THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW PRATT'S DIGEST OF FEDERAL BANKING LAWS 1920 EDITION CONTAINING THE FULL TEXT OF THE NATIONAL BANK ACT, THE FEDERAL RESERVE ACT AND OTHER LAWS OF INTEREST TO BANKS WITH ALL AMENDMENTS, ANNOTATIONS, CASES, NOTES, INFORMAL RULINGS, REGULATIONS AND OPIN- IONS OF COUNSEL TO APRIL 1, 1920. COMPILED AND PUBLISHED BY A. S. PRATT & SONS, Inc. NATIONAL "Rank Acents and Attorneys WILKIN S BUILDING WASHINGTON, D. C. ? T . Copyright, 1920, by A. S. PRATT & SONS INCORPORATED s 1 Table of Contents PART I. THE NATIONAL BANK ACT, AMENDMENTS AND SUPPLEMENTARY ACTS. CHAPTEB PAGE I. Comptroller of the Currency 1 II. Organization and Powers of National Banks 7 III. Officers and Shareholders 54 IV. Issue and Redemption of Circulating Notes 72 V. Regulation of the Banking Business 99 VI. Reports and Examinations 125 VII. Taxation 131 VIII. Dissolution and Receivership 144 IX. Crimes and Misdemeanors 169 X. Suits, Jurisdiction and Evidence 184 PART II. THE FEDERAL RESERVE ACT, WITH ALL AMENDMENTS TO APRIL 1, 1920. I. The Federal Reserve Act, with all Amendments to April 1, 1920 193 PART III. ACTS OF A GENERAL NATURE, SECTIONS OF REVISED STATUTES AND REGULATIONS, NOT INCLUDED IN PARTS I AND II, AFFECTING NA- TIONAL BANKS. I. The Clayton Act and The Kern Amendment 333 II. Government Depositaries 345 III. Postal Savings Depositaries 361 IV. Currency and Money 376 V. Regulations of Treasury Department Relating to United States Bonds 396 PART IV. SPECIAL ARTICLES ON SUBJECTS OF INTEREST TO NATIONAL BANKS. I. Organization De Novo 420 II. By-Laws 451 ill 735G lv CHAPTEtt PAGE III, Reorganization of State and Private Banks 457 IV. Conversion of State Bank to National 461 V. Bonds and Circulation 472 VI. Consolidation of National Banks 491 VII. Increase and Reduction of Capital Stock, Restoration of Im- paired Capital, Change of Name or Location 505 VIII. Liquidation 522 IX. Extension of Corporate Existence 534 Table of Cases Cited A PAGE Adair v. Robinson, 6 Tex. Civ. App., 275 139 Adams v. Nashville, 95 U. S., 19 137 Adams v. Spokane Drug Company, 57 Fed. Rep., 888 167 Agnew v. U. S., 165 U. S. 36 173 Albion National Bank v. Montgomery, 54 Neb. 681 118, 122, 124 Albuquerque National Bank v. Perea, 147 U. S. 87 142 Aldrich v. Bingham, 131 Fed. Rep. 363 61 Aldrich v. Campbell, 97 Fed. Rep. 663 62, 63 Aldrich v. Chemical National Bank, 176 U. S. 618 18 Aldrich v. Yates, 95 Fed. Rep. 78 63 Allen v. First National Bank of Xenia, 23 Ohio St. 97 106 Allen v. Luke, 141 Fed. Rep. 694 163, 164 American National Bank v. Adams, 44 Okla. 129 11 Amoskeag Savings Bank v. Purdy, 231 U. S. 373 136, 139, 142 Anderson v. Line, 14 Fed. Rep. 405 59 Anderson v. Phila. Warehouse Co., Ill U. S. 479 60 Armstrong, In re, 41 Fed. Rep. 381 166 Armstrong v. Chemical National Bank, 41 Fed. Rep. 234 166 Armstrong v. Chemical National Bank, 83 Fed. Rep. 556 14 Armstrong v. Second National Bank, 38 Fed. Rep. 883 100 Armstrong, Receiver v. "Warner, 49 Ohio St. 376 167 Aspey v. Whittemore, 199 Mass. 65 53 Aspinwall v. Butler, 133 U. S. 595 43, 190 Assaria State Bank v. Dolley, 219 U. S., 121 19 Atlantic National Bank v. Harris, 118 Mass. 147 46 Atlantic State Bank v. Savery, 82 N. Y. 291 14 Auburn Savings Bank v. Hayes, 61 Fed. Rep. 911 152, 168 Auten v. Manistee National Bank, 67 Ark. 243 15, 149 B Bailey v. Mosher, 63 Fed. Rep. 488 163 Bailey v. Tillinghast, 99 Fed. Rep. 801 62 Baker v. Ault, 78 Fed. Rep. 374 188 Baker v. Beach, 85 Fed. Rep. 836 65 v vi PAGE Baker v. Schofield, 221 Fed. Rep. 322 23, 151 Baldwin v. State National Bank, 26 Minn. 43 22 Bank v. Beach, Fed. Case No. 2736 100 Bank v. Conway, 87 Wash. 506 22 Bank v. Kennedy, 17 Wall. 19 150, 152 Bank v. Lanier, 11 Wall. 369 109, 110, 435 Bank v. Mclntyre, 40 Ohio St. 528 46 Bank v. Williams, 58 N. J. Law 45 137 Bank of Augusta v . Earle, 13 Pet. 519 100 Bank of Bethel v. Pahquioque Bank, 14 Wall. 383 149, 152, 154 Bank of Cadiz v. Slemans, 34 Ohio St. 142 124 Bank of California v. Richardson, 248 U. S. 476 135 Bank of Redemption v. Boston, 125 U. S. 60 135, 136 Bank of Weston v. Lynch, 69 W. Va. 333 119 Barnet v. Muncie National Bank, 98 U. S. 855 118, 119, 123 Barron v. McKinnon, 196 Fed. Rep. 933 12, 14, 23, 110 Batchelor v. United States, 156 U. S. 426 174 Bates v. Dresser, 229 Fed. Rep. 772 164, 186 Bath Savings Institution v. Sagadahoc N. B. 89 Me. 500 146 Beall v. Essex Savings Bank, 67 Fed. Rep. 816 60 Beard's Estate, In re, 7 Wyoming 104 63 Bell v. Hanover National Bank, 57 Fed. Rep. 821 16G Bethel v. Pahquioque Bank, 14 Wall. 383 154 Billingsley v. United States, 178 Fed. Rep. 654 173, 175 Binghampton Trust Co. v. Auten, 68 Ark. 299 118 Birmingham National Bank v. Mayer, 104 Ala. 634 146 Blair v. First National Bank of Mansfield, 10 Chicago Legal News 84; 2 Nat. Bank Cas. 173 16 Bletz v. Columbia National Bank, 87 Pa. St. 87 123, 187 Board of Commissioners of Morgan County v. First National Bank, 57 N. E. Rep. 728 137 Bobs v. People's National Bank, 21 Fed. Rep. 888 122 Boone County National Bank v. Latimer, 67 Fed. Rep. 27 167 Bowden v. Johnson, 107 U. S. 251 152 Bowen v. Needles National Bank, 94 Fed. Rep. 925 15 Bowerman v. Hamner, 250 U. S. 504 162 Boyd v. Schneider, 124 Fed. Rep. 239; 131 Fed. Rep. 223 163, 164 Boyer V. Boyer, 113 U. S. 690 138, 142 Boynoll v. State, 25 Wis. 112 140 Braden's Estate, In re, 165 Pa. St. 184 35 Bradley v. People, 4 Wall. 459 140 Breese v. U. S., 106 Fed. Rep. 680 175 Bridgers v. First National Bank, 152 N. C. 293 55 Briggs v. Spaulding, 141 U. S. 132 69, 162, 163 Brinkerhoff v. Bostwick, 88 N. Y. 52 153, 163. 186 vil PAGE Britten v. Evansville National Bank, 105 U. S. 322 138 Brooks V. Neal, 223 Mass. 467 152 Brown v. Ellis, 103 Fed. Rep. 834 63 Brown v. Finn, 142 U. S. 56 59 Brown v. French, 80 Fed. Rep. 166 142 Brown v. Marion National Bank, 169 U. S. 416 120, 124 Brown v. Schleier, 118 Fed. Rep. 981 21 Bullard v. National Bank, 18 Wall. 589 109 Bundy v. Cocke, 128 U. S. 185 59 Bundy v. Jackson, 24 Fed. Rep. 628 110 Burnham v. First National Bank, 53 Fed. Rep. 163 186 Burrows v. Niblack, 84 Fed. Rep. Ill 110 Burrows v. Smith, 95 Va. 694 139 Bushnell v. Chatauqua Co. Natl. Bank, 74 N. Y. 290 11 Bushnell v. Leland, 164 U. S. 684 148 Butler v. Eaton, 141 U. S. 240 36 Butler v. Poole, 44 Fed. Rep. 586 , 63, 151, 152, 187 C Cadle v. Baker, 20 Wall. 650 149 California Natl. Bank v. Kennedy, 167 U. S. 362 12, 13 Cal. Natl. Bank of San Diego, In re, 53 Fed. Rep. 38 151 Carlon v. First National Bank, 157 Fed. Rep. 809 129 Case v. Citizens' Bank, 100 U. S. 446 37 Case v. Citizens' Bank of Louisiana, Fed. Case No. 2489 166 Case v. First Natl. Bank, 109 N. Y. Supp. 1119 17 Case v. Small, 10 Fed. Rep. 722 151 Casey v. Galli, 94 U. S. 673 58, 61, 62, 191, 470 Castles v. City of New Orleans, 46 La. Ann. 542 142 Catch v. Fitch, 34 Fed. Rep. 566 61 Central National Bank v. Pratt, 115 Mass. 539 123 Chadwick v. United States, 141 Fed. Rep. 225 176 Charleston v. People's National Bank, 5 S. C. 103 42, 135 Charleston National Bank v. Bradford, 51 W. Va. 255 119, 123 Chatham & Phoenix Natl. Bank v. Guaranty Trust Co., 256 Fed. Rep. 90 359 Chattahoochee Natl. Bank v. Schley, 58 Ga. 360 11 Chemical Natl. Bank v. Armstrong, 59 Fed. Rep. 372 155 Chemical Natl. Bank v. Armstrong, 65 Fed. Rep. 573 14 Chemical Natl. Bank v. Hartford Deposit Co., 156 111. 522 s. c. 161 U. S. 1 149, 152 Chemical Natl. Bank of Chicago v. Worlds' Columbian Exposition, 170 111. 82 166 riii PAGE Cherry V. City Natl. Bank, 144 Fed. Rep. 587 14 Chesborough v. Woodworth, 195 Fed. Rep. 875 165 Christopher v. Norvell, 201 U. S. 216 58, 59 Church v. Ayer, 80 Fed. Rep. 543 63 Citizens' Bank of Louisiana v. Board of Assessors, 52 Fed. Rep. 73.. 135 Citizens' Natl. Bank v. Appleton, 216 U. S. 196 15, 19 Citizens' Natl. Bank v. Donnell, 195 U. S. 369 118, 124 Citizens' Natl. Bank v. Dowd, 35 Fed. Rep. 340 167 Citizens' Natl. Bank v. Forman's Assignee, 111 Ky. 206 117, 121 Citizens' Natl. Bank of Kingman v. Berry, 53 Kans. 696 16, 70 Citizens' Natl. Bank of Lebanon v. Burton, 90 S. W. 944 140 City Natl. Bank v. Phelps, 97 N. Y. 44 , 46 City Natl. Bank of Mangum v. Crow, 27 Okla. 107 164 City of Boston v. Beal, 55 Fed. Rep. 26, s. c. 51 Fed. Rep. 306 141 City of Carthage v. First Natl. Bank, 71 Mo. 508 141 Clement v. United States, 149 Fed. Rep. 305 51 Clement Natl. Bank v. Vermont, 231 U. S. 120 142 Cleveland, Brown & Co. v. Shoeman, 40 Ohio S. 176 12 Clews v. Barden, 36 Fed. Rep. 617 163 Cochran v. U. S., 157 U. S. 286 173, 175 Coffey v. National Bank of Missouri, 46 Mo. 140 11, 46 Coffin v. United States, 162 U. S. 664 172, 174, 175 Cogswell v. Second National Bank, 56 Atl. Rep. 574 187 Commercial Bank v. Weinhard, 192 U. S. 243, s. c. 41 Ore. 359. .112, 515 Commercial Natl. Bank v. Chambers, 182 U. S. 556 136, 139 Commercial Natl. Bank v. Pirie, 82 Fed. Rep. 799 15 Commissioners of Rice County v. Citizens' National Bank of Fair- ibault, 23 Minn. 280 137 Commonwealth v. Barry, 116 Mass. 1 174 Commonwealth v. Felton, 101 Mass. 204 174, 187 Commonwealth v. Ketner, 92 Pa. St. 372 174, 187 Commonwealth v. Tanney, 97 Mass. 50 174 Conklin v. The Second Natl. Bank, 45 N. Y. 655 110 Cook County Natl. Bank v. United States, 107 U. S. 445 149, 155, 167 Corcoran v . Batchelder, 147 Mass. 541 106 Corn Exchange Bank v. Blye, 101 N. Y. 303 167 Corn Exchange Natl. Bank v. Kaiser, 160 Wis. 199 13 County Commissioners v. Farmers' and Mechanics' National Bank 48 Md. 117 136 Cox v. Beck, 83 Fed. Rep. 269 , 119 Cragie v. Hadley, 99 N. Y. 131 166 Crocker v. First Natl. Bank, Fed. Case No. 3397 122 Crocker v. Whitney, 71 N. Y. 161. 22 Cross v. North Carolina, 132 U. S. 131 173, 174 lx PAGE Cummings v. Natl. Bank, 101 U. S. 153 142 Cummings v. U. S., 232 Fed. Rep. 844 172 D Daggs v. Phoenix Bank, 177 U. S. 549 117 Danforth v. Natl. State Bank, 48 Fed. Rep. 271 117 Davis v. Cook, 9 Mo. 134 186 Davis v. Elmira Savings Bank, 161 U. S. 275, rev. 142 N. Y. 590 167 Davis v. Essex Baptist Society, 44 Conn. 582 65 Davis v. Weed, 44 Conn. 569 58 Delano v. Butler, 118 U. S. 634 43 Dennis v. First Natl. Bank of Seattle, 127 Cal. 453 188 Denton v. Baker, 79 Fed. Rep. 189 156 Deposit Bank of Owensboro v. Davies, 102 Ky. 174 140 Deweese v. Smith, 106 Fed. Rep. 438 2, 62, 63, 64 Dolley v. Abilene Natl. Bank, 179 Fed. Rep. 461 19 Doty v. First Natl. Bank of Larimore, 3 N. D. 9 35, 36 Dow v. United States, 82 Fed. Rep. 904 172, 173 Dresser v. Traders' Natl. Bank, 165 Mass. 120 17 Driesbach v. Natl. Bank, 104 U. S. 52 119 E Eans v. Exchange Bank, 79 Mo. 182 , 46 Earle, In re, 92 Fed. Rep. 22; 96 Fed. Rep. 678 151 Earle v. Conway, 178 U. S. 456 188 Earle v. Pennsylvania, 178 U. S. 449 188 Easton v. Iowa, 188 U. S. 220 174 Eaton v. Union County Natl. Bank, 141 Ind. 136 142 Elder v. First Natl. Bank of Ottawa, 12 Kans. 238 106 Ellerbee v. Natl. Exchange Bank, 109 Mo. 445 14 Ellis v. First Natl. Bank of Olney, 11 111. App. 275 119 Ellis v. Little, 27 Kans. 707 151 Elwood v. First Natl. Bank, 41 Kans. 475 145, 146 Emigh v. Earling, 134 Wis. 565 , 19 Engelke v. Schlender, 75 Tex. 559 139 Eno, In ro, 54 Fed. Rep. 669 , 174, 187 Evans v. Natl. Bank of Savannah, 251 U. S. 108 117 Evans v. United States, 153 U. S. 608 175 Exchange Bank v. Peters, 45 Fed. Rep. 13 163 Exeter Natl. Bank v. Orchard, 42 Neb. 579 123 F PAGE Faber v. Stephens, 35 Fed. Rep. 17 167 Farmers' & Mechanics' Bank v. Hoagland, 7 Fed. Rep. 159 120 Farmers' & Mechanics' Natl. Bank v. Dearing, 91 U. S. 29 116, 123 Farmers' & Merchants' Natl. Bank v. Smith, 77 Fed. Rep. 129 15 Farmers' & Traders' Natl. Bank v. Hoffman, 93 Iowa 119 135, 141 Farmers' Natl. Bank v. McCoy, 42 Okla. 420 120, 124 Farmers' Natl. Bank v. Suther, 28 Okla. 806 145 Farmers' Natl. Bank v. Templeton, 40 S. W. Rep. 412 71 Fellows v. First Natl. Bank (Mich.), 159 N. E. 335 234 Fidelity & Deposit Co. 17. Natl. Bank of Com. (Tex.), 106 S. W. Rep. 782 15 First Natl. Bank v. Albright, 208 U. S. 548 142 First Natl. Bank v. Bailey, 15 Mont. 301 142 First Natl. Bank v. Beaman, 257 Fed. Rep. 729 218 First Natl. Bank v. Brodhecker, 137 Ind. 693 142 First Natl. Bank v. Chapman, 173 U. S. 205 136 First Natl. Bank v. Chehalis County, 6 Wash. 64 135, 138 First Natl. Bank v. City of Richmond, 39 Fed. Rep. 309 138 First Natl. Bank v. Converse, 200 U. S. 425 13 First Natl. Bank v. Davis, 135 Ga. 687 121 First Natl. Bank v. Fellows, 244 U. S. 416 234 First Natl. Bank v. Forest, 40 Fed. Rep. 705 186 First Natl. Bank v. Garlinghouse, 22 Ohio St. 492 123 First Natl. Bank v. Grimes, 49 Kans. 219 119, 120 First Natl. Bank v. Haire, 36 Iowa 443 22 First Natl. Bank v. Hunter, 109 Tenn. 91 119 First Natl. Bank v. Lanz, 202 Fed. Rep. 117 110 First Natl. Bank v. Latham, 37 Okla. 286 121 First Natl. Bank v. Lavater, 196 U. S. 115 120 First Natl. Bank v. Lindsay, 45 Fed. Rep. 619 138, 140 First Natl. Bank v. Maxfield, 83 Me. 576 22 First Natl. Bank v. Monroe, 135 Ga. 614 15, 19 First Natl. Bank v. Morgan, 132 U. S. 141 120 First Natl. Bank v. Murray, 212 Fed. Rep. 140 49 First Natl. Bank v. Natl. Exchange Bank, 92 U. S. 122 12, 13 First Natl. Bank v. Peterborough, 56 N. H. 38 136 First Natl. Bank v. Selden, 120 Fed. Rep. 212 168 First Natl. Bank v. Strong, 138 111. 347 11 First Natl. Bank v. Watt, 184 U. S. 151 121 First Natl. Bank of Allentown v. Hock, 89 Pa. St. 324 12 First Natl. Bank of Centralia v. Marshall, 26 111. App. 440 145 First Natl. Bank of Cincinnati v. Beaman, 257 Fed. Rep. 729 137 First Natl. Bank of Cincinnati v. Durr, 246 Fed. Rep. 163 137 PAGE First Natl. Bank of Concord v. Hawkins, 174 U. S. 3C4, 372 13, 53 First Natl. Bank of Concordia v. Rowley, 52 Kans. 394 122 First Natl. Bank of Dorchester v. Smith, 39 Neb. 90 122 First Natl. Bank of Grand Forks v. Anderson, 1T2 U. S. 573, s. c. 5 N. D. 451 IS First Natl. Bank of Holstein v. Shallenberger, 172 Fed. Rep. 999. . . 19 First Natl. Bank of Leoti v. Fisher, 45 Kan. 726 135, 138 First Natl. Bank of Lynn v. Ocean Natl. Bank, 60 N. Y. 278 11 First Natl. Bank of Moscow v. American Natl. Bank, 173 Mo. 153. . 15 First Natl. Bank of Mt. Pleasant v. Tinstman, Fed. Case No. 4805. . 116 First Natl. Bank of Pierre v. Smith, 8 S. D. 7 14 First Natl. Bank of Rochester v. Harris, 108 Mass. 514 10 First Natl. Bank of Rochester v. Pierson, 24 Minn. 140 14 First Natl. Bank of Tecumseh v. Overman, 22 Neb. 116 124 First Natl. Bank of Youngstown v. Hughes, 6 Fed. Rep. 737 141 Fish v. Olin, 76 Vt. 120 i 152 Fisher v. Yoder, 53 Fed. Rep. 565 152, 186 Flannagan v. California Natl. Bank, 56 Fed. Rep. 959 16 Flickner v. United States, 150 Fed. Rep. 1 172 Foil's Appeal, 21 Alb. L. J.; 2 N. B. C. 411 37 Foster v. Chase, 75 Fed. Rep. 797 61 Foster v. Wilson, 75 Fed. Rep. 797 61 Fourth Natl. Bank v. Stahlman, 132 Tenn. 367 13, 21 Fowler v. Gowing, 152 Fed. Rep. 801, 165 Fed. Rep. 891 , 61, 65 Fowler v. Scully, 72 Pa. St. 451 2.2 Fraaer v. Seibern, 16 Ohio St. 614 140 Freeman v. Jackson, 227 Fed. Rep. 688 164 Freeman Manufacturing Co. v. Natl. Bank of the Republic, 160 Mass. 398 1S8 Fridley v. Bowen, 87 111. 151 22 G Garner v. Second Natl. Bank, 66 Fed. Rep. 369 188 Geiger v. United States, 162 Fed. Rep. 844 175 George v. Wallace, 135 Fed. Rep. 286 16, 185, 186 Gibson v. Peters, 150 U. S. 342 153, 189 Gilbert v. McNulta, 96 Fed. Rep. 83 186 Gold Mining Co. v. Rocky Mountain Natl. Bank, 96 U. S. 640 106 Graham v. Piatt, 28 Colo. 421 59 Graves v. United States, 165 U. S. 323 173 Gray v. Faulkhauser, 58 Oregon 423 35 Green v. Bennet, 110 N. W. Rep. 108 145 Grow v. Cockrell, 63 Ark. 418 16 Gruber v. First Natl. Bank, 87 Pa. St. 468 116 XH PAGE Guarantee Co. v. Hanway, 104 Fed. Rep. 369 1SG Guernsey v. Black Diamond Coal & Mining Co., 99 Iowa 471 70 Guild v. First Natl. Bank of Deadwood, 4 S. D. 566 120 Guthrie v. Harkness, 199 U. S. 148 130 H Hade v. McVey, 31 Ohio St. 231 123, 187 Hager v. Union Natl. Bank, 63 Me. 509 110 Hale v. Walker, 31 Iowa 344 60 Hall v. First Natl. Bank of Fairfield, 30 Neb. 94, 99 117, 121 Hanna v. Lyon, 179 N. Y. 107 163 Hanover Natl. Bank v. First Natl. Bank, 109 Fed. Rep. 421 15 Hanson v. Heard, 69 N. H. 190 16, 118 Harper v. United States, 104 S. W. Rep. 673; 170 Fed. Rep. 385. .173, 174 Harrington v. First Natl. Bank, 1 Thompson & Cook (N. Y.) 361. . . 17 Haseltine v. Central Natl. Bank, 183 U. S. 132 116, 119 Hayden v. Chemical Natl. Bank, 80 Fed. Rep. 587 166 Hayden v. Thompson, 71 Fed. Rep. 60 113 Hayes v. Shoemaker, 39 Fed. Rep. 319. 36 Hays v. Beardsley, 136 N. Y. 299 166 Hazard v. Natl. Exchange Bank of Newport, 26 Fed. Rep. 94 37 Hazen v. Lyndonville Natl. Bank, 70 Vt. 543 186 Hendee v. Conn., etc., R. R. Co., 26 Fed. Rep. 677. .j 186 Henderson Natl. Bank v. Alves, 91 Ky. 142 119 to 122, 124, 186 Hennessey v. City of St. Paul, 54 Minn. 219 18 Hepburn v. School Directors, 23 Wall. 480 137 Herman, In re, 50 Fed. Rep. 517 153 Herrmann v. Edwards, 238 U. S. 107 185 Higgins v. Fidelity Insurance, T. & S. Dep. Co., 108 Fed. Rep. 475. . 60 Hill v. Natl. Bank of Barre, 15 Fed. Rep. 432 121 Hills v. Exchange Bank, 105 U. S. 319 142 Hinds v. Marmelejo, 60 Cal. 229 117 Hintermister v. First Natl. Bank, 64 N. Y. 212 122, 123 Hirsh v. Jones, 56 Fed. Rep. 137 164 Hiscock v. Lacy, 9 Misc. (N. Y.) 578 113 Hobart, Receiver, etc., v. Gould, 8 Fed. Rep. 57 63 Hobbs v. Western Natl. Bank, Fed. Case No. 6551a 35 Hodgson v. McKinstry, 3 Kans. App. 412 , 145 Holmes v. Boyd, 90 Ind. 322 22 Home Savings Bank v. City of Des Moines, 205 U. S. 503 140 Hoover v. Weiss Malting and Elevator Co., 55 Fed. Rep. 356 188 Hotchkin v. Third Natl. Bank, 219 Mass. 234 12 Hot Springs Independent School District v. First Natl. Bank, 61 Fed. Rep. 417 152, 186 Xlll PAGE Howard Natl. Bank v. Loomis, 51 Vt. 349 22 Howe v. Barney, 45 Fed. Rep. 668 163 Huggins v. Citizens' Natl. Bank, 6 Tex. Civ. 33 119 Hughitt v. Hayes, 136 N. Y. 163 167 Hulitt v. Bell, 85 Fed. Rep. 98 112 Hunt, Appellant, 141 Mass. 515 86 I International Trust Co. v. Weeks, 203 U. S. 364 21, 186 Interstate Natl. Bank v. Ferguson, 48 Kans. 732 11 Irons v. Manufacturers' Nat. Bank, Fed. Case No. 7068 146, 149 J Jackson v. United States, 20 Ct. Cls. 298 155 Jacobson v. Berry, 135 111. App. 415 i 148 Jenkins v. Neff, 186 U. S. 230, s. c. 163 N. Y. 320 136, 137 Jerome v. Cogswell, 78 Conn. 75, 204 U. S. 1 44 Jewett v. United States, 100 Fed. Rep. 832 , 526 Johnson v. Laflin, 5 Dill. 65; 103 U. S. 800 36, 37 Johnson v. Natl. Bank of Gloversville, 74 N. Y. 329 116 Jones v. Rushville Natl. Bank, 138 Ind. 87 142 Jones Natl. Bank v. Yates, 240 U. S. 541 165 Junction City v. Bank, 96 Kans. 407 13 K Keliher v. United States, 193 Fed. Rep. 8 174, 175 Kelsey v. National Bank of Crawford, 69 Pa. St. 425 46 Kennedy v. California Savings Bank, 101 Cal. 495 13 Kennedy v. Gibson, 8 Wall. 498, 505 62, 150, 152 to 154 Kerfoot v. Farmers' & Merchants' Bank, 218 U. S. 281 23 Kettenbach v. United States, 202 Fed. Rep. 377 172 to 174 Keyser v. Hitz, 133 U. S. 138 3, 36, 47, 59, 190 Kimball v. Aspey, 164 Fed. Rep. 830 53 King v. Armstrong, 50 Ohio St. 222 63 King v. Miller, 53 Oregon 53 17 King v. Pomeroy, 121 Fed. Rep. 287 149, 164 Korbly v. Springfield Inst, for Savings, 245 U. S. 330 64, 112 L Lake Erie, etc., R. R. Co. v. Indianapolis Natl. Bank, 65 Fad. Rep. 690 167 Lanham v. First Natl. Bank of Crete, 46 Neb. 663 123 xlv PAGE Lantry v. Wallace, 182 U. S. 536 64, 110 Lasater v. First Natl. Bank of Jacksboro, 96 Tex. 345 122 Latimer v. Bard, 76 Fed. Rep. 536 60 Lazear v. Natl. Union Bank of Baltimore, 52 Md. 78 122, 123 Leach v. Hale, 31 Iowa 69 11, 12 Leather Mfgr. Natl. Bank v. Cooper, 120 U. S. 778 185 Letcher v. German Natl. Bank, 119 S. W. Rep. (Ky.) 236 35 Levitan v. Houghton Natl. Bank, 174 Mich. 566 184 Lewis v. Switz, 74 Fed. Rep. 381 59, 65 Libby v. Union Natl. Bank, 99 111. 622 22 Linn Co. Natl. Bank v. Crawford, 69 Fed. Rep. 532 152, 186 Lionberger v. Rouse, 9 Wall. 468. 139, 140 Lockwood v. The American Natl. Bank, 9 R. I. 308 46 Logan County Natl. Bank v. Townsend, 139 U. S. 67 11, 18, 186 Lowry Natl. Bank, In re, 29 opp. Atty. Gen. 81 47, 100 Luberg v. Commonwealth, 94 Pa. St. 85 174 Lucas v. Coe, 86 Fed. Rep. 972 64 Lucas v. Government Natl. Bank, 78 Pa. St. 228 119 Lucas County v. Jamison, 179 Fed. Rep. 338 155 Lull v. Anamosa Natl. Bank, 110 Iowa 537 141 Lynch v. Bank, 22 W. Va. 534 122 Lyons v. Bank of Discount, 154 Fed. Rep. 391 148 M Magoffin v. Boyle Natl. Bank, 69 S. W, (Ky.) 702 22 Magruder v. Colston, 44 Md. 349 60 Marion Natl. Bank v. Burton, 90 S. W. 944 140 Marion Natl. Bank v. Thompson, 101 Ky. 277 119 Market Natl. Bank v. Pacific Natl. Bank, 30 Hun (N. Y.) 50 166 Massey v. Fisher, 62 Fed. Rep. 958 167 Matthews v. Columbia Natl. Bank, 79 Fed. Rep. 558 43, 55, 56 Mayor v. First Natl. Bank, 59 Ga. 648 141 McBoyle v. Union Natl. Bank, 162 Cal. 277 13 McBride v. Illinois Natl. Bank, 128 App. Div. (N. Y.) 503 188 McCann v. First Natl. Bank of Jeffersonville, 112 Ind. 354 44 McCarthy v. First Natl. Bank, 223 U. S. 493; 121 N. W. 853.119, 121, 122 McCartney v. Earle, 115 Fed. Rep. 462 186 McClaine v. Rankin, 197 U. S. 154; 119 Fed. Rep. 110. .. .62, 63, 150, 151 McCorroick v. Market Natl. Bank of Chicago, 165 U. S. 538 s. c. 162 111. 100 9, 21, 439 McCreary v. First Natl. Bank of Morristown, 109 Tenn. 128 121, 123 McDonald v. Chemical Bank, 174 U. S. 610 166 McDonald v. Thompson, 184 U. S. 71 63 XV PAGE McFarlin v. First Natl. Bank of Kansas City, G8 Fed. Rep. 8C8 42, 60 McGhee v. First Natl. Bank of Tobias, 40 Neb. 92 120 McKinnon v. Morse, 177 Fed. Rep. 576 161 McKnight v. U. S., 115 Fed. Rep. 972. 172 McMahon v. Macy, 51 N. Y. 155 65 McQuiddy v. King, 191 Ala. 205 39 Mechanics' Natl. Bank v. Baker, 65 N. J. Law 113 137 Mercantile Natl. Bank v. Mayor, 172 N. Y. 35 136 Mercantile Natl. Bank v. New York, 121 U. S. 138 136, 137 Mercantile Natl. Bank v. Shields, 59 Fed. Rep. 952 138 Mercer v. Dyer, 15 Mont. 317 167 Merchants' & Planters' Natl. Bank v. Horton, 27 Okla. 689 122 Merchants' Bank of Valdosta v. Baird, 160 Fed. Rep. 642 15 Merchants' Natl. Bank v. Glendon, 120 Mass. 97 190 Merchants' Natl. Bank v. Hanson, 33 Minn. 40 14 Merchants' Natl. Bank v. Natl. Bank, 231 Fed. Rep. 556 146 Merchants' Natl. Bank v. Sevier, 14 Fed. Rep. 662 120 Merchants' Natl. Bank v. Sharkey, 64 Ore. 32 119 Merchants' Natl. Bank v. State Natl. Bank, 10 "Wall. 604 86, 100 Merchants' Natl. Bank v. Wehrmann, 202 U. S. 295; 69 Ohio St. 160.. 17 Merrill v. Florida Land & Improvement Co., 60 Fed. Rep. 17 61 Merrill v. Natl. Bank of Jacksonville, 173 U. S. 131 154, 155, 156 Metropolitan Natl. Bank v. Claggett, 141 U. S. 520 46, 186, 470 Metropolitan Stock Exchange v. Lyndonville Natl. Bank (Vt.), 57 Atl. Rep. 101 18 Metropolitan Trust Co. v. McKinnon, 172 Fed. Rep. 846 12, 111 Meyers v. Valley Natl. Bank, Fed. Case No. 9519 Ill Michigan Insurance Bank v. Eldred, 143 U. S. 293 46 Miller v. First Natl. Bank of Cincinnati, 46 Ohio St. 424 135 Miller v. Howard, 95 Tenn. 407 162 Miller v. King, 223 U. S. 505 19 Missouri River Telegraph Co. v. First Natl. Bank, 74 111. 217 124 Mix v. Natl. Bank of Bloomington, 91 111. 20 190 Moore v. Jones, 3 Woods 53 60 Morris v. Third Natl. Bank, 142 Fed. Rep. 25 14, 22 Morse v. United States, 174 Fed. Rep. 539 173 Moss v. Goodhart, 209 Fed. Rep. 102; 47 Mont. 257 151, 164 Moss v. Whitzel, 108 Fed. Rep. 579 145, 156 Movius v. Lee, 30 Fed. Rep. 298 69, 162 Muir v. Citizens' Natl. Bank, 39 Wash. 57 145 Multnomah County v. Oregon Natl. Bank, 61 Fed. Rep. 912 167 Murray v. Chambers, 151 Fed. Rep. 142 186 Murray v. Walker, 156 Ky. 536 35, 130 xvi N PAGE Natl. Bank v. Bruhn, 64 Tex. 571 117 Natl. Bank v. Carpenter, 52 N. J. Law 165 122 Natl. Bank v. Case, 99 U. S. 628 12, 60, 111 Natl. Bank v. Commonwealth, 9 Wall. 353 141 Natl. Bank v. Drake, 35 Kans. 564 68 Natl. Bank v. Graham, 100 U. S. 699 11 Natl. Bank v. Insurance Co., 104 U. S. 54 145 Natl. Bank v. Johnson, 104 U. S. 271 116 Natl. Bank v. Matthews, 98 U. S. 621 14, 18, 22, 23 Natl. Bank v. Whitney, 103 U. S. 99 14 Natl. Bank of Brunswick v. Sixth Natl. Bank, 212 Pa. St. 238 15 Natl. Bank of Chattanooga v. Mayor, 8 Heiskell (Tenn) 814 141 Natl. Bank of Commerce v. Atkinson, 55 Fed. Rep. 465 15, 71 Natl. Bank of Commerce v. Equitable Trust Co., 227 Fed. Rep. 526 s. c. 211 Fed. Rep. 688 19 Natl. Bank of Commonwealth v. Mechanics' Natl. Bank, 94 U. S. 437. 155 Natl. Bank of Daingerfield v. Ragland, 181 U. S. 45. . 121 Natl. Bank of Guthrie v. Earl, 2 Okla. 617 1 G Natl. Bank of St. Albans, In re, 49 Fed. Rep. 120 59 Natl. Bank of Rahway v. Carpenter, 52 N. J. Law 165 121 Natl. Bank of Virginia v. City of Richmond, 42 Fed. Rep. 877 135 Natl. Bank of Winterset v. Eyre, 52 Iowa 114 123 Natl. Bank of Xenia v. Stewart, 107 U. S. 676 110 Natl. Exchange Bank of Balto. v. Peters, 44 Fed. 13 164 Natl. Exchange Bank of Hartford v. Guy, 57 Conn. 224 52 Natl. Park Bank of N. Y. v. Harmon, 214 Fed. Rep. 891. 60 Natl. Security Bank v. Butler, 129 U. S. 223 166 Natl. Security Bank v. Price, 22 Fed. Rep. 697 166 Natl. State Bank v. Brainard, 61 Hun. 339 119 Natl. State Bank of Oskaloosa v. Young, 25 Iowa 311 134, 136 Nevada Bank of San Francisco v. Portland Natl. Bank, 59 Fed. Rep. 338 , 16 Newell v. Natl. Bank of Somerset, 12 Bush. (Ky.) 57 117, 124 Newell v. Somerset First Natl. Bank, 13 Ky. L. Rep. 775 123 New Orleans Natl. Bank v. Raymond, 29 La. Ann. 355 22 New York L. E. and W. R. R. Co., Matter of, 99 N. Y. 12 422 Newport Natl. Bank v. Board of Education, 114 Ky. 87 13 Newton Natl. Bank v. Newbegin, 74 Fed. Rep. 135 61 Noble State Bank v. Haskell, 219 U. S. 104 19 Norfolk Natl. Bank v. Schwenk, 46 Neb. 381 119, 123 North Ward Natl. Bank v. City of Newark, 39 N. J. Law 380 136 Norton v. United States, 205 Fed. Rep. 593 172 xvn O PAGE Oates v. First Natl. Bank, 100 U. S. 239 123 O'Connor v. Whitherby, 111 Cal. 523 62 O'Hare v. Second Natl. Bank of Titusville, 77 Pa. St. 96 106 Ohio Valley Natl. Bank v. Hulitt, 204 U. S. 162 13, 61 Ordway v. Central Natl. Bank, 47 Md. 217 123, 145, 186 Ornn v. Merchants' Natl. Bank, 16 Kans. 34 22 Osborn v. First Natl. Bank, 175 Pa. St. 494 120, 122 Owensboro Natl. Bank v. Owensboro, 173 U. S. 664 134 Owinge v. Lehman, 190 111. App. 432 37 P Pacific Natl. Bank v. Eaton, 141 U. S. 227 36, 43 Pacific Natl. Bank V. Mixter, 124 U. S. 721; 114 U. S. 462 152, 188 Palmer v. McMahon, 133 U. S. 660 136 Pape v. Capital Bank of Topeka, 20 Kans. 440 14 Park Natl. Bank of Chicago v. Neblack, 67 111. App. 583 149 Patterson v. Plummer, 10 N. D. 95 141 Pattison v. Syracuse Natl. Bank, 80 N. Y. 82 11 Paul v. McGraw, 3 Wash. St. 296 141 Pauly v. State Loan and Trust Co., 165 U. S. 606 60 Pearce v. U. S., 192 Fed. Rep. 561 172 Pelton v. Commercial Natl. Bank, 101 U. S. 143 136, 142 People v. Binghampton Trust Co., 139 N. Y. 185 12 People v. Brady, 271 111. 100 234 People v. Commissioners, 4 "Wall. 241 139 People v. Feitner, 191 N. Y. 88 139 People v. Remington, 121 N. Y. 328 155 People v. Weaver, 100 U. S. 539, reversing 67 N. Y. 516 and over- ruling People v. Dolan, 36 N. Y. 59 138 People Ex. Rel. Lorge v. Consolidated Natl. Bank, 105 App. Div. (N. Y.), 409 130 People's State Bank of Lakota v. Francis, 8 N. D. 369 151, 153 Pepper v. Fidelity & Casualty Co., 125 Fed. Rep. 822 , 152 Peterborough Natl. Bank v. Childs, 133 N. Y. 248 119 Peters v. Bain, 133 U. S. 670 59 Peters v. Commercial Natl. Bank, 142 U. S. 614 185 Peters v. Foster, 56 Huh. 607 149, 152 Philler et al. v. Patterson, 168 Pa. St. 468 17 Pickett v. Merchants' Natl. Bank of Memphis, 32 Ark. 346 120 Pittsburgh Works v. State Natl. Bank, Fed. Case No. 11, 198 12 Planten v. Natl. Nassau Bank, 174 App. Div. (N. Y.) 254. . .145, 146, 164 xviii PAQE Planters' Bank v. Berry, 92 Ga. 2C4 188 Piatt v. Beebe, 57 N. Y. 339 148 Potter v. United States, 155 U. S. 438 176 Prescott V. Haughey, 65 Fed. Rep. 663 164 Prescott Natl. Bank v. Butler, 157 Mass. 548 14, 18 Prettyman v. United States, 180 Fed. Rep. 30 171, 175 Price v. Coleman, 22 Fed. Rep. 694 166 Rankin v. Barton, 199 U. S. 228 186 Rankin v. Cooper, 149 Fed. Rep. 1010 164 Rankin v. Emigh, 218 U. S. 27 19 Rankin v. Fidelity Insurance, etc., Co., 189 U. S. 242 60 Rankin v. Herod, 140 Fed. Rep. 661 186 Rankin v. Miller, 207 Fed. Rep. 602 62, 63 Rankin v. Ware, 88 Kans. 23 62 Raynor v. Pacific Natl. Bank, 93 N. Y. 371 188 Reynolds v. Crawfordsville Bank, 112 U. S. 405 14, 23 Reynolds v. Touzalin Imp. Co., 62 Neb. 236 18 Rice Co. v. Commercial Natl. Bank, 88 S. E. Rep. 999 15 Richards v. Attleboro Natl. Bank, 148 Mass. 187 531 Richardson v. United States, 181 Fed. Rep. 1 171, 173, 174, 175 Richmond v. Irons, 121 U. S. 27 58, 145, 149, 526, 531 Riddle ?;. First Natl. Bank, 27 Fed. Rep. 503 86 Roberts v. Hill, 23 Fed. Rep. 31 166 Robertson v. Buffalo Co. Natl. Bank, 40 Neb. 235 17 Robinson v. Hall, 63 Fed. Rep. 222, reversing 59 Fed. Rep. 648 18, 153, 154, 162, 163 Robinson v. Southern Natl. Bank, 94 Fed. Rep. 964 60 Robinson v. Turrentine, 59 Fed. Rep. 554 59 Rockwell v. Farmers' Natl. Bank, 4 Colo. App. 562 117, 119 Rosenblatt v. Johnson, 104 U. S. 462 140 S St. Louis Natl. Bank v. Papin, Fed. Case No. 12, 239 136 Salter v. Williams, 244 Fed. Rep. 126 61 San Diego County v. California Natl. Bank, 52 Fed. Rep. 59 167 San Francisco v. Crocker-Woolworth Natl. Bank, 92 Fed. Rep. 273.. 134 Schaberg's Estate v. McDonald, 60 Neb. 493 151 Schofield v. Baker, 212 Fed. Rep. 504 151 Schofield v. State Natl. Bank, 97 Fed. Rep. 282 15 xix FAGE Schrader v. Mfgrs. Natl. Bank, 133 U. S. 67 58, 145, 526, 531 Schuyler Natl. Bank v. Bullong, 24 Neb. 821; 28 Neb. 684 120, 121, 124, 186 Schuyler Natl. Bank v. Gadsden, 191 U. S. 451 123 Scott v. Armstrong, 146 U. S. 499 167 Scott v. Latimer, 89 Fed. Rep. 843 42, 64 Scott v. United States, 130 Fed. Rep. 429 173 The Seattle, 170 Fed. Rep. 284 106 Second Natl. Bank v. Fitzpatrick, 111 Ky. 228 117, 119, 121, 122 Seeber v. Commercial Natl. Bank of Ogden, 77 Fed. Rep. 957 18 Shafer v. First Natl. Bank, 53 Kans. 614 119 Shaw v. Natl. German-American Bank, 132 Fed. Rep. 658 13 Shunk v. First Natl. Bank of Galion, 22 Ohio St. 508 119 Simons v. Fisher, 55 Fed. Rep. 905 71 Simpson v. United States, 223 Fed. Rep. 940 175 Skud v. Tillinghast, 195 Fed. Rep. 1. 153 Slaughter v. First Natl. Bank, 109 Ala. 157 123, 124, 174 Smalley v. McGraw, 148 Mich. 394 165 Smith v. Exchange Natl. Bank of Pittsburgh, 26 Ohio St. 141. ..14, 123 Smith v. First Natl. Bank of Chadron, 45 Neb. 444 106 Smith v. First Natl. Bank of Crete, 42 Neb. 687 121 Smith v. Phillips Natl. Bank, 114 Me. 297 53 Smithson v. Hubbell, 81 Fed. Rep. 593 186 Snohomish County v. Puget Sound Natl. Bank, 81 Fed. Rep. 518 185 Snyder v. Mt. Sterling Natl. Bank, 94 Ky. 231 120 Sowles v. Witters, 39 Fed. Rep. 403 63 Spofford v. First Natl. Bank of Tama City, 37 Iowa 181 12 Spokane County v. Clark, 61 Fed. Rep. 538 167 Sponberg v. First Natl. Bank, 18 Idaho 524. 21 Stafford Natl. Bank v. Davis, 59 N. H. 38 136 State v. Clement Natl. Bank, 84 Vt. 167 141, 142 State v. People's Natl. Bank, 70 Atl. Rep. (N. H.) 542 11, 12 State v. Tuller, 34 Conn. 280 174 Stephens v. Bernays, 41 Fed. Rep. 401 152 Stephens v. Follett, 43 Fed. Rep. 842 60 Stephens v. Monongahela Bank, 111 U. S. 197 123 Stephens v. Overstoltz, 43 Fed. Rep. 465, 471 163, 164 Stokes V. Continental Trust Co., 186 N. Y. 285 42 Stout v. United States, 227 Fed. Rep. 799 175 Studebaker v. Perry, 184 U. S. 258; 102 Fed. Rep. 947 2, 63, 64 Supervisors v. Stanley, 105 U. S. 305 138 Sykes v. Canton First Natl. Bank, 2 S. D. 242 11 XX T PA«E Talbott v. Silver Bow County, 139 U. S. 438, 441 136, 140 Tapley v. Martin, 116 Mass. 275 18, 190 Taylor v. Hutton, 43 Barb. 195 71 Taylor v. Thomas, 124 App. Div. (N. Y.) 53 165 Teague v. First Natl. Bank of Salina. 5 Kans. App. 300 122 Tecumseh Natl. Bank v. Chamberlain, 63 Neb. 1G3 153 Thatcher v. West River Natl. Bank, 19 Mich. 196 190 Thayer v. Butler, 141 U. S. 234 36, 59 Third Natl. Bank, In re, 4 Fed. Rep. 775 151 Third Natl. Bank v. Blake, 73 N. Y. 260 12, 22 Third Natl. Bank v. Buffalo German Ins. Co., 193 U. S. 581, s. c. 162- N. Y. 163 109, 110 Third Natl. Bank v. Hughes, 76 Fed. Rep. 385 142 Third Natl. Bank of Philadelphia v. Miller, 90 Pa. St. 241 119 Thomas v. City Natl. Bank of Hastings, 40 Neb. 501 15 Thomas V. Farmers' Bank of Maryland, 46 Md. 43 46 Thomas v. Gilbert, 101 Pac. Rep. (Oregon) 393 112 Thomas v. Taylor, 224 U. S. 73 165 Thompson v. German Insurance Co., 76 Fed. Rep. 892 63, 152 Thompson v. St. Nicholas Natl. Bank, 146 U. S. 240 14, 109 Tiffany v. Natl. Bank, 18 Wall. 409 116 Tillinghast v. Bailey, 86 Fed. Rep. 46 60 Timberlake v. First Natl. Bank, 43 Fed. Rep. 231 117, 120, 122, 124 Tootle v. First Natl. Bank of Port Angeles, 6 Wash. 181 18 Tourtelot v. Stoltenben, 101 Fed. Rep. 362 61 Town Council of Lexington v. Union Natl. Bank, 75 Miss. 1 18 Trabue v. Cook, 12 S. W. Rep. 455 122 Traders' Natl. Bank v. Chipman, 164 U. S. 347 168 Trenholm v. Commercial Natl. Bank, 38 Fed. Rep. 323 162 Trustees v. Natl. State Bank, 57 N. J. Law 27 18 Tuttle v. Iron Natl. Bank, 170 N. Y. 9 145, 187 U United States v. Allen, 47 Fed. Rep. 696 173 United States v. Breese, 131 Fed. Rep. 915, 916 172 United States v. Britton, 107 U. S. 655; 108 U S. 199 172, 173 United States v. Cadwallader, 59 Fed. Rep. 077 175 United States v. Conners, 111 Fed. Rep. 734 178 United States v. Corbett, 215 U. S. 233 172, 173 United States v. Crecelius, 34 Fed. Rep. 30 173 United States v. Curtis, 107 U. S. 671 68 United States v. Ege, 49 Fed. Rep. 852 173 xxi PAGE United States v. Eno, 56 Fed. Rep. 218 174 United States v. Fish, 24 Fed. Rep. 585 172 United States v. French, 57 Fed. Rep. 382 175 United States v. German, 115 Fed. Rep. 987 172 United States v. Graves, 53 Fed. Rep. 634 173 United States v. Harper, 33 Fed. Rep. 471 172, 173 United States v. Heinze, 161 Fed. Rep. 425; 183 Fed. Rep. 907; 218 U. S. 532 109, 172, 175 United States v. Herrig, 204 Fed. Rep. 124 173 United States v. Hillegas, 176 Fed. Rep. 444 174 United States v. Hughitt, 45 Fed. Rep. 47 173 United States v. Jewett, 84 Fed. Rep. 142 175 United States v. Martindale, 146 Fed. Rep. 280 172 United States v. McClarty, 191 Fed. Rep. 523 173 United States v. Means, 42 Fed. Rep. 599 173 United States v. Morse, 161 Fed. Rep. 429 172 United States v. Northway, 129 U. S. 327 175 United States v. Norton, 188 Fed. Rep. 256 172, 175 United States v. Potter, 56 Fed. Rep. 83 175 United States v. Smith, 152 Fed. Rep. 542 175 United States v. Steinman, 172 Fed. Rep. 913 172 United States v. Twining, 132 Fed. Rep. 129 189 United States v. Warner, 26 Fed. Rep. 616 174 United States v. Weitzel, 246 U. S. 533 175 United States v. Wilson, 176 Fed. Rep. 806 172, 173 United States ex rel. Cond v. Barry, 36 Fed. Rep. 246 56 United States Natl. Bank v. First Natl. Bank, 79 Fed. Rep. 296 14, 71 Upton v. Natl. Bank of South Reading, 120 Mass. 153 22 Van Allen v. Assessors, 3 Wall. 573 39, 135, 137, 139, 140 Van Lenven v. First Natl. Bank, 54 N. Y. 671 12 Van Reed v. People's Natl. Bank, 198 U. S. 554; 173 N. Y. 314 188 Van Slyke v. State, 26 Wis. 655 140 Venango Natl. Bank v, Taylor, 56 Pa. St. 14 167 W Waite v. Dowly, 94 U. S. 527 141 Walden Natl. Bank v. Birch, 130 N. Y. 221 110 Walsh v. United States, 174 Fed. Rep. 615 172 Walker v. Windsor Natl. Bank, 56 Fed. Rep. 76 185 Washington Natl. Bank v. King County, 9 Wash. 607 137 xxii PAGE Washington Natl. Bank v. Eckels, 57 Fed. Rep. 870 146, 148 Watkins v. Natl. Bank of Lawrence, 51 Kans. 254 145, 146 Watt v. First Natl. Bank, 76 Minn. 458 121 Weber v. Spokane Natl. Bank, 64 Fed. Rep. 208, reversing 50 Fed. Rep. 735 108 Weckler v. First Natl. Bank of Hagerstown, 42 Md. 581 12 Weitzel v. Brown, 224 Mass. 190 3, 62, 149, 152, 190 Welles v. Graves, 41 Fed. Rep. 459 162, 163, 164 Welles v. Larrabee et al., 36 Fed. Rep. 866 60, 65 Welles v. Stout, 38 Fed. Rep. 807 63 Western Natl. Bank v. Armstrong, 152 U. S. 346 14 Westervelt v. Mohrenstecher, 76 Fed. Rep. 118 17 Wheeler v. Union Natl. Bank, 96 U. S. 785 124 Wheelock v. Kost, 77 111. 296 60, 61, 148 Whitbeck v. Mercantile Bank, 127 U. S. 193 136 White v. Knox, 111 U. S. 784 155 Whitney Natl. Bank v. Parker, 41 Fed. Rep. 402 135 Wichita Natl. Bank v. Smith, 72 Fed. Rep. 568 185 Wickham v. Hull, 60 Fed. Rep. 326 58, 186 Wigert v. First Natl. Bank, 175 Fed. Rep. 739 21 Wild, In re, Fed. Case No. 4173, 11 Blatchford 243 117 Wiley v. First Natl. Bank of Brattleboro, 47 Vt. 546 11 Wiley v. Starbuck, 44 Ind. 298 117, 123 Willard Mfg. Co. v. Tierney, 130 N. C. 611 188 Williams v. American Natl. Bank, 85 Fed. Rep. 376 43 Williams v. Brady, 232 Fed. Rep. 740 164, 165 Williams v. Cobb, 219 Fed. Rep. 663 37 Williamson v. American Bank, 109 Fed. Rep. 36, 115 Fed. Rep. 793 63, 64, 147 Winter v. Baldwin, 89 Ala. 483 35 Witters v. Foster, 28 Fed. Rep. 737 186 Witters v. Sowles, 35 Fed. Rep. 640; 38 Fed. Rep. 700 59 Wolverton v. Exchange Natl. Bank, 11 Wash. 94 117 Woodward v. Ellsworth, 4 Colo. 580 140 Woodward v. Old Second Natl. Bank, 154 Mich. 459 130 Wright v. First Natl. Bank, Fed. Case No. 18,078, 8 Bliss. 243 122 Wright v. Merchants' Natl. Bank, Fed. Case No. 18,084 149 Wylie v. Northampton Bank, 119 U. S. 361 11 Wyman v. Citizens' Natl. Bank of Faribault, 29 Fed. Rep. 734 106 Wyman v. Wallace, 201 U. S. 230 147 xxiit Y PAGE Yardley v. Clothier, 49 Fed. Rep. 337; 51 Fed. Rep. 506 167 Yates v. Jones Natl. Bank, 206 U. S. 158; 240 U. S. 541 164, 165 Yakima Natl. Bank v. Knipe, 6 Wash. 348 191 Yerkes v. Natl. Bank of Port Jervis, 69 N. Y. 383 12, 14 Young v. McKay, 50 Fed. Rep. 394 36 Young v. Wempke, 46 Fed. Rep. 354 149 Z Zinn v. Baxter, 65 Ohio St. 341 163 INDEX TO SECTIONS OF U. S. REVISED STATUTES AND ADDITIONAL ACTS RELATING TO NATIONAL AND FEDERAL RESERVE BANKS SECTIONS OF U. S. REVISED STATUTES U. 8. U.S. U.S. Revised Digest Revised Digest Page. Revised Digest Page. Sttitute Section. Page. statute Section. Statute Section. Section. Section. Section. 324... 2 2 5152.... 47 64 5211.... 127 125 325 . . . 3 2 5153 30 44 5212 .... 128 127 326 .. . 4 2 5154 31 45 5213 .... 129 128 327 .. . 5 3 5155 32 47 5214 .... 136, 137 131 328 .. . 6 3 5158 56 76 5215.... 139 132 329 .. . 7 3 5161 57 76 5216 .... 140 133 330 .. . 8 4 5162 67 79 5217.... 141 133 331 .. . 9 4 5163 68 80 5218 .... 142 133 333... 10 5 5164.-.. 69 80 5219 .... 144 134 380 .. . 188 189 5165 70 80 5220 .... 149 144 736 .. . 187 189 5166.... 71 81 5221 .... 150 146 884 .. . 189 189 5167 64,65,66 78, 79 5222 .... 94 91 885 .. . 190 190 5163 24 40 5223 .... 91 89 3583 . . . 179 182 5169 25 40 5224 .... 95 92 3584 . . . 346 386 5170.... 26 41 5225 .... 97 93 3585 . . . 347 387 5172.... 76 83 5225 .... 98 93 3587 . . . 350 387 5173.... 77 84 5227 .... 99 94 3588 . . . 351 387 5174.... 79 84 5228 .... 100 95 3589 . . . 352 387 5175*... 75 82 5229 .... 101 95 3590 . . . 353 388 5182 81 85 5230 .... 102 95 3620 . . . 316 345 5183 83 86 5231 .... 103 96 3701 . . . 146 143 5184 84 86 5232 .... 106 97 3347 . . . 317 346 5187 165 169 5233 .... 107 97 5133... 12 8 5188 180 182 5234 .... 152, 154 147, 150 5134... 13 8 5189 181 183 5235 .... 155 154 5135 . . . 14 9 5190 109 99 5236 156 154 6136 . . . 15 9 5195 88 87 5237 .... 157 156 5137 . . . 17 20 5196 121 114 5238 .... 158 156 5138 . . . 20 34 5197 125 115 5239 .... 163 161 5139 . . . 21 34 5198 126 118 5240 .... 131 129 5140 . . . 22 37 5199 ... 119 113 5241 .... 135 130 5141 . . . 23 38 5200 113 101 5242 .... 164, 186 165, 187 5142 . . . 28 42 5201 116 109 5243 .... 182 183 5143 . . . 29 43 5202 114 107 5413 .... 169 176 5144 . . . 44 54 5203 120 114 5415 .... 170 176 5145... 48 65 5204 118 112 5430 .... 171 177 5146 . . . 49 66 5205 117 111 5431 .... 172 179 5147... 50 67 5206 122 114 5432 .... 173 179 5148... 51 69 5207 166 170 5433 .... 174 179 5149 . . . 52 69 5208 115 108 5434 .... 175 180 5150... 53 70 5209 167 170 6437 .... 176 180 5151 . . . 45 56 5210.... 124 115 5497.... 177 181 (* Repealed) ACTS RELATING TO NATIONAL AND FEDERAL RESERVE BANKS Act Digest Section Page June 20, 1874 1 1 June 20, 1874 78 84 June 20, 1874 89 87 June 20, 1874 91 89 June 20, 1874 96 93 June 20, 1874 104 96 June 23, 1874 108 98 Jan. 14, 1875 80 85 Feb. 8, 1875 147 143 Feb. 8, 1875 148 143 Feb. 18, 1875 8 4 Feb. 18, 1875 95 92 Feb. 18, 1875 100 95 June 30, 1876 117 111 June 30, 1876 123 115 June 30, 1876 151 147 June 30, 1876 153 148 June 30, 1876 162 158 Feb. 27, 1877 79 84 Feb. 27, 1877 97 93 Feb. 27, 1877 127 125 Feb. 27, 1877 Sec. 1 316 345 Feb. 28, 1878 Sec. 1 348 387 March 1, 1879 143 133 June 9, 1879 Sec. 3 349 387 Feb. 26, 1881 130 128 July 12, 1882 Ch. 290 Sec. 1 37 50 July 12, 1882 Sec. 3 40 51 July 12, 1882 Sec. 4 41 51 July 12, 1882 Sec. 5 42 52 July 12, 1882 Sec. 7 43 53 July 12, 1882 92 90 July 12, 1882 93 90 July 12, 1882 105 96 July 12, 1882 168 175 July 12, 1882 183 184 XIT xxvi Act Digest Section Page July 12, 1882 Sec. 12 355 388 March 29, 1886 159 157 March 29, 1886 160 158 March 29, 1886 161 158 May 1, 1886 Ch ' 73 Sec. 1 27 41 May 1, 1886 Ch ' 73 Sec. 2 34 49 May 1, 1886 Ch ' 73 Sec. 3 35 49 May 1, 1886 Ch 73 Sec. 4 36 49 Aug. 13, 1888 184 185 July 14, 1890 90 88 July 28, 1892 82 85 Aug. 13, 1894 145 142 March 2, 1897 162 158 March 14, 1900 Sec. 1 329 377 March 14, 1900 Sec. 2 330 377 March 14, 1900 Sec. 3 357 389 March 14, 1900 Sec. 4 331 379 March 14, 1900 Sec. 5 332 379 March 14, 1900 Sec. 6 333 380 March 14, 1900 Sec. 7 334 381 March 14, 1900 Sec. 8 335 381 March 14, 1900 Sec. 9 336 382 March 14, 1900 Sec. 10 20 34 March 14, 1900 Sec. 11 59, 60 . 61 77 March 14, 1900 Sec. 12 58, 72, 73, 74 , 75 76, 81, 82 March 14, 1900 Sec. 13 137 131 March 14, 1900 Sec. 14 344 385 March 3, 1901 Ch 871 30 44 April 12, 1902 Ch 503 38 50 April 28, 1902 10, 11 5, 6 Feb. 28, 1905 49 66 Dec. 21, 1905 62, 138 78, 132 Jan. 22, 1906 113 101 Jan. 26, 1907 178 181 March 4, 1907 92 90 March 4, 1907 Sec. 1 333 380 March 4, 1907 Sec. 2 345 386 March 4, 1907 Sec. 3 30 44 May 27, 1908 317 346 March 4, 1909 169, 170, 171, 172, 173, 176, 177, 179, 180, 181, r, 74, 175, 176, 177, 179, 182, 183 180, 181 March 4, 1909 Sec. 225 318 347 xxvii Act Digest Section Page March 4, 1909 Sec. 87 323 360 June i 25 , 1910 Sec . 8 327 S75 June i 25, 1910 Sec. 10 328 375 March 5 !, 1911 63 78 March 1 !, 1911 333 380 March 2 !, 1911 185 187 Dec. 23, 1913 Sec. 1 192 198 Dec. 23, 1913 Sec. 2 193, 198, 194, 199, 195, 200, 198, 201 197, 198, 200, 201, 202, 203 Dec. 23, 1913 Sec. 3 202 203 Dec. 23, 1913 Sec. 4 203, 208, 204, 209, 205, 210, 206, 211, 207, 212 204, 210, 205, 211 206, 207, 208, Dec. 23, 1913 Sec. 5 213 212 Dec. 23, 1913 Sec. 6 213 212 Dec. 23, 1913 Sec. 7 214, 215 216, 218 Dec. 23, 1913 Sec. 8 31 45 Dec. 23, 1913 Sec. 9 217 218 Dec. 23, 1913 Sec. 10 2, 218, : 219, 220, 221, 2, 226, 227, 228 222, 223 Dec. 23, 1913 Sec. 11 225, 230, 235, 226, 231, 236, 227, 232, 237 228, 233, 229, 234, 229, 230, 231, 232, 237 Dec. 23, 1913 Sec. 12 238 238 Dec. 23, 1913 Sec. 13 19, 114, 239, 240, 241, 28, 107, 239, 240, 249. 242, 243, 244, 246, , 248 252, 253, 259, 260, 261 Dec. 23, 1913 Sec. 14 249, 254 250, 251, 252, 253, 265, 268, 269, 273, 274 Dec. 23, 1913 Sec. 15 255 275 Dec. 23, 1913 Sec. 16 256, 257, 258, 259, 260, 276, 277, 278, 279, 280, 261, 262, 263, 264, , 265 281, 282, 283 Dec. 23, 1913 Sec. 17 54 74 Dec. 23, 1913 Sec. 18 55, 269, 270, 271, 272 74, 290, 291, 292 Dec. 23, 1913 Sec. 19 273, 279, 274, 280, 275, 281 276, 278, 292, 300 294, 295, 296, 297, Dec. 23, 1913 Sec. 20 282 300 Dec. 23, 1913 Sec. 21 131 , 285 , 286 , 287 129, 300, 301 Dec. 23, 1913 Sec. 22 288 301 Dec. 23, 1913 Sec. 23 46 57 Dec. 23, 1913 Sec. 24 18 23 Dec. 23, 1913 Sec. 25 291, 296 292, 293, 294, 295, 304 , 305, , 306, 307 Dec. 23, 1913 Sec. 26 298 327 Dec. 23, 1913 Sec. 27 299 327 xxviii Act Digest Section Page Dec. 23, 1913 Sec. 28 29 43 Dec. 23, 1913 Sec. 29 301 327 Dec. 23, 1913 Sec. 30 302 328 Aug. 15, 1914 278 , 279 , 280 , 281 296 , 297, 300 Oct. 15, 1914 (Clayton Act) Sec. 8 304, 305, 306, 307, 308 333, 334, 336, 338, 340 Oct. 15, 1914 Sec. 11 309, 314, 310, 315 311, 312, 313, 341, , 342, 343, 344 March 3, 1915 239 239 May 15, 191G 154, , 307 150, 338 May 18, 1916 Sec. 2 325 361 May 18, 1916 Sec. 17 326 375 June 12, 1916 333 380 July 17, 1916 Sec. 6 321 349 Sept. 7, 1916 18, 19, 114, 237, 239, 23, 28, : L07, 237, 239, 240, 241, 242, 243, 244, 240, 249, 252, 253, 259, 246, 248, 254, 257, 291, 260, 261, 274, 277, 304, 292, 293, 294, 295, 296 305, 306, 307 April 24, 1917 Sec. 7 319, 320 348 June 21, 1917 202 203 June 21, 1917 Sec. 2 209 210 June 21, 1917 Sec. 3 217 218 June 21, 1917 Sec. 4 239 239 June 21, 1917 Sec. 5 243 253 June 21, 1917 See. 6 254 274 June 21, 1917 Sec. 7 257, 262 258, 259, 260, 261, 277, 278, 279, 280, 281 June 21, 1917 Sec. 8 266 289 June 21, 1917 Sec. 9 54 74 June 21, 1917 Sec. 10 273, 278, 274, 279, 275, 280, 276, 281 277, 292, 300 294, 295, 296, 297, June 21, 1917 Sec. 11 288 301 Oct. 5, 1917 75 82 April 5, 1918 114 107 April 23, 1918 Sec. 1 337 382 April 23, 1918 Sec. 2 338 382 April 23, 1918 Sec. 3 339 383 April 23, 1918 Sec. 4 340 383 April 23, 1918 Sec. 5 341 384 April 23, 1918 Sec. 6 342 384 April 23, 1918 Sec. 7 342 384 April 23, 1918 Sec. 8 342 384 April 23, 1918 Sec. 9 343 385 Act May 22, 1918 Sept. 24, 1918 Sept. 26, 1918 Sept. 26, 1918 Sec. 1 Sept. 26, 1918 Sec. 2 Sept. 26, 1918 Sec. 3 Sept. 26, 1918 Sec. 4 Sept. 26, 1918 Sec. 5 Nov. 7, 1918 March 3, 1919 March 3, 1919 Sec. 1 March 3, 1919 Sec. 2 March 3, 1919 Sec. 3 Sept. 17, 1919 Oct. 22, 1919 Dec. 24, 1919 Jan. 13, 1920 April 13, 1920 Digest Section Page 16 19 113 101 115, 167, 168 109, 170, 175 208 208 235 232 263 282 275, 276 295 288 301 33 47 76 83 214 216 219 226 237 237 292, 293 305, 306 113, 114 101, 107 297, 356 307, 389 81 85 253 274 PART ONE THE NATIONAL BANK ACT, AMENDMENTS AND SUPPLEMENTARY ACTS WITH ANNOTATIONS CHAPTER I. COMPTROLLER OP THE CURRENCY. Section 1. Title of Act. 2. Bureau of Comptroller of the Currency. 3. Comptroller of the Currency. 4. Oath and Bond of Comptroller. 5. Deputy Comptroller; duties, etc. 6. Clerks. 7. Prohibition Against Interest in National Banks. 8. Seal of Office. 9. Offices, Vaults, etc., for Bureau. 10. Annual Report of Comptroller. 11. Furnishing of List of Clerks, etc. § 1. Title of Act. — The act entitled "An act to provide a National currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," ap- proved June third, eighteen hundred and sixty-four, shall here- after be known as the "National Bank Act." (Act June 20, 1874, Ch. 343, Sec. 1, 18 Stat. L. 123.) 1 § 2. Eureau of Comptroller of the Currency. — There shall be in the Department of the Treasury a bureau charged with the execu- tion of all laws passed by Congress relating to the issue and regu- lation of National currency secured by United States bonds and, under the general supervision of the Federal Eeserve Board, of all Federal reserve notes, the chief officer of which bureau shall be called the Comptroller of the Currency and shall perform his duties under the general directions of the Secretary of the Treas- ury. (Eev. Stat. U. S. Sec. 324, as amended by Sec. 10, Act Dec. 23, 1913, 38 Stat. L. 2G0.) While the construction of National banking laws by the Comptroller of the Currency is persuasive, and entitled to careful consideration, yet a Court, if satisfied that such construction is error, will not follow it. (Deweese v. Smith, 106 Fed. Rep., 438.) And where the meaning of the act is clear, the construction placed thereon by the Comptroller can not be considered. (Studebaker v. Perrin, 184 U. S., 252.) The Federal Trade Commission has no jurisdiction over banks. § 3. Comptroller of the Currency — Appointment — Term of Office — Salary. — The Comptroller of the Currency shall be appointed by the President, on the recommendation of the Secretary of the Treasury, by and with the advice and consent of the Senate, and shall hold his office for the term of five years unless sooner re- moved by the President, upon reasons to be communicated by him to the Senate ; and he shall be entitled to a salary of five thousand dollars a year. (Eev. Stat. U. S. Sec. 325.) For compensation of Comptroller as member of Reserve Board see Sec. 10 Federal Reserve Act, page 226. § 4. Oath and Bond of Comptroller. — The Comptroller of the Currency shall, within fifteen days from the time of notice of his appointment, take and subscribe the oath of office; and he shall give to the United States a bond in the penalty of one hun- dred thousand dollars, with not less than two responsible sureties, to be approved by the Secretary of the Treasury, conditioned for the faithful discharge of the duties of his office. (Eev. Stat. U. S. Sec. 326.) The bond of a surety company is now accepted. § 5. Deputy Comptroller: Duties, Etc. — There shall be in the Bureau of the Comptroller of the Currency a Deputy Comptroller of the Currency, to be appointed by the Secretary, who shall be entitled to a salary of two thousand five hundred dollars a year, and who shall possess the power and perform the duties attached by law to the office of Comptroller during a vacancy in the office or during the absence or inability of the Comptroller. The Deputy Comptroller shall also take the oath of office prescribed by the Constitution and laws of the United States, and shall give a like bond in the penalty of fifty thousand dollars. (Eev. Stat. U. S. Sec. 327.) Salary. — By the appropriation act of Feb. 3, 1905, and all subse- quent acts the salary of the Deputy Comptroller has been fixed at $3,500. Judicial Notice. — The court will take judicial notice of the fact that a certain person was on a certain day the Deputy Comptroller of the Currency; and where he has signed a certificate as "Acting Comp- troller" the court will assume that at the date of such certificate he was authorized to exercise the powers and discharge the duties of Comptroller. (Keyser v. Hitz, 133 U. S., 438; V/eitzel v. Brown, 224 Mass. 190.) Additional Deputy Comptroller. — By the appropriation act of May 22, 1908, provision was made for an additional Deputy Comptroller, at a salary of $3,000, who shall possess the power and perform the duties attached by law to the office of Comptroller during a vacancy in the office of Comptroller and Deputy Comptroller, or during the absence or inability of the Comptroller and the Deputy Comptroller, and said assistant Deputy Comptroller shall give a like bond in the penalty of $50,000. § 6. Clerks. — The Comptroller of the Currency shall employ, from time to time, the necessary clerks, to be appointed and clas- sified by the Secretary of the Treasury, to discharge such duties as the Comptroller shall direct. (Rev. Stat. U. S. Sec. 328.) § 7. Prohibition Against Interest in National Banks. — It shall not be lawful for the Comptroller or the Deputy Comptroller of the Currenc} r , either directly or indirectly, to be interested in any association issuing National Currency under the laws of the United States. (Rev. Stat. U. S. Sec. 329.) For prohibition against interest in State Bank or Trust CoTnpany see Sec. 10 Federal Reserve Act, page 227. § 8. Seal of Office.— The seal devised by the Comptroller of the Currency for his office, and approved by the Secretary of the Treasury, shall continue to be the seal of office of the Comptroller, and may be renewed when necessary. A description of the seal, with an impression thereof, and a certificate of approval by the Secretary of the Treasury, shall be filed in the office of the Sec- retary of State, (liev. Stat. U. S. Sec. 330 as amended by Act, Feb. 18, 1875, Chap. 80, 18 Stat. L. 317.) § 9. Offices, Vaults, etc., for Bureau. — There shall be assigned from time to time, to the Comptroller of the Currency, by the Secretary of the Treasury, suitable rooms in the Treasury build- ing for conducting the business of the Currency Bureau, con- taining safe and secure fire-proof vaults, in which the Comptroller shall deposit and safely keep all the plates not necessarily in the possession of engravers or printers, and other valuable things be- longing to his Department; and the Comptroller shall from time to time furnish the necessary furniture, stationery, fuel, lights, and other proper conveniences for the transaction of the business of his office. (Eov. Stat. IT. S. Sec. 331.) § 10. Annual Report of Comptroller. — The Comptroller of the Currency shall make an annual report to Congress, at the com- mencement of its session, exhibiting — First. A summary of the state and condition of every associa- tion from which reports have been received the preceding year, at the several dates to winch such reports refer, with an abstract of the whole amount of banking capital returned by them, of the whole amount of their debts and liabilities, the amount of circu- lating notes outstanding, and the total amount of means and re- sources, specifying the amount of lawful money held by them at the times of their several returns, and such other information in relation to such associations as, in his judgment, may be useful. Second. A statement of the associations whose business has been closed during the year, with the amount of their circulation re- deemed and the amount outstanding. Third. Any amendment to the laws relative to banking by which the system may be improved and the security of the holders of its notes and other creditors may be increased. Fourth. A statement exhibiting under appropriate heads the resources and liabilities and condition of the banks, banking com- panies, and savings banks organized under the laws of the several States and Territories; such information to be obtained by the Comptroller from the reports made by such banks, banking com- panies, and savings banks to the legislatures or officers of the differ- ent States and Territories, and, where such reports can not be ob- tained, the deficiency to be supplied from such other authentic sources as may be available. Fifth. The names and compensation of the clerks employed by him, and the whole amount of the expense of the banking de- partment during the year. (Rev. Stat. U. S. Sec. 333) ; expenses incurred during each } r ear, in liquidation of each failed National bank separately. (Sec. 12, Act. April 28, 1902, 32 Stat. L. 138.) How Copies to be Obtained. — The first report of the Comptroller of the Currency was made for the year 1863 by the Hon. Hugh Mc- Culloch, the first Comptroller. The earlier reports are out of print, and those of some of the later years also, but copies of such as are on hand and can be spared may be obtained on application to' the Comptroller of the Currency by bankers and others who are interested In banking matters. Repobt to be Pbin-ted. — By Act January 12, 1S95, Ch. 23 (28 Stat. L. 616), as amended by Pub. Res. 25, March 4, 1907 (34 Stat. L, 1425), it is provided that there shall be printed each year thirteen thousand copies of the Report of the Comptroller of the Currency, one thousand for the Senate, two thousand for the House, and ten thousand for distribution by the Comptroller. § 11. Furnishing of List of Clerks, Examiners, Receivers, etc. — That for the fiscal year of nineteen hundred and two and there- after, a full and complete list of all officers, agents, clerks, and other employes of the office of the Comptroller of the Currency, including bank examiners, receivers and attorneys for receivers, and clerks employed by such examiners and receivers, or any other person connected with the work of said office in Washington or elsewhere, whoso salary or compensation is paid from the Treas- ury of the United States or assessed against or collected from existing or failed banks under their supervision or control, shall be transmitted to the Secretary of the Interior in accordance with the provision of an Act of Congress approved January twelfth, eighteen hundred and eighty-five, relating to the Official Eegister : And provided further, That the Comptroller of the Currency is hereby directed to include in Ms Annual Eeport to the Speaker of the House of Eepresentatives, expenses incurred during each year, in liquidation of each failed national bank separately. (Act, April 28, 1902; 32 Stat. L., 138.) CHAPTER II. Organization and Powers of National Banks. Section 12. Who May Form National Banking Associations — Ar- ticles of Association. 13. Organization Certificate. 14. Acknowledgment of Organization Certificate. 15. Corporate Powers of Associations. 16. Subscriptions to American National Eed Cross. 17. Limitations as to Eeal Estate and Mortgages. 18. Loans on Eeal Estate by National Banks. 19. Power of National Banks as Insurance Agents. 20. Amount of Capital Eequired. 21. Par Value of Stock — Transfers — Stockholders' Eights and Liabilities. 22. When Capital Stock Must be Paid In. 23. Failure to Pay Installments on Stock — Sale of Stock — Eestoring Capital so Eeduced. 24. Comptroller to Determine if Association is Entitled to Commence Business. 25. Certificate of Authority to Commence Business. 26. Publication of Comptrollers Certificate. 27. Increase of Capital Stock. 28. When Increase of Capital Stock Becomes Valid. 29. Seduction of Capital Stock. 30. Depositaries of Public Moneys. 31. Conversion of State into National Banks. 32. Same Subject — State Banks having Branches. 33. Consolidation of National Banking Associations. 34. Change of Name and Location. 35. Same Subject — Continuance of Liabilities. 36. Same Subject. 7 8 37. Extension of Corporate Existence. 38. Same Subject — Further Extension. 39. Amendment of Articles in Case of Change. 40. Special Examination of Extended Bank — Certificate of Comptroller. 41. Privileges, Liabilities, etc., of Extended Banks. 42. Withdrawal of Shareholders ; Preference in Allotment. 43. Banks not Extending — Continuance of Franchise for Purpose of Liquidation. § 12. Who May Form National Banking Associations — Articles of Association. — Associations for carrying on the business of bank- ing under this Title may be formed by any number of natural persons, not less in any case than five. They shall enter into articles of association, which shall specify in general terms the object for which the association is formed, and may contain any other pro- visions, not inconsistent with law, which the association may see fit to adopt for the regulation of its business and the conduct of its affairs. These articles shall be signed by the persons uniting to form the association, and a copy of them 3hall be forwarded to the Comptroller of the Currency, to be filed and preserved in his office. (Eev. Stat. IT. S. Sec. 5133.) For full details how to proceed in the organization of a National Bank, with form of articles of association, etc., see §360 ff. § 13. Organization Certificate. — The persons uniting to form such an association shall, under their hands, make an organization certificate, which shall specifically state: First. The name assumed by such association ; which name shall be subject to the approval of the Comptroller of the Currency. Second. The place where its operations of discount and deposit are to be carried on, designating the State, Territory, or district, and the particular county and city, town, or village. Third. The amount of capital stock and the number of shares into which the same is to be divided. Fourth. The names and places of residence of the shareholders and the number of shares held by each of them. Fifth. The fact that the certificate is made to enable such persons to avail themselves of the advantages of this Title. (Eev. Stat. U. S. Sec. 5134.) Place of Location — How Designated. — The provision of law requir- ing that the place where the business is to be carried on shall be stated in the organization certificate refers to the town or city, and not to the particular building or street number. (McCormick v. Market Nat. Bank of Chicago, 162 111., 100.) For authority to change names or locations see act May 1, 1886, $32. § 14. Acknowledgment of Organization Certificate. — The or- ganization certificate shall be acknowledged before a judge of some court of record, or notary public ; and shall be, together with the acknowledgment thereof, authenticated by the seal of such court, or notary, transmitted to the Comptroller of the Currency, who shall record and carefully preserve the same in his office. (Eev. Stat. U. S. Sec. 5135.) For form of certificate see $385. § 15. Corporate Powers of Associations.— -Upon duly making and filing articles of association and an organization certificate, the association shall become, as from the date of the execution of its organization certificate, a body corporate, and as such, and in the name designated in the organization certificate, it shall have power — First. To adopt and use a corporate seal. •Second. To have succession for the period of twenty years from its organization, unless it is sooner dissolved according to the provisions of its articles of association, or by the act of its share- holders owning two-thirds of its stock, or unless its franchise be- comes forfeited by some violation of law. Third. To make contracts. Fourth. To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons. Fifth. To elect or appoint directors, and by its board of direc- 10 tors to appoint a president, vice-president, cashier, and other offi- cers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and ap- point others to fill their places. Sixth. To prescribe, by its board of directors, by-laws not in- consistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers ap- pointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed. Seventh. To exercise by its board of directors, or duly author- ized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by dis- counting and negotiating promissory notes, drafts, bills of ex- change, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money on personal security; and by obtaining, issuing, and circulating notes according to the provisions of this Title. But no association shall transact any business except such as is incidental and necessarily preliminary to its organization until it has been authorized by the Comptroller of the Currency to com- mence the business of banking. (Eev. Stat. XJ. S. Sec. 5136.) Note. — See §25 and §26, post, relating to issuing and publishing of certificate authorizing association to begin business. For power of a National bank to act as trustee, executor, adminis- trator, etc., see Sec. 11 (k) Federal Reserve Act, §235. For power of a National bank to establish branches in foreign coun- tries, see Sec. 25 of Federal Reserve Act, §291. For powers of a National bank regarding acceptances, see Sec. 13 of Federal Reserve Act, §243. Banking Powers. — The enumeration of powers in the seventh sub- division of this section merely constitutes the usual formula descrip- tive of the banking business, and is based on the model New York banking act of 1838. National banks can not only exercise the prin- cipal powers expressly enumerated but those which are reasonably implied, such as the business of making collections. The banks can 11 also exercise such powers as are properly incidental to the principal features enumerated in the act or implied therefrom, and can make any contracts which legitimately appertain to the business of banking as defined by the statute. (Logan Co. Nat. Bank v. Townsend, 139 U. S., 67, 73; Pattison v. Syracuse Nat. Bank, 80 N. Y., 82.) Deposits. — National banks can not only receive general deposits but can contract as to the parties to whom they shall be repaid. (Sykes v. Canton First Nat. Bank, 2 S. D., 242.) They may receive deposits of the public funds of a city, agree to pay interest thereon and give bond for their security. (Interstate Nat. Bank v. Ferguson, 48 Kan., 732.) Special Deposits. — National banks can receive special deposits, in- cluding deposits of bonds and securities for safe-keeping, either for a compensation or gratuitously; but not, for example, a stock of mer- chandise to be stored in the rear of the banking-room. (National Bank v. Graham, 100 U. S., 699; Pattison v. Syracuse Nat. Bank, supra; First Nat. Bank v. Strang, 138 111., 347; Am. Nat. Bank v. Adams, 44 Okla., 129.) For liability of National banks for loss of special deposits, see First Nat. Bank v. Ocean Nat. Bank, 60 N. Y., 278; Wiley v. First Nat. Bank, 47 Vt., 546; Pattison v. Syracuse Nat. Bank, supra; Chattahoochee Nat. Bank v. Schley, 58 Ga., 360; National Bank v. Graham, 100 U. S., 699; Leach v. Hale, 31 la., 69; Wylie v. Northampton Bank, 119 U. S., 361; Coffey v. Nat. Bank of Mo., 46 Mo., 140. Deposit as Stakeholder. — A National bank may receive the deposit of a fund in controversy to abide the event of a litigation or award, or to be payable upon a contingency to some person other than the de- positor. (Bushnell v. Chatauqua County National Bank, 74, N. Y., 290. But see American National Bank v. Adams, 44 Okla., 129.) Savings Deposits. — Under the broad authority to "receive deposits" conferred by the National Bank Act there appears to be no reason why a National bank may not receive savings accounts under rules similiar to those adopted by savings banks respecting the time and manner of withdrawal, interest, etc. Such deposits, however, are not to be invested in the manner in which savings deposits are ordinarily invested, but must be employed in the modes described by the National Bank Act and Federal Reserve Act. Such deposits are not held upon a trust, but the relation between the bank and the depositor is that of debtor and creditor. (State v. People's Nat. Bank, 70 Atl. Rep. (N. H.), 542.) In some of the States, as for instance in New York, the use of the word "savings" as applied to bank deposits is forbidden, 12 except when used by a savings bank organized under the State law. (See People v. Binghampton Trust Co., 139 N. Y., 185.) But it is questionable whether such a statute would be held by the courts to have any application to National banks doing business within the State. (State v. People's Nat. Bank, supra.) See Sec. 19 of Federal Reserve Act, page 292 and notes thereunder. Safe Deposit Boxes. — In the absence of statutory provisions, the Comptroller of the Currency leaves it to the discretion of the directors of National banks as to whether a moderate investment of the bank's funds shall be made in building safe deposit vaults for the use of customers. Security fob Loans. — Since the words "loans on personal security" are used in contradiction to real estate security, National banks may take in addition to personal security for discounts and loans, pledges of bonds, choses in action, bills of lading, or other personal chattels. (National Bank v. Case, 96 U. S., 62S; Cleveland, Brown & Co. v. Shoe- man, 40 Oh. St., 176; Spofford v. First Nat. Bank, 37 la., 181; Pittsburg L. & C. "Works v. State Nat. Bank, Fed. Cas. No. 11, 198; Third Nat. Bank v. Blake, 73 N. Y., 260.) See next section for notes on real estate loans. Dealing in Stocks and Bonds. — A National bank has no power to deal in stocks and bonds, or buy and sell them upon commission. Such operations are not incidental to the business of banking as defined in the statute. (Weckler v. First Nat. Bank of Hagerstown, 42 Md., 581; First Nat. Bank of Allentown v. Hock, 89 Pa. St., 324; First Nat. Bank v. National Exchange Bank, 92 U. S., 122; California Nat. Bank v. Kennedy, 167 U. S., 362; Metropolitan Trust Co., v. McKinnon, 172 Fed. Rep., 846; Barrow v. McKinnon, 196 Fed. Rep., 933; Hotchkin v. Third Nat. Bank, 219 Mass., 234.) Dealing in Government Bonds. — It would seem, however, that Na- tional banks as financial agents of the Government may be employed to perform any duties in respect to its bonds; and may buy and sell and exchange Government securities for their customers. It has been decided that National banks have power to receive United States bonds of one class for the purpose of having them converted into bonds of another class, and that the exchanging of Government se- curities is a legitimate part of their business. (Yerkes v. National Bank of Port Jervis, 69 N. Y., 383; Van Lenven v. First Nat. Bank, 54 N. Y., 671; Leach v. Hale, 31 Iowa, 69.) 13 Stocks Taken as Security For or in Payment of Debts. — But while the National banks are impliedly prohibited from dealing in stocks, they may yet accept stock when it is transferred to them, bona fide, in satisfaction or payment, or by way of compromise of debts due to or from the bank, and when it is taken with a view to its subsequent sale or conversion into money so as to make good or reduce an anticipated loss. (First Nat. Bank of Charleston v. National Exchange Bank, 92 U. S., 122; Corn Exchange Nat. Bank v. Kaiser, 160 Wis., 199; Fourth Nat. Bank v. Stahlman, 132 Tenn., 367; First Nat. Bank v. Converse, 200 U. S., 425.) Duty to Dispose of Stock Properly Acquired — Power of Cashter to Sell. — Where a National bank legally acquires title to stock in an- other corporation, previously held as collateral security or taken for debt, such stock should be disposed of promptly, and that action will be required by the Comptroller of the Currency. And a sale of the stock, being within the ordinary business of the bank, may be made by the cashier. (McBoyle v. Union Nat. Bank, 162 Cal., 277.) Purchase of Stock of Other National Banks. — A National bank can not lawfully acquire and hold the stock of another National bank as an investment. And where such stock has been purchased the bank may plead its want of power as a defense to an assessment upon the stock, notwithstanding It appears as the registered owner thereof, and has received and retained the dividends thereon. (First Nat. Bank of Concord v. Hawkins, 174 U. S., 364. But see Ohio Valley Nat. Bank v. Hulitt, 204 U. S., 162; see also Shaw v. National German-American Bank, 132 Fed. Rep., 658.) Purchase of Municipal Bonds. — A National bank has power to deal in municipal bonds, and may make a contract with a municipal cor- poration for the purchase of its bonds. (Newport Nat. Bank v. Board of Education of Newport, 114 Ky., 87; Junction City v. Bank, 96 Kan., 407.) Not Liable as Stockholder Where Purchase of Stock is Ultra Vires. — Where a National bank has purchased stock in another cor- poration, out of the ordinary course of its business, and not as security for a debt previously contracted, it may plead ultra vires, in an action against it as a stockholder of such corporation. (California Nat. Bank v. Kennedy, 167 U. S., 362, overruling Kennedy v. California Savings Bank, 101 Cal., 495.) Bank Can Pass Title to Stock Illegally Purchased. — Though a purchase of corporate stock by a National bank is ultra vires and void- 14 able as between the parties, it is not void, and title passes to ; the bank, which it may transfer to a third person, prior to any election by the other party to the original transaction to rescind the sale. (Barron v. McKinnon, 196 Fed. Rep., 933.) Purchasing Commercial Paper. — A National bank may purchase and sell commercial paper, the term "discount," properly interpreted, in- cluding a "purchase" as well as a loan. (Morris v. Third Nat. Bank, 142 Fed., 25; Smith v. Bank, 26 Oh. St., 141; Yerkes v. Bank, 69 N. Y., 382; Atlantic State Bank v. Savery, 82 N. Y., 291; Pape v. Capital Bank, 20 Kans., 440. But see contra Lazear v. National Union Bank, 53 Md., 78, and First Nat. Bank v. Pierson, 24 Minn., 140; see qualify- ing rule in Prescott Nat. Bank v. Butler, 157 Mass., 548; Merchants Nat. Bank v. Hanson, 33 Minn., 40; First Nat. Bank v. Smith, 8 S. D., 7, and analogous cases, National Bank v. Mathews, 98 U. S., 621; National Bank v. Whitney, 103 U. S., 99; Reynolds v. Crawfordsville Bank, 112 U. S., 405; Thompson v. St. Nicholas Bank, 146 TJ. S., 240, and Ellerbee v. National Exchange Bank, 109 Mo., 445.) Borrowing of Money. — 'The power to borrow money or to give notes is not expressly conferred by the act; but in proper cases a bank may become a temporary borrower of money. (Western Nat. Bank v. Arm- strong, 152 U. S., 346; Chemical Nat. Bank v. Armstrong, 65 Fed. Rep., 573.) But such transactions are so much outside of the general scope of the bank's business, that the officer acting for the bank therein must have special authority. (Id.) But there may be cases where an officer may legitimately borrow money for the bank's use without authority from the board. (Cherry v. City Nat. Bank, 144 Fed. Rep., 587.) Rediscounts. — A rediscount by a National bank of its bills receiv- able, though it endorses the same, and becomes contingently liable for their payment, is not a borrowing of mo'ney by the bank, but has some of the characteristics of a sale. (United States Nat. Bank v. First Nat. Bank of Little Rock, 79 Fed. Rep., 296.) And such a transaction is not so far outside the scope of ordinary banking transactions as to im- pose upon the bank buying such paper the duty of ascertaining that the act has been specially authorized by the board of directors. (Id.) The rule that an officer has no po'wer to borrow money unless specially authorized by the directors, is not applicable in a case where a general and long-established usage is shown between correspondent banks to borrow and lend through the officers of the bank, no further authority being furnished or demanded; the presumption being that such usage was condoned and acquiesced in by the directors of the borrowing bank. (Armstrong v. Chemical Nat. Bank, 83 Fed. Rep., 556.) 15 And it has been held that the president of a National bank who has the actual management of its operations is authorized to procure the discount of its paper. (Hanover Nat. Bank v. First Nat. Bank of Burlingame, 109 Fed. Rep., 421.) The subsequent fraud of its cashier will not relieve a National bank from its liability as indorser on paper transferred by him within the scope of his authority to an innocent third person. (Auten v. Manistee Nat. Bank, 67 Ark., 243.) Lending Credit — Accommodation Paper. — A National bank has no authority to lend its credit, and its accommodation paper or indorse- ment or guaranty will be void in the hands of any person taking the same with knowledge of the facts. (National Bank of Brunswick v. Sixth Nat. Bank, 212 Pa. St., 238; Merchants' Bank of Valdosta v. Baird, 160 Fed. Rep., 642; Fidelity and Deposit Co. v. National Bank of Commerce (Tex.), 106 S. W. Rep., 782; National Bank of Commerce v. Atkinson, 55 Fed. Rep., 465.) Guaranty. — A National bank has no power to give an accommodation guaranty, and such a guaranty is not enforceable against the bank. (Bowen v. Needles National Bank, 94 Fed. Rep., 925.) So, it has been held that the officers and directors of a National bank have no author- ity to bind the bank by a guaranty of the debts of a third person contracted for his own benefit. (Commercial Nat. Bank v. Pirie, 82 Fed. Rep., 799; Farmers' and Merchants' Nat. Bank v. Smith, 77 Fed. Rep., 129; Rice & Hutchins Atlanta Co. v. Commercial Nat. Bank, 88 S. E. Rep., 999.) So, a National bank has no power, either with or without consideration, to bind itself that a draft drawn upon one of its customers will be paid. (First National Bank of Moscow v. American Nat. Bank, 173 Mo., 153; National Bank of Brunswick v. Sixth Nat. Bank, 212 Pa. St., 238; First Nat. Bank of Jallapooro v, Monroe, 135 Ga., 614.) But see Citizens' Nat. Bank v. Appleton, 216 U. S., 196. Guaranty of Paper Sold by Bank. — While a National bank may not lend its credit for accommodation, it may guaranty the payment of commercial paper as incidental to the exercise of its power to buy and sell the same. (Thomas v. City Nat. Bank of Hastings, 40 Neb., 501.) Assuming Obligations of Another Bank. — A National bank has power to make a contract whereby, in consideration of the transfer to it of the office furniture, lease and cash assets of another National bank, it will assume and pay the liabilities of such other bank. (Scho- field v. State Nat. Bank, 97 Fed. Rep., 282.) Where a contract by Which a National bank assumed all the obligations of an insolvent 16 bank in contemplated liquidation was fully explained at a meeting at which 1,665 out of 2,000 shares were represented, and after the contract was executed, it was ratified by a vote exceeding two-thirds of the stock; held that the stockholders were not thereafter entitled to claim that such contract was ultra vires. (George v. Wallace, 135 Fed. Rep., 286.) Loans to Officebs. — A National bank may make loans to its officers and directors as freely as to other persons. (Blair v. First Nat. Bank of Mansfield, 10 Chicago Legal News, 84; 2 Nat. Bank Cas., 173.) But the loans must be honest, and the borrowers must not participate in making the loans to themselves. (Id.) Dealing in Checks. — Dealing in checks is a part of the usual busi- ness of banking, and would be within the general powers of a bank without special mention. And there is no difference in this respect between checks payable to bearer and those payable to order. (First National Bank of Rochester v. Harris, 108 Mass., 514.) Lending fob Customers. — A National bank is not authorized to en- gage in the business of lending money for its customers; and it can not be held liable for the acts of its officers in so doing. (Grow v. Cockrill, 63 Ark., 418.) Employment of Attorneys. — Under the fourth subdivision of section 5136 a National bank has full power to employ attorneys to bring or defend suits in any court of law or equity; and such employment, in- cluding the agreement for compensation, may be made by the president of such bank. (National Bank of Guthrie v. Earl, 2 Old., 617; see also Citizens' National Bank of Kingman v. Berry, 53 Kans., 696.) Binding Bank to Pay Draft. — An officer of a National bank has no power to bind it to pay the draft of a third person on one of its cus- tomers to be drawn at a future day, when it expects to have a deposit from him sufficient to cover it, and no action lies against the bank for its refusal to pay such a draft. (Flannagan v. California Nat. Bank, 56 Fed. Rep., 959.) False Representation of Cashier. — A National bank may be held liable for damages for a false representation made by its cashier as to credit of a customer seeking credit at another bank. (Neveda Bank of San Francisco v. Portland National Bank, 59 Fed. Rep., 338.) Collections. — The cashier of a National bank has authority on be- half of the bank to make a collection from another bank. (Hanson v. 17 Heard, 69 N. H., 190.) And a National bank may take an absolute assignment of a claim for collection and agree to pay the proceeds, or a part thereof, to another. (King v. Miller, 53 Oregon, 53.) Partnership. — A National bank has no power to become a member of a partnership, and cannot be held liable as a partner. (Merchants' National Bank v. Wehrmann, 09 Ohio St., 160.) It cannot, even in satisfaction of a debt, become the absolute owner of shares in a part- nership, and as it cannot take the shares, it cannot be held liable for the debts of the firm. (Merchants' Nat. Bank v. Wehrmann, 202 U. S., 295.) Nor can it be estopped from denying that it was a partner. {Id.) Contract to Pat fob the Producing of Customer. — In the case of Dresser v. Trader's Nat. Bank (165 Mass., 120), the Sup. Ct. of Mass. held that a National bank is not authorized to make a contract to furnish fire insurance to a person in consideration of his procuring a customer for the bank, and intimated that a National bank should not pay money to a third person to secure a customer. Donation of Funds. — The president of a National bank by signing its name to a subscription paper can not obligate the bank to donate $200 to parties on condition that they would erect a paper-mill. Such donation of its funds to aid in building a paper-mill is not legitimate business for a bank; and the bank is not bound by the agreement. (Robertson v. Buffalo Co. Nat. Bank, 40 Neb., 235.) Political contribu- tions prohibited by act Jan. 26, 1907. See §178. Contributions to Red Cross are permitted during war. See §16. Clearing-house. — The law does not forbid a National bank becoming a member of a clearing-house association organized merely for facili- tating settlements between the members thereof. (Philler et al. v. Patterson, 168 Pa. St., 468.) Officers — .Tenure of Office. — The officers hold their positions by the tenure specified in the statute, to wit, the pleasure of the board of directors and can not be chosen for any stated term. (Harrington v. First Nat. Bank of Chittenango, 1 Thompson & Cook (N. Y.), 361; Westervelt v. Mohrenstecher, 76 Fed. Rep., 118.) A by-law which provides that an officer shall hold office for a stated term, as for one year, is void. (Id.) (See also Case v. First Nat. Bank, 109 N. Y. Supp., 1119.) Bonds of Officers. — The directors should require bonds from the officers of the bank and are personally liable for losses caused by neglect in leaving the management wholly to the cashier who had but 2 18 little property and of whom they required no bond. (Robinson v. Hall, 63 Fed. Rep., 222, reversing 59 Fed. Rep., 648.) A surety on the bond of a cashier of a National bank is not dis- charged by the fact that before the bond was given, the cashier had committed frauds upon the bank, if such frauds were unknown to the officers of the bank, although they were guilty of gross negligence in not discovering them. (Tapley v. Martin, 116 Mass., 275.) Insurance of Lives or Officers. — The Comptroller of the Currency has refused to approve a plan for the insurance by a National bank of the lives of its officers or employes for the benefit of the bank, but recommends the furnishing to small salaried clerks and employes in- surance equal to one year's salary for the benefit of their families, the premiums to be met by an adjustment of salaries. Ultra Vires. — Where a National bank makes a contract which is beyond its powers, such contract is void, and not merely voidable, and it can not be estopped from making the defense of ultra vires when it is sued for non-performance on its part. (Metropolitan Stock Ex- change v. Lyndonville Nat. Bank (Vt.), 57 Atl. Rep., 101.) But there are many cases where such a contract, having been performed, has been enforced. (Logan County Bank v. Townsend, 139 U. S., 67; Prescott Nat. Bank v. Butler, 157 Mass., 548.) So, where a National bank has made a loan upon a real estate mortgage, its want of power to take such a security is not a defense to the mortgagee in a suit by the bank to foreclose the mortgage. (National Bank v. Matthews, 98 U. S., 621.) See also Hennessey v. City of St. Paul, 54 Minn., 219. And so, in an action by a National bank on railroad aid bonds, the obligor cannot set up as a defense that the purchase of the bonds by the bank was ultra vires. (Town Council of Lexington v. Union Nat. Bank, 75 Miss., 1.) And where a borrower has deposited collateral securities with a National bank, he cannot set up as a defense that the bank had no power to take the same. (Reynolds v. Touzalin Imp. Co., 62 Neb. 236.) Where Bank Has Received Benefits of Ultra Vires Contract. — Conversely, where a National bank has received and retained the bene- fit of a contract made by its officers, it can not plead that the contract was unauthorized by the directors, or beyond the power of the bank or its officers to make. (Tootle v. First Nat. Bank of Port Angeles, 6 Wash., 181; Trustees of First Presbyterian Church v. National State Bank, 57 N. J. Law, 27; First Nat. Bank of Grand Forks v. Anderson, 172 U. S., 573; s. c. 5 N. D., 451; Aldrich v. Chemical Nat. Bank, 176 U. S., 618; Seeber v. Commercial Nat. Bank of Ogden, 77 Fed. Rep., 957.) 19 Money Equitably Belonging to Others. — But a National bank can not receive moneys equitably belonging to another and not account for the same, even though they be received as an incident of the bank's illegal contract. (National Bank of Commerce v. Equitable Trust Company, 227 Fed. Rep., 526; s. c. 211 Fed. Rep., 688. See Citizens' Nat. Bank v. Appleton, 216 U. S., 196, and compare First Nat. Bank v. Monroe, 135 Ga., 614.) So, though the purchase and carrying on of a mercantile company by a National bank was illegal, the persons dealing with the mercantile company are entitled to receive the money paid into the bank for their account. (Rankin v. Emigh, 218 U. S., 27; Emigh v. Earling, 134 Wis., 565.) National Bank as Agent in Making Collections. — A National bank under the power to "exercise all such incidental powers as shall be necessary to carry on banking," may do those acts and occupy those relations which are usual or necessary in making collections of com- mercial paper and other evidences of debt. It is both usual and proper for the legal title to negotiable instruments to be vested in a bank by mere endorsement for purposes of collection, holding the proceeds as the endorser directs; and there is no difference in law if the title is conveyed by a lengthier and more formal instrument. In both cases the bank takes the legal title for the purposes of demand and collec- tion; and in a proper case, there is no reason why it may not go further and institute suit thereon in its own name for the recovery of what may be due. (Miller v. King, 223 U. S., 505.) Bank Guaranty Law. — The National banks located in Kansas may not lawfully avail themselves of the provisions of the Bank Depositors' Guaranty Act of that State. (Dolley v. Abilene Nat. Bank, 179 Fed. Rep., 461.) But though the effect of the Act should be to attract de- positors from the National banks to the guaranteed State banks, this would not make the statute void. But see First Nat. Bank of Holstein v. Shallenberger, 172 Fed. Rep., 999. The constitutionality of State Guaranty laws is upheld in Assaria State Bank v. Dolley, 219 U. S., 121; Noble State Bank v. Haskell, 219 U. S., 104. § 16. Subscriptions to American National Red Cross. — That during the continuance of the state of war now existing it shall be lawful for any national banking association to contribute to the American National Bed Cross, out of any net profits otherwise available under the law for the declaration of dividends, such sum or sums as the directors of said association shall deem expedi- ent. Each association shall report to the Comptroller of the Cur- 20 rency within ten days after the making of any such contribution the amount of such contribution and the amount of net earnings in excess of such contribution. Such report shall be attested by the president or cashier of the association in like manner as the report of the declaration of any dividend. Sec. 2. That all sums so contributed shall be utilized by the American National Red Cross in furnishing volunteer aid to the sick and wounded of the combatant armies, the voluntary relief of the Army and Navy of the United States, and the relief and mitiga- tion of the suffering caused by the war to the people of the United States and their allied nations. (Act May 22, 1918.) § 17. limitations as to Heal Estate and Mortgages, except as provided In the Federal Eeserve Act. — A National banking asso- ciation may purchase, hold, and convey real estate for the following purposes, and for no others: First. Such as shall be necessary for its immediate accommo- dation in the transaction of its business. Second. Such as shall be mortgaged to it in good faith by way of security for debts previously contracted. Third. