March 3, 1915, September 7, 1916, June 21, 1917, and September 26, 1918. Most of these amendments were enacted by Congress upon the recommendation of the Federal Reserve Board, and the law division assisted in the preparation of the amendments.

In addition to the foregoing amendments, the Federal Reserve Act has been modified or amended by provisions incorporated in other

acts.

Following the passage of these amendments there is compiled by the law division under direction of the Board, a new edition of the Federal Reserve Act with an appendix containing extracts from other acts of Congress which amend the Federal Reserve Act or affect the operation of Federal Reserve Banks or member banks, all fully indexed.

STATE LEGISLATION.

It is obviously important that there should be maintained in the office of general counsel a proper analysis of State laws affecting the operations of member banks and a record of all banking laws passed by the several States.

Member banks, other than national banks, are subject to the laws of the 48 States, and these laws have been made applicable to the operations of national banks in certain particulars; for example, in the exercise of fiduciary powers.

There has been prepared by this division and published in the Federal Reserve Bulletin, an analysis of the State laws relating to reserve requirements, an analysis of State laws relating to bank acceptances, and an analysis of State laws affecting the operations of foreign banking corporations. This information is of great importance at the present time since our member banks are now authorized to establish and maintain branches in foreign countries or to subscribe to stock in banks engaged principally in the business of international or foreign banking. As our foreign trade develops it may reasonably be expected that foreign banks will desire to increase their activities in this country. As many of the State laws impose restrictions on the operations of foreign banks, it is important that this subject should be given careful consideration by those interested in the standardization of such laws.

The law division is also engaged in the preparation of an analysis of State laws relating to capital and surplus requirements, which will be published at an early date, and an analysis of State laws relating to limitations on loans.

It endeavors, through the counsel for the several Federal Reserve Banks and through the superintendents of banks of the several States to keep on file copies of all acts passed by State legislatures which affect the operations of banking corporations. From time to time these acts are published in the Bulletin.

In an effort to assist in bringing about a standardization of State banking laws and a coordination of Federal and State banking powers, certain Federal legislation to this end has been recommended and an analysis of the several State laws has been made to show what legislation is necessary on the part of the State legislatures to enable State banks which become members of the Federal Reserve System to conduct their operations on a basis of substantial equality with other member banks. This analysis, with a standard form of enabling act, was prepared at the request of the president of the American Bankers' Association, and with slight modifications has been adopted by that association in its program of legislation for the year 1919. As 44 State legislatures meet during the current year, it is hoped that many of the States will adopt the necessary legislation to remove any inequalities that may exist by reason of the conflict in State and Federal laws.

REGULATIONS.

The law division is called upon to assist in the preparation of all regulations of the Board in order that they shall in all cases conform legally to the letter and spirit of the Federal Reserve Act.

OPINIONS.

As previously stated, this division is required to pass upon questions involving the interpretation of the Federal Reserve Act, the national bank act, the negotiable instruments law, and the laws of the several States which affect the operation of national banks, State banks, or trust companies which are members of the Federal Reserve System.

INFORMAL RULINGS.

Rulings which involve the application of regulations of the Board or of provisions of the Federal Reserve Act, to concrete questions arising in the administration of the act, are usually referred to this division before being published or formally entered so that there may be no question of their legality.

CLAYTON ACT.

Under the Kern amendment to the Clayton Act, the Board is authorized under certain conditions to permit the same person to serve as an officer or director of two or more banking institutions which are not in substantial competition. Applications for this permission are filed on regular forms prepared by the Board, and in each case are referred to this division to ascertain whether the application is in proper form; whether it contains data sufficient to enable the Board to pass upon the question presented, and it is

usually necessary for this division to conduct correspondence and to prepare various memoranda in connection with such application. The national-bank examiners report all cases where the same person is serving with two or more banking institutions in apparent violation of the Clayton Act. Such cases are referred to this division which must determine

(a) Whether a permit has been granted by the Board;

(b) If not, what is the capital and surplus of the banks involved; (c) What is the population of the place in which the banks are located according to the 1910 census;

(d) Whether the banks involved are member banks.

A report is then made to the Board with a recommendation as to the action to be taken.

More than 2,000 cases have been passed upon by the counsel's office and a list of applications granted and refused comprises more than 143 pages of typewritten matter.

STATE BANK APPLICATIONS FOR MEMBERSHIP.

