve Board, up to an amount not exceeding at any time more than one hundred per cent. of the bank's paid-up and unimpaired capital stock and surplus.

In no event shall the aggregate amount of the acceptances growing out of domestic transactions exceed fifty per cent. of the bank's capital stock and surplus.

The Federal Reserve Board has determined that any member bank, having an unimpaired surplus equal to at least twenty per

1 A readily marketable staple within the meaning of these regulations may be defined as an article of commerce, agriculture, or industry of such uses as to make it the subject of constant dealings in ready markets with such frequent quotations of price as to make (1) the price easily and definitely ascertainable and (2) the staple itself easy to realize upon by sale at any time.

ACCEPTANCES BY MEMBER BANKS OF DRAFTS AND BILLS OF EXCHANGE

cent. 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 one hundred per cent. of its paid-up and unimpaired capital stock and surplus, may file an application for that 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.

The approval of any such application may be recinded upon 90 days' notice to the bank affected.

The Reserve Bank requires certain evidences of eligibility, and although the member banks may accept paper having six months to run, it is not eligible for rediscount at the Federal Reserve Bank until such time as it has a maturity of not more than three months, exclusive of days of grace.

E

RESERVE REQUIREMENTS

VERY member bank in the Federal Reserve System is re

quired to keep on deposit at the Federal Reserve Bank of its district certain cash reserve balances which are designated in the paragraphs following. "Demand deposits," within the meaning of the act, comprise all deposits payable within 30 days; "time deposits" comprise all deposits payable after 30 days and all savings accounts and certificates of deposit subject to not less than 30 days' notice before payment, and all postal savings deposits.

1. Reserve Requirements for Banks not in Reserve Cities1-Not less than 7 per cent. of the aggregate amount of demand deposits and 3 per cent. of its time deposits.

2. Reserve Requirements for Banks in Reserve Cities-Not less than 10 per cent. of demand deposits and 3 per cent. of time deposits.

Exception:

If located in the outlying districts of a reserve city or in territory added to such a city by extension of its corporate charter, the bank may upon the affirmative vote of five members of the Federal Reserve Board, maintain the reserve balances specified in Paragraph 1 above.

3. Reserve Requirements for Banks in Central Reserve CitiesNot less than 13 per cent. of demand deposits and 3 per cent. of time deposits.

Exception:

If located in the outlying districts of a central reserve city or in territory added to such city by the extension of its corporate charter, the bank may, upon the affirmative vote of five members of the Federal Reserve Board, maintain the reserve balances specified in Paragraphs 1 or 2 above.

1 Central Reserve Cities-New York and Chicago.

Reserve Cities-Boston, Albany, Brooklyn and Bronx, Buffalo, Philadelphia, Pittsburgh, Baltimore, Washington, Richmond, Charleston, Atlanta, Savannah, Jacksonville, Birming. ham, New Orleans, Dallas, El Paso, For Worth, Galveston, Houston, San Antonio, Waco, Little Rock, Louisville, Memphis, Nashville, Cincinnati, Cleveland, Columbus, Toledo, Indianapolis, Peoria, Detroit, Grand Rapids, Milwaukee, Minneapolis, St. Paul, Cedar Rapids, Des Moines, Dubuque, Sioux City, St. Louis, Kansas City, Mo., St. Joseph, Lincoln, Omaha, Kansas City, Kans., Topeka, Wichita, Denver, Pueblo, Muskogee, Oklahoma City, Tulsa, Seattle, Spokane, Tacoma, Portland, Los Angeles, Oakland, San Francisco, Ogden, Salt Lake City.