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. Fourth. Such as it shall purchase at sales under judgments, de- crees, or mortgages held by the association, or shall purchase to secure debts due to it. But no such association shall hold the possession of any real estate under mortgage, or the title and possession of any real estate purchased to secure any debts due to it, for a longer period than five years. (Rev. Stat. U. S. Sec. 5137.) For power of National banks to make loans on real estate as pro- vided by the Federal Reserve Act, see next section. How Purchases and Conveyances Made. — In purchasing or convey- ing real estate a National bank should act through its president or cashier, duly authorized by regular resolution of its board of directors. Banking-House — Character of Improvement. — Land purchased or leased by a National bank for the purposes of its business may be 21 improved by it so as to yield the largest income and lessen its own rent. Where a National bank invests in real estate in excess of its powers, and the transaction has been acquiesced in for a long time, the Government only can be heard to complain, and a receiver can not do so. (Brown i?. Schleier, 118 Fed. Rep., 981.) A bank may erect a building partly for its own use and partly to let out to tenants. (Wigert v. Bank, 175 Fed., 739.) Investment in a banking house should not be out of proportion to the capital and business of the bank and such a question is primarily for decision by the board ot directors. Leasehold — Agreement to Rrect Building on. — A National bank may lease property for a term of years and agree with the lessor to construct such a building as it desires, provided that It acts In good faith, solely with a view of Obtaining an eligible location, and not with a view of investing its funds in real property or embarking them in speculations in real estate. (Brown v. Schleier, et al., 118 Fed. Rep., 981.) Such a lease is not invalid because made for a longer period than the corporate existence of the bank. (Id.) And, even though the lease be assignable only with the consent of the lessor. (International Trust Company v. Weeks, 203 U. S., 364.) Nor is such a lease invalid because the gross rents payable during the term will reach a sum exceeding the amount of the bank's capital stock. (Brown v. Schleier, et al., 118 Fed. Rep., 981.) But a National bank which has not been authorized by the certificate of the Comptroller e'f the Cur- rency to commence the business of banking has no power to execute a lease of a banking-house for a term of years. (McCormick v. Market Nat. Bank of Chicago, 165 U. S., 538 s. c, 162 111., 100.) Nevertheless, persons organizing a National bank may secure an option on property desired for a banking-house with a provisional agreement for a lease to be executed when the bank is chartered. Taking Stock in Building Company. — Where it acts in good faith, with a view to providing suitable quarters for the transaction of its business, a National bank may acquire and hold stock In a building corporation. (Fourth Nat. Bank v. Stahlman, 132 Tenn., 367.) Cashier Has No Authority to Make Leases.— -The leasing of any part of the bank's building to others is outside of the ordinary duties of the cashier, and for this purpose he should have authority from the board. (Spongberg v. First Nat. Bank, 18 Idaho, 524.) When Real Estate Security May Be Taken. — The authority con- ferred by subdivisions 2, 3 and 4 is for the purpose of enabling the bank to collect the debts due it, and is not a general grant of power 22 to deal in real estate, or to take real estate or any mortgage or lien thereon as security for contemporaneous loans. Prior to taking a mortgage or conveyance of real estate the debt must previously have been contracted in good faith and the security or real estate later taken in good faith to avoid or lessen a contemplated loss. (Bank v. Conway, 87 Wash., 506; Bank v. Matthews, 98 U. S., 621; Fowler v. Scully, 72 Pa, St., 451; Crocker v. Whitney, 71 N. Y., 161; Fridley v. Bowen, 87 111., 151; First Nat. Bank v. Maxfleld, 83 Me., 576; Upton v. Bank, 120 Mass., 153.) In order to secure antecedent indebtedness, the bank may make an additional advance and take a mortgage on real estate to secure both the advance and the prior debt, and the real estate may be worth more than the debt. And it may discharge or purchase prior liens and do the things an individual would reason- ably do under similar circumstances to secure himself against loss. (Libby v. Bank, 99 111., 622; Ornn v. Bank, 16 Kans., 34; Holmes v. Boyd, 90 Ind., 322; Morris v. Bank, 142 Fed., 25; Magoffin v. Bank, 69 S. W. (Ky.), 702; Howard N. B. v. Loomis; 51 Vt. 349; New Orleans Nat. Bank v. Raymond, 29 La. Ann. 355.) Debentures — Stock of Real Estate Companies — Wife's Separate Estate. — One question of frequent occurrence is whether the deben- tures of mortgage loan companies can be taken as collateral. This point has never been judicially determined, but the Comptrollers of the Currency have generally expressed the opinion that they are not proper securities for a National bank to receive. But it has been held by the Supreme Court of Minnesota that a National bank may make loans upon the security of the stock of a corporation whose property consists solely of real estate. (Baldwin v. State Nat. Bank, 26 Minn., 43.) Where a married woman indorsed a note: "I hereby charge my separate and personal estate for the payment of the within note" it was held in Third Nat. Bank v. Blake, 73 N. Y., 260 that the indorse- ment was to be treated as personal security, within the meaning of the National banking law, and not as a mortgage. Mortgage Given to Indorser to Enure to Bank. — A National bank may make an agreement that, in case a note discounted by it shall not be paid, a mortgage given by the maker to his indorser shall enure to the benefit of the bank. (First Nat. Bank v. Haire, 36 Iowa, 443). Promissory Notes Secured by Mortgage Notes — Judgment Notes. — The Solicitor of the Treasury, in an opinion given to the Comptroller of the Currency, has held that it is not unlawful for a National bank to lend upo'n a promissory note, which is secured by bonds and notes 23 which are in turn secured by real estate. Nor is it unlawful for a National bank to lend on judgment notes,, which when recorded be- come liens on real estate; provided such loans are made solely on personal security given. Violation of Law Can Not Be Set up by Borrower. — No one but the Government can be heard to complain that a bank has exceeded its powers and acquired real estate or made real estate loans. The only penalty which it incurs is a liability to a forfeiture of its franchises. The conveyance or mortgage is not void, but o"nly voidable. (National Bank v. Matthews, 98 U. S., C21; Kerfoot v. Farmers' & Merchants' Bank, 218 U. S., 281; Barron v. McKinnon, 196 Fed. Rep., 933; Baker v. Schofield, 221 Fed. Rep., 322; Reynolds v. Crawfordsville Bank, 112 U. S., 405.) Policy of the Law. — The prohibition against loans on real estate other than as permitted by the Federal Reserve Act, though often criticized, is, by the great majority of bankers, deemed wise and salutary. The very nature of the banking business, as distinguished from insurance, trust and other similar business, demands liquid and readily convertible assets. The prohibition against loans c'n real estate has now been modified by Sec. 24 of the Federal Reserve Act, so as to permit National banks to make loans on the most liquid and best secured forms of real estate securities. (See following section.) § 18. Loans on Eeal Estate by National Banks. — Any Na- tional Banking association not situated in a central reserve city may make loans secured by improved and unencumbered farm land situated within its Federal reserve district or within a radius of one hundred miles of the place in which such bank is located, ir- respective of district lines, and may also make loans secured by improved and unencumbered real estate located within one hundred miles of the place in which such bank is located, irrespective of district lines; but no loan made upon the security of such farm land shall be made for a longer time than five years, and no loan made upon the security of such real estate as distinguished from farm land shall be made for a longer time than one year nor shall the amount of any such loan, whether upon such farm land or upon such real estate, exceed fifty per centum of the actual value of the property offered as security. Any such bank may make 24 such loans, whether secured by such farm land or such real estate, in an aggregate sum equal to twenty-five per centum of its capital and surplus or to one-third of its time deposits and such banks may continue hereafter as heretofore to receive time deposits and to pay interest on the same. The Federal Reserve Board shall have power from time to time to add to the list of cities in which National banks shall not be permitted to make loans secured upon real estate in the manner described in this section. (Sec. 24, Act Dec. 23, 1913, 38 Stat. L. 273, as amended by Act Sept. 7, 1916, 39 Stat. L. 754.) Regulation G of Federal Reserve Board, Series of 1917 (Super- ceding Reg. G of 1915). [To avoid repetition Sec. 2-1 as amended is not quoted.] National banks not located in central reserve cities may, therefore, legally make loans secured by improved and unencumbered farm land or other real estate as provided by this section. Certain conditions and restrictions must, however, be observed — (a) There must be no prior lien on the land; that is, the lending bank must hold an absolute first mortgage or deed of trust. (b) The amount of the loan must not exceed 50 per cent, of the actual value of the land by which it is secured. (c) The maximum amount of loans which a national bank may make on real estate, whether on farm land or on other real estate as dis- tinguished from farm land, is limited under the terms of the act to an amount not in excess of one-third of its time deposits at the time of the making of the loan, and not in excess of one-third of its average time deposits during the preceding calendar year: Provided, however, That if one-third of such time deposits as of the date of making the loan or one-third of the average t'me deposits for the preceding calen- dar year, is less than one-fourth of the capital and surplus of the bank as of the date of making the loan, the bank in such event shall have authority to make loans upon real estate under the terms of the Act to the extent of one-fourth of the bank's capital and surplus as of that date. (d) Farm land to be eligible as security for a loan by a National bank must be situated within the Federal reserve district in which such bank is located or within a radius of 100 miles of such bank irrespective of district lines. 25 (e) Real estate as distinguished from farm land to be eligible as security for a loan by a National bank must be located within a radius of 100 miles of such bank irrespective of district lines. (/) The right of a National bank to "make loans" under section 24 includes the right to purchase or discount loans already made as well as the right to make such loans in the first instance: Provided, how- ever, That no loan secured by farm land shall have a maturity of more than five years from the date on which it was purchased or made by the National bank and that no loan secured by other real estate shall have a maturity of more than one year from such dat8. (g) Though no National bank Is authorized under the provisions of section 24 to make a loan on the security of real estate, other than farm land, for a period exceeding one year, nevertheless, at the end of the year, it may properly make a new loan upon the same security for a period not exceeding one year. The maturing note must be cancelled and a new note taken in its place, but in order to obviate the necessity of making a new mortgage or deed of trust for each renewal, the original mortgage or deed of trust may be so drawn in the first instance as to cover possible future renewals of the original note. Under no circumstances, however, must the bank obligate itself in advance to make such a renewal. It must, in all cases, preserve the right to require payment at the end of the year and to foreclose the mortgage should that action become necessary. The same principles apply to loans of longer maturities secured by farm lands. (h) In order that real estate loans held by a bank may be readily classified, a statement signed by the officers making a loan and having knowledge of the facts upon which it is based must be attached to each note secured by a first mortgage on the land by which the loan is secured, certifying in detail as of the date of the loan that all of the requirements of law have been duly observed. Loans on Real Estate. — Loans on real estate come within the limi- tation imposed by section 5200 of the Revised Statutes of the United States. No National bank, therefore, may loan to any one person, firm, or corporation on the security of real estate an amount exceeding 10 per cent, of the capital and surplus of such bank. (Opinion of Counsel of Board, March 23, 1916.) Real Estate Loans by Central Reserve City National Banks. — Any National bank located in the outskirts of a central reserve city, but within the corporate limits of such city, Is not authorized under the provisions of the Federal Reserve Act to make loans on real estate. (Opinion of Counsel of Board, Sept. 27, 1916.) 26 Loans on City Real Estate. — National banks in making loans se- cured by improved and unencumbered real estate may lend an amount equal to one-half of the market value of the real estate as improved. The value of the improvements constitutes a part of the value of the properly offered as security. (Opinion of Counsel of Board, Oct. 17, 1916.) Banks Not Compelled to Make Loans. — Member banks may loan funds on real estate for a limited period, protecting themsleves by mortgage, but there is nothing in the Federal Reserve Act which com- pels them to make such loans. Notes based on real estate security may not be rediscounted with Federal Reserve Banks. (Informal Ruling of Board, July 8, 1916.) Loans to be Included in Reporting. — Neither Federal Reserve Board nor Comptroller of the Currency can require banks that may choose to make loans under section 24 of the Act to include in the limitation under that section the aggregate of real estate loans which may have been acquired under section 5137 of the Revised Statutes. (Informal Ruling of Board, Oct. 3, 1916.) Circular of Comptroller, Oct. 27, 1916. — National banks not situated in a *central reserve city are now au- thorized to make loans secured by real estate upon the following conditions: IF THE REAL ESTATE SECURITY IS FARM LAND 1. It must be improved. 2. There must be no prior lien. 3. Property must be located in the same Federal reserve district as the bank making the loan or within a radius of 100 miles of the place in which the bank is located irrespective of district lines. 4. The amount of the loan must not exceed 50 per cent, of the actual value of the property upon which it is secured. 5. The loan must not be for a period longer than five years. *The Federal Reserve Board is authorized under the Act, at its dis- cretion, to increase the number of cities in which it is not permissible for National banks to make loans secured by real estate. At present the only prohibited cities are the three central reserve cities of New York, Chicago and St. Louis. 27 IF THE REAL ESTATE IS NOT FARM LAND— 1. It must be improved. 2. There must be no prior lien. 3. Property must be located within a radius cf 100 miles of the place in which the bank is located irrespective of district lines. 4. The amount of the loan must not exceed 50 per cent, of the actual value of the property upon which it is secured. 5. The loan must not be for a period longer than one year. The aggregate of loans secured by real estate — farm land and other improved real estate — made by any bank must not exceed — One-fourth of the capital and surplus of the bank, or one-third of its time deposits, at the time of making the loan, not exceeding one-third of its average time deposits during the preceding calendar year; Provided, however, that if "one-third of such time deposits" as of the date of making the loan, or "one-third of the average time deposits for the preceding calendar year" shall have amounted to less than "one-fourth of the capital and surplus of the bank" as of the date of the loan, the bank shall have authority to make loans upon real estate under the terms of the Act to the extent of "one-fourth of the bank's capital and surplus" as of the date of making the loan. A certificate should be attached to each real estate loan made under the provisions of Section 24, in the following form: WE CERTIFY THAT: , 192 Loan number (ours. Amount, $ Maker Dated Was discounted or purchased by this bank on (if loa,n originally made by bank on date of note this fact should be stated). Its maturity is The time to maturity from date note was acquired by this bank It is secured by a lien on real estate as follows (include here brief description of property under following headings) : Farm land (give number of acres) or other real estate as follows: Improved (state character of improvements) : 28 There is no prior lien (see abstract of title on file in bank). Land is located within Federal Reserve District No. (or is located within 100 miles of location of this bank, as the case may be). The estimated fair value of the land is $ per acre, being $ The estimated value of the improvements on the land is ? The total value of the property is $ The amount of the loan does not exceed 50 per cent of the actual value of the property by which it is secured. Officers of Bank ot [Upon request the publishers will furnish separate forms for such certificates by officers.] § 19. Power of National Banks As Insurance Agents.— That in addition to the powers now vested by law in National bank- ing associations organized under the laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in 6aid State, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between the said association and the insurance company for which it may act as agent; and may also act as the broker or agent for others in making or pro- curing loans on real estate located within one hundred miles of the place in which said bank may be located, receiving for such services a reasonable fee or commission: Provided, however, That no such bank shall in any case guarantee either the principal or interest of any such loans or assume or guarantee the payment of any premium or insurance policies issued through its agency by its principal: And provided further, That the bank shall not guarantee the truth of any statement made by an assured in filing his application for insurance. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, 39 Stat. L., 752.) 29 Right of a National Bank to Write Insubance Through Its Of- ficers. — Except as specified above, National banks have no express or implied power to write fire, cyclone, liability, or other kinds of in- surance, or to receive the profits from insurance contracts entered into by its officers. (Opinion of Counsel of Board, Jan. 13, 1915.) Regulation of Compteolleb of Cubbency, Dec. 1, 1910. — It will be seen from the above that in order to avail itself of the provisions of this act relative to acting as agent for an insurance company: (a) The bank must be located in a place the population of which does not exceed 5000 as shown by the last preceding decennial census. (&) The Insurance company for which the bank acts as agent must have been authorized by the authorities of the State in which the bank is located to do business in that State. (c) The activities of the bank as such agent must be restricted to the soliciting and selling of insurance and the collection of premiums on policies Issued by the insurance company. (d) The bank may receive for services so rendered such lawful fees or commissions as may be agreed upon between the bank and the insurance company for which It may act as agent. (e) The bank is prohibited from assuming or guaranteeing the pay- ment of any premium on insurance policies issued, through its agency, by its principal. (/) The bank is prohibited from guaranteeing the truth of any state- ment made by an assured in filing his application for insurance. (g) The powers conferred are to be exercised under such regulations as may be prescribed by the Comptroller of the Currency. In pursuance of the foregoing amendment the following regulations are hereby prescribed for National banks which may undertake to act as agents for Insurance companies: 1. Each contract of agency must be formally accepted by the board of directors of the agent bank by a resolution spread upon the minutes in the following form: "Be it resolved that the contract of agency entered into on 192.. between the Insurance Company and the Na- tional Bank of , by president (or vice-president) and cashier, a copy of which is on file in this bank, is hereby ratified and approved." 2. A certified copy of such resolution, attested by the president or vice-president and by the cashier and by a majority of the directors of the bank, must be forwarded to this office on forms to be furnished by this office. 30 3. There should be on Cle in the bank, available for inspection by the Examiner, the following documents: (c) An authoritative statement showing the population of the town according to the last preceding decennial census. (6) A proper certificate from the authorities of the State in which the bank is located showing as to each insurance company for which the bank is acting as agent that such company has re- ceived authority from the said State to transact business in that State. (c) A proper certificate or other writing of each insurance company for which the bank acts, authorizing the bank to act as its agent, setting forth that the bank does not guarantee the pay- ment of any premium on insurance policies issued through its agency by its principal, and stating that the bank is not to be held responsible for the truth of any statement made by an assured in filing his application for insurance. (d) Copies of all reports made by the agent bank to each insurance company which it represents. 4. The bank will be required to keep a record as to each company for which it acts as agent, showing: For fire insurance: the amount of each policy, the rate and premium, date of commencement, term, and date of expiration, as well as a description of property insured, with name of assured and to whom loss is payable. As to life in- surance: Amount and date of policy, with premium, and a statement as to under what form the insurance is written, giving also name of assured and beneficiary. As to any and all other forms of insur- ance: The fullest possible particulars as to amounts, dates, rates, premiums, and what is insured by the policy, and of collections of all premiums collected for account of the company, refunds made, the proportion of premium credited to the profits of the bank under its agreement with the company, the proportion due the company, the amounts and dates of all remittances made to the insurance company on account of premiums collected, and the balance, if any, due from the bank to the insurance company. 5. The bank will be required to carry on its general ledger an account which will, at all times, show the amount due to insurance companies for which it is acting as agent, on account of premiums collected but not remitted, and this liability must be shown in reports of condition and in the published statements of the bank under the heading "other liabilities — on account of insurance premiums col- lected and not remitted," unless specifically provided for in the report. 6. The bank should also keep such records as may be required by each insurance company in the manner and under the forms pre- 31 scribed by the various companies; all of which should be available for iuspectiou by the Examiner on request. 7. The agent bank must not assume any responsibility or liability for either the adjustment, settlement, or payment of losses under any policy issued by or through its agency. 8. The records of all profits derived from the insurance agency should be carried in a separate account on the books of the bank, and the records should be so kept as to enable the Examiner readily to trace to the source all items of profit derived in this connection. WHERE A NATIONAL BANK ACTS AS BROKER OR AGENT IN MAKING OR PROCUR- ING LOANS ON REAL ESTATE. In order to avail itself of this privilege: (a) The bank must be located in a place the population of which does not exceed 5000 as shown by the last preceding decennial census. (6) The real estate by which the loans negotiated are secured must be located within 100 miles of the place in which the negotiating bank is located. (c) The bank may receive for such services a reasonable fee or commission. (eZ) The bank shall in no case guarantee either the principal or interest of any such loans, (e) The powers conferred are to be exercised under such regula- tions as may be prescribed by the Comptroller of the Currency. The following regulations are prescribed for National banks which may undertake to act as agents or brokers in making or procuring loans on real estate: 1. A bank intending to avail itself of this provision of the law must adopt by its board of directors a resolution in the following form: "Be it resolved, That the officers of the — < National Bank of are hereby authorized and empowered on behalf of this bank, as broker or agent, to accept from customers of this bank deposits of funds to be invested for account of said customers, in lo'ans secured by real estate, and to procure, as broker or agent, for customers of this bank loans which shall be secured by real estate, under the provisions of the Act approved September 7, 191G: Provided, that the investment of such funds as stated, and all such procuring of loans or lending of funds for clients shall be undertaken only under writ- ten instructions from the customer for whom this bank, through its officers, may act as broker or agent, such written instructions in each case to be first delivered to an officer of this bank. Such instruc- tions shall, in all cases, state clearly that the bank in acting as broker 32 or agent In no way guarantees payment of either the principal or interest of any loan so negotiated." 2. A certified copy of such resolution, attested by the president or vice-president and cashier and by a majority of the directors of the bank, must be forwarded to this office, on forms to be furnished by this office. 3. No bank shall charge more than one commission or brokerage on the making of any loan; that is to say, if it shall charge a broker- age or commission to the party borrowing the money, it shall not charge a brokerage or commission to the party to whom money is so loaned, and vice versa. 4. Each bank acting under this provision of law will be required to keep a record showing as to each loan negotiated by the bank — (a) The name and address of the principal for whom the bank is acting. (b) Date of written Instructions from the principal. (c) Name and address of maker of note. (d) Date of note. (e) Date of maturity of note. (/) Brief description of property securing note, showing location and distance from place in which bank is located. (g) Character of improvements, etc. (7i) Name and address of party to whom note was transferred or delivered by the bank, (i) Date of such transfer or delivery. (;') Amount of principal of note, (fc) Rate of interest or discount. (I) Rate of commission or brokerage charged by bank for acting as broker or agent. (m) Amount of such commission or brokerage, and whether said commission was paid the borrower of the money or by the party for whom it was loaned. 5. A book should be kept showing the date on which each mort- gage or deed of trust negotiated by the bank has been admitted to record, the court in which the same is recorded, and the recordation fees paid in each case. C. The records of all profits derived from acting as broker or agent in negotiating loans on real estate should be carried in a separate account on the books of the bank, and the records should be so kept as to enable the Examiner readily to trace to the source all items of profit derived in this connection. 7. Deposits of money received by the bank as broker or agent to be invested In loans secured by real estate as prescribed by law, must be treated as trust funds and kept separate and apart from the other assets of the bank. Such funds must in no case be permitted to 33 pass from the possession of the bank until the loan for which they are to be paid out is formally accepted by or in behalf of the party for whose account negotiated. 8. No bank sball advance or use its own funds in connection with real estate loans negotiated as broker or agent. 9. No loans secured by real estate, which the bank has negotiated as broker or agent, should become a part of the assets of the bank even temporarily, unless such loans conform to the provisions of section 24 of the Federal Reserve Act, as amended. 10. There should be available in the bank for inspection by the National Bank Examiner — (a) An authoritative statement showing the population of the town according to' the last preceding decennial census. (&) All records pertaining to the negotiation of real estate loans as broker or agent. National banks acting as broker for the placing of loans should prepare blank forms of application to be executed by applicants for loans. These applications should show — (a) Location of property. (b) Acreage. (c) Assessed valuation. (d) Estimated present value. (e) Brief descriptions of buildings thereon and estimated value of them. (f) Whether buildings are insured, and, if so, for what amounts and in what companies. (g) Whether property is already encumbered, and, if so, for what amount. (h) If property is farm property applicant should state whether or not the dwelling is provided with sanitary arrangements ap- proved by the local board of health, and, if not, what sanitary arrangements there are. At the foot of this application should be printed below the signa- ture of the applicant a statement to the effect that "The statements in the foregoing application have been submitted to this bank by the applicant for the loan, but this bank does not undertake to guar- antee the correctness of any of the statements made by the applicant." If any applicant for a loan makes statements in his application which any officers of the bank before whom the application may come may have reason to think are not correct, the attention of the applicant should be called to the possible discrepancy. § 20. Amount of Capital Required. — No association shall be organized with a less capital than one hundred thousand dollars, 3 34 except that banks with a capital of not less than fifty thousand dollars may, with the approval of the Secretary of the Treasury, be organized in any place the population of which does not exceed six thousand inhabitants, and except that banks with a capital of not less than twenty-five thousand dollars may, with the sanction of the Secretary of the Treasury, be organized in any place the population of which does not exceed three thousand inhabitants. No association shall be organized in a city the population of which exceeds fifty thousand persons with a capital of less than two hundred thousand dollars. (Rev. Stat. IT. S. Sec. 5138, as amended by Act March 14, 1900, Ch. 41, Sec. 10, 31 Stat. L., 48.) Determination of Population. — When there is any question as to the population of a place being within the limit of the requirement of the law, the Comptroller obtains from the Census Bureau and from other sources as full information as possible. In case the applicants to organize a National bank believe the population reported to the Comp- troller not correct, they may furnish such counter evidence as they may be able to obtain. A certificate from the mayor of the place or other good evidence of actual population probably will be considered. Any error of the Comptroller as to population can be corrected in appropriate legal proceedings. It sometimes happens that banks have less than the minimum capital required by law for the population of the place. The explanation is that they were either organized when the places were smaller, or were organized in villages afterward ab- sorbed by adjacent cities. Authorization of Banks Under $100,000 Capital. — When application is made to the Comptroller for a bank with less than $100,000 capital, he certifies the application, with statement as to population, etc., to the Secretary of the Treasury, who thereupon takes action and approves or not as he deems best. § 21. Par Value of Stock — Transfers — Stockholders' Rights and Liabilities. — The capital stock of each association shall be divided into shares of one hundred dollars each, and be deemed personal property, and transferable on the books of the associa- tion in such manner as may be prescribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares; and no change 35 shall be made in the articles of association by which the rights, remedies or security of the existing creditors of the association shall be impaired. (Rev. Stat. U. S. Sec. 5139.) The exception to the division into shares of $100 each is only in case of State banks converted. (See $31.) If a converting bank de- sires to change the denomination of its shares, the new denomination must be $100. See also §§ 45 and 4G for the liability of shareholders. State Statutes. — A State law cannot limit the transferable quality of National bank stock. (Doty v. First National Bank of Larimore, 3 N. D., 9.) But a state court may order a new certificate to issue though the by-laws require the production of the old certificate before the issue of a new one. (Letcher v. German Nat. Bank, 119 S. W. Rep. (Ky.) ( 236.) So, a State statute prescribing the mode of transfer of stock by executors will apply to the stock of a National bank located in such State. (Hobbs v. Western Nat. Bank, Fed. Case No. 6551a.) And it is held that a State statute which provides that the stock- holders of all private corporations shall have the right of access to and inspection and examination of the books, records and papers of the corporation at all reasonable and proper times, applies to Na- tional banks located within the State. (Winter v, Baldwin, 89 Ala., 483; Murray v. Walker, 156 Ky., 536.) And National bank stock is sub- ject to seizure and sale on execution under authority of State laws. (In re Braden's Estate, 165 Pa. St., 184.) Transfer of Stock — Entry of Transfer — Lost Certificates. — The transfer of stock in National banks is not governed by different rules from those which are ordinarily applied to the transfer of stock in other corporations. (Johnson v. Laflin, 103 U. S., 800.) The entry of the transaction in the books of the bank is required, not for the purpose of passing the title from seller to buyer, but for the protec- tion of the parties, and others dealing with the bank, and to enable the bank to know who are its stockholders. (Id.) See also Gray v. Faulkhauser, 58 Oregon, 423. Accordingly, it has been held by the Supreme Court of the United States that where the shareholder de- livers his certificates of stock to the purchaser, with a blank power of attorney to make the transfer on the books of the bank, and receives the purchase-money, the sale is coinplete and the title passes from seller to buyer. (Id.) And so it has been decided that where a share- holder who has sold his stock delivers the certificates with a proper power of attorney to the cashier with a request that the transfer be made upon the books, and the cashier promises so to do, the transferror 36 has done all that Is legally required of him to divest himself of the liability of a stockholder, and should the cashier fail to make the trans- fer on the books, the transferror can not be held as a stockholder in case the bank should afterwards become insolvent. (Hayes v. Shoe- maker, 39 Fed. Rep., 319; Young v. McKay, 50 Fed. Rep., 397.) When a certificate of stock is left with the officers of the bank to be trans- ferred on the books, the transfer takes place at the time when it Is so left, and not at the time of actual entry in the books, provided the party leaving it has authenticated to the officers of the bank his in- tention to make such transfer in the manner prescribed by the by- laws of the bank. (Young v. McKay, 50 Fed. Rep., 394.) The rights of a transferee of National bank stock, under an unrecorded transfer, good at common law, are superior to the rights of a subsequent at- taching creditor of the transferror without notice. (Doty v. First Nat. Bank of Larimo're, 3 N. D., 9.) For What Purpose Transfer on Books Necessary. — Until the trans- fer is recorded, the corporation Is not bound to recognize the transferee as a stcokholder, and he is not entitled to vote upon the stock, or to receive the dividends thereon, or, in fact, to have any of the privileges of a stockholder. The transferror also has an interest in having the transfer registered, because he will not be discharged from his liability as a stockholder until this is done. The record made of the transfer upon the books of the bank is suf- ficient, as between the transferee and the bank, to work a change of ownership, and new certificates are not necessary to his becoming the owner of the stock so transferred. (Keyser v. Hitz, 133 U. S., 438.) Subscription to stock and payment in full and entry of his name on the books as a stockhtilder makes the subscriber a shareholder without taking out a certificate. (Pacific National Bank v. Eaton, 141 U. S., 227; Thayer v. Butler, 141 U. S., 234; Butler v. Eaton, 141 U. S., 240.) In case of loss of a certificate of stock a bond of indemnity should be required before the issue of a duplicate certificate to avoid the possi- bility of the bank becoming liable for an Illegal issue. Right of Stockholders to Transfer. — A shareholder in a National bank, while it is a going concern, has the absolute right, in the ab- sence of fraud to make a bona fide and actual sale and transfer of his shares at any time, to any person capable in law of purchasing and holding the same, and this right is not subject, in such cases, to the control of the directors or other stockholders. (Johnson v. Laflin, 5 Dill, 65.) The directors are authorized to prescribe regulations under which the transfer of stock shall be made; but these regulations must be reasonable, and under the pretence of prescribing the manner thereof, the directors can not clog the transfer with useless restric- 37 tions. (Johnson v. Laflin, 103 U. S., 800.) The transfer does not re- quire approval by the directors, nor can they decline to make it in a proper case. {Id.) But where the transfer is sought to be made to a person incapable in law of assuming the liabilities of a stockholder — as where it is made to an infant, or to a person of unsound mind — then the directors might refuse to permit the transfer to be registered, for such a transfer is a fraud upon the corporation, the stockholders and creditors. And so they might refuse where the transfer is evi- dently made merely for the purpose of escaping liability, as where a shareholder in an insolvent bank seeks to transfer his stock to a pauper, or man of straw, or to an insolvent or irresponsible person. Where the person intrusted by the directors with the duty of entering the transfers on the books of the bank, refuses for insufficient reason to note a transfer, the bank will be liable for damages resulting there- from. (Case v. Citizens' Bank, 100 U. S., 446, see also Hazard v. Bank, 26 Fed., 94.) Specific Performance. — A court of equity will not enforce specific performance of an agreement to sell shares in a National bank to enable the purchaser to obtain control of the bank, for the reason that, (1) equity will not generally enforce specific execution of a contract relating to personal chattels, and (2) because a decree en- forcing the agreement in question would be against public policy. (Foil's Appeal, 21 Alb., L. J.; 2 N. B. C, 411; but see Owinge v. Lehman, 190 111. App., 432.) National Bank Stock Not an Interest-Bearing Security. — While the shares of stock in a National bank are securities, they are not in- terest-bearing, and hence a provision in a will directing the executors to invest the funds of the estate in interest-bearing securities does not authorize an investment in National bank stock. (Williams v. Cobb, 219 Fed. Rep., 663.) § 22. When Capital Stock Must be Paid In.— At least fifty per centum of the capital stock of every association shall be paid in before it shall be authorized to commence business; and the remainder of the capital stock of such association shall be paid in installments of at least ten per centum each, on the whole amount of the capital as frequently as one installment at the end of each succeeding month from the time it shall be authorized by the Comptroller of the Currency to commence business; and the payment of each installment shall be certified to the Comptroller, 38 under oath, by the president or cashier of the association. (Rev. Stat. U. S. Sec. 5140.) Fayjlent of Subscriptions. — The Comptroller now requires that each shareholder listed in the Organization Certificate, or his assignee, shall have paid in fifty per cent, on stock held by him, and further that the list of shareholders in the aforesaid certificate shall include all subscribers to the stock and not be a list of a few subscribers tak- ing the full stock in their names and paying for it, while an under- standing or agreement exists with other parties that they are to transfer a certain amount to them on payment for the shares. But where there is no subscription paper, and parties in order to expedite charter are listed as the entire original shareholders in Organization Certificate and pay in their pro rata fifty per cent, on the capital, this would meet the requirements of the law, and if the corporators later should wish to distribute some of their holdings there could be no legal objection. The Comptroller's purpose is to avoid speculation in the original stock of banks organizing. The Comptroller's office furnishes blanks for certifying payments on capital. For form, see $§ 397 and 398. § 23. Failure to Pay Installments on Stock — Sale of Stock — Restoring Capital so Reduced. — Whenever any shareholder, or his assignee, fails to pay any installment on the stock when the same is required by the preceding section to be paid, the directors of such association may sell the stock of such delinquent shareholder at public auction, having given three weeks' previous notice thereof in a newspaper published and of general circulation in the city or county where the association is located, or if no newspaper is published in said city or county, then in a newspaper published nearest thereto, to any person who will pay the highest price there- for, to be not less than the amount then due thereon, with the expenses of advertisement and sale ; and the excess, if any, shall bo paid to the delinquent shareholder. If no bidder can be found who will pay for such stock the amount due thereon to the as- sociation, and the cost of advertisement and sale, the amount pre- viously paid shall be forfeited to the association, and such stock shall be sold as the directors may order within six months from the time of such forfeiture, and if not sold it shall be cancelled and deducted from the capital stock of the association. If any such 39 cancellation and reduction shall reduce the capital of the asso- ciation below the minimum of capital required by law, the capital stock shall, within thirty days from the date of such cancellation, be increased to the required amount; in default of which a re- ceiver may be appointed, according to the provisions of section fifty-two hundred and thirty-four, to close up the business of the association. (Eev. Stat. U. S. Sec. 5141.) Legal Status of Stock. — It must be remembered that from the time of his subscription a person becomes a shareholder, and that all the shareholders have entered into a contract among themselves, and are mutually responsible to each other. The stock doubtless has a legal standing before a single payment is made, and the association may be legally organized and become a body corporate before a single dollar of the capital is paid in by anyone. Thus sales or transfers of stock may take place before any capital is paid in. This is in line with the decision of the United States Supreme Court in Van Allen v. Assessors (3 Wall., 573), which holds a share of stock to be an entity distinct from capital. The actual holder or subscriber, in whose name the stock stands on the books of the bank at the time the directors call for the payment of the first installment of 50 per cent., must pay it, and payment can doubtless be compelled by legal proceedings. The section under consideration does not refer to this first installment, but to the subsequent installments, the dates of payment of which were fixed by the preceding section. The whole tenor of section 5141 im- plies a pervious payment of 50 per cent, which is in the nature of a forfeit, if the stock has to be sold on account of failure to meet the subsequent installments. Limit of Time foe Paying in Capital. — A new association would strictly, under this section, have the following time to make good its capital before a receiver could be appointed; First, the time until the installment became due; then three weeks for notice by publication: then six months from forfeiture to cancellation; and, finally, thirty days longer in which to bring up capital to required amount. How capital is to be made good in such case is not distinctly stated, but probably by assessment on remaining stockholders. State Statute not Applicable. — A State statute which prescribes a mode of procedure in favor of judgment creditors against delinquent shareholders is not applicable to National banks, though by its terms it purports to apply to all corporations. (MoQuiddy v. King, 191 Ala., 205.) 40 § 24. Comptroller to Determine if Association is Entitled to Commence Business. — Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this Title, and the association transmitting the same notifies the Comptroller that at least fifty per centum of its capital stock has been duly paid in, and that such association has complied with all the provisions of this Title required to be complied with before an association shall be authorized to commerce the business of banking, the Comp- troller shall examine into the condition of such association, as- certain especially the amount of money paid in on account of its capital, the name and place of residence of each of its directors, and the amount of the capital stock of which each is the owner in good faith, and generally whether such association has complied with all the provisions of this Title required to entitle it to en- gage in the business of banking; and shall cause to be made and attested by the oaths of a majority of the directors, and by the president or casher of the association, a statement of all the facts necessary to enable the Comptroller to determine whether the association is lawfully entitled to commence the business of bank- ing. (Eev. Stat. U. S. Sec. 5168.) Preliminary Examination. — The Comptroller orders an examination of local conditions and the status of the organizers and proposed offi- cers to be made by the nearest available examiner prior to approving the application to organize and this preliminary examination suffices in practically all cases. See Chapter I, Part IV, for full details. § 25. Certificate of Authority to Commence Business.— If , upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the Comptroller, whether by means of a special commission appointed by him for the purpose of inquiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of banking, the Comptroller shall give to such association a certificate, under his hand and official seal, that such association has complied with all the provisions required to be complied with before commencing the business of banking, 41 and that such association is authorized to commence such business. But the Comptroller may withhold from an association his cer- tificate authorizing the commencement of business, whenever he has reason to suppose that the shareholders have formed the same for any other than the legitimate objects contemplated by this Title. (Eev. Stat. TJ. S. Sec. 5169.) See note to preceding section. The certificate named in this section is the bank's charter, that is, its authority to do business. § 26. Publication of Comptroller's Certificate. — The association shall cause the certificate issued under the preceding section to be published in some newspaper printed in the city or county where the association is located for at least sixty days next after the issuing thereof; or, if no newspaper is published in such city or county, then in the newspaper published nearest thereto. (Eev. Stat. U. S. Sec. 5170.) This refers to the certificate of authority to begin business. An in- sertion in a weekly newspaper or in a weekly edition of a daily news- paper during the sixty days is sufficient. The Comptroller requires the publisher's oath of publication and a copy of the paper containing the notice as evidence of publication for the time required. § 27. Increase of Capital Stock. — Any National banking asso- ciation may, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association, increase its capital stock, in accordance with existing laws, to any sum approved by the said Comptroller, notwithstand- ing the limit fixed in its original articles of association and deter- mined by said Comptroller ; and no increase of the capital stock of any National banking association, either within or beyond the limit fixed in its original articles of association, shall be made except in the manner herein provided. (Act May 1, 1886, Ch. 73, Sec. 1 ; 24 Stat. L., 18.) Obsolete Peovisions in Abttcles of Association. — Prior to the Act of 1886, the statute provided that "Any association formed under this title may, by its articles of association, provide for an increase of its capital from time to time, as may be deemed expedient, subject to the 42 limitations of this title. But the maximum of such increase to be pro- vided in the articles of association shall be determined by the Comp- troller of the Currency." (Rev. Stat. U. S., Sec. 5142.) Many banks, therefore, have a provision of this character in their articles of asso- ciation. But this is noW obsolete. It is no longer necessary to insert in the articles of association provisions for an increase of capital stock; for shareholders owning two-thirds of the shares may increase the capital stock at any time and to any amount, subject only to the ap- proval of the Comptroller of the Currency, and this notwithstanding that the articles of association contain a provision fixing a maximum limit. By Whom Increase Authorized. — The increase must now be made by the shareholders, and not by the directors, and all provisions in the articles of association of banks organized prior to May 1, 1886, au- thorizing directors to increase the stock, have become wholly nugatory. Right of Shareholders to Subscribe for New Shares. — It is a gen- eral rule of law that where the capital stock of a corporation is in- creased each shareholder has a right of pre-emption to the new stock in proportion to his shares in the original stock. (Stokes v. Con- tinental Trust Co., 186 N. Y., 285.) § 28. When Increase of Capital Stock Becomes Valid. — No in- crease of capital shall be valid until the whole amount of such increase is paid in, and notice thereof has been transmitted to the Comptroller of the Currency, and his certificate obtained specifying the amount of such increase of capital stock, with his approval thereof, and that it has been duly paid in as part of the capital of such association. (Eev. Stat. IT. S. Sec. 5142.) Comptroller's Atfroval — Recovery of Money Paid Where Increase Not Made. — The stock of a National bank can not be lawfully increased before the entire amount of the new capital has been paid in and the Comptroller of the Currency has certified to the increase and to the fact of payment in the mode prescribed by Section 5142, Rev. Stat. U. S. (McFarlin v. National Bank of Kansas City, 68 Fed. Rep., 868; Charleston v. People's Nat. Bank, 5 S. C, 103.) And the provision of the statute as to payment does not create a condition, express or im- plied, that shares subscribed and paid for in full are not valid unless the entire amount of the proposed increase is subscribed and paid for in full. (Scott v. Latimer, 89 Fed. Rep., 843.) Where money paid in on subscriptions to an increase of capital is received by a bank as 43 a trust fund to be applied to that purpose, and before the increase is approved by the Comptroller and his certificate issued, the bank fails, the money so paid may be recovered by the subscribers. {Id.) Where Whole Amount of Increase is Not Taken. — 'The U. S. Su- preme Court in the case of Aspinwall v. Butler, 133 U. S., 565, has held that where an increase of the capital stock is authorized In a certain sum there is no implied condition that a subscription shall be void if the whole amount so authorized is not subscribed. (See also Delano v. Butler, 118 U. S., 634.) Therefore, where a shareholder subscribes his additional share towards doubling the capital and pays his sub- scriptions, the fact that the stockholders, with the assent of the Comp- troller, reduce the amount of the stock they had proposed to issue, does not permit him to repudiate his subscription and recover the money paid on it. (Pacific National Bank v. Eaton, 141 U. S., 227.) But if there were a large and material deficiency in the amount of capital contemplated, equity might interfere to protect subscribers. (Aspinwall v. Butler, 133 U. S., 595; Matthews v. Columbia Nat. Bank, 79 Fed. Rep., 558.) In an action to recover money deposited with a National bank the plaintiff may show that stock issued by the bank in his name was is- sued to him merely as collateral security for such deposit. (Williams v. American National Bank of Arkansas City, 85 Fed. Rep., 376.) And it is no defense to the bank that the stock was issued without au- thority of law. {Id.) § 29. Reduction of Capital Stock. — Any association formed un- der this title may, by the vote of shareholders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this title to authorize the formation of associa- tions; but no such reduction shall be allowable which will reduce the capital of the association below the amount required for its outstanding circulation, nor shall any reduction be made until the amount of the proposed reduction has been reported to the Comp- troller of the Currency and such reduction has been approved by the said Comptroller of the Currency and by the Federal Eeserve Board, or by the organization committee pending the organization of the Federal Eeserve Board. (Eev. Stat. IT. S. Sec. 5143, as amended by Sec. 28, Act Dec. 23. 1913; 38 Stat. L., 274.) Reduction of Capital to Meet Impairment. — In reduction to meet impairment of capital there can be no withdrawal of assets; for, prima 44 facie, any further withdrawal of assets would result in still further im- pairment of the capital. (McCann v. First National Bank of Jefferson- ville, 112 Ind., 354.) But the stockholders have a right to provide that the assets charged off shall be set aside as a trust fund for the benefit of the stockholders. (Jerome v. Cogswell, 78 Conn., 75; 204 U. S. 1.) and in each case the right to participate in the distribution of such fund is vested in those who are stockholders at the time of the re- duction. (Id.) § 30. Depositaries of Public Moneys. — All National banking associations, designated for that purpose by the Secretary of the Treasury, shall be depositaries of public money, under such regula- tions as may be prescribed by the Secretary; and they may also be employed as financial agents of the Government; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the Government, as may be required of them. The Secretary of the Treasury shall require the asso- ciations thus designated to give satisfactory security, by the de- posit of "United States bonds and otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government: Provided, That the Secretary shall, on or before the first of January of each year, make a public statement of the securities required during that year for such deposits. And every association so designated as receiver or depositary of the public money shall take and receive at par all of the national cur- rency bills, by whatever association issued, which have been paid into the Government for internal revenue, or for loans or stocks : Provided, That the Secretary of the Treasury shall distribute the deposits herein provided for, as far as practicable, equitably be- tween the different States and sections. (Rev. Stat. TJ. S. Sec. 5153, as amended by Act March 3, 1901, Ch. 871 ; 31 Stat. L., 1448 ; Act March 4, 1907, Ch. 2913, Sec. 3 ; 34 Stat. L., 1290.) See Section 15 of Federal Reserve Act, page 275, requiring the de- posit of Government funds in either Federal Reserve banks or member banks. For additional information as to Government depositories Bee Part III, Ch. III. 45 § 31. Conversion of State into National Banks. — Any bank in- corporated by special law of any State or of the United States or organized under the general laws of any State or of the United States and having an unimpaired capital sufficient to entitle it to become a National banking association under the provisions of the existing laws may, by the vote of the shareholders owning not less than fifty-one per centum of the capital 6tock of such bank or banking association, with the approval of the Comptroller of the Currency be converted into a National banking association, with any name approved by the Comptroller of the Currency: Provided, however, That said conversion shall not be in contra- vention of the State law. In such case the articles of association and organization certificate may be executed by a majority of the directors of the bank or banking institution, and the certificate shall declare that the owners of fifty-one per centum of the capital stock have authorized the directors to make such certificate and to change or convert the bank or banking institution into a National association. A majority of the directors, after executing the ar- ticles of association and the organization certificate, shall have power to execute all other papers and to do whatever may be re- quired to make its organization perfect and complete as a National association. The shares of any such bank may continue to be for the same amount each as they were before the conversion, and the directors may continue to be directors of the association until others are elected or appointed in accordance with the provisions of the statutes of the United States. When the Comptroller has given to such bank or banking association a certificate that the provisions of this Act have been complied with, such bank or banking association, and all its stockholders, officers, and em- ployees, shall have the same powers and privileges, and shall be subject to the same duties, liabilities, and regulations, in all re- spects, as shall have been prescribed by the Federal Reserve Act and by the National banking Act for associations originally or- ganized as National banking associations. (Rev. Stat. U. S. Sec. 5154, as amended Sec. 8, Act. Dec. 23, 1913; 38 Stat. L., 258.) For further Information on this subject see Ch. IV., Part IV. 46 Authority Required. — Many States have passed enabling acts, both to enable State banks to become National banks and to enable National banks to become State banks. CoitroRATE Relation to Old Bank; — 'The conversion of a State bank into a National bank does not destroy its identity or its corporate ex- istence; it is not a closing of business, but simply a continuation of the same body, with the same officers and stockholders, the same prop- erty, assets and business of banking under a changed jurisdiction. (Metropolitan Nat. Bank v. Clagett, 141 U. S., 520.) The conversion and change of name do not affect its right to sue on liabilities incurred to it under its former name. (Michigan Insurance Bank v. Eldred, 143 U. S., 293; City Nat. Bank v. Phelps, 97 N. Y., 44.) And conversely the National bank is liable after the conversion for all the obligations of the old institution. (Coffee v. National Bank of Missouri, 46 Mo., 140; Kelsey v. National Bank of Crawford, 69 Pa. St., 426; Atlantic Nat. Bank v. Harris, 118 Mass., 147.) A National bank, organized as the successor of a State bank, may take and hold the assets of the bank whose place it takes, though there was not in form a conversion from a State to a National corporation, but the organization of a new corporation. (Bank v. Mclntyre, 40 Ohio St., 528.) And such bank will be liable to the depositors of the fdrmer bank. (Eans v. Exchange Bank, 79 Mo., 182.) Assets of Converting Bank. — The Comptroller of the Currency has ruled that a bank entering the National system by conversion will be allowed to carry over to and include in its assets as a National bank only such assets as are allowed by the National Bank Act, excluding any assets prohibited by Sections 5136 and 5200, Revised Statutes, excepting that under certain circumstances and an assurance of speedy liquidation a small portion of prohibited assets is sometimes permitted to be taken over. Directors, Name, Etc. — All of the directors of the State bank at the time of conversion will continue to be directors of the National bank until others are appointed or elected, though some of them may not have joined in the execution of the articles of association and organiza- tion certificate. (Lockwood v. The American National Bank, 9 R. I., 308.) A State law authorizing National banks which have been converted from State banks to use the name of the original corpora- tion for the purpose of prosecuting and defending suits is not in conflict with the National banking law, and therefore proceedings based upon a judgment obtained before the conversion may be instituted by such association in its former corporate name. (Thomas v. Farmers* Bank of Maryland, 46 Md., 43.) When a bank has been converted, new 47 certificates of stock are not necessary, but the old certificates should be stamped to show the conversion. (Keyser v. Hitz, 133 U. S., 138.) For full information, instructions and forms see Chapter IV., Part IV. § 32. Same Subject — State Banks Having Branches. — It shall be lawful for any bank or banking association, organized under State laws, and having branches, the capital being joint and as- signed to and used by the mother-bank and branches in definite proportions, to become a National banking association in conform- ity with existing laws, and to retain and keep in operation its branches, or such one or more of them as it may elect to retain; the amount of the circulation redeemable at the mother-bank, and each branch to be regulated by the amount of capital assigned to and used by each. (Eev. Stat. U. S. Sec. 5155.) The authority conferred by this section appears to exclude by impli- cation the right to establish domestic branches in any other case; and this has been the view uniformly held by the Comptrollers of the Cur- rency. (See opinion of Attorney General regarding Lowry Nat. Bank, 29 Op. Atty. Gen., 81.) For the limit of liability to any one person of a State bank with branches converted into a National bank see note to §113, page 105. § 33. Consolidation of National Banking Associations. — That any two or more National banking associations located within the same county, city, town, or village, may with the approval of the Comptroller of the Currency, consolidate into one association under the charter of either existing banks, on such terms and con- ditions as may be lawfully agreed upon by a majority of the board of directors of each association proposing to consolidate, and be ratified and confirmed by the affirmative vote of the shareholders of each such association owning at least two-thirds of its capital stock outstanding, at a meeting to be held on the call of the directors after publishing notice of the time, place, and object of the meeting for four consecutive weeks in some newspaper published in the place where the said association is located, and if no news- paper is published in the place, then in a paper published nearest thereto, and after sending such notice to each shareholder of record by registered mail at least ten days prior to said meeting: 48 Provided, That the capital stock of such consolidated association shall not be less than that required under existing law for the organization of a national bank in the place in which it is located : And provided further, That when such consolidation shall have been effected and approved by the Comptroller any shareholder of either of the associations so consolidated who has not voted for such consolidation may give notice to the directors of the association in which he is interested within twenty days from the date of the certificate of approval of the Comptroller that he dissents from, the plan of consolidation as adopted and approved, whereupon he shall be entitled to receive the value of the shares so held by him, to be ascertained by an appraisal made by a com- mittee of three persons, one to be selected by the shareholder, one by the directors, and the third by the two so chosen; and in case the value so fixed shall not be satisfactory to the shareholder he may, within five days after being notified of the appraisal, ap- peal to the Comptroller of the Currency, who shall cause a re- appraisal to be made, which shall be final and binding; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of the reappraisal; otherwise, the appellant shall pay said expenses, and the value so ascertained and determined shall be deemed to be a debt due and be forth- with paid to said shareholder from said bank, and the share so paid shall be surrendered and after due notice sold at public auction within thirty days after the final appraisement provided for in this Act. Sec. 2. That associations consolidating with another association under the provisions of this Act shall not be required to deposit lawful money for their outstanding circulation, but their assets and liabilities shall be reported by the association with which they have consolidated. And all the rights, franchises, and in- terests of the said national bank so consolidated in and to every species of property, personal and mixed, and choses in action thereto belonging, shall be deemed to be transferred to and vested in such national bank into which it is consolidated without any deed or other transfer, and the said consolidated national bank shall hold and enjoy the same and all rights of property, fran- 49 chises, and interests in the same manner and to the same extent as was held and enjoyed by the national bank so consolidated therewith. (Act Nov. 7, 1918.) For further information on this subject see Chap. VI, Part IV. § 34. Change of Name and Location. — That any National bank- ing association may change its name or the place where its opera- tions of discount and deposit are to be carried on to any other place within the same State, not more than thirty miles distant, with the approval of the Comptroller of the Currency, by the vote of shareholders owning two-thirds of the stock of such association. A duly authenticated notice of the vote and of the new name or location selected shall be sent to the office of the Comptroller of the Currency; but no change of name or location shall be valid until the Comptroller shall have issued his certificate of approval of the same. (Act May 1, 1886, Ch. 73, Sec. 2 ; 24 Stat. L., 18.) Where Removal is to a Larger Place. — This act is to be construed with reference to the other provisions of law governing the National banks; and, therefore, where the removal Is to be made td a larger place, the capital stock must first be increased to the amount required for banks in such place. It Is important for the stockholders to bear this in mind when determining the question of removal. See First Nat. Bank v. Murray, 212 Fed. Rep., 140. § 35. Same Subject — Continuance of Liabilities. — That all debts, liabilities, rights, provisions, and powers of the association under its old name shall devolve upon and inure to the associa- tion under its new name. (Act May 1, 1886, Ch. 73, Sec. 3; 24 Stat. L., 19.) § 36. Same Subject. — That nothing in this act contained shall be so construed as in any manner to release any National banking association under its old name or at its old location from any liability or affect any action or proceeding in law in which said association may be or become a party or interested. (Act May 1, 1886, Ch. 73, Sec. 4; 24 Stat. L., 19.) 4 50 § 37. Extension of Corporate Existence. — That any National banking association organized under the Acts of February twenty- fifth, eighteen hundred and sixty-three, June third, eighteen hun- dred and sixty-four, and February fourteenth, eighteen hundred and eighty, or under sections fifty-one hundred and thirty-three, fifty-one hundred and thirty-four, fifty-one hundred and thirty-five, fifty-one hundred and thirty-six, and fifty-one hundred and fifty- four of the Eevised Statutes of the United States, may, at any time within the two years next previous to the date of the expira- tion of its corporate existence under present law, and with the approval of the Comptroller of the Currency, to be granted as hereinafter provided, extend its period of succession by amending its articles of association for a term of not more than twenty years from the expiration of the period of succession named in said ar- ticles of association, and shall have succession for such extended period, unless sooner dissolved by the act of shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law, unless hereafter modified or repealed. (Act July 12, 1882, Ch. 290, Sec. 1; 22 Stat. L., 162.) For procedure to be followed and forms, see Chap. IX, Part IV. § 38. Same Subject — Further Extension. — That the Comp- troller of the Currency is hereby authorized, in the manner pro- vided by, and under the conditions and limitations of, the Act of July twelfth, eighteen hundred and eighty-two, to extend for a further period of twenty years the charter of any National bank- ing association extended under said Act which shall desire to con- tinue its existence after the expiration of its charter. (Act April 12, 1902, Ch. 503; 32 Stat. L., 102.) The regulations of the Comptroller's office for re-extension of charter are the same as for original extension. (See Ch. IX, Part IV.) The Comptroller should he notified sixty days before expiration of old charter of intention to extend or to close out the business of the bank, in order that he may satisfy himself that the bank is solvent. § 39. Same Subject — Amendment of Articles in Case of Change. — That such amendment of said articles of association shall be au- 51 thorized by the consent in writing of shareholders owning not less than two-thirds of the capital stock of the association; and the board of directors shall cause such consent to be certified under the seal of the association, by its president or cashier, to the Comp- troller of the Currency, accompanied by an application made by the president or cashier for the approval of the amended articles of association by the Comptroller ; and such amended articles of asso- ciation shall not be valid until the Comptroller shall give to such association a certificate, under his hand and seal, that the associa- tion has complied with all the provisions required to be complied with, and is authorized to have succession for the extended period named in the amended articles of association. (Act July 12, 1882, Ch. 290, Sec. 2; 22 Stat. L., 1G2.) § 40. Special Examination of Extended Bank — Certificate of Comptroller. — That upon the receipt of the application and cer- tificate of the association provided for in the preceding section, the Comptroller of the Currency shall cause a special examination to be made, at the expense of the association, to determine its condition; and if after such examination or otherwise it appears to him that said association is in a satisfactory condition, he shall grant his certificate of approval provided for in the preceding section, or if it appears that the condition of said association is not satisfactory, he shall withhold such certificate of approval. (Act July 12, 1882, Ch. 290', Sec. 3 ; 22 Stat. L., 163.) Where a National bank continues its existence and performs the functions of such an association after the expiration of its original corporate existence for a long period of time, it will be presumed to have accepted the benefit of a certificate executed by the Comptroller of the Currency extending its corporate existence. (Clement v. United States, 149 Fed. Rep., 305.) The certificate of the Comptroller is con- clusive evidence of a compliance by the bank with all necessary condi- tions precedent to the extension. (Id.) The Comptroller requires that the certificate of approval be published. § 41. Privileges, Liabilities, etc., of Extended Banks.— That any association so extending the period of its succession shall continue to enjoy all the rights and privileges and immunities granted, and 52 shall continue to be subject to all the duties, liabilities and re- strictions imposed by the Kevised Statutes of the United States and other Acts having reference to National banking associations, and it shall continue to be in all respects the identical association it was before the extension of its period of succession. (Act July 12, 1882, Chap. 290, Sec. 4; 22 Stat. L., 1G3.) A bond given to a National bank by the individual members of a cor- poration to secure such paper as the bank may discount for the cor- poration does not expire with the termination of the twenty years for which the bank was originally incorporated, and the obligors are liable for discounts made after the bank has extended the period of its ex- istence. (National Exchange Bank of Hartford v. Guy, 57 Conn., 224.) § 42. Withdrawal of Shareholders; Preference in Allotment. — That when any National banking association has amended its ar- ticles of association as provided in this Act, and the Comptroller has granted his certificate of approval, any shareholder not assent- ing to such amendment may give notice in writing to the directors, within thirty days from the date of the certificate of approval, of his desire to withdraw from said association, in which case he shall be entitled to receive from said banking association the value of the shares so held by him, to be ascertained by an appraisal made by a committee of three persons, one to be selected by such share- holder, one by the directors, and the third by the first two; and in case the value so fixed shall not be satisfactory to any such share- holder, he may appeal to the Comptroller of the Currency, who shall cause a reappraisal to be made, which shall be final and bind- ing; and if said reappraisal shall exceed the value fixed by said committee, the bank shall pay the expenses of said reappraisal, and otherwise the appellant shall pay said expenses ; and the value so ascertained and determined shall be deemed to be a debt due, and be forthwith paid, to said shareholder, from said bank; and the shares so surrendered and appraised shall, after due notice, be sold at public sale, within thirty days after the final appraisal pro- vided in this section: Provided, That in the organization of any banking association, intended to replace any existing banking asso- ciation, and retaining the name thereof, the holders of stock in the 53 expiring association shall be entitled to preference in the allot- ment of the shares of the new association in proportion to the num- ber of shares held by them respectively in the expiring association. (Act July 12, 1882, Ch. 290, Sec. 5; 22 Stat. L., 163.) From What Date Notice Effective. — The notice of withdrawal given within 30 days after the extension is effective as of the date of the expiration of the original charter. (Smith v. Phillips Nat. Bank, 111 Me., 297.) And where a shareholder has given the notice, and ap- pointed an appraiser, and has refused to accept dividends on the stock, he can not be held liable as a stockholder because of delay on the part of the bank. (Kimball v. Aspey, 164 Fed. Rep., 830; Aspey v. Whitte- more, 199 Mass., 65.) Watveb of Right to Withdraw. — If, after the extension of the char- ter a dividend is declared, a shareholder who demands and receives the dividend waives the right to withdraw. (Smith v. Phillips National Bank, 114 Me., 297.) § 43. Banks Not Extending — Continuance of Franchise for Pur- pose of liquidation.— That National banking associations whose corporate existence has expired, or shall hereafter expire, and which do not avail themselves of the provisions of this Act, shall be required to comply with the provisions of sections fifty-two hundred and twenty-one and fifty-two hundred and twenty-two of the Re- vised Statutes in the same manner as if the shareholders had voted to go into liquidation, as provided in section fifty-two hundred and twenty of the Revised Statutes ; and the provisions of sections fifty- two hundred and twenty-four and fifty-two hundred and twenty-five of the Revised Statutes shall also be applicable to such associa- tions, except as modified by this Act; and the franchise of such association is hereby extended for the sole purpose of liquidating their affairs until such affairs are finally closed. (Act July 12, 1882, Ch. 290, Sec. 7; 22 Stat. L., 164.) The Comptroller sends blanks to expiring associations to enable them to give the notice to hi3 office required by Section 5222, Revised Statutes, see page 91. Such expiring associations must, within six months from the date of expiration of the charter, deposit lawful money to retire their circulation. CHAPTER III. Officers and Shareholders. Section 44. Eights of Shareholders at Election — Proxies. 45. Liability of Shareholders — National Bank Act. 46. Same — Provisions of Federal Eeservo Act. 47. Executors, Trustees, etc., not personally liable. 48. Directors — Election of — Term of Office. 49. Qualification of Directors. 50. Oath Required of Directors. 51. Vacancies — How Filled. 52. Proceedings Where no Election held at appointed time. 53. President. § 44. Rights of Shareholders at Elections — Proxies. — In all elections of directors, and in deciding all questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or book-keeper of such association shall act as proxy; and no share- holder whose liability is past due and unpaid shall be allowed to vote. (Eev. Stat. U. S. Sec. 5144.) Shareholders' Meetings. — There is nothing in the National Bank Act regarding notice of the annual meeting of shareholders at the time specified in the articles of association. The articles of association or by-laws of the bank usually provide for such a notice, but if they are silent the better and safer course would be to give the usual thirty days' notice, and this should certainly be given if any unusual or extraordinary business is to be considered, such as amending the ar- ticles. Unless provision is made in the articles of association special meetings of shareholders should be called on thirty days' notice, which should state the business to be transacted. For want of due notice the proceedings, unless acquiesced in or ratified by all shareholders, may 54 55 be set aside as invalid. See §52, page 69, for procedure where no election of directors is made at the time appointed. A majority vote of all the stock of the bank is necessary to amend the articles of association and the affirmative vote of two-thirds of the entire capital stock is necessary to increase or reduce the capital, consolidate the bank with another or liquidate the association. When an act requires the assent of the shareholders their assent unless unanimous must be given at a duly called meeting. The in- dividual assent in writing of a majority no matter how large is not binding upon any non-assenting shareholder. The only exception to this rule is in the case of the amendment of the articles of association extending the period of corporate existence, which the law states the shareholders may authorize in writing. The mistake is frequently made of supposing that business requiring the action of the stockholders can be transacted at a meeting of the board of directors when the directors own a majority of the stock, or the amount of stock necessary to determine the actions of the share- holders, but every stockholder has a right to' be present and to express his assent or dissent; and this he has, of course, no opportunity of doing when the business is considered at a meeting of the directors. Where the articles of association of a National bank provide that meetings of the stockholders may be called by the board of directors or by any three stockholders, a meeting called by the President and Cashier is not lawfully convened. (Matthews v. Columbia National Bank, 79 Fed. Rep., 558.) Cumulative Voting — Voting Trust. — The laws of some of the States authorize stockholders at meetings held to elect directors to cumulate their votes; that is, if a stockholder is entitled to one vote on each share of stock held, he may cast his entire vote for one candidate, in- stead of casting an equal number for all candidates. But this method of voting is not authorized by the National Bank Act. Nor can the stockholders enter into a voting trust agreement. (Bridgers v. First Nat. Bank, 152 N. C, 293.) Proxies.— The Comptroller has ruled that a director is an officer and can not act as a proxy at a shareholders' meeting, and this seems to carry out the spirit of the law, as the bank is under the control of the directors and they have in many cases a great personal interest in the action of the meeting, especially where the meeting is held for the election of directors, and they are candidates for re-election. In all cases it is best for the proxy to be a person in no way connected with the management of the bank. (For form of proxy for elections of di- rectors, see page 66, §48.) A proxy, howover, while it must be in writing, need not be in any 56 particular form, nor need it be acknowledged or proved, but it must be in such shape as reasonably to satisfy the inspectors of election as to its genuineness and validity, and to this end the corporate officers may Insist upon reasonable evidence of the regularity and the genuine- ness of the proxy before allowing it to be voted. The proxy should be dated. When certificates of proxy are destroyed after use, parol evidence is admissible to prove their former existence and sufficiency. A stock- holder who signs a form of proxy in blank and hands ft over to an- other to be used in the ordinary way impliedly authorizes that other to fill up the blank with his own name. Although a proxy contains blanks as to' the hour and day of the meeting, yet this may be filled in by the party using the proxy. The ordinary proxy being intended for an election merely, does not enable the proxy to vote to increase the capital stock of the bank, to consolidate it with another National bank, or to' place it in liquidation, unless the proxy itself in general or special terms gives the proxy the power to vote on such question. The proxy can not vote when the owner of the stock is present and votes. A proxy is always revocable, even when by its terms it is made "Irrevocable," and the law allows a stockholder to revoke it. Frequently an attempt is made to per- manently unite the voting power of several stockholders and thus con- trol the corporation by giving irrevocable proxies to specified persons, but the common law allows a stockholder to revoke a proxy at any time. "Where Meeting Not Lawfully Called. — A proxy can not bind his principal by attending, and participating in, a meeting of stockholders not lawfully called. (Matthews v. Columbia Nat. Bank, 79 Fed. Rep., 558.) "What Liability Disqualifies Shabeholdeb to Vote.— The provision of this section which disqualifies shareholders "whose liability is past due and unpaid" applies only where the liability is for unpaid sub- scriptions for stock, and was not intended to disqualify shareholders otherwise indebted to the bank. (United States ex rel. Cond. v. Barry, 3G Fed. Rep., 246.) § 45. Individual Liability of Stockholders — Provision of Na- tional Bank Act. — The shareholders of every National banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and en- gagements of such association, to the extent of the amount of their 57 stock therein, at the par value thereof, in addition to the amount invested in such shares; except that shareholders of any banking association now existing under State laws, having not less than five millions of dollars of capital actually paid in, and a surplus of twenty per centum on hand, both to be determined by the Comp- troller of the Currency, shall be liable only to the amount invested in their shares; and such surplus of twenty per centum shall be kept undiminished^ and be in addition to the surplus provided for in this Title; and if at any time there is a deficiency in such sur- plus of twenty per centum, such association shall not pay any dividends to its shareholders until the deficiency is made good; and in case of such deficiency, the Comptroller of the Currency may compel the association to close its business and wind up its affairs under the provisions of chapter four of this Title. (Rev. Stat. IT. S. Sec. 5151.) § 46. Same — Provision of Federal Reserve Act.— The stockhold- ers of every National banking association shall be held indi- vidually responsible for all contracts, debts, and engagements of 6uch association, each to the amount of his stock therein, at the par value thereof in addition to the amount invested in such stock. 