The Board has approved more than 650 applications of State banks for membership in the Federal Reserve System during the past year. Each of such applications is first submitted to this division and in each case it is necessary—

(1) To ascertain if the application and exhibits are executed in proper form;

(2) Whether all necessary exhibits accompany the application; (3) To examine and make a certificate as to the legality of suggested conditions of membership;

(4) To examine State laws to ascertain (a) whether the bank has any unusual powers, and prepare memorandum on this subject, and (b) whether the bank has power to join the system;

(5) To ascertain whether the bank has the necessary capital stock; (6) To examine the charter or articles of incorporation; (7) To prepare memoranda regarding any unusual or doubtful cases and to call to the attention of the Board any irregularities; (8) It is also necessary to prepare numerous letters in connection with these applications calling for additional information.

APPLICATIONS FOR TRUST POWERS.

Since the passage of the act of September 26, 1918, which amended section 11 (k) of the Federal Reserve Act, there has been a considerable increase in the number of applications filed by national banks for permission to exercise trust powers. In each case it is necessary for this division

(1) To ascertain whether the application is executed in proper form;

(2) Whether the bank has the necessary capital and surplus required by the State law;

(3) Whether the State law gives competing institutions the powers applied for;

(4) To prepare a report in each case for the Federal Reserve Board.

The amendment referred to makes various State laws applicable to the operations of national banks exercising trust powers. It is therefore necessary for this division to maintain a careful analysis of all the laws of the State relating to the exercise of fiduciary powers by competing State corporations and to pass upon a very large number of questions arising in connection with the exercise of trust powers.

There is now in course of preparation a new series of regulations governing the exercise of these powers by national banks in accordance with the act as amended.

ACCEPTANCES.

A very large number of questions have arisen in connection with the use of bank credit in the form of acceptances. This being a new power vested in national banks by the Federal Reserve Act, it is necessary to carefully supervise its exercise to the end that a proper discount market may be developed along conservative lines, and in order that this power may not be used for the purpose of evading limitations or restrictions imposed upon the credit operations of national and member banks.

COMPTROLLER OF THE CURRENCY.

To avoid any possible conflict which may result in cases where the jurisdiction of the Comptroller of the Currency and the Federal Reserve Board is seemingly concurrent, the general counsel of the Federal Reserve Board acts in such cases as joint counsel for the Board and the Comptroller. The law division of the Board is therefore required to pass upon a number of questions arising in connection with the operations of national banks.

FOREIGN EXCHANGE TRANSACTIONS.

Under the trading with the enemy act, the President was authorized to use any agency or agencies that he might select to control foreign exchange transactions and to prevent the resources of this country from being used for enemy purposes. The Federal Reserve Board was designated by Executive order of January 26, 1918, as the agency of the Secretary of the Treasury to exercise proper supervision over all such transactions. All persons carrying accounts either with or for foreign correspondents or engaging in any manner

in transactions in foreign exchange or transfers of credits as between the United States and any foreign country were required to obtain a registration certificate from the Federal Reserve Board and to make regular reports of all such transactions. In each case a certificate of nonenemy interests was required, and whenever it appeared that the consummation of the transaction would not be compatible with the best interests of the United States its consummation was ordered suspended by the Federal Reserve Board, pending investigation. The law division was accordingly called upon to prepare various regulations and rulings and to pass upon a number of intricate questions of Federal law and international law in connection with the exercise of these functions.

FIDUCIARY POWERS.

Section 11 (k) of the Federal Reserve Act authorizes the Federal Reserve Board "to grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, and register of stocks and bonds under such rules and regulations as the said Board may prescribe."

In its last annual report the Board called attention to the decision of the Supreme Court of the United States, in the case of Bank v. Fellows, which sustained the right of Congress to grant fiduciary powers to national banks and to vest in such banks any powers enjoyed by competing State corporations.

In the course of its opinion the court indicated that the purpose of Congress in providing that fiduciary powers might be granted to national banks "when not in contravention of State or local law" was to bring about a more thorough coordination of banking powers as between Federal and State institutions.

In order to remove any question of the power of the Board to accomplish this result by regulation an amendment to the act was recommended which was designed to make national banks exercising fiduciary powers subject to State laws in so far as those laws provided appropriate safeguards for the protection of beneficiaries of trust estates. The amendment suggested by the Board with some modifications was included in the act which was approved and became a law on September 26, 1918. Under the act as amended the fiduciary powers which may be granted by the Board have been enlarged so as to include authority to act as guardian of estates, assignee, receiver, committee 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 the laws of the State in which the national bank is located.