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A member bank's balance at its Federal Reserve Bank may under certain conditions be checked against and withdrawn for the purpose of meeting existing liabilities. (See “Loans," Paragraph 6, Page 64.)

No bank that is a member of the Federal Reserve System may keep on deposit with any state bank or trust company which is not a member of the system, a sum exceeding 10 per cent. of its own paid capital and surplus. No member bank may act as the medium or agent of a non-member bank in applying for or receiving discounts from the Federal Reserve Bank, except by permission of the Federal Reserve Board.

CHECK CLEARING AND COLLECTION

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THE following is an abridged transcript of the Federal Re

serve Board's Regulation J, Series of 1920. Section 16 of the Federal Reserve Act authorizes the Federal Reserve Board to require each Federal Reserve Bank to exercise the function of a clearing house for its member banks, and section 13 of the Federal Reserve Act, as amended by the Act approved June 21, 1917, authorizes each Federal Reserve Bank to receive from any nonmember bank or trust company, solely for the purposes of exchange 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 nonmember bank or trust company maintains with its Federal Reserve Bank a balance sufficient to offset the items in transit held for its account by the Federal Reserve Bank.

In pursuance of the authority vested in it under these provisions of law, the Federal Reserve Board has arranged to have each Fed

, eral Reserve Bank exercise the functions of a clearing house for member banks that desire to avail themselves of its privileges and for nonmember state banks and trust companies that maintain with the Federal Reserve Bank balances sufficient to qualify them to send items for exchange or for collection. Such nonmember State banks and trust companies will hereinafter be referred to in this regulation as nonmember clearing banks.

Each Federal Reserve Bank shall exercise the functions of a clearing house under the following general terms and conditions:

1-Each Federal Reserve Bank will receive at par from its member

banks and from nonmember clearing banks in the district, checks,' drawn on all member and nonmember clearing banks and on all other nonmember banks which agree to remit at par through the Federal Reserve Bank of their district.

1 A check is generally defined as a draft or order upon a bank or banking house, purporting to be drawn upon a deposit of funds, for the payment at all events of a certain sum of money to a certain person therein named, or to him or his order, or to bearer, and payable instantly on demand.

2—Each Federal Reserve Bank will receive at par from other Fed

eral Reserve Banks, and from all member and nonmember clearing banks, regardless of their location, for the credit of their account with their respective Federal Reserve Banks, checks drawn upon all member and nonmember clearing banks of its district and upon all other nonmember banks of its district whose checks are collected at par by the Federal Reserve 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 such time as may be specified in the appropriate time schedule referred to in subdivision 7.

4Checks received by a Federal Reserve Bank on its member or non

member clearing 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, as shown by the appro

priate time schedule referred to in subdivision 7. 5—Under this plan each Federal Reserve Bank will receive at par

from its member and nonmember clearing banks checks on all member and nonmember clearing banks and on all other nonmember banks whose checks can be collected at par by any Federal Reserve Bank. Member and nonmember clearing 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 nonmember clearing bank may ship currency or species 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.' 6-Section 19 of the Federal Reserve Act provides that,

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 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 balance required by law is fully restored. Items cannot be counted as part of the minimum reserve balance to be carried by a member bank with its Federal Reserve Bank until such time as may be specified in the appropriate time schedule referred to in subdivision 7. Therefore, should a member bank draw against items before such time, 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 and by the Federal

1 In accordance with instructions issued by the Federal Reserve Board on April 24, 1917, the various Federal Reserve Banks have issued circulars setting forth the conditions under which their respective member banks may draw drafts on their Reserve Bank accounts payable with or through any other Federal Reserve Bank.

Reserve Board. 7-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. Each Federal Reserve Bank will publish time schedules showing the time at which any item sent to it will be counted as reserve and be

come available to meet any checks drawn. 8-In handling items for member and nonmember clearing banks, a

Federal Reserve Bank will act as agent only. The board will require that each member and nonmember clearing bank authorize its Federal Reserve Bank to send checks for collection to bank 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 set forth by the Federal Reserve Banks in their letters of instruction to their member and nonmember clearing banks. Each 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 nonmember banks which are clearing through the Federal Reserve Bank.

INTERLOCKING BANK DIRECTORATES

UNDER THE CLAYTON ACT
(FEDERAL RESERVE BOARD REGULATION L, SERIES OF 1920)

Definitions applicable to this regulation:

Member bank-Any national bank and any state bank or trust com-
pany which is a member of the Federal Reserve System.
National bank—National banking associations, and all banks and trust
companies doing business in the District of Columbia.
Resources-An amount equal to the sum of the deposits, capital, sur-
plus, and undivided profits.
State bank-Any bank, banking association, or trust company incorpo-
rated under state law.
Private banker-Any unincorporated individual engaging in one or
more phases of the banking business and to any member of an unin-
corporated firm engaging in such business.
Edge Act-Section 25 (a) of the Federal Reserve Act, as amended
December 24, 1919.
Edge Corporation-Any corporation organized under the provisions of
the Edge Act.
City of over 200,000 inhabitants—any city, incorporated town, or village
of more than 200,000 inhabitants, as shown by the last preceding decennial
census of the United States. Any bank located anywhere within the
corporate limits of such city is located in a city of over 200,000 inhabitants
within the meaning of the Clayton Act, even though it is located in a
suburb or an outlying district at some distance from the principal part
of the city.

Prohibitions of Clayton Act THE Clayton Antitrust Act lays down three specific conditions in which directors of one bank are forbidden to be directors of another bank, viz. :

1-No person who is a director or other officer or employee of a

national bank or Edge Corporation having resources aggregating more than $5,000,000 can legally serve at the same time as director, officer, or employee of any other national bank or Edge Corporation,

regardless of its location. 2-No person who is a director in a state bank or trust company having resources aggregating more than $5,000,000, or who is a private banker

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