'The stockholders in any National banking association who shall have transferred their shares or registered the transfer thereof within sixty days next before the date of the failure of such asso- ciation to meet its obligations, or with knowledge of such impend- ing failure, shall be liable to the same extent as if they had made no such transfer, to the extent that the subsequent transferee fails to meet such liability ; but this provision shall not be construed to affect in any way any recourse which such shareholders might other- wise have against those in whose names such shares are registered at the time of such failure. (Sec. 23, Act Dec. 23, 1913; 38 Stat. L., 273.) This section evidently repeals so much of Sec. 5151 U. S. R. S. (Sec. 45 next preceding) as Is Inconsistent with its provisions. Under the old law shareholders were "responsible, equally and ratably f,nd not one for another" and the solvent shareholders could not he required to contribute more than their proportion of the deficiency. The amount 58 which each shareholder was liable to contribute bore the same pro- portion to the total deficit as his own stock bore to' the whole amount of capital stock. (United States v. Knox, 102 U. S., 422.) Under the new law solvent shareholders can be required to contribute the portion that is not paid by insolvent shareholders up to the full par value of their stock and may be assessed 100 per cent, if necessary to pay the debts of the bank. The enactment of the new law in this unsatisfactory form, without making it more specific as to applicability and without repealing the old law will undoubtedly give rise to much litigation. Does it apply to stock bought before its enactment? Does it apply to debts incurred or deficits created prior to its passage? The courts will have to deter- mine. The cases cited in the following notes construe the old law but the principles stated therein apply equally well to the new statute. Fob What Liabilities of the Bank Shareholders are Responsible. — The liability is not contractual, but exists by force of the statute. (Christopher v. Norvell, 201 U. S., 21G; First National Bank of Con- cord v. Hawkins, 174 U. S., 372.) It is restricted to such contracts, debts, and engagements of the bank as have been duly contracted in the ordinary course of business. (Richmond v. Irons, 121 U. S., 27; Schrader v. Manufacturers' National Bank, 133 U. S., 67.) The liability of the stockholders, therefore, can not be enforced to pay the claims of creditors on new contracts made after the bank has been placed in voluntary liquidation. (Id.) Extent of Liabilities. — The liability o'f the shareholder is for in- terest on the debts of the bank as well as for the principal thereof. (Richmond v. Irons, 121 U. S„ 27.) The assessment itself bears in- terest from the date of the order. (Casey v. Galli, 94 U. S., 673.) Deceased Stockholders. — This liability survives against the repre- sentatives of a deceased shareholder, and adheres to his estate after his death, though he dies before the insolvency of the bank occurs. (Richmond v. Irons, 121 U. S., 27; Davis v. Weed, 44 Conn., 569; Wickham v. Hull, 60 Fed. Rep., 326.) And the fact that the title to the stock of a deceased shareholder vests in his administrator does not relieve the estate from the burden of an assessment. (Davis v. Weed, supra.) Nor will the fact that the administration is complete, and all the assets have been distributed, defeat an action brought to recover the assessment. (Id.) Married Women. — When the law of the State where the contract is made permits married women to become owners of stock, they will be 59 subject to all the liabilities of stockholders. (Bundy v. Cocke, 128 U. S., 185; Keyser v. Hitz, 133 U. S., 438; In Re National Bank of St. Al- bans, 49 Fed. Rep., 120; Anderson v. Line, 14 Fed. Rep., 405.) If a married woman is by the State law capable of holding stock in a National bank in her own right, she is liable thereon under this sec- tion, though the law of the State does not authorize married women to bind themselves by contract, for the law annexes her liability of its own force, and no capacity to act on her part is required. (Christopher v. Norvell, 201 U. S., 216; Witters v. Sowles, 35 Fed. Rep., 640, and 38 Fed. Rep., 700; Robinson v. Turrentine, 59 Fed. Rep., 554.) Assignment fob Creditors — Defrauding Creditors. — The fact that one is a stockholder and director in an insolvent National bank, and individually liable for the debts of the bank to the amount of his stock, will not operate so as to prevent him from making an otherwise lawful disposition of his property for the benefit of his creditors. (Peters v. Bain, 133 U. S., 670.) Where a stockholder in a National bank makes a general assignment after the bank has become insolvent, his estate in the hands of the assignee becomes liable for an assess- ment upon such stock. (Graham v. Piatt, 28 Colorado, 421.) Sufficiency of Transfer. — A person whose name is put upon the stock-books without his knowledge or consent can not be held liable as a stockholder; but where the transferee is a director concerned in the management of the bank he is presumed to have knowledge of the fact that the stock stands in his name, and if he does no't repudiate the transfer, he is liable as the holder. (Brown v. Finn, 142 U. S., 56.) And where one endorses a check payable to his order, which discloses upon its face that it is for dividends on stock standing in his name on the books of the bank, he is estopped to deny that he is the owner of the stock upon which the dividends are declared. (Keyser v. Hitz, 133 U. S., 138). Where certificates of stock are made out to the holder as the absolute owner thereof, and he so appears on the books of the bank, he will not be permitted to show in an action against him to recover an assessment on the stock that he held the same as trustee. (Lewis v. Levitz, 74 Fed. Rep., 381.) Subscribers to New Stock. — A stockholder who elects to subscribe for shares of an increase and actually pays for the same, and is regis- tered as holding the additional shares on the books of the bank, thereby becomes a shareholder, and his failure to call for his certificate of stock makes no difference in his liability as such. (Thayer v. Butler, 141 U. S., 234.) But the fact that the subscriber for new shares (which were never issued) received a dividend on old shares trans- 60 ferred to him without his knowledge in place of new shares, does not estop him from denying his liability as a shareholder, where such dividend was received in the belief that it was paid to him by virtue of his subscription to the new stock. (Stephens v. Follett, 43 Fed. Rep., 842.) But the subscribers may be estopped to dispute the legality of increase by accepting certificates for the stock, receiving dividends, and giving proxies to vote upo*n the stock. (Tillinghast v. Bailey, 86 Fed. Rep., 46; Latimer v. Burd, 76 Fed. Rep., 536.) And the certificate of the Comptroller of the Currency authorizing the increase of the capital stock of a National bank is conclusive upon the subscribers to such new stock when sued for an assessment laid upon the same. (Id.) (See also McFarlin v. First Nat. Bank, 68 Fed. Rep., 868.) Liability of Pledgee. — A person who holds stock merely as collateral security is liable as the owner of the stock, if he appears upon the books of the bank as such. (National Bank v. Case, 99 U. S., 628; Moore v. Jones, 3 Woods, 53; Hale v. Walker, 31 Iowa, 344; Wheelock v. Kost, 77 111., 296; but see Magruder v. Colston, 44 Md., 349.) But a pledgee, acting in good faith, and without any fraudulent intention, has the perfect right to shun such liability, and may have the control of the stock for the purposes of security without being made liable as a registered shareholder. (Anderson v. Philadelphia Warehouse Company, 111 U. S., 479.) In Beall v. Essex Savings Bank (67 Fed. Rep., 816), it was held by the United States Circuit Court of Appeals, that where the stock is transferred as collateral security, and the fact that it is held only as such security appears upon the transfer book of the bank, the person by whom it is so held will not be liable to an assessment upon the stock in case of the failure of the bank. And, in Pauly v. State Loan and Trust Company (165 U. S., 606), it was held by the Supreme Court of the United States that one to whom stock of a National bank is transferred upon the books of the bank "as pledgee" is not liable as a stockholder. And, of course, a pledgee who does not appear by the books of the bank or otherwise to be the owner is not liable for an assessment upon the shares on the insolvency of the bank. (Welles v. Larrabee et ah, 36 Fed. Rep., 866; Robinson v. Southern National Bank, 94 Fed. Rep., 964.) If the holder in fact holds the stock merely as collateral se- curity, he may list the shares in his own name as pledgee, or in the name of another and irresponsible party, even though this be done for the purpose of avoiding liability. (Rankin v. Fidelity Insurance, etc., 189 U. S., 242; National Park Bank of N. Y. v. Harmon, 214 Fed. Rep., 891; Higgins v. Fidelity Insurance, T. and S. Dep. Co., 108 Fed. Rep., 475.) When proved or admitted that the person in whose name the stock stands is a mere pledgee, the burden is upon the receiver 61 to show that he knowingly permitted it to stand in his name on the books of the bank. (Tourtelot v. Stoltenben, 101 Fed. Rep., 362.) If the person who takes stock as pledgee uses the same so as to vest the title in himself, he is liable as a stockholder. (Ohio Valley Nat. Bank v. Hulitt, 204 U. S., 162.) Purchase in Name of Infant. — One who buys stock of a National bank in the name of an Infant or transfers stock to an infant will be liable for an assessment, since the infant is incapable of binding him- self as a stockholder. (Foster v. Chase, 75 Fed. Rep., 797; Aldrich v. Bingham, 131 Fed. Rep., 363.) And the ratification by the infant of such purchase after he becomes of age will not affect such liability. (Foster v. Wilson, 75 Fed. Rep., 797; but see Fowler v. Gowing, 152 Fed. Rep., 801.) Liability is fob Benefit of All Cbeditobs. — The liability of the stockholders can be enforced only in favor of all the creditors. If, therefore, a stockholder gives any security for his liability, it must be for the benefit of all the creditors alike. Where a stockholder, after the failure of a bank, gave a mortgage for the purpose of securing a single depositor, such mortgage was held void as against a judgment obtained in an action against such stockholder to enforce his indi- vidual liability. (Catch v. Fitch, 34 Fed. Rep., 566.) Rescinding Purchase— Fbaud of Bank.— A stockholder who has been induced by fraudulent representations to subscribe for sto'ck in a Na- tional bank will not necessarily be precluded from repudiating such subscription by reason of the insolvency of the bank, if he has exer- cised due diligence in discovering the fraud, and has acted promptly after such discovery. (Newton Nat. Bank v. Newbegin, 74 Fed. Rep., 135; Salter v. Williams, 244 Fed. Rep., 126.) An intending purchaser of bank stock is entitled to rely upon a statement of its president as to the bank's condition without inquiring further. (Merrill v. Florida Land & Improvement Co., CO Fed. Rep., 17.) The receipt by a bank of the proceeds of a fraudulent sale of stock belonging to it, and the subsequent appointment of a receiver, gives its creditors no such right in the proceeds as will prevent the purchasers from rescinding the sale and requiring restitution. (Id.) Estoppel. — A shareholder against whom suit is brought to recover the assessment made upon him by the Comptroller will not be per- mitted to deny the existence of the association, or that it was legally incorporated. (Casey v. Galli, 94 U. S., 673; Wheelock v. Kost, 77 111., 296.) 62 Procedure. — The creditors of an insolvent National bank must seek their remedy through the Comptroller, in the mode prescribed by the statute; they can not proceed directly in their own names against stockholders. It is the duty of the Comptroller of the Currency to decide when proceedings are necessary against the stockholders of a National bank to enforce their personal liability, and to what extent such liability shall be enforced; and in an action by a receiver to enforce such liability, such prior determination of the Comptroller must be distinctly averred and proved. But it is not essential to aver and prove that the assessment was necessary, for the decision of th9 Comptroller on this point is conclusive. Kennedy v. Gibson, 8 Wall, 498; Casey v. Galli, 94 U. S., 673.) Nor is it necessary to allege that the Comptroller had determined that the assessment was necessary; it is sufficient to allege that he made the assessment. (O'Connor v. Whithorby, 111 Cal., 523.) Demand Not Necessary. — Demand of, or notice to, stockholders by the Comptroller of the Currency or receiver, is not a prerequisite to the maintenance of a suit to enforce the stockholders' statutory lia- bility. (Rankin v. Miller, 207 Fed. Rep., 602; Weitzel v. Brown, 224 Mass., 190.) Decision of Comptroller Conclusive. — The decision of the Comp- troller of the Currency that it is necessary to enforce the statutory liability of the stockholders is conclusive, and may not be questioned by a stockholder in an action to enforce his liability. (Rankin v. Miller, 207 Fed. Rep., 602; DeWeese v. Smith, 106 Fed. Rep., 438; Aldrich v. Campbell, 97 Fed. Rep., 663; Rankin v. Ware, 88 Kan., 23.) And so as to his decision that a second or further assessment is neces- sary. (Rankin v. Miller, supra). Form of Action. — When the full personal liability of shareholders is to be enforced the action must be at law. (Kennedy v. Gibson, 8 Wall, 498; Casey v. Galli, 94 U. S., 673.) When the assessment is not for the full value of the shares, the suit may be in equity. (Kennedy v. Gibson, 8 Wall, 498.) And where questions are involved which are common to a number of stockholders they may be joined as defendants. (Bailey v. Tillinghast, 99 Fed. Rep., 801.) When Right of Action Accrues — Statute of Limitations. — The liability of stockholders of National banks is conditional, and the right to sue does not obtain until the Comptroller of the Currency has acted; his order is the basis of the suit, and the statute of limitations does not commence to run until assessment is made. (McClain v. Rankin, 63 197 U. S., 154; Aldrich V. Yates, 05 Fed. Rep., 78; McDonald v. Thomp- son, 184 U. S., 71; Deweese v. Smith, 106 Fed. Rep., 438.) The State statute of limitations apply to actions to enforce assessments. (Mc- Clain v. Rankin, 197 U. S., 154; Butler v. Pole, 44 Fed. Rep., 586; Thompson v. German Insurance Company, 76 Fed. Rep., 892.) The statute begins to run as soon as the assessment is made. Laches on the part of the Comptroller of the Currency in failing to collect an earlier assessment and in undertaking the collection of the one sued on is not a defense, since these matters are committed exclusively to his judgment and his action must be treated as seasonable and regular. (Rankin v. Miller, 207 Fed. Rep., C02.) Set-off. — A stockholder of an insolvent National bank, who happens also to be one of its creditors, can not cancel or diminish the assess- ment by offsetting his individual claim against it. (Hobart, Receiver, etc., v. Gould, 8 Fed. Rep., 57: Sowles v. Witters, 39 Fed. Rep., 403; but see Welles v. Stout, 38 Fed. Rep., 807). The indebtedness on the assess- ment of a stockholder who is insolvent may be set off against a divi- dend, payable out of the assets of the bank, on a balance due him on his deposit account with the bank at the time of its failure. (King v. Armstrong, 50 Ohio St., 222.) Agent May Not Enforce. — An agent chosen by stockholders to take charge of the business of a National bank in liquidation can not en- force the individual liability of the stockholders, after all the debts have been paid. (Church v. Ayer, 80 Fed. Rep., 543; Williamson v. American Bank, 109 Fed. Rep., 36.) Claim Not Entitled to Preference. — The individual liability of a stockholder in an insolvent National bank is not a preferred claim against his estate, and is not entitled to priority of payment even though the estate is insolvent. (In Re Beard's Estate, 7 Wyoming, 104.) Books of the Bank as Evidence in Suit to Recover Assessment. — The books of a National bank are, among the shareholders, public rec- ords and evidence of what they show, and are admissible against a shareholder in an action brought against him by the Receiver to re- cover an assessment upon his stock. (Brown v. Ellis, 103 Fed. Rep., 834.) Successive Assessments. — The Comptroller of the Currency has power to levy successive assessments upon the stockholders in an in- solvent National bank and his power is not exhausted by one assess- ment. (Studebaker v. Perry, 184 U. S., 252; Aldrich v. Campbell, 97 64 Fed. Rep., 663; Studebaker v. Perry, 102 Fed. Rep., 947.) And a judgment In favor of the Receiver for the recovery of an assessment does not estop him from maintaining a second action against the same shareholder for another assessment which had not been made or was not due when the first action was commenced. (Deweese v. Smith, 106 Fed. Rep., 438.) The Comptroller of the Currency has discretionary power to withdraw an assessment on shareholders before it is paid or when partly paid. (Korbley v. Springfield Inst, for Sav- ings, 245 U. S., 330.) Pckciiase Procured by Fraudulent Representations of Officebs. — In an action at law by the Receiver of an insolvent National bank to enforce the individual liability of a shareholder, the latter can not set up as a defense that he was induced to purchase the stock of the bank by the fraudulent representations of its officers. (Lantry v. Wallace, 182 U. S„ 536; Scott v. Latimer, 89 Fed. Rep., 843.) Where Bank Has Gone Into Liquidation. — Where the bank has gone into voluntary liquidation, the only authorized procedure for the en- forcement of the individual liability of its stockholders is by a suit in equity in the nature of a creditor's suit brought on behalf of all creditors in a court for the district in which the bank is located, in which the necessity and extent of the ratable enforcement of the stock- holders' liability shall be determined. (Williamson v. American Bank, 115 Fed. Rep., 793.) Such suit sho"uld be brought against the bank and all its stockholders, and, in case ancillary proceedings should be neces- sary for the collection from non-resident stockholders of their ratable proportion of the amount necessary to pay creditors, such suits should be authorized by the court of original jurisdiction, and brought by a Receiver or other person appointed by such court. (Id.) § 47. Executors, Trustees, etc., Not Personally Liable. — Persons holding stock as executors, administrators, guardians, or trustees, shall not be personally subject to any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward, or person interested in such trust-funds would be, if living and com- petent to act and hold the stock in his own name. (Rev. Stat. TJ. S. Sec. 5152.) Application of Section. — This section is of general application and is not limited to trustees appointed such by will or by order of some court or judge. (Lucas v. Coe, 86 Fed. Rep., 972.) The fact that the <65 trust estate consists entirely of stock in the failed bank, and that the failure of the bank wipes out the value of the trust estate does not impose any liability upon the trustee individually. (Fowler v. Gowing, 152 Fed. Rep., 801; 165 Fed. Rep., 891.) An executor continues to be liable as such for an assessment upon National bank stock left by his testator until he has transferred the personal property belonging to the estate. (Baker v. Beach, 85 Fed. Rep., 836.) Evidence of Ownership. — The fact that the stock is held in a repre- sentative capacity must be noted on the stock-book of the bank; if a person appears there as absolute owner of the stock he will not be permitted to deny that he is such. (Davis v. Essex Baptist Society, 44 Conn., 569; Lewis v. Switz, 74 Fed. Rep., 1.) But see McMahon v. Macy (51 N. Y., 155). And if a person appears on the stock-book as "trustee" he is not personally liable. (Welles v. Larrabee, 36 Fed. Rep., 866.) § 48. Directors — Election of — Term of Office. — The affairs of each association shall be managed by not less than five directors, who shall be elected by the shareholders at a meeting to be held at any time before the association is authorized by the Comptroller of the Currency to commence the business of banking; and after- ward at meetings to be held on such day in January of each year as is specified therefor in the articles of association. The directors shall hold office for one year, and until their successors are elected and have qualified. (Rev. Stat. IT. S. Sec. 5145.) For restrictions on interlocking directorates, see Section 8, Clayton Anti-Trust Act, §305 ft. Annual Meeting — Date of — Business at Annual Meetings — Repbe- sentation. — .The annual meeting must be held in January, but on any day of that month, although in the articles of association furnished by the Comptroller the second Tuesday is named and commonly adopted. At the annual meeting no business but the election of directors can be transacted without due notice having been given, stating that other business will be transacted; otherwise the ratification of action taken should be obtained from shareholders not present. No provision is made in the statute for any definite representation of stock at annual meetings, and the Comptroller holds that a majority is not necessary unless provided in the articles of association or by- laws. 5 GG Form of Proxy for Use at Shareholders' Meeting for Election of Directors. — Know all men by these presents that I, — ■ — , do hereby constitute and appoint attorney and agent for me, and in my name, place, and stead to vote as my proxy at any and all elections of directors of according to the number of votes I should be entitled to vote if there personally present. In witness whereof I have hereunto set my hand this day of — i >, one thousand nine hundred and — Signed in presence of — § 49. Qualifications of Directors. — Every director must, dur- ing his whole term of service, be a citizen of the United States, and at least three-fourths of the directors must have resided in the State, Territory, or district in which the association is located, for at least one year immediately preceding their election, and must be residents therein during their continuance in office. Every director must own, in his own right, at least ten shares of the capital stock of the association of which he is a director, unless the capital stock of the bank shall not exceed twenty-five thousand dollars, in which case he must own in his own right at least five shares of such capital stock. Any director who ceases to be the owner of the required number of shares of the stock, or who be- comes in any other manner disqualified, shall thereby vacate his place. (Eev. Stat. II. S. Sec. 5146; Act Feb. 28, 1905, Ch. 1163; 33 Stat. L., 818.) Qualifications of Directors. — A director of a National bank must be a citizen of the United States, must own in his own right not less than five shares of the stock of the bank when the capital is $25,000, and ten shares in other cases, and he must hold the stock free from pledge. In a newly organized bank a director may pay for his stock in partial payments on the same terms as the other shareholders and need not pay sooner in order to qualify. As the stock must be held in the director's own right, no person who holds stock in a merely representative capacity — as an executor, administrator, guardian, or trustee — can be a director. The number of shares held by a director 67 of a State bank converting to a National bank may remain the same until the annual election. Then the number must be that required of a National bank, but the par value of the stock does not need to be changed. A director who owns more than the required number of shares may- sell or pledge all of his stock except the requisite number without becoming disqualified. A person who is not a shareholder may be elected director but can not qualify until he has acquired the requisite number of shares. A director when elected or within a reasonable time thereafter, must take the oath required. On failure to do so, it would appear that a vacancy may be declared and a new director elected. At least three-fourths of the directors must have resided in the State, Territory or district where the bank is located for one year immediately preceding their election, and continue residents while directors. It is therefore necessary that in a board of five, four must be residents. In a board of seven, six, etc. An unmarried woman, whether a widow or spinster, can be a di- rector; and so may a married woman in States where the laws permit her to assume all the obligations of a stockholder. § 50. Oath Required of Directors. — Each director, when ap- pointed or elected, shall take an oath that he will, so far as the duty devolves on him, diligently and honestly administer the affairs of such association, and will not knowingly violate, or willingly permit to be violated, any of the provisions of this Title, and that he is the owner in good faith, and in his own right, of the number of shares of stock required by this Title, subscribed by him or standing in his name on the books of the association, and that the same is not hypothecated, or in any way pledged, as security for any loan or debt. Such oath, subscribed by the direc- tor making it, and certified by the officer before whom it is taken, shall be immediately transmitted to the Comptroller of the Cur- rency, and shall be filed and preserved in his office. (Rev. Stat. U. S. Sec. 5147.) For liability of directors for violation of act, see §163, page 161. Oath of Directors. — The law as regards directors' oaths is fatally defective, failing to provide before what officer to be taken. That an oath may have efficacy, especially in case an indictment for perjury 68 is to be sustained thereon, it is requisite that the oath shall have been prescribed by law, and taken before an officer duly authorized to ad- minister it. The act of Feb. 2G, 1881, which authorizes an oath to be taken before a notary public, applies only to the oath to the report of condition of bank. As regards the other oaths pre- scribed by the National banking law, there does not appear to be any officer competent to administer them. (United States v. Curtis, 107 U. S., 671.) The Comptroller, however, requires them to be taken. For forms of oaths of directors see Chapter I, Part IV. Directors Can Act Only as a Board. — The election of a person as a director does not constitute him an agent of the corporation with au- thority to act separately and independently of his fellow-members. It is the board, duly convened and acting as a unit, that is made the representative of the bank. (National Bank v. Drake, 35 Kan., 564.) Frequently, it is true, a director does have authority to bind the bank when acting separately and apart from the others; but he must have been authorized by the Board, either expressly or impliedly, to act as the agent of the bank. "What Constitutes a Board. — A quorum generally consists of a ma- jority of the whole board. A provision to this effect is usually con- tained in the articles of association (see form of articles Ch. I, Part IV, though this would be the rule in the absence of any provision what- ever on the subject. Where a majority is required to constitute a quorum, this means a majority of a full board, and not merely a majority of those who may be members at the time. Thus, should there be a vacancy in a board consisting of ten members, six would still be necessary to make a quorum, though five would be a majority of the present members. Sometimes the articles of association do' not provide for any specific number of directors, but provide that the board shall consist of not less, or not more, than a certain number, or both, as for instance, "The board of directors shall consist of not less than five and not more than ten stockholders." This leaves it to the stockholders to determine at each annual election the number which shall constitute a full board for the ensuing year. If, in such a case, the stockholders do not manifest their intention by expressly setting it forth in a reso- lution, it is to be gathered from their action in electing a certain number of directors, and it is to be supposed that the number so elected was intended to constitute the board for the year; and the effect is the same as if they had expressly provided for that number in the articles of association or otherwise. Vacancies occurring through the year should, therefore, be filled as in other cases. 69 Disqualification and Resignation. — It would seem to be the proper construction of the law that where a director becomes disqualified, this ipso facto vacates his place in the board, and no removal by the other directors is necessary. The provision that the directors are to hold office for one year does not require a director to serve for the whole term for which he was elected, and prohibit him from resigning dur- ing such term, but he may resign at any time during the year. (Briggs v. Spalding, 141 U. S., 132.) The apparent purpose of the provision, in regard to the term of office, is to make it conform to the time of the new election, and not to absolutely require every director to serve the full term. (Movius v. Lee, 30 Fed. Rep., 298.) The resignation of a director should be tendered to the board, and not to the share- holders. As the president is the head of the board, it may be tendered to him. (Movius v. Lee, 30 Fed. Rep., 298.) It is the more orderly and proper way to put the resignation in writing, but an oral resigna- tion tendered to the president is sufficient. (Briggs v. Spalding, 141 U. S., 132.) § 51. Vacancies — How Filled. — 'Any vacancy in the board shall be filled by appointment by the remaining directors, and any di- rector so appointed shall hold his place until the next election. (Eev. Stat. U. S. Sec. 5148.) It seems to be the proper construction of this section, that the duty of filling any vacancy in the board is obligatory on the remaining di- rectors, and is not merely discretionary with them. The power is con- ferred upon them for the benefit of the bank and its stockholders, and these have an interest in having the power exercised. § 52. Proceedings Where No Election Held at Time Appointed. — If, from any cause, an election of directors is not made at the time appointed, the association shall not for that cause be dis- solved, but an election may be held on any subsequent day, thirty days' notice thereof in all cases having been given in a newspaper published in the city, town, or county in which the association is located; and if no newspaper is published in such city, town, or county, snch notice shall be published in a newspaper published nearest thereto. If the articles of association do not fix the day on which the election shall be held, or if no election is held on the day fixed, the day for the election shall be designated by the board of directors in their by-laws, or otherwise; or if the directors 70 fail to fix the day, shareholders representing two-thirds of the shares may do so. (Rev. Stat. U. S. Sec. 5149.) When No Election Held. — It would seem, therefore, that unless two- thirds of the stock were dissatisfied with an existing board of directors, such board, by neglecting to have elections held, might retain office for an indefinite period. The Comptroller might, perhaps, require them to renew their oaths each year, or he might construe the law to be man- datory as to annual elections; in which case the bank would have to be guided by the Comptroller's construction, unless it wished to con- test the matter in the courts. If a shareholders' meeting is held by mistake on the wrong day, another meeting must be called, giving the regular thirty-day notice, but if all shareholders waive notice and consent to date fixed, the Comptroller will not object. § 53. President. — One of the directors to be chosen by the board shall be the president of the board. (Eev. Stat. IT. S. Sec. 5150.) For restrictions on commissions, fees, etc., to bank officers, see Sec- tion 22 of Federal Reserve Act, page 301. President of Bank. — The term "president of the board" is construed by the office of the Comptroller of the Currency to mean president of the bank. Ex-Officio Powers. — The president o'f the board of directors is the presiding officer of the board, but otherwise his ex-officio powers are not greater than those of any other director, except that, as the head of the board, he may bring suits in behalf of the bank, and in proceed- ings against the bank legal process may be served upon him when it might not be proper to serve it upon any other director. But usually he is also the chief executive officer of the bank, and has large powers delegated to him by the board. Vested Powers. — The president's authority as chief managing agent of the bank is derived from the by-laws or vested in him by the board of directors, either expressly or by implication. The president has the power to employ counsel and manage the litigation of a bank, in the absence of any order of the board of directors depriving him of such power. (Citizens' Nat. Bank of Kingman v. Berry, 53 Kan., 696.) And he has, by virtue of his office, authority to assign a judgment owned by the bank (Guernsey v. Black Diamond Coal and Mining Company, 71 99 Iowa, 471); or to compromise or release a debt due to the bank. (Farmers' Nat. Bank v. Templeton, 40 S. W. Rep., 412.) He has no power inherent in his office to bind the bank on the execution of a note in its name; but power to do so may be conferred on him by the board of directors, either expressly by resolution to that effect, or by subsequent ratification, or by acquiescence in transactions of a similar nature of which the directors have notice. (National Bank of Con> merce v. Atkinson, 55 Fed. Rep., 465.) But it is within the scope of the implied power of the president to indorse negotiable paper in the ordinary transaction of the bank's business, and a special authority for this purpose need not be conferred by the board of directors. (United States National Bank v. First Nat. Bank of Little Rock, 79 Fed. Rep., 296.) See also Simons v. Fisher, 55 Fed. Rep., 905. The directors have the right to remove the president at any time even though the bank has never legally adopted any by-laws. (Taylor v. Hatton, 43 Barb., 195.) CHAPTER IV. Issue and Redemption of Circulating Notes. Section 54. Deposit of Bonds with Treasurer — Repeal of Require- ments for Minimum 1 Deposits. 55. Retirement of National Bank Notes — Sale of Bonds to Reserve Banks. 56. United States Bonds Denned. 57. Exchange of Coupon Bonds Authorized. 58. Exchange for Two Per Cent. Bonds Authorized. 59. Basis of Exchange. 60. Issue of Two Per Cent. Bonds Authorized. 61. Two Per Cent. Bonds to be Issued at Par — How Num- bered and Paid — Interest. 62. Bonds Issued under Panama Canal Act may be De- posited. 63. Bonds Issued under Act of 1909 Not Available. 64. Bonds to be Held as Securit} r for Circulating Notes — Interest. 65. Where Value of Bonds has Depreciated. 66. Exchange for Other Bonds. 67. Transfer of Bonds to and by Treasurer. 68. Registry of Bond Transfers. 69. Association to be Advised of Transfers. 70. Comptroller and Treasurer to Have Access to Books. 71. Annual Examination of Bonds. 72. Delivery of Circulation to Associations — Amount of. 73. Notes May Equal Capital Stock Paid In. 74. Bank Which Has Retired Notes may Increase Cir- culation. 75. Denomination and Limitation of Notes. 76. Printing of Circulating Notes — Denominations — Tenor. 72 73 Section 77. Plates and Dies — Expenses of Bureau. 78. Charter Number of Bank to be Printed on its Notes. 79. Annual Examination of Plates, Dies, etc. 80. Eepeal of Limit of Circulation, etc. 81. Circulating Notes: for What Keceivable. 82. Bank Liable Though Notes Not Signed or Signatures Forged. 83. Issue of Other Notes Prohibited. 84. Destroying and Eeplacing Mutilated Notes. 85. National Gold Banks. 86. Imitation of National Bank Notes — Penalty for. 87. Penalty for Mutilating Notes, etc. 88. Bank to Bedeem Its Notes at Its Counter. 89. Bedemption Fund; Bedemption of Notes at United States Treasury. 90. Bedemption Fund Covered into Treasury. 91. Betiring Circulation. 92. Same Subject. 93. Circulating Notes of Extended Banks — Lawful Money Deposit — Expense of New Plates. 94. Deposit to Bedeem Circulation of Liquidating Banks. 95. Beassignment of Bonds, Bedemption of Notes, etc., in Such Case. 96. Beturn of Notes of Failed or Liquidating Banks. 97. Destruction of Bedeemed Notes of Liquidating Bank. 98. Mode of Protesting Notes. 99. Examination by Special Agent — Forfeiture of Bonds. 100. Bank Not to Do Business After Protest of Notes. 101. Bedemption of Notes at Treasury. 102. Sale of Bonds — Lien of United States upon Assets. 103. Sale of Bonds at Private Sale. 104. Expense of Transporting and Assorting Notes — Cost of Plates. 105. Same Subject. 106. Disposition to be Made of Notes Bedeemed by Treas- urer. 107. Cancellation of Notes. 74 Section 108. Mode of Destruction. § 54. Deposit of Bonds with Treasurer — Repeal of Require- ments for Minimum Deposit.— So much of the provisions of sec- tion fifty-one hundred and fifty-nine of the Revised Statutes of the United States, and section four of the Act of June twentieth, eighteen hundred and seventy-four, and section eight of the Act of July twelfth, eighteen hundred and eighty-two, and of any other provisions of existing statutes as require that before any National banking association shall be authorized to commence banking business it shall transfer and deliver to the Treasurer of the United States a stated amount of United States registered bonds, and so much of those provisions or of any other provisions of existing statutes as require any National banking association now or hereafter organized to maintain a minimum deposit of such bonds with the Treasurer is hereby repealed. (Sec. 17, Act Dec. 23, 1913, as amended by Sec. 9, Act June 21, 1917.) Rigiit of a National Bank to Increase the Amotjnt of Its Circu- lating Notes. — There are no provisions of law which prohibit a Na- tional bank from increasing the amount of its outstanding circulating notes merely because it has withdrawn circulation since the passage of the Federal Reserve Act under the provisions of section 18 of that Act. (Opinion of Counsel of Board, Dec. 4, 1915.) § 55. Retirement of National Bank Notes — Sale of Bonds to Reserve Banks. — After two years from the passage of this Act, and at any time during a period of twenty years thereafter, any mem- ber bank desiring to retire the whole or any part of its circulating notes, may file with the Treasurer of the United States an appli- cation to sell for its account, at par and accrued interest, United States bonds securing circulation to be retired. The Treasurer shall, at the end of each quarterly period, fur- nish the Federal Eeserve Board with a list of such applications, and the Federal Eeserve Board may, in its discretion, require the Federal reserve banks to purchase such bonds from the banks whose applications have been filed with the Treasurer at least ten days before the end of any quarterly period at which the Federal Ee- serve Board may direct the purchase to be made: Provided, That 75 Federal reserve banks shall not be permitted to purchase an amount to exceed $25,000,000 of such bonds in any one year, and which amount shall include bonds acquired under section four* of this Act by the Federal reserve bank. Provided further, That the Federal Reserve Board shall allot to each Federal reserve bank such proportion of such bonds as the capital and surplus of such bank shall bear to the aggregate capital and surplus of all the Federal reserve banks. Upon notice from the Treasurer of the amount of bonds so sold for its account, each member bank shall duly assign and transfer, in writing, such bonds to the Federal reserve bank purchasing the same, and such Federal reserve bank shall, thereupon, deposit law- ful money with the Treasurer of the United States for the purchase price of such bonds, and the Treasurer shall pay to the member bank selling such bonds any balance due after deducting a sufficient sum to redeem its outstanding notes secured by such bonds, which notes shall be cancelled and permanently retired when redeemed. (Sec. 18, Act Dec. 23, 1913; 38 Stat. L., 268.) Since the outbreak of the world war and the resulting demand for circulation of all kinds the Federal Reserve Board has not required the Federal Reserve Banks to purchase any bonds under the provisions of this act. As the present price of all bonds with the circulation privilege is above par, and likely to" remain so, banks desiring to dis- pose of such bonds can sell them to better advantage in the open market. The publishers specialize in buying and selling bonds of this character and will be pleased to receive orders. Purchase of Uxiteo States Boxds by Federal Reserve Banks. — Fed- eral Reserve Banks have an unlimited right to purchase United States bonds in the open market. They may also, under the provisions of Section 18, be permitted or required, after December 23, 1915, to pur- chase bonds bearing the circulation privilege, up to an amount not ex- ceeding $25,000,000 a year, from member banks which make proper ap- plication to the Treasurer of the United States. In order to deter- mine the amount any one reserve bank shall buy under Section 18 in any one year, it is necessary to allot to each bank its own propor- tionate share of the entire sum offered for sale through the Treasurer *This is apparently an error in the Act. Reference should have been made to Section 14. and deduct therefrom the amount of bonds bearing the circulation privilege bought by such bank in the open market within that year. (Opinion of Counsel of Board, April 22, 1915.) Additional Circulation After Sale of Bonds. — A National bank which reduced the amount of its circulating notes by the sale of bonds may take out additional circulation on the security of other bonds bought in the open market. (Informal Ruling of Board, Jan. 6, 1916.) § 56. United States Bonds Defined- The term "United States bond," as used throughout this chapter, shall be construed to mean registered bonds of the United States. (Rev. Stat. U. S. Sec. 5158.) Bonds issued under the Postal Savings Depositories Law can not be deposited as security for circulating notes, nor can Liberty or Victory bonds. § 57. Exchange of Coupon Bonds Authorized. — The Secretary of the Treasury is authorized to receive from any association, and cancel, any United States coupon bonds, and to issue in lieu thereof registered bonds of like amount, bearing a like rate of interest and having the same time to run. (Eev. Stat. U. S. Sec. 5161.) Coupon bonds, as well as registered bonds properly transferred, are usually sent to the office of the Comptroller of the Currency by regis- tered mail or express, and the bond clerk in that office takes the neces- sary steps to convert the coupon bonds into registered, and to turn over the bonds in due course to the custody of the Treasurer of the United States In trust for the bank. § 58. Exchange for Two Per Cent. Bonds Authorized. — Under regulations to be prescribed by the Secretary of the Treasury any National banking association may substitute the two per centum bonds issued under the provisions of this Act for any of the bonds deposited with the Treasurer to secure circulation or to secure deposits of public money. (Act Mfcrch 14, 1900, Sec. 12; 31 Stat. L., 49.) 77 § 59. Basis of Exchange. — Such outstanding bonds may be re- ceived in exchange at a valuation not greater than their present worth to yield an income of two and one-quarter per centum per annum; and in consideration of the reduction of interest effected, the Secretary of the Treasury is authorized to pay the holders of the outstanding bonds surrendered for exchange, out of any money in the Treasury not otherwise appropriated, a sum not greater than the difference between their present worth, computed as afore- said, and their par value, and the payments to be made hereunder shall be held to be payments on account of the sinking fund created by section thirty-six hundred and ninety-four of the Eevised Statutes. (Sec. 11, Act March 14, 1900; 31 Stat. L., 48.) § 60. Issue of Two Per Cent. Bonds Authorized.— The Secretary of the Treasury is hereby authorized to receive at the Treasury any of the outstanding bonds of the United States bearing interest at five per centum per annum, payable February first, nineteen hun- dred and four, and any bonds of the United States bearing interest at four per centum per annum, payable July first, nineteen hun- dred and seven, and any bonds of the United States bearing in- terest at three per centum per annum, payable August first, nine- teen hundred and eight, and to issue in exchange therefor an equal amount of coupon or registered bonds of the United States in such form as he may prescribe, in denominations of fifty dollars or any multiple thereof, bearing interest at the rate of two per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after thirty years from the date of their issue, and said bonds to be payable, principal and interest, in gold coin of the present standard value, and to be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority. (Sec. 11, Act March 14, 1900; 31 Stat. L., 48.) § 61. Two Per Cent. Bonds to be Issued at Par — How Numbered and Paid — Interest.— The two per centum bonds to be issued un- der the provisions of this Act shall be issued at not less than par, and they shall be numbered consecutively in the order of their 78 issue, and when payment is made the last numbers issued shall be first paid, and this order shall be followed until all the bonds are paid; and whenever any of the outstanding bonds are called for payment, interest thereon shall cease three months after such call. (Sec. 11, Act March 14, 1900; 31 Stat. L., 18.) § 62. Deposit of Bonds Issued Under Panama Canal Act. — The two per cent, bonds of the United States authorized by section eight of the act entitled "An act to provide for the construction of a canal connecting the waters of the Atlantic and Pacific oceans," approved June twenty-eighth, nineteen hundred and two, shall have all the rights and privileges accorded by law to other two per cent, bonds of the United States. (Sec. 11, Act Dec. 21, 1905; 34 Stat. L., 5.) § 63. Bonds Issued Under Act of 1909 Not Available. — That the Secretary of the Treasury be, and he is hereby, authorized to insert in the bonds to be issued by him under section thirty-nine of an Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other pur- poses," approved August fifth, nineteen hundred and nine, a pro- vision that such bonds shall not be receivable by the Treasurer of the United States as security for the issue of circulating notes to National banks ; and the bonds containing such provision shall not be receivable for that purpose. (Act March 2, 1911, Ch. 195; 36 Stat. L., 1013.) § 64. Bonds to be Held as Security for Circulating Notes — Interest. — The bonds transferred to and deposited with the Treasurer of the United States by any association, for the se- curity of its circulating notes, shall be held exclusively for that purpose until such notes are redeemed, except as provided in this Title. The Comptroller of the Currency shall give to any such association powers of attorney to receive and appropriate to its own use the interest on the bonds which it has so transferred to the Treasurer; but such powers shall become inoperative whenever such association fails to redeem its circulating notes. (Rev. Stat. U. S. Sec. 5167.) 79 § G5. Where Value of Bonds Has Depreciated.— Whenever the market or cash value of any bonds thus deposited with the Treas- urer is reduced below the amount of the circulation issued for the same, the Comptroller may demand and receive the amount of such depreciation in other United States bonds at cash value, or in money, from the association, to be deposited with the Treasurer as long as such depreciation continues. (Eev. Stat. U. S. Sec. 5167.) § 66. Exchange for Other Bonds.— The Comptroller, upon the terms prescribed by the Secretary of the Treasury, may permit an exchange to be made of any of the bonds deposited with the Treasurer by any associations for other bonds of the United States authorized to be received as security for circulating notes, if he is of opinion that such an exchange can be made without prejudice to the United States; and he may direct the return of any bonds to the association which transferred the same, in sums of not less than one thousand dollars, upon the surrender to him and the can- cellation of a proportionate amount of such circulating notes : Provided, That the remaining bonds which shall have been trans- ferred by the association offering to surrender circulating notes are equal to the amount required for the circulating notes not surren- dered by such association [and that the amount of bonds in the hands of the Treasurer is not diminished below the amount re- quired to be kept on deposit with him],* and that there has been no failure by the association to redeem its circulating notes, nor any other violation by it of the provisions of this Title, and that the market or cash value of the remaining bonds is not below the amount required for the circulation issued for the same. (Eev. Stat. U. S. Sec. 5167.) § 67. Transfer of Bonds to and by Treasurer. — All transfers of United States bonds made by any association under the provisions of this Title shall be made to the Treasurer of the United States in trust for the association, with a memorandum written or printed on each bond, and signed by the cashier or some other officer of the association making the deposit. A receipt shall be given to the as- *See Section 54 which repeals this clause. 80 sociation by the Comptroller of the Currency, or by a clerk ap- pointed by him for that purpose, stating that the bond is held in trust for the association on whose behalf the transfer is made, and as security for the redemption and payment of any circulating notes that have been or may be delivered to such association. No assignment or transfer of any such bond by the Treasurer shall be deemed valid unless countersigned by the Comptroller of the Cur- rency. (Rev. Stat. U. S. Sec. 5162.) For full instructions on the deposit and withdrawal of bonds see Chapter V, Part IV. § 68. Registry of Bond Transfers. — The Comptroller of the Currency shall keep in his office a book, in which he shall cause to be entered, immediately upon countersigning it, every transfer or assignment by the Treasurer of any bonds belonging to a National banking association presented for his signature. He shall state in such entry the name of the association from whose account the transfer is made, the name of the party to whom it is made, and the par value of the bonds transferred. (Rev. Stat. U. S. Sec. 5163.) § 69. Association to be Advised of Transfers. — The Comptroller of the Currency shall, immediately upon countersigning and enter- ing any transfer or assignment by the Treasurer of any bonds be- longing to a National banking association, advise by mail the association from whose accounts the transfer is made of the kind and numerical designation of the bonds and the amount thereof so transferred. (Rev. Stat. U. S. Sec. 5164.) § 70. Comptroller and Treasurer to Have Access to Books. — The Comptroller of the Currency shall have at all times, during office hours, access to the books of the Treasurer of the United States for the purpose of ascertaining the correctness of any transfer or as- signment of the bonds deposited by an association, presented to the Comptroller to countersign; and the Treasurer shall have the like access to the book mentioned in section fifty-one hundred and sixty- 81 three, during office hours, to ascertain the correctness of the entries in the same ; and the Comptroller shall also at all times have access to the bonds on deposit with the Treasurer to ascertain their amount and condition. (Rev. Stat. U. S. Sec. 5165.) § 71. Annual Examination of Bonds. — Every association having bonds deposited in the office of the Treasurer of the United States shall, once or oftener in each fiscal year, examine and compare the bonds pledged by the association with the books of the Comptroller of the Currency and with the accounts of the association, and, if they are found correct, to execute to the Treasurer a certificate setting forth the different kinds and the amounts thereof, and that the same are in the possession and custody of the Treasurer at the date of the certificate. Such examination shall he made at such a time or times during the ordinary business hours as the Treasurer and the Comptroller, respectively, may select, and may be made by an officer or agent of such association duly appointed in writing for that purpose; and his certificate before mentioned shall be of like force and validity as if executed by the president or cashier. A duplicate of such certificate, signed by the Treasurer, shall be re- tained by the association. (Rev. Stat. IT. S. Sec. 5166.) This section throws upon the association the direct responsibility of ascertaining the safety and actual presetoce on deposit of the bonds held in trust for it by the Treasurer. The examination is made in practically all cases by the bank's accredited agent, and we render this service for a large number of banks. For full details see Chapter V, Part IV. 72. Delivery of Circulation to Associations — Amount of. — Upon the deposit with the Treasurer of the United States, by any National banking association, of any bonds of the United States in the manner provided by existing law, such association shall be entitled to receive from the Comptroller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited; and any National banking association now having bonds on deposit for the security of circulating notes, and upon which an amount of 6 82 circulating notes has been issued less than the par value of the bonds, shall be entitled, upon due application to the Comptroller of the Currency, to receive additional circulating notes in blank to an amount which will increase the circulating notes held by such association to the par value of the bonds deposited, such ad- ditional notes to be held and treated in the same way as circu- lating notes of National banking associations heretofore issued, and subject to all the provisions of law affecting such notes : Pro- vided, That nothing herein contained shall be construed to modify or repeal the provisions of section fifty-one hundred and sixty- seven of the Eevised Statutes of the United States, authorizing the Comptroller of the Currency to require additional deposits of bonds or of lawful money in case the market value of the bonds held to secure the circulating notes shall fall below the par value of the circulating notes outstanding for which such bonds may be deposited as security. (Act March 14, 1900, Ch. 41, Sec. 12; 31 Stat. L., 49.) § 73. Notes May Equal Capital Stock Paid In. — The total amount of such notes issued to any such association may equal at any time but shall not exceed the amount at such time of its capital stock actually paid in. (Act March 14, 1900, Sec. 12; 31 Stat. L., 49.) § 74. Eank Which Has Retired Notes May Increase Circulation. — So much of an Act entitled "An Act to enable National bank- ing associations to extend their corporate existence, and for other purposes," approved July twelfth, eighteen hundred and eighty- two, as prohibits any National bank which makes any deposit of lawful money in order to withdraw its circulating notes from re- ceiving any increase of its circulation for the period of six months from the time it made such deposit of lawful money for the pur- pose aforesaid, is hereby repealed, and all other Acts or parts of Acts inconsistent with the provisions of this section are hereby repealed. (Act March 14, 1900, Sec. 12; 31 Stat. L., 49.) § 75. Denomination and limitation of Notes. — That the Act of June third, eighteen hundred and sixty-four, Eevised Statutes, 83 section fifty-one hundred and seventy-five, which prohibits national banks from being furnished with notes of less denomination than $5, be, and it is hereby, repealed. Sec. 2. That that part of the Act of March fourteenth, nine- teen hundred, which provides "that no National banking associa- tion shall, after the passage of this Act, be entitled to receive from the Comptroller of the Currency, or to issue or reissue, or place in circulation more than one-third in amount of its circulating notes of the denomination of $5," be, and it is hereby, repealed. Sec. 3. That from and after the passage of this Act any Na- tional banking association, upon compliance with the provisions of law applicable thereto, shall be entitled to receive from the Comptroller of the Currency, or to issue or reissue, or place in circulation notes in denominations of $1, $2, $5, $10, $20, $50, and $100 in such proportion as to each of said denominations as the bank may elect: Provided, however, That no bank shall receive or have in circulation at any one time more than $25,000 in notes of the denominations of $1 and $2. Sec. 4. That all Acts or parts of Acts which are inconsistent with this Act are hereby repealed. (Act Oct. 5, 1917, repealing Eev. Stat. U. S. Sec. 5175 and part of Sec. 12, Act March 14, 1900.) § 76. Printing 1 of Circulating Notes — Denominations — Tenor. — That in order to furnish suitable notes for circulation, the Comp- troller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved, in the best manner to guard against counterfeiting and fraudulent alterations, and shall have printed therefrom and numbered such quantity of circulating notes in blank, or bearing engraved signatures of officers as herein provided, of the denominations of $1, $2, $5, $10, $20, $50, $100, $500, and $1,000, as may be required to supply the associations entitled to receive the same. Such notes shall express upon their face that they are secured by United States bonds deposited with the Treasurer of the United States, by the written or engraved signatures of the Treasurer and Register, and by the imprint of the seal of the Treasury; and shall also 84 express upon their face the promise of the association receiving the same to pay on demand, attested by the written or engraved signatures of the president or vice president and cashier; and shall bear such devices and such other statements and shall be in such form as the Secretary of the Treasury shall, by regula- tion, direct. (Rev. Stat. U. S. Sec. 5172, as amended by Sec. 4, Act March 3, 1919.) § 77. Plates and Dies — Expenses of Bureau. — The plates and special dies to be procured by the Comptroller of the Currency for the printing of such circulating notes shall remain under his con- trol and direction, and the expenses necessarily incurred in execut- ing the laws respecting the procuring of such notes, and all other expenses of the Bureau of the Currency, shall be paid out of the proceeds of the taxes or duties assessed and collected on the circula- tion of National banking associations under this Title. (Rev. Stat. U. S. Sec. 5173.) § 78. Charter Number of Bank to be Printed on Its Notes. — ■ That the Comptroller of the Currency shall, under such rules and regulations as the Secretary of the Treasury may prescribe, cause the charter numbers of the association to be printed upon all National bank notes which may be hereafter issued by him. (Act June 20, 1874, Ch. 343, Sec. 5; 18 Stat. L., 124.) § 79. Annual Examination of Plates, Dies, etc.— The Comp- troller of the Currency shall cause to be examined, each year, the plates, dies, but-pieces (bed-pieces), and other material from which the National bank circulation is printed, in whole or in part, and file in his office annually a correct list of the same. Such ma- terial as shall have been used in the printing of the notes of associations which are in liquidation, or have closed business, shall be destroyed under such regulations as shall be prescribed by the Comptroller of the Currency and approved by the Secretary of the Treasury. The expenses of any such examination or destruction shall be paid out of any appropriation made by Congress for the 85 special examination of National banks and bank-note plates. (Rev. Stat. IT. S. Sec. 5174; Act Feb. 27, 1877, c. 69; 19 Stat. L., 252.) § 80. Repeal of Limit of Circulation, etc. — 'That section five thousand one hundred and seventy-seven of the Eevised Statutes, limiting the aggregate amount of circulating notes of National banking associations, be, and is hereby, repealed; and each exist- ing banking association may increase its circulating notes in ac- cordance with existing law without respect to said aggregate limit; and new banking associations may be organized in accordance with existing law without respect to said aggregate limit; and the pro- visions of law for the withdrawal and redistribution of National bank currency among the several States and Territories are hereby repealed. (Act. Jan. 14, 1875, Ch. 15, Sec. 3; 18 Stat. L., 296.) § 81. Circulating 1 Notes — For What Receivable. — Any associa- tion receiving circulating notes under this title may, if its promise to pay such notes on demand is expressed thereon attested by the written or engraved signatures of the president or vice president and the cashier thereof in such manner as to make them obliga- tory promissory notes payable on demand at its place of business, issue, and circulate the same as money. Such written or engraved signatures of the president or vice president and the cashier of such association may be attached to such notes either before or after the receipt of such notes by such association. And such notes shall be received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except duties on imports; and also for all salaries and other debts and demands owing by the United States to indi- viduals, corporations, and associations within the United States, except interest on the public debt, and in redemption of the Na- tional currency. (Eev. Stat. Sec. 5182, as amended by Act ap- proved Jan. 13, 1920.) § 82. Bank Liable Though Notes Not Signed or Signatures Forged. — That the provisions of the Eevised Statutes of the United States, providing for the redemption of National bank SG notes, shall apply to all National bank notes that have been or may be issued to, or received by, any National bank, notwithstanding such notes may have been lost or stolen from the bank and put in circulation without the signature or upon the forged signature of the president or vice president and cashier. (Act July 28, 1892, Ch. 317; 27 Stat. L., 322.) § 83. Issue of Other Notes Prohibited. — No National banking association shall issue post-notes or any other notes to circulate as money than such as are authorized by the provisions of this Title. (Eev. Stat. U. S. Sec. 5183.) Applies to Cihcueatixg Notes. — 'This section applies only -where the instruments are issued to "circulate as money," and where this is not the purpose they are not within the prohibition. (Hunt, Appellant, 141 Mass., 515; Riddle v. First Nat. Bank, 27 Fed. Rep., 503.) Thus, it has been held, that this section does not forbid the issue of cer- tificates of deposit. (See cases cited above.) Nor does it forbid the certification of checks, although the purpose of a certification, by making the check primarily the obligation of the bank, is to give it currency so that it may pass freely from hand to hand. (See Mer- chants' National Bank v. State National Bank, 10 Wallace, 604.) § 84. Destroying and Replacing Mutilated Notes. — It shall be the duty of the Comptroller of the Currency to receive worn-out or mutilated circulating notes issued by any banking association, and also, on due proof of the destruction of any such circulating notes, to deliver in place thereof to the association other blank circulating notes to an equal amount. Such worn-out or mutilated notes, after a memorandum has been entered in the proper books, in ac- cordance with such regulations as may be established by the Comp- troller, as well as all circulating notes which shall have been paid or surrendered to be cancelled, shall be burned * to ashes in pres- ence of four persons, one to be appointed by the Secretary of the Treasury, one by the Comptroller of the Currency, one by the Treasurer of the United States, and one by the association, under such regulations as the Secretary of the Treasury may prescribe. A certificate of such burning, signed by the parties so appointed, *See Section 108, which provides for destruction by maceration. 87 shall be made in the books of the Comptroller, and a duplicate thereof forwarded to the association whose notes are thus cancelled. (Eev. Stat. U. S. Sec. 5184.) This section makes it mandatory for National banks with circula- tion to appoint a representative to witness the destruction of multilated notes. We act in this capacity for a large number of banks. For full details and forms see Chapter V, Part IV. § 85. National Gold Banks.— As no National gold banks are now in existence the provisions of the National Bank Act relating thereto are omitted. § 86. Imitation of National Bank Notes — Punishment for. — See Chapter on Crimes and Misdemeanors, page 182. § 87. Penalty for Mutilating Notes, etc.— See Chapter on Crimes and Misdemeanors, page 183. § 88. Bank to Redeem Its Notes at Its Counter.— This section shall not relieve any association from its liability to redeem its circulating notes at its own counter, at par, in lawful money on demand. (Rev. Stat. IT. S. Sec. 5195.) The other provisions of the section required the selection of banks in certain cities as redemption agents. These provisions were repealed by the act of June 30, 1874. See next section. § 89. Redemption Fund ; Redemption of Notes at United States Treasury. — That every association organized, or to be organized, under the provisions of the said act, and of the several acts amen- datory thereof, shall at all times keep and have on deposit in the Treasury of the United States, in lawful money of the United States, a sum equal to five per centum of its circulation, to be held and used for the redemption of such circulation [which sum shall be counted as a part of its lawful reserve, as provided in section two of this act] ;* and when the circulating notes of any such associations, assorted or unassorted, shall be presented for re- demption, in sums of one thousand dollars or any multiple thereof, ♦Repealed by Section 20 of Federal Reserve Act. 88 to the Treasurer of the United States, the same shall be redeemed in United States notes. All notes so redeemed shall be charged by the Treasurer of the United States to the respective associations issuing the same, and he shall notify them severally on the first day of each month, or oftener, at his discretion, of the amount of such redemptions ; and whenever such redemptions for any associa- tion shall amount to the sum of five hundred dollars, such asso- ciation so notified shall forthwith deposit with the Treasurer of the United States a sum in United States notes equal to the amount of its circulating notes so redeemed. And all notes of National banks, worn, defaced, mutilated, or otherwise unfit for circulation, shall, when received by any Assistant Treasurer, or at any designated depository of the United States, be forwarded to the Treasurer of the United States for redemption, as provided herein. And when such redemptions have been so reimbursed, the circulating notes so redeemed shall be forwarded to the respective associations by which they were issued ; but if any of such notes are worn, mutilated, defaced, or rendered otherwise unfit for use, they shall be forwarded to the Comptroller of the Currency and destroyed, and replaced as now provided by law.* . . . And provided further, That so much of section thirty-two of said Na- tional Bank Act requiring or permitting the redemption of its circulating notes elsewhere than at its own counter, except as provided for in tins section, is hereby repealed. (Act June 20, 1874, Ch. 343, Sec. 3 ; 18 Stat. L., 123.) For full particulars on the five per cent, fund and on the redemp- tion of currency see Chapter V, Part IV. § 90. Redemption Fund Covered into Treasury. — That upon the passage of this act the balances standing with the Treasurer of the United States to the respective credits of National banks for deposits made to redeem the circulating notes of such banks, and all deposits thereafter received for like purpose, shall be cov- *The provision omitted requires the banks to reimburse the Treasury the expense incurred. 89 ered into the Treasury as a miscellaneous receipt, and the Treas- urer of the United States shall redeem from the general cash in the Treasury the circulating notes of said banks which may come into his possession subject to redemption, and upon the certifi- cate of the Comptroller of the Currency that such notes have been received by him and that they have been destroyed and that no new notes will be issued in their place, reimbursement of their amount shall be made to the Treasurer, under such regulations as the Secretary of the Treasury may prescribe, from an appropria- tion hereby created, to be known as National bank notes Redemp- tion account, but the provisions of this act shall not apply to the deposits received under section three of the Act of June twentieth, eighteen hundred and seventy-four, requiring every National bank to keep in lawful money with the Treasurer of the United States a sum equal to five per centum of its circulation, to be held and used for the redemption of its circulating notes; and the balance remaining of the deposits so covered shall, at the close of each month, be reported on the monthly public debt statement, as debt of the United States bearing no interest. (Act July 14, 1890, Ch. 708, Sec. 6; 26 Stat. L., 289.) § 91. Retiring Circulation. — That any association organized under this act, or any of the acts of which this is an amendment, desiring to withdraw its circulating notes, in whole or in part, may, upon the deposit of lawful money with the Treasurer of the United States [in sums of not less than nine thousand dollars],* take up the bonds which said association has on deposit with the Treasurer for the security of such circulating notes, which bonds shall be as- signed to the bank in the manner specified in the nineteenth sec- tion of the National Bank Act; and the outstanding notes of said association, to an amount equal to the legal tender notes deposited, *The clauses of this section enclosed in brackets were repealed by Section 17 of the Federal Reserve Act as amended by Section 9 of the act of June 21. 1917. (See Section 54 ante). National banks are there- fore no longer required to make deposit of bonds as a condition pre- cedent to the commencement of business, or to make or maintain minimum deposits. 90 shall be redeemed at the Treasury of the United States, and de- stroyed as now provided by law: [Provided, That the amount of the bonds on deposit for circulation shall not be reduced below fifty thousand dollars.]* An association which is in good faith winding up its business for the purpose of consolidating with an- other association shall not be required to deposit lawful money for its outstanding circulation; but its assets and liabilities shall be reported by the association with which it is in process of consolida- tion. (Act June 20, 1874, Ch. 343, Sec. 4; 18 Stat. U. S. 124; Bev. Stat. TJ. S. 5223.) § 92. Same Subject — Retiring Circulation. — That any National banking association, now organized or hereafter organized, desiring to withdraw its circulating notes, upon a deposit of lawful money with the Treasurer of the United States, as provided in section four of the Act of June twentieth, eighteen hundred and seventy- four, or as provided in this Act, is authorized to deposit lawful money and, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, withdraw a proportionate amount of bonds held as security for its circulating notes in the order of such deposits : Provided, That not more than nine millions of dollars of lawful money shall be deposited during any calendar month for this purpose: And provided further, That the provisions of this section shall not apply to bonds called for redemption by the Secretary of the Treasury, nor to the with- drawal of circulating notes in consequence thereof. (Act July 12, 1882, Ch. 290, Sec. 9; 22 Stat. L., 164; Act March 4, 1907, Sec. 4; 34 Stat. L., 1290.) The provision omitted provided that "no National hank which makes any deposit of lawful money in order to withdraw its circulating notes shall be entitled to receive any increase of its circulation for the period of six months from the time it made such deposits of lawful money for the purpose aforesaid." This was repealed by Act March 14, 1900. § 93. Circulating Notes of Extended Banks — Lawful Money Deposit — Expense of New Plates. — That the circulating notes of any association so extending the period of its succession, which. * Repealed. See § 54 Ante. 91 shall have been issued to it prior to such extension, shall be re- deemed at the Treasury of the United States, as provided in section three of the Act of June twentieth, eighteen hundred and seventy- four, entitled "An Act fixing the amount of United States notes, providing for redistribution of National bank currency, and for other purposes," and such notes when redeemed shall be forwarded to the Comptroller of the Currency and destroyed, as now pro- vided by law; and at the end of three years from the date of the extension of the corporate existence of each bank the association so extended shall deposit lawful money with the Treasurer of the United States sufficient to redeem the remainder of the circula- tion which was outstanding at the date of its extension, as pro- vided in sections fifty-two hundred and twenty-two, fifty-two hun- dred and twenty-four, and fifty-two hundred and twenty-five of the Eevised Statutes; and any gain that may arise from the fail- ure to present such circulating notes for redemption shall inure to the benefit of the United States ; and from time to time, as such notes are redeemed or lawful money deposited therefor as pro- vided herein, new circulating notes shall be issued as provided for by this act, bearing such devices, to be approved by the Secretary of the Treasury, as shall make them readily distinguishable from the circulating notes heretofore issued: Provided, however, That each banking association which shall obtain the benefit of this Act shall reimburse to the Treasury the cost of preparing the plate or plates for such new circulating notes as shall be issued to it. (Act July 12, 1882, Ch. 290, Sec. 6; 22 Stat. L., 163.) § 94. Deposit to Redeem Circulation of Liquidating Banks. — Within six months from the date of the vote to go into liquidation, the association shall deposit with the Treasurer of the United States lawful money of the United States sufficient to redeem all its outstanding circulation. The Treasurer shall execute duplicate receipts for money thus deposited, and deliver one to the associa- tion and the other to the Comptroller of the Currency, stating the amount received by him, and the purpose for which it has been received; and the money shall be paid into the Treasury of the 92 •United States, and placed to the credit of such, association upon redemption account. (Eev. Stat. U. S. Sec. 5222.) Limit of Time. — If not otherwise determined, the vote to liquidate takes effect immediately, and the six months run from that date; but if the vote itself is that the liquidation shall take place at a, future date, then that future date is the actual date on which the vote takes effect, and the six months run therefrom. Lawful Money. — Lawful money is United States gold coin, silver dollars or legal-tender notes. See $346 ff. How Deposit Made. — The usual method is to make the deposit either directly or through a correspondent or agent with the Treasurer of the United States at Washington, or an Assistant Treasurer. When the depo'sit is made with an Assistant Treasurer, he issues a certificate of deposit which is sent to Washington. When the deposit is made, and the bank has paid to the United States Treasurer all amounts due for taxes on circulation and all amounts due for expenses of redeem- ing notes, its bonds on deposit will be surrendered to' it. We are al- ways glad to sell such bonds for liquidating banks and can arrange to make the deposit so that the bank will not put up any money. § 95. Reassignment of Bonds, Redemption of Notes, etc., in Such Case. — Whenever a sufficient deposit of lawful money to re- deem the outstanding circulation of an association proposing to close its business has been made, the bonds deposited by the asso- ciation to secure payment of its notes shall be reassigned to it in the manner prescribed by section fifty-one hundred and sixty-two. And thereafter the association and its shareholders shall stand dis- charged from all liabilities upon the circulating notes, and those notes shall be redeemed at the Treasury of the United States. And if any such bank shall fail to make the deposit and take up its bonds thirty days after the expiration of the time specified, the Comptroller of the Currency shall have power to sell the bonds pledged for the circulation of said bank, at public auction in New York city, and after providing for the redemption and cancella- tion of said circulation, and the necessary expenses of the sale, to pay over any balance remaining to the bank or its legal representa- tive. (Rev. Stat. U. S. Sec. 5224; Act Feb. 18, 1875, c. 80; 18 Stat. L., 320.) 93 § 96. Return of Notes of Failed or Liquidating Banks.— .'And it shall be the duty of the Treasurer, assistant treasurers, designated depositaries and National bank depositaries of the United States * * * to assort and return to the Treasury for redemption the notes of such National banks as have failed, or gone into volun- tary liquidation for the purpose of winding up their affairs, and of such as shall hereafter so fail or go into liquidation. (Act June 20, 1874, Sec. 8; 18 Stat. L., 125.) § 97. Destruction of Redeemed Notes of Liquidating Bank. — Whenever the Treasurer has redeemed any of the notes of an asso- ciation which lias commenced to close its affairs under the five preceding sections, he shall cause the notes to be mutilated and charged to the redemption account of the association ; and all notes so redeemed by the Treasurer shall, every three months, be certi- fied to and burned * in the manner prescribed in section fifty-one hundred and eighty-four. (Rev. Stat. U. S. 5225; Act Feb. 27, 1877, c. 69; 19 Stat. L., 252.) § 98. Mode of Protesting Notes. — Whenever any National banking association fails to redeem in the lawful money of the United States any of its circulating notes, upon demand of pay- ment duly made during the usual hours of business, at the office of such association, [or at its designated place of redemption] -!- the holder may cause the same to be protested, in one package by a notary public, unless the president or cashier of the association whose notes are presented for payment, or the president or cashier of the association at the place at which they are redeemable f offers to waive demand and notice of the protest, and, in pursuance of such offer, makes, signs, and delivers to the party making such demand an admission in writing, stating the time of the demand, the amount demanded, and the fact of the non-payment thereof. * See Section 108, which provides that such notes be destroyed by maceration. f Circulation is redeemable only at the Treasury or over the counter of the association. Designated places of redemption have not existed since June 20, 1874. 94 The notary public, on making such protest, or upon receiving such admission, shall forthwith forward such admission or notice of protest to the Comptroller of the Currency, retaining a copy therof. If, however, satisfactory proof is produced to the notary public that the payment of the notes demanded is restrained by order of any court of competent jurisdiction, he shall not protest the same. When the holder of any notes causes more than one note or package to be protested on the same day, he shall not re- ceive pay for more than one protest. (Rev. Stat. U. S. Sec. 522G.) Redemption After Lawful Money Deposit. — It is, perhaps, open to dispute whether a bank, after it has deposited lawful money to retire a portion of its circulation under the act of June 20, 1874, is obliged to redeem its notes at its own counter until the deposit of lawful money- is exhausted by presentation of notes at the Treasury. In other words, it is held by some that while lawful money remains on deposit in the Treasury the bank might refuse to redeem a note presented at its own counter, and refer the presentor to the Treasury. However this may be, while Section 5227 is in force, a bank might place itself in a very disagreeable position, and perhaps injure its credit, by refusing to re- deem any of its notes at its own counter, that is, so long as it continues a going bank. § 99. Examination by Special Agent — Forfeiture of Bonds. — On receiving notice that any National banking association has failed to redeem any of its circulating notes, as specified in the pre- ceding section, the Comptroller of the Currency, with the con- currence of the Secretary of the Treasury, may appoint a special agent, of whose appointment immediate notice shall be given to such association, who shall immediately proceed to ascertain whether it has refused to pay its circulating notes in the lawful money of the United States, when demanded, and shall report to the Comptroller the fact so ascertained. If from such protest, and the report so made, the Comptroller is satisfied that such asso- ciation has refused to pay its circulating notes and is in default, he shall, within thirty days after he has received notice of such fail- ure, declare the bonds deposited by such association forfeited to the United States, and they shall thereupon be so forfeited. (Rev. Stat. U. S. Sec. 5227.) 95 § 100. Bank Not to Do Business After Protest of Notes. — After a default on the part of an association to pay any of its circulating notes has been ascertained by the Comptroller, and notice thereof has been given by him to the association, it shall not be lawful for the association suffering the same to pay out any of its notes, discount any notes or bills or otherwise prosecute the business of banking, except to receive and safely keep money belonging to it, and to deliver special deposits. (Rev. Stat. U. S. Sec. 5228; Act Feb. 18, 1875, c. 80; 18 Stat. L., 320.) § 101. Redemption of Notes at Treasury. — Immediately upon declaring the bonds of an association forfeited for non-payment of its notes, the Comptroller shall give notice, in such manner as the Secretary of the Treasury shall, by general rules or otherwise, direct, to the holders of the circulating notes of such association, to present them for payment at the Treasury of the United States ; and the same shall be paid as presented in lawful money of the United States; whereupon the Comptroller may, in his discretion, cancel an amount of bonds pledged by such association equal at current market rates, not exceeding par, to the notes paid. (Rev. Stat. U. S. Sec. 5229.) § 102. Sale of Bonds — Lien of United States Upon Assets. — Whenever the Comptroller has become satisfied, by the protest or the waiver and admission specified in section fifty-two hundred and twenty-six, or by the report provided for in section fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes, he may, instead of cancelling its bonds, cause so much of them as may be necessary to redeem its outstand- ing notes to be sold at public auction in the city of New York, after giving thirty days' notice of such sale to the association. For any deficiency in the proceeds of all the bonds of an associa- tion, when thus sold, to reimburse to the United States the amount expended in paying the circulating notes of the association, the United States shall have a paramount lien upon all its assets; and such deficiency shall be made good out of such assets in preference to any and all other claims whatsoever, except the 90 necessary costs and expenses of administering the same. (Rev. Stat. U. S. Sec. 5230.) § 103. Sale of Bonds at Private Sale. — The Comptroller may, if he deems it for the interest of the United States, sell at private sale any of the bonds of an association shown to have made default in paying its notes, and receive therefor either money or the cir- culating notes of the association. But no such bonds shall be sold by private sale for less than par, nor for less than the market value thereof at the time of sale ; and no sales of any such bonds, either public or private, shall be complete until the transfer of the bonds shall have been made with the formalities prescribed by sec- tions fifty-one hundred and sixty-two, fifty-one hundred and sixty- three, and fifty-one hundred and sixty-four. (Rev. Stat. U. S. Sec. 5231.) § 104. Expense of Transporting and Assorting Notes — Cost of Plates. — That each of said associations shall reimburse to the Treasury the charges for transportation and the costs for assorting such notes; and the associations hereafter organized shall also severally reimburse to the Treasury the cost of engraving such plates as shall be ordered by each association respectively; and the amount assessed upon each association shall be in proportion to the circulation redeemed, and be charged to the fund on deposit with the Treasurer. (Act June 20, 1874, Ch. 343, Sec. 3; 18 Stat. L., 124.) § 105. Same Subject. — 'That the National banks which shall hereafter make deposits of lawful money for the retirement in full of their circulation shall, at the time of their deposit, be as- sessed for the cost of transporting and redeeming their notes then outstanding a sum equal to the average cost of the redemption of National bank notes during the preceding year, and shall there- upon pay such assessment; and all National banks which have heretofore made, or shall hereafter make, deposits of lawful money for the reduction of their circulation, shall be assessed and shall pay an assessment in the manner specified in section three of the 97 Act approved June twentieth, eighteen hundred and seventy-four, for the cost of transporting and redeeming their notes redeemed from such deposits subsequently to June thirtieth, eighteen hun- dred and eighty-one. (Act July 12, 1882, Ch. 290, Sec. 8; 22 Stat. L., 164.)* § 106. Disposition to be Made of Notes Redeemed by Treasurer. — The Secretary of the Treasury may, from time to time, make such regulations respecting the disposition to be made of circu- lating notes after presentation at the Treasury of the United States for payment, and respecting the perpetuation of the evi- dence of the payment thereof, as may seem to him proper. (Rev. Stat. IT. S. 5232.) Notes of Failed Banks. — This section was originally part of Section 47 of the Act of June 3, 1864, and had application only to notes of banks in default, the bonds of which were forfeited, and which notes were redeemed, under a further provision of the same Section 47 (now Section 5229, Rev. Stat. U. S.) at the Treasury of the United States. Certificates of Destruction. — The disposition to be made of this particular class of notes is left to the discretion of the Secretary of the Treasury. If Section 5232 as it now stands is construed to apply solely to the notes of banks in default redeemed at the Treasury, then a certificate of destruction of all other classes of notes redeemed at the Treasury, whether of banks in liquidation or of banks retiring cir- culation, must be furnished to the respective associations issuing the notes, as the mode of destruction of all other classes of notes is fixed in the various sections o'f the law regarding the same. (See Section 5225, R. S. U. S.; Section 3 of the Act of June 20, 1874; Sections 6 •and 7 of the Act of July 12, 1882, and Section 5184, Rev. Stat. U. S. See Sections 84, 89, 93 and 97.) § 107. Cancellation of Notes. — All notes of National banking associations presented at the Treasury of the United States fon payment shall, on being paid, be cancelled. (Eev. Stat. U. S. Sec. 5233.) * This section should be read in connection with Section 9, Act of June 21, 1917, Section 54 ante, repealing previous requirements that minimum deposits of bonds be maintained by National banks with the U. S. Treasurer. 7 98 This provision is modified as to notes fit for circulation redeemed from the 5 per cent, redemption fund by the Act of June 20, 1874, Sec- tion 3, which permits such notes to be returned to the banks for reissue. § 108. Mode of Destruction. — For the maceration of National bank notes, United States notes, and other obligations of the United States authorized to be destroyed, ten thousand dollars; and that all such issues hereafter destroyed may be destroyed by maceration instead of burning to ashes, as now provided by law; and that so much of sections twenty-four and forty-three of the National Currency Act as requires National bank notes to be burned to ashes is hereby repealed. (Act June 23, 1874, Ch. 455, Sec. 1; 18 Stat. L., 20C.) By Act June 20, 1874, Ch. 343, Sec. 8 (18 Stat. U. S., 124) it is made the duty "of the Treasurer, Assistant Treasurers, designated deposit- aries, and National bank depositaries of the United States, * * to assort and return to the Treasury, for redemption, the notes of such National banks as have failed, or gone into voluntary liquidation, for the purpose of winding up their affairs." CHAPTER V. Regulation of the Banking Business. Section 109. Place of Business. 110. Reserve Cities — Central Reserve Cities. 111. Bank Reserves. 112. Redemption Fund with Treasurer Not Part of Re~ serve. 113. Limit of Liability of any Person to Bank. 114. Limit on Total Indebtedness of Banks — Exceptions. 115. Check Not to be Certified Unless Drawer Has Amount Thereof on Deposit. 116. Banks Not to Lend Upon Their Own Stock. 117. Enforcing Payment of Capital Stock. 118. Withdrawal of Capital— Dividends— Bad Debts. 119. Dividends and Surplus Funds. 120. Circulating Notes Not to be Hypothecated. 121. Each Bank to Receive Notes of Other Banks. 122. Banks Not to Pay out Uncurrent Notes. 123. Stamping Counterfeit Notes. 124. List of Shareholders. 125. Rate of Interest Which Bank May Charge. 126. Penalty for Taking Usurious Interest. § 109. Place of Business.— The usual business of each National banking association shall be transacted at an office or banking house located in the place specified in its organization certificate. (Rev. Stat. U. S. Sec. 5190.) For the provision authorizing National hanks having a capital and surplus of $1,000,000 or more to establish branches in foreign coun- tries see Sec. 25 of the Federal Reserve Act, page 304. 99 100 Place of Business. — This provision must be construed reasonably; and where a part of the legitimate business of the bank can not be transacted at the banking-house it may be done elsewhere. (Mer- chants Nat. Bank v. State Nat. Bank, 10 Wallace, 604.) Branch Banks. — It is settled beyond doubt that a National bank, independently of the National Bank Act, is not under its charter authorized to establish a branch bank for the purpose of carrying on a general banking business in the place designated in its certificate of organization or anywhere in the United States, and furthermore, that Section 5190, U. S. R. S., properly construed, restricts the carrying on of a general banking business by a National bank to one office or banking house in the place designated in the association certificate of organization, except in so far as that section is amended by Section 25 of the Federal Reserve Act, as amended, which permits foreign branches under certain conditions. (See opinion of Attorney-General regarding Lowry National Bank of Atlanta, Georgia, 29 Op. A. G., 81.) And the Solicitor of the Treasury in an opinion rendered July 25, 1910, held that a National bank could not establish a branch or agency for the purpose of receiving deposits and cashing checks. See also Arm- strong v. Second National Bank (38 Fed. Rep., 883.) Agencies. — 'There is a clear distinction between a branch bank and an agency. (29 Op. Atty. Gen., 81.) A National bank may establish an agency for a specific purpose such as dealing in bills of exchange. (Bank of Augusta v. Earle, 13 Pet, 519; Bank v. Beach, Fed. Case No. 2736.) § 110. Reserve Cities — Central Reserve Cities. — The power to designate Reserve and Central Reserve cities is now vested in the Federal Reserve Board, see section 11 (e) of Federal Reserve Act, page 230, and note thereto for a list of the Reserve and Central Reserve cities. § 111. Bank Reserves. — (This subject is now governed Ivy Sec- tion 19 of the Federal Reserve Act. See page 294 ff.) § 112. Redemption Fund with Treasurer Not Part of Reserve. — (Sections two and three of the Act of June 20, 1874, which pro- vided that the redemption fund deposited with the Treasurer might be counted as a part of the reserve was repealed by Section 20 of the Federal Reserve Act. See page 300.) 101 § 113. Limit of Liability of Any Person to Bank. — The total liabilities to any association of any person or of any company, cor- poration, or firm for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed 10 per centum of the amount of the capital stock of such association, actually paid in and unimpaired, and 10 per centum of its unimpaired surplus fund: Provided, how- ever, That (1) the discount of bills of exchange drawn in good faith against actually existing values, including drafts and bills of exchange secured by shipping documents conveying or securing title to goods shipped, and including demand obligations when se- cured by documents covering commodities in actual process of ship- ment, and also including bankers' acceptances of the kinds de- scribed in Section 13 of the Federal Eeserve Act, (2) the dis- count of commercial or business paper actually owned by the per- son, company, corporation, or firm negotiating the same, (3) the discount of notes secured by shipping documents, warehouse re- ceipts, or other such documents conveying or securing title cover- ing readily marketable nonperishable staples, including live stock, when the actual market value of the property securing the obliga- tion is not at any time less than 115 per centum of the face amount of the notes secured by such documents and when such property is fully covered by insurance, and (1) the discount of any note or notes secured by not less than a like face amount of bonds or notes of the United States issued since April 24, 1917, or certificates of indebtedness of the United States, shall not be considered as money borrowed within the meaning of this section. The total liabilities to any association, of any person or of any cor- poration, or firm, or company, or the several members thereof upon any note or notes purchased or discounted by such associa- tion and secured by bonds, notes, or certificates of indebtedness as described in (4) hereof shall not exceed (except to the extent permitted by rules and regulations prescribed by the Comptroller of the Currency, with the approval of the Secretary of the Treas- ury) 10 per centum of such capital stock and surplus fund of such association and the total liabilities to any association of any person or of any corporation, or firm, or company, or the several 103 members thereof for money borrowed, including the liabilities upon notes secured in the manner described under (3) hereof, except transactions (1), (2), and (4), shall not at any time exceed 25 per centum of the amount of the association's paid-in and unim- paired capital stock and surplus. The exception made under (3) hereof shall not apply to the notes of any one person, corporation or firm or company, or the several members thereof for more than six months in any consecutive twelve months. (Rev. Stat. U. S. Sec. 5200, as amended by Act Jan. 22, 1906 ; by Sec. 6, Act Sept. 24, 1918, and by Sec. 1, Act Oct. 22, 1919.) CIRCULAR OF THE COMPTROLLER OF THE CURRENCY OF OCTOBER 25, 1919. Loaning Powebs of National Banks Under the Amendment to Section 5200, U. S. R. S., Which Became Effective October 22, 1919. (Section 5200 as set out above Is omitted to avoid repetition.) The amounts which, a National bank may properly lend to any one person, company, corporation, or firm (including in the liability of a company or firm, the liabilities of the several members thereof) under the various clauses of Section 5200, as amended by the Act of October 22, 1919, are stated in terms of the percentage of the paid-up and un- impaired capital stock and surplus of the lending bank Character of loans. (A) Accommodation or straight loans, whether or not single name. Loans secured by stocks, bonds, and authorized real estate mort- gages. (B) "Bills of exchange drawn in good faith against actually existing values." The law expressly provides that this phrase shall also include: (a) Drafts and bills of exchange secured by shipping documents conveying or securing title to the goods shipped. (b) Demand obligations, when secured by documents covering commodities in actual process of shipment. (c) Bankers' acceptances of the kinds described in Section 13 of the Federal Reserve Act. (C) Commercial or business paper (of other makers) actually owned by the person, company, corporation, or firm negotiating the same. 103 (D) Notes secured by shipping documents, warehouse receipts, or other such documents, conveying or securing title covering read- ily marketable nonperishable staples, including live stock. No bank may make any loan under (D), however, (a) Unless the actual market value of the property securing the obligation is not at any time less than 115 per cent, of the face amount of the note, and (b) Unless the property is fully covered by insurance, and in no event shall the privilege afforded by (D) be exercised for any one customer for more than six months in any consecutive twelve months. (E) Notes secured by not less than a like face amount of bonds or notes of the United States issued since April 24, 1917, or by certificates of indebtedness of the United States. (F) Notes secured by United States Government obligations of the kinds described under (E), the face amount of which is at least equal to 105 per cent, of the amount of the customer's notes. Amounts loanable. (A) Maximum limit, 10 per cent, of bank's paid-up and unimpaired capital and surplus. (B) No limit imposed by law. (C) No limit imposed by law. (D) Fifteen per cent, of bank's capital and surplus, in addition to the amount allowed under (A) ; or if the full amount allowed under (A) is not loaned, then the amOunt which may be loaned in the manner described under (D) is increased by the loanable amount not used under (A). In other words, the amount loaned under (A) must never be more than 10 per cent., but the aggregate of (A) and (D) may equal, but not exceed, 25 per cent. (E) Ten per cent, of bank's capital and surplus, in addition to the amount allowed under (A), or if the full amount allowed under (A) is not loaned, then the amount which may be loaned in the manner described under (E) is increased by the loanable amount not used under (A). In other words, the amount loaned under (A) must never be more than 10 per cent., but the aggregate of (A) and (E) may equal, but not exceed, 20 per cent. 104 (F) No limit, but this privilege, under regulations of the Comptroller of the Currency, expires December 31, 1920. Some examples of what a National bank may lend at any one time to any one customer under the amendment to Section 5200, of October 22, 1919, expressed in terms of percentage of the bank's capital and surplus. Ex. 1 Ex. 2 Ex. 3 Ex.4 (A) Accommodation or straight loans, or loans secured by shares of stock, bonds, or au- thorized real estate mortgages 10% 5% 5% (D) Notes secured by warehouse receipts, etc... 15% 20% 15% 25% (E) Notes secured by a like face amount of Government obligations 10% 10% 15% 10% Total 35% 35% 35% 35% (B) Bills of exchange drawn against actually existing values No limit imposed by law. (C) Commercial or business paper Do. (F) Notes secured by at least 105 per cent, of United States Government obligations . . . Do. The time within which loans secured by Government obligations may be granted in excess of 10 per cent, of the capital and surplus has been extended from January 1, 1920, to December 31, 1920. Section 5202, as amended by the Act effective October 22, 1919, per- mits a National bank to be liable without limit as indorser on accepted bills of exchange payable abroad actually owned by the indorsing bank and discounted at home or abroad. The Comptroller rules that the surplus of a National bank referred to above does not include "undivided profits," and that therefore the latter can not be included as a basis for loans unless carried to the surplus fund by a vote of the Directors. Intent of Restriction. — The general purpose of this section is ob- vious. It is to prohibit any bank from hazarding a large amount of its funds in loans to any one person, and to require such a distribution of the risks among a large number of persons that the failure of any one or two customers will not so seriously involve the bank as to endanger its solvency. But the transactions of the banks would be unduly ham- pered if this rule applied in the case of all discounts, and so greater latitude is permitted in certain cases and no limitations imposed in others. 105 When Applicable. — Numerous questions arise under this section which cause bank officers much perplexity. The question that should always be answered is, who is the borrower? i. e., Who procured the money from the bank? The liabilities of a person to a bank as indorser, guarantor or surety should not be considered in computing the ten per cent, limit unless such person actually negotiated the loan with the bank and received the proceeds derived therefrom. The Comptroller of the Currency holds that the liabilities of an accom- modation maker should be included in estimating the ten per cent, limit. The legality of this position, however, is doubtful as such maker incurs the liability for the accommodation of another and, as he does not receive the proceeds, would not seem to be the borrower. But it is to be remembered that the question, who is the borrower? is not always to be determined from the positions of the parties as they appear on the paper. The borrower may be the maker, or he may be an indorser. It is the person who negotiates the paper with the bank, who procures the money upon it, that is the borrower, irrespec- tive of whether he appears thereon as indorser or guarantor or maker. Another question which often arises is, When one person is a partner in two firms, will a loan of the maximum amount to one of these firms preclude a loan to the other firm? The Comptroller of the Currency holds that the liability of the common partner is to be deemed the liability of each of the two firms. But as to the correctness of this ruling there may be some doubt. It is the individual indebtedness of the different parties which is mentioned in the statute. Nothing is said about including the liabilities of any other partnership, nor is such an intention necessarily to be inferred. As each partner is liable for all the debts of the firm, it is reasonable that his individual lia- bility to the bank should be included in the liabilities of the partner- ship; but the fact that there is a common partner will no't make one partnership liable for the debts of the other, and there would, there- fore, be no reason why the liabilities of one firm should affect the right of the bank to make loans to the other firm. State Bank With Branches Converted Into National. — 'There is no restriction of law prohibiting the Comptroller of the Currency from permitting a National bank, having a lawfully established branch, to make loans at either place, based on the total amount of the capi- talization and surplus of the corporation. The only restriction in law in that respect is that the aggregate loans made by the mother bank and all of its branches shall not at any one time exceed the limitations expressed in Section 5200 Revised Statues, as amended. (27 Op. Atty. Gen., 601.) 106 Penalty. — The only penalty for violation of this section is the lia- bility which the bank incurs of a forfeiture of its franchises, as pre- scribed in Sec. 5239, Rev. Stat. U. S., and though the loan is in excess of the amount here prescribed, the bank can recover the full amount from the borrower. (Gold Mining Company v. Rocky Mountain Nat. Bank, 96 U. S., 640; Corcoran v. Batch elder, 147 Mass., 541. O'Hare v. Second Nat. Bank of Titusville, 77 Pa. St., 96; Wyman v. Citizens' Nat. Bank of Faribault, 29 Fed. Rep., 734; Smith v. First Nat. Bank, 45 Neb., 444.) And a court of equity will not enjoin the bank from trans- ferring to innocent third persons notes and securities, on the ground that the notes represent part of a loan made in excess of 10 per cent, of the capital of the bank. (Elder v. First Nat. Bank of Ottawa, 12 Kans., 238.) Where a State bank loans to one person an amount in excess of one-tenth of its capital, and is afterwards converted into a National bank, it may, after conversion, extend tlie time for payment without violating this section. (Allen v. First Nat. Bank of Xenia, 23 Ohio St., 97.) A chattel mortgage is not void because the advances made exceed one-tenth of the capital of the bank. (The Seattle, 170 Fed. Rep., 284.) Bills of Exchange Drawn in Good Faith Against Actually Ex- isting Values. — In determining whether a certain transaction amounts to a discount of such paper or should be deemed a loan within the 10 per cent, limitation, the substance rather than the form of the transaction is the test. Consequently, bills secured by shipping docu- ments, or by the pledge of goods actually sold, may be discounted by member banks, before acceptance, without limitation as far as this section is concerned. If, however, such a bill should first be accepted by the drawee who then discounts it with a member bank, the transac- tion would be subject to the limitations imposed by the section, though the paper is in the form of commercial or business paper. As a matter of fact, however, the latter transaction is a straight loan. The acceptance of the bill by the drawee discharges the drawer and while the instrument remains a bill of exchange in form, it ceases to be such in fact. The obligation of the drawee is now primary, whereas prior to his acceptance it was secondary or collateral, and where the bank discounts the accepted paper it is in effect making a direct loan to the drawee on his own obligation. So also where a bank purchases its own acceptance under authority of Section 13 of the Federal Reserve Act, it is in effect merely using its funds to anticipate the payment of a liability which its customer has agreed to pay at a later day and even though the bill were secured by shipping documents, etc., the security is only collateral, and the bank has made a loan of its funds to its customer and the loan is sub- 107 ject to the limitations of the section. (Opinion of Counsel of Board, Dec. 1, 1916.) Commercial or Business Paper. — If for any reason it is not deemed practicable to discount bills of exchange as indicated, advances may be made on "commercial or business paper" by banks discounting the notes given in payment for cotton, grain, or other products. Instead of advancing money in excess of the limit to any party for the pur- chase of cotton, grain, etc., the purchaser should be required to give his notes in payment for the commodity to the dealers from whom it is purchased, and such notes may be discounted for the dealers when indorsed by them and accompanied by warehouse receipts assigned to the bank. This would be practically an advance to the purchaser, and at the same time come within the exception relative to the dis- count of commercial or business paper. There would seem to be no good reason why the dealers should re- fuse to indorse such notes as the bank would hold the warehouse receipts until the purchaser paid his notes, which he could do by drawing a bill of exchange when ready to make a shipment. These transactions should not be confused with the purchase or discount of a bank's own acceptance. In the latter case the bank has actually utilized its own funds in purchasing the rights of the holder of the acceptance. But where a bank accepts a draft drawn against it and this acceptance is discounted with a third party, the customer procuring the acceptance has not borrowed the money, but only the credit, of the accepting bank and the limitations of the section does not apply to the bank in so dealing with the customer. So also when a bill of exchange has been accepted by the drawee, and the shipping documents have been removed, though the direct obliga- tion of the drawee to pay such bill at maturity may be said to be substituted for the "actual value" against which the bill was originally drawn, nevertheless, when discounted by a bona fide owner for value, its discount would not be subject to the limitations of the section, since it would still come within the classification of "commercial or business paper actually owned by the person negotiating the same." (Opinion of Counsel of Board, Dec. 1, 191G.) § 114. Limitation on Total Indebtedness of National Banks — Exceptions. — No National banking association shall at any timd be indebted, or in any way liable, to an amount exceeding the amount of its capital stock at such time actually paid in and 108 remaining undiminished by losses or otherwise, except on account of demands of the nature following: First. Notes of circulation. Second. Moneys deposited with or collected by the association. Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. Fourth. Liabilities to the stockholders of the association for dividends and reserve profits. Fifth. Liabilities incurred under the provisions of the Federal Eeserve Act. Sixth. Liabilities incurred under the provisions of the War Finance Corporation Act. Seventh. Liabilities created by the indorsement of accepted bills of exchange payable abroad actually owned by the indorsing bank and discounted at home or abroad. (Rev. Stat. U. S. Sec. 5202, as amended by Sec. 13, Act Dec. 23, 1913; Act Sept. 7, 1916; Sec. 20, Act April 5, 1918, and Sec. 2, Act Oct. 22, 1919.) A National bank may become indebted upon any contract within the scope of its powers to the full amount of its capital stock then actually paid in, notwithstanding that it has notes of circulation, deposits, special funds subject to draft, or funds for the payment of declared dividends to stockholders, which either alone or in the aggregate equal its paid-in capital stock. (Weber v. Spokane Nat. Bank, 64 Fed. Rep., 208.) The fact that an indebtedness of a National bank was incurred in violation of Rev. Stat. U. S., 5202, is no defense to the bank or its receiver. (Id. reversing the decision of the United States Circuit Court in the same case. See 50 Fed. Rep., 735.) § 115. Checks Not to be Certified Unless Drawer Has Amount Thereof on Deposit. — It shall be unlawful for any officer, director, agent, or employee of any Federal reserve bank, or of any mem- ber bank as defined in the Act of December twenty-third, nine- teen hundred and thirteen, known as the Federal Eeserve Act, to certify any check drawn upon such Federal reserve bank or member bank unless the person, firm, or corporation drawing the check has on deposit with such Federal reserve bank or mem- ber bank, at the times such check is certified, an amount of money not less than the amount specified in such check. Any 109 check so certified by a duly authorized officer, director, agent, or employee shall be a good and valid obligation against such Federal reserve bank or member bank; but the act of any officer, director, agent, or employee of any such Federal reserve bank or member bank in violation of this section shall, in the discre- tion of the Federal Reserve Board, subject such Federal reserve bank to the penalties imposed by section eleven, subsection (h), of the Federal Eeserve Act, and shall subject such member bank if a national bank to the liabilities and proceedings on the part of the Comptroller of the Currency provided for in section fifty- two hundred and thirty-four, Eevised Statutes, and shall, in the discretion of the Federal Eeserve Board, subject any other mem- ber bank to the penalties imposed by section nine of said Federal Eeserve Act for the violation of any of the provisions of said Act. (Eev. Stat. U. S. Sec. 5208, as amended by Act Sept. 26, 1918.) Liability for Certification. — The bank will be liable upon the cer- tification, though it is made in violation of this section. (Thompson v. St. Nicholas Nat. Bank, 146 U. S. f 240, s. c. 113 N. Y., 325.) See also United States v. Heinze, 161 Fed. Rep., 425. § 116. Banks Not to Lend Upon Their Own Stock. — No asso- ciation shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be neces- sary to prevent loss upon a debt previously contracted in good faith ; and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale; or, in default thereof, a receiver may be appointed to close up the business of the association, according to section fifty- two hundred and thirty-four. (Eev. Stat. U. S. Sec. 5201.) Bank Can Not Acquire Lten. — A National bank can not acquire a lien on its own stock in the hands of its stockholders, and any pro- vision in the articles of association or by-laws, or in the certificates of stock prohibiting a transfer until the liability of the stockholder to the bank is paid, is wholly void. (Bank v. Lanier, 11 Wall., 369; Bullard v. National Bank, 18 Wall., 589; Third Nat. Bank v. Buffalo German Ins. Co., 193 U. S., 581; s. c, 162 N. Y., 163.) A provision of this character in the certificate of stock does not affect the rights of 110 a transferee, or operate as notice to him, since the provision is wholly void. (Third Nat. Bank v. Buffalo German Insurance Company, 193 U. S., 581.) But when a stockholder has pledged his stock to the bank, he can dispute the validity of such pledge only while the con- tract is executory, and the security still subsists in the possession of the bank; if the stock has been sold, and the proceeds applied to the payment of the debt, the court will not aid him to recover the value of his stock. (National Bank of Xenia v. Stewart, 107 U. S., 676.) Where a bank takes a pledge of its own stock to secure a deposit made with another bank, this is a lending upon the security of its stock within the meaning of this section. (Bank v. Lanier, 11 Wall., 369.) So this section forbids the bank to hold the stock of the shareholder to secure an indebtedness due from him to it on account of collections made for its account. (Conklin v. Second Nat. Bank, 45 N. Y., 655.) But this section will not prevent a bank from holding a cash dividend as pledged for the indebtedness of the shareholder to the bank. (Hager v. Union Nat. Bank, 63 Me., 59.) Nor does it forbid the shares of the stockholder to be attached for his indebtedness to the bank. (Id.) Purchase Not Void, But Only Voidable. — Inasmuch as no penalty is imposed either upon the bank or the borrower for a violation of this section, such violation may not be urged against the validity of the transaction by any one except the Government, at least unless the objection was made before the contract was executed or while the security was in the hands of the bank. (Walden Nat. Bank v. Birch, 130 N. Y., 221.) Nor is the statute available as a defense to one who has bought the stock of the bank, when sued by the receiver for an assessment upon the same. (Lantry v. Wallace, 182 U. S., 536; Burrows v. Niblock, 84 Fed. Rep., 111.) Bank May Transfer Title. — As a loan made by a National bank upon the security of its own stock is not void, but only voidable, the bank upon being compelled to take the stock, may transfer a good title to the purchaser. (Barron v. McKinnon, 196 Fed. Rep., 933; First Nat. Bank v. Lanz, 202. Fed. Rep., 117.) Purchase and Sale By Officers of Bank. — The sale by an officer to himself of the stock of the bank owned by the bank may be ratified by the bank or its legal representative; but a sale by himself to the bank of its own stock, where he acts in the double capacity of seller and buyer, cannot be ratified when the purchase of the stock by the bank is not necessary to prevent loss upon a debt previously con- tracted. (Bundy v. Jackson, 24 Fed. Rep., 1628.) And where a Na- tional bank purchased shares of its own stock, and divided them among its directors, the transaction was held void, and the directors Ill to have acquired no title. (Meyers v. Valley Nat. Bank, Fed. Case No. 9519.) Stock of Othek National Bank. — This section does not forbid a National bank to make a lo'an upon the security of the stock of an- other National bank. (National Bank v. Case, 96 U. S., 628.) But it may not purchase such stock on speculation. (Metropolitan Trust Company v. McKinnon, 172 Fed. Rep., 846.) § 117. Enforcing Payment of Capital Stock. — Every associa- tion which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the share- holders pro rata for the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon all bonds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until other- wise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as pro- vided by law, for three months after receiving notice from the Comptroller, a receiver may be appointed to close up the business of the association, according to the provisions of section fifty-two hundred and thirty-four. And provided, That if any shareholder or shareholders of such bank shall neglect or refuse, after three months' notice, to pay the assessment, as provided in this section, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after thirty days' notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency; and the balance, if any, shall be returned to such delinquent shareholder or shareholders. (Rev. Stat. U. S. 5205, as amended by Act June 30, 1876, Ch. 156, Sec. 4; 19 Stat. L., 64.) 112 Decision of the Comptroller Conclusive. — The decision of the Comptroller that the capital is impaired is conclusive. (Thomas v. Gilbert, 101 Pac. Rep. (Oregon), 393.) The Comptroller has discre- tionary power to withdraw an assessment on shareholders before it is paid or when partly paid and levy a subsequent assessment. (Kor- bly v. Springfield Inst., 245 U. S., 330.) Assessment ry Shareholders. — The directors have no authority to make an assessment but a meeting of, the stockholders must be called and they must lay the assessment on themselves. The assessment, however, is enforceable only by subjecting the stock of the persons refusing to pay, and no action will lie against a stockholder per- sonally. (Commercial Bank v. Weinhard, 192 U. S., 243; s. c, 41 Oregon, 359; Hulitt v. Bell, 85 Fed. Rep., 98.) § 118. Withdrawal of Capital— Dividends— Bad Debts.— No association, or any member thereof, shall, during the time it shall continue its banking operations, withdraw, or permit to be with- drawn, either in the form of dividends or otherwise, any portion of its capital. If losses have at any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no dividend shall ever be made by any association, while it continues its banking operations, to an amount greater than its net profits then on hand, deducting therefrom its losses and bad debts. All debts due to any associa- tions, on which interest is past due and unpaid for a period of six months, unless the same are well secured, and in process of collection, shall be considered bad debts within the meaning of this section. But nothing in this section shall prevent the re- duction of the capital stock of the association under section fifty- one hundred and forty-three. (Eev. Stat. U. S. Sec. 5204.) To Prevent Impairment. — This section is intended to guard against any impairment of the paid-in capital, especially against that insidious form of impairment so dangerous to stockholders — its withdrawal in the shape of dividends. Undivided Profits. — Net profits, both in this section and in Section 5199, seem to mean profits other than legal surplus which remain at the end of each six months after deducting all expenses, losses, and bad debts. 113 Bad Debts. — The definition of bad debts is as plain as can be made of a thing so difficult to define. There is one positive sign, viz., in- terest past due and unpaid for six months, and two qualifications; that is, even if interest is due and unpaid for six months, they are still not bad debts, if, first, they are well secured, and, second, in process of collection. The indefiniteness of this definition consists in the difference of opinion which may arise as to security. § 119. Dividends and Surplus Funds. — The directors of any association may, semi-annually, declare a dividend of so much of the net profits of the association as they shall judge expedient; but each association shall, before the declaration of a dividend, carry one-tenth part of its net profits of the preceding half year to its surplus fund until the same shall amount to twenty per centum of its capital stock. (Eev. Stat. U. S. Sec. 5199.) Dividend Periods. — This section is permissive, and it is doubtful if under it any other than semi-annual dividends are strictly legal. Still some banks declare quarterly and a few monthly and bi-monthly dividends. Surplus Fund. — The surplus fund provided for in this section up to twenty per cent, of capital must be maintained. Any amount in ex- cess may be distributed in dividends. Wrongful Refusal to Declare Dividends. — Where the earnings prop- erly applicable to a dividend are ample for such purpose, and the directors, or a majority of them, acting in bad faith and without reasonable cause, refuse to declare a dividend, the courts will inter- pose on behalf of those stockholders who otherwise would be without remedy, and require the directors to make a dividend of a reasonable amount. (Hiscock v. Lacy, 9 Misc. (N. Y.), 578.) An action for this purpose may be maintained in a state court. (Id.) Suit to Recover Illegal Dividends. — The Receiver of an insolvent National bank may maintain a suit in equity against the shareholders to recover dividends unlawfully paid to them out of the capital stock when the bank has earned no net profit, and is in fact insolvent. (Hay- den v. Thompson, 71 Fed. Rep., 60.) In such case the remedies pro- vided by the National Bank Act are not exclusive, and no special or- der of the Comptroller of the Currency is necessary to enable the re- ceiver to bring suit. (Id.) 8 114 § 120. Circulating- Notes Not to Be Hypothecated. — No asso- ciation shall, cither directly or indirectly, pledge or hypothecate any of its notes of circulation, for the purpose of procuring money to be paid in on its capital stock, or to be used in its banking opera- tions, or otherwise; nor shall any association use its circulating notes, or any part thereof, in any manner or form, to create or in- crease its capital stock. (Eev. Stat. U. S. Sec. 5203.) Notes of circulation are to be issued by the bank in ordinary course of business. § 121. Each Bank to Receive Notes of Other Banks. — Every Na- tional banking association formed or existing under this Title shall take and receive at par, for any debt or liability to it, any and all notes or bills issued by any lawfully organized National banking association. (Eev. Stat. U. S. Sec. 5196.) By Act July 12, 1882, Ch. 260, Sec. 12, it is provided that no National bank shall be a member of any clearing-house in which gold and silver certificates are not receiveable in settlement of clearing-house balances, and that such certificates may be counted as a part of the bank's law- ful reserve. See also Act March 14, 1900, Ch. 41, Sec. 6; 31 Stat. U. S., 48. § 122. Banks Not to Pay Out Uncurrent Notes. — No associa- tion shall at an}- time pay out on loans or discounts, or in pur- chasing drafts or bills of exchange, or in payment of deposits, or in any other mode pay or put into circulation the notes of any bank or banking association which are not, at any such time, re- ceivable at par, on deposit, and in payment of debts by the asso- ciation so paying out or circulating such notes; nor shall any association knowingly pay or put in circulation any notes issued by any bank or banking association which at the time of such paying out or putting in circulation is not redeeming its circulating notes in lawful money of the United States. (Rev. Stat. U. S. Sec. 5206.) This section was inserted in the law at a time when there was still a large amount of State bank notes in circulation, and it had reference 115 to these State bank notes as well as to the notes of National banking associations. § 123. Stamping Counterfeit Notes. — That all United States officers charged with the receipt or disbursements of public moneys, and all officers of National banks, shall stamp or write in plain letters the word "counterfeit," "altered," or "worthless," upon all fraudulent notes issued in the form of, and intended to circu- late as money which shall be presented at their places of business ; and if such officers shall wrongfully stamp any genuine note of the United States, or of the National banks, they shall, upon presentation, redeem such notes at the face value thereof. (Act June 30, 1876, Ch. 156, Sec. 5; 19 Stat. L., 63.) § 124. List of Shareholders. — The president and cashier of every National banking association shall cause to be kept at all times a full and correct list of the names and residences of all the share- holders in the association, and the number of shares held by each, in the office where its business is transacted. Such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under State authority, during business hours of each day in which busi- ness may be legally transacted. A copy of such list, on the first Monday of July of each year, verified by the oath of such presi- dent or cashier, shall be transmitted to the Comptroller of the Currency. (Eev. Stat. U. S. Sec. 5210.) Blanks for this list are sent to all banks from the Comptroller's office each year, in time to enable the bank to make and send the list. § 125. Rate of Interest Which Bank May Charge. — Any asso- ciation may take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evi- dences of debt, interest at the rate allowed by the laws of the State, Territory, or district where the bank is located, and no more, except that where by the laws of any State a different rate is limited for banks of issue organized under State laws, the rate so limited shall be allowed for associations organized or existing 11G in any such State under this Title. When no rate is fixed by the laws of the State, or Territory, or district, the bank may take, receive, reserve, or charge a rate not exceeding seven per centum, and such interest may be taken in advance, reckoning the days from which the note, bill, or other evidence of debt has to run. And the purchase, discount, or sale of a bona-fide bill of exchange, payable at another place than the place of such purchase, dis- count, or sale, at not more than the current rate of exchange for sight-drafts in addition to the interest, shall not be considered as taking or receiving a greater rate of interest. (Eev. Stat. U. S. Sec. 5197.) State Rate Limit. — This section allows National banks to charge the rate of interest allowed by the State to natural persons generally, and a higher rate if State banks of issue are authorized to charge a higher rate. (Tiffany v. National Bank, 18 Wallace, 409.) Though the consequences of acceptance of usurious interest by a National bank and the penalties to be enforced are to be determined by the provisions of the National Banking Act, the ascertainment of the rate of interest allowable is to be according to the State law. (Farmers', etc., Bank v. Dearing, 91 U. S., 29, 32; Haseltine v. Bank, 183 U. S., 132, 134.) (Id.) General State Rate Governs. — >But it is the rate of interest allowed to the banks of the State generally that a National bank may charge; and the fact that a few of the State banks are specially authorized to take a higher rate does not warrant the National banks in doing the same. (Gruber v. First National Bank, 87 Pa. St., 468. But see First National Bank of Mount Pleasant v. Tinstman, Fed. Case No. 4805.) Nor is it to be understood that whatever by the laws of the State is lawful for natural persons in acquiring title to negotiable paper is lawful for National banks. (National Bank v. Johnson, 104 U. S., 271.) Thus, though the State law fixes no limit to the rate which natural persons may take for the discount or purchase of business paper, this does not authorize the National banks to discount such paper at higher than the legal rate. (Johnson v. National Bank of Gloversville, 74 N. Y., 329; affirmed in National Bank v. Johnson, 104 U. S„ 271.) Seven Per Cent. Limit. — And where the State law does not limit the rate of interest which may be charged on loans to corporations, a National bank located in that State can not charge more than seven 117 per cent, on such loans. (In re Wild, Fed. Case No. 4173, 11 Blatch- ford, 243.) But if the statutes of the State expressly authorized parties to contract for any rate of interest National banks may do likewise, and are not, in such case, limited to seven per cent. (Daggs v. Phcenix Bank, 177 U. S., 549; Hinds v. Marrnelejo, 60 Cal., 229; National Bank v. Bruhn, 64 Tex., 571; Rockwell v. Farmers' National Bank, 4 Colo. App., 562; Wolverton v. Exchange Nat. Bank, 11 Wash., 94.) Where a State statute fixes a certain rate as the legal rate, but authorizes parties to agree in writing for a higher rate, the National banks are permitted to charge such higher rate by written agreement. (Wiley v. Starbuck, 44 Ind., 298; Newell v. National Bank of Somer- set, 12 Bush (Ky.), 57.) A National bank in Mississippi is not al- lowed to retain interest in advance, but can charge interest only on the sum actually loaned. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) Agreement as to Time of Entering Credit. — The bank and its cus- tomer have the right to agree as to the time of entering credits, and if such agreement is made in good faith to equalize the interest on different items, and not for the purpose of receiving illegal interest, it is not a violation of the law. (Timberlake v. First National Bank, 43 Fed. Rep., 231.) (Id.) Application of Payments. — Where payments are made generally to a National bank on a promissory note which include unlawful interest, they will be applied on the principal. (Hall v. First Nat. Bank of Fair- field, 30 Neb., 94; Citizens' Nat. Bank v. Forman's Assignee, 111 Ky., 206.) The fact that the payments made by the debtor have been ap- plied by the bank on its books to interest as such does not authorize the presumption that the debtor so applied them, where he had no access to the books, and no knowledge of the application made by the bank. (Second Nat. Bank of Richmond v. Fitzpatrick, 111 Ky., 228.) Purchase of Drafts. — In a case in the United States Circuit Court of Appeals it was held that where a National bank purchases drafts at a rate of discount larger than the rate of interest allowed by the law of the State, this will be usury. (Danforth v. National State Bank, 48 Fed. Rep., 271.) Where the maximum rate of interest al- lowed by the State to be taken or reserved is eight per cent, per an- num, a National bank within the State may discount notes and re- serve interest at the rate of eight per cent, per annum upon the face of the notes. (Evans v. National Bank of Savannah, U. S. Sup. Ct, Oct. Term, 1919.) 118 Usury Patd by Corporations. — 'The inhibition contained in this sec- tion is general and forbids the taking of usurious interest from an (artificial, as well as from a natural, person. (Albion Bank v. Mont- gomery, 54 Neb., 681.) Promise of Cashier to Pay Usurious Interest. — The promise of the cashier to pay interest upon a deposit at an usurious rate will not bind the bank; but the bank would be bound to return the amount actually received by it. (Hansen v. Heard, 69 N. H., 190.) Plea of Usury by National Bank — State Statute. — A State statute providing that corporations shall not plead usury applies to National banks. (Binghamton Trust Company v. Anten, 68 Ark., 299.) § 128. Penalty for Taking Usurious Interest. — The taking, re- ceiving, reserving, or charging a rate of interest greater than is allowed by the preceding section, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid, the person by whom it has been paid, or his legal representa- tives, may recover back, in an action in the nature of an action of debt, twice the amount of the interest thus paid from the asso- ciation taking or receiving the same; provided such action is com- menced within two years from the time the usurious transaction occurred. (Rev. Stat. U. S. Sec. 5198.) Intent of the Law. — The Supreme Court of the United States has analyzed this section as follows: "Two categories are thus defined, and the consequences denounced. (1) Where illegal interest has been knowingly stipulated for, but not paid, then only the sum lent, without interest, can be recovered. (2) Where such illegal interest has been paid, then twice the amount so paid can be recovered in a penal action of debt, or suit in the nature of such action, against the offending bank, brought by the persons paying the same, or their legal repre- sentatives." (Barnet v. Muncie Nat. Bank, 98 U. S., 855.) Remedy Where Action is by the Bank. — Where the bank sues to re- cover the loan, it can not, if there has been usury, recover any interest at all, but only the principal of the loan. (Barnet v. Muncie N. Bk., 98 U. S., 855.) Nor can it meet the plea of usury by electing to remit the excessive interest. (Citizens' N. Bk. v. Donnel, 195 U. S., 369.) 119 But the defendant, if he has paid the usurious interest, can not avail himself of such payment as a set-off or counter claim against the principal of the loan sued on; he must bring a separate action therefor. (Barnet v. Muncie N. Bk., 98 U. S., 855; Haseltine v. Central N. Bk., 183 U. S., 132; Peterborough N. Bk. v. Childs, 133 N. Y., 248; Ellis v. First N. Bk. of Olney, 11 111. App., 275; Rockwell v. Farmers' N. Bk., 4 Colo. App., 562; Huggin v. Citizens' N. Bk., 6 Tex. Civ. App., 33; Norfolk N. Bk. v. Schwenk, 46 Neb., 381; Marion N. Bk. v. Thompson, 101 Ky., 277; First N. Bk. v. Hunter, 109 Tenn., 91; Cox v. Beck, 83 Fed. Rep., 269; Merchants' Nat. Bank v. Sharkey, 64 Ore., 32; Bank of Weston v. Lynch, 69 W. Va., 333.) And usurious interest paid on re- newing a series of notes can net, in an action by the bank on the last of them, be applied in satisfaction of the debt. (Driesbach v. National Bank, 104 U. S., 52; Charleston Nat. Bank v. Bradford, 51 W. Va., 255.) No Statute of Limitations Where Action is by Bank. — Where a National bank sues upon an usurious contract the debtor may always plead usury, for in such an action there is no' statute of limitations. (McCarthy v. First Nat. Bank, 223 U. S., 493.) The two years men- tioned in Section 5198 Rev. Stat, applies only to actions brought against a bank to recover the penalty prescribed by that section. (Id.) What Intebest Forfeited — Interest After Maturity. — Where the instrument carries with it illegal interest, the whole interest is for- feited, and not merely that which the party borrowing may agree to pay. The usury destroys the interest-bearing power of the obligation, and there is no point of time from which it can bear interest. Not only does it forfeit the interest accruing before maturity, but as well that accruing after maturity (Lucas v. Government Nat. Bank, 78 Pa. St., 228; Shunk v. First Nat. Bank of Galion, 22 Ohio St., 508; National State Bank v. Brainard, 61 Hun., 339; First Nat. Bank v. Grimes, 49 Kans., 219), though the latter rate be lawful (Shafer v. First Nat. Bank, 53 Kans., 614), or the interest which otherwise would accrue by law upon non-payment after maturity. (Henderson Nat. Bank v. Alves, 91 Ky., 142.) And an amount paid on the paper after the maturity thereof must be credited on the principal without regard to when the interest thereo'n accrued. (National State Bank v. Brain- ard, 61 Hun., 339.) By charging more than legal interest on over- drafts the bank will lose the right to recover any interest at all. (Third Nat. Bank of Philadelphia v. Miller, 90 Pa. St., 241.) Though it has been held that a National bank by contracting for usurious in- terest forfeits interest only to the date of bringing suit on the note, and judgment for the principal should bear interest at the legal rate from the date of filing the petition. (Second Nat. Bank of Richmond 120 v. Fitzpatrick, 111 Ky., 228.) Where a National bank has rediscounted notes at an usurious rate of interest, the fact that the bank for which the rediscount was made has charged illegal interest on those notes to its customers will not affect its right to set up the defense of usury in an action by the re-discounting bank. (Id.) As to whether a Na- tional bank can discount a note containing a provision to pay an at- torney's fee if suit shall be brought to enforce payment, see Merchants' Nat. Bank v. Sevier (14 Fed. Rep., 662). Renewals. — If the note is renewed from time to time, no portion of usurious interest included in the renewal note can be recovered. (First Nat. Bank of Mead Centre v. Grimes, 49 Kans., 219.) And the usury is not purged by settlements and renewal notes without additional usury. (Pickett v. Merchants' Nat. Bank of Memphis, 32 Ark., 346.) In a suit upon the last renewal the bank can recover only the principal sum originally advanced. (Snyder v. Mount Sterling Nat. Bank, 94 Ky., 231.) And any payments made upon any of such notes will be applied to the principal. (Id.) And even though the interest upon the renewal notes has been reduced to the legal rate, no part of the same can be recovered. (Farmers' and Mechanics' Bank v. Hoagland, 7 Fed. Rep., 159.) A note given for already accrued interest, in part usurious, is without consideration; and suspension of the right of collection, between its date and maturity, in no way operates to supply the essential element otherwise lacking. (McGhee v. First Nat. Bank of Tobias, 40 Neb., 920 But in order to render the bank liable to the penalty of doubling the amount of interest paid prescribed by this section, the illegal interest must have been actually paid; and it is not sufficient that it was carried into renewal notes. (Brown v. Marion Nat. Bank, 169 U. S., 416; First Nat. Bank v. Lavater, 196 U. S., 115; Osbom v. First Nat. Bank, 175 Pa. St., 494.) Penalty foe Taking Usury — Knowledge of Bank — Allegations of Complaint. — To subject the bank to the penalty for taking usurious interest there must have been paid not only a larger rate of interest than that allowed by law, but that larger rate must have been know- ingly received. (Timberlake v. First Nat. Bank, 43 Fed. Rep., 231.) And the petition or complaint must allege that it was knowingly re- ceived. (Henderson Nat. Bank v. Alves, 91 Ky., 142; Schuyler Nat. Bank v. Bullong, 24 Neb., 321.) As to when allegations of complaint are sufficient to sustain a judgment in an action against a National bank for exacting usurious interest, see First Nat. Bank v. Morgan, 132 U. S., 141; Guild v. First Nat. Bank of Deadwood, 4 S. D., 566; Farm- ers' Nat. Bank v. McCoy, 42 Okla., 420. 121 Amount of Penalty. — The penalty is twice the amount of interest paid and is not limited to twice the excess above the legal rate. (First Nat. Bank v. Watt, 184 U. S., 151; Henderson Nat. Bank v. Alves, 91 Ky., 142; Schuyler Nat. Bank v. Bullong, 28 Neb., 684; Hill v. National Bank of Barre, 15 Fed. Rep., 432; Second Nat. Bank v. Fitzpatrick, 111 Ky., 228; Watt v. First Nat. Bank, 76 Minn., 458.) But in a suit to recover such penalty the plaintiff can not be allowed interest on the amount. (McCreary v. First Nat. Bank of Morristown, 109 Tenn., 128.) It has been held, however, that a judgment against a National bank for twice the amount of interest paid, as a penalty for taking usury, should allow interest from the date of filing the petition to recover the penalty, that being the date of the first demand therefor. (Second Nat. Bank v. Fitzpatrick, 111 Ky., 228.) Usurious Interest Must Have Been Actually Paid — What Wtll Constitute Payment. — In order that the borrower may maintain an action against the bank to recover the penalty provided by the statute for taking usurious interest, such usurious interest must have been actually paid, and it is not sufficient that such interest is merely charged to his account. (Hall v. First Nat. Bank of Fairfield, 30 Neb., 99.) Nor is it sufficient that the interest was reserved from the original loan by way of discount. (McCarthy v. First Nat. Bank, 223 U. S., 493; Smith v. First Nat. Bank, 42 Neb., 687; Citizens' Nat. Bank v. Forman's Assignee, 111 Ky., 206; compare National Bank of Rahway v. Carpenter, 52 N. J. Law, 165.) And as the payment contemplated by the statute is an actual payment, and not a further promise to pay, the giving of a renewal note will not sustain a recovery of the penalty. (First Nat. Bank v. Latham, 37 Okla., 286.) Nor will facts constituting an accord and satisfaction. (Id.) Where Payment Made in Property. — The borrower may recover the penalty where the usurious interest has been paid by a transfer of property. (First Nat. Bank v. Davis, 135 Ga., 687.) But where prop- erty is accepted as payment, its market value at the time must exceed the principal and lawful interest. (Id.) And it must appear that the transfer and delivery of the property was tendered by the debtor and accepted by the bank, not only as payment of the lawful interest, but also of the illegal interest. (Id.) When Right of Action Accrues — Limitation. — The period of two years within which the action to recover the penalty must be brought begins to run from the time the interest is actually paid, and not from the time it was agreed to be paid. (National Bank of Dainger- field v. Ragland. 181 U. S., 45.) And if such usurious interest is in- 122 eluded in a note, the limitation does not begin to run until the note is paid. (Id.) So, where the interest upon one note is included in the amount of another note, which is subsequently paid in full. (Second Nat. Bank v. Fitzpatrick, 111 Ky., 228.) And where usurious interest has been paid in advance the two-year limitation begins to run when such payment is made, and not from the time when the note is paid. (McCarthy v. First Nat. Bank, 223 U. S., 493.) Each payment of il- legal interest is regarded as "a transaction" within the intent of the statute, and when such payment is actually made, or accrues, the two years' limitation commences to run. (First Nat. Bk. of Dorchester v. Smith, 39 Neb., 90; Lynch v. Bank, 22- West Va., 534; Nat. Bk. v. Car- penter, 52 N. J., Law, 165; McCarthy v. First Nat. Bk., 121 N. W. Rep., 853; Bobs v. People's Nat. Bank, 21 Fed. Rep., 888.) But the payment of the loan is not a condition precedent to the right of the borrower to maintain an action to recover the penalty for the usurious interest paid. The penalty for all illegal interest paid within two years may be recovered in one action, whether the amount was in one payment or in several. (Hintermister v. First Nat. Bank, 64 N. Y., 212.) "Who May Being Action for Penaxtt. — Only the party paying the il- legal interest, or his representatives, can recover the penalty therefor. (Timberlake v. First Nat. Bank, 43 Fed. Rep., 231.) But the person making payment may do so, though he is an accommodation maker. (Trabue v. Cook, 12 S. W. Rep., 455.) The action can not be brought by a guarantor or surety. (Lazear v. National Union Bank, 52 Md., 73.) And one of the joint makers of a note can. not recover the penalty where the illegal interest was paid by the other maker. (Timberlake v. First Nat. Bank, 43 Fed. Rep., 231; First Nat. Bank of Concordia v. Rowley, 52 Kans., 394; Trabue v. Cook, 12 S. W. Rep., 455.) But where joint makers have paid separately, but from a joint fund, they may join in an action for the penalty. (Merchants' and Planters' Nat. Bank v. Horton, 27 Okla., 689.) Where a bankrupt has paid illegal interest, Tiis assignee may bring such action. (Wright v. First Nat. Bank, Fed. Case No. 18,078, 8 Bliss., 243; Cro'cker v. First Nat. Bank, Fed. Case No. 3397; Henderson Nat. Bank v. Alves, 91 Ky., 142. But see Osborn v. First Nat. Bank of Athens, 175 Pa. St., 474.) But if the trustee in bankruptcy fails to administer such asset, the bankrupt, after discharge, may sue on the claim. (Lasater v. First Nat. Bank of Jacksboro, 96 Tex., 345.) The right is conferred upon an artificial, as well as upon a natural, person. (Albion Nat. Bank v. Montgomery, 54 Neb., 681.) But several of the joint makers of a note on which il- legal interest is paid by such parties individually can not unite in one action to recover such penalty. (Teague v. First Nat. Bank of Salina, 5 Kans. App., 300.) The statute confers upon the parties separate 123 rights, and the fact that they have paid equal amounts can not change the rule. The cause of action accrues to the one paying the unlawful interest, and to each one making such a payment. {Id.) Effect of Usury ox the Contract of tfte Parties. — Usury does not render the contract void (Farmers' and Mechanics' Nat. Bank v. Dear- ing, 91 U. S., 29); nor defeat the title of the bank to the instrument (Newell v. Somerset First Nat. Bank (Ky.), 13 Ky. L. Rep., 775); nor does it avoid an endorsement or guaranty of the paper upon which the usurious interest is reserved or paid. (Lazear v. National Union Bank, 52 Md., 78; Oates v. First Nat. Bank, 100 U. S., 239.) And the usurious character of the transaction between the bank and the payee will not affect the liabilities of- antecedent parties to- the instrument. (Smith v. Exchange Nat. Bank, 26 Ohio St., 141.) State Laws. — The penalties provided by this section of the National Bank Act are exclusive; and the usury laws of the State, and the penalties therein provided, have no application to the National banks. (Farmers' and Mechanics' Bank v. Dearing, 91 U. S., 29; Stephens v. Monongahela Bank, 111 U. S., 197; Barnet v. Muncie Nat. Bank, 98 U. S., 855; Hintermister v. First Nat. Bank, 64 N. Y., 212; Central Nat. Bank v. Pratt, 115 Mass., 539; First Nat. Bank v. Garlinghouse, 22 Ohio St., 492; Wiley v. Starbuck, 44 Ind., 298; Slaughter v. First Nat. Bank of Montgomery, 109 Ala., 157; Charleston Nat. Bank v. Bradford, 51 W. Va., 255.) Nor do the provisions of the Judiciary Acts of March 3, 1887, and August 13, 1888, have the effect of subjecting National banks to the penalties fixed by the States for exacting unlawful in- terest. (Norfolk Nat. Bank v. Schwenk, 41 Neb., 3S1.) Nor is this the effect of the proviso to Section 4 of the Act of July 12, IS 82. (Lanhara v. First Nat. Bank of Crete, 46 Neb., 663.) But a National bank which has succeeded to the business of a private bank may incur the penal- ties which attached to the former institution when endeavoring to en- force the obligation acquired from it. (Exeter Nat. Bank v. Orchard, 42 Neb., 579.) Whei'e usurious interest is paid to a National bank, the transaction is governed by the laws of the United States, though the security is taken in the name of the President of the bank in his individual name. (Schuyler Nat. Bank v. Gadsden, 191 U. S., 451.) Jurisdiction of State Courts. — The defense of usury may be set up in an action brought in a State court (National Bank of Winterset v. Eyre, 52 Iowa, 114), and State courts have jurisdiction of actions for the recovery of the penalty prescribed for taking illegal interest. (Ordway v. Central Nat. Bank, 47 Md., 217; Bletz v. Columbia Nat. Bank, 87 Pa. St., 87; Hade v. McVey, 31 Ohio St., 231; McCreary v. 124 First Nat. Bank, 109 Tenn., 12S.) Such action may be brought in any local court in the county having jurisdiction of the amount in- volved. (Schuyler Nat. Bank v. Bullong, 28 Neb., 684; First Nat. Bank of Tecumseh v. Overman, 22 Neb., 116; Henderson Nat. Bank v. Alves, 01 Ky., 142; Farmers' Nat. Bank v. McCoy, 42 Okla., 420. But see Newell v. National Bank of Somerset (Ky.), 12 Bush, 57.) But the courts of one State have no jurisdiction of an action against a National bank located in another State to recover the penalty. (Missouri River Telegraph Company v. First Nat. Bank of Sioux City, 74 111., 217.) Construction of tue Statute. — The statute will be liberally con- strued to effect the ends for which it was passed, but a forfeiture under its provisions will not be declared unless the facts upon which it rests are clearly established. And since the courts uniformly incline against the declaration of a forfeiture, the party seeking such declaration should be held to make convincing proof of each essential to forfeiture. (Wheeler v. Union Nat. Bank, 96 U. S., 785.) A doubt as to whether there has been a taking of illegal interest will be resolved in favor of the bank. (Timberlake v. First Nat. Bank, 43 Fed. Rep., 231; Wheeler v. Union Nat. Bank of Pittsburg, 96 U. S. 785.) But the statute is not a penal statute, and does not require to be strictly construed. (Albion Nat. Bank v. Montgomery, 54 Neb., 681.) Compounding Interest. — Where interest is compounded in a manner prohibited by the State statute, all interest is forfeited, though the total is less than the maximum rate allowed by the State. (Citizens' Nat. Bank v. Donnell, 195 U. S., 369.) Usurious Loans to Directors. — A director is not, by reason of his position, estopped from setting up the defense of usury in an action brdught against him by the bank. (Bank of Cadiz v. Slemans, 34 Ohio St., 142.) When Rx t le de Minimis Applies. — Where the illegal interest exacted amounts to only five cents, the rule de minimis non curat lex applies, and the bank will not be liable to a penalty therefor. (Slaughter v. First Nat. Bank of Montgomery, 109 Ala., 157.) Waiver. — 'The forfeiture is not waived by giving a separate note for the interest, or by giving a renewal note in which is included the usurious interest. (Brown v. Marion Nat. Bank of Lebanon, 169 U. S., 416.) CHAPTER VI. Reports and Examinations. Section 127. Reports to Comptroller — Publication of. 128. Reports of Dividends and Net Earnings. 129. Penalty for Failure to Make Reports. 130. Verification of Returns of National Banks. 131. Appointment, Powers, Duties, Salaries, etc., of Ex- aminers. 132. Examiners Not to Disclose Information. 133. Loans, Gratuities and Commissions to Examiners Forbidden. 134. Examinations by Federal Reserve Board and Federal Reserve Banks. 135. Limitation of Visitorial Powers. § 127. Reports to Comptroller — Publication of. — Every associa- tion shall make to the Comptroller of the Currency not less than five reports during each year, according to the form which may be prescribed by him, verified by the oath or affirmation of the presi- dent or cashier of such association, and attested by the signatures of at least three of the directors. Each such report shall exhibit, in detail and under appropriate heads, the resources and liabilities of the associations at the close of business on any past day by him specified; and shall be transmitted to the Comptroller within five days after the receipt of a request or requisition therefor from him and in the same form in which it is made to the Comptroller shall be published in a newspaper published in the place where such association is established, or if there is no newspaper in the place, then in one published nearest thereto in the same county, at tho expense of the association; and such proof of publication shall be furnished as may be required by the Comptroller. The Comp- 125 12G troller shall also have power to call for special reports from airy particular association whenever in his judgment the same are necessary in order to have a full and complete knowledge of its con- dition. (Bev. Stat. U. S. Sec. 5211; Act Feb. 27, 1877, Oh. 69; 19 Stat. L., 252.) For power of Federal Reserve Board to examine National banks and require reports from them, see Section 11 (a) of Federal Reserve Act, § 225, page 229. In the case of Riggs Nat. Bank v. Comptroller of the Currency et ah, 44 Washington Law Reporter, 434, the court upheld the right of the Comptroller to call for detailed and special information from a Na- tional bank. Owing to changes in the form of each report of condition it is im- possible to analyze this report in detail. Only a few of the requirements in making up such a report can be considered. Form of Report. — Banks should always use the latest form of report furnished by the Comptroller, and none other will be accepted. Word "None." — 'The word "none" must be inserted on the face of the report in the special column provided therefor if no amount is to be entered in the item and likewise in all schedules. If there is more than one column in a schedule, the word "none" should be so written that it covers all columns. Failure to do so will require the bank to make up new report. Proof of Publication. — The publisher's certificate must be an exact copy of the figures shown in the report of condition. It must be signed and sworn to by the same officer and before the same notary that took the oath of the report of condition, also bear the autograph signatures of the same three directors that attested the report of condition. It is required that the report must be published in a newspaper pub- lished in the same city Or town as bank is located, and if no news- paper is published, then in the one nearest thereto in the same county. The length of time the paper has been in business has no bearing on the subject, the only requirement being that it is a newspaper entered at the postofnce where issued. 127 § 128. Reports of Dividends and Net Earnings. — In addition to the reports required by the preceding section, each association shall report to the Comptroller of the Currency, within ten days after declaring any dividend, the amount of such dividend, and the amount of net earnings in excess of such dividend. Such re- ports shall be attested by the oath of the president or cashier of the association. (Rev. Stat. IT. S. Sec. 5212.) Instructions as to Making Reports. — 'The requirement now is that regular reports must be made on June SO and December 31 of each year whether dividends are declared or not. Whenever a dividend is declared between these dates a complete report must be made show- ing the amount of the dividend and net earnings on the day the divi- dend is declared, regardless of the date of payment, and forwarded to the Comptroller within ten days from date of declaration. The Comptroller mails blanks for regular semi-annual reports to banks in time for making returns on June 30 and December 31. FORM OF SPECIAL NOTIFICATION OF DIVIDEND DECLARED Charter No The , located at in the State of Capital Stock Paid in, $ ; Surplus Fund,* $ Date of declaration, .,., 192 Date payable, ., 192 Net earnings on hand at date of declaration of dividend (including earnings of this period and balance of earnings remaining from previous periods) $ Less: Losses sustained and not charged off $ Bad debts on hand, as defined by Sec. 5204, Rev. Stat Net profits carried to surplus fund (see Sec. 5199, Rev. Stat.) Net earnings available for dividend $ Amount of dividend declared ( per cent, on capital) Net earnings available in excess of dividend $ I, , cashier of the above-named bank, do solemnly swear that the above statement is true, and that the * Surplus after payment of dividend should be entered here. 128 lawful reserve of this bank on the date of the declaration of the divi- dend herein reported conformed to the requirements of Section 19 of the Federal Reserve Act, to the best of my knowledge and belief. Cashier. State of > ss; CoUiNTY OF Sworn to and subscribed before me this day of , 192 [seal.] Notary Public. § 129. Penalty for Failure to Make Reports. — EVery association which fails to make and transmit any report required under either of the two preceding sections shall be subject to a penalty of one hundred dollars for each day after the periods, respectively, therein mentioned, that it delays to make and transmit its report. When- ever any association delays or refuses to pay the penalty herein imposed, after it has been assessed by the Comptroller of the Currency, the amount thereof may be retained by the Treasurer of the United States, upon the order of the Comptroller of the Cur- rency, out of the interest, as it may become due to the associa- tion, on the bonds deposited with him to secure circulation. All sums of money collected for penalties under this section shall be paid into the Treasury of the United States. (Eev. Stat. U. S. Sec. 5213.) § 130. Verification of Returns of National Banks. — That the oath or affirmation required by section fifty-two hundred and eleven of the Eevised Statutes, verifying the returns made by National banks to the Comptroller of the Currency, when taken before a notary public properly authorized and commissioned by the State in which said notary resides and the bank is located, or any other officer having an official seal, authorized in such State to administer oaths, shall be a sufficient verification as contemplated by said section fifty-two hundred and eleven: Provided, That the officer administering the oath is not an officer of the bank. (Act Feb. 26, 1881, Ch. 82 ; 21 Stat. L., 352.) 129 § 131. Appointment, Powers, Duties, Salaries, etc., of Exam- iners. — The Comptroller of the Currency, with the approval of the Secretary of the Treasury, shall appoint examiners who shall ex- amine every member bank at least twice in each calendar year and of tener if considered necessary : Provided, however, That the Fed- eral Eeserve Board may authorize examination by the State au- thorities to be accepted in the case of State banks and trust com- panies and may at any time direct the holding of a special ex- amination of State banks or trust companies that are stockholders in any Federal reserve bank. The examiner making the exami- nation of any National bank, or of any other member bank, shall have power to make a thorough examination of all the affairs of the bank and in doing so he shall have power to administer oaths and to examine any of the officers and agents thereof under oath and shall make a full and detailed report of the condition of said bank to the Comptroller of the Currency. The Federal Reserve Board, upon the recommendation of the Comptroller of the Currency, shall fix the salaries of all bank examiners and make report thereof to Congress. The expense of the examinations herein provided for shall be assessed by the Comp- troller of the Currency upon the banks examined in proportion to assets or resources held by the banks upon the dates of examina- tion of the various banks. (Sec. 5240, U. S. Eev. Stat., as amended by Sec. 21 of the Federal Reserve Act.) Examiner Does Not Represent Bank. — A National bank examiner is in no sense an agent or officer of the bank he examines. He can bind it in no way and can contract for it in no way. (Carlon v. First Nat. Bank, 157 Pac. Rep., 809.) § 132. Examiners Not to Disclose Information. — (For the pro- vision of law forbidding examiners to disclose the names of bor- rowers or the collateral for loans, see Section 22 of Federal Re- serve Act, §288.) § 133. Loans, Gratuities and Commissions to Examiners For- bidden. — (For the provision of law forbidding banks to make loans or grant gratuities to bank examiners, see Section 22 of Federal Reserve Act, §288.) 9 130 § 134. Examinations by Federal Reserve Board and Federal Reserve Banks. — (For the power of a Federal Eeserve Bank to examine a member bank, see Section 21 of Federal Reserve Act, page 300 ; for the like power of the Federal Eeserve Board, see Sec- tion 11 (a) of Federal Eeserve Act, §225.) § 135. Limitation of Visitorial Powers. — No association shall be subject to any visitorial powers other than such as are authorized by this Title, or are vested in the courts of justice. (Eev. Stat. IT. S. Sec. 5241.) For a somewhat similar provision see Section 21 of Federal Reserve Act, $286. Inspection of Books by Stockholders. — A stockholder has the right, for proper purposes, and under reasonable regulations as to time and place, to examine the books of the bank; and this right may be en- forced by a State Court. (Guthrie v. Harkness, 199 U. S., 148.) And a State statute authorizing stockholders of a corporation to inspect the books thereof applies to a National bank located in the State. (People ex rel. Lorge v. Consolidated Nat. Bank, 105 App. Div. (N. Y.), 409.) The Court has power to deny an inspection if demanded for an illegiti- mate purpose, and may regulate the time when the inspection may be made; but if the inspection is sought for a legitimate purpose and application is made to the corporation during business hours the right is mandatory. (Id.) See also Woodward v. Old Second Nat. Bank, 154 Mich., 459, and Murray v. Walker, 156 Ky., 536. CHAPTER VII. Taxation. Section 136. Tax on Circulating Notes Secured by Deposit of Other Than 2 Per Cent. Bonds. 137. Tax on Circulating Notes Secured by Deposit of 2 Per Cent. Bonds. 138. Same Subject — Panama Canal 2 Per Cent. Bonds. 139. Returns of Outstanding Circulation. 140. Assessment if Return is Not Made. 141. Collection of Tax Where Bank Fails to Pay. 142. Refunding Excess Tax Paid. 143. Tax on Notes of Insolvent Bank Abated. 144. State Taxation of Shares of Stock and Real Estate. 145. State Taxation of National Bank Notes. 146. United States Bonds Exempt from Taxation. 147. Tax on Circulation of State Banks, etc. 148. Tax on Notes of State Banks, etc., Used for Circula- tion and Paid Out by National Banks, State Banks, etc. § 136. Tax on Circulating Notes Secured by Deposit of Other Than Two Per Cent. Bonds. — In lieu of all existing taxes, every association shall pay to the Treasurer of the United States, in the months of January and July, a duty of one-half of one per centum each half-year upon the average amount of its notes in circulation. (Rev. Stat. U. S. Sec. 5214.) § 137. Tax on Circulating Notes Secured by Deposit of Two Per Cent. Bonds. — Every National banking association having on deposit as provided by law bonds of the United States, bearing interest at the rate of two per centum per annum, issued under 131 132 the provisions of this Act, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per centum, each half year upon the average amount of such of its notes in circulation as are based upon the deposit of said two per cent bonds; and such taxes shall be in lieu of existing taxes on its notes in circulation imposed by section fifty-two hundred and fourteen of the Revised Statutes. (Rev. Stat. U. S. Sec. 5214, as amended by Act March 14, 1900, Sec. 13 ; 31 Stat. L., 49.) § 138. Same Subject — Panama Canal Two Per Cent. Bonds. — Every National banking association having on deposit, as pro- vided by law, such bonds issued under the provisions of said section eight of said Act, approved June twenty-eight, nineteen hundred and two, to secure its circulating notes, shall pay to the Treasurer of the United States, in the months of January and July, a tax of one-fourth of one per cent, each half year upon the average amount of such of its notes in circulation as are based upon the deposit of said two per cent, bonds ; and such taxes shall be in lieu of existing taxes on its notes in circulation imposed by section fifty- two hundred and fourteen of the Eevised Statutes. (Act Dec. 21, 1905; 34 Stat. L., 5.) § 139. Eeturns of Outstanding Circulation. — In order to en- able the Treasurer to assess the duties imposed by the preceding section, each association shall, within ten days from the first days of January and July of each year, make a return, under the oath of its president or cashier, to the Treasurer of the United States, in such form as the Treasurer may prescribe, of the average amount of its notes in circulation,! * * * * for the six months next preceding the most recent first day of January or July. Every association which fails so to make such returns shall be liable to a penalty of two hundred dollars, to be collected either out of the interest as it may become due such association on the t The provisions omitted here required a return of the average amount of capital stock and deposits. These have been rendered ob- solete by the repeal of the tax on those items. For full details and instructions see Ch. V, Part IV. 133 bonds deposited with the Treasurer, or, at his option, in the man- ner in which penalties are to be collected of other corporations un- der the laws of the United States. (Kev. Stat. U. S. Sec. 5215.) § 140. Assessment if Return is Not Made. — Whenever any asso- ciation fails to make the half-yearly return required by the preced- ing section, the duties to be paid by such association shall be assessed upon the amount of notes delivered to such association by the Comptroller of the Currency. (Eev. Stat. TJ. S. Sec. 5216.) It is best for the bank to make up its own average, as that made by the Treasurer would necessarily include notes of the bank not actually in circulation. § 141. Collection of Tax "Where Bank Fails to Pay.— Whenever an association fails to pay the duties imposed by the three * pre- ceding sections, the sums due may be collected in the manner pro- vided for the collection of United States taxes from other corpora- tions ; or the Treasurer may reserve the amount out of the interest, as it may become due, on the bonds deposited with him by such defaulting association. (Eev. Stat. U. S. Sec. 5217.) § 142. Refunding Excess Tax Paid. — In all cases where an as- sociation has paid or may pay in excess of what may be or has been found due from it, on account of the duty required to be paid to the Treasurer of the United States, the association may state an account therefor, which, on being certified by the Treasurer of the United States and found correct by the First Comptroller of the Treasury, shall be refunded in the ordinary manner by warrant on the Treasury. (Eev. Stat. U. S. 5218.) § 143. Tax on Notes of Insolvent Bank Abated. — That when- ever and after any bank has ceased to do business by reason of insolvency or bankruptcy, no tax shall be assessed or collected, or paid into the Treasury of the United States, on account of such * The reference here is to Rev. Stat. U. S., Sections 5214, 5215 and 5216. See above sections. 134 bank, which shall diminish the assets thereof necessary for the full payment of all its depositors; and such tax shall be abated from such National banks as are found by the Comptroller of the Cur- rency to be insolvent; and the Commissioner of Internal Revenue, when the facts shall so appear to him, is authorized to remit so much of said tax against insolvent State and savings banks as shall be found to affect the claims of their depositors. (Act March 1, 1879, Ch. 125, Sec. 22; 20 Stat. L., 351.) § 144. State Taxation of Shares of Stock and Real Estate. — > Nothing herein shall prevent all the shares in any association from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the State within which the association is located; but the Legislature of each State may determine and direct the manner and place of taxing all the shares of National banking associations located within the State, subject only to the two restrictions, that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State, and that the shares of any National banking association owned by non-residents of any State shall be taxed in the city or town where the bank is located, and not elsewhere. Nothing herein shall be construed to exempt the real property of associations from either State, county or municipal taxes, to the same extent, accord- ing to its value, as other real property is taxed. (Rev. Stat. TJ. S. Sec. 5219.) Taxes Authorized by This Section Exclusive. — The taxes which the States are authorized by this section to impose are exclusive, and the National banks are not liable to any other tax imposed under State authority. (National State Bank of Oskaloosa v. Young, 25 Iowa, 311; Owensboro Nat. Bank v. Owensboro, 173 U. S., 664.) Thus, a State may not tax the intangible property or franchise of a National bank. (Owensboro Nat. Bank v. Owensboro, supra.) Taxes Upon the Shares — Difference Between Shares and Capital Stock. — The personal property of a National bank can not be directly assessed for taxation by State authority. (City and County of San Francisco v. Crocker-Woolworth Nat. Bank, 92 Fed. Rep., 273.) The 135 taxes which the States are authorized to impose are taxes upon the shares of stock in the hands of the stockholders. Such taxes are not the same as taxes upon the capital of the bank. (Van Allen v. The Assessors, 3 Wall., 573.) Where new shares are issued they can not be taxed until the increase is approved by the Comptroller of the Cur- rency. (Charleston v. People's Nat. Bank, 5 S. C, 103.) The shares are taxable without regard to their ownership, and where a National bank owns stock in another National bank, it may be taxed thereon. (Bank of Redemption v. Boston, 126 U. S., 60; see also, Bank of Calif. v. Richardson, 248 U. S., 476.) To Whom Assessed. — As the tax can be only on the shares they must be assessed to the shareholders in their names, and not in the name of the bank. (Miller v. First Nat. Bank of Cincinnati, 46 Ohio St., 424.) And an assessment of the capital stock as the personal property of the bank without mention of the shareholders is void. (Farmers' & Traders' Nat. Bank v. Hoffman, 93 Iowa, 119.) And the shares can not be assessed in solido against the bank. (First Nat. Bank of Leoti v. Fisher, 45 Kan., 726; National Bank of Virginia v. City of Richmond, 42 Fed. Rep., 877; Citizens' Bank of Louisiana v. Board of Assessors, 52 Fed. Rep., 73; Whitney Nat. Bank v. Parker, 41 Fed. Rep., 402. But see First Nat. Bank of Aberdeen v. Chehalis County, 6 Wash., 64.) But, as we shall see hereafter, the bank may be required to pay the tax for its shareholders. Meaning of the Teem "Moneyed Capital." — The provision that the taxation shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens is to be construed in the light of the purpose and object of Congress. The main purpose was to render impossible for the States, in levying taxes, to create and foster an unequal and unfriendly competition, by favoring institutions or individuals carrying on a similar business, and operations and in- vestments of a like character. The business of banking, as defined by law and custom, consists in the issue of notes payable on demand, in- tended to circulate as money, where the banks are banks of issue, in receiving deposits payable on demand, in discounting commercial paper, making loans of money on collateral security, buying and selling bills of exchange, negotiating loans, and dealing in negotiable securities is- sued by the Government, State, National and municipal and other cor- porations. These are the operations in which the capital invested in National banks is employed, and it is the nature of that employment which constitutes it in the eye of this statute "moneyed capital." Cor- porations and individuals carrying on these operations do come into competition with the business of National banks, and capital thus em- 136 ployed is what is intended to be described by the act of Congress. (Mercantile Nat. Bank v. New York, 121 U. S., 138; Talbott v. Silver Bow County, 139 U. S., 438; Palmer v. McMahon, 133 U. S., GGO; Bank of Redemption v. Boston, 125 U. S., 60; First Nat. Bank v. Chapman, 173 U. S., 205; Commercial Nat. Bank v. Chambers, 182 U. S., 556.) Accordingly, it has been held by the United States Supreme Court that the exemption from taxation of shares of stock in corporations, the business of which does not come into competition with that of the National banks, is not a discrimination against National banks within the intendment of the law. (Mercantile Nat. Bank v. New York, 121 U. S., 138.) Trust companies operating under the laws of New York are not in any proper sense banking institutions within the intend- ment of this section. (Jenkins v. Neff, 186 U. S., 230; s. c, 163 N. Y. f 320.) "What is Meant by "Greater Rate." — Any system of assessment of taxes which exacts from the owner of the shares of a National bank a larger sum in proportion to the actual value of those shares than it does from other moneyed capital, valued in like manner, taxes the shares at a greater rate, notwithstanding that the percentage of tax on the valuation is the same as that applied to other moneyed capital. (Pedton v. Commercial Nat. Bank, 101 U. S., 143; see also Whitbeck v. Mercantile Bank, 127 U. S., 193.) But the prohibition against dis- crimination applies to stockholders of National banks as a class, and not as individuals, and a scheme of taxation that is fair to the class will not be held invalid because of a particular case arising from cir- cumstances personal to the individual affected. (Amoskeag Savings Bank v. Purdy, 231 TJ. S., 373.) And where there is no discrimination against National bank stock in favor of other personal property, the fact that the assessment for taxation upon personal estate is at a higher ratio of valuation than upon real estate is no ground for the intervention of a court of equity at the instance of a National bank. (Mercantile Nat. Bank v. Mayor, 172 N. Y., 35.) Valuation of Shares — What May Be Included in Estimating Val- ues. — In estimating the value of the shares, all the property and assets of the bank may be taken into consideration unless such property is taxed separately. (St. Louis Nat. Bank v. Papin, Fed. Case No. 12,239; Stafford Nat. Bank v. Davis, 59 N. H., 38.) And it has been held that where shares are taxed at their par value, the surplus fund may be taxed separately if it is not invested in Federal securities. (First Nat. Bank v. Peterborough, 56 N. H., 38; North Ward Nat. Bank v. City of Newark, 39 N. J. Law, 380. But see National State Bank v. Young, 25 Iowa, 311; County Commissioners v. Farmers' and Mechanics' Nat 137 Bank, 48 Md., 117.) If the shares are assessed at their actual cash value without any deduction for real estate, the latter should not be taxed separately. (Commissioners of Rice County v. Citizens' Nat. Bank of Faribault, 23 Minn., 280.) As the tax is upon the shares and not upon the capital stock, it is not necessary that any deduction should be made for that portion of the capital which is invested in United States bonds or other non-taxable securities. (Van Allen v. The Assessors, 3 Wall., 573; Mechanics' Nat. Bank v. Baker, 65 N. J. Law, 113.) In making a return of the value of its own stock tor the purposes of taxation a National bank can not deduct the stock which it holds in the Federal Reserve Bank. (First Nat. Bank of Cincinnati v. Durr, 246 Fed. Rep., 163; Same v. Beaman, 257 Fed. Rep., 729.) Same Subject — How Real Estate Treated. — In fixing the actual value of shares of bank stock for the purpose of taxation, the real estate of the bank is to be taken at its actual value, notwithstanding it is assessed at a lower valuation. (Jenkins v. Neff, 163 N. Y., 320.) Under the statutes of Indiana the real estate owned by a National bank is not to be included in the valuation of the shares of stock for purposes of taxation. (Board of Commissioners of Morgan County v. First Nat. Bank, 57 N. E. Rep., 728.) But where the real estate has been so included, and the bank has also paid a tax upon the real estate as such, the latter tax can not be recovered by the bank; for the wrong done was in the over-valuation of the stock, and not in the assessment of the real estate to' the bank. {Id.) As to the rule in New Jersey, see Bank v. Williams (58 N. J. Law, 45) ; Mechanics' Nat. Bank v. Baker (65 N. J. Law, 113). Exemptions. — In Adams v. Nashville (95 U. S., 19) it was said by the Supreme Court, "the act of Congress was not intended to curtail the State power on the subject of taxation. It simply required that capital invested in National banks should not be taxed at a greater rate than like property similarly invested. It was not intended to cut off the power to exempt particular kinds of property if the legislature chose to do so." Accordingly, it has been held by that court that a partial exemption of other moneyed capital will not deprive the State of the power to levy a tax on National bank sto'ck. (Hepburn v. School Directors, 23 Wall., 480; see also Washington Nat. Bank v. King Co., 9 Wash., 607.) Thus bonds issued by a State, or under its authority, by its public municipal bodies, although they undoubtedly represent mon- eyed capital, may be exempted without this effect, since they are not ordinarily the subject o'f taxation. (Mercantile Bank v. Now York, 121 U. S., 138.) So the State may exempt savings-bank deposits (Id.), or the credits of individuals such as accounts, promissory notes, and 138 mortgages. (First Nat. Bank v. Chehalis Co., 6 Wash., 64.) But all exemptions must be founded upon just reason, and not operate as an unfriendly discrimination against investments in National bank shares. (Id.) Where the exemptions in favor of other moneyed capital are so palpable as to show that there is a serious discrimination against capital invested in the shares of National banks, the tax upon such shares will be declared invalid. (Boyer v. Boyer, 113 U. S., 690.) And where a tax is imposed on the market value of the shares of a National bank without allowance of any deduction for the non-taxable securities and specifically taxed property held by the bank, and where it is also so assessed that the owners of shares thus taxed are deprived of the privilege allowed other moneyed capitalists of deducting from the amount of securities held by them the amount Of bonds, securities, liquidated claims and demands due from them respectively to others, such a tax violates the provisions of the Statutes of the United States, and is void. (The First Nat. Bank of Richmond v. The City of Rich- mond, 39 Fed. Rep., 389.) If in the practical execution of a State tax law it is found impracticable to list more than a small portion of the property subject to taxation, other than National bank shares, the National banks may demand such forms of relief as will protect the shareholders from paying a greater rate of taxation than is imposed on individual citizens. (First Nat. Bank v. Lindsay, 45 Fed. Rep., 619.) Deductions— Stockholders of the National banks must be allowed the same deductions from the assessment against them upon their shares of stock that are allowed to the other taxpayers in the State on their moneyed capital. (People v. Weaver, 100 U. S., 539, reversing 67 N. Y., 516, and overruling People v. Dolan, 36 N. Y., 59.) And if the owners of other moneyed capital are permitted to deduct from the assessed value thereof the amount of debts which they owe, the same privilege must be allowed to the holders of National bank stock. ( Peo- ple v. Weaver, 100 U. S., 539; Britton v. Evansville Nat. Bank, 105 U. S„ 322; Supervisors v. Stanley, 105 U. S., 305; First Nat. Bank of Leoti v. Fisher, 45 Kans., 726; Mercantile Nat. Bank v. Shields, 59 Fed. Rep., 952.) And the mode of assessment must be such that these de- ductions can be made; and, therefore, an assessment of all the shares against the bank in solido which would preclude such deductions, would be void. (First Nat. Bank v. City of Richmond, 39 Fed. Rep., 309.) But it is immaterial that such deductions are allowed to holders of stock in railroad, insurance and manufacturing corporations, since such stock is not regarded as "moneyed capital." (Mercantile Nat. Bank v. Shields, 59 Fed. Rep., 952.) Where the State laws require National bank shares to be assessed 139 at their real value, it is not a discrimination against these banks that private banks are permitted to deduct their deposits from their taxable assets, and this privilege is withheld from National banks, for the deposits are debts against the bank, and the real value of the shares depends upon the value of the bank's franchise, capital and property of all kinds, less its debts. (Engelke v. Schlender, 75 Tex., 559.) Un- der the statutes of Virginia a stockholder in a National bank is not entitled to have his indebtedness deducted from the value of his stock before it is assessed. (Burrows v. Smith, 95 Va., 694.) As the tax is on the shares and not on the capital, deductions can not be made for capital invested in U. S. bonds or other non-taxable securities. (Van Allen v. Assessors, 3 Wall., 573.) Flat Rate Without Deductions. — Though the State law may allow deductions to persons and corporations generally, yet a low flat rate, imposed upon the shares of all banks, both State and National, without the right to make deductions for debts, does not discriminate against National banks and is not invalid under the National Bank Act. (Amoskeag Savings Bank v. Purdy, 231 U. S., 373; People v. Feitner, 191 N. Y., 88.) Non-Taxable Property. — The intention of Congress was that the rate of taxation should be the same as, or not greater than, the tax upon moneyed capital, which is subject and liable to taxation, and which the State has the capacity to tax. (People v. Commissioners, 4 Wall., 241; Lionberger v. Rouse, 9 Wall., 468.) It is, therefore, no objection to a tax on National bank stock that, while deductions are made from the personal estates of individuals and the capital of State corpora- tions for the Government bonds owned by them, no such deduction is made on account of the capital of National banks so invested, or that private bankers are allowed to deduct legal tender notes, and no such deduction allowed to National banks. (Adair v. Robinson, 6 Tex., Civ. App., 275; People v. Commissioners, supra.) And where a State had previously contracted with banks chartered by it that they should not be taxed above a certain rate, it was held by the Supreme Court that a tax on National bank stock at a greater rate was not invalid, if this rate was not greater than that assessed upon all other moneyed capital within the State. (Lionberger v. Rouse, 9 Wall., 468.) Real Estate in Other States. — The National Bank Act does not re- quire that real estate situated outside of the State in which the bank is located shall be excluded in estimating the value of the shares for purposes of taxation. (Commercial Nat. Bank v. Chambers, 182 U. S., 556.) 140 Mode in Which State Banks Must Be Tased.— Where the State banks are taxed upon the capital, no tax can be imposed upon the shares of National banks, for as the capital of the State banks may- consist of bonds of the United States which are exempt from taxation, a tax on capital is not equivalent to a tax on shares. (Van Allen v. The Assessors, 3 Wall., 573; Bradley v. The People, 4 Wall., 459.) But though the tax upon the State banks is not eo nomine a tax on shares, yet if it is equivalent to such a tax, the shares in the National banks located in that State may be taxed. (Frazer v. Seibern, 16 Ohio St., 614; Van Slyke v. State, 26 Wis., 655; Boynoll v. State, 25 Wis., 112.) But Congress meant no more than to require of the States, as a condi- tion to the exercise of the power to tax the shares in National banks, that they should, as far as they had the capacity, tax in like manner the shares of banks of their own creation. (Lionberger v. Rouse, 9 Wall., 468.) Therefore, where a State has previously contracted with the banks which it has chartered that they should not be taxed above a certain rate, a tax upon National bank shares at a greater rate is not invalid, if this rate is not greater than that assessed upon all the moneyed capital within the State, except that of the State banks. {Id.; The City of Des Moines, 205 U. S., 503; Marion Nat. Bank of Lebanon v. Burton, and The Citizens' Nat. Bank of Lebanon v. Burton, 90 S. W. 944.) State Constitution. — 'The taxation upon National bank shares by State must be characterized by such equality and uniformity as is re- quired by the State constitution for the protection of individual citi- zens having moneyed capital. (First Nat. Bank v. Lindsay, 45 Fed. Rep., 619.) National and State banks in Kentucky are subject to county and municipal taxation. (Deposit Bank of Owensboro v. Davies County, 102 Ky., 174.) And the acceptance by the banks of the act known as the "Hewitt Law" does not preclude the State from subject- ing them to other modes of taxation. (Id.) Taxation by Territories. — Although the word "territory" is not men- tioned specifically in the statute, the Territories have the same power of taxation of National banks that the States have. (Talbott v. Silver Bow Co., 139 U. S., 441.) Insolvent National Bank. — The personal property of an insolvent National bank in the hands of a receiver appointed by the Comptroller of the Currency is exempt from taxation under State laws. (Rosen- blatt v. Johnson, 104 U. S., 462; see Woodward v. Ellsworth, 4 Colo., 580.) And where a National bank has become insolvent and the prop- erty representing the capital stock has been swept away, no tax on the 141 shares can be collected from the receiver under a statute requiring a tax to be paid by the bank. (City of Boston v. Beal, 55 Fed. Rep., 26; s. c, 51 Fed. Rep., 306.) Report to Comptroller Not Evidence of Value of Shares. — The written report of the officers of a National bank to the Comptroller of the Currency, made pursuant to Section 5211, Rev. St. U. S., does not purport to give the actual or estimated value of the bank's property, and is incompetent, alone, as a basis from which to deduce the actual value of the bank's stock. (Patterson v. Plummer, 10 N. D., 95.) License Tax. — Neither the State nor its municipalities can impose a license or privilege tax upon the National banks. (State v. Clement Nat. Bank, 84 Vt, 167; Mayor v. First Nat. Bank, 59 Ga., 648; City of Carthage v. First Nat. Bank, 71 Mo., 508; National Bank of Chattanooga v. Mayor, 8 Heiskell (Tenn.), 814.) Collection of Taxes. — While the tax is upon the shares it is usually collected from the banks, they paying for their shareholders. The right of the States to collect the tax in this manner has been sustained by the United States Supreme Court. (National Bank v. Common- wealth, 9 Wall., 353.) But the bank is not absolutely liable for the tax upon the shares; to render it liable it must be shown to have, or have had, dividends or other property belonging to the shareholders. (Far- mers' and Traders' Nat. Bank v. Hoffman, 93 Iowa, 191.) A State may require the officers of National banks located within its territory to transmit lists of its stockholders to the taxing officers of the various towns and villages in which the stockholders who are residents reside. (Waite v. Dowly, 94 U. S., 527; First Nat. Bank of Youngstown v. Hughes, 6 Fed. Rep., 737.) And State courts have jurisdiction to com- pel the officers of National banks by mandamus to exhibit to the county assessors the list of the shareholders in their banks; and to this end it is not necessary the statute should be supplemented by State legis- lation. (Paul v. McGrau, 3 Wash. St., 296.) Where a National bank has become insolvent and the property representing the capital stock has been swept away, no tax on the shares can be collected from the receiver under a statute requiring the tax to be paid by the bank. (City of Boston v. Beal, 51 Fed. Rep., 306; s. c, 55 Fed. Rep., 26.) Agreement of Bank to Pay Taxes. — An agreement by a National bank to pay taxes on its stock to it, and assessed at the time against the sellers, in consideration of being allowed to retain the dividends and surplus, is not illegal, although the taxes are not properly assessed. (Lull v. Anamosa Nat. Bank, 110 Iowa, 537.) 142 Tax Upon Deposits. — The rule that a State can exercise no control over a National bank, except as Congress may permit, does not prevent the States from taxing the deposits therein against the depositors; and the State may make the bank its agent to collect the tax. (State v. Clement Nat. Bank, 84 Vt, 167; Clement Nat. Bank v. Vermont, 231 U. S., 120.) And the contract of a National bank, voluntarily made in pursuance of the State Statute, to pay to the State the tax deposits, is a contract designed to promote the bank's interests in an authorized branch of its business, and is not ultra vires. (Id.) Remedy for Illegal Taxation. — If the tax is illegal the bank may, on behalf of its stockholders, maintain a suit to enjoin the collection thereof. (Cummings v. National Bank, 101 U. S., 153; Hills v. Ex- change Bank, 105 U. S., 319; Pelton v. Commercial Nat. Bank, 101 U. S., 143; Boyer v. Boyer, 113 U. S., 143; Third Nat. Bank v. Hughes, 76 Fed. Rep., 385.) But there must be more than a mere apprehension that the National Bank Act will be violated. (First Nat. Bank v. Albright, 208 U. S., 548.) The discrimination must be affirmatively shown. (Amoskeag Savings Bank v. Purdy, 231 U. S., 373.) Two banks against the stock of which separate assessments have been made can not join in such a suit. (Jones v. Rushville Nat. Bank, 138 Ind., 87.) Where there is a tribunal empowered to grant full relief in such cases, an injunction will not issue until application shall have been made to such tribunal. (Albuquerque Nat. Bank v. Perea, 147 U. S., 87; First Nat. Bank v. Bailey, 15 Mont., 301. See Eaton v. Union County Nat. Bank, 141 Ind., 136; Castles v. City of New Orleans, 46 La. Ann., 542; First Nat. Bank v. Brodhecker, 137 Ind., 693.) Where a National bank seeks an injunction on the ground of excessive valuation of its shares, the sum admitted to be due must be first paid or tendered. (Albuquer- que Nat. Bank v. Perea, 147 U. S., 87.) A court of equity may restrain the sale of the property of the bank for taxes assessed upon the stock of its shareholders. (Brown v. French, 80 Fed. Rep., 166.) Such an action may be maintained by a receiver. (Id.) § 145. State Taxation of National Bank Notes.— That circu- lating notes of National banking associations and United States legal-tender notes and other notes and certificates of the United States, payable on demand and circulating or intended to circulate as currency, and gold, silver, or other coin shall be subject to taxation as money on hand or on deposit under the laws of any State or Territory: Provided, That any such taxation shall be exercised in the same manner and at the same rate that any such 143 State or Territory shall tax money or currency circulating as money within its jurisdiction. That the provisions of this act shall not be deemed or held to change existing laws in respect of the taxation of National banking associations. (Act August 13, 1894, Ch. 281, Sees. 1 and 2; 28 Stat. L., 278.) This does not apply to the bank issuing the notes, but to the holders thereof. § 146. United States Bonds Exempt from Taxation. — All stocks, bonds, Treasury notes, and other obligations of the United States shall be exempt from taxation by or under State or municipal or local authority. (Rev. Stat. U. S. 3701.) So far as this section prohibits State taxation of legal-tender notes it was repealed by Act August 13, 1894. (See preceding section.) § 147. Tax on Circulation of State Banks, etc. — That every person, firm, association, other than National bank associations, and every corporation, State bank, or State banking association shall pay a tax of ten per centum on the amount of their own notes used for circulation and paid out by them. (Act Feb. 8, 1875, Sec. 19; 18 Stat. L., 311.) § 148. Tax on Notes of State Banks, etc., "Used for Circulation and Paid Out by National Banks, State Banks, etc. — That every such person, firm, association, corporation, State bank, or State banking association, and also every National banking association, shall pay a like tax of ten per centum on the amount of notes of any person, firm, association other than a National banking asso- ciation, or of any town, city, or municipal corporation, used for circulation and paid out by them. (Act Feb. 8, 1875, Sec. 20; 18 Stat. L., 311.) CHAPTER VIII. Dissolution and Receivership. Section 149. Voluntary Liquidation. 150. Notice of Intention to Go into Liquidation. 151. Mode of Enforcing Stockholders' Liability. 152. Appointment of Receiver for Failure of Bank to Pay Its Notes. 153. Appointment of Receiver Where Franchise Forfeited — In Cases of Insolvency. 154. Duties and Powers of Receiver — Deposit of Funds. 155. Advertisement of Comptroller to Creditors. 156. Dividends to Creditors. 157. Injunction upon Receivership. 158. Expenses of Protest, Examination and Receivership. 159. Equities in Real E'state, etc. — Protection of — Recom- mendation of Receiver. 160. Same Subject — Approval of Comptroller and Secre- tary of Treasury. 161. Same Subject — Mode of Paying for Property. 162. Disposition of Assets After Payment of Creditors — Agent for Stockholders — Mode of Distribution. 163. Violation of National Bank Act — How Determined — Penalty for — Liability of Directors. 164. Transfers in Contemplation of Insolvency — Prefer- ences. § 149. Voluntary Liquidation. — Any association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock. (Rev. Stat. IT. S. Sec. 5220.) For full particulars and forms see Ch. VIII, Part IV. 144 145 Shareholders' Meeting. — The owners of two-thirds of the stock may vote to liquidate the bank, though they are the directors and executive officers thereof, since they owe no duty to dissenting minority stock- holders to continue the bank. (Green v. Bennet, 110 N. W. Rep., 108.) The action must be taken at a meeting of stockholders duly assem- bled. The notice of meeting should clearly indicate the business to be transacted. The vote in favor of the liquidation must represent two-thirds of all the stock. But shareholders owning two-thirds of the stock may place the bank in liquidation., though this may be contrary to the wishes, and against the interests, of the owners of the remainder of the stock. (Watkins v. National Bank of Lawrence, 51 Kans., 254.) A person who, with full knowledge of all the steps taken in placing a bank in liquidation, receives and retains a dividend paid by the officers in control of the liquidating bank, will not be heard to deny the validity of the liquidation. (Id.) See also First Nat. Bank of €entralia v. Marshall, 26 111. App., 440, and Elwood v. First Nat. Bank, 41 Kans., 475. New Contracts. — After a National bank has been placed in liquida- tion, its officers have no authority to transact any business in its name, except such as is implied in the duty of winding up its affairs. (Rich- mond v. Irons, 121 U. S., 27; Schroder v. Manufac. Nat. Bank of Chi- cago, 133 U. S., 67; Moss v. Whitzel, 108 Fed. Rep., 579.) Transfers of Stock — Inspection of Books. — A National bank in liquidation can not be compelled to enter subsequent transfers of stock on its books and issue new certificates therefor. (Muir v. Citizens' National' Bank, 39 Wash., 57.) The stockholders may in a proper case by mandamus require the officers and directors to exhibit to them the books, papers and assets of the bank, and permit them to examine the same. (Matter of Tuttle v. Iron Nat. Bank, 170 N. Y., 9.) Corporate Existence. — The placing of the bank in liquidation does not dissolve it as a corporation; but it will continue to exist as a body corporate for the purpose of suing and being sued until its affairs are finally closed. (Natl. Bank v. Insurance Co., 104 U. S., 54; Ordway v. Central Nat. Bank, 47 Md., 217; Farmers' Nat. Bank v. Suther, 28 Okla., 806; Planten v. Nat. Nassau Bank, 174 App. Div. (N. Y.), 254. But see Hodgson v. McKinstry, 3 Kans. App., 412.) Assets Become Trust Fund. — The assets of a bank in liquidation become a trust fund to be administered for the benefit of all creditors pro rata, and while the bank retains its corporate existence and may be sued, the effect of a judgment obtained against it by a creditor Is 10 146 only to fix the amount of the debt, and the judgment plaintiff can ac- quire no lien which will give him an advantage over other creditors. (Merchants' Nat. Bank v. National Bank of Lillington, 231 Fed. Rep., 556.) Receiver. — Where the bank is insolvent the Comptroller of the Cur- rency may appoint a receiver therefor, notwithstanding the stock- holders have voted to place the bank in liquidation. (Washington Nat. Bank of Tacoma v. Eckels, 57 Fed. Rep., 870.) And a court of competent jurisdiction may appoint a receiver for a liquidating bank, where the bank is insolvent, or its affairs are being mismanaged. (Irons v. Manufacturers' Nat. Bank, Fed. Case NO. 7068; Elwood v. First Nat. Bank, 41 Kans., 475. But see Watkins v. National Bank of Lawrence, 51 Kans., 254.) Liquidating Bank as Garnishee. — The right of a creditor of a de- positor to make the bank a garnishee is not affected by the fact that the bank has gone into voluntary liquidation. (Birmingham Nat. Bank v. Mayer, 104 Ala., 634.) Dividends. — Liquidation dividends of a National bank belong to the holders of shares, whether those shares be recorded upon the books of the bank or not, and must be paid to the holders of such shares on de- mand. The negotiability or transferable character of the stock of a National bank depends upon the laws of the United States, and is not affected by State laws. (Bath Savings Institution v. Sagadahoc Nat. Bank, 89 Maine, 500.) Suits Against Directors — Demand. — Where a National bank goes into voluntary dissolution, and a resolution is adopted by more than two-thirds of the shareholders authorizing the appointment by the stockholders of a committee to liquidate the affairs of the bank, a stockholder, in an action in the name of the corporation for an ac- counting by directors for losses resulting from their mismanagement, wrongful acts and negligence, need not show a demand upon, and a refusal by the liquidating committee to bring the action. (Planten v. National Nassau Bank, 174 App. Div. (N. Y.), 254.) Nor is the plain- tiff in such action required to show a demand on the stockholders. {Id.) § 150. Notice of Intention to Go into Liquidation. — Whenever a vote is taken to go into liquidation it shall be the duty of the board of directors to cause notice of this fact to be certified, under the seal of the association, by its president or cashier, to the Comp- troller of the Currency, and the publication thereof to be made for 147 a period of two months in a newspaper published in the city of New York, and also in a newspaper published in the city or town in which the association is located, or if no newspaper is there published, then in the newspaper published nearest thereto, that the association is closing up its affairs, and notifying the holders of its notes and other creditors to present the notes and other claims against the association for payment. (Rev. Stat. U. S. Sec. 5221.) For full particulars see Ch. VIII, Part IV. Date of Liquidation. — The liquidation takes effect on the date speci- fied in the shareholders' resolution and, if no time is mentioned therein then on the date of the vote and not on the receipt of the notice by the Comptroller. § 151. Mode of Enforcing Stockholders' Liability. — That when any National banking association shall have gone into liquidation under the provisions of section five thousand two hundred and twenty of said Statutes, the individual liability of the shareholders provided for by section fifty-one hundred and fifty-one of said Statutes may be enforced by any creditor of such association, by bill in equity in the nature of a creditor's bill, brought by such creditor on behalf of himself and of all other creditors of the as- sociation, against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the dis- trict in which such association may have been located or estab- lished. (Act June 30, 1876, Ch. 156, Sec. 2 ; 19 Stat. L., 63.) This is the only authorized procedure for enforcing the individual liability of the shareholders of a National bank which has gone into voluntary liquidation. (Williamson v. American Bank, 109 Fed. Rep., 36; 115 Fed. Rep., 793.) The liability may be enforced to pay notes is- sued by the bank for money borrowed by it. (Wyman v. Wallace, 201 U. S., 230.) And the creditor need not obtain judgment on the notes. {Id.) § 152. Appointment of Receiver for Failure of Bank to Pay Its Notes. — On becoming satisfied, as specified in sections fifty-two 143 hundred and twenty-six and fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Cur- rency may forthwith appoint a receiver, and require of him such bond and security as he deems proper. (Rev. Stat. TJ. S. Sec. 5234.) § 153. Appointment of Receiver Where Franchise Forfeited — In Cases of Insolvency. — That whenever any National banking association shall be dissolved, and its rights, privileges, and fran- chises declared forfeited, as prescribed in section fifty-two hundred and thirty-nine of the Eevised Statutes of the United States, oi* whenever any creditor of any National banking association shall have obtained a judgment against it in any court of record, and made application, accompanied by a certificate from the clerk of the court stating that such judgment has been rendered and has remained unpaid for the space of thirty days, or whenever the Comptroller shall become satisfied of the insolvency of the Na- tional banking association, he may, after due examination of its affairs, in either case, appoint a receiver, who shall proceed to close up such association, and enforce the personal liability of the shareholders, as provided in section fifty-two hundred and thirty- four of said statutes. (Act June 30, 1876, Ch. 156, Sec. 1; 19 Stat. L., 63.) This section is not unconstitutional. (Bushnell v. Leland, 164 U. S., 684.) Congress had power to apply it to banks in the District of Columbia. (Lyons v. Bank of Discount, 154 Fed. Rep., 391.) A debtor of the bank cannot question the authority of the receiver. (Jacobson v. Berry, 135 111. App., 415.) Decisions of Comptroller. — The decision of the Comptroller that the bank is insolvent is final, and is not reviewable by the courts. (Washington Nat. Bank of Tacoma v. Eckels, 57 Fed. Rep., 870; Piatt v. Beebe, 57 N. Y., 339; Wheelock v. Ko'st. 77 111., 296.) Nor is the Comptroller's power in this respect limited by the authority given to the stockholders under Rev. Stat. U. S., Sec. 5220, to place the bank in liquidation (Id.) ; nor by the act of 1876, authorizing the appoint- ment of an "agent" for the stockholders. (Id.) 149 Jurisdiction of Courts to Appoint Receiver. — It has been held in several cases that the power of the Comptroller to appoint a receiver is not exclusive, and that a court of equity of ccimpetent jurisdiction may direct a receivership where, according to the rules of equity, it may do' so in the case of other corporations. (Irons v. Manufacturers' Nat. Bank, Fed. Case No. 7068; Wright v. Merchants' Nat. Bank, Fed. Case No. 18,084; King v. Pomeroy, 121 Fed. Rep., 287.) A receiver so ap- pointed may enforce the individual liability of the stockholders for the debts of the bank. (King v. Pomeroy, 121 Fed. Rep., 287.) A receiver may be appointed in a proper case by a Federal court for a bank which has gone into voluntary liquidation. (Richmond v. Irons, 121 U. S., 27.) But the expenses of such a receiver can not be charged to the stockholders as a part of their statutory liability. {Id.) Effect of Appointment of Receiver. — The failure of a bank and the seizure by the Comptroller of the Currency ends the exercise of volition by the officers of the bank, suspends the payment of checks, matures all demand notes held by the bank, and applies to the payment of such notes, all balances on the books of the bank, standing to' the credit of the makers of the notes. (Park Nat. Bank of Chicago v. Neblack, 67 111. App., 583.) But the appointment of a receiver for a National bank by the Comptroller of the Currency does not Operate to dissolve the corporation. (Chemical Nat. Bank v. Hartford Deposit Company, 161 U. S„ 1; Bank of Bethel v. Pahquioque Bank, 14 Wall., 383; Chemical Nat. Bank v. Hartford Deposit Company, 156 111., 522.) Presentment of Paper. — Where a National bank has been placed in the hands of a receiver paper payable at the bank should be presented at the office of the Receiver. (Hutchison v. Crutcher, 98 Tenn., 421.) Where a bank examiner is in charge the paper should be presented to him. (Auten v. Manistee Nat. Bank, 67 Ark., 243.) Bankruptcy Law Does Not Apply. — Insolvent National banks can be wound up only in the mode provided by the National Bank Act; the Federal laws on bankruptcy do not apply. (Cook Co'unty Nat. Bank v. United States, 107 U. S., 445.) Questioning Validity of Appointment. — The legality of the appoint- ment of a receiver can not be inquired into by the debtors or stock- holders of the bank when sued by him; as to them, the action of the Comptroller in making the appointment is conclusive until set aside on the application of the bank. (Cadle v. Baker, 20 Wall., 650; Weitzel v. Brown, 224 Mass., 190; Peters v. Foster, 56 Hun., 607; Young v. Wcmpke, 46 Fed. Rep., 354.) 150 Supervisory Power of Comptroller. — The receiver is the instrument of the Comptroller, and is subject to the general direction of that officer (Kennedy v. Gibson, 8 Wall., 505), and may be removed by the Comptroller at any time. (Kennedy v. Gibson, 18 Wall., 505.) But the language of the statute that the receiver shall act under the di- rection of the Comptroller means no more than that the receiver shall be subject to the direction of the Comptroller; it does not mean that he shall do no act without special instructions. Thus, he may bring an action to recover an ordinary debt due to the bank without having received special instructions from the Comptroller to do so. (Bank v. Kennedy, 17 Wall., 19.) Specific authority given to a receiver to bring an action against a stockholder to recover an assessment is not with- drawn or affected by a subsequent general authority to' compromise or sell all the claims or assets of the bank. (McLain v. Rankin, 119 Fed. Rep., 110.) § 154. Duties and Powers of Beceiver — Deposit of Funds. — Such receiver, under the direction of the Comptroller, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues and claims belonging to it, and, upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property of such associa- tion, on such terms as the court shall direct ; and may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders. Such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comptroller, and also make report to the Comptroller of all his acts and proceedings: Provided, That the Comptroller may, if he deems proper, deposit any of the money so made in any regular Government depositary, or in any State or National bank either of the city or town in which the insolvent bank was located, or of a city or town as adjacent thereto as practicable ; if such de- posit is made he shall require the depositary to deposit United. States bonds or other satisfactory securities with the Treasurer of the United States for the safe-keeping and prompt payment of the money so deposited. Such depositary shall pay upon such money interest at such rate as the Comptroller may prescribe, not less, however, than two per centum per annum upon the average monthly 151 amount of such deposits. (Kev. Stat. TJ. S. Sec. 5234, as amended by Act May 15, 1916; 39 Stat. L., 122.) Contracts of Receiver. — The Receiver can not charge the estate of the bank by any executory contract, unless authorized so to do by the provisions of the law and the order of a court of competent jurisdiction obtained upon the terms of the law. (Ellis v. Little, 27 Kans., 701. See also People's State Bank of Lakota v. Francis, 8 N. D., 369.) Sales by Receiver. — Before the receiver can sell any of the property of the bank he should have the approval of the Comptroller and must have an order from a court of competent jurisdiction; a sale made without such an order is void. (Schofield v. Baker, 212 Fed. Rep., 504; Ellis v. Little, 27 Kans., 707. See also In re Earle, 92 Fed. Rep., 22.) Where the order directs him to sell, he can not exchange or trade the property for other property. (Ellis v. Little, 27 Kans., 707.) And an order to sell the personal and chattel property of the bank will not authorize him to assign a contract with respect to realty. (Baker v. Schofield, 221 Fed. Rep., 322.) A sale made by a Receiver under order of a court is to all intents and purposes a judicial sale. {In re Third National Bank, 4 Fed. Rep., 775); and the approval thereof by the courts has the force and effect of a judgment, and such proceedings are not subject to collateral attack. (Schaberg's Estate v. McDonald, 60 Neb., 493.) For a case where action was brought against a Re- ceiver for making a wrongful sale of the bank's assets, see Moss v. Goodhart, 209 Fed. Rep., 102. Compounding Debts. — Bad or doubtful debts due to a National bank can not be compounded upon the order of the Comptroller of the Cur- rency; but for this purpose the order of some court of competent juris- diction is also required. (Case v. Small, 10 Fed. Rep., 722.) It is questionable whether the court has power to authorize the compound- ing of the statutory liability of a stockholder in a National bank. {In re certain stockholders of the California National Bank of San Diego, 53 Fed. Rep., 38; Butler v. Poole, 44 Fed. Rep„ 586.) And it has been held that a judgment recovered against a stockholder on an assessment made by the Comptroller, although uncollectible, is not a "bad or doubtful debt," which a court may authorize the Receiver to compound, under Rev. St., Section 5234. {In re Earle, 96 Fed. Rep., 678.) But a receiver may enforce a compromise agreement entered into for the settlement of a stockholders' liability. (McClain v. Rankin, 119 Fed. Rep., 110.) And with the approval of the Court that appointed him, he may compromise a judgment debt of two joint debtors, where he 152 has been unable to find any property of either of them, by releasing the debtors on receiving from one of them a sum of money less than the amount of the judgment. (Brooks v. Neal, 223 Mass., 467.) Suits by and Against Receiver. — The Receiver may sue either in his o'wn name or in the name of the bank. (National Bank v. Ken- nedy, 17 Wall., 19.) And a creditor may bring suit either against the receiver or the bank. (Bank of Bethel v. Pahquioque Bank, 14 Wall., 833; Chemical Nat. Bank of Chicago v. Hartford Deposit Co., 156 111., 522.) In the case of ordinary debts due to the bank the Receiver may bring a suit to recover them without special directions from the Comp- troller. (Id.) But when the individual liability of the stockholders is to be enforced, the Receiver, before beginning suit, must have the direction of the Comptroller. (Kennedy v. Gibson, 8 Wall., 505; Bank v. Kennedy, 17 Wall., 19.) As to the sufficiency of the Comptroller's directions see Weitzel v. Brown, 224 Mass., 190; Bowden v. Johnson, 107 U. S., 251. Jurisdiction of Federal Court. — The receiver of an insolvent Na- tional bank may bring suit in a Federal court to collect assets of the bank regardless Of the citizenship of the parties. (Fisher v. Yoder, 53 Fed. Rep., 565; Linn County Nat. Bank v. Crawford, 69 Fed. Rep., 532.) So, a suit by the Receiver to enforce the individual liability of the stockholders in a case arising under the laws of the United States, and where the amount involved exceeds $2,000, is within the jurisdiction of the United States Circuit Court. (Thompson v. German Insurance Co., 76 Fed. Rep., 892.) See also Hot Springs Independent School District v. First Nat. Bank of Hot Springs, 61 Fed. Rep., 417; Auburn Savings Bank v. Hayes, 61 Fed. Rep., 911. The Receiver is an officer of the United States within the meaning of Section 563, Rev. Stat. U. S., which gives the District Courts jurisdiction of "all suits at common law brought by the United States, or any officer thereof authorized by law to sue." (Stephens v. Bernays, 41 Fed. Rep., 401.) Where the Receiver takes a case by appeal or writ of error to the Supreme Court of the United States, he is not required to give a bond td answer in damages and costs. (Pacific Nat. Bank v. Mixter, 114 U. S., 462; Pep- per v. Fidelity and Casualty Co., 125 Fed. Rep., 822.) State Courts — State Statutes. — The Receiver may sue in the State courts. (Fish v. Olin, 76 Vt, 120.) He will not be treated by the State courts as a foreign Receiver, and can sue therein to recover an assess- ment levied on the shareholders of a bank located in another State. (Peters v. Foster, 56 Hun., 607.) An action by a Receiver against the stockholder is governed by the State statute of limitations. (Butler v. Poole, 44 Fed. Rep., 586.) 153 District Attorney — State Statutes. — As the Receiver is the agent of the United States, suits instituted by him should, under Section 380, Revised Statutes, be conducted by the United States district attorney for the district, but this provision is only directory, and if the Receiver employs other counsel in a suit against a debtor of the bank, the de- fendant can not be heard to make the objection that this duty of the local officer of the Government has been devolved upon another. (Ken- nedy v. Gibson, 8 Wall., 498.) But United States district attorneys are not entitled to any compensation, in addition to their salaries, for conducting suits brought by Receivers of National banks. (Gibson v. Peters, 150 U. S., 342.) The Receiver may at any time dismiss an attorney employed by him, regularly or otherwise, to prosecute claims of the bank, and employ another in his place, whom the court will, by order, substitute in the place of the dismissed attorney, except as to such cases as the latter may have commenced and finished. (In re Herman, 50 Fed. Rep., 517.) Receiver Occupies Same Position as the Bank. — Where a Receiver is placed in charge of the assets of a National bank, he stands, as to such assets, in the place of the bank, and is chargeable with knowledge of all facts known to the bank affecting the character of such assets. (People's State Bank of Lakota v. Francis, 8 N. D., 369.) And he may hot appropriate to the use of the bank or its creditors any seeming asset that in equity and good conscience belongs to another, or enforce against another any claim which ought not to be enforced. (Skud v. Tillinghast, 195 Fed. Rep., 1.) Suits Against Directors. — Suits against the directors for neglect or mismanagement of the affairs of the bank should usually be brought by the Receiver, but if the Receiver refuses to act, such suit may be brought by any shareholder on behalf of himself and the other share- holders. (Brinkerhoff v. Bostwick, 88 N. Y., 52.) See note to $163, page 163. Power of Bank Examiner in Charge of Bank. — A bank examiner, who takes charge of the assets of a National bank under the directions ot the Comptroller, is not the agent for the bank in such negotiations as the bank may be permitted to enter into with a view to the re- sumption of the business. (Tecumseh Nat. Bank v. Chamberlain Bank- ing House, 63 Neb., 163.) Duty of Directors to Preserve Assets. — The duty of the directors to take the necessary steps to preserve the assets of the bank does not end merely because a bank examiner has taken possession of the bank by direction of the Comptroller of the Currency. (Robinson v. Hall, 154 63 Fed. Rep., 222.) Their duties as directors in this regard do not cease until a Receiver has been appointed. {Id.) Thus, it would be their duty to see that a mortgage given to the bank was duly recorded, notwithstanding a bank examiner was in charge. (Id.) § 155. Advertisement of Comptroller to Creditors. — The Comp- troller shall, upon appointing a receiver, cause notice to be given, by advertisement in such newspaper as he may direct for three consecutive months, calling on all persons who may have claims against such association to present the same, and to make legal proof thereof. (Eev. Stat. IT. S. Sec. 5235.) § 156. Dividends to Creditors. — From time to time, after full provision has been first made for refunding to the United States any deficiency in redeeming the notes of such association, the Comptroller shall make a ratable dividend of the money so paid over to Mm by such receiver on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction, and, as the proceeds of the assets of such association are paid over to him, shall make further dividends on all claims previously proved or adjudicated; and the remainder of the pro- ceeds, if any, shall be paid over to the shareholders of such asso- ciation, or their legal representatives, in proportion to the stock by them respectively held. (Eev. Stat. TJ. S. Sec. 5236.) How Claims Established. — The claims of creditors may be proved before the Receiver acting under the supervision of the Comptroller, or established by suit against the bank. But creditors must seek their remedy through the Comptroller in the mode prescribed by the statute; they can not proceed directly in their own names against the stock- holders or debtors of the bank. (Kennedy v. Gibson, 8 Wall., 505: Bank of Bethel v. Pahquioque Bank, 14 Wall., 383.) The decision of the Receiver rejecting a claim is not final, but the creditor still has the right to sue therefor. (Bethel v. Pahquioque Bank, 10 Wall., 383.) But a judgment only determines the validity of the claim, and the creditor must await the pro-rata distribution by the Comptroller, and can not have execution on his judgment. (Id.) A judgment against the Receiver directing the manner in which the assets of the bank shall be distributed should be certified by the Receiver to the Comp- troller of the Currency and be paid in due course of distribution. (Merrill v. National Bank of Jacksonville, 173 U. S., 131.) 155 Interest. — Claims when proved to the satisfaction of the Co'mptroller are upon the same footing as if they had been put in judgment, and bear interest the same as a judgment. (National Bank of Common- wealth v. Mechanics' National Bank, 94 U. S., 437.) But a creditor v/ho has obtained a judgment against the bank is not entitled to in- terest upon the face of the judgment, but only upon the amount of the claim at the date of the failure. (White v. Knox, 111 U. S., 784.) In estimating the dividends to be paid out of the assets, the value of the claims at the time the insolvency is declared is to be taken as the basis of distribution. (White v. Knox, 111 U. S., 784.) Interest should be allowed during the period of administration if the sum realized from the assets is sufficient to pay both principal and interest to all creditors who have established claims. (National Bank of Commonwealth v. Mechanics' Nat. Bank, 94 U. S., 437; White v. Knox, 111 U. S., 784.) See also Chemical Nat. Eank v. Armstrong, 59 Fed. Rep., 372. Secured Creditors — Collaterals. — A secured creditor of an insolvent National bank may prove and receive dividends upon the face of his claim as it stood at the time of the declaratidn of insolvency, without crediting either his collaterals, or his collections made afterwards, sub- ject always to the proviso that dividends must cease when from them and the collaterals realized the claim has been paid in full. (Merrill v. National Bank of Jacksonville, 173 U. S., 131; Chemical Nat. Bank v. Armstrong, 59 Fed. Rep., 372. See also People v. Remington, 121 N. Y., 328.) Priority — Claims Due the United States. — The priority of the United States is only for the deficiency in redeeming the notes of the bank. (Cook County Nat. Bank v. United States, 107 U. S., 445.) Sec- tion 3466, U. S. Rev. Stat., which gives the United States a priority for all claims due it from insolvent debtors, do'es not apply. (Id.) As against the proceeds of the bonds deposited to secure the notes of the bank, the United States can set off no claim except for such deficiency. (Id.) And the five per cent, redemption fund can not be retained by the Treasurer to pay taxes due to the United States. (Jackson v. United States, 20 Ct. Cls., 298.) The mere fact that a deposit of public moneys was wrongful, and known to be so by the bank, does not give a claim therefor priority. (Lucas County v. Jamison, 170 Fed. Rep., 338.) Authority of the Comptroller. — Under Sections 5234 and 5236 of the Revised Statutes, the assets of an insolvent National bank so col- lected by the receiver are entirely within the control and disposition of the Comptroller of the Currency, and the Receiver is without power 156 in respect to the payment of dividends. The Receiver is the mere in- strument of the Comptroller, and is subject in all respects to his in- structions. (Merrill v. National Bank of Jacksonville, 173 U. S., 131.) Suits on Rejected Claims. — Notwithstanding the insolvency of a Na- tional bank, and the appointment of a Receiver by the Comptroller of the Currency, the corporation continues as a legal entity, and an action may be maintained against it on a claim rejected by the Receiver. (Denton v. Baker, 79 Fed. Rep., 189.) Acceptance of Dividends — Estoppel. — The acceptance of dividends upon a claim against an insolvent National bank as allowed by the Comptroller of the Currency does not estop the depositor from after- wards maintaining an action against such bank upon a claim not cov- ered by such allowance of the Comptroller. (Chemical Nat. Bank of Chicago v. "World's Columbian Exposition, 170 111., 82.) § 157. Injunction upon Receivership.- Whenever an association against which proceedings have been instituted, on account of any alleged refusal to redeem its circulating notes as aforesaid, denies having failed to do so, it may, at any time within ten days after it has been notified of the appointment of an agent, as provided in section fifty-two hundred and twenty-seven, apply to the nearest circuit, or district, or territorial court of the United States to enjoin further proceedings in the premises; and such court, after citing the Comptroller of the Currency to show cause why further proceedings should not be enjoined, and after the decision of the court or finding of a jury that such association has not refused to redeem its circulating notes, when legally presented in the lawful money of the United States, shall make an order enjoining the Comptroller, and any receiver acting under his direction, from all further proceedings on account of such alleged refusal. (Eev. Stat. U. S. Sec. 5237.) This section gives a bank opportunity to disprove mistaken charges, and a method of stopping unwarranted proceedings. (See Moss v. Whitzel, 108 Fed. Rep., 579.) § 158. Expenses of Protest, Examination and Receivership. — * All fees for protesting the notes issued by any National banking association shall be paid by the person procuring the protest to be 157 made, and such association shall be liable therefor; but no part of the bonds deposited by such association shall be applied to the pay- ment of such fees. All expenses of any preliminary or other ex- aminations into the conditions of any association shall be paid by such association. All expenses of any receivership shall be paid out of the assets of such association before distribution of the proceeds thereof. (Eev. Stat. IT. S. Sec. 5238.) § 159. Equities in Real Estate, etc. — Protection of — Recom- mendation of Receiver. — That whenever the receiver of any Na- tional bank duly appointed by the Comptroller of the Currency, and who shall have duly qualified and entered upon the discharge of his trust, shall find it in his opinion necessary, in order to fully protect and benefit his said trust, to the extent of any and all equities that such trust may have in any property, real or personal, by reason of any bond, mortgage, assignment, or other proper legal claim attaching thereto, and which said property is to be sold under any execution, decree of foreclosure, or proper order of any court of jurisdiction, he may certify the facts in the case, together with his opinion as to the value of the property to be sold, and the value of the equity his said trust may have in the same, to the Comp- troller of the Currency, together with a request for the right and authority to use and employ so much of the money of said trust as may be necessary to purchase such property at such sale. (Act March 29, 1886, Ch. 28, Sec. 1 ; 24 Stat. L., 8.) § 160. Same Subject — Approval of Comptroller and Secretary of Treasury. — That such request, if approved by the Comptroller of the Currency, shall be, together with the certificate of facts in the case, and his recommendation as to the amount of money which, in his judgment, should be so used and employed, submitted to the Secretary of the Treasury; and if the same shall likewise be ap- proved by him, the request shall be by the Comptroller of the Cur- rency allowed, and notice thereof, with copies of the request, cer- tificate of facts, and indorsement of approvals, shall be filed with the Treasurer of the United States. (Act March 29, 188G, Ch. 28, Sec. 2 ; 24 Stat. L., 8.) 158 § 161. Same Subject — Mode of Paying for Property. — That whenever any such requests shall be allowed as hereinbefore pro- vided, the said Comptroller of the Currency shall be, and is, em- powered to draw upon and from such funds of any such trust as may be deposited with the Treasurer of the United States for the benefit of the bank in interest to the amount as may be recom- mended and allowed and for the purpose for which such allowance was made: Provided, however, That all payments to be made for or on account of the purchase of any such property and under any such allowance shall be made by the Comptroller of the Cur- rency direct, with the approval of the Secretary of the Treasury, for such purpose only and in such manner as he may determine and order. (Act March 29, 1886, Ch. 28, Sec. 3; 24 Stat. L., 8.) § 162. Disposition of Assets After Payment of Creditors — Agent for Stockholders — Mode of Distribution.— That whenever any as- sociation shall have been or shall be placed in the hands of a re- ceiver, as provided in section fifty-two hundred and thirty-four and other sections of the Revised Statutes of the United States, and when, as provided in section fifty-two hundred and thirty-six thereof, the Comptroller of the Currency shall have paid to each and every creditor of such association, not including shareholders who are creditors of such association, whose claim or claims as such creditor shall have been proved or allowed as therein pre- scribed, the full amount of such claims, and all expenses of the receivership and the redemption of the circulating notes of such association shall have been provided for by depositing lawful money of the United States with the Treasurer of the United States, the Comptroller of the Currency shall call a meeting of the shareholders of such association by giving notice thereof for thirty days in a newspaper published in the town, city, or county where the business of such association was carried on, or if no newspaper is there published, in the newspaper published nearest thereto. At such meeting the shareholders shall determine whether the receiver shall be continued and shall wind up the affairs of such association, or whether an agent shall be elected for that purpose, and in so determining the said shareholders shall vote by ballot, 159 in person or by proxj% each share of stock entitling the holder to one vote, and the majority of the stock in value and number of shares shall be necessary to determine whether the said receiver shall be continued, or whether an agent shall be elected. In case such majority shall determine that the said receiver shall be con- tinued, the said receiver shall thereupon proceed with the execu- tion of his trust, and shall sell, dispose of, or otherwise collect the assets of the said association, and shall possess all the powers and authority, and be subject to all the duties and liabilities origi- nally conferred or imposed upon him by his appointment as such receiver, so far as the same remain applicable. In case the said meeting shall, by the vote of a majority of the stock in value and number of shares, determine that an agent shall be elected, the said meeting shall thereupon proceed to elect an agent, voting by ballot, in person or by proxy, each share of stock entitling the holder to one vote, and the person who shall receive votes repre- senting at least a majority of stock in value and number shall bo declared the agent for the purposes hereinafter provided; and whenever any of the shareholders of the association shall, after the election of such agent, have executed and filed a bond to the satis- faction of the Comptroller of the Currency, conditioned for the payment and discharge in full of each and every claim that may thereafter be proved and allowed by and before a competent court, and for the faithful performance of all and singular the duties of such trust, the Comptroller and the receiver shall thereupon trans- fer and deliver to such agent all the undivided or uncollected or other assets of such association then remaining in the hands or subject to the order and control of said Comptroller and said re- ceiver, or either of them; and for this purpose said Comptroller and said receiver are hereby severally empowered and directed to execute any deed, assignment, transfer, or other instrument in writ- ing that may be necessary and proper ; and upon the execution and delivery of such instrument to the said agent the said Comptroller and the said receiver shall by virtue of this act be discharged from any and all liabilities to such association and to each and all the creditors and shareholders thereof. Upon receiving such deed, assignment, transfer, or other instrument the person elected such 160 agent shall hold, control, and dispose of the assets and property of such association which he may receive under the terms hereof for the benefit of the shareholders of such association, and he may in his own name, or in the name of such association, sue and be sued and do all other lawful acts and things necessary to finally settle and distribute the assets and property in his hands, and may sell, compromise, or compound the debts due to such association, with the consent and approval of the circuit or district court of the United States for the district where the business of such associa- tion was carried on, and shall at the conclusion of his trust render to such district or circuit court a full account of all his proceedings, receipts, and expenditures as such agent, which court shall, upon due notice, settle and adjust such accounts and discharge said agent and the sureties upon said bond. And in case any such agent so elected shall refuse to serve, or die, resign, or be removed, any share- holder may call a meeting of the shareholders of such association in the town, city, or village where the business of the said asso- ciation was carried on, by giving notice thereof for thirty days in a newspaper published in said town, city or village, or if no news- paper is there published, in the newspaper published nearest thereto, at which meeting the shareholders shall elect an agent, voting by ballot, in person or by proxy, each share of stock en- titling the holder to one vote, and when such agent shall have received votes representing at least a majority of the stock in value and number of shares, and shall have executed a bond to the share- holders conditioned for the faithful performance of his duties, in the penalty fixed by the shareholders at said meeting, with two sureties, to be approved by a judge of a court of record, and file said bond in the office of the clerk of a court of record in the county where the business of said association was carried on, he shall have all the rights, powers, and duties of the agent first elected as hereinbefore provided. At any meeting held as here- inbefore provided administrators or executors of deceased share- holders may act and sign as the decedent might have done if living, and guardians of minors and trustees of other persons may so act and sign for their ward or wards or cestui qui trust. The proceeds of the assets of property of any such association which 161 may be undisturbed at the time of such meeting or may be subse- quently received shall be distributed as follows: "First. To pay the expenses of the execution of the trust to the date of such payment. "Second. To repay any amount or amounts which have been paid in by any shareholder or shareholders of such association upon and by reason of any and all assessments made upon the stock of such association by the order of the Comptroller of the Cur- rency in accordance with the provisions of the Statutes of the United States; and, "Third. The balance ratably among such stockholders, in pro- portion to the number of shares held and owned by each. Such distribution shall be made from time to time as the proceeds shall be received and as shall be deemed advisable by the said Comp- troller or said agent." (Act June 30, 1876, Ch. 156, Sec. 3, as amended by Act March 2, 1897, Ch. 354; 29 Stat. L., 600.) Suit by Agent Against Directors. — A stockholder's agent may main- tain an action against the former directors of the bank to recover damages for losses occasioned by their violations of law. (McKinnon v. Morse, 177 Fed. Rep., 576.) § 163. Violation of National Bank Act — How Determined — Penalty For — Liability of Directors. — If the directors of any Na- tional banking association shall knowingly violate, or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this Title, all the rights, privileges, and franchises of the association shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, • district, or territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency, in his own name, before the association shall be declared dissolved. And in cases of such violation, every director who participated in or assented to the same shall be held liable in his personal and individual capacity for all damages which the association, its shareholder, or any other person, shall have sustained in con- sequence of such violation. (Kev. Stat. U. S. Sec. 5239.) 11 1G2 When Bank Liable to Forfeiture. — To render a National bank liable to a forfeiture of its franchises for violation of law, the acts must have been committed by the directors, or have been knowingly- permitted by them. (Trenholm, Comptroller of the Currency v. Com- mercial Nat. Bank of Dubuque, 38 Fed. Rep., 323.) Violations of law by the executive officers or agents of the bank, without the knowledge and consent of the directors, do not constitute grounds for forfeiting the franchises. (Id.) Such a suit is within Section 1047, Rev. Stat. U. S., and must be brought within five years. (Welles v. Graves, 41 Fed. Rep., 459.) Liability of Directors. — Directors who violate any of the provisions of the law can be held personally liable for the loss resulting to the bank therefrom. Thus, where they make a loan in excess of one-tenth of the capital stock of the bank, in violation of Section 5200, Revised Statutes, they will be liable to the bank for all damages sustained by it in consequence of such loan. The degree of care required of the directors is that which men of ordinary prudence would exercise under similar circumstances, and in determining this the restrictions of the banking law and the usages of business should be taken into account. The question is ultimately one of fact, to be determined under all the circumstances. (Briggs v. Spalding, 141 U. S., 132; Movius v. Lee, 30 Fed. Rep., 298.) They are entitled under the law to commit the banking business, as defined, to their duly authorized officers, but this does not absolve them from the duty of reasonable supervision, and they will not be permitted to be shielded from liability because of igndrance of wrong-doing, if such ig- norance is the result of gross inattention. (Bowerman v. Hamner, U. S. Supreme Court, Oct., 1918). The directors of a National bank should require officers of their bank to give bond, and are personally liable for lo'sses caused by neglect in leaving the management wholly to a cashier who had but little property and of whom they required no bond. (Robinson v. Hall, 63 Fed. Rep., 222.) A National bank having suspended payment the directors issued a circular stating that the bank was entirely solvent, and invited its customers to make deposits with it, to be held as special deposits. Afterwards a Receiver was appointed by the Comptroller of the Cur- rency, and the special deposits made in pursuance of such invitation were turned over to him: Held, That the directors were individually liable for the amount of such deposits. (Miller v. Howard, 95 Term., 407.) 163 If directors who are depositors and who' know some time before sus- pension that that event is inevitable, and that the bank can pay only a percentage of its deposits, and yet check for the whole of their own balances, thereby diminishing the percentage to which the other creditors would be entitled, they defraud to this extent the creditors whose interests they were relied upon to protect, and will be held to strict accountability. (Robinson v. Hall, 63 Fed. Rep., 222.) For cir- cumstances under which directors would not be liable for the acts of the cashier in violation of the banking law done without their partici- pation or knowledge, see Clews v. Barden, 36 Fed. Rep., 617. It is within the power of the board to give a director a leave of ab- sence on account of ill health, and if frauds are committed during his absence and without his knowledge, he will not be liable for them. (Briggs v. Spaulding, 141 U. S., 132.) Actions Against Directors — How Brought. — An action to recover damages from the directors for losses resulting from a violation of law may be brought, though the Comptroller of the Currency has not procured a forfeiture of the charter. (Allen v. Luke, 141 Fed. Rep. f 694; Stephens v. Overstolz, 43 Fed. Rep., 465. But see "Welles v. Graves, 41 Fed. Rep., 459.) Where a Receiver has been appointed for the bank, the action should be brought by him; for the personal liabil- ity of the officers and directors is an asset of the bank belonging equally to all creditors, and must therefore be enforced by the Receiver for their benefit in proportion to the amount of their claims; and the action can not be brought by a creditor. (Boyd v. Schneider, 124 Fed. Rep., 239; Bailey v. Mosher, 63 Fed. Rep., 488; Exchange Bank v. Peters, 45 Fed. Rep., 13); nor by the individual stockholders. (Howe v. Barney, 45 Fed. Rep., 668.) But where the Receiver refuses to bring an action against negligent directors to recover the amount which the shareholders have been compelled to contribute to pay the debts of the association, an action against such directors may be brought by a shareholder on behalf of himself and the other shareholders. (Zinn v. Baxter, 65 Ohio St., 341.) And where the receiver is a director, and one of the parties charged with misconduct and against whom a remedy is sought, the action may be brought by a shareholder on be- half of himself and the other shareholders. (Brinkerhoff v. Bostwick, 88 N. Y., 52.) Such an action may be brought in a State court. (Id.) But a stockholder can not bring an action against the directors for losses caused by their negligence, unless he was a stockholder when the acts complained of were committed, and also is such when the action is brought. (Hanna v. Lyon, 179 N. Y., 107.) And, as in the case of other stockholders' actions, the stockholders bringing the ac- 1G4 tion must show a demand upon the directors, or upon the Receiver as the case may be, or must show that such a demand would have been; useless. (Moss v. Goodhart, 47 Mont., 257.) But see Planten v. Nat. Nassau Bank, 174 App. Div. (N. Y.), 254, for procedure where the bank is in liquidation. It has also been held that the depositors in a National bank may- maintain an action against the directors to recover for losses caused by the negligent performance of their duties as such directors. (Boyd v. Schneider, 131 Fed. Rep., 223; Welles v. Graves, 41 Fed. Rep., 459.) Right of Action Against Director Survives. — The liability of a di- rector for violations of the provisions of the National Bank Act does not expire with his death, but survives against his estate. The cause of action is ex contractu and not ex delicto. (Williams v. Brady, 232 Fed. Rep., 740; Stevens v. Overstolz, 43 Fed. Rep., 465; Allen v. Luke, 141 Fed. Rep., 694; Bates v. Dresser, 229 Fed. Rep., 772.) Whether Action in Equity or at Law — Statutory Remedy Not Ex- clusive. — As to whether the suit against the directors should be brought in equity or at law, the authorities are not agreed. (Free- man v. Jackson, 227 Fed. Rep., 688; Stephens v. Overstolz, 43 Fed. Rep., 771; National Exchange Bank of Baltimore v. Peters, 44 Fed. Rep., 13; Welles v. Graves, 41 Fed. Rep., 459; Rankin v. Cooper, 149 Fed. Rep., 1010; Hirsh v. Jones, 56 Fed. Rep., 137.) The remedy of a creditor's suit given by the statute is cumulative and not exclusive. (King v. Pomeroy, 121 Fed. Rep., 287.) But see Yates v. Jones Nat. Bank, 206 U. S., 15*8; 240 U. S. 541. Thus, it does not preclude a common law action against the directors for false and fraudulent representations made by *,hem. (Prescott v. Haughey, 65 Fed. Rep., 663.) Action to Recover from Directors for ExcEssrvE Loans. — The issues of fact in such actions are (1) whether the lo'ans made were made at the time when the person to whom they were made was already in- debted to the bank in a sum equal to one-tenth of the capital surplus; (2) whether such loans were knowingly made or assented to by such directors; and (3) what portions of the moneys so loaned were lost. (City National Bank of Mangum v. Crow et al., 27 Okla., 107.) Liability of Directors for Making False Reports. — The making and publishing by a National bank of the reports required by statute are not merely for the information of the Comptroller, but are to guide so much of the public as may have occasion to act thereon, and one who buys from another stock in the bank in reliance upon a false 165 report of its condition, and suffers damage thereby has a right of action against any officer or director who, knowing its falsity, author- izes such report, under Rev. St., Sec. 5239, which makes them in- dividually liable for damages sustained by the association, its stock- holders, "or any other person." (Chesborough v. "Woo'dworth, 195 Fed. Rep., 875.) The liability of the directors is several, and plaintiff may sue one or more, but must make out a sufficient case against each one to authorize a recovery against him, and, in general, the detailed his- tory of the entire transaction and of each defendant's connection with the same is admissible. (Id.) But the statute (Rev. Stat. XJ. S. Sec. 5239) affords the only test of liability, and hence it must be shown that the director sought to be held liable acted knowingly; and it is not sufficient that he might, by the exercise of ordinary diligence, have acquired knowledge of the true condition of the bank. (Yates v. Jones Nat. Bank, 206 U. S., 158, overruling Smalley v. McGraw, 148 Mich., 394; Jones Nat. Bank v. Yates, 240 U. S., 541.) See also Taylor v. Thomas, 124 App. Div. (N. Y.), 53. But although the common law action of deceit does not lie and the measure of responsibility is laid down in the National Bank Act, an action may be maintained in the State court regardless of the form of pleading, if the pleading itself satisfies the rule of responsibility declared by that act. (Thomas v. Taylor, 224 U. S., 73.) There is in effect, an intentional violation of a statute when one deliberately refuses to examine that which it is his duty to examine. The fact that a statement of the condition of a National bank is not made voluntarily, but under order of the Comptroller of the Currency, does not relieve the directors from liability for false statements know- ingly made therein. Notice from the Comptroller of the Currency to the directors to collect or charge off certain assets is a warning that those assets are doubtful; and to disregard such a notice and represent the assets in a statement to be good is a violation of the law and ren- ders the directors making the statement liable for damages to one deceived thereby. (Thomas v. Taylor, 224 U. S., 73.) Liability fob Neglect. — But there is a liability on the part of Na- tional bank directors for failure to perform the duties which the gen- eral principles of the law cast upon them when they become directors, distinct from, and in addition to, the duties and liabilities expressly imposed by the statutes. (Williams v. Brady, 232 Fed. Rep., 740.) § 164. Transfers in Contemplation of Insolvency — Preferences. — All transfers of the notes, bonds, bills of exchange, or other evi- dence of debt owing to any National banking association, or of deposits to its credit, all assignments of mortgages, sureties on 166 real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable tiling for its use, or for the use of any of its shareholders or creditors, and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the ap- plication of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void. (Rev. Stat. U. S. Sec. 5242.) Meaning of "Insolvency." — The term in this section has the same meaning as in the National bankrupt law; it does not mean absolute inability to pay at some future time, upon a settlement and winding up of the bank's affairs, but a present inability to pay in the ordinary course of business. (Case v. Citizens' Bank of Louisiana, Fed. Case No. 2489; Market Nat. Bank v. Pacific Nat. Bank, 30 Hun. (N. Y.) 50.) "What Constitutes a Preference. — To bring a transfer of assets within the operation of this section, it is not necessary that the person to whom they are transferred should know of the insolvency, but it is sufficient if the insolvency is in the contemplation of the bank only. (National Security Bank v. Butler, 129 U. S., 223.) But it should ap- pear that the money was paid in contemplation of insolvency, for the purpose of giving a preference, and with a view to preventing the application of the assets to the claims of creditors generally. (Hays v. Beardsley, 136 N. Y., 299.) It will be presumed that any transfer of assets, made after the closing of the bank has been determined upon, whereby any creditor obtains a preference over other creditors, was made with the intent to prefer. (National Security Bank v. Price, 22 Fed. Rep., 697.) See also Armstrong v. Chemical Nat. Bank, 41 Fed. Rep., 234; Roberts v. Hill, 23 Fed. Rep., 31; Bell v. Hanover Nat. Bank, 57 Fed. Rep., 821; Price v. Coleman, 22 Fed. Rep., 694; McDonald v. Chemical Bank, 174 U. S., 610; In re Armstrong, 41 Fed. Rep., 381; Hayden v. Chemical Nat. Bank, 80 Fed. Rep., 587. Deposits Made When Bank Insolvent — Recovery of. — A depositor in a National bank may recover funds deposited after the bank has become hopelessly insolvent. He merely reclaims his own property ob- tained by fraud. (Cragie v. Hadley, 99 N. Y., 131.) And the fact that the money deposited was not marked, and, by a mingling with the other funds of the bank, lost its identity, does not affect the right of the depositor to recover in full, if it can be traced into the vault of 167 the bank, and it appears that a sum equivalent thereto' remained con- tinuously on hand in the bank until removed by the receiver. (Massey v. Fisher, 62 Fed. Rep., 958.) But the moneys or paper deposited or the proceeds thereof must be traced into the hands of the receiver. (Multnomah County v. Oregon Nat. Bank, 61 Fed. Rep., 912; Spokane County v. Clark, 61 Fed. Rep., 538; Lake Erie, etc., R. R. Co. v. In- dianapolis Nat. Bank, 65 Fed. Rep., 690. Compare San Diego County v. California Nat. Bank, 52 Fed. Rep., 59; Boone County Nat. Bank v. Latimer, 67 Fed. Rep., 27; Citizens' Nat. Bank v. Dowd, 35 Fed. Rep., 340.) Action of Replevin. — A person claiming title to property in the pos- session of a receiver which has come into his possession with the pro- perty belonging to the bank, may maintain an action of replevin therefor. (Corn Exchange Bank v. Blye, 101 N. Y., 303; Faber v. Ste- phens, 35 Fed. Rep., 17.) Set-off. — This section does not prohibit the allowance of any valid set-off, legal or equitable, which a debtor of a bank may have against any obligation owing by him to it at the time of its insolvency. (Arm- strong, Receiver, v. Warner, 49 Ohio St., 376; Scott v. Armstrong, 146 U. S„ 499.) A depositor may therefore set-off the amount of his deposit against his liability as maker of a note, or as indorser of a note if sued separately, held by the receiver, though such note had not matured when the bank was closed, and the receiver appointed. (Scott v. Arm- strong, 146 U. S., 499; Yardley v. Clothier, 49 Fed. Rep., 337; 51 Fed. Rep., 506; Adams v. Spokane Drug Co., 57 Fed. Rep., 888; Mercer v. Dyer, 15 Mont., 317; Hughitt v. Hayes, 136 N. Y., 163.) If, however, the maker and indorser are sued jointly, the indorser can set-off the amount of his depo'sit only upon proof that the maker is insolvent. (Id.) But the debtor of the bank will not be permitted to set-off against his liability a claim against the bank assigned to him after the bank had closed its doors. (Venango Nat. Bank v. Taylor, 56 Pa. St., 14.) Against the proceeds of the bonds deposited to secure circulation the United States can set-off no claim, except for money advanced to re- deem notes. (Cook County Nat. Bank v. United States, 107 U. S., 445.) State Statute — Debt Due Savings Bank. — A State statute directing that deposits made by savings banks shall be first paid out of the assets of an insolvent bank can have no application to an insolvent National bank, since such statute is in conflict with the provisions of the Na- tional Bank Act. (Davis v. The Elmira Savings Bank, 161 U. S., 275, reversing s. c. 142 N. Y., 590.) A State statute forbidding conveyances 1G8 by insolvent debtors for the purpose of giving a preference applies to such conveyance made to a National bank. (Traders' National Bank v. Chipman, 164 U. S., 347.) Such a statute is not in conflict with any provisions of the National bank act. (Id.) Federal Question. — The question whether a savings bank which was a depositor with a National bank which has become insolvent shall be paid in full persuant to State statute is a question arising under the laws of the United States, and entitles the receiver of the bank when sued for such deposit to remove the case into the United States Cir- cuit Court. (Auburn Savings Bank v. Hayes, 61 Fed. Rep., 911; see also First Nat. Bank v. Selden, 120 Fed. Rep., 212.) CHAPTER IX. Crimes and Misdemeanors. Section 165. Unlawfully Countersigning Notes. 166. Receipt of United States or National Bank Notes as Security. 167. Embezzlement, Abstraction and Misapplication of Bank Funds — False Entries. 168. Illegal Certification of Check. 169. Obligations of the United States Defined. 170. Forging and Counterfeiting National Bank Notes. 171. Wrongful Use of Plates, False Plates, Notes, etc. 172. Passing, Selling, etc., Counterfeits. 173. Taking Impressions of Plates, etc. 174. Persons Having Impressions, etc., in their Possession. 175. Buying, Selling, etc., Counterfeits. 176. Issuing, etc., Notes of Closed Banks. 177. Receipt of Public Money When Not Authorized De- positary. 178. Political Contributions. 179. Restrictions on Checks Less Than One Dollar. 180. Imitation of National Bank Notes — Penalty for. 181. Penalty for Mutilating Notes, etc. 182. Use of Title "National." § 165. Unlawfully Countersigning Notes. — No officer acting under the provisions of this Title shall countersign or deliver to any association, or to any other company or person, any circulating notes contemplated by this Title, except in accordance with the true intent and meaning of its provisions. Every officer who violates this section shall be deemed guilty of a high misdemeanor, and shall be fined not more than double the amount so countersigned 169 170 and delivered, and imprisoned not less than one year and not more than fifteen years. (Rev. Stat. U. S. Sec. 5187.) This applies to officers of the Government. No cases have arisen un- der it since the National banking law went into force. § 166. Receipt of United States or National Bank Notes As Security.— No association shall hereafter offer or receive United States notes or National bank notes as security or as collateral security for any loan of money, or for a consideration agree to withhold the same from use, or offer or receive the custody or promise of custody of such notes as security, or as collateral se- curity, or consideration for any loan of money. Any association offending against the provisions of this section shall be deemed guilt}' of a misdemeanor, and shall be fined not more than one thousand dollars and a further sum equal to one-third of the money so loaned. The officer or officers of any association who shall make any such loans shall be liable for a further sum equal to one-quarter of the money loaned; and any fine or penalty in- curred by a violation of this section shall be recoverable for the benefit of the party bringing such suit. (Eev. Stat. U. S. Sec. 5207.) The provision of this section was designed to prevent the locking up of money. It was aimed at a favorite method of accomplishing this at one time put in practice in New York city, and, perhaps, elsewhere. § 167. Embezzlement, Abstraction and Misapplication of Banks' Funds — False Entries. — Any officer, director, agent, or employee of any Federal reserve bank, or of any member bank as defined in the Act of December twenty-third, nineteen hundred and thir- teen, known as the Federal Reserve Act, who embezzles, abstracts, or wilfully misapplies any of the moneys, funds or credits of such Federal reserve bank or member bank, or who, without authority from the directors of such Federal reserve bank or member bank, issues or puts in circulation any of the notes of such Federal reserve bank or member bank, or who, without such authority, issues or puts forth any certificate of deposit, draws any order 171 or bill of exchange, makes any acceptance, assigns any note, bond, draft, bill of exchange, mortgage, judgment, or decree, or who makes any false entry in any book, report, or statement of such Federal reserve bank or member bank, with intent in any case to injure or defraud such Federal reserve bank or member bank, or any other company, body politic or corporate, or any individual person, or to deceive any officer of such Federal re- serve bank or member bank, or the Comptroller of the Currency, or any agent or examiner appointed to examine the affairs of such Federal reserve bank or member bank, or the Federal Re- serve Board; and every receiver of a National banking associa- tion who, with like intent to defraud or injure, embezzles, ab- stracts, purloins, or wilfully misapplies any of the moneys, funds, or assets of his trust, and every person who, with like intent, aids or abets any officer, director, agent, employee, or receiver in any violation of this section shall be deemed guilty of a mis- demeanor, and upon conviction thereof in any district court of the United States shall be fined not more than $5,000 or shall be imprisoned for not more than five years, or both, in the discre- tion of the court. Any Federal reserve agent, or any agent or employee of such Federal reserve agent, or of the Federal Reserve Board, who em- bezzles, abstracts, or wilfully misapplies any moneys, funds, or securities intrusted to his care, or without complying with or in violation of the provisions of the Federal Reserve Act, issues or puts in circulation any Federal reserve notes shall be guilty of a misdemeanor and upon conviction in any district court of the United States shall be fined not more than $5,000 or imprisoned for not more than five years, or both, in the discretion of the court. (Rev. Stat. U. S. Sec. 5209, as amended Act Sept. 26, 1918.) Offense Must Come Within the Statute. — Gross maladministration and inexcusable breach of duty on the part of the officers of a National bank in its management, however disastrous to its stockholders, are not punishable unless in violation of this section. (Prettyman v. United States, 180 Fed. Rep., 30.) Intent. — The wrongful intent is of the essence of the offense, and must be proved as laid. (Richardson v. United States, 181 Fed. Rep., 172 1.) Therefore, a mere mistake in making an entry is not a violation of this section. (United States v. Wilson, 176 Fed. Rep., 806.) An intent to defraud or injure the bank is an essential ingredient of every offense specified in this section. (McKnight v. United States, 115 Fed. Rep., 972; United States v. Breese, 131 Fed. Rep., 916; United States v. Wilson, 176 Fed. Rep., 806.) The intent is inferred from the act, and while such inference is not conclusive, it throws the burden of proor upon the defendant. (United States v. German, 115 Fed. Rep., 987; United States v. Corbett, 215 U. S., 233.) Evidence of a uniform sys- tem of falsification similar to that charged in the indictment is ad- missible to show intent. (Kettenbach v. United States, 202 Fed. Rep., 377.) Where the intent with which the accused aided a clerk to ab- stract is material the accused may testify to his intent. (Cummins v. United States, 232 Fed. Rep., 844.) Wilful Misapplication and Abstraction. — The words "wilfully misapplies" are new in statutes creating offenses, and they are not used in describing any offense at common law. (United States v. Britton, 107 U. S., 655.) To constitute the offense the misapplication must have been for the use or benefit of the party charged, or of some person or company other than the bank, with intent to injure and defraud the bank, or some other body corporate, or some natural person. It is something different from the acts of official maladminis- tration referred to in Section 5239. (United States v. Britton, 107 U. S., 655.) When the funds or assets of the bank are unlawfully taken from its possession, and afterward willfully misapplied by con- verting them to the use of any person other than the bank, with intent to injure and defraud, the offense, as described in the statute, is com- mitted. (United States v. Harper, 33 Fed. Rep., 471; United States v. Breese, 131 Fed. Rep., 915; Walsh v. United States, 174 Fed. Rep., 615.) The act may be done directly and personally, or indirectly through the agency of another. (United States v. Harper, 33 Fed. Rep., 471; United States v. Fish, 24 Fed. Rep., 585.) For specific examples of the applicability of this section see Flickner v. United States, 150 Fed. Rep., 1; United States v. Heinze, 161 Fed. Rep., 425; 183 Fed. Rep., 907; Coffin v. United States, 162 U. S., 664; Dow v. United States, 82 Fed. Rep., 904; United States v. Steinman, 172 Fed. Rep., 913; United States v. Norton, 188 Fed. Rep., 256; United States v. Britton, 108 U. S., 199; United States v. Martindale, 146 Fed. Rep., 280; Pearce v. United States, 192 Fed. Rep., 561.) It is no defense that the money was afterwards refunded. (United States v. Morse, 161 Fed. Rep., 423; Norton v. United States, 205 Fed. Rep., 593.) False Enteies. — Any entry on the books of the bank which is inten- 173 tionally made to represent what is not true, with intent either to de- fraud the bank or to deceive any of those specified in the act, is a false entry within the meaning of this section. (Agnew v. United States, 165 U. S., 36; United States v. Harper, 33 Fed. Rep., 471.) The entries may be made either personally or by direction. (Agnew v. United States, 165 U. S., 36; Morse v. United States, 174 Fed. Rep., 539; United States v. Wilson, 176 Fed. Rep., 806; Richardson v. United States, 181 Fed. Rep., 1; United States v. Harper, 33 Fed. Rep., 471; United States v. Allen, 47 Fed. Rep., 696; Scott v. United States, 130 Fed. Rep., 429.) For specific examples of the manner in which the courts have applied this law, see United States v. Means, 42 Fed. Rep., 599; United States v. Britton, 107 U. S., 655; United States v. Crecelius, 34 Fed. Rep., 30; United States v. Graves, 53 Fed. Rep., 700; Graves v. United States, 165 U. S., 323; Billingsley v. United States, 178 Fed. Rep., 644; United States v. McClarty, 191 Fed. Rep., 523; Cochran v. United States, 157 U. S., 286; United States v. Ege, 49 Fed. Rep., 852; Dow v. United States, 82 Fed. Rep., 904; Cross v. North Carolina, 132, U. S., 131.) And the statute does not require that any person should have been in fact defrauded or actually deceived by the false entry in order to make the crime complete; if there was an attempt to deceive, and the false entry was knowingly entered, and was a false entry which was naturally and necessarily calculated to mislead, this would be sufficient, in the absence of contravening proof, to authorize a find- ing that the person making it made it with intent to deceive. (United States v. Graves, 53 Fed. Rep., 700.) False entries in a report to the Comptroller of the Currency constitute this offense. (United States v. Hughitt, 45 Fed. Rep., 47; Harper v. United States, 170 Fed. Rep., 385; United States v. Corbett, 215 U. S., 233.) And to leave a blank un- filled which calls for an answer being equivalent to a statement that there is nothing to report under this heading may constitute a false entry. (Kettenbach v. United States, 202 Fed. Rep., 377. But see United States v. Herrig, 204 Fed. Rep., 124.) Form of Report. — >But where the form of report, as prescribed by the Comptroller, contains headings of "Loans and Discounts," and also of "Overdrafts," it is the duty of the bank officer to make his entries in such report in such manner that each of these headings shall truth- fully state the condition of his bank as to such heading. (United States v. Graves, 53 Fed. Rep. ,634.) The "liabilities," which are re- quired to be stated in the repo'rts to the Comptroller, include con- tingent as well as absolute liabilities; and hence an unmatured note, payment of which at maturity is guaranteed by the bank, should be included. (Cochran v. United States, 157 U. S., 286.) A schedule on 174 the back of a report covered by the same affidavit, is a part of the re- port. (Harper v. United States, 104 S. W. Rep., 673.) Aiding and Abetting Commission of Offense. — Persons who are not officers or agents of the bank may be aiders and abettors in the viola- tion of this section. (Coffin v. United States, 162 U. S., 664; Keliher v. United States, 193 Fed. Rep., 8.) But the words "any person," as used in the statute, are not limited to persons not connected with the bank, but include as well officers and agents of a bank; and, therefore, one officer may be properly convicted of aiding and abetting another officer. (Kettenbach v. United States, 202 Fed. Rep., 377.) See also Richardson v. United States, 181 Fed. Rep., 1; United States v. Hillegas, 176 Fed. Rep., 444. Wiien Criminal Laws of State Applt. — As the offense of embezzle- ment of the funds and property of the bank is provided for in the National banking law, an officer of the bank can not be indicted there- for under State laws, nor have the State courts jurisdiction of such offense. (Commonwealth v. Ketner, 92 Pa. St., 372; Commonwealth v. Felton, 101 Mass., 204.) But where the property fraudulently con- verted belongs to the customers of the bank, as, for instance, property left on special deposit, the criminal laws of the State apply. (State v. Tuller, 34 Conn., 280; Commonwealth v. Tanney, 97 Mass., 50.) Larceny of the funds or property of the bank is punishable under State laws. (Commonwealth v. Barry, 116 Mass., 1.) And an officer of a National bank may be indicted for forgery under State laws. (Cross v. State of North Carolina, 132 U. S., 131.) So' an officer of the bank may be indicted under a State statute for making false and fraudulent entries in the books of the bank, such offense amounting to forgery at common law. (Luberg v. Commonwealth, 94 Pa. St., 85.) But the State courts have no jurisdiction of the crime of "false en- tries" as defined by this section. (In re Eno, 54 Fed. Rep., 669.) A State statute forbidding banks to receive deposits when the bank is in- solvent, and making such action a penal offense on the part of the officers of the bank, can have no application to National banks lo'cated in such State. (Easton v. State of Iowa, 188 U. S., 220; Slaughter v. First Nat. Bank, 109 Ala., 157.) Indictment — Fokm of — Misapplication of Assets. — An indictment for a misapplication of the funds of a National bank must specify the particulars of the application, so as to show the application charged to be a criminal misapplication as distinguished from applications that are unlawful, but not criminal. (United States v. Eno, 56 Fed. Rep., 218; United States v. Warner, 26 Fed. Rep., 616; Batchelor v. United 175 States, 156 U. S., 426.) But if the indictment describes specifically the funds misapplied, and the manner of the misapplication, it need not negative every possible theory consistent with an honest purpose in the disposition of the funds specified. (Evans v. United States, 153 U. S., 608.) See also Coffin v. United States, 162 U. S., 664; Geiger v. United States, 162 Fed. Rep., 844; United States v. Northway, 129 U. S., 327; Breese v. United States, 106 Fed. Rep., 680; United States v. Smith, 152 Fed. Rep., 542; Keliher v. United States, 193 Fed. Rep., 8; United States v. Heinze, 218 U. S., 532; Stout v. United States, 227 Fed. Rep., 799; United States v. Jewett, 84 Fed. Rep., 142.) Indictment foe Making False Entries. — In an indictment for mak- ing a false entry in a report to the Comptroller it is sufficient to aver that the defendant made such false entry in a certain report of the condition of the bank, . . . made to the Comptroller of the Cur- rency in accordance with the provisions of Section 5211. (Cochran v. United States, 157 U. S., 286.) See also United States v. French, 57 Fed. Rep., 382; United States v. Potter, 56 Fed. Rep., 83; Richardson v. United States, 181 Fed. Rep., 1; Billingsley v. United States, 178 Fed. Rep., 654. Indictment — Different Counts. — Embezzlement, abstraction, and willful misapplication of the moneys, funds, etc., as described in this section, constitute three separate crimes or offenses, which, under Rev. St., Sec. 1024, may be joined in one indictment, but must be stated in separate counts. (United States v. Cadwallader, 59 Fed. Rep., 677.) See also United States v. Jewett, 84 Fed. Rep., 142; Simpson v. United States, 229 Fed. Rep., 940; Prettyman v. United States, 180 Fed. Rep., 30; United States v. Norton, 188 Fed. Rep., 256; United States v. Jewett, 84 Fed. Rep., 142. Agent in Liquidation. — This section applies to an agent in liquida- tion appointed by tbe stockholders. (United States v. Jewett, 84 Fed. Rep., 142.) But not to a receiver appointed by the Comptroller of the Currency under R. S., 5234. He is an officer of the United States, not an agent of the bank. (U. S. v. Weitzel, 246 U. S., 533.) § 168. Illegal Certification of Check.— Any officer, director, agent, or employee of any Federal reserve bank or member bank who shall wilfully violate the provisions of this section, or who shall resort to any device, or receive any fictitious obligation, di- rectly or collaterally, in order to evade the provisions thereof, or who shall certify a check before the amount thereof shall have 176 been regularly entered to the credit of the drawer upon the books of the bank, shall be deemed guilty of a misdemeanor and shall, on conviction thereof in any district court of the United States, be fined not more than $5,000, or shall be imprisoned for not more than five years, or both, in the discretion of the court. ( Act July 12, 1882, Ch. 290, Sec. 13; 22 Stat. L., 162, as superseded by Act Sept. 26, 1918.) It is not necessary that the officer should himself deliver the check to some person outside of the bank, or that he should take any part in such delivery; but the offense would be complete if, after he had written the certification, the actual delivery is made by some clerk or other officer without his knowledge. But the certification must have been willful. (Potter v. United States, 155 U. S., 438.) But it is not essential to prove that the defendant had knowledge that the false certification was in violation of the statute; if he knew the facts, the criminal intent is presumed. (Chadwick v. United States, 141 Fed. Rep., 225.) § 169. Obligations of the United States Denned. — The words "obligation or other security of the United States" shall be held to mean all bonds, certificates of indebtedness, National bank cur- rency, coupons, United States notes, Treasury notes, gold certifi- cates, silver certificates, fractional notes, certificates of deposit, bills, checks or drafts for money, drawn by or upon authorized officers of the United States, stamps and other representatives of value, of whatever denomination, which have been or may be issued under any act of Congress. (Eev. Stat. U. S. Sec. 5413; Act March 4, 1909, Sec. 147; 35 Stat. L., 1115.) Punishment fob Forging ok Counterfeiting Securities. — Whoever, with intent to defraud, shall falsely make, forge, counterfeit, or alter any obligation or other security of the United States, shall be fined not more than five thousand dollars and imprisoned not more than fifteen years. (Rev. Stat. U. S. Sec. 5414; Act March 4, 1909, Sec. 148; 35 Stat. U. S., 1115.) § 170. Forging and Counterfeiting National Bank Notes. — Whoever shall falsely make, forge, or counterfeit, or cause or pro- cure to be made, forged or counterfeited, or shall willingly aid or 177 assist in falsely making, forging or counterfeiting, any note in imitation of, or purporting to be in imitation of, the circulating notes issued by any banking association now or hereafter author- ized and acting under the laws of the United States; or whoever shall pass, utter, or publish, or attempt to pass, utter, or publish, any false, forged, or counterfeited note, purporting to be issued by any such association doing a banking business, knowing the same to be falsely made, forged, or counterfeited; or whoever shall falsely alter, or cause or procure to be falsely altered, or shall willingly aid or assist in falsely altering any such circulating notes, or shall pass, utter, or publish, or attempt to pass, utter, or pub- lish as true, any falsely altered or spurious circulating note is- sued, or purporting to have been issued, by any such banking association, knowing the same to be falsely altered or spurious, shall be fined not more than one thousand dollars, and imprisoned not more than fifteen years. (Eev. Stat. L., 5415; Act March 4, 1909, Sec. 149; 35 Stat. L., 1115.) § 171. Wrongful Use of Plates—False Plates, Notes, etc.—* Whoever having control, custody, or possession of any plate, stone, or other thing, or any part thereof, from which has been printed, or which may be prepared by direction of the Secretary of the Treasury for the purpose of printing, any obligation or other security of the United States, shall use such plate, stone, or other thing, or any part thereof, or knowingly suffer the same to be used for the purpose of printing any such or similar obligation, or other security, or any part thereof, except as may be printed for the use of the United States by order of the proper officer thereof; or whoever by any way, art or means shall make or execute or cause or procure to be made or executed, or shall assist in making or executing any plate, stone or other thing in the likeness of any plate designed for the printing of such obligation or other security, or whoever shall sell any such plate, stone, or other thing, or bring into the United States or any place subject to the jurisdiction thereof, from any foreign place any such plate, stone, or other thing, except under the direction of the Secretary of the Treasury or other proper officer, or with any other intent, in either case, 12 178 than that such plate, stone, or other thing be used for the printing of the obligations or other securities of the United States ; or who- ever shall have in his control, custody, or possession any plate, stone, or other thing in any manner made after or in the similitude of any plate, stone, or other thing from which any such obliga- tion or other security has been printed, with the intent to use such plate, stone, or other thing, or to suffer the same to be used in forging or counterfeiting any such obligation or other security, or any part thereof; or whoever shall have in his possession or custody, except under authority from the Secretary of the Treas- ury or other proper officer, any obligation or other security, made or executed, in whole or in part, after the similitude of any obliga- tion or other security issued under the authority of the United States, with intent to sell or otherwise use the same; or whoever shall print, photograph, or in any other manner make or execute, or cause to be printed, photographed, made or executed, or shall aid in printing, photographing, making, or executing any engrav- ing, photograph, print, or impression in the likeness of any such obligation or other security, or any part thereof, or shall sell any such engraving, photograph, print, or impression, except to the United States ; or shall bring into the United States, or any place subject to the jurisdiction thereof, from any foreign place any such engraving, photograph, print, or impression, except by di- rection of some proper officer of the United States; or whoever shall have or retain in his control or possession, after a distinctive paper has been adopted by the Secretary of the Treasury for the obligations and other securities of the United States, any similar paper adapted to the making of any such obligation or other se- curity, except under the authority of the Secretary of the Treas- ury or some other proper officer of the United States, shall be fined not more than five thousand dollars, or imprisoned not more than fifteen years, or both. (Rev. Stat. U. S. Sec. 5430; Act March 4, 1909, Sec. 150; 35 Stat. L., 1116.) Notes issued by a State bank are not obligations issued under au- thority of the United States within the meaning of this section. (U. S. v. Conners, 111 Fed. Rep., 734.) 179 § 172. Passing, Selling, etc., Counterfeits. — Whoever, with in- tent to defraud, shall pass, utter, publish, or sell, or attempt to pass, utter, publish, or sell, or shall bring into the United States, or any place subject to the jurisdiction thereof, with intent to pass, publish, utter, or sell, or shall keep in possession or conceal with like intent any falsely made, forged, counterfeited, or altered obligation, or other security of the United States, shall be fined not more than five thousand dollars, and imprisoned not more than fifteen years. (Rev. Stat. U. S. Sec. 5431; Act March 4, 1909, Sec. 151; 35 Stat. L., 1116.) § 173. Taking Impressions of Plates, etc. — Whoever, without authority from the United States, shall take, procure, or make, upon lead, foil, wax, plaster, paper, or any other substance or material, an impression, stamp, or imprint of, from, or by the use of any bed-plate, bed-piece, die, roll, plate, seal, type, or other tool, implement, instrument, or thing used or fitted or intended to be used in printing, stamping, or impressing, or in making other tools, implements, instruments, or things, to be used, or fitted or intended to be used, in jarinting, stamping, or impressing any kind or description of obligation or other security of the United States, now authorized or hereafter to be authorized by the United States, or circulating note or evidence of debt of any banking association under the laws thereof, shall be fined not more than five thousand dollars, or imprisoned not more than ten years, or both. (Rev. Stat. U. S. Sec. 5432; Act March 4, 1909, Sec. 152; 35 Stat. L., 1117.) § 174. Persons Having Impressions, etc., in Their Pos- session. — Whoever, with intent to defraud, shall have in his pos- session, keeping, custody, or control, without authority from the United States, any imprint, stamp, or impression, taken or made upon any substance or material whatsoever, of any tool, imple- ment, instrument, or thing, used or fitted or intended to be used, for any of the purposes mentioned in the preceding section; or whoever, with intent to defraud, shall sell, give, or deliver any such imprint, stamp, or impression to any other person, shall be 180 fined not more than five thousand dollars, or imprisoned not more than ten years, or both. (Eev. Stat. U. S. Sec. 5433; Act March 4, 1909, Sec. 153; 35 Stat. L., 1117.) § 175. Buying, Selling, etc., Counterfeits, etc. — Whoever shall buy, sell, exchange, transfer, receive, or deliver, any false, forged, counterfeited or altered obligation or other security of the United States, or circulating note of any banking association organized or acting under the laws thereof, which has been or may hereafter be issued by virtue of any act of Congress, with the intent that the same be passed, published, or used as true and genuine, shall be fined not more than five thousand dollars, or imprisoned not more than ten years, or both. (Rev. Stat. U. S. Sec. 5434; Act March 4, 1909, Sec. 154; 35 Stat. L., 1117.) § 176. Issuing, etc., Notes of Closed Banks. — In all cases where the charter of any corporation which has been or may be created by act of Congress has expired or may hereafter expire, if any director, officer, or agent of the corporation, or any trustee thereof, or any agent of such trustee, or any person having in his possession or under his control the property of the corporation for the pur- pose of paying or redeeming its notes and obligations, shall know- ingly issue, reissue, or utter as money, or in any other way know- ingly put in circulation any bill, note, check, draft, or other security purporting to have been made by any such corporation whose charter has expired, or by any officer thereof, or purporting to have been made under authority derived therefrom, or if any per- son shall knowingly aid in any such act, he shall be fined not more than ten thousand dollars, or imprisoned not more than five years, or both. But nothing herein shall be construed to make it unlawful for any person, not being such director, officer, or agent of the corporation, or any trustee thereof, or any agent of such trustee, or any person having in his possession or under his con- trol the property of the corporation for the purpose hereinbefore set forth, who has received or may hereafter receive such bill, note, check, draft, or other security, bona fide and in the ordinary trans- actions of business, to utter as money or otherwise circulate the 181 same. (Eev. Stat. IT. S. Sec. 5137; Act March 4, 1909, Sec. 174; 35 Stat. L., 1122.) This section was an act originally passed in 1837 to apply to the Second Bank of the United States, the charter of which had just expired. For some reason or other the compilers embodied this old act in the Revised Statutes. § 177. Receipt of Public Money When Not Authorized De- positary. — Every banker, broker, or other person not an authorized depositary of public moneys, who shall knowingly receive from any disbursing officer, or collector of internal revenue, or other agent of the United States, any public money on deposit, or by way of loan or accommodation, with or without interest, or otherwise than in payment of a debt against the United States, or shall use, transfer, convert, appropriate, or apply any portion of public money for any purpose not prescribed by law, and every president, cashier, teller, director, or other officer of any bank or banking as- sociation, who shall violate any provision of this section, is guilty of embezzlement of the public money so deposited, loaned, trans- ferred, used, converted, appropriated, or applied, and shall be fined not more than the amount embezzled, or imprisoned not more than ten years, or both. (Eev. Stat. U. S. Sec. 5497; Act March 4, 1909, Sec. 96; 35 Stat. L., 1106.) It will be seen from this section that all banks other than public depositaries are put on notice in regard to dealings with disbursing officers, etc., of the United States. If the provisions of this section are violated, such violation constitutes embezzlement. Sections 3639 and 3651 of the Revised Statutes are also of importance to bankers in this connection as having reference to public moneys. § 178. Political Contributions.— That it shall be unlawful for any National bank, or any corporation organized by authority of any laws of Congress, to make a money contribution in connection with any election to any political office. It shall also be unlaw- ful for any corporation whatever to make a money contribution in connection with any election at which Presidential and Vice-Presi- dential electors or a Representative in Congress is to be voted for or any election by any State legislature of a United States Sena- 182 tor. Every corporation which shall make any contribution in violation of the foregoing provisions shall be subject to a fine not exceeding five thousand dollars, and every officer or director of any corporation who shall consent to any contribution by the corpora- tion in violation of the foregoing provisions shall upon conviction be punished by a fine not exceeding one thousand and not less than two hundred and fifty dollars, or by imprisonment for a term of not more than one year, or both such fine and imprisonment in the discretion of the court. (Act Jan. 26, 1907; 34 Stat. L., 864.) § 179. Eestrictions on Checks Less Than One Dollar. — No per- son shall make, issue, circulate, or pay out any note, check, memo- randum, token or other obligation for a less sum than one dollar, intended to circulate as money or to be received or used in lieu of lawful money of the United States; and every person so offending shall be fined not more than five hundred dollars or imprisoned not more than six months, or both. (Rev. Stat. U. S., Sec. 3583; Act March 4, 1909, Sec. 178; 35 Stat. L., 1122.) This section does not prohibit the issue of checks in any amount, no matter how small, for ordinary purposes. It applies only to those cases where the checks are intended to circulate as money. § 180. Imitation of National Bank Notes — Penalty for. — It shall not be lawful to design, engrave, print, or in any manner make or execute, or to ^^tter, issue, distribute, circulate, or use, any business or professional card, notice, placard, circular, hand-bill, or advertisement, in the likeness or similitude of any circulating note or other obligation or security of any banking association organized or acting under the laws of the United States which has been or may be issued under any act of Congress, or to write, print, of otherwise impress upon any such note, obligation, or security, any business or professional card, notice, or advertisement, or any notice or advertisement of any matter or thing whatever. Who- ever shall violate any provision of this section shall be fined not more than one hundred dollars, or imprisoned not more than six months, or both. (Rev. Stat. U. S. Sec. 5188; Act March 4, 1909, Sec. 175; 35 Stat. L., 1122.) 183 § 181. Penalty for Mutilating Notes, etc.— Whoever shall mu- tilate, cut, deface, disfigure, or perforate with holes, or unite or cement together, or do any other thing to any bank bill, draft, note, or other evidence of debt, issued by any National banking associa- tion, or shall cause or procure the same to be done with intent to render such bank bill, draft, note or other evidence of debt unfit to be reissued by said association, shall be fined not more than one hundred dollars, or imprisoned not more than six months, or both. (Rev. Stat. U. S. Sec. 5189; Act March 4, 1909, Sec. 176; 35 Stat. L., 1122.) § 182. Use of Title "national."— All banks not organized and transacting business under the National currency laws, or under this Title, and all persons or corporations doing the business of bankers, brokers, or savings institutions, except savings banks au- thorized by Congress to use the word "National" as a part of their corporate name, are prohibited from using the word "National" as a portion of the name or title of such bank, corporation, firm, or partnership; and any violation of this prohibition committed after the third day of September, eighteen hundred and seventy- three, shall subject the party chargeable therewith to a penalty of fifty dollars for each day during which it is permitted or repeated. (Eev. Stat. IT. S. Sec. 5243.) Use of Wokd "Federal." — The Federal Reserve Board discourages the use of the word "Federal" as part of the title of member banks. (Informal Ruling of Board, July 21, 1917.) CHAPTER X. Suits, Jurisdiction and Evidence. Section 183. Jurisdiction of Suits by and Against National Banks. 184. Same Subject — Federal Courts. 185. Original Jurisdiction of District Court. 186. Attachment, etc., Before Final Judgment Prohibited. 187. Proceedings to Enjoin Comptroller — Where Had. 188. United States District Attorney to Conduct Suits. 189. Instruments Certified by Comptroller as Evidence. 190. Certified Copy of Organization Certificate as Evi- dence. § 183. Jurisdiction of Suits by and Against National Banks. — That the jurisdiction for suits hereafter brought by or against any association established under any law providing for National banking associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under any law of the United States which do or might do banking business where such National banking associations may be doing business when such suits may be begun. And all laws and parts of laws of the United States inconsistent with this proviso be, and the same are hereby, repealed. (Act July 12, 1882, Ch. 290, Sec. 4; 22 Stat. L., 162.) Statute Applies to State Courts. — The Act of 1882 providing that jurisdiction should be the same as in actions against other than Na- tional banks was not superseded or repealed by 24 Stat. L., 554 as amended by Act of August 13, 1888, 25 Stat. L., 436. Nor does the former statute refer only to the jurisdiction of Federal courts; it ap- plies to actions instituted in the courts of the State in which the de- fendant is a resident. (Levitan v. Houghton Nat. Bank, 174 Mich., 556.) 184 185 § 184. Same Subject — Federal Courts.— That all National bank- ing associations established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located ; and in such cases the circuit and district courts shall not have jurisdiction other than such as they would have in cases between individual citizens of the same State. The provisions of this section shall not be held to affect the jurisdiction of the courts of the United States in cases commenced by the United States or by direction of an officer thereof, or cases for winding up the affairs of any such bank. ( Act Aug. 13, 1888, Ch. 866, Sec. 4; 25 Stat. L., 436.) General Effect of This Section. — National banks are on precisely the same footing as individuals or other corporations with respect to the right to sue or be sued in the federal courts. (Peters v. Com- mercial Nat. Bank, 142 U. S., 614.) A cause in which a National bank is a party defendant can not be removed into a Federal court on the mere ground that the defendant is a National bank. (Leather Mfr. Nat. Bank v. Cooper, 120 U. S., 778; Wichita Nat. Bank v. Smith, 72 Fed. Rep., 568.) And a Receiver of the bank who is substituted as a party in place of the bank has no greater rights in this respect than the bank itself. (Wichita Nat. Bank v. Smith, 72 Fed. Rep., 568.) The assets of an insolvent National bank are not brought under the control or protection of the Federal courts by the transfer of such assets to an agent of the stockholders. (Snohomish County v. Puget Sound Nat. Bank, 81 Fed. Rep., 518.) And in the absence of diverse citizenship the Federal courts have not jurisdiction of a suit by a stockholder against directors of a National bank and the bank to compel the directors to reimburse the bank for wrongfully investing its funds, nor has the District Court any jurisdiction of such a suit under para- graph 16 of Section 24, Judicial Code. (Herrmann v. Edwards, 238 U. S., 107.) Federal Questions — Diverse Citizenship. — But these enactments do not place National banks under any disadvantage with reference to raising Federal questions in Federal courts. (Walker v. Windsor Na- tional Bank, 56 Fed. Rep., 76.) A suit which may be brought in a Federal court by or against a citizen of a State because it arises under the laws of the United States, may, for the same reason, be brought by or against a National bank located in the same State. (George v. 186 Wallace, 1.35 Fed. Rep., 286. See also Witters v. Foster, 28 Fed Rep., 737; Hot Springs School Dist. v. First Nat. Bank, 61 Fed. Rep., 417; Metropolitan Nat. Bank v. Claggett, 141 U. S., 520; Logan Bank v. Townsend, 139 U. S., 67.) The Federal courts have jurisdiction of an action between a National bank located in one State and a citizen of another State. (First Nat. Bank v. Forest, 40 Fed. Rep., 705. See also Wickham v. Hull, 60 Fed. Rep., 326: Rankin v. Barton, 199 U. S., 228.) Actions by and Against Receivers — These enactments do not affect the jurisdiction of the Federal courts in cases brought for -winding up affairs of insolvent National banks; and the Receiver may bring an action in Federal courts to collect the assets of the bank without regard to the citizenship of the parties. (Bates v. Dresser, 229 Fed. Rep., 772; Murray v. Chambers, 151 Fed. Rep., 142; Rankin v. Herod, 140 Fed. Rep., 661; Fisher v. Yoder, 53 Fed. Rep., 565; Linn County Nat. Bank v. Crawford, 69 Fed. Rep., 532; Hendee v. Connecticut, etc., R. R. Co., 26 Fed. Rep., 677; Burnham v. First Nat. Bank, 53 Fed. Rep., 163.) Thus, a suit brought by a Receiver to enforce a liability due to the bank, and to secure a sale under the order of the court of pledged securities, is one for winding up the affairs of the bank, and within the jurisdiction of the Circuit Court, without regard to the citizen- ship of the parties. (McCartney v. Earle, 115 Fed. Rep., 462; Gilbert v. McNulta, 96 Fed. Rep., 83.) But the Circuit Court has no jurisdiction of a suit in equity against a Receiver appointed by the Comptroller where the amount in controversy is less than $2,000 (now $3,000). (Smithsoh v. Hubbell, 81 Fed. Rep., 593.) Agent of Stockholders. — The Federal courts have jurisdiction of an action by or against the agent of the shareholders, chosen under the Act of June 30, 1876, regardless of the question of citizenship. (Guar- anty Co. v. Hanway, 104 Fed. Rep., 369; International Trust Co. v. Weeks, 203 U. S., 364; see also George v. Wallace, 135 Fed. Rep., 286.) Jurisdiction of State Courts. — For jurisdictional purposes, a Na- tional bank is a citizen of the State in which it is located. (Hazen v. Lyndonville Nat. Bank, 70 Vt, 543; Davis v. Cook, 9 Mo., 134.) The State courts have jurisdiction of an action brought by a shareholder on behalf of himself and other shareholders to recover of the directors of an insolvent National bank damages for injuries resulting from their negligence and misconduct. (Brinckerhoff v. Bostwick, 88 N. Y., 52.) And State courts have jurisdiction of actions against National banks to recover the penalty prescribed by Congress for taking usu- rious interest. (Schuyler v. Bullong, 28 Neb., 684; Henderson Nat. Bank v. Alves, 91 Ky., 142; Ordway v. Central Nat. Bank, 47 Md., 217; 187 Bletz v. Columbia Nat. Bank, 87 Pa. St., 87; Kade v. McVey, 31 Ohio St., 231.) They also have power to issue a writ of mandamus requiring the directors of a National bank in liquidation to exhibit the books to the stockholders. (Matter of Tuttle v. Iron Nat. Bank, 170 N. Y., 9.) And where the period of corporate existence of a National bank has expired, and its affairs are being wound up, a Receiver for its property may be appointed by a State court upon the application of a stockholder. (Cogswell v. Second Nat. Bank, 56 Atl. Rep., 574.) But State courts have no jurisdiction in criminal cases arising under the National Bank Act. (In re Eno, 54 Fed. Rep., 669; Commonwealth v. Felton, 101 Mass., 204; Commonwealth v. Ketner, 92 Pa. St., 372.) The State statute of limitations applies to a suit brought by the receiver of a National bank against a shareholder to recover an assess- ment upon his stock to pay the debts of the bank. (Butler v. Poole, 44 Fed. Rep., 586.) § 185. Original Jurisdiction of District Court — The district court shall have original jurisdiction as follows: * * * * Sixteenth. Of all cases commenced by the United States, or by direction of any officer thereof, against any National banking association, and cases for winding up the affairs of any such bank ; and of all suits brought by any banking association established in the district for which the court is held, under the provisions of title "National Bank," Revised Statutes, to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as pro- vided by said title. And all National banking associations estab- lished under the laws of the United States shall, for the purposes of all other actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the States in which they are respectively located. (Act March 3, 1911, Sec. 24; 36 Stat. L., 1092.) Proceedings to enjoin Comptroller are those authorized by section 5237, United States Revised Statutes. Until the passage of the Act of March 3, 1911, the circuit courts had this jurisdiction under section 629, United States Revised Statutes. § 186. Attachment, etc., Before Final Judgment Prohibited. — No attachment, injunction, or execution shall be issued against such association or its property before final judgment in any suit, action 188 or proceeding, in any State, county, or municipal court. (Rev. Stat. U. S. Sec. 5242.) This section is constitutional. (Dennis v. First Nat. Bank of Seattle, 127 Cal., 453.) Attachments— In Pacific Nat. Bank v. Mixter (124 TJ. S., 721 it was held that the effect of this provision is to write into all State attach- ment laws an exception in favor of National banks, and all such laws must be read as if they contained an exception in favor of National banks. As the attachment is void, a bond given by a National bank to dissolve such attachments, served by summons of garnishment, is also void. (Planters' Bank v. Berry, 92 Ga., 264.) Where service is made on a National bank only by attachment and publication or ser- vice out of the State, the attachment being prohibited by this section will be vacated and the service set aside. (Van Reed v. People's Nat. Bank, 198 U. S., 554; Garner v. Second Nat. Bank, 66 Fed. Rep., 369.) The provision of this section prohibiting attachments is not repealed by the Act of Congress of July 12, 1882, providing that the jurisdiction for suits thereafter brought against National banks shall be the same as for suits against State banks, and repealing laws inconsistent there- with. (Raynor v. Pacific Nat. Bank, 93 N. Y., 371.) The prohibition applies whether the bank is solvent or insolvent. (Van Reed v. People's Nat. Bank, 173 N. Y., 314.) But it does not apply where the bank intervenes in an attachment suit and claims the property. (Willard Mfg. Co. v. Tierney, 130 N. C, 611.) And an attachment sued out against a National bank as garnishee is not an attachment against the bank or its property, within the meaning of this section. (Earle v. Pennsylvania, 178 U. S., 449; Earle v. Conway, 178 U. S., 456.) The motion to dissolve the attachments may be made at any time before the attached property has been applied to payment of the judgment. (McBride v. Illinois Nat. Bank, 128 App. Div. (N. Y.), 503.) Injunctions. — This section forbids State courts to grant injunctions against National banks before final judgment; and the prohibition is not repealed by Stat. L. 1882, C. 290, Sec. 4, or Stat. L. 1887, C, 373, Sec. 4, or Stat. L. 1888, C. 866, Sec. 4. (Freeman Manufactur- ing Company v. National Bank of the Republic, 160 Mass., 398.) But this section does not deprive the Federal courts of the power to issue such an injunction. (Hoover v. Weiss Malting and Elevator Co., 55 Fed. Rep., 356. But see Baker v. Ault, 78 Fed. Rep., 374.) 189 § 187. Proceedings to Enjoin Comptroller— Where Had.— All proceedings by any National banking association to enjoin the Comptroller of the Currency, under the provisions of any law re- lating to National banking associations, shall be had in the district where such association is located. (Rev. Stat. U. S. Sec. 736.) § 188. United States District Attorney to Conduct Suits.— All suits and proceedings arising out of the provisions of law govern- ing National banking associations, in which the United States or any of its officers or agents shall be parties, shall be conducted by the district attorneys of the several districts under the direction and supervision of the Solicitor of the Treasury. (Eev. Stat. U. S. Sec. 380.) Compensation of District Attorney. — If a District Attorney of the United States, acting under the provisions of this section, conducts a suit or proceeding arising out of the provisions of law governing Na- tional banking associations, he is entitled to no remuneration other than that coming from his salary, from the compensation and fees authorized to' be taxed and allowed, and such additional compensation as is expressly allowed by law, specifically, on account of services named. (Gibson v. Peters, 150 U. S., 342.) Receiver as Officer or Agent. — The receiver of a National bank is an officer or agent of the United States within the meaning of those terms as used in this section. (Id.) (See also United States v. Twin- ing, 132 Fed. Rep., 129.) § 189. Instruments Certified by Comptroller as Evidence. — Every certificate, assignment, and conveyance executed by the Comptroller of the Currency, in pursuance of law, and sealed with his seal of office, shall be received in evidence in all places and courts; and all copies of papers in his office, certified by him and authenticated by the said seal, shall in all cases be evidence equally with the originals. An impression of such seal directly on the paper shall be as valid as if made on wax or wafer. (Rev. Stat. U. S. Sec. 884.) Certified Copies as Evidence in State Court. — .Under U. S. Rev. Sts. sections 178, 327, 884, copies of papers oh file in the office of the 190 Comptroller of the Currency, certified by his deputy and authenticated by his seal of office, are competent evidence, in an action by a receiver of a National bank to recover the amount of an assessment upon a shareholder, to prove the charter of the bank, its extension, the adjudi- cation of insolvency by the Comptroller, the appointment of the plain- tiff as receiver, the assessment and the authorizing and directing of the receiver to bring suit for its collection. (Weitzel v. Brown, 224 Mass., 190.) Judicial Notice.— The court will take judicial notice that a person, -who' signed as "Acting Comptroller of the Currency" a certificate bear- ing the seal of the Comptroller of the Currency of the United States and asserting the truth of copies of originals on file in that office, held that office and will assume that at the date of his certificate he was authorized to exercise the powers and discharge the duties of the Comptroller, and was therefore, at the time acting Comptroller. (Weitzel v. Brown, 224 Mass., 190; Keyser v. Hitz, 133 U. S., 438; Aspinwall v. Butler, 133 U. S., 595.) How Copies Obtained. — Certified copies of papers are furnished by the Comptroller's office when such copies could be obtained upon an order of court. An order of court is not usually required, but the parties should set forth in detail the purpose for which the copies are desired. § 190. Certified Copy of Organization Certificate as Evidence. — — Copies of the organization certificate of any National banking association, duly certified by the Comptroller of the Currency, and authenticated by his seal of office, shall be evidence in all courts and places within the jurisdiction of the United States of the exist- ence of the association, and of every matter which could be proved by the production of the original certificate. (Rev. Stat. TJ. S. Sec. 885.) Effect of Certificate as Evidence. — This certificate, together with proof that the bank has been acting as a National bank for a long time, is amply sufficient evidence to establish, at least prima facie, the existence of the corporation. (Mix v. National Bank of Bloomington, 91 111., 20. See also Thatcher v. West River Nat. Bank, 19 Mich., 196; Merchants' Nat. Bank v. Glendon, 120 Mass., 97.) And such certificate is competent evidence in a State court. (Tapley v. Martin, 116 Mass., 275.) In a suit against the bank or its stockholders this certificate 191 is conclusive evidence of the organization. (Casey v. Galli, 94 U. S., 673.) Pkoof by Othek Evidence. — In an action by a National bank it is competent to prove by parol that it was carrying on a general banking business as a National bank authorized by the general laws of the United States under the name by which it had sued. (Yakima Nat. Bank v. Knipe, 6 Wash., 348.) 192 PART TWO THE FEDERAL RESERVE ACT, WITH ALL AMENDMENTS TO APRIL 1, 1920. Section 191. Passage of Act. 192. Title of Act and Definition of Terms. 193. Powers Eeserve Bank Organization Committee — Fed- eral Eeserve Cities and Districts. 194. Incidental Powers of Organization Committee. 195. Capital Stock of Eeserve Banks — Subscription by National Banks. 196. Liability of Shareholders of Eeserve Banks. 197. Penalties for Failure of National Banks to Signify Acceptance of Terms of Act, etc. 198. Capital Stock of Eeserve Banks — Public Subscrip- tion. 199. Same Subject — Allotment to United States. 200. Same Subject — Transfers. 201. Minimum Capital Stock of Eeserve Bank — Status of Eeserve and Central Eeserve Cities — Expenses of Organization Committee. 202. Branch Offices of Eeserve Banks. 203. Organization of Eeserve Banks. 204. Corporate Powers of Eeserve Banks. 205. Duties of Directors of Eeserve Banks. 206. Classification of Directors of Eeserve Banks. 207. Qualifications of Directors of Eeserve Banks. 208. Election of "Class A" and "Class B" Directors. 209. Appointment of "Class C" Directors — Designation of Federal Eeserve Agents and Deputy Federal Ee- serve Agents, and Assistants. 210. Compensation of Directors of Eeserve Banks. 193 13 194 Section 211. Powers of Organization Committee — Reserve Bank Directors. 212. Terms of Directors of Reserve Banks — Filling of Va- cancies. 213. Stock Issues — Increase, Decrease and Cancellation of Capital of Reserve Banks. 214. Dividends and Surplus of Reserve Banks. 215. Exemption from Taxation — Reserve Banks. 216. Conversion of State into National Banks. 217. State Banks as Members — Admission, Restrictions, Suspension and Withdrawal. 218. Creation of Federal Reserve Board — Salaries of Members. 219. Organization of Board. 220. Assessment to Meet Expenses of Board. 221. Qualifications of Members of Board — Filling Va- cancies. 222. Supervision of Secretary of Treasury Over Board. 223. Annual Report of Board to Congress. 224. Bureau for Issue and Regulation of National Bank Notes and Federal Reserve Notes. 225. Visitorial Powers of Board — Publication of Weekly Statements. 226. Power of Board — Rediscount by Reserve Bank of Discounted Paper of Other Reserve Banks. 227. Power of Board to Suspend Reserve Requirements — Tax on Deficiency. 228. Power of Board — Issue, Delivery and Retirement of Federal Reserve Notes. 229. Power of Board — Reserve and Central Reserve Cities. 230. Power of Board — Suspension or Removal of Officer or Director of Reserve Bank. 231. Power of Board-— Waiting Off of Doubtful or Worth- less Assets by Reserve Banks. 232. Power of Board — Suspension, Liquidation or Reor- ganization of Reserve Bank. 195 Section 233. Power of Board — Bonding of Federal Reserve Agents — Performance of Duties, Functions and Services of Act. 234. Power of Board — General Supervision Over Eeserve Banks. 235. Power of Board — Grant of Trustee Powers to Na- tional Banks. 236. Power of Board — Employment of Assistants, Clerks, etc. 237. Power of Board — Permission to Discount Paper in Excess of Limitation When Secured by War Time Securities. 238. Federal Advisory Council. 239. Powers of Eeserve Banks — As Depositary and Col- lecting Agent — Collection Charges. 240. Powers of Eeserve Banks — Discount of Notes, Drafts, and Bills of Exchange. 241. Limitation on Aggregate of Paper of One Borrower Eediscounted for Any One Bank. 242. Powers of Eeserve Banks — Discount of Acceptances. 243. Foreign and Domestic Acceptances by Member Banks. 244. Powers of Eeserve Banks — Advances to Member Banks. 245. Limitation on Total Indebtedness of National Bank — Exceptions. 246. Power of Board — Dealings of Eeserve Banks in Ne- gotiable Paper. 247. Power of National Banks as Insurance Agents. 248. Acceptance by Member Banks of Drafts and Bills of Exchange Drawn to Furnish Dollar Exchange. 249. Powers of Eeserve Banks — Open Market Purchases of Bills of Exchange, Trade Acceptances and Bankers Acceptances. 250. Powers of Eeserve Banks — Gold Coin and Bullion in Open Market. 251. Powers of Eeserve Banks — Notes, Bonds and War- rants in Open Market. 196 Section 252. Powers of Reserve Banks — Bills of Exchange in Open Market. 253. Powers of Reserve Banks — Pates of Discount. 254. Powers of Reserve Banks — Foreign Accounts, Agen- cies, and Correspondents. 255. Government Deposits in Reserve Banks. 256. Federal Reserve Notes. 257. Collateral Security for Federal Reserve Notes. 258. Federal Reserve Notes — Reserve Against, Issue, Ex- change, and Redemption. 259. Federal Reserve Notes — Redemption Fund — Para- mount Lien on Assets of Reserve Bank. 260. Reduction of Outstanding Federal Reserve Notes. 261. Exchange of Federal Reserve Notes for Gold, Gold Certificates or Lawful Money. 262. Federal Reserve Notes — Substitution of Collateral to — Retirement of — Liability of Federal Reserve Agent for. 263. Printing of Federal Reserve Notes. 264. Reserve Banks as Collecting Agents for Member Banks. 2/65. Transfer of Funds Among Reserve Banks — Board as Clearing House for Reserve Banks — Reserve Banks As Clearing Houses for Member Banks. 266. Deposits of Gold Coin and Gold Certificates with Treasurer by Federal Reserve Banks and Agents. 267. Deposit of Bonds by National Banks with Treasurer — Repeal of Minimum Deposit Requirements. 268. Retirement of National Bank Notes — Sale of Bonds to Reserve Banks. 269. Federal Reserve Bank Notes — Similarity to National Bank Notes. 270. Exchange by Reserve Banks of Two Per Cent. Bonds for Three Per Cent. Bonds and One-Year Notes. 271. Issue of One-Year Three Per Cent. Gold Notes and, Thirty-Year Three Per Cent. Gold Bonds. 272. Exchange of One- Year Notes for Thirty-Year Bonds. 197 Section 273. Definition of Demand and Time Deposits. 274. Keserves Carried by Member Banks Not in Reserve or Central Reserve Cities. 275. Reserves Carried by Member Banks Located in Re- serve Cities. 276. Reserves Carried by Member Banks Located in Cen- tral Reserve Cities. 277. Eligible Paper as Reserve. 278. Limit of Deposit of Member with Non-Member Bank — Member as Agent of Non-Member Bank in Discounting with Reserve Banks. 279. Withdrawal of Required Reserves — Penalties. 280. Calculation of Reserves. 281. Membership of National Banks Located in United States, but Outside of Continental United States. 282. Five Per Cent. Redemption Fund as Reserve. 283. Appointment of Examiners — Examinations of Mem- ber Banks. 284. Salaries of Examiners — Expense of Examinations. 285. Special Examination of Members by Reserve Banks. 286. Limitation of Visitorial Powers. 287. Examination of Reserve Banks by Board. 288. Fees, Commissions, Gifts, etc., Prohibited to Officers, Employees, etc., of Member Banks, and to Bank Examiners — Exceptions. 289. Liability of Stockholders of National Banks. 290. Loans on Real Estate by National Banks. 291. Foreign Branches of National Banks. 292. Power of National Bank to Take Stock in Corpora- tions Transacting Foreign Business. 293. Reports and Examinations of Foreign Branches, etc. 294. Powers of Board Over Corporations in Which Na- tional Banks Own Stook. 295. Accounts of Foreign Branches. 296. Exception to Prohibition of Clayton Act. 297. Banking Corporations Authorized to do Foreign Banking Business (the Edge Bill). 198 Section 298. Maintenance of Standard of Value— Parity of Forms of Money — Gold Reserve. 299. Emergency Currency. 300. Reduction of Capital Stock of National Banks. 301. Saving Clause. 302. Reservation of Right to Amend, Alter, or Repeal. 303. Opinions of Counsel of Board on Negotiable Instru- ments Law, etc. § 191. Passage of Act. — An Act entitled "An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes," was approved December 1 23, 1913. (38 Stat. L., 251.) § 192. Title of Act and Definition of Terms. — Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the short title of this Act shall be the "Federal Reserve Act." Wherever the word "bank" is used in this Act, the word shall be held to include State bank, banking association, and trust company, except where National banks or Federal reserve banks are specifically referred to. The terms "National bank" and "National banking association" used in this Act shall be held to be sjmonymous and interchange- able. The term "member bank" shall be held to mean any National bank, State bank, or bank or trust company which has become a member of one of the reserve banks created by this Act. The term "board" shall be held to mean Federal Reserve Board; the term "district" shall be held to mean Federal Reserve district ; the term "reserve bank" shall be held to mean Federal reserve bank. (Sec. 1, Act Dec. 23, 1913; 38 Stat. L., 251.) § 193. Powers Reserve Bank Organization Committee — Federal Reserve Cities and Districts. — As soon as practicable, the Secre- tary of the Treasury, the Secretary of Agriculture and the Comp- troller of the Currency, aGting as "The Reserve Bank Organize 199 tion Committee," shall designate not less than eight nor more than twelve cities to be known as Federal reserve cities, and shall divide the continental United States, excluding Alaska, into districts, each district to contain only one of such Federal reserve cities. The determination of said organization committee shall not be subject to review except by the Federal Eeserve Board when or- ganized: Provided, That the districts shall be apportioned with due regard to the convenience and customary course of business and shall not necessarily be coterminous with any State or States. The districts thus created may be readjusted and new districts may from time to time be created by the Federal Eeserve Board, not to exceed twelve in all. Such districts shall be known as Federal reserve districts and may be designated by number. A majority of the organization committee shall constitute a quorum with author- ity to act. (Sec. 2, Act Dec. 23, 1913.) On April 2, 1914, the Reserve Bank Organization Committee rendered a decision designating twelve Federal reserve cities and determining the twelve Federal reserve districts. (See map on page 192.) The Federal reserve cities were designated as follows: No. 1, Boston; No. 2, New York; No. 3, Philadelphia; No. 4, Cleveland; No. 5, Rich- mond; No. 6, Atlanta; No. 7, Chicago; No. 8, St. Louis; No. 9, Min- neapolis; No. 10, Kansas City; No. 11, Dallas; No. 12, San Francisco. Abolition of Reserve Districts and Reserve Banks. — The Federal Reserve Board has no power to abolish existing Federal Reserve Dis- tricts or Federal Reserve Banks. (Opinion of Attorney General, Nov. 22, 1915.) Change of Location of Reserve Bank — Minimum Capitalization. — The Federal Reserve Board does not possess power to change the pre- sent location of any Federal Reserve Bank and the minimum capitaliza- tion of $4,000,000 required as a condition precedent to commencing business is not a continuing requirement. (Opinion of Attorney General, April 14, 1916.) Reduction of Federal Reserve Districtis. — The Federal Reserve Act does not give to the Federal Board the power to reduce the number of Federal Reserve districts determined by the Reserve Bank organiza- tion committee. (Opinion of Counsel of Board, Nov. 22, 1915.) 200 § 194. Incidental Powers of Organization Committee. — Said organization committee shall be authorized to employ counsel and expert aid, to take testimony, to send for persons and papers, to administer oaths, and to make such investigation as may be deemed necessary by the said committee in determining the re- serve districts and in designating the cities within such districts where such Federal reserve banks shall be severally located. The said committee shall supervise the organization in each of the cities designated of a Federal reserve bank, which shall include in its title the name of the city in which it is situated, as "Federal Re- serve Bank of Chicago." (Sec. 2, Act Dec. 23, 1913.) § 195. Capital Stock of Reserve Banks — Subscription by Na- tional Banks. — Under regulations to be prescribed by the organi- zation committee, every National banking association in the United States is hereby required, and every eligible bank in the United States and every trust company within the District of Columbia, is hereby authorized to signify in writing, within sixty days after the passage of this Act, its acceptance of the terms and provisions hereof. When the organization committee shall have designated the cities in which Federal reserve banks are to be organized, and fixed the geographical limits of the Federal reserve districts, every National banking association within that district shall be required within thirty days after notice from the organization committee, to subscribe to the capital stock of such Federal reserve bank in a sum equal to six per centum of the paid-up capital stock and sur- plus of such bank, one-sixth of the subscription to be payable on call of the organization committee or of the Federal Reserve Board, one-sixth within three months and one-sixth within six months thereafter, and the remainder of the subscription, or any part thereof, shall be subject to call when deemed necessary by the Federal Reserve Board, said payments to be in gold or gold certifi- cates. (Sec. 2, Act Dec. 23, 1913.) § 196. Liability of Shareholders of Reserve Banks.— The share- 201 holders of every Federal reserve bank shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of their subscriptions to such stock at the par value thereof in addition to the amount subscribed, whether such sub- scriptions have been paid up in whole or in part, under the pro- visions of this Act. (Sec. 2, Act Dec. 23, 1913.) § 197. Penalties for Failure of National Bank to Signify Ac- ceptance of Terms of Act, etc. — Any National bank failing to sig- nify its acceptance of the terms of this Act within the sixty days aforesaid, shall cease to act as a reserve agent, upon thirty days' notice, to be given within the discretion of the said organization committee or of the Federal Reserve Board. Should any National banking association in the United States now organized fail within one year after the passage of this Act to become a member bank or fail to comply with any of the pro- visions of this Act applicable thereto, all of the rights, privileges, and franchises of such association granted to it under the National bank Act, or under the provisions of this Act, shall be thereby for- feited. Any non-compliance with or violation of this Act shall, however, be determined and adjudged by any court of the United States of competent jurisdiction in a suit brought for that purpose in the district or territory in which such bank is located, under di- rection of the Federal Reserve Board, by the Comptroller of the Currency in his own name before the association shall be declared dissolved. In cases of such non-compliance or violation, other than the failure to become a member bank under the provisions of this Act, every director who participated in or assented to the same shall be held liable in his personal or individual capacity for all damages which said bank, its shareholders, or any other person shall have sustained in consequence of such violation. Such dissolution shall not take away or impair any remedy against such corporation, its stockholders or officers, for any lia- bility or penalty which shall have been previously incurred. (Sec. 2, Act Dec. 23, 1913.) 202 § 198. Capital Stock of Reserve Banks — Public Subscription. — Should the subscriptions by banks to the stock of said Federal reserve banks or any one or more of them be, in the judgment of the organization committee, insufficient to provide the amount of capital required therefor, then and in that event the said organiza- tion committee may, under conditions and regulations to be pre- scribed by it, offer to public subscription at par such an amount of stock in said Federal reserve banks or any one or more of them, as said committee shall determine, subject to the same conditions as to payment and stock liability as provided for member banks. ISTo individual, copartnership, or corporation other than a mem- ber bank of its district shall be permitted to subscribe for or to hold at any time more than $25,000 par value of stock in any Federal reserve bank. Such stock shall be known as public stock and may be transferred on the books of the Federal reserve bank by the chairman of the board of directors of such bank. (Sec. 2, Act Dec. 23, 1913.) § 199. Same Subject — Allotment to United States. — Should the total subscriptions by banks and the public to the stock of said Federal reserve banks, or any one or more of them, be, in the judgment of the organization committee, insufficient to provide the amount of capital required therefor, then and in that event the said organization committee shall allot to the United States such an amount of said stock as said committee shall determine. Said United States stock shall be paid for at par out of any money in the Treasury not otherwise appropriated, and shall be held by the Secretary of the Treasury and disposed of for the benefit of the United States in such manner, at such times, and at such price, not less than par, as the Secretary of the Treasury shall determine. Stock not held by member banks shall not be entitled to voting power. (Sec. 2, Act Dec. 23, 1913.) § 200. Same Subject — Transfers.— The Federal Reserve Board 203 is hereby empowered to adopt and promulgate rules and regulations governing the transfers of said stocks. (Sec. 2, Act Dec. 23, 1913.) § 201. Minimum Capital Stock of Reserve Bank — Status of Re- serve and Central Reserve Cities — Expenses of Organization Com- mittee. — ISTo Federal reserve bank shall commence business with a subscribed capital less than $-1,000,000. The organization of re- serve districts and Federal reserve cities shall not be construed as changing the present status of reserve cities and central reserve cities, except in so far as this Act changes the amount of reserves that may be carried with approved reserve agents located therein. The organization committee shall have power to appoint such assis- tants and incur such expenses in carrying out the provisions of this Act as it shall deem necessary, and such expenses shall be payable by the Treasurer of the United States upon voucher approved by the Secretary of the Treasury, and the sum of $100,000, or so much thereof as may be necessary, is hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, for the payment of such expenses. (Sec. 2, Act Dec. 23, 1913.) § 202. Branch Offices of Reserve Banks.— The Federal Re- serve Board may permit or require any Federal reserve bank to establish branch banks within the Federal reserve district in which it is located or within the district of any Federal reserve bank which may have been suspended. Such branches, subject to such rules and regulations as the Federal Eeserve Board may prescribe, shall be operated upon the supervision of a board of directors, to consist of not more than seven nor less than three directors, to whom a majority of one shall be appointed by the Federal reserve bank of the district, and the remaining directors by the Federal Reserve Board. Directors of branch banks shall hold office during the pleasure of the Federal Reserve Board. (Sec. 3, Act Dec. 23, 1913, as amended by Act June 21, 1917; 40 Stat. L., 232.) 204 Branches of Federal Reserve Banks. — List of at date Of this publi- cation. Federal Re- Brandies at Federal Re- Branches at serve Bank of serve Bank of New York Buffalo Minneapolis Helena Cleveland Cincinnati & Pitts- Kansas City Omaha, Denver & burgh Oklahoma City. Richmond Baltimore Dallas El Paso & Houston Atlanta New Orleans, Jack- iSan Francisco sonville, Bir- Los Angeles, Port- mingham and land, Salt Lake Nashville City, Seattle & Chicago Detroit Spokane St. Louis Louisville, Memphis and Little Rock § 203. Organization of Reserve Banks.— When the organization committee shall have established Federal reserve districts as pro- vided in section two of this Act, a certificate shall be filed with the Comptroller of the Currency showing the geographical limits of such districts and the Federal reserve city designated in each of such districts. The Comptroller of the Currency shall there- upon cause to be forwarded to each National bank located in each district, and to such other banks declared to be eligible by the organization committee which may apply therefor, an applica- tion blank in form to be approved by the organization committee, which blank shall contain a resolution to be adopted by the board of directors of each bank executing such application, authorizing a subscription to the capital stock of the Federal reserve bank organizing in that district in accordance with the provisions of this Act. When the minimum amount of capital stock prescribed by this Act for the organization of any Federal reserve bank shall have been subscribed and allotted, the organization committee shall designate any five banks of those whose applications have been re- ceived, to execute a certificate of organization, and thereupon the banks so designated shall, under their seals, make an organization 205 certificate which shall specifically state the name of such Federal reserve bank, the territorial extent of the district over which the operations of such Federal reserve bank are to be carried on, the city and State in which said bank is to be located, the amount of capital stock and the number of shares into which the same is divided, the name and place of doing business of each bank exe- cuting such certificate, and of all banks which have subscribed to the capital stock of such Federal reserve bank and the number of shares subscribed by each, and the fact that the certificate is made to enable those banks executing same, and all banks which have subscribed or may thereafter subscribe to the capital stock of such Federal reserve bank, to avail themselves of the advantages of this Act. The said organization certificate shall be acknowledged before a judge of some court of record or notary public; and shall be, to- gether with the acknowledgment thereof, authenticated by the seal of such court, or notar}^, transmitted to the Comptroller of the Currency, who shall file, record and carefully preserve the same in his office. (Sec. 4, Act Dec. 23, 1913.) § 204. Corporate Powers of Reserve Banks.— Upon the filing of such certificate with the Comptroller of the Currency as afore- said, the said Federal reserve bank shall become a body corporate and as such, and in the name designated in such organization cer- tificate, shall have power — First. To adopt and use a corporate seal. Second. To have succession for a period of twenty years from its organization unless it is sooner dissolved by an Act of Congress, or unless its franchise becomes forfeited by some violation of law. Third. To make contracts. Fourth. To sue and be sued, complain and defend, in any court of law or equity. Fifth. To appoint by its board of directors, such officers and employees as are not otherwise provided for in this Act, to define their duties, require bonds of them and fix the penalty thereof, and to dismiss at pleasure such officers or employees. Sixth. To prescribe by its board of directors, by-laws not in- 206 consistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed. Seventh. To exercise by its board of directors, or duly author- ized officers or agents, all powers specifically granted by the pro* visions of this Act and such incidental powers as shall be necessary to carry on the business of banking within the limitations pre- scribed by this Act. Eighth. Upon deposit with the Treasurer of the United States of any bonds of the United States in the manner provided by ex- isting laws relating to National banks, to receive from the Comp- troller of the Currency circulating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited, such notes to be issued under the same conditions and provisions of law as relate to the issue of circulating notes of National banks secured by bonds of the United States bearing the circulating privilege, except that the issue of such notes shall not be limited to the capital stock of such Federal reserve bank. But no Federal reserve bank shall transact any business except such as is incidental and necessarily preliminary to its organiza- tion until it has been authorized by the Comptroller of the Cur- rency to commence business under the provisions of this Act. (Sec. 4, Act Dec. 23, 1913.) Officers and Clerks of Reserve Banks. — Appointments of clerks of Federal Reserve Banks may be for an indefinite period, provided they are subject to the pleasure of the board of directors. Officers should, however, be appointed from year to year and their salaries, as well as those of clerks, are subject to the annual approval of the Federal Reserve Board. (Informal Ruling of Board, Jan. 6, 1916.) Money Order Business. — There is no authority under the law for Federal Reserve Banks to engage in the money order business. (In- formal Ruling of Board, June 17, 1915.) § 205. Duties of Directors of Reserve Banks.— Every Federal reserve bank shall be conducted under the supervision and control of a board of directors. 207 The board of directors shall perform the duties usually apper- taining to the office of directors of banking associations and all such duties as are prescribed by law. Said board shall administer the affairs of said bank fairly and impartially and without discrimination in favor of or against any member bank or banks and shall, subject to the provisions of law and the orders of the Federal Reserve Board, extend to each mem- ber bank such discounts, advancements and accommodations as may be safely and reasonably made with due regard for the claims and demands of other member banks. (Sec. 4, Act Dec. 23, 1913.) § 206. Classification of Directors of Reserve Banks. — Such board of directors shall be selected as hereinafter specified and shall consist of nine members, holding office for three years, and divided into three classes, designated as classes A, B, and C. Class A shall consist of three members, who shall be chosen by and be representative of the stock-holding banks. Class B shall consist of three members, who at the time of their election shall be actively engaged in their district in commerce, agriculture or some other industrial pursuit. Class C shall consist of three members who shall be designated by the Federal Eeserve Board. When the necessary subscriptions to the capital stock have been obtained for the organization of any Federal reserve bank, the Federal Reserve Board shall appoint the class C directors and shall designate one of such directors as chair- man of the board to be selected. Pending the designation of such chairman, the organization committee shall exercise the powers and duties appertaining to the office of chairman in the organiza- tion of such Federal reserve bank. (Sec. 4, Act Dec. 23, 1913.) Class A Directors — Residents of District. — The words "representa- tive of the stock holding banks" mean that Class A directors must reside in the district for which they are elected. (Informal Ruling of Board, Oct. 1G, 191G.) § 207. Qualifications of Directors of Federal Reserve Banks. — No Senator or Representative in Congress shall be a member of 208 the Federal Reserve Board or an officer or a director of a Federal reserve bank. No director of class B shall be an officer, director, or employee of any bank. No director of class C shall be an officer, director, employee, or stockholder of any bank. (Sec. 4, Act Dec. 23, 1913.) National Bank Examinees as Directors. — Election or appointment of National bank examiners to directorships in Federal Reserve Banks is against the policy of the Bo'ard. (Resolution of Board, Dec. 28, 1915.) § 208. Election of "Class A" and "Class B" Directors.— Direc- tors of class A and class B shall be chosen in the following manner : The Federal Eeserve Board shall classify the member banks of the district into three general groups or divisions, designating each group by number. Each group shall consist as nearly as may be of banks of similar capitalization. Each member bank shall be permitted to nominate to the chairman of the board of directors of the Federal reserve bank of the district one candidate for director of class A and one candidate for director of class B. The candidates so nominated shall be listed by the chairman, indicating by whom nominated, and a copy of said list shall, within fifteen days after its completion, be furnished by the chairman to each member bank. Each member bank by a resolu- tion of the board or by an amendment to its by-laws shall author- ize its president, cashier, or some other officer to cast the vote of the member bank in the elections of class A and class B directors. Within fifteen days after receipt of the list of candidates the duly authorized officer of a member bank shall certify to the chairman his first, second, and other choices for director of class A and class B, respectively, upon a preferential ballot upon a form furnished by the chairman of the board of directors of the Federal reserve bank of the district. Each such officer shall make a cross opposite the name of the first, second, and other choices for a director of class A and for a director of class B, but shall not vote more than one choice for any one candidate. No officer or director of a member bank shall be eligible to serve as a class 209 A director unless nominated and elected by banks which are members of the same group as the member bank of which he is an officer or director. Any person who is an officer or director of more than one mem- ber bank shall not be eligible for nomination as a class A director except by banks in the same group as the bank having the largest aggregate resources of any of those of which such person is an officer or director. Any candidate having a majority of all votes cast in the column of first choice shall be declared elected. If no candidate has a majority of all the votes in the first column, then there shall be added together the votes cast by the electors for such candidates in the second column and the votes cast for the several candidates in the first column. If any candidate then has a majority of the electors voting, by adding together the first and second choices, he shall be declared elected. If no candidate has a majority of electors voting when the first and second choices shall have been added, then the votes cast in the third column for other choices shall be added together in like manner, and the candidate then having the highest number of votes shall be declared elected. An immediate report of election shall be declared. (Sec. 4, Act Dec. 23, 1913, as amended by Sec. 1, Act Sept. 3/6, 1918; 40 Stat. L., 967.) Nomination of Directors — Certification of Choices. — The right of a member bank to nominate a candidate for director is permissive under the terms of section 4 and not mandatory. It is the duty of every duly authorized officer, after receipt of the list of candidates, to certify to the chairman his first, second, and other choices. The law in this connection is mandatory and not per- missive, it evidently being specified in order that there may be no possibility of a failure to elect. Inasmuch, however, as member banks are not obliged to nominate a candidate, it is possible that there may be less than three nominees, and in such case vote can be made for only first and second choices, or if only one nominee only first choice. There is no inconsistency, however, in requiring a first, second, and third choice vote when there are three or more candidates. Both the spirit and the letter of the act require this. (Ruling of Board, Oct. 13, 191G.) 14 210 § 209. Appointment of "Class C" Directors — Designation of Federal Reserve Agents, Deputy Federal Eeserve Agents and Assistants. — Class C directors shall be appointed by the Federal Eeserve Board. They shall have been for at least two years resi- dents of the district for which they are appointed, one of whom shall be designated by said board as chairman of the board of directors of the Federal reserve bank and as "Federal reserve agent." He shall be a person of tested banking experiences, and- in addition to his duties as chairman of the board of directors of the Federal reserve bank he shall be required to maintain, under regulations to be established by the Federal Eeserve Board, a local office of said board on the premises of the Federal reserve bank. He shall make regular reports to the Federal Eeserve Board and shall act as its official representative for the performance of the functions conferred upon it by this Act. He shall receive an an- nual compensation to be fixed by the Federal Eeserve Board and paid monthly by the Federal reserve bank to which he is desig- nated. One of the directors of class C shall be appointed by the Federal Eeserve Board as deputy chairman to exercise the powers of the chairman of the board when necessary. In case of the absence of the chairman and deputy chairman, the third class C director shall preside at meetings of the board. Subject to the approval of the Federal Eeserve Board, the Federal reserve agent shall appoint one or more assistants. Such assistants, who shall be persons of tested banking experience, shall assist the Federal reserve agent in the performance of his duties and shall also have power to act in his name and stead during his absence or disability. The Federal Eeserve Board shall require such bonds of the assistant Federal reserve agents as it may deem necessary for the protection of the United States. Assistants to the Federal reserve agent shall receive an annual compensation, to be fixed and paid in the same manner as that of the Federal reserve agent. (Sec. 4, Act Dec. 23, 1913, as amended by Sec. 2, Act June 21, 1917; 40 Stat. L., 232.) Payments to Deputy Federal Reserve Agents. — No payment should be made to Deputy Federal Reserve Agents except for official services 211 to the banks at the request, in writing, of the Federal Reserve Agent or board of directors. This does net affect directors' fees. (Informal Ruling of Board, Oct. 6, 1915.) Qualifications of Federal Reserve Bank Directors. — A director possessing necessary qualifications at the time of his election is not made ineligible to serve out his term by a change in the geographical limits of his district which results in making him a resident of another district. (Opinion of Counsel of Board, May 11, 1915.) Class C Directors — Executive Committee. — There is no objection to Class C directors serving as members of the executive committees of Federal Reserve Banks. (Informal Ruling of Board, July, 1915.) Eligibility of Class C Directors for All Appointments. — Class C directors of Federal Reserve Banks are eligible to the same appoint- ment and duties as Class A and Class B directors. (Informal Ruling of Board, Jan. 14, 1916.) § 210. Compensation of Directors of Reserve Banks— Directors of Federal reserve banks shall receive, in addition to any compensa- tion otherwise provided, a reasonable allowance for necessary ex- penses in attending meetings of their respective boards, which amount shall be paid by the respective Federal reserve banks. Any compensation that may be provided by boards of directors of Federal reserve banks for directors, officers or employees shall be subject to the approval of the Federal Reserve Board. (Sec. 4, Act Dec. 23, 1913.) § 211. Powers of Organization Committee — Reserve Bank Di- rectors.— The Reserve Bank Organization Committee may, in or- ganizing Federal reserve banks, call such meetings of bank direc- tors in the several districts as may be necessary to carry out the purposes of this Act, and may exercise the functions herein con- ferred upon the chairman of the board of directors of each Federal reserve bank pending the complete organization of such bank. (Sec. 4, Act Dec. 23, 1913.) § 212. Terms of Directors of Reserve Banks— Filling of Va- cancies.- At the first meeting of the full board of directors of 212 each Federal reserve bank, it shall be the duty of the directors of classes A, B, and C, respectively, to designate one of the mem- bers of each class whose term of office shall expire in one year from the first of January nearest to date of such meeting, one whose term of office shall expire at the end of two years from said date, and one whose term of office shall expire at the end of three years from said date. Thereafter every director of a Federal re- serve bank chosen as hereinbefore provided shall hold office for a term of three years. Vacancies that may occur in the several classes of directors of Federal reserve banks may be filled in the manner provided for the original selection of such directors, such appointees to hold office for the unexpired terms of their prede- cessors. (Sec. 4, Act Dec. 23, 1913.) Holding Oveb of Federal Reserve Bank Directors. — A director of la Federal Reserve Bank has no authority to continue to serve as such after the expiration of his term even though his successor has not been elected. (Opinion of Counsel of Board, March 23, 1917.) § 213. Stock Issues — Increase, Decrease and Cancellation of Capital of Reserve Banks.— The capital stock of each Federal re- serve bank shall be divided into shares of $100 each. The out- standing capital stock shall be increased from time to time as member banks increase their capital stock and surplus or as ad- ditional banks become members, and may be decreased as member banks reduce their capital stock or surplus or cease to be members. Shares of the capital stock of Federal reserve banks owned by member banks shall not be transferred or hypothecated. When a member bank increases its capital stock or surplus, it shall there- upon subscribe for an additional amount of capital stock of the Federal reserve bank of its district equal to six per centum of the said increase, one-half of said subscription to be paid in the man- ner hereinbefore provided for original subscription, and one-half subject to call of the Federal Eeserve Board. A bank applying for stock in a Federal reserve bank at any time after the or- ganization thereof must subscribe for an amount of the capital stock of the Federal reserve bank equal to six per centum of the paid-up capital stock and surplus of said applicant bank, paying 213 therefor its par value plus one-half of one per centum a month from the period of the last dividend. When the capital stock of any Federal reserve bank shall have been increased either on ac- count of the increase of capital stock of member banks or on account of the increase in the number of member banks, the board of directors shall cause to be executed a certificate to the Comp- troller of the Currency showing the increase in capital stock, the amount paid in, and by whom paid. When a member bank re- duces its capital stock it shall surrender a proportionate amount of its holdings in the capital of said Federal reserve bank, and when a member bank voluntarily liquidates it shall surrender all of its holdings of the capital stock of said Federal reserve bank and be released from its stock subscription not previously called. In either case the shares surrendered shall be cancelled and the mem- ber bank shall receive in payment therefor, under regulations to be prescribed by the Federal Reserve Board, a sum equal to its cash- paid subscriptions on the shares surrendered and one-half of one per centum a month from the period of the last dividend, not to exceed the book value thereof, less any liability of such member bank to the Federal reserve bank. If any member bank shall be declared insolvent and a re- ceiver appointed therefor, the stock held by it in said Federal reserve bank shall be cancelled, without impairment of its liability, and all cash-paid subscriptions on said stock, with one-half of one per centum per month from the period of last dividend, not to exceed the book value thereof, shall be first applied to all debts of the insolvent member bank to the Federal reserve bank, and the balance, if any, shall be paid to the receiver of the insolvent bank. Whenever the capital stock of a Federal reserve bank is reduced, either on account of a reduction in capital stock of any member bank or of the liquidation or insolvency of such bank, the board of directors shall cause to be executed a certificate to the Comp- troller of the Currency showing such reduction of capital stock and' the amount repaid to 6uch bank. (Sec. 5 and 6, Act Dec. 23, 1913.) Regulation I of Fedebal Reserve Boabd, Series of 1917 (Supersed- ing Reg. I of 1916).— 214 INCREASE OF CAPITAL STOCK. Whenever the capital stock of any Federal Reserve Bank shall be increased by new banks becoming members, or by the increase of capital or surplus of any member bank and the' allotment of additional capital stock to such bank, the board of directors of such Federal Re- serve Bank shall certify such increase to the Comptroller of the Cur- rency on Form 58, which is made a part of this regulation. DECREASE OF CAPITAL STOCK. I. "Whenever a member bank reduces its capital stock or surplus, and, in the case of reduction of its capital, such reduction has been approved by the Comptroller of the Currency and by the Federal Re- serve Board in accordance with the provisions of section 28 of the Federal Reserve Act, it shall file with the Federal Reserve Bank of which it is a member an application on Form 60, which is made a part of this regulation. When this application has been approved, the Federal Reserve Bank shall take up and cancel the receipt issued to' such bank for cash payments made on its subscription and shall issue in lieu thereof a new receipt after refunding to the member bank the proportionate amount due such bank on account of the subscription canceled. The receipt so issued shall show the date of original issue, sO that dividends may be calculated thereon. II. Whenever a member bank shall be declared insolvent and a re- ceiver appointed by the proper authorities, such receiver shall file with the Federal Reserve Bank of which the insolvent bank is a member an application on Form 87, which is made a part of this regu- lation, for the surrender and cancellation of the stock held by, and for the refund of all balances due to' such insolvent member bank. Upon approval of this application by the Federal Reserve Agent the Federal Reserve Bank shall accept and cancel the stock surrendered, and shall adjust accounts between the member bank and the Federal Reserve Bank by applying to the indebtedness of the insolvent member bank to such Federal Reserve Bank all cash-paid subscriptions made by it on the stock canceled with one-half of 1 per centum per month from the period of last dividend, if earned, not to exceed the book value thereof, and the balance, if any, shall be paid to the duly au- thorized receiver of such insolvent member bank. III. Whenever a member bank goes into voluntary liquidation and a liquidating agent is appointed, such agent shall file with the Federal Reserve Bank of which it is a member an application on Form 86, which is made a part of this regulation, for the surrender and can- 215 cellation of the stock held by and for the refund of all balances due to such liquidating member bank. Upon approval of this application by the Federal Reserve Agent the Federal Reserve Bank shall accept and cancel the stock surrendered, and shall adjust accounts between the liquidating member bank and the Federal Reserve Bank by apply- ing to the indebtedness of the liquidating member bank to such Fed- eral Reserve Bank all cash-paid subscriptions made by it on the stock canceled with one-half of 1 per centum per month from the period of last dividend, if earned, not to exceed the book value thereof, and the balance, if any, shall be paid to the duly authorized liquidating agent of such liquidating member bank. IV. Whenever the stock of a Federal Reserve Bank shall be reduced in the manner provided in Paragraphs I, II, or III of this regulation the board of directors of such Federal Reserve Bank shall, in accord- ance with the provisions of section 6, file with the Comptroller of the Currency a certificate of such reduction on Form, 59, which is made a part of this regulation. Forms 58 and 59 apply only to Federal reserve banks. Forms 60 and 87 are for use by member banks and will be forwarded by their respective reserve banks upon request. SUERENDEB OF STOCK BY A MEMBEE BANK REDUCING ITS SURPLUS. — The Federal Reserve Act does not require that a member bank neecessarily surrender a proportionate part of its stock in the Federal Reserve Bank of which it is a member when it reduces its surplus. Such surrender is left to the discretion of the Federal Reserve Bank, subject to the ap- proval of the Federal Reserve Board. (Opinion of Counsel of Board, June 17, 1915.) Liquidation of a Membee Bank. — A vote of more than two-thirds of the stockholders of a National bank ratifying a sale of its assets to fanother corporation is not a vote to go into liquidation as required by the Revised Statutes of the United States. A Federal Reserve Bank can not, under those facts, cancel the shares of its stock held by such member bank, nor can it refund to the member bank the amount of its cash-paid subscriptions to such stock. (Opinion of Counsel of Board, Jan. 20, 1916.) Applications to Reduce Stock. — When a member bank desires to reduce its capital stock, the application should be sent to the Federal Reserve Bank of the district which will present the matter to the Comptroller of the Currency and the Federal Reserve Board. (In- formal Ruling of Board, June 2, 1915.) 216 Duplicate Certificates. — Certificates of increase and decrease of capital stock in member banks are to be made in duplicate and copies mailed both to the Federal Reserve Board and the Comptroller of the Currency. (Informal Ruling of Board, July, 1915.) Identification of Bank as Member. — A member bank becomes ac- tively identified with the Federal Reserve System when its stock in the Federal Reserve Bank has been issued and paid for, and the re- quired reserve deposited. (Informal Ruling of Board, Aug. 11, 1915.) Application for Additional Stock — Certificate of Comptroller of Currency. — In considering applications of member banks for addi- tional stock in Federal Reserve Banks, the Federal Reserve Board will not hereafter require a certificate from the Comptroller of the Cur- rency as to the amount of capital and surplus of the applying bank. (Informal Ruling of Board, Nov. 27, 1915.) Applications should be filed with the proper Federal Reserve Bank and will be considered quarterly, i. e., on the first of January, April, July and October. (In- formal Ruling of Board, March 13, 1915.) Transfer of Federal Reserve Bank Stock. — A National bank acquir- ing assets of another National bank in liquidation is not entitled to have transferred to it the Federal Reserve Bank stock held by the liquidating bank. (Opinion of Counsel of Board, Feb. 3, 1917.) Conversion of a State Bank Into a National Bank. — In view of the fact that the conversion of a State into a National bank does not destroy the corporate identity of the bank, it is hardly necessary for the State bank to file an application for the surrender of its stock or for the National bank to file an application for new stock. (Informal Ruling of Board, Aug. 2, 1917.) § 214. Dividends and Surplus of Reserve Banks.— After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders shall be entitled to receive an an- nual dividend of six per centum on the paid-in capital stock, which dividend shall be cumulative. After the aforesaid dividend claims have been fully met, the net earnings shall be paid to the United States as a franchise tax except that the whole of such net earnings, including those for the year ending December thirty-first, nineteen hundred and eighteen, shall be paid into a surplus fund until it shall amount 217 to one hundred per centum of the subscribed capital stock of such bank, and that thereafter ten per centum of such net earn- ings shall be paid into the surplus. The net earnings derived by the United States from Federal re- serve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury. Should a Federal re- serve bank be dissolved or go into liquidation, any surplus remain- ing, after the payment of all debts, dividend requirements as here- inbefore provided, and the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied. (Sec. 7, Act Dec. 23, 1913, as amended by Sec. 1, Act March 3, 1919; 40 Stat. L., 1314.) Payment of Dividends to Transferred Member Banks. — Where mem- ber banks have been transferred from one district to another, the Re- serve Bank of the district from which the transfer is made is liable to such member banks for unpaid dividends up to the date of transfer. (Informal Ruling of Board, Oct. 31, 1916.) Dividends on Surrendered Stock. — Member banks surrendering stock on account of liquidation or reduction in capital or surplus are entitled to cash-paid subscriptions plus one-half of 1 per cent, per month from date of subscription, not to exceed the book value thereof. If surren- dered because of transfer to another district, member banks are en- titled to accrued dividend certificates. (Opinion of Counsel of Board, Dec. 20, 1915.) Rights of Liquidating National Bank to Accrued Dividends. — Any National bank which liquidates and reorganizes as a State bank for- feits its rights to accrued dividends from its Federal Reserve Bank. Such rights do not survive in favor of such State bank even though it immediately becomes a member bank. (Opinion of Counsel of Board, Dec. 28, 1916.) Surrender of Stock by Liquidating Bank. — When a member bank voluntarily liquidates, or when it is declared insolvent and a receiver appointed, the stock held by it in the Federal Reserve Bank must be surrendered for cancellation. (Informal Ruling of Board, May 14, 1917.) 218 § 215. Exemption from Taxation — Reserve Banks.- Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate. (Sec. 7, Act Dec. 23, 1913.) Deduction of Federal Reserve Bank Stock from Tax Assessments Levied on Shareholders of Member Banks. — Where the State imposes a tax on the shares of a bank, whether State or National, as the prop- erty of the shareholder, and such tax ia not assessed against the cor- iporation as such, the right to deduct nontaxable securities in making the return of the value of the shares for taxation has not been recog- nized by the courts. (Opinion of Counsel of Board, Sept. 14, 1915; First Nat. Bank v. Beaman, 257 Fed. Rep., 729.) Stamp Tax on Certificates of Stock. — Stock issued to member banks by Federal Reserve Banks is exempt from the stamp tax imposed in Schedule A of the Act of October 22, 1914 (38 Stat, 759). (Opinion of Attorney General, March 10, 1916.) Stamp Tax on Instruments Issued by Reserve Banks. — All instru- ments and things mentioned in Schedule A of act approved October 22, 1914, when issued by Federal Reserve Banks are subject to tax. This, however, has no connection with opinion of November 28, 1914, that capital stock of Federal Reserve Banks is exempt from these special taxes. (Opinion of Solicitor of Internal Revenue, Feb. 15, 1915.) § 216. Conversion of State into National Banks-Sec Sec. 31, page 45, Part I. § 217. State Banks as Members — Admission, Restrictions, Suspension and Withdrawal. — Any bank incorporated by special law of any State, or organized under the general laws of any State or of the United States, desiring to become a member of the Fed- eral Reserve Sj r stem, may make application to the Federal Reserve Board, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal reserve bank organized within the district in which the applying bank is lo- cated. Such application shall be for the same amount of stock that the applying bank would be required to subscribe to as a 219 national bank. The Federal Eeserve Board, subject to such condi- tions as it may prescribe, may permit the applying bank to be- come a stockholder of such Federal reserve bank. In acting upon such applications the Federal Eeserve Board shall consider the financial condition of the applying bank, the general character of its management, and whether or not the corporate powers exercised are consistent with the purposes of this Act. Whenever the Federal Eeserve Board shall permit the apply- ing bank to become a stockholder in the Federal reserve bank of the district its stock subscription shall be payable on call of the Federal Eeserve Board, and stock issued to it shall be held sub- ject to the provisions of this Act. All banks admitted to membership under authority of this section shall be required to comply with the reserve and capital requirements of this Act and to conform to those provisions of law imposed on national banks which prohibit such banks from lending on or purchasing their own stock, which relate to the withdrawal or impairment of their capital stock, and which re- late to the payment of unearned dividends. Such banks and the officers, agents, and employees thereof shall also be subject to the provisions of and to the penalties prescribed by section fifty-two hundred and nine of the Eevised Statutes, and shall be required to make reports of conditions and of the payment of dividends to the Federal reserve bank of which they become a member, not less than three of such reports shall be made annually on call of the Federal reserve bank on dates to be fixed by the Federal Eeserve Board. Failure to make such reports within ten days after the date they are called for shall subject the offending bank to a penalty of $100 a day for each day that it fails to transmit such report; such penalty to be collected by the Federal reserve bank by suit or otherwise. As a condition of membership such banks shall likewise be subject to examinations made by direction of the Federal Eeserve Board or of the Federal reserve bank by examiners selected or approved by the Federal Eeserve Board. Whenever the directors of the Federal reserve bank shall ap- 220 prove the examinations made by the State authorities, such ex- aminations and the reports thereof may be accepted in lieu of examinations made by examiners selected or approved by the Fed- eral Eeserve Board: Provided, however, That when it deems it necessary the board may order special examination by examiners of its own selection and shall in all cases approve the form of the report. The expenses of all examinations, other than those made by State authorities, shall be assessed against and paid by the banks examined. If at any time it shall appear to the Federal Reserve Board that a member bank has failed to comply with the provisions of this section or the regulations of the Federal Eeserve Board made pursuant thereto, it shall be within the power of the board after 1 hearing to require such bank to surrender its stock in the Fed- eral reserve bank and to forfeit all rights and privileges of mem- bership. The Federal Eeserve Board may restore membership upon due proof of compliance with the conditions imposed by this section. Any State bank or trust company desiring to withdraw from membership in a Federal reserve bank may do so, after six months' written notice shall have been filed with the Federal Eeserve Board, upon the surrender and cancellation of all of its holdings of capital stock in the Federal reserve bank: Provided, however, That no Federal reserve bank shall, except under ex- press authority of the Federal Reserve Board, cancel within the same calendar year more than twenty-five per centum of its capi- tal stock for the purpose of effecting voluntary withdrawals dur- ing that year. All such applications shall be dealt with in the order in which they are filed with the board. Whenever a mem- ber bank shall surrender its stock holdings in a Federal reserve bank, or shall be ordered to do so by the Federal Eeserve Board, under authority of law, all of its rights and privileges as a member bank shall thereupon cease and determine, and after due provision has been made for any indebtedness due or to become due to the Federal reserve bank it shall be entitled to a refund of its cash paid subscription with interest at the rate of one-half of one per centum per month from date of last dividend, if 221 earned, the amount refunded in no event to exceed the book value of the stock at that time, and shall likewise be entitled to repay- ment of deposits and of any other balance due from the Federal reserve bank. No applying bank shall be admitted to membership in a Federal reserve bank unless it possesses a paid-up, unimpaired capital suffi- cient to entitle it to become a national banking association in the place where it is situated under the provisions of the national bank Act. Banks becoming members of the Federal Reserve System under authority of this section shall be subject to the provisions of this section and to those of this Act which relate specifically to mem- ber banks, but shall not be subject to examination under the pro- visions of the first two paragraphs of section fifty-two hundred and forty of the Revised Statutes as amended by section twenty- one of this Act.* Subject to the provisions of this Act and to the regulations of the board made pursuant thereto, any bank becoming a member of the Federal Reserve System shall retain its full charter and statutory rights as a State bank or trust com- pany, and may continue to exercise all corporate powers granted it by the State in which it was created, and shall be entitled to all privileges of member banks: Provided, however, That no Fed- eral reserve bank shall be permitted to discount for any State bank or trust company notes, drafts, or bills of exchange of any one borrower who is liable for borrowed money to such State bank or trust company in an amount greater than ten per centum of the capital and surplus of such State bank or trust company, but the discount of bills of exchange drawn against actually ex- isting value and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as borrowed money within the meaning of this sec- tion. The Federal reserve bank, as a condition of the discount of ♦This amends Sec. 21 of the Reserve Act; $ 131, page 129, which read as follows: "The Comptroller of the Currency, with the approval of the Secre- tary of the Treasury, shall appoint examiners who shall examine every member bank at least twice in each calendar year and oftener if con- sidered necessary; etc." 222 notes, drafts, and bills of exchange for such State bank or trust company, shall require a certificate or guaranty to the effect that the borrower is not liable to such bank in excess of the amount provided by this section, and will not be permitted to become liable in excess of this amount while such notes, drafts, or bills of exchange are under discount with the Federal reserve bank. It shall be unlawful for any officer, clerk, or agent of any bank admitted to membership under authority of this section to certify any check drawn upon such bank unless the person or company drawing the check has on deposit therewith at the time such check is certified an amount of money equal to the amount speci- fied in such check. Any check so certified by duly authorized officers shall be a good and valid obligation against such bank, but the act of any such officer, clerk, or agent in violation of this section may subject such bank to a forfeiture of its membership in the Federal Eeserve System upon hearing by the Federal Eeserve Board. (Sec. 9, Act Dec. 23, 1913, as amended by Sec. 3, Act June 21, 1917; 40 Stat. L., 232.) The provisions of this section are in no way affected by Sec. 5200 of the Revised Statutes as amended. See § 113, page 101. EEGULATION H OF THE FEDEEAL EESERVE BOAED, SEEIES OF 1917. (Superseding Eegulation H of 1916.) MEMBERSHIP OF STATE BANKS AND TRUST COMPANIES. I. Statutory Requirements. (The provisions of Section 9 of the Federal Reserve Act as amended are omitted to avoid repetition.) II. Banks Eligible for Membership. A State bank or a trust company to be eligible for membership in 9. Federal Reserve Bank must comply with the following conditions: 1. It must have been incorporated under a special or general law of the State or district in which it is located. 2. It must have a minimum paid-up unimpaired capital stock as follows: 223 In cities or towns not exceeding 3,000 inhabitants, $25,000. In cities or towns exceeding 3,000 but not exceeding 6,000 inhabi- tants, $50,000. In cities or towns exceeding 6,000 but not exceeding 50,000 inhabi- tants, $100,000. In cities exceeding 50,000 inhabitants, $200,000. III. Applications fob Membership. Any eligible State bank or trust company may make application on F. R. B. Form 83a, made a part of this regulation, to the Federal Re- serve Board for an amount of capital stock in the Federal Reserve Bank of its district equal to 6 per cent, of the paid-up capital stock and surplus of such State bank or trust company. This application must be forwarded direct to the Federal Reserve Agent of the district in which the applying bank or trust company is located and must be accompanied by Exhibits I, II and III, referred to on page 1 of the application blank. IV. Approval of Application. In passing upon an application the Federal Reserve Board will con- sider especially — 1. The financial condition of the applying bank or trust company and the general character of its management. 2. Whether the corporate powers exercised by the applying bank or trust company are consistant with the purposes of the Federal Reserve Act. 3. Whether the laws of the State or district in which the applying bank or trust company is located contain provisions likely to prevent proper compliance with the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board made in conformity therewith. If, in the judgment of the Federal Reserve Board, an applying bank or trust company conforms to all the requirements of the Federal Reserve Act and these regulations, and is otherwise qualified for mem- bership, the Board will issue a certificate of approval subject to such conditions as it may deem necessary to insure compliance with the act and these regulations. When the co'nditions imposed by the Board have been accepted by the applying bank or trust company the Board will issue a certificate of approval, whereupon the applying bank or trust company shall make a payment to the Federal Reserve Bank of its district of one-half of the amount of its subscription, i. e., 3 per cent, of the amount of its paid-up capital and surplus, and upon re- ceipt of this payment the appropriate certificate of stock will be issued by the Federal Reserve Bank. The remaining half of the subscription 224 of the applying bank or trust company shall be subject to call when deemed necessary by the Federal Reserve Board. V. Powers and Restriction's. Every State bank or trust company while a member of the Federal Reserve System — 1. Shall retain its full charter and statutory rights as a State bank or trust company, subject to' the provisions of the Federal Reserve Act and to the regulations of the Federal Reserve Board, including any conditions embodied in the certificate of approval. 2. Shall maintain such improvements and changes in its banking practice as may have been specifically required of it by the Federal Reserve Board as a condition of its admissio'n and shall not lower the standard of banking then required of it; and 3. Shall enjoy all the privileges and observe all those requirements of the Federal Reserve Act and of the regulations of the Federal Re- serve Board made in conformity therewith which are applicable to State banks and trust companies which have become member banks. VI. Examinations and Reports. Every State bank or trust company, while a member of the Federal Reserve System, shall be subject to examinations made by direction of the Federal Reserve Board or of the Federal Reserve Bank by ex- aminers selected or approved by the Federal Reserve Board. In order to avoid duplication, examinations of State banks and trust companies made by State authorities will be accepted in lieu of ex- aminations by examiners selected or approved by the Board wherever these are satisfactory to the directors of the Federal Reserve Bank and where, in addition, satisfactory arrangements for cooperation in the matter of examination between the designated examiners of the Board and those of the States already exist or can be effected with State authorities. Examiners from the staff of the Board or of the Federal Reserve Banks will, whenever desirable, be designated by the Board to act with the examination staff of the State in order that uniformity in the standard of exmination may be assured. Every State bank or trust company, while a member of the Federal Reserve System, shall be required to make in each year not less than three reports of condition and of the payment of dividends. Such reports shall be made to the Federal Reserve Bank of its district on call of such bank on dates to be fixed by the Federal Reserve Board. Loans in Excess of 10 per cent Limitation. — State member banks are not subject to the limitations of section 5200 but are subject only 225 to such limitatiCns as are imposed by State laws. Loans to one person in excess of 10 per cent are, however, ineligible for rediscount with a Federal Reserve Bank. (Informal Ruling of Board, Oct. 20, 1917; opinion of Counsel of Board, July 25, 1917.) Where the excess is re- discounted with a correspondent bank the remaining 10 per cent is eligible for rediscount. (Opinion of Counsel of Board, June 21, 1918.) Transactions of Branch Banks. — Transactions and membership of a branch bank should be treated with those of the parent bank as one corporation, even though the branch is located in another district. (Informal Ruling of Board, May 22, 1915; opinion of Counsel of Board, April 24, 1918.) Applications for Membership by State Banks Before Commencing Business. — A State bank may make application for membership in the Federal Reserve System as soon as it has been granted a charter iand is authorized to commence business, but not before. (Opinion of Counsel of Board, Nov. 10, 1917.) Eligibility of Mutual Savings Bank. — A mutual savings bank with- out capital stock or stockholders is not eligible under the law for membership in the Federal Reserve System. (Informal Ruling of Board, Oct. 30, 1917.) Private Bankers as Members. — The Federal Reserve Act does not permit a private banker to become a member bank, nor does it permit Federal Reserve Banks to' extend clearing privileges to such a banker. (Opinion of Counsel of Board, July 30, 1917.) Branches of Trust Company Members. — Trust companies having branches are eligible for membership in the Federal Reserve System and may continue to maintain such branches. (Informal Ruling of Board, June 12, 1915.) Opening of New Branches. — It is not the intent of the Board to deny an institution having branches at the date it becomes a member of the Federal Reserve System the right to add additional branches, except for reasons similar to those which might influence a State banking department in withholding its consent. (Informal Ruling of Board, July 29, 1915.) Liabhity of Stockholders of State Banks Wnicn Have Become Member Banks. — There is no provision in the Federal Reserve Act imposing double liability on the stockholders of State banks or trust 15 226 companies which become members of a Federal Reserve Bank. (Opin- ion of Counsel of Board, June 5, 1915.) Ineligibility of Building and Loan Associations. — Building and loan associations may not become members of the Federal Reserve System. (Informal Ruling of Board, July, 1915.) Use of Word "Federal." — The Federal Reserve Board discourages the use of the words "Federal" and "Reserve" as part of the title of member banks but approves the following words on letterheads and in advertisements: "Member of the Federal Reserve System." (In- formal Ruling of Board, July 21, 1917, and May 18, 1918.) § 218. Creation of Federal Reserve Board — Salaries of Mem- bers.— A Federal Eeserve Board is hereby created which shall con- sist of 6even members, including the Secretary of the Treasury and the Comptroller of the Currency, who shall be members ex officio, and five members appointed by the President of the United States, by and with the advice and consent of the Senate. In se- lecting the five appointive members of the Federal Eeserve Board, not more than one of whom shall be selected from any one Federal reserve district, the President shall have due regard to a fair rep- resentation of the different commercial, industrial and geograph- ical divisions of the country. The five members of the Federal Eeserve Board appointed by the President and confirmed as afore- said shall devote their entire time to the business of the Federal Eeserve Board and shall each receive an annual salary of $12,000, payable monthly together with actual necessary traveling expenses, and the Comptroller of the Currency, as ex officio member of the Federal Eeserve Board, shall, in addition to the salary now paid him as Comptroller of the Currency, receive the sum of $7,000 annually for his services as a member of said Board. (Sec. 10, Act Dec. 23, 1913.) § 219. Organization of Board.— The Secretary of the Treasury and the Comptroller of the Currency shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank. The ap- pointive members of the Federal Eeserve Board shall be ineligible 227 during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank, ex- cept that this restriction shall not apply to a member who has served the full term for which he was appointed. Of the five mem- bers thus appointed by the President at least two shall be persons experienced in banking or finance. One shall be designated by the President to serve for two, one for four, one for six, one for eight, and one for ten years, and thereafter each member so ap- pointed shall serve for a term of ten years unless sooner removed for cause by the President. Of the five persons thus appointed, one shall be designated by the President as governor and one as vice governor of the Federal Eeserve Board. The governor of the Federal Eeserve Board, subject to its supervision, shall be the active executive officer. The Secretary of the Treasury may assign offices in the Department of the Treasury for the use of the Federal Ee- serve Board. Each member of the Federal Eeserve Board shall within fifteen days after notice of appointment make and sub- scribe to the oath of office. (Sec. 10, Act Dec. 23, 1913, as amended by Sec. 2, Act March 3, 1919; 40 Stat. L., 1315.) § 220. Assessment to Meet Expenses of Board.— The Federal Eeserve Board shall have power to levy semi-annually upon the Federal reserve banks, in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses and the salaries of its members and employees for the half year suc- ceeding the levying of such assessment, together with any deficit carried forward from the preceding half year. (Sec. 10, Act Dec. 23, 1913.) Separation of Federal Reserve Note Account. — The cost of Federal Reserve notes should be charged to the Federal Reserve Banks as a separate account and paid as bills are rendered by the Treasury De- partment. This note account should not be included in the semiannual assessment against Federal Reserve Banks. (Informal Ruling of Board, March 24, 1915.) § 221. Qualifications of Members of Board — Filling Vacancies. — The first meeting of the Federal Eeserve Board shall be held in 228 Washington, District of Columbia, as soon as may be after tbe passage of this Act, at a date to be fixed by the Eeserve Bank Or- ganization committee. The Secretary of the Treasury shall be ex officio chairman of the Federal Eeserve Board. No member of the Federal Eeserve Board shall be an officer or director of any bank, banking institution, trust company, or Federal reserve bank nor hold stock in any bank, banking institution, or trust company ; and before entering upon his duties as a member of the Federal Eeserve Board he shall certify under oath to the Secretary of the Treasury that he has complied with this requirement. Whenever a vacancy shall occur, other than by expiration of term, among the five members of the Federal Eeserve Board appointed by the President, as above provided, a successor shall be appointed by the President, with the advice and consent of the Senate, to fill such vacancy, and when appointed he shall hold office for the unex- pired term of the member whose place he is selected to fill. The President shall have power to fill all vacancies that may happen on the Federal Eeserve Board during the recess of the Senate, by granting commissions which shall expire thirty days after the next session of the Senate convenes. (Sec. 10, Act Dec. 23, 1913.) § 222. Supervision of Secretary of Treasury Over Board. — Nothing in this Act contained shall be construed as taking away any powers heretofore vested by law in the Secretary of the Treas- ury which relate to the supervision, management, and control of the Treasury Department and bureaus under such department, and wherever any power vested by this Act in the Federal Eeserve Board or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be ex- ercised subject to the supervision and control of the Secretary. (Sec. 10, Act Dec. 23, 1913.) § 223. Annual Report of Board to Congress. — The Federal Ee- serve Board shall annually make a full report of its operations to the Speaker of the House of Eepresentatives, who shall cause the same to be printed for the information of the Congress. (Sec. 10, Act Dec. 23, 1913.) 229 § 224. Bureau for Issue and Regulation of National Bank Notes and Federal Reserve Notes. — See § 2, page 1, Part I. § 225. Visitorial Powers of Board — Publication of Weekly Statements.— The Federal Eeserve Board shall be authorized and empowered : (a) To examine at its discretion the accounts, books and affairs of each Federal reserve bank and of each member bank and to re- quire such statements and reports as it may deem necessary. The said board shall publish once each week a statement showing the condition of each Federal reserve bank and a consolidated statement for all Federal reserve banks. Such statements shall show in de- tail the assets and liabilities of the Federal reserve banks, single and combined, and shall furnish full information regarding the character of the money held as reserve and the amount, nature and maturities of the paper and other investments owned or held by Federal reserve banks. (Sec. 11, Act Dec. 23, 1913.) § 226. Power of Board — Rediscount by Reserve Bank of Dis- counted Paper of Other Reserve Banks. — (b) To permit, or, on the affirmative vote of at least five members of the Reserve Board to require Federal reserve banks to rediscount the discounted paper of other Federal reserve banks at rates of interest to be fixed by the Federal Eeserve Board. (Sec. 11, Act Dec. 23, 1913.) § 227. Power of Board to Suspend Reserve Requirements — Tax on Deficiency. — (c) To suspend for a period not exceeding thirty days, and from time to time to renew such suspension for periods not exceeding fifteen days, any reserve requirement specified in this Act: Provided, That it shall establish a graduated tax upon the amounts by which the reserve requirements of this Act may be permitted to fall below the level hereinafter specified: And provided further, That when the gold reserve held against Fed- eral reserve notes falls below forty per centum, the Federal Ee- serve Board shall establish a graduated tax of not more than one per centum per annum upon such deficiency until the reserves fall to thirty-two and one-half per centum, and when said reserve falls 230 below thirty-two and one-half per centum, a tax at the rate in- creasingly of not less than one and one-half per centum per an- num upon each two and one-half per centum or fraction thereof that such reserve falls below thirty-two and one-half per centum. The tax shall be paid by the reserve bank, but the reserve bank shall add an amount equal to said tax to the rates of interest and discount fixed by the Federal Reserve Board. (Sec. 11, Act Dec. 23, 1913.) § 228. Power of Board — Issue, Delivery and Retirement of Federal Reserve Notes.- (d) To supervise and regulate through the bureau under the charge of the Comptroller of the Currency the issue and retirement of Federal reserve notes, and to prescribe rules and regulations under which such notes may be delivered by the Comptroller to the Federal reserve agents applying therefor. (Sec. 11, Act Dec. 23, 1913.) § 229. Power of Board — Reserve and Central Reserve Cities. — (e) To add to the number of cities classified as reserve and central reserve cities under existing law in which National banking asso- ciations are subject to the reserve requirements set forth in section twenty * of this Act; or to reclassify existing reserve and central reserve cities or to terminate their designation as such. (Sec. 11, Act Dec. 23, 1913.) Requirements fob Reserve Cities. — The requirements to be observed before any city is designated by the Board as a reserve city are: Pop- ulation, 50,000; capital and surplus of Natio'nal banks, $3,000,000; deposits, not less than $10,000,000; and the indorsement of the applica- tion by at least 50 National banks located outside the applying city. (Statement of Board, March 22, 1915.) Central Reserve Cities — List of. — There are only three central reserve cities, namely: New York, Chicago and St. Louis. Reserve Cities — List of. — The following were the reserve cities on the date of this publication: Boston, Albany, Brooklyn and Bronx, * This reference to Section 20 is an error in the Act. The reference should be to Section 19. 231 Buffalo, Philadelphia, Pittsburgh, Baltimore, Washington, Richmond, Charleston, Atlanta, Jacksonville, Birmingham, New Orleans, Dallas, El Paso, Fort Worth, Galveston, Houston, San Antonio, Waco, Little Rock, Louisville, Chattanooga, Memphis, Nashville, Cincinnati, Cleve- land, Columbus, Toledo, Indianapolis, Peoria, Detroit, Grand Rapids, Milwaukee, Minneapolis, St. Paul, Cedar Rapids, Des Moines, Dubuque, Sioux City, Kansas City, Mo., St. Joseph, Lincoln, Omaha, Kansas City, Kans., Topeka, Wichita, Denver, Pueblo, Muskogee, Oklahoma City, Tulsa, Seattle, Spokane, Tacoma, Portland, Ore., Los Angeles, Oakland, San Francisco, Ogden, Salt Lake City. § 230. Power of Board — Suspension or Removal of Officer or Director of Reserve Bank. — -(f) To suspend or remove any officer or director of any Federal reserve bank, the cause of such removal to be forthwith communicated in writing by the Federal Reserve Board to the removed officer or director and to said bank. (Sec. 11, Act Dec. 23, 1913.) § 231. Power of Board— Writing Off of Doubtful or Worthless Assets by Reserve Banks.— (g) To require the writing off of doubt- ful or worthless assets upon the books and balance sheets of Fed- eral reserve banks. (Sec. 11, Act Dec. 23, 1913.) § 232. Power of Board — Suspension, Liquidation or Reorgan- ization of Reserve Bank. — (h) To suspend, for the violation of any of the provisions of this Act, the operations of any Federal reserve bank, to take possession thereof, administer the same during the period of suspension, and, when deemed advisable, to liquidate or reorganize such bank. (Sec. 11, Act Dec. 23, 1913.) § 233. Power of Board — Bonding of Federal Reserve Agents — - Performance of Duties, Functions and Services of Act. — (i) To require bonds of Federal reserve agents, to make regulations for the safeguarding of all collateral, bonds, Federal reserve notes, money or property of any kind deposited in the hands of such agents, and said board shall perform the duties, functions, or ser- vices specified in this Act, and make all rules and regulations necessary to enable said board effectively to perform the same. (Sec. 11, Act Dec. 23, 1913.) 233 §234. Power of Board — General Supervision Over Reserve Banks. — (j) To exercise general supervision over said Federal Ee- serve Banks. (Sec. 11, Act Dec. 23, 1913.) §235. Power of Board — Grant of Trustee Powers to National Banks. — (k) To grant by special permit to National banks ap- plying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assistant receiver, com- mittee 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. Whenever the laws of such State authorize or permit the exer- cise of any or all of the foregoing powers by State hanks, trust companies, or other corporations which compete with National banks, the granting to and the exercise of such powers by Na- tional banks shall not be deemed to be in contravention of State or local law within the meaning of this Act. National banks exercising any or all of the powers enumerated in this subsection shall segregate all assets held in any fiduciary capacity from the general assets of the bank and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this subsection. Such books and records shall be open to inspection by the State authorities to the same extent as the books and records of cor- porations organized under State law which exercise fiduciary pow- ers, but nothing in this Act shall be construed as authorizing the State authorities to examine the books, records, and assets of the National bank which are not held in trust under authority of this subsection. No National bank shall receive in its trust department deposits of current funds subject to check or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange pur- poses. Funds deposited or held in trust by the bank awaiting investment shall be carried in a separate account and shall not 233 be used by the bank in the conduct of its business unless it shall first set aside in the trust department United States bonds or other securities approved by the Federal Eeserve Board. In the event of the failure of such bank the owners of the funds held in trust for investment shall have a lien on the bonds on other securities so set apart in addition to their claim against the estate of the bank. Whenever the laws of a State require corporations acting in a fiduciary capacity, to deposit securities with the State authori- ties for the protection of private or court trusts, National banks so acting shall be required to make similar deposits and securities so deposited shall be held for the protection of private or court trusts, as provided by the State law. National banks in such cases shall not be required to execute the bond usually required of individuals if State corporations un- der similar circumstances are exempt from this requirement. National banks shall have power to execute such bond when so required by the laws of the State. In any case in which the laws of a State require that a corpora- iton acting as trustee, executor, administrator, or in any capacity specified in this section, shall take an oath or make an affidavit, the president, vice president, cashier, or trust officer of such Na- tional bank may take the necessary oath or execute the necessary affidavit. It shall be unlawful for any National banking association to lend any officer, director, or employee any funds held in trust under the powers conferred by this section. Any officer, director, or employee making such loan, or to whom such loan is made, may be fined not more than $5,000, or imprisoned not more than five years, or may be both fined and imprisoned, in the discretion of the court. In passing upon application for permission to exercise the pow- ers enumerated in this subsection, the Federal Eeserve Board may take into consideration tho amount of capital and surplus of the applying bank, whether or not such capital and surplus is sufficient under the circumstances of the case, the needs of the community to be served, and any other facts and circumstances 234 that seem to it proper, and may grant or refuse the application accordingly : Provided, That no permit shall be issued to any Na- tional banking association having a capital and surplus less than the capital and surplus required by State law of State banks, trust companies, and corporations exercising such powers. (Sec. 11, Act Dec. 23, 1913, as amended by Sec. 2, Act Sept. 26, 1918; 40 Stat. L., 968.) The Supreme Court of Illinois, in the case of People v. Brady, (271 111., 100), and the Supreme Court of Michigan in the case of Fellows v. First Nat. Bank (Mich. 159 N. E., 335), held that section 11 (k) -was unconstitutional and void. The latter case, however, was taken to the Supreme Court of the United States and reversed, the court holding that the section was constitutional and valid. (First Nat. Bank v. Fellows, 244 U. S., 416.) On March 27, 1920, Judge Van Valkenburgh of the U. S. District Court at Kansas City, Mo., held that a National bank, duly authorized to exercise trust powers, could, with the Comptroller's approval, use the words "trust company" as part of its corporate title even though the state law prohibited such use, REGULATION F OF THE FEDERAL RESERVE BOARD, SERIES OF 1919. (Superseding Regulation F of 1917.) I. Statutory Provisions. See $235 above. II. Applications. A National bank desiring to exercise any or all of the powers au- thorized by section 11 (k) of the Federal Reserve Act, as amended by the Act of September 26, 1918, shall make application to the Federal Reserve Board, on a form approved by said Board, for a special permit authorizing it to exercise such powers. In the case of an original application — that is, where the applying bank has never been granted the right to exercise any of the powers authorized by section 11 (k), the application should be made On Form 61. In the case of a supple- mental application — that is, where the applying bank has already been granted the right to exercise one or more of the powers authorized by section 11 (k), the application should be made on Form 61b. Both forms are made a part of this regulation and may be obtained from the Federal Reserve Board or any Federal Reserve Bank. 235 III. Separate Departments. Every National bank permitted to act under this section shall es- tablish a separate trust department, and shall place such department under the management of an officer or officers, whose duties shall be prescribed by the board of directors of the bank. IV. Custody of Trust Securities and Investments. The securities and investments held in each trust shall be kept separate and distinct from the securities owned by the bank and separate and distinct one from another. Trust securities and invest- ments shall be placed in the joint custody of two or more officers or other employees designated by the board of directors of the bank and all such officers and employees shall be bo'nded. V. Deposit of Funds Awaiting Investment or Distribution. Funds received or held in the trust department of a National bank awaiting investment or distribution may be deposited in the com- mercial department of the bank to the credit of the trust department, provided that the bank first delivers to the trust department, as col- lateral security, United States bonds, o'r other readily marketable securities owned by the bank, equal in market value to the amount of the funds so deposited. VI. Investment of Trust Funds. (c) Private trusts. — Funds held in trust must be invested in strict accordance with the terms of the will, deed, or other instrument creating the trust. Where the instrument creating the trust contains provisions authorizing the bank, its officers, or its directors to exercise their discretion in the matter of investments, funds held in trust may be invested only in those classes of securities which are approved by the directors of the bank. Where the instrument creating the trust does not specify the character or class of investments to' be made and does not expressly vest in the bank, its officers, or its directors a discretion in the matter of investments, funds held in trust shall be invested in any securities in which corporate or individual fiduciaries in the State in which the bank is located may lawfully invest. (b) Court trusts. — Except as hereinafter provided, a National bank acting as executor, administrator, or in any other fiduciary capacity, under appointment by a court of competent jurisdiction, shall make all investments under an order of that court, and copies of all such orders shall be filed and preserved with the records of the trust depart- ment of the bank. If the court by general order vests a discretion in 236 the National bank to invest funds held in trust, or, if under the laws of the State in which the bank is located corporate fiduciaries ap- pointed by the court are permitted to exercise such discretion, the National bank so appointed may invest such funds in any securities in which corporate or individual fiduciaries in the State in which the bank is located may lawfully invest. VII. Books and Accounts. All books and records of the trust department shall be kept separate and distinct from other books and records of the bank. All accounts opened shall be so kept as to enable the National bank at any time to furnish information or reports required by the Federal or State authorities, and such books and records shall be opened to the in- spection of such authorities. VIII, Examinations. Examiners appointed by the Comptroller of the Currency or desig- nated by the Federal Reserve Board will be instructed to make thorough and complete audits of the cash, securities, accounts, and investments of the trust department of the bank at the same time that examination is made of the banking department. IX. Conformity with: State Laws. Nothing in these regulations shall be construed to give a National bank exercising the powers permitted under the provisions of section 11 (k) of the Federal Reserve Act, as amended, any rights or privileges in contravention of the laws of the State in which the bank is located within the meaning of that Act. X. Revocation of Permits. The Federal Reserve Board reserves the right to revoke permits granted under the provisions of section 11 (k), as amended, in any case where in the opinion of a Board a bank has wilfully violated the provisions of the Federal Reserve Act or of these regulations or the laws of any State relating to the operations of such bank when acting in any of the capacities permitted under the provisions of section 11 (k), as amended. XI. Changes in Regulations. These regulations are subject to change by the Federal Reserve Board; provided, however, that no such change shall prejudice any 237 obligation undertaken in good faith under regulations in effect at the time the obligation was assumed. (Note. — The above regulation F took effect April 15, 1919.) Board's Powee to Grant. — The board in the last analysis must de- termine whether it will or will not grant fiduciary powers and whether State law permits them to be exercised. (Informal Ruling of Board, June 4, 1915.) Under the provisions of section 11 (k), as amended by the Act of September 26, 1918, the Federal Reserve Board may properly permit any National bank to exercise any of the fiduciary powers authorized by that section, unless there is some express provision of the laws of the State in which such bank is located which either directly or by necessary implication prohibits National banks from exercising such powers and even if there is such an express statute, the Board may issue its permit if any State bank, trust company, or other competing corporation in that State is permitted to exercise the powers applied for by the National bank. (Opinion of Counsel of Board, March 31, 1919.) § 236. Power of Board — Employment of Assistants, Clerks, etc. — (i) To employ such, attorneys, experts, assistants, clerks, or other employees as may be deemed necessary to conduct the busi- ness of the board. All salaries and fees shall be fixed in advance by said board and shall be paid in the same manner as the salaries of the members of said board. All such attorneys, experts, assis- tants, clerks, and other employees shall be appointed without re- gard to the provisions of the Act of January sixteenth, eighteen hundred and eighty-three (volume twenty-two, United States Statutes at Large, page four hundred and three), and amendments thereto, or any rule or regulation made in pursuance thereof: Provided, That nothing herein shall prevent the President from placing said employees in the classified service. (Sec. 11, Act Dec. 23, 1913.) § 237. Power of Board — Permission to Discount Paper in Ex- cess of Limitation When Secured by War-Time Securities. — (m) Upon the affirmative vote of not less than five of its mem- 233 bers, the Federal Reserve Board sliall have power to permit Fed- eral reserve banks to discount for any member bank notes, drafts, or bills of exchange bearing the signature or endorsement of any- one borrower in excess of the amount permitted by section nine and section thirteen of this Act, but in no case to exceed twenty per centum of the member bank's capital and surplus: Provided, however, That all such notes, drafts, or bills of exchange dis- counted for any member bank in excess of the amount permitted under such sections shall be secured by not less than a like face amount of bonds or notes of the United States issued since April twenty-fourth, nineteen hundred and seventeen, or certificates of indebtedness of the United States: Provided further, That the provisions of this subsection (m) shall not be operative after De- cember thirty-first, nineteen hundred and twenty. (Sec. 11, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by Sec. 3, Act March 3, 1919 ; 40 Stat. L., 1315.) § 238. Federal Advisory Council. — There is hereby created a Federal Advisory Council, which shall consist of as many members as there are Federal reserve districts. Each Federal reserve bank by its board of directors shall annually select from its own Federal reserve district one member of said council, who shall receive such compensation and allowances as may be fixed by his board of directors subject to the approval of the Federal Reserve Board. The meetings of said advisory council shall be held at Washington, District of Columbia, at least four times each } r ear, and oftener if called by the Federal Reserve Board. The council may in addition to the meetings above provided for hold such other meetings in Washington, District of Columbia, or elsewhere, as it may deem necessary, may select its own officers and adopt its own methods of procedure, and a majority of its members shall constitute a quorum for the transaction of business. Vacancies in the council shall be filled by the respective reserve banks, and members selected to fill vacancies, shall serve for the unexpired term. The Federal Advisory Council shall have power, by itself or through its officers, (1) to confer directly with the Federal Re- serve Board on general business conditions; (2) to make oral or 239 written representations concerning matters within the jurisdiction of said board; (3) to call for information and to make recom- mendations in regard to discount rates, rediscount business, note issues, reserve conditions in the various districts, the purchase and sale of gold or securities by reserve banks, open-market operations by said banks, and the general affairs of the reserve banking sys- tem. (Sec. 12, Act Dec. 23, 1913.) Time of Election. — Elections of members of the advisory council should be made at the first meeting after the 1st of January each year which is attended by the new directors of Federal Reserve Banks. (In- formal Ruling of Board, Dec. 16, 1915.) Attendance at Directors' Meetings. — Members of the advisory coun- cil should sit with boards of directors of the Federal Reserve Banks only by invitation, and not as a matter of course. (Informal Ruling of Board, Feb. 16, 1916.) § 239. Powers of Beserve Banks — As Depository and Collect- ing Agent — Collection Charges.— Any Federal reserve bank may re- ceive from any of its member banks, and from the United States, deposits of current funds in lawful money, National bank notes, Federal reserve notes, or checks, and drafts, payable upon presen- tation, and also, for collection, maturing notes and bills ; or, solely for purposes of exchange or of collection, may receive from other Federal reserve banks deposits of current funds in lawful money, National bank notes, or checks upon other Federal reserve banks, and checks and drafts, payable upon presentation within its dis- trict, and maturing notes and bills payable within its district; or, solely for the purposes of exchange or of collection, may re- ceive from any nonmember bank or trust company deposits of current funds in lawful money, National bank notes, Federal re- serve notes, checks and drafts payable upon presentation, or matur- ing notes and bills: Provided, Such nonmember bank or trust company maintains with the Federal reserve bank of its district a balance sufficient to offset the items in transit held for its ac- count by the Federal reserve bank : Provided further, That noth- ing in this or any other section of this Act shall be construed as prohibiting a member or nonmember bank from making reason- 240 able charges, to be determined and regulated by the Federal Re- serve Board, but in no case to exceed 10 cents per $100 or fraction thereof, based on the total of checks and drafts presented at any one time, for collection or payment of checks and drafts and re- mission therefor by exchange or otherwise; but no such charges shall be nxade against the Federal reserve banks. (Sec. 13, Act Dec. 23, 1913, as amended by Act March 3, 1915, and further by Act Sept. 7, 1916, and by Sec. 4, Act June 21, 1917; 40 Stat. L. 234.) See Regulation J of the Federal Reserve Board, Series of 1917 after $ 265, on page 284. Deposits by Nonmembeb Banks in Federal Reserve Banks. — That part of section 13 as amended by the act approved June 21, 1917, which authorizes Federal Reserve Banks to receive deposits from nonmember banks is merely permissive and not mandatory, and in accepting any deposit authorized by that section a Federal Reserve Bank may prop- erly require the depositing bank to maintain a balance sufficient to cover checks drawn against the depositing bank as well as items re- ceived from that bank. (Opinion of Counsel of Board, July 10, 1917.) Deposits of Unfit Currency. — Any Federal Reserve Bank may prop- erly refuse to accept deposits of unfit currency which are offered to it for the purpose of imposing on it the expense of shipment to Wash- ington for redemption. (Opinion of Counsel of Board, Jan. 31, 1916.) Exchange Charge on Banker's Acceptance. — A banker's acceptance is a draft within the meaning of this section and a member bank has no legal right to deduct exchange in accounting to a Federal Reserve Bank for one of its own acceptances forwarded to it for collection by the Federal Reserve Bank. (Ruling of Board, Feb., 1920.) § 240. Powers of Reserve Banks — Discount of Notes, Drafts and Bills of Exchange. — Upon the indorsement of any of its member banks, which shall be deemed a waiver of demand, notice and protest by such bank as to its own indorsement exclusively, any Federal reserve bank may discount notes, drafts, and bills of ex- change arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricul- 241 tural, industrial, or commercial purposes, or the proceeds of which have been used, or are to be used, for such purposes, the Federal Eeserve Board to have the right to determine or define the char- acter of the paper thus eligible for discount, within the meaning of this Act. Nothing in this Act contained shall be construed to prohibit such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise from being eligible for such discount; but such definition shall not include notes, drafts, or bills covering merely investments or is- sued or drawn for the purpose of carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at the time of discount of not more than ninety days, exclusive of days of grace : Provided, That notes, drafts, and bills drawn or issued for agricultural purposes or based on live stock and having a maturity not exceeding six months, exclusive of days of grace, may be discounted in an amount to be limited to a per- centage of the assets of the Federal reserve bank, to be ascertained and fixed by the Federal Eeserve Board. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) Regulation A of Federal Reserve Board, Series of 1917 (Super- ceding Reg. A of 1916) — Rediscounts Under Section 13. A. Notes, Drafts and Bills of Exchange. I. General Statutory Provisions. Any Federal Reserve Bank may discount for any of its member banks any note, draft, or bill of exchange provided — (a) It has a maturity at the time of discount of not more than 90 days, exclusive of days of grace; but if drawn or issued for agricul- tural purposes or based on live stock, it may have a maturity at the time of discount of not more than six months, exclusive of days of grace. (b) It arose out of actual commercial transactions; that is, it must be a note, draft, or bill of exchange which has been issued or drawn 10 242 for agricultural, industrial, or commercial purposes, or the proceeds of which have been used or are to be used for such purposes. (c) It was not issued for carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States. (d) The aggregate of notes, drafts, and bills bearing the signature or indorsement of any one borrower, whether a person, company, firm, or corporation rediscounted for any one member bank shall at no time exceed 10 per cent, of the unimpaired capital and surplus of such bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values. (e) It is indorsed by a member bank. (f) It conforms to all applicable provisions of this regulation. II. General Character of Notes, Drafts, and Bills of Exchange Eligible. The Federal Reserve Board, exercising its statutory rights to define the character of a note, draft, or bill of exchange eligible for redis- count at a Federal Reserve Bank, has determined that — ■ (a) It must be a note, draft, or bill of exchange the proceeds of which have been used or are to be used in producing, purchasing, carry- ing, or marketing goods* in one or more of the steps of the process of production, manufacture, or distribution. (b) It must not be a note, draft, or bill of exchange the proceeds of which have been used or are to be used for permanent or fixed in- vestments of any kind, such as land, buildings, or machinery. (c) It must not be a note, draft, or bill of exchange the proceeds of which have been used or are to be used for investments of a purely speculative character. (d) It may be secured by the pledge of goods or collateral, provided it is otherwise eligible. III. Applications for Rediscount. All applications for the rediscount of notes, drafts, or bills of ex- change must contain a certificate of the member bank, in form to be prescribed by the Federal Reserve Bank, that, to the best of its knowl- edge and belief, such notes, drafts, or bills of exchange have been issued for one or more of the purposes mentioned in II (a). * When used in this regulation the word "goods" shall be construed to include goods, wares, merchandise, or agricultural products, in- cluding live stock. 243 IV. Promissory Notes. (a) Definition. — A promissory note, within the meaning of this reg- ulation, is defined as an unconditional promise, in writing, signed by the maker, to pay, in the United States, at a fixed or determinable future time, a sum certain in dollars to order or to bearer. (6) Evidence of eligibility and requirement of statements. — A Fed- eral Reserve Bank must be satisfied by reference to the note or other- wise that it is eligible for rediscount. Compliance of a note with II (6) may be evidenced by a statement of the borro'wer showing a reasonable excess of quick assets over current liabilities. The member bank shall certify in its application whether the note offered for re- discount has been discounted for a depositor or another member bank or whether it has been purchased from a nondepositor. It must also certify whether a financial statement of the borrower is on file. Such financial statements must be on file with respect to all notes offered for rediscount which have been purchased from sources other than a depositor or a member bank. With respect to any other note offered for rediscount, if no statement is on file, a Federal Reserve Bank shall use its discretion in taking the steps necessary to satisfy itself as to eligibility. It is authorized to waive the requirement, of a statement with respect to any note discounted by a member bank for a depositor or another member bank — (1) If it is secured by a warehouse, terminal, or other similar re- ceipt covering goods in storage. (2) If the aggregate of obligations of the borrower rediscounted and offered for rediscount at the Federal Reserve Bank is less than a sum equal to 10 per cent, of the paid-in capital of the member bank and does not exceed $5,000. V. Drafts, Bills of Exchange, and Trade Acceptances. (a) Definition. — A draft or bill of exchange, within the meaning of this regulation, is defined as an unconditional order in writing, ad- dressed by one person to another, other than a banker as defined under B (b), signed by the person giving it, requiring the person to whom it is addressed to pay, in the United States, at a fixed or determinable future time, a sum certain in dollars to the order of a specified person; and a trade acceptance is defined as a draft or bill of exchange drawn by the seller on the purchaser of goods sold and accepted by such purchaser. (b) Evidence of eligibility. — A Federal Reserve Bank shall take such steps as it deems necessary to satisfy itself as to the eligibility of the draft or bill offered for rediscount, unles3 it presents prima facie evi- 244 dence thereof or bears a stamp or certificate affixed by the acceptor or drawer showing that it is a trade acceptance. VI. Six Months' Agbicultubal Papeb. (a) Definition. — Six months' agricultural paper, within the meaning of this regulation, is defined as a note, draft, bill of exchange, or trade acceptance drawn or issued for agricultural purposes, or based on live stock; that is, a note, draft, bill of exchange, or trade acceptance the proceeds of which have been used, or are to be used, for agricultural purposes, including the breeding, raising, fattening, or marketing of live stock, and which has a maturity at the time of discount of not more than six months, exclusive of days of grace. (6) Eligibility. — To be eligible for rediscount six months' agricul- tural paper, whether a note, draft, bill of exchange, or trade accept- ance, must comply with the respective sections of this regulation which would apply to it if its maturity were 90 days or less. VII. Commodity Papeb. (a) Definition. — Commodity paper within the meaning of this reg- ulation is defined as a note, draft, bill of exchange, or trade acceptance accompanied and secured by shipping documents or by a warehouse, terminal, or other similar receipt covering approved and readily mar- ketable, nonperishable staples properly insured. (&) Eligibility. — To be eligible for rediscount at the special rates authorized to be established for commodity paper, such a note, draft, bill of exchange, or trade acceptance must also comply with the re- spective sections of this regulation applicable to it, must conform to the requirements of the Federal Reserve Bank relating to shipping documents, receipts, insurance, etc., and must be a note, draft, bill of exchange, or trade acceptance on which the rate of interest or discount — including commission — charged the maker, does not exceed 6 per cent, per annum. (c) Suspension of commodity rate. — As the special rate on com- modity paper is intended to assist actual producers during crop-moving periods and is not designed to benefit speculators, the Board reserves the right to suspend the special rates herein provided whenever it is apparent that the movement of crops, which this rate is intended to facilitate, has been practically completed. B. Bankeb's Acceptances. (a) General statutory provisions. — Any Federal Reserve Bank may discount for any of its member banks bankers' acceptances which have 245 a maturity at the time of discount of not more than three months' Bight, exclusive of days of grace, which are indorsed by at least one member bank, and which grow out of transactions involving the im- portation and exportation of goods; or, which grow out of transactions involving the domestic shipment of goods, provided shipping docu- ments are attached at the time of acceptance; or, which are secured at the time of acceptance by a warehouse receipt or other such docu- ment conveying or securing title covering readily marketable staples. Any Federal Reserve Bank may also acquire drafts or bills of ex- change drawn on member banks by banks or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange. (&) Definition. — A banker's acceptance within the meaning of this regulation is denned as a draft or bill of exchange of which the ac- ceptor is a bank or trust company, or a firm, person, company, or corporation engaged in the business of granting bankers' acceptance credits. (c) Eligibility.— >To be eligible for rediscount the bill must have been drawn under a credit opened for the purpose of conducting, or settling accounts resulting from, a transaction or transactions involv- ing (1) the shipment of goods between the United States and any foreign country, or between the United States and any of its de- pendencies or insular possessions, or between foreign countries, or (2) the domestic shipment of goods, provided shipping documents are attached at the time of acceptance; or it must be a bill which is se- cured at the time of acceptance by a warehouse receipt or other such document conveying or securing title covering readily marketable staples. Any Federal Reserve Bank may also acquire drafts or bills drawn by a bank or banker in a foreign country or dependency or insular possession of the United States for the purpose of furnishing dollar exchange and accepted by a member bank in accordance with the provisions of Regulation C, page 262. Such drafts or bills may be acquired prior to acceptance provided they have the indorsement of a member bank. (d) Evidence of eligibility. — A Federal Reserve Bank must be satis- fied, either by reference to the acceptance itself or otherwise, that it is eligible for rediscount. Satisfactory evidence of eligibility may consist of a stamp or certificate affixed by the acceptor in form satis- factory to the Federal Reserve Bank. Rediscount of Drafts Payable on Condition. — A draft made "pay- able on arrival of car" is nonnegotiable, not being payable at a deter- minable future time, and is therefore ineligible for rediscount by a Federal Reserve Bank. (Opinion of Counsel of Board, Feb. 13, 1915.) 246 Rediscount or the Assignment of Open Accounts. — The assignment of an open account is not negotiable paper and is not elegible for re- discount by a Federal Reserve Bank under the terms of section 13 of the Federal Reserve Act. (Opinion of Counsel of Board, April 17, 1916.) Agricultural Products or Implements. — The purchase or sale of an agricultural product, or of implements or other commodities used in agriculture, constitutes a commercial transaction. Where the proceeds of a note made by a merchant are used to purchase seed to be later retailed or sold, such a note can not be treated as one given for an agricultural purpose and can not be discounted by a Federal Reserve Bank if it has a maturity at time of discount of more than 90 days. (Opinion of Counsel of Board, Sept. 15, 1916.) Trade Acceptances of Retailers. — A bill of exchange drawn by the seller of goods and accepted by the purchaser of those goods is a trade acceptance, regardless of whether or not the purchaser intends to resell the goods or to use them for his own purpose. (Informal Ruling of Eoard, Dec. 24, 1917.) Drafts Drawn on Sales Corporations. — A draft drawn by a corpora- tion upon a sales corporation which it and a number of other con- cerns have organized will, when accepted, become a trade acceptance, even though the selling corporation is a stockholder of the sales cor- poration, provided the latter is organized in good faith and not merely to act as an agent for the purpose of evading the law. (Opinion of Counsel of Board, Dec. 12, 1917.) Notes for Farm Tools. — Notes of farmers or consumers given for the purchase price of farm tools, agricultural machinery, or other farm-operating equipment are discountable under section 13 of the Federal Reserve Act, which provides for notes, bills, or drafts drawn or issued for agricultural purposes. Presentation of notes of farmers or consumers for the purchase price of farm tools or agricultural machinery by the dealer, with his indorsement for rediscount, does not change their classification as for agricultural purposes. (Informal Ruling of Board, Dec. 30, 1915.) Chattel Mortgages Unnecessary. — The act does not require the taking of chattel mortgages as security for loans based on agricultural operations. The direct, primary purpose of the loan should be for the ordinary operations of agriculture. The words "based on" are not considered synonymous with "secured by." Agricultural paper need 247 not be directly secured by agricultural products, but should be gen- uinely based upon transactions entered upon for agricultural opera- tions. (Informal Ruling of Board, Jan. 9, 1915.) Rediscount of Participation Certificate. — There is no provision in the Federal Reserve Act which authorizes a Federal Reserve Bank to rediscount a certificate of participation in a note, because even though the original note is eligible for rediscount, a participation certificate nevertheless is nothing more than the evidence of an equitable interest in that original note, and does not in any way represent a legal claim against the maker of the note. (Informal Ruling of Board, Nov. 1 1917.) Indorsement "Without Recourse." — If a note is otherwise eligible for rediscount, the fact that it bears a "without recourse" indorsement of a nonmember bank will not affect its eligibility. (Opinion of Coun- sel of Board, July 3, 1918.) Note of Dealer. — A note made by dealer in agricultural implements or in live stock is not agricultural paper. (Informal Ruling of Board, July, 1915.) Paper of Merchants and Others. — "Commodity paper" includes not only paper originating with the producer, but also paper of merchants and others when the commodity is not carried for speculative or purely investment purposes. (Informal Ruling of Board, Sept. 8, 1915.) Purchases from Member Banes. — Purchases by Federal Reserve Banks from member banks of commodity loans without the member banks' indorsement would not be open-market purchases, because such commodity loans are in the form of ordinary promissory notes or one- name paper. (Informal Ruling of Board, Nov. 1G, 1915.) Discount by Meecantile Firms with Federal Reserve Banks. — Federal Reserve Banks can not discount commodity paper directly for mercantile firms. (Informal Ruling of Board, Feb. 1, 1916.) Finance or Credit Companies, Notes of. — The note of a finance or credit company which is drawn either directly or indirectly to finance some industrial or commercial concern in the transaction of its busi- ness is not eligible for rediscount, even though it may be secured by paper which is itself eligible for rediscount. (Informal Ruling of Board, Feb. 11, 1918.) 248 Bills Receivable as Collateral. — The note of a manufacturer se- cured by his bills receivable is desirable paper, and should certainly not be debarred as a collateral trust note. When issued for the purpose of carrying collateral for a speculative purpose or collateral in the nature of stocks and bonds other than the securities of the United States, the note would not be eligible for rediscount. (Informal Ruling of Board, June 17, 1915.) Collateral Notes. — The fact that paper otherwise eligible has the additional security of collateral or is secured by real estate mortgage, in no way affects its eligibility. (Informal Ruling of Board, Aug. 12, 1915; Opinion of Counsel of Board, May 3, 1917.) No Limitation on Rediscounts. — Under section 5202, Revised Sta- tutes, a National bank may not borrow as bills payable in excess of its capital stock. Under the Federal Reserve Act it may rediscount actual items of paper in its possession to any amount in the discretion of the Federal Reserve Bank of its district. (Informal Ruling of Board, Jan. 29, 1916.) Loans Directly to Individuals. — Federal Reserve Banks do not make loans directly to individuals, but rediscount the paper of mem- ber banks which are all National banks and such State banks as may have joined the Federal Reserve System. (Informal Ruling of Board, May 2, 1916.) Drafts Payable on or Before Certain Date. — Drafts payable "ninety days from date or before on five days after demand (i. e., on five days' notice) by the holder hereof" are negotiable and eligible for discount with a Federal Reserve Bank. (Opinion of Counsel of Board, Feb. 23, 1917.) Notes Payable "On or Before." — 'Notes payable "on or before" a certain date are eligible for rediscount with Federal Reserve Banks provided they conform to the law and regulations of the Board in other respects. (Informal Ruling of Board, June 28, 1916.) Demand Notes. — A demand note or bill is not eligible for rediscount since it is not in terms payable within 90 days, but at the option of the holder may not be presented for payment until after that time. (Informal Ruling of Board, April 19, 1917.) A note payable "on de- mand, and if no demand is made thereon " is eligible for redis- count if the date filled in the blank is not more than 90 days from the date of discount. (Informal Ruling of Board, June 15, 1917.) 249 "Staples" Defined. — "Staples" as used in Reg. A, series of 1917, include manufactured goods as well as raw materials, provided the goods are nonperishable and have a wide ready market. (Informal Ruling of Board, Sept. 7, 1916.) A readily marketable staple may be defined as an article of com- merce, agriculture, or industry of such uses as to make it the subject of constant dealings in ready markets with such frequent quotations of prices as to make (a) the price easily and definitely ascertainable and (b) the staple itself easy to realize upon by sale at any time. (Ruling of Board, July, 1919.) Rate op Interest. — State law governs the rate of interest which National banks may charge. Board approves the rate of rediscount which may be charged by Federal Reserve Banks. (Informal Ruling of Board, Nov. 21, 1916.) Indorsements of Negotiable Paper. — An indorsement of negotiable paper which is made upon a separate piece of paper attached to the original instrument is a valid indorsement of such instrument, and paper so indorsed may be rediscounted by reserve banks. (Opinion of Counsel of Board, July 12, 1916.) Trade Acceptance Providing for Discount if Paid at Maturity. — A trade acceptance which consists of an order to pay a certain amount, which is the amount of the debt minus a discount for prompt pay- ment at maturity, or, if not paid at maturity, to pay a greater amount, which is the amount of the debt without any discount, is an order to pay a sum certain and is negotiable. (Opinion of Counsel of Board, Jan. 26, 1918.) Discount of Paper Secured by or Issued for Purposes of Trading in Bonds or Notes of the United States. — Any member bank may rediscount with its Federal Reserve Bank a note, draft, or bill drawn for the purpose of carrying or trading in bonds or notes of the United States (Opinion of Counsel of Board, Feb. 16, 1917.) ; War Savings Stamps, however, are not included in this category of bonds or notes of the United States. (Opinion of Counsel of Board, June 8, 1918.) § 241. Limitation on Aggregate of Paper of One Borrower Re- discounted for Any One Bank. — The aggregate of such notes, drafts, and bills bearing the signature or indorsement of any one borrower, whether a person, company, firm, or corporation, redis- counted for any one bank shall at no time exceed ten per centum 250 of the unimpaired capital and surplus of said bank; but this re- striction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) Limit of 10 Per Cent, to One Maker or Ixdorser. — If any particular paper presented by a member bank to a Federal Reserve Bank for rediscount, singly or added to the paper of the same makers or in- dorsers which the Federal Reserve Bank has already rediscounted for said member bank, amounts to a total of more than 10 per cent, of the unimpaired capital and surplus of that bank, the Federal Reserve Bank has no authority for such rediscount. (Informal Ruling of Board, April 17, 1916.) Such limitations, however, do not refer to the indorsement of a non-member bank on paper rediscounted with a member bank. (Informal Ruling of Board, May 1, 1918.) Limit of Rediscounts of Commercial or Business Paper. — While a member bank may acquire commercial or business paper such as trade acceptances from the same person in excess of 10 per cent, of its unimpaired capital and surplus (sec. 5200, U. S. R. S.), its Federal Reserve Bank can not rediscount such paper bearing the signature or indorsement of the same person in excess of that amount unless they can be classified also as "bills of exchange drawn against actually existing values." (Opinion of Counsel of Board, Aug. 21, 1918.) Section 13, Federal Reserve Act, does not amend section 5200, United States Revised Statutes. (Opinion of Counsel of Board, May 9, 1916.) Trade Acceptances as Bills Drawn Against Actually Existing Values. — Bills drawn by the seller against the purchaser and accepted before the sale or delivery of the goods should not be treated as bills drawn against actually existing values, since such goods are not in the possession of the drawee either in the original form or in the shape or the proceeds of their sale; except where the goods have passed out of the possession of the drawer and have been placed in storage subject to the control or order of the drawee. (Opinion of Counsel of Board, Aug. 21, 191S.) What a Federal Reserve Bank Mat Discount for Its Member Banks. — The limitations imposed upon the amounts of rediscounts which a Federal Reserve Bank may make for a member bank, whether State or National, are determined by the provisions of the Federal Reserve Act and are not in any way affected by the amendment to Section 5200. In the opinion of the Federal Reserve Board this phrase "bills of 251 exchange drawn against actually existing values" includes, among other kinds of paper "drafts' or bills of exchange secured by shipping documents conveying or securing title to goods shipped" and "bankers' acceptances of the kinds described in Section 13 of the Federal Re- serve Act" even though Section 13 (unlike the amendment to Section 5200) does not expressly state that those two classes of paper are bills of exchange drawn against actually existing values. In the opinion of the Board, however, accepted demand bills on which the drawer is released from liability are not "bills of exchange" within the meaning of Section 13 and must, therefore, be included in deter- mining the limits on the amount of paper any one borrower which a Federal Reserve Bank may rediscount for any member bank. (Ruling of Board, Nov., 1919.) Bills of Exchange Drawn Against Actually Existing Value. — A bill of exchange discounted before acceptance may be said to be drawn against actually existing value, within the meaning of Section 13 of the Federal Reserve Act, when and only when it is accompanied by shipping documents, warehouse receipts, or other papers securing title to the goods sold. An accepted bill of exchange, unaccompanied by shipping documents or other such papers, may be considered as drawn against actually existing value if drawn against the drawee at the time of, or within a reasonable time after, the shipment or delivery of the goods sold. In this latter case there must be reason- able grounds to believe that the goods are in existence in the hands Of the drawee either in their original form or in the shape of the proceeds of their sale. (Opinion of Counsel of Board, Nov. 27, 1916.) Rediscounts of Commercial ok Business Paper for a Member State Bank. — Under the terms of Section 13 no Federal Reserve Bank may properly rediscount for any State member bank the paper of any one borrower in excess of 10 per cent, of the capital and surplus of that member bank. Bills of exchange which are drawn against actually existing values are expressly excepted from this limitation but com- mercial or business paper must be included within it. (Opinion of Counsel of Board, Dec, 1919.) Limitation Upon the Aggregate Rediscounts of the Paper of One Borrower Made for Different Member Banks. — A Federal Reserve Bank may properly decline to discount for a member bank the paper of any one borrower on the ground that the Federal Reserve Bank has theretofore discounted for other member banks what it deems to be a sufficient amount of that particular borrower's paper. (Opinion of Counsel of Board, March, 1920.) 252 § 242. Powers of Reserve Banks — Discount of Acceptances. — Any Federal reserve bank may discount acceptances of the kinds hereinafter described, which have a maturity at the time of dis- count of not more than three months' sight, exclusive of days of grace, and which are indorsed by at least one member bank. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) Discount of Acceptances Indorsed by Member Banks Located in Another District. — In the discount of acceptances by Federal Reserve Banks in accordance with the provisions of Section 13, it is immaterial whether the member bank is located in the district of the Federal Reserve Bank which is making the discount or in any other district, the term "member bank" being broad enough to include member banks wherever located. Such discounts, being made under the provisions of Section 13, are eligible as collateral security for Federal Reserve notes issued under the provisions of Section 16. (Opinion of Counsel of) Board, April 30, 1915.) Member Banks' Acceptances, Status of. — An acceptance which has been purchased by the accepting bank and subsequently rediscounted with its Federal Reserve Bank is not subject to the limitations of Section 5200 of the Revised Statutes. (Opinion of Counsel of Board, July 26, 1917.) Discount of Renewals. — The acceptance business of Federal Re- serve Banks is not restricted "to the original transaction only." "When the first acceptance matures the member bank may renew the acceptance, and there is no reason why a Federal Reserve Bank may not discount such renewed acceptance although a Federal Reserve Bank must not engage in advance to make such discount of a renewal. (Informal Ruling of Board, June 16, 1915.) Conditions Attached to and Affecting Negotiability of Bills of Exchange and Acceptances. — A bill of exchange, in order to be ne- gotiable, must be an unconditional order to pay, on demand or at a fixed or determinable future time, a certain sum of money to order to bearer. If payment is dependent upon the happenings of a cer- tain contingency, the bill is conditional and nonnegotiable. If pay- ment is confined to the proceeds of a particular fund and is not chargeable to the general credit of the drawer, the bill is conditional and nonnegotiable. A general acceptance of a conditional bill or a conditional acceptance 253 of an unconditional bill makes the acceptance a conditional one and destroys its negotiability. There is some doubt in the courts whether the mere reference to a particular consignment of goods makes the bill conditional, some courts stating that it is merely an indication of the fund out of which the drawee is to reimburse himself; other courts holding that it makes the bill conditional because limiting payment to the proceeds of the particular shipment referred to. There is no doubt, however, that a reference, in general terms, on the face of an accepted bill to the fact that it is based on the exportation or importation of goods, would not make it conditional and nonnegotiable, and it would not, therefore, be ineligible for discount under the provisions of Section 13 of the Federal Reserve Act. (Opinion of Counsel of Board, Feb. 2, 1915.) Differential as to Acceptances. — 'There is no objection to a mod- erate differential to apply between the discount by the reserve bank of member bank acceptances and those of non-member institutions. (In- formal Ruling of the Board, Dec. 4, 1916.) § 243. Foreign and Domestic Acceptances by Member Banks. — Any member bank may accept drafts or bills of exchange drawn upon it having not more than six months' sight to run, exclusive of days of grace, which grow out of transactions involving the importation or exportation of goods; or which grow out of trans- actions involving the domestic shipment of goods provided ship- ping documents conveying or securing title are attached at the time of acceptance; or which are secured at the time of accept- ance by a warehouse receipt or other such document conveying or securing title covering readily marketable staples. No mem- ber bank shall accept, whether in a foreign or domestic transaction, for any one person, company, firm, or corporation to an amount equal at any time in the aggregate to more than ten per centum of its paid-up and unimpaired capital stock and surplus, unless the bank is secured either by attached documents or by some other actual security growing out of the same transaction as the ac- ceptance; and 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 : Provided, hoivever, That the Federal Eeserve Board, under such general regulations as it may prescribe, which shall apply to all banks alike regard- 254 less of the amount of capital stock and surplus, may authorize any member bank to accept such bills to an amount not exceed- ing at any time in the aggregate one hundred per centum of its paid-up and unimpaired capital stock and surplus : Provided fur- ther, That the aggregate of acceptances growing out of domestic transactions shall in no event exceed fifty per centum of such capital stock and surplus. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 191G, and further by Sec. 5, Act June 21, 1917; 40 Stat. L., 235.) Acceptances to Finance Future Importations. — Drafts drawn for the purpose of importing goods are properly acceptable by member banks whether or not the sale of the goods has actually been made at the time of acceptance. It is not even necessary that the goods to be sold be identified at the time of acceptance. The accepting bank must be reasonably sure, however, that the proceeds will be used for the purpose specified. (Informal Ruling of Board, June 14, 1917.) Acceptances in Excess of 10 Percent. — The acceptance by a bank of unsecured drafts to an amount exceeding 10 per cent, of the capital and surplus of the bank would constitute a violation of the limitation contained in this section, whether or not the customer of the bank guaranteeing the acceptance is the drawer of the draft, or some other person. (Opinion of Counsel of Board, Dec. 23, 1918.) A member bank may accept either in a domestic or foreign transaction for one person in an amount in excess of 10 per cent, provided the acceptance remains secured throughout the life of the draft. It can not accept in domestic transactions without being secured at the time of accept- ance, but may release the security after acceptance upon the execu- tion of a trust receipt or an agreement by the customer that so much of the proceeds of the sale of the go'ods covered by the security as may be necessary to pay the draft will be deposited with the accepting bank when available and will not be used for other purposes. (Ruling of Board, Jan. 7, 1919.) Bankers' Acceptances Against Open Accounts of Foreign Pur- chasers. — National banks can not accept drafts for the purpose of enabling domestic concerns to extend credits on open account to foreign purchasers. (Opinion of Counsel of Board, Jan. 29, 1919.) Domestic Acceptances — Security and Limitations. — Although Sec- tion 13 of the Federal Reserve Act authorizes member banks to ac- 255 cept drafts drawn in domestic transactions only when secured at the time of acceptance by attached shipping documents or warehouse receipts or other such documents, nevertheless the security may properly be released after acceptance; provided, however, that in any case where the total amount accepted for any one customer exceeds 10 per cent of the capital and surplus of the accepting bank the se- curity can not be released unless some other actual security growing out of the same transaction is substituted therefor. A trust receipt which permits the customer for whom the draft is accepted to obtain control of the goods is not actual security for the purposes of this section of the law. (Opinion of Counsel of Board, Feb. 28, 1919.) Security Covering Acceptances in Excess of 10 Per Cent. Limita- tion of Section 13. — Under the provisions of Section 13 a member bank may accept for any one customer in excess of 10 per cent, of its capital and surplus, provided it is secured by attached documents or by some other actual security growing out of the same transaction as to all acceptances in excess of that 10 per cent, limitation. (Opin- ion of Counsel of Board, April 1, 1919.) Renewal of Drafts Drawn by the Purchaser of Goods and Se- cured at the Time of Original Acceptance by Warehouse Receipts or Bhls of Lading. — As defined in an opinion published on page 380 of the May 1917, Bulletin, a draft drawn by the purchaser of goods is not eligible for acceptance merely because it is secured at the time of acceptance by a bill of lading covering the goods bought. It must be established that the proceeds of the draft are applied to the pay- ment of those goods. No National bank may properly accept the re- newal of a draft drawn by the purchaser of goods and secured at the time of original acceptance by a bill of lading or warehouse receipt unless the renewal acceptance complies with the terms of the law and the rulings and regulations of the Board applicable to the original acceptance. (Opinion of Counsel of Board, Jan., 1920.) Acceptance of Drafts Drawn Abroad and Secured by Foreign Ware- house Receipts. — A draft drawn abroad, payable in the United States in dollars and secured by a warehouse receipt covering readily market- able staples stored in a warehouse located in a foreign country, is eligible for acceptance by a member bank and after acceptance is eligible for rediscount by a Federal Reserve Bank under the provisions of Section 13 of the Federal Reserve Act, but, under the terms of the Board's present regulations, is not eligible for purchase by a Federal Reserve Bank in the open market, under the provisions of Section 14 of the Federal Reserve Act. (Opinion of Counsel of Board, July 25, 1919.) 256 Acceptance of Drafts Secured by Warehouse Receipts. — The Fed- eral Reserve Board is of the opinion that no draft which is secured by a warehouse receipt should properly be considered eligible for acceptance under the terms of Section 13 unless the goods covered by the warehouse receipt are being held in storage pending a reason- ably immediate sale, shipment, or distribution into the process of manufacture. Any draft therefore which is drawn to carry goods for speculative purposes or for any indefinite period of time without the purpose to sell, ship, or manufacture within a reasonable time, should not be considered eligible for acceptance under the provisions of Section 13. Such a draft would be merely a cloak to evade the restrictions of Section 5200 of the Revised Statutes and is not one of the kinds which Congress intended to make eligible for acceptance. (Ruling of Board, Sept., 1919.) Drafts with Documents Attached — Conveyance of Title. — Under the provision of Section 13, which authorizes any member bank to ac- cept drafts based upon domestic shipment of goods, provided shipping documents conveying or securing title are attached, such documents must be made out or indorsed so as to convey or secure title to the accepting bank. (Opinion of Counsel of Board, Jan. 31, 1918.) Bankers' Export Acceptances Defined. — Where a dealer is engaged in purchasing the same character of goods for export and for do- mestic use, a member bank accepting his draft drawn to finance an export transaction should require proper assurances that proceeds of draft are to be used in connection with such export transaction and that the acceptance will be paid out of pro'ceeds of sale of goods exported. (Opinion of Counsel of Board, April 1, 1918.) Drafts with Documents Attached — Definition. — A provision of Section 13 which authorizes any member bank to accept drafts based upon the domestic shipment of goOds, provided shipping documents are "attached," should not be construed so as to require that the documents be physically fastened to the draft. It is sufficient if the accepting bank has possession of the documents at the time of accept- ance. (Opinion of Counsel of Board, Sept. 14, 1917.) Acceptances of Member Banks. — (a) The limitations imposed by Section 5202, Revised Statutes, on the liabilities incurred by any Na- tional bank do not apply to acceptances of such banks. (b) A member bank may legally purchase its own acceptances, but such a transaction is equivalent to a loan or advance to the custoiner for whom the acceptance was made and the liability of such customer 257 becomes subject to the limitations of Section 5200, Revised Statutes. (c) The limitations imposed by Section 5200, Revised Statutes, on the amount of money which may be borrowed by any individual from a member bank do not apply to acceptances of such bank. (d) The power of member banks to accept drafts or bills of ex- change should not be confused with the power to discount the ac- ceptances of others. (Opinion of Counsel of Board, Oct. 27, 1916.) Acceptances by Cobbespondents — When a Dieect Liability. — 'Drafts accepted by fo'reign correspondents at the request, and under the guarantee of a National bank in the United States, should be re- ported as a direct liability of such National bank, and should be treated as subject to the limitations imposed by the Federal Reserve Act on the acceptance power of National banks. (Opinion of Counsel of Board, March 7, 1918.) Teust Receipts as Actuax Secubity foe Acceptance Teansactions. — If an acceptance is secured by shipping documents which are sur- rendered by the acceptor for a trust receipt which permits the pur- chaser of the goods to retain control of the goods, the accepting bank can not be said to be secured "by some other actual security" as pro- vided in Section 13 of the Federal Reserve Act. A trust receipt, how- ever, which does not permit the purchaser to procure control of the goods, may properly be said to be actual security within the meaning of the act. (Opinion of Counsel of Board, Oct. 12, 1917.) "Warehouse Receipts. — Warehouse receipts offered as security for bills accepted by member banks under authority of Section 13 of the Federal Reserve Act must be issued by warehouses which are inde- pendent of the borrower. The corporation issuing such receipt must be organize in good faith as an independent corporation, and its affairs must be administered by duly authorized officers and agents independent of the borrower in order to comply with the rulings of the Board referred to. (Informal Ruling of Board, Nov. 30, 1917.) Agreements to Accept. — While a letter of credit or credit agreement may lawfully be made by a National bank which will extend by its terms for a period exceeding six months, the agreement must not be of such a character as will impose upon the holders of drafts accepted thereunder any obligation to renew such drafts so that the period of acceptance shall exceed six months in duration as to any specified draft. (Informal Ruling of Board, August, 1915.) Identification oe Specific Goons. — It is not necessary that the specific goods covered by an acceptance based upon an import or 17 258 export transaction must be identified at the time of the acceptance. In interpreting the word "involved" in connection with the importation or exportation of goods, upon which an acceptance has been based, it is held that goods may be purchased and shipped subsequent to the time of the first acceptance, provided that there is a definite bona fide contract for the shipment of the goods within a specified and reasonable time. (Informal Ruling of Board, Nov. 9, 1915.) Assurances to Banks. — 'Member banks may best protect themselves in determining whether acceptances are based upon the exportation or importation of goods by stipulating the right at times to ask for sub- stantiation of assurances from a customer. (Informal Ruling of Board, Nov. 9, 1915.) Acceptance by Member Banks op Drafts Drawn in Transactions Involving Export of Goods. — A dealer having drawn drafts accepted by a member bank in an export transaction should be given the option, with the consent of the accepting bank, to secure such drafts in the manner required of those drawn in domestic transactions if he wishes to use the proceeds derived from the sale of the goods exported for purposes other than the payment of such acceptances. (Opinion of Counsel of Board, April 11, 1918.) Acceptances Covebing Domestic Shipments of Goods. — A draft drawn upon a National bank covering current domestic shipments of goods is not eligible for acceptance by such bank under the pro- visions of Section 13 of the Federal Reserve Act unless shipping docu- ments are attached at the time of acceptance. (Opinion of Counsel of Board, April 29, 1919.) Mere Acceptance and Ten Per Cent. Limitation. — The 10 per cent, limitation imposed by Section 5200 of the Revised Statutes is not in- tended to apply to the mere acceptance of a bill of exchange, but the provisions of Section 5200 would apply to the indebtedness arising between the drawer of the bill and the accepting bank in case the drawer fails to furnish funds with which to meet the acceptance at maturity. (Informal Ruling of Board, Jan. 3, 1916.) Acceptances and Stamp Tax. — Drafts, acceptances, overdrafts, and post-dated, checks are not taxable under the Act approved October 22, 1914, as promissory notes. (Ruling of Commissioner of Internal Revenue, April 3, 1916.) Character of Bills That May Be Accepted by Member Banks. — A member bank can not legally accept a bill drawn upon it by an ac- 259 ceptance house for the purpose of reimbursing itself and secured col- laterally by an acceptance based upon the importation or exportation of goods. Such an acceptance does not grow out of a transaction in- volving the importation or exportation of goods, nor does it grow out of a transaction involving the domestic shipment or storage of goods. (Informal Ruling of the Board, December 8, 1916.) Substitution of Security fob Acceptances. — During the life of an acceptance other warehouse receipts may be substituted for those pledged as security for the acceptance. (Informal Ruling of the Board, Dec. 15, 1916.) Demand and Sight Bills. — Demand and sight bills of exchange must be presented for payment by the holder within a reasonable time. Demand and sight bills become due and payable on the date on which they are presented for acceptance. If a member bank holds demand and sight drafts for more than a reasonable time after acceptance, they must be classed as overdue paper and considered in substance as promissory notes of the acceptor subject to the limitations imposed by Section 5200. (Opinion of Coun- sel of Board, Nov. 28, 1916.) Draft Against Shipment by Corporation to Agent. — A member bank may properly accept a draft drawn against the shipment of goods from a corporation to its agent or branch even though no sale of the goods is involved In the transaction. (Informal Ruling of Board, Aug. 24, 1917.) Warehouse Acceptances Covering Goods Under Contract for Sale and Delivery At a Remote Period. — Although a National bank may accept drafts drawn upon It having not more than six months' sight to run which are secured at the time of acceptance by a warehouse receipt conveying or securing title covering readily marketable staples, nevertheless, such an acceptance must not be made subject to any renewals. (Opinion of Counsel of Board, March, 1920.) § 244. Powers of Reserve Banks — Advances to Member Banks. — Any Federal reserve bank may make advances to its member banks on their promissory notes for a period not exceeding fifteen days at rates to be established by such Federal reserve banks, sub- ject to the review and determination of the Federal Reserve Board, provided such promissory notes are secured by such notes, drafts, bills of exchange, or bankers' acceptances as are eligible for re- 260 discount or for purchase by Federal reserve banks under the pro- visions of this Act, or by the deposit or pledge of bonds or notes of the United States. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) Promissory Notes of Member Banks. — Member banks in procuring advances from their Federal Reserve Bank on their promissory note must secure such notes by paper eligible for rediscount or for pur- chase by Federal Reserve Banks or by bonds or notes of the United States. County warrants are not eligible as security. (Opinion of Counsel of Board, Oct. 5, 1916.) Advances to Member Banks. — Eligible paper pledged as security for a promissory note of a member bank on which an advance is being made by a Federal Reserve Bank need not be indorsed by such mem- ber bank if such eligible paper is already in negotiable form. (Opinion of Counsel of Board, Oct. 26, 1916.) Advances on Bonds or Notes of United States. — Any member bank may procure advances from its Federal Reserve Bank on its own prom- issory note secured by a deposit of or pledge of bonds or notes of the United States. (Opinion of Counsel of Board, Feb. 16, 1917.) Farm loan bonds, however, are not obligations of the United States and are not eligible as collateral. (Opinion of Counsel of Board, Nov. 26, 1917.) Renewal of 15-Day Notes of Member Banks. — A Federal Reserve Bank may properly renew the 15-day notes of its member banks if properly secured, provided that the Federal Reserve Bank does not obligate itself in advance to make any such renewal. (Opinion of Counsel of Board, Sept. 13, 1917.) § 245. Limitation on Total Indebtedness of National Bank — Exceptions. — See § 114, page 107, under Part I. § 246. Powers of Board — Dealings of Reserve Banks in Nego- tiable Paper.— The discount and rediscount and the purchase and sale by any Federal reserve bank of any bills receivable and of domestic and foreign bills of exchange, and of acceptances au- thorized by this Act, shall be subject to such restrictions, limita- tions, and regulations as may be imposed by the Federal Reserve 261 Board. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) § 247. Power of National Banks as Insurance Agents. — See § 19, page 28, Part I. § 248. Acceptance by Member Banks of Drafts and Bills of Exchange Drawn to Furnish Dollar Exchange.— Any member bank may accept drafts or bills of exchange drawn upon it having not more than three months' sight to run, exclusive of days of grace, drawn under regulations to be prescribed by the Federal Reserve Board by banks or bankers in foreign countries or depend- encies or insular possessions of the United States for the purpose of furnishing dollar exchange as required by the usages of trade in the respective countries, dependencies, or insular possessions. Such drafts or bills may be acquired by Federal reserve banks in such amounts and subject to such regulations, restrictions, and limitations as may be prescribed by the Federal Eeserve Board: Provided, however, That no member bank shall accept such drafts or bills of exchange referred to [m] this paragraph for any one bank to an amount exceeding in the aggregate ten per centum of the paid-up and unimpaired capital and surplus of the accepting bank unless the draft or bill of exchange is accompanied by docu- ments conveying or securing title or by some other adequate security: Provided further, That no member bank shall accept such drafts or bills in an amount exceeding at any time the aggre- gate of one-half of its paid-up and unimpaired capital and surplus. (Sec. 13, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916.) 262 REGULATION" C OF FEDERAL RESERVE BOARD, SERIES OF 1917. (Superseding Regulation C of 191fi.) ACCEPTANCE BY MEMBER BANKS OF DRAFTS AND BILLS OF EXCHANGE. A. Acceptance of drafts or bills of exchange drawn against domestic or foreign shipments of goods or secured by warehouse receipts covering readily marketable staples. I. Statutory Provisions. Under the provisions of the fifth paragraph of Section 13 of the Federal Reserve Act, as amended by the acts of September 7, 1916, and June 21, 1917, any member bank may accept drafts or bills of exchange drawn upon it, having not more than six months' sight to run, exclusive of days of grace, which grow out of transactions in- volving the importation or exportation of goods; or which grow out of transactions involving the domestic shipment of goods, provided shipping documents conveying or securing title are attached at the time of acceptance; or which are secured at the time of acceptance by a warehouse receipt or other such document conveying or securing the title covering readily marketable staples. This paragraph limits the amount which any bank shall accept for any one person, company, firm, or corporation, whether in a foreign or domestic transaction, to an amount not exceeding at any time, in the aggregate, more than 10 per centum of its paid-up and unimpaired capital stock and surplus. This limit, however, does not apply in any case where the accepting bank is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance. The law also provides that any bank may accept such bills up to an amount not exceeding at any time, in the aggregate, more than one- half of its paid-up and unimpaired capital stock and surplus; or, with the approval of the Federal Reserve Board, up to an amount not ex- ceeding at any time, in the aggregate, more than 100 per centum of its paid-up and unimpaired capital stock and surplus. In no event, however, shall the aggregate amount of acceptances growing out of domestic transactions exceed 50 per centum of such capital stock and surplus. 263 II. Regulations. 1. Under the provisions of the law referred to above the Federal Reserve Board has determined that any member bank, having an un- impaired surplus equal to at least 20 per centum 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, in the aggregate, 100 per centum of its paid-up and unimpaired capital stock and surplus, may file an application for the 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. 2. The Federal Reserve Bank shall report to the Federal Reserve Board upon the standing of the applying bank, stating whether the business and banking conditions prevailing in its district warrant the granting of such applications. 3. The approval of any such application may be rescinded upon 90 days' notice to the bank affected. B. Acceptance of drafts ob bills of exchange drawn fob the pubpose of cbeatinq dollab exchange. I. Statutort Peovisions. Section 13 of the Federal Reserve Act also provides that any mem- ber bank may accept drafts or bills of exchange drawn upon it having not more than three months' sight to run, exclusive of days of grace, drawn, under regulations to be prescribed by the Federal Reserve Board, by banks or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnish- ing dollar exchange as required by the usages of trade in the respec- tive countries, dependencies, or insular possessions. No member banks shall accept such drafts or bills of exchange for any one bank to an amount exceeding in the aggregate 10 per centum of the paid-up and unimpaired capital and surplus of the accepting bank unless the draft or bill of exchange is accompanied by documents conveying or securing title or by some other adequate security. No member bank shall accept such drafts or bills in an amount exceed- ing at any time in the aggregate one-half of its paid-up and unimpaired capital and surplus. This 50 percent limit is separate and distinct from and not included in the limits placed upon the acceptance of drafts and bills of exchange as described under Section A of this regulation. 264 II. Regulations. Any member bank desiring to accept drafts drawn by banks or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange shall first make an application to the Federal Reserve Board setting forth the usages of trade in the respective countries, dependencies or in- sular possessions in which such banks or bankers are located. If the Federal Reserve Board should determine that the usages of trade in such countries, dependencies, or possessions require the granting of the acceptance facilities applied for, it will notify the applying bank of its approval and will also publish in the Federal Reserve Bulletin the name or names of those countries, dependencies, or possessions in which banks or bankers are authorized to draw on member banks whose applications have been approved for the pur- pose of furnishing dollar exchange. The Federal Reserve Board reserves the right to modify or on 90 days' notice to revoke its approval either as to any particular member bank or as to any foreign country or dependency or insular possession of the United States in which it has authorized banks or bankers to draw on member banks for the purpose of furnishing dollar exchange. Membeb Bank Acceptances. — When a member bank purchases its own acceptance before maturity such acceptance need not be included in the aggregate of acceptances authorized by Setion 13. (Opinion of Counsel of Board, July 25, 1916.) Banker's "Dollar Exchange" Acceptances. — The 50 per cent, limit imposed upon the amount of drafts which a member bank may accept for the purpose of furnishing dollar exchange is separate and distinct from and not included in the limits imposed by Section 13 upon the amount of drafts or bills of exchange drawn against the shipment of goods or against warehouse receipts covering readily marketable staples, which a member bank may accept. (Opinion of Counsel of Board, June 15, 1917.) Bankers' Acceptances Without Documents, as "Accommodation." — The acceptance of a draft by a member bank against an acceptance agreement which purports to assign to the bank certain collateral security, but which does not specifically mention any security as as- signed, is an ordinary accommodation acceptance, and is not authorized by law. (Opinion of Counsel of Board, March 22, 1918.) Bankers' Domestic Acceptances, Eligibility of. — A draft drawn by the purchaser of goods against a National bank is not eligible for 265 acceptance by that bank under the provisions of Section 13 of the Federal Reserve Act merely because it is secured by a bill of lading covering the goods bought. (Opinion of Counsel of Board, April 21, 1917.) § 249. Powers of Reserve Banks — Open Market Purchases of Bills of Exchange, Trade Acceptances and Bankers' Acceptances. — Any Federal reserve bank may, under rules and regulations pre- scribed by the Federal Eeserve Board, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers' acceptances and bills of exchange of the kinds and ma- turities of this Act made eligible for rediscount, with or without the indorsement of a member bank. (Sec. 14, Act Dec. 23, 1913.) Regulation B of the Federal Reserve Board, Series of 1917 (Su- perceding Reg. B of 1916.) — Open-market purchases of bills of exchange, trade acceptances, and bankers' acceptances under section 14. I. General Statutory Provisions. Section 14 of the Federal Reserve Act permits Federal Reserve Banks under rules and regulations to be prescribed by the Federal Reserve Board to purchase and sell in the open market from banks, firms, corporations, or individuals, bankers' acceptances and bills of exchange of the kinds and maturities made eligible by the Act for rediscount, with or without the indorsement of a member bank. II. General Character of Bills and Acceptances Eligible. The Federal Reserve Board, exercising its statutory right to regulate the purchase of bills of exchange and acceptances, has determined that a bill of exchange or acceptance, to be eligible for purchase by Federal Reserve Banks under Section 14 — (a) Must not have been issued for carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States. (&) Must not be a bill the proceeds of which have been used or are to be used for permanent or fixed investments of any kind, such as land, buildings, or machinery, or for investments of a merely specula- tive character. 266 (c) Must have been accepted by the drawee prior to purchase by a Federal Reserve Bank unless It is accompanied and secured by ship- ping documents or by a warehouse, terminal, or other similar receipt conveying security title. (d) May be secured by the pledge of goods* or collateral, provided it is otherwise eligible. In addition to the above general requirements, each bill of exchange and trade acceptance purchased under the terms of this regulation must also conform to the more specific requirements set forth under III, and each banker's acceptance must also conform to the more specific requirements set forth under IV. III. Bills of Exchange and Trade Acceptances. (a) Definition. — A bill of exchange, within the meaning of this reg- ulation, is defined as an unconditional order in writing, addressed by one person to another, other than a banker as defined under IV (a), signed by the person giving it, requiring the person to whom it is addressed, to pay, In the United States, at a fixed or determinable fu- ture-time, a sum certain in dollars to the order of a specified person; and a trade acceptance is defined as a bill of exchange drawn by the seller on the purchaser of goods sold, and accepted by such purchaser. (6) Eligibility. — To be eligible for purchase the bill must have arisen out of an actual commercial transaction, domestic or foreign; that is, it must be a bill which has been issued or drawn for agri- cultural, industrial, or commercial purposes or the proceeds of which have been used or are to be used for the purpose of producing, pur- chasing, carrying or marketing goods in one or more of the steps of the process of production, manufacture, or distribution. It must have a maturity at time of purchase of not more than ninety days, exclusive of days of grace. (c) Evidence of eligibility. — A Federal Reserve Bank shall take such steps as it deems necessary to satisfy itself as to the eligibility of the bill offered for purchase, unless it presents prima facie evidence thereof or bears a stamp or certificate affixed by the acceptor or drawer show- ing that it is a trade acceptance. (d) Statements. — Unless indorsed by a member bank, a bill is not eligible for purchase until a satisfactory statement has been fur- nished of the financial condition of one or more of the parties thereto. ♦When used in this regulation the word "goods" shall be construed to include goods, wares, merchandise, or agricultural products, in- cluding live stock. 267 IV. Bankers' Acceptance. (a) Definition. — A banker's acceptance, within the meaning of this regulation, is a bill of exchange of which the acceptor is a bank or trust company, or a firm, person, company, or corporation engaged in the business of granting bankers' acceptance credits. (b) Eligibility. — To be eligible for purchase, the bill which must have a maturity at time of purchase of not more than three months, exclusive of days of grace, must have been drawn under a credit opened for the purpose of conducting, or settling accounts resulting from, a transaction or transactions innvolving — (1) The shipment of goods between the United States and any foreign country, or between the United States and any of its dependencies or insular possessions, or between foreign coun- tries, or (2) The shipment of goods within the United States, provided the bill at the time of its acceptance is accompanied by shipping documents, or (3) The storage within the United States of readily marketable goods, provided the acceptor of the bill is secured by ware- house, terminal, or other similar receipt, or (4) The storage within the United States of goods which have been actually sold, provided the acceptor of the bill is secured by the pledge of such goods; or it must be a bill drawn by a bank or banker in a foreign country or dependency or insular possession of the United States for the pur- pose of furnishing dollar exchange. In this latter case the bank or banker drawing the bill must be in a country, dependency, or posses- sion whose usages of trade have been determined by the Federal Re- serve Board to require the drawing of bills of this character. (c) Evidence of eligibility. — A Federal Reserve Bank must be satis- fied either by reference to the acceptance itself, or otherwise, that it is eligible for, purchase. Satisfactory evidence of eligibility may con- sist of a stamp or certificate affixed by the acceptor, in form satis- factory to the Federal Reserve Bank. No evidence of eligibility is required with respect to a bill accepted by a National bank. (d) Statements. — Bankers' acceptances, other than those accepted or indorsed by member banks, shall be eligible for purchase only after the acceptor has furnished a satisfactory statement of financial condi- tion in form to' be approved by the Federal Reserve Board and has agreed in writing with a Federal Reserve Bank to inform it upon re- quest concerning the transactions underlying such acceptances. Banker's Acceptance Secured by Bti.l or Sale. — A banker's accept- ance drawn for the purpose of purchasing goods secured by a bill 268 of sale of stock in hand is not eligible for purchase by Federal Reserve Banks under the provisions of Regulation B. (Opinion of Counsel of Board, Nov. 4, 1916.) Acceptance by Drawee. — A draft to be eligible as an acceptance must be accepted by the drawee and not by any one else. A draft drawn by a corporation can not be purchased by a Federal Reserve Bank in the open market as a banker's acceptance. For the same reason such a draft is ineligible as a trade acceptance. (Informal Ruling of Board, Feb. 1, 1916.) Single Name Paper. — Any Federal Reserve Bank may, under the provisions of Section 14 of the Federal Reserve Act, purchase accept- ances and bills of exchange of certain kinds and maturities in the open market, but promissory notes as distinguished from bills of ex- change, whether one or more names, are not eligible for such pur- chase. (Opinion of Counsel of Board, Oct. 8, 1915.) Bill of Exchange Drawn by the Drawee. — An instrument in the form of a bill of exchange, drawn by an agent of a corporation upon the corporation itself, is not a bill of] exchange such as is eligible for purchase in the open market by Federal Reserve Banks. (Opinion of Counsel of Board, Aug. 2, 19ft.) Purchase of Acceptances by Branch of Reserve Bank. — The Board has no objections to the purchase of acceptances by a branch of a re- serve bank under the authorization of the reserve bank. (Informal Ruling of Board, Nov. 23, 1916.) Indorsement on Bill of Exchange. — An indorsement on a bill of exchange which expressly exempts the indorser from any responsibility for the validity or genuiness of an accompanying bill of lading or other paper or for the quality, quantity, or delivery of goods covered thereby, does not render the bill non-negotiable or ineligible for pur- chase by a Federal Reserve Bank. (Informal Ruling of Board, May 16, 1917.) § 250. Powers of Reserve Banks — Gold Coin and Bullion in Open Market. — Every Federal reserve bank shall have power: (a) To deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or gold certificates, and to contract for loans of gold coin or bul- lion, giving therefor, when necessary, acceptable security, including 269 the hypothecation of United States bonds or other securities which Federal reserve banks are authorized to hold. (Sec. 14, Act Dec. 23, 1913.) § 251. Powers of Keserve Banks — Notes, Bonds, and Warrants in Open Market. — (b) To buy and sell, at home or abroad, bonds and notes of the United States, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation dis- tricts, such purchases to be made in accordance with rules and regulations prescribed by the Federal Reserve Board. (Sec. 14, Act Dec. 23, 1913.) Regulation E of Federal Reserve Board, Series of 1917 (Super- ceding Reg. E of 1916). — Purchase of Warrants. — The statutory provisions are omitted to prevent repetition. For brevity's sake, the term "warrant" when used in this regulation shall be construed to mean "bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months," and term "municipality" shall be construed to mean "State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage, and reclamation districts." Regulation. 1. Any Federal Reserve Bank may purchase warrants issued by a municipality in anticipation of the collection of taxes or in anticipa- tion of the receipt of assured revenues, provided — (a) They are the general obligations of the entire municipality; it being intended to exclude as ineligible for purchase all such obligations as are payable from "local benefit" and "special assessment" taxes when the municipality at large is not di- rectly or ultimately liable: (&) They are issued in anticipation of taxes or revenues which are due and payable on or before the date of maturity of such warrants; but the Federal Reserve Board may waive this con- 270 dition in specific cases. For the purposes of this regulation taxes shall be considered as due and payable on the last day on which they may be paid without penalty; (c) They are issued by a municipality — (1) Which has been in existence* for a period of ten years; (2) Which for a period of 10 years previous to the purchase has not defaulted* for longer than 15 days in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it. (3) Whose net funded indebtedness* does not exceed 10 per centum of the valuation of its taxable property, to be ascertained by the last preceding valuation of property for the assessment of taxes. II. Except with the approval of the Federal Reserve Board, no Federal Reserve Bank shall purchase and hold an amount in excess of 25 per centum of the total amount of warrants outstanding at any time and issued in conformity with provisions of Section 14 (b) above quoted, and actually sold by a municipality. III. Except with the approval of the Federal Reserve Board, the aggregate amount invested by any Federal Reserve Bank in warrants of all kinds shall not exceed at the time of purchase a sum equal to 10 per centum of the deposits kept by its member banks with such Federal Reserve Bank. IV. Except with the approval of the Federal Reserve Board, the maximum amount which may be invested at the time of purchase by any Federal Reserve Bank In warrants of any single municipality shall be limited to the following percentages of the deposits kept in such Federal Reserve Bank by its member banks: Five per centum of such deposits in warrants of a municipality of 50,000 population or over. Three per centum of such deposits in warrants of a municipality of over 30,000 population, but less than 50,000. ,One per centum of such deposits in warrants of a municipality of over 10,000 population, but less than 30,000. V. Warrants of a municipality of 10,000 population or less shall be purchased only with the special approval of the Board. The population of a municipality shall be determined by the last Federal or State census. Where it can not be exactly determined the board will make special rulings. VI. Opinion of recognized counsel on municipal issues or of the regularly appointed counsel of the municipality as to the lagality of the issue shall be secured and approved in each case by counsel for the Federal Reserve Bank. *See appendix to Regulation E. 271 VII. Any Federal Reserve Bank may purchase from any of Its mem- ber banks warrants of any municipality, indorsed by such member bank, with waiver of demand, notice, and protest, up to an amount not to exceed 10 per centum of the aggregate capital and surplus of such member bank: Provided, however, That such warrants comply with provisions I and III of these regulations, except that where a period of 10 years is mentioned in I (c) hereof a period of 5 years shall be substituted for the purposes of this clause. Appendix to Regulation E. "Net Funded Indebtedness." — The term "net funded indebtedness" is hereby defined to mean the legal gross indebtedness of the munici- pality (including the amount of any school district or other bonds which depend for their redemption upon taxes levied upon property within the municipality) less the aggregate of the following items: (1) The amount of outstanding bonds or other debt obligations made payable from current revenues; (2) The amount of outstanding bonds issued for the purpose of providing the inhabitants of a municipality with public utili- ties, such as waterworks, docks, electric plants, transporta- tion facilities, etc.: Provided, that evidence is submitted showing that the income from such utilities is sufficient for maintenance, for payment of interest on such bonds, and for the accumulation of a sinking fund for their redemption; (3) The amount of outstanding improvement bonds, issued under laws which provide for the levying of special assessments „ against abutting property in amounts sufficient to insure the payment of interest on the bonds and the redemption thereof: Provided, That such bonds are direct obligations of the mu- nicipality and included In the gross indebtedness of the municipality; (4) The total of all sinking funds accumulated for the redemption of the gross indebtedness of the municipality, except sinking funds applicable to bonds just described in (1), (2), and (3) above. "existence" and "nondefault." Warrants will be construed to comply with that part of I (c) of Regulation E relative to term of existence and nondefault, under the following conditions: (1) Warrants issued by or in behalf of any municipality which was, subsequent to the issuance of such warrants, consolidated with or merged into an existing political division which meets the re- quirements of these regulations, will be deemed to be the warrants 272 of such political division: Provided that such warrants were assumed by such political division under statutes and appropriate proceedings the effect of which is to make such warrants general obligations of such assuming political division and payable, either directly or ul- timately, without limitation to a special fund from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (2) Warrants issued by or in behalf of any municipality which was, subsequent to the issuance of such warrants, wholly succeeded by a newly organized political division whose term of existence, added to that of such original political division or of any other political di- vision so succeeded, is equal to a period of 10 years will be deemed to be warrants of such succeeding political division: Provided, That dur- ing such period none of such political divisions shall have defaulted for a period exceeding 15 days in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it: And provided further, That such warrants were assumed by such new political division under statutes and appropriate proceedings the effect of which is to make such warrants general obligations of such assuming political division and payable, either directly or ulti- mately, without limitation to a special fund from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (3) Warrants issued by or in behalf of any municipality which, prior to such issuance, became the successor of one or more, or was formed by the consolidation or merger of two or more, pre-existing political divisions, the term of existence of one or more of which, added to that of such succeeding or consolidated political division, is equal to a period of 10 years, will be deemed to be warrants of a political division which has been in existence for a period of 10 years: Provided, that during such period none of such original, suc- ceeding, or consolidated political divisions shall have defaulted for a period exceeding 15 days in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it. Maturity of Bonds. — That part of Section 14, which provides that "revenue bonds * * * with a maturity from date of purchase of not exceeding six months" may be purchased, contemplates that such bonds might at the date of issue have a maturity of longer than six months. Bonds are eligible for purchase under this sec- tion if, at the time of issue, provision is made for the establishment of a redemption fund which will be sufficient and available for the payment of the bonds at maturity, provided, of course, that at the 273 time of purchase the bonds have not more than six months to run. (Opinion of Counsel of Board, Feb. 9, 1915.) Warrants Issued in Anticipation of Assured Revenue. — 'Federal Reserve Banks may, under the provisions of Section 14 of the Federal Reserve Act, purchase warrants issued in anticipation of the receipt of "assured revenues." The term "revenue" as applied to the income of a State or other political unit, does not include the proceeds of a sale of public securities. Warrants which are issued in anticipation of the receipt of the proceeds of municipal bonds are not, therefore, eligible for purchase under the provisions of this section. (Opinion of Counsel of Board, March 7, 1916.) Eligibility of Warrants. — The Federal Reserve Board may, under the provisions of Regulation E, authorize Federal Reserve Banks to purchase warrants which are issued in anticipation of the collection of taxes and which mature after the date on which 1 such taxes are due but before the penalty attaches for their nonpayment, if experi- ence has demonstrated that the due date produces sufficient taxes to pay the warrants at maturity. (Opinion of Counsel of Board, Dec. 4, 1916.) Purchase of Warrants. — Federal Reserve Banks should not buy non-negotiable warrants. (Informal Ruling of Board, February 13, 1917.) Warrants should only be purchased by Federal Reserve Banks during periods of great ease of money and when rediscounts from member banks and offers of bankers' acceptances are not heavy. (In- formal Ruling of Board, February 20, 1917.) § 252. Powers of Reserve Banks — Bills of Exchange in Open Market. — (c) To purchase from member banks f.nd to sell, with or without its indorsement, bills of exchange arising out of com- mercial transactions, as hereinbefore defined. (Sec. 14, Act Dec. 23, 1913.) Noxmeaiber Trust Company Acceptances. — Acceptances drawn by a manufacturer on and accepted by a trust company not a member of the Federal Reserve System, the proceeds of which are to be used for purchases of raw material and payment for labor where the goods had not been sold and no warehouse receipts or other instruments could be furnished, are held not to be eligible for purchase by a Federal Reserve Bank. (Informal Ruling of Board, Jan. 8, 1916.) 18 274 § 253. Powers of Reserve Banks — Rates of Discount — (d) To establish from time to time, subject to review and determination of the Federal Reserve Board, rates of discount to be charged by the Federal reserve bank for each class of paper, which shall be fixed with a view of accommodating commerce and business and which, subject to the approval, review, and determination of the Federal Reserve Board, may be graduated or progressed on the basis of the amount of the advances and discount accomodations extended by the Federal reserve bank to the borrowing bank. (Sec. 14, Act Dec. 23, 1913, as amended by Act April 13, 1920. Federal Reserve Bank Discount Rates. — Congress not only has the [power to prescribe rates of discount for Federal Reserve Banks, which rates may exceed the statutory rates fixed by the States in which such Federal Reserve Banks are located, but it may also delegate this power to the Federal Reserve Board, or to the Federal Reserve Banks, sub- ject to the approval of such Board. (Opinion of Counsel of Board, Nov. 19, 1914.) Forward Discount Rates. — Federal Reserve Banks may, under the established right to fix discount rates for acceptances or other eligible paper, fix a forward rate; that is, a rate to apply at a future time. Such a rate is calculated to accommodate trade and commerce as re- quired by the Act, and will tend to obviate speculation due to fluc- tuating rates. (Opinion of Counsel of Board, May 18, 1915.) Discount Rates. — The rate of discount charged by a Federal Reserve Bank should be based upon the maturity of the instrument discounted at the time it is discounted and not upon a collateral agreement by which the member bank binds itself to repurchase before maturity. (Opinion of Counsel of Board, July 31, 1916.) Preferential Rates of Discount on Membee Bank Notes. — The Federal Reserve Board may, under the terms of Section 14 of the Federal Reserve Act, approve a preferential rate of discount upon member bank notes secured by certificates of indebtedness of the United States, by Liberty bonds, or by Victory notes. (Opinion of Counsel of Board, Feb., 1920.) § 254. Powers of Reserve Banks — Foreign Accounts, Agencies and Correspondents. — (e) To establish accounts with other Fed- eral reserve banks for exchange purposes and, with the consent 275 or upon the order and direction of the Federal Reserve Board and under regulations to be prescribed by said board, to open and maintain accounts in foreign countries, appoint correspondents, and establish agencies in such countries, whersoever it may be deemed best for the purpose of purchasing, selling, and collecting bills of exchange, and to buy and sell, with or without its indorse- ment, through such correspondents or agencies, bills of exchange (or acceptances) arising out of actual commercial transactions which have not more than ninety days to run, exclusive of days of grace, and which bear the signature of two or more responsible parties, and, with the consent of the Federal Eeserve Board, to open and maintain banking accounts for such foreign corres- pondents or agencies. Whenever any such account has been opened or agency or correspondent has been appointed by a Fed- eral reserve bank, with the consent of or under the order and direction of the Federal Reserve Board, any other Federal re- serve bank may, with the consent and approval of the Federal Reserve Board be permitted to carry on or conduct, through the Federal reserve bank opening such account or appointing such agency or correspondent, any transaction authorized by this sec- tion under rules and regulations to be prescribed by the board. (Sec. 14, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by Sec. 6, Act June 21, 1917; 40 Stat. L., 235.) Foreign Agents. — The Federal Reserve Board has authorized the Federal Reserve Bank of New York to open and maintain banking accounts with and for the following: Bank of England, London, Eng. Sveriges Riksbank, Stockholm, Sweden. Bank of France, Faris, France. Norges Bank, Christiania, Nor- way. Philippine Nat. Bank, Manila, P. I. De Nederlandsche Bank, Amster- dam, Holland. Bank of Italy, Rome, Italy. Banque Nationale de Belgique, Brussels, Belgium. Bank of Japan, Tokio, Japan. Bank of Spain, Madrid, Spain. § 255. Government Deposits in Reserve Banks. — The moneys held in the general fund of the Treasury, except the five per 27G centum fund for the redemption of outstanding National bank notes and the funds provided in this Act for the redemption of Federal reserve notes may, upon the direction of the Secretary of the Treasury, be deposited in Federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the Government or any part thereof may be deposited in such banks, and disburse- ments may be made by checks drawn against such deposits. No public funds of the Philippine Islands, or of the postal sav- ings, or any Government funds, shall be deposited in the conti- nental United States in any bank not belonging to the system es- tablished by this Act: Provided, however, That nothing in this Act shall be construed to deny the right of the Secretary of the Treasury to use member banks as depositories. (Sec. 15, Act Dec. 23, 1913.) Government Depositories. — There is nothing in the Federal Reserve Act which authorizes the Secretary of the Treasury to use State banks which have become member banks as depositories for public moneys generally, though they may be made depositories for postal savings funds. — (Opinion of Counsel of Board, July 8, 1915.) , Deposit of Postal Funds in Nonmembeb Banks. — Section 15 of the Federal Reserve Act, which prohibits the deposit of any Government funds in nonmember banks, operates as a repeal of so much of Section 3847, United States Revised Statutes, as amended by the act of May 27, 1908, as authorizes postmasters to deposit public moneys in State as well as National banks. By an act approved May 18, 1916, postal saving deposits may, under certain conditions, be deposited in non- member banks. (Opinion of Counsel of Board, June 5, 1916.) On Nov. 23, 1915, the Secretary of the Treasury appointed the twelve Federal Reserve Banks depositories and fiscal agents of the Govern- ment, to act as such on and after January 1, 1916. § 256. Federal Reserve Notes. — Federal reserve notes, to be is- sued at the discretion of the Federal Eeserve Board for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable by all National and member 277 banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in gold on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or in gold or lawful money at any Federal reserve bank. (Sec. 16, Act Dec. 23, 1913.) Federal Reserve Notes and Federal Reserve Bank Notes. — Federal Reserve Bank notes are obligations of Federal Reserve Banks and secured by United States bonds. Federal reserve notes are obligations of the United States. No reserve need be maintained against Federal reserve bank notes except the 5 per cent, redemption fund with the Treasurer of the United States. Federal reserve notes, however, are subject to reserves of not less than 40 per cent., in which the 5 per cent, redemption fund is counted as a part. Federal Reserve Bank notes bear the words "national currency" and "Federal Reserve Bank note." Federal reserve notes bear the words "Federal Reserve note." (Informal Ruling of Board, May 12, 1916.) § 257. Collateral Security for Federal Reserve Notes. — Any Federal reserve bank may make application to the local Fed- eral reserve agent for such amount of the Federal reserve notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal reserve agent of collateral in amount equal to the sum of the Federal reserve notes thus applied for and issued pursuant to such ap- plication. The collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under the pro- visions of section thirteen of this Act, or bills of exchange in- dorsed by a member bank of any Federal reserve district and purchased under the provisions of section fourteen of this Act, or bankers' acceptances purchased under the provisions of said section fourteen, or gold or gold certificates ; but in no event shall such collateral security, whether gold, gold certificates, or eligible paper, be less than the amount of Federal reserve notes applied for. The Federal reserve agent shall each day notify the Fed- eral Eeserve Board of all issues and withdrawals of Federal re- serve notes to and by the Federal reserve bank to which he is accredited. The said Federal Reserve Board may at any time call upon a Federal reserve bank for additional security to protect 278 the Federal reserve notes issued to it. (Sec. 1G, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by Sec. 7, Act June 21, 1917; 40 Stat. L., 236.) Pledges of Collateral Security. — Rediscounts held by the Federal Reserve Agent as security for Federal reserve notes, and gold order certificates deposited with a Federal Reserve Agent for the purpose of reducing the liability of a Federal Reserve Eank for its outstanding Federal reserve notes, must be so indorsed as to enable such agent to realize on such securities or to convert such certificates into gold if necessary. (Opinion of Counsel of Board, June 28, 1915.) Government Obligations — Notes and Bills Drawn for Trading in.— Notes, drafts, and bills of exchange drawn for the purpose of carrying or trading in bonds or notes of the United States and rediscounted under the provisions of Section 13 are eligible as collateral security for the issue of Federal Reserve notes. (Opinion of Counsel of Board, May 31, 1917.) § 258. Federal Reserve Notes — Reserve Against, Issue, Ex- change and Redemption. — -Every Federal reserve bank shall main- tain reserves in gold or lawful money of not less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum against its Federal reserve notes in actual circulation: Provided, hoivever, That when the Federal reserve agent holds gold or gold certificates as collateral for Federal re- serve notes issued to the bank such gold or gold certificates shall be counted as part of the gold reserve which such bank is required to maintain against its Federal reserve notes in actual circulation. Notes so paid out shall bear upon their faces a distinctive letter and serial number which shall be assigned by the Federal Reserve Board to each Federal reserve bank. Whenever Federal reserve notes issued through one Federal reserve bank shall be received by another Federal reserve bank, they shall be promptly re- turned for credit or redemption to the Federal reserve bank through winch they were originally issued or, upon direction of such Federal reserve bank, they shall be forwarded direct to the Treasurer of the United States to be retired. No Federal re- serve bank shall pay out notes issued through another under pen- alty of a tax of ten per centum upon the face value of notes 279 so paid out. Notes presented for redemption at the Treasury of the United States shall be paid out of the redemption fund and returned to the Federal reserve banks through which they were originally issued, and thereupon such Federal reserve bank shall, upon demand of the Secretary of the Treasury, reimburse such redemption fund in lawful money or, if such Federal reserve notes have been redeemed by the Treasurer in gold or gold cer- tificates, then such funds shall be reimbursed to the extent deemed necessary by the Secretary of the Treasury in gold or gold cer- tificates, and such Federal reserve bank shall, so long as any of its Federal reserve notes remain outstanding, maintain with the Treasurer in gold an amount sufficient in the judgment of the Secretary to provide for all redemptions to be made by the Treasurer. Federal reserve notes received by the Treasurer other- wise than for redemption may be exchanged for gold out of the redemption fund hereinafter provided and returned to the re- serve bank through which they were originally issued, or they may be returned to such bank for the credit of the United States. Federal reserve notes unfit for circulation shall be returned by the Federal reserve agents to the Comptroller of the Currency for cancellation and destruction. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 236.) Deposit of Federal Reserve Notes for Credit or Redemption. — A Federal Reserve Bank receiving Federal reserve notes issued by an- other Federal Reserve Bank may return such notes to the issuing bank either for redemption or for credit. (Opinion of Counsel of Board, July 30, 1915.) Transportation Charges on Federal Reserve Notes.— -Each Fed- eral Reserve Bank must pay all expenses incident to the issue and retirement of its own Federal reserve notes, including transportation charges on notes returned to the bank of issue from any other Federal Reserve Bank or from the Treasury of the United States where they have been redeemed. (Opinion of Counsel of Board, Jan. 18, 1916.) § 259. Federal Reserve Notes — Redemption Fund — Paramount Lien on Assets of Reserve Bank. — The Federal Reserve Board shall require each Federal reserve bank to maintain on deposit in 280 the Treasury of the United States a sum in gold sufficient in the judgment of the Secretary of the Treasury for the redemption of the Federal reserve notes issued to such bank, but in no event less than five per centum of the total amount of notes issued less the amount of gold or gold certificates held by the Federal re- serve agent as collateral security; but such deposit of gold shall be counted and included as part of the forty per centum reserve hereinbefore required. The board shall have the right, acting through the Federal reserve agent, to grant, in whole or in part, or to reject entirely the application of any Federal reserve bank for Federal reserve notes; but to the extent that such application may be granted the Federal Reserve Board shall, through its local Federal reserve agent, supply Federal reserve notes to the banks so applying, and such bank shall be charged with the amount of notes issued to it and shall pay such rate of interest as may be established by the Federal Eeserve Board on only that amount of such notes which equals the total amount of its outstanding Federal reserve notes less the amount of gold or gold certificates held by the Federal reserve agent as collateral security. Federal reserve notes issued to any such bank shall, upon delivery, to- gether with such notes of such Federal reserve bank as may be issued under section eighteen of this Act upon security of United States two per centum Government bonds, become a first and paramount lien on all the assets of such bank. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) Interest Charges ox Federal Reserve Notes. — The Federal Reserve Board may, in its discretion, fix the amount of interest which shall be charged reserve banks for the use of Federal reserve notes and in this manner force their retirement when redundant and so furnish elasticity. (Informal Ruling of Board, April 28, 1916.) § 260. Reduction of Outstanding Federal Eeserve Notes. — Any Federal reserve bank may at any time reduce its liability for oustanding Federal reserve notes by depositing with the Fed- eral reserve agent its Federal reserve notes, gold, gold certificates, or lawful money of the United States. Federal reserve notes so 281 deposited shall not be reissued, except upon compliance with the conditions of an original issue. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) Deposit of Silver Certificates. — Inasmuch, as silver certificates are now to all intents and purposes lawful money they may be received by Federal Reserve Agents when offered by Federal Reserve Banks to re- duce liability for Federal reserve notes outstanding. (Informal Ruling of Board, Jan. 12, 1915.) § 261. Exchange of Federal Reserve Notes for Gold, Gold Cer- tificates or Lawful Money.— The Federal reserve agent shall hold such gold, gold certificates, or lawful money available exclusively for exchange for the outstanding Federal reserve notes when of- fered by the reserve bank of which he is a director. Upon the re- quest of the Secretary of the Treasury the Federal Eeserve Board shall require the Federal reserve agent to transmit to the Treasurer of the United States so much of the gold held by him as collateral security for Federal reserve notes as may be required for the ex- clusive purpose of the redemption of such Federal reserve notes, but such gold when deposited with the Treasurer shall be counted and considered as if collateral security on deposit with the Fed- eral reserve agent. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) Deposits of Gold oe Lawful Moxey by a Federal Reserve Age^t With the Federal Reserve Board. — Gold, gold certificates, or lawful money deposited by the Federal Reserve Bank with its Federal Reserve Agent for the purpose of reducing its liability for outstanding notes may legally be deposited by such agent with the Federal Reserve Board. (Opinion of Counsel of Board, June 23» 1915.) § 262. Federal Reserve Notes — Substitution of Collateral to — Retirement of — Liability of Federal Reserve Agent for. — Any Federal reserve bank may at its discretion withdraw collateral deposited with the local Federal reserve agent for the protection of its Federal reserve notes issued to it and shall at the same time substitute therefor other collateral of equal amount with the approval of the Federal reserve agent under regulations to 282 be prescribed by the Federal Reserve Board. Any Federal re- serve bank may retire any of its Federal reserve notes by deposit- ing them with the Federal reserve agent or with the Treasurer of the United States, and such Federal reserve bank shall there- upon be entitled to receive back the collateral deposited with the Federal reserve agent for the security of such notes. Federal reserve banks shall not be required to maintain the reserve or the redemption fund heretofore provided for against Federal reserve notes which have been retired. Federal reserve notes so de- posited shall not be reissued except upon compliance with the conditions of an original issue. All Federal reserve notes and all gold, gold certificates, and lawful money issued to or deposited with any Federal reserve agent under the provisions of the Federal reserve Act shall here- after be held for such agent, under such rules and regulations as the Federal Reserve Board may prescribe, in the joint cus- tody of himself and the Federal reserve bank to which he is ac- credited. Such agent and such Federal reserve bank shall be jointly liable for the safe-keeping of such Federal reserve notes, gold, gold certificates, and lawful money. Nothing herein con- tained, however, shall be construed to prohibit a Federal reserve agent from depositing gold or gold certificates with the Federal Reserve Board, to be held b) r such board subject to his order, or with the Treasurer of the United States for the purposes au- thorized by law. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 7, Act June 21, 1917; 40 Stat. L., 237.) § 263. Printing of Federal Reserve Notes. — In order to furnish suitable notes for circulation as Federal reserve notes, the Comp- troller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom and numbered such quantities of such notes of the denominations of $5, $10, $20, $50, $100, $500, $1,000, $5,000, $10,000 as may be required to supply the Federal reserve banks. Such notes shall be in form and tender as directed by the Secretary of the Treasury under the provisions 283 of this Act and shall bear the distinctive numbers of the several Federal reserve banks through which they are issued. (Sec. 16, Act Dec. 23, 1913, as amended by Sec. 3, Act Sept. 26, 1918; 40 Stat. L., 969.) § 264. Reserve Banks as Collecting Agents for Member Banks. — Every Federal reserve bank shall receive on deposit at par from member banks or from Federal reserve banks checks and drafts drawn upon any of its depositors, and when remitted by a Federal reserve bank, checks and drafts drawn by any depositor in any other Federal reserve bank or member bank upon funds to the credit of said depositor in said reserve bank or member bank. Nothing herein contained shall be construed as prohibiting a mem- ber bank from charging its actual expense incurred in collecting and remitting funds, or for exchange sold to its patrons. The Federal Eeserve Board shall, by rule, fix the charges to be col- lected by the member banks from its patrons whose checks are cleared through the Federal reserve bank and the charge which may be imposed for the service of clearing or collection rendered by the Federal reserve bank. (Sec. 16, Act Dec. 23, 1913.) Method of Collecting Bill of Lading Dbafts. — 'Drafts secured by bill of lading forwarded to a reserve bank for collection by one of its member banks may be credited upon receipt and wben paid the sending bank may be charged interest at the published rate for the time the draft is outstanding plus the actual cost of collection. (In- formal Ruling of Board, Dec. 29, 1916.) § 265. Transfer of Funds Among Reserve Banks — Board As Clearing House for Reserve Banks — Reserve Banks As Clearing Houses for Member Banks. — The Federal Eeserve Board shall make and promulgate from time to time regulations governing the transfer of funds and charges therefor 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. (Sec. 16, Act Dec. 23, 1913.) 284 REGULATION J OF THE FEDERAL RESERVE BOARD, SERIES OF 1917. (Superseding Regulation J of 1916.) CHECK CLEARING AND COLLECTION. Section 16 of the Federal Reserve Act authorizes the Federal Re- serve Board to require each Federal Reserve Bank to exercise the functions 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 ex- change 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 non- member bank or trust company maintains with its Federal Reserve Bank a balance sufficient to offset the items in transit held for its ac- count by the Federal Reserve Bank. In pursuance of the authority vested in it under these provisions of law, the Federal Reserve Board, desiring to afford both to the public and to the various banks of the country a direct, expeditious, and economical system of check collection and settlement of balances, has arranged to have each Federal Reserve Bank exercise the functions of a clearing house for such of its member banks as desire to avail themselves of its privileges and for such State banks and trust com- panies as may maintain with the Federal Reserve Bank a balance sufficient to qualify it as a clearing member under the provisions of Section 13. Each Federal Reserve Bank shall exercise the functions of a clear- ing house under the following general terms and conditions: (1) Each Federal Reserve Bank will receive at par from its mem- ber banks and from nonmember banks in its district which have become clearing members, checks* drawn on all member and clearing member banks and on all other nonmember banks which agree to remit at par through the Federal Reserve Bank of their district. (2) Each Federal Reserve Bank will receive at par from other Federal Reserve Banks and will receive at par from all member and clearing member banks, regardless of their location, for the credit of *A check is generally defined as a draft or order upon a bank or or- der 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. 285 their accounts with their respective Federal Reserve Banks, checks drawn upon all member and clearing member banks of its district and upon all other nonmember banks of its district whose checks can be collected at par by the Federal Reserve Bank. The Federal Re- serve Banks will prepare a par list of all nonmember banks, to be revised from time to time, which will be furnished to member and clearing member 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 actually collected, in accordance with the best practice now pre- vailing. (4) Checks received by a Federal Reserve Bank on its member or clearing member 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. (5) In the selection of collecting agents for handling checks on non- member banks, which have not become clearing members, member banks will be given the preference. (6) Under this plan each Federal Reserve Bank will receive at par from its member and clearing member banks checks on all mem- ber and clearing member banks and on all other nonmember banks whose checks can be collected at par by any Federal Reserve Bank. Member and clearing 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, hoicever, That a member or clearing member bank may ship currency or specie 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.* (7) Section 19 of the Federal Reserve Act provides that — i 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, hoicever, That no bank shall at any * In accordance with instructions issued by the Federal Reserve Board on April 24, 1917, the various Federal Reserve Banks have is- sued circulars setting forth the conditions under which their respec- tive member banks may draw drafts on their Reserve Bank accounts payable with or through any other Federal Reserve Bank. 286 time make new loans or shall pay any dividends unless and until the total balance required by law is fully restored. It is manifest that items in process of collection can not lawfully be counted as part of the minimum reserve balance to be carried by a member bank with its Federal Reserve Bank. Therefore, should a member bank draw against such items 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. In as much as it is essential that the law in respect to the mainten- ance by member banks of the required minimum reserve balance shall be strictly complied with, the Federal Reserve Board, under authority vested in it by Section 19 of the Act, hereby prescribes as the penalty for any deficiency in reserves a sum equivalent to an interest charge on the amount of the deficiency of 2 per cent, per annum above the ninety day discount rate of the Federal Reserve Bank of the district in which the member bank is located. The Board reserves the right to increase this penalty whenever conditions re- quire it. For the purpose of keeping their reserve balances Intact member banks may at all times have recourse to the rediscount facilities offered by their respective Federal Reserve Banks. (8) 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 bank to enable it to determine the time at which any item sent its Federal Reserve Bank will be counted as reserve and become available to meet any checks drawn. (9) In handling items for member and clearing member banks, a Federal Reserve Bank will act as agent only. The Board will require that each member and clearing member bank authorize its Federal Reserve Bank to send checks for collection to banks 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 sent forth by the Federal Reserve Banks in their letters of instruction to their member and clearing member 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 non- member banks which are clearing through the Federal Reserve Bank. (10) The cost of collecting and clearing checks must necessarily be 287 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. Meaning of Par Collection. — It should be sufficiently clear that checks, even though collectible at par and given immediate credit entry on the books of the depositing bank, are not funds immediately available to be drawn against, and, of course, this applies with equal force to each deposit account with a member bank. Thus, if a customer deposits with his bank a number of checks, some of which it will take two, four, or six days to collect through a Federal Reserve Bank, it is obvious that he is entitled only to be given credit deferred by the length of time it takes to collect the items, or, if he asks for im- mediate credit in available funds, he should pay something for the privilege. However, as was heretofore stated, "The Federal Reserve Board has not yet laid down any rule as to what charges a bank may make against its customers, but there is no intention at all that a member bank shall collect its customers' checks at a loss to itself; that is to say, without some fee to cover cost of collection." The expression printed upon some checks, "Collectible at par through Federal Reserve Bank," means that the check is collectible at full face value through the Federal Reserve Bank, but if it is desired to use a check as cash the element of time in transit must be paid for. Under the principles above enunciated, a member bank will be authorized to charge its customers the amount per item charged by the Federal Reserve Bank for collecting their checks, say iy 2 or 2 cents per item, plus an interest charge if funds are advanced before they have been collected. By providing that the Federal Reserve Banks shall act as clearing houses for all member banks, the Act in effect establishes 12 local points at which all checks can be centered and collected, and it is fully expected thereby to create a more efficient machine for check collections than has ever existed in the country before. The direct routing of items which it is expected to establish in connection with this plan, should very considerably reduce time in transit, and last, but not least, the actual cost of the service rendered should be less to the banks, and, hence, to their customers. (Statement of Board, July, 191G.) Collection of Items on Non-member Banks. — Understanding of the Board that agreement of a member bank to collect items on nonmem- 288 ber banks is voluntary and tbat upon due notice to the Federal Re- serve Bank arrangements would no doubt be made to handle such items in some other way. The Board expects a member bank to pay items drawn against it when remitted by a Federal Reserve Bank. (Informal Ruling of Board, July 28, 1916.) Gold Settlement Fund. — Under the power conferred upon the Board to exercise the functions of a clearing house for the reserve banks, provision has been made for the establishment of a gold clearance fund at Washington, D. C, for the purpose of effecting with as little delay and cost as possible settlements between reserve banks. Gold Settlement Fund as Reserve. — Gold kept in a clearing fund under the control of the Board may be counted by reserve banks de- positing such gold as part of their reserve against liabilities other than Federal reserve notes. The gold clearing fund may be kept by the board in the Treasury or one of the subtreasuries of the United States. (Opinion of Counsel of Board, April 19, 1915.) Negotiability of Bills and Notes Made Payable "in Exchange." — A bill or note made payable "in exchange" is not payable "in money," and is, therefore, not negotiable. Federal Reserve Banks can not be required to receive checks and drafts drawn in this manner for collec- tion or credit. (Opinion of Counsel of Board, Aug. 10, 1916.) § 266. Deposits of Gold Coin and Gold Certificates with Treas- urer by Federal Reserve Banks and Agents. — That the Secretary of the Treasury is hereby authorized and directed to receive de- posits of gold coin or of gold certificates with the Treasurer or any assistant treasurer of the United States when tendered by any Federal reserve bank or Federal reserve agent for credit to its or his account with the Federal Eeserve Board. The Secretary shall prescribe by regulation the form of receipt to be issued by the Treasurer or Assistant Treasurer to the Federal reserve bank or Federal reserve agent making the deposit, and a duplicate of such receipt shall be delivered to the Federal Eeserve Board by the Treasurer at "Washington upon proper advices from any as- sistant treasurer that such deposit has been made. Deposits so made shall be held subject to the orders of the Federal Eeserve Board and shall be payable in gold coin or gold certificates on the order of the Federal Eeserve Board to any Federal reserve 289 bank or Federal reserve agent at the Treasury or at the Subtreas- nry of the United States nearest the place of business of such Federal reserve bank or such Federal reserve agent: Provided, however, That any expense incurred in shipping gold to or from the Treasury or Subtreasuries in order to make such payments, or as a result of making such payments, shall be paid by the Fed- eral Eeserve Board and assessed against the Federal reserve banks. The order used by the Federal Reserve Board in making such payments shall be signed by the governor or vice governor, or such other officers or members as the board may by regulation prescribe. The form of such order shall be approved by the Sec- retary of the Treasury. The expenses necessarily incurred in carrying out these pro- visions, including the cost of the certificates or receipts issued for deposits received, and all expenses incident to the handling of such deposits shall be paid by the Federal Reserve Board and included in its assessments against the several Federal reserve banks. Gold deposits standing to the credit of any Federal reserve bank with the Federal Reserve Board shall, at the option of said bank, be counted as part of the lawful reserve which it is re- quired to maintain against outstanding Federal reserve notes, or as a part of the reserve it is required to maintain against deposits. Nothing in this section 6hall be construed as amending section six of the Act of March fourteenth, nineteen hundred, as amended by the Acts of March fourth, nineteen hundred and seven, March second, nineteen hundred and eleven, and June twelfth, nineteen hundred and sixteen, nor shall the provisions of this section be construed to apply to the deposits made or to the receipts or cer- tificates issued under those Acts. (Sec. 8, Act June 21, 1917; 40 Stat. L., 238; by which the above provisions were added to Sec. 1G of the Act Dec. 23, 1913.) § 267. Deposit of Bonds by National Banks with Treasurer — Eepeal of Minimum Deposit Requirements.— See § 54, page 74, Part I. 19 290 § 268. Retirement of National Bank Notes — Sale of Bonds to Reserve Banks.— See § 55, page 74, Part I. § 269. Federal Reserve Bank Notes — Similarity to National Bank Notes. — 'The Federal reserve banks purchasing such bonds shall be permitted to take out an amount of circulating notes equal to the par value of such bonds. Upon the deposit with the Treasurer of the United States of bonds so purchased, or any bonds with the circulating privilege acquired under section four of this Act, any Federal reserve bank making such deposit in the manner provided by existing law, shall be entitled to receive from the Comptroller of the Currency circu- lating notes in blank, registered and countersigned as provided by law, equal in amount to the par value of the bonds so deposited. Such notes shall be the obligations of the Federal reserve bank procuring the same, and shall be in form prescribed by the Secre- tary of the Treasury, and ito the same tenor and affect as National bank notes now provided by law. They shall be issued and re- deemed under the same terms and conditions as National bank notes except that they shall not be limited to the amount of the capital stock of the Federal reserve bank issuing them. (Sec. 18, Act Dec. 23, 1913.) For distinction between Federal Reserve Bank notes and Federal reserve notes see Informal Ruling of Board, May 12, 1916, under Sec. 16 of the Act, $256. § 270. Exchange by Reserve Banks of Two Per Cent. Bonds for Three Per Cent. Bonds and One Year Notes. — Upon application of any Federal reserve bank, approved by the Federal Eeserve Board, the Secretary of the Treasury may issue, in exchange for United States two per centum gold bonds bearing the circulation privilege, but against which no circulation is outstanding, one- year gold notes of the United States without the circulation priv- ilege, to an amount not to exceed one-half of the two per centum bonds so tendered for exchange, and thirty-year three per centum gold bonds without the circulation privilege for the remainder of the two per centum bonds so tendered: Provided, That at the time 291 of such exchange the Federal reserve bank obtaining such one-year gold notes shall enter into an obligation with the Secretary of the Treasury binding itself to purchase from the United States for gold at the maturity of such one-year notes, an amount equal to those delivered in exchange for such bonds, if so requested by the Secretary, and at each maturity of one-year notes so purchased by such Federal reserve bank, to purchase from the United States such an amount of one-year notes as the Secretary may tender to such bank, not to exceed the amount issued to such bank in the first instance, in exchange for the two per centum United States gold bonds; said obligation to purchase at maturity such notes shall continue in force for a period not to exceed thirty years. (Sec. 18, Act Dec. 23, 1913.) Exchange of 2 Per Cent. U. S. Bonds. — That part of Section 18 which provides that the Secretary of the Treasury may, upon application of any Federal Reserve Bank approved by the Board, issue in exchange for 2 per cent, bonds one-year gold notes and 3 per cent, bonds, the gold notes not to exceed one-half of the 2 per cent, bonds offered for exchange, becomes effective at once and not after two years from the passage of the Act, as is provided for other paragraphs of Section 18. (Opinion of Counsel of Board, Jan. 4, 1915.) One-Yeae Gold Notes. — The obligation of a Federal Reserve Bank to renew one-year gold notes which it has received in exchange for United States 2 per cent, bonds can not be transferred to another Federal Reserve Bank. The obligation to renew is binding upon the original bank, at the option of the Secretary of the Treasury, for a period not to exceed 30 years, though such bank may enter into a contract with another corporation or individual to buy such renewal notes from it when issued. Nothing in the Act prevents the sale of one-year notes to a purchaser, who will be entitled to receive payment from the Government at maturity. (Opinion of Counsel of Board, March 10, 1916.) § 271. Issue of One Year Three Per Cent. Gold Notes and Thirty Year Three Per Cent. Gold Bonds. — For the purpose of making the exchange herein provided for, the Secretary of the Treasury is authorized to issue at par Treasury notes in coupon or registered form as he may prescribe in denominations of one hundred dollars, or any multiple thereof, bearing interest at the rate of three per 292 centum per annum, payable quarterly, such Treasury notes to be payable not more than one year from the date of their issue in gold coin of the present standard value, and to be exempt as to principal and interest from the payment of all taxes and duties of the United States except as provided by this Act, as well as from taxes in any form by or under State, municipal, or local authori- ties. And for the same purpose, the Secretary is authorized and empowered to issue United States gold bonds at par, bearing three per centum interest payable thirty years from date of issue, such bonds to be of the same general tenor and effect and to be issued under the same general terms and conditions as the United States three per centum bonds without the circulation privilege now is- sued and outstanding. (Sec. 18, Act Dec. 23, 1913.) § 272. Exchange of One Year Notes for Thirty Year Bonds. — Upon application of any Federal reserve bank, approved by the Federal Eeserve Board, the Secretary may issue at par 6uch three per centum bonds in exchange for the one-year gold notes herein provided for. (Sec. 18, Act approved Dec. 23, 1913.) § 273. Definition of Demand and Time Deposits. — Demand de- posits within the meaning of this Act shall comprise all deposits payable within thirty days, and time deposits shall comprise all deposits payable after thirty days, and all savings accounts and certificates of deposit which are subject to not less than thirty days' notice before payment, and all postal savings deposits. (Sec. 19, Act Dec. 23, 1913, as amended by Sec. 10, Act approved June 21, 1917.) Regulation D of Federal Reserve Board, Series of 1917: — Time Deposit's and Savings Accounts. — The statutory provisions are omitted to save repetition. TIME DEPOSITS, OPEN ACCOUNTS. The tennl "time deposits, open accounts" shall be held to include all accounts, not evidenced by certificates of deposit or savings pass books, in respect to which a written contract is entered into with the depositor at the time the deposit is made that neither the whole nor 293 any part of such deposit may be withdrawn by check or otherwise, except on a given date or on written notice given by the depositor a certain specified number of days in advance, in no case less than 30 days. SAVINGS ACCOUNTS. The term "savings accounts" shall be held to include those accounts of the bank in respect to which, by its printed regulations, accepted by the depositor at the time the account is opened — (a) The pass book, certificate, or other similar form of receipt must be presented to the bank whenever a deposit or withdrawal is made, and (&) The depositor may at any time be required by the bank to give notice of an intended withdrawal not less than 30 days before a withdrawal is made. TIME CEETIFICATES OF DEPOSIT. A "time certificate of deposit" is defined as an instrument evidencing the deposit with a bank, either with or without interest, of a certain sum specified on the face of the certificate payable in whole or in part to the depositor or on his order — (a) On a certain date, specified on the certificate, not less than 30 days after the date of the deposit, or (6) After the lapse of a certain specified time subsequent to the date of the certificate, in no case less than 30 days, or (c) Upon written notice given a certain specified number of days, not less than 30 days before the date of repayment, and (d) In all cases only upon presentation of the certificate at each withdrawal for proper indorsement or surrender. Time Certificates of Deposit Which Become Payable Within Thiety Days. — A certificate of deposit which, though originally pay- able in 60 or 90 days, and which, though originally a time deposit within the meaning of the regulations of the Federal Reserve Board, becomes a demand deposit when it becomes payable within 30 days. (Opinion of Counsel of Board, June 7, 1919.) Right of National Banks to Advertise Savings Accounts. — The Federal law relating to the establishment and operation of National banks is superior to and controlling over a State law which might otherwise apply to or govern the operations of National banks. Con- gress having conferred on National banks the power to pay Interest on time deposits, it is evident that the right to advertise and solicit such savings accounts is a necessary incident to the exercise of that 294 power, and that no State law can interfere with its exercise. (Opinion of Counsel of Board, Feb. 24, 1915.), Savings Accounts as Time Deposits. — Savings accounts opened un- der regulations which do not require the presentation of the pass book on withdrawal of deposits, but which merely authorize the member bank to require the presentation of such book, are not savings ac- counts within the definition of that term in Regulation D, series of 1916. (Opinion of Counsel of Board, Oct. 5, 1916.) Time Deposits — Open Accounts. — In order to consider an open ac- count a time deposit under the provisions of Regulation D, the bank in which the deposit is made must require 30 days' notice of an in- tended withdrawal. (Opinion of Counsel of Board, Nov. 13, 1916.) Reserve Against Time Deposits. — If depositor is led to believe, by advertisement or printed rule, that savings deposits are not subject to the enforcement of 60-day notice before payment, then such de- posits take the higher rate of reserve. Notice may be waived as a matter of courtesy under the definite understanding that it may be applied at any time. (Informal Ruling of Board, July, 1915.) § 274. Reserves Carried by Member Banks Not in Reserve or Central Reserve Cities. — Every bank, banking association, or trust company which is or which becomes a member of any Fed- eral reserve bank shall establish and maintain reserve balances with its Federal reserve bank as follows: (a) If not in a reserve or central reserve city, as now or here- after defined, it shall hold and maintain with the Federal re- serve bank of its district an actual net balance equal to not less than seven per centum of the aggregate amount of its demand deposits and three per centum of its time deposits. (Sec. 19, Act Dec. 23, 1913, as amended by Sec. 10, Act June 21, 1917; 40 Stat. L., 239.) For form to be used in the computation of reserve see note to § 280, page 298. Member banks are now permitted to carry with their Federal Re- serve Bank the reserve heretofore required to be kept in their own vaults. Section 7 of the act April 24, 1917, provides that no reserve need be kept against deposits of public moneys by the United States 295 in designated depositaries. This does not include postal savings deposits. Five Per Cent Fund as Reserve. — The 5 per cent, redemption fund deposited with the Treasurer of the United States can not be counted as part of lawful reserve. (See Section 20 of act, page 300.) § 275. Reserves Carried by Member Banks Located in Reserve (b) Cities. — If in a reserve city, as now or hereafter defined, it shall hold and maintain with the Federal reserve bank of its dis- trict an actual net balance equal to not less than ten per centum of the aggregate amount of its demand deposits and three per centum of its time deposits: Provided, however, That if located in the outlying districts of a reserve city or in territory added to such a city by the extension of its corporate charter, it may, upon the affirmative vote of five members of the Federal Eeserve Board, hold and maintain the reserve balances specified in paragraph (a) hereof. (Sec. 19 of Act Dec. 23, 1913, as amended by Sec. 10, Act June 21, 1917, and further by Sec. 4, Act Sept. 26, 1918; 40 Stat. L., 970.) For form to be used in the computation of reserve see note to §2S0, page 298. Reserve of Banks in Outlying Districts of Reserve and Central Reserve Cities. — The fact that a bank is located in what may have been declared by the Federal Reserve Board to be an outlying district of a central reserve city does not of itself entitle the bank to carry a lower reserve, but the Board should act on each case and determine what amount of reserve should be carried against demand deposits by each bank so located. (Opinion of Counsel of Board, October 19, 1918.) § 276. Reserves Carried by Member Banks Located in Central Reserve Cities. — (c) If in a central reserve city, as now or here- after defined, it shall hold and maintain with the Federal reserve bank of its district an actual net balance equal to not less than thirteen per centum of the aggregate amount of its demand de- posits and three per centum of its time deposits: Provided, hoiv- ever, That if located in the outlying districts of a central reserve city or in territory added to such city by the extension of its 296 corporate charter, it may, upon the affirmative vote of five mem- bers of the Federal Reserve Board, hold and maintain the reserve balances specified in paragraphs (a) or (b) thereof. (Sec. 19, Act Dec. 23, 1913, as amended by Sec. 10, Act June 21, 1917, and further by Sec. 4, Act Sept. 26, 1918; 40 Stat. L., 970.) For form to be used in the computation of reserve see note to $280, page 298. § 277. Eligible Paper as Beserve.— That part of section 19 of the Federal Reserve Act, as amended by Act Aug. 15, 1914, which provided that any Federal reserve bank may receive from the member banks as reserves not exceeding one-half of each install- ment, eligible paper as described in section 13, properly indorsed and acceptable to the said reserve bank, is repealed. (Act June 21, 1917.) § 278. Limit of Deposit of Member with Non-Member Bank — Member as Agent of Non-Member Bank in Discounting with Reserve Banks.— No member bank shall keep on deposit with any State bank or trust company which is not a member bank a sum in excess of ten per centum of its own paid-up capital and sur- plus. No member bank shall act as a medium or agent of a non- member bank in applying for or receiving discounts from a Federal reserve bank under the provisions of this Act, except by permission of the Federal Reserve Board. (Sec. 19, Act Dec. 23, 1913, as amended by Act Aug. 15, 1914, and further by Sec. 10, Act June 21, 1917; 40 Stat. L., 239.) State Bank Members. — This section applies also to State bank members. See Regulation H of Federal Reserve Board, Series of 1916, under Section 9 of the Act regarding membership of State banks and trust companies. Excessive Loans. — Law provides that "all deposits of a National bank with nonmember banks which are in excess of 10 per cent, of its Capital and surplus are to be reported as excessive loans." Comp- troller has no choice but to enforce this requirement. (Informal Ruling of Board, June 16, 1915.) 297 § 279. Withdrawal of Required Eeserves— Penalties.— The re- quired 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 Eeserve 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 un- less and until the total balance required by law is fully restored. (Sec. 19, Act Dec. 23, 1913, as amended by Act Aug. 15, 1914, and further by Sec. 10, Act June 21, 1917; 40 Stat. L., 239.) § 280. Calculation of Reserves. — In estimating the balances re- quired by this Act, the net difference of amounts due to and from other banks shall be taken as the basis for ascertaining the de- posits against which required balances with Federal reserve banks shall be determined. (Sec. 19, Act Dec. 23, 1913, as amended by Act Aug. 15, 1914, and further by Sec. 10, Act June 21, 1917; 40 Stat. L., 240.) Reserve of Bank With Branches. — Reserve to be maintained by a bank having branches should be based upon the balance of both the parent bank and the branches. Capital-stock subscriptions and dividends should be treated in the same manner. If, as a matter of bookkeeping, banks desire to carry separate checking accounts, there is no objection. (Informal Ruling of Board, May 22, 1915.) Computation of Reserves. — Under Section 19 as amended banks are permitted to count as reserve only actual balances carried with a Federal Reserve Bank. In estimating the amount against which reserve must be carried they are permitted to deduct balances due from banks from balances due to banks and to carry reserve only against the net balance due to banks and against other deposit liabilities. (Page 614, Aug., 1917, Bulletin.) Government Deposits, Reserves Against. — Under the provisions of Section 7 of the act approved April 24, 1917, National banks and member banks are not required to maintain reserves against Govern- ment deposits other than postal savings deposits, regardless of the source of the funds deposited. This section, however, does not apply to Federal Reserve Banks. (Opinion of Counsel of Board, May 5, 1917.) 298 Reserves, Deductions in Determining. — Member banks in deter- mining the amount against which reserves must be carried, may deduct all Government deposits, except postal savings deposits, from the amount of gross demand deposits, and may deduct from the amount of balances due to other banks the amount of balances due from other banks, and may include in the amount due from banks checks drawn on banks located in the same place and exchanges for clearing houses. The law, however, does not permit member banks to deduct checks on other banks located in the same place or ex- changes for clearing houses from gross demand deposits, nor does it permit cash on hand to be deducted from gross demand deposits. (Opinion of Counsel of Board, July 19, 1917.) Deposits With a Federal Reserve Bank from the Savings Depart- ment of a Trust Company Member, Bank to Count As Reserve. — A member bank which operates both a savings department and a com- mercial banking department may properly deposit funds out of its savings department with the Federal Reserve Bank to count as reserve against its savings deposits even though under the terms of the State law such a deposit with the Federal Reserve Bank is not subject to any claim by the Federal Reserve Bank against the member bank itself as distinct from the savings department. (Opinion of Counsel of Board, May 29, 1919.) Form for Computation of Reserve. — COMPUTATION OF RESERVE TO BE CARRIED WITH THE FEDERAL RESERVE BANKS BY NATIONAL BANKS. DEMAND DEPOSITS. 1. Deposits (including Dividends unpaid), other than United States Government deposits, pay- able within thirty days 2. Balances due to banks, other than Federal Reserve Bank $ 3. (Amount due to Federal Reserve Bank deferred credits $ 4. Cashier's Checks on own Bank out- standing $ 5. Certified Checks outstanding ...$ TOTAL DUE TO BANKS (Items 2, 3, 4 and 5) $ >- 299 Less: 6. Balances due from banks other than Federal Reserve Bank and foreign banks $ 7. Items with Federal Reserve Bank in process of collection i $ 8. Checks on other banks in same place. . $ 9. Exchange for clearing house $ TOTAL DEDUCTIONS (Items 6, 7, 8 and 9) $. 10. Net Balance due to banks* 11. TOTAL DEMAND DEPOSITS (Items 1 and 10) TIME DEPOSITS. 12. Savings Accounts (subject to not less than 30 days' notice before payment) $. 13. Certificates of deposit (subject to not less than 30 days' notice before pay- ment) , $. 14. Other deposits payable only after 30 days $ . 15. Postal Savings deposits $ . 16. TOTAL TIME DEPOSITS (Items 12, 13, 14 and 15) RESERVE REQUIRED. Banks in Central Reserve Cities, 13%; Reserve Cities, 10%; elsewhere, 7% of Demand deposits (Item 1) ../ $. 3% of time deposits (Item 16) $. TOTAL RESERVE to be maintained with Federal Reserve Bank Note. — "Balances due to all banks other than Federal Reserve Bank," (Item 2 Demand Deposits) should include balances due to foreign banks. ♦Should the aggregate "due from banks" (Items 6, 7, 8 and 9) ex- ceed the aggregate "due to banks" (Items 2, 3, 4 and 5), both items must be omitted from the calculation. 300 § 281. Membership of Banks Located in United States but Outside of Continental United States.— National banks, or banks organized under local laws, located in Alaska or in a dependency or insular possession or any part of the United States outside the continental United States may remain non-member banks, and shall in that event maintain reserves and comply with all the conditions now provided by law regulating them; or said banks may, with the consent of the Reserve Board, become member banks of any one of the reserve districts, and shall in that event take stock, maintain reserves, and be subject to all the other provisions of this Act. (Sec. 19, Act Dec. 23, 1913, as amended by Act Aug. 15, 1914, and further by Sec. 10, Act June 21, 1917; 40 Stat. L., 240.) § 282. Five Per Cent. Redemption Fund As Reserve.— So much of sections two and three of the Act of June twentieth, eighteen hundred and seventy-four, entitled "An Act fixing the amount of United States notes, providing for a redistribution of the National bank currency, and for other purposes," as provides that the fund deposited by any National banking association with the Treasurer of the United States for the redemption of its notes shall be counted as a part of its lawful reserve as provided in the Act afore- said, is hereby repealed. And from and after the passage of this Act such fund of five per centum shall in no case be counted by any National banking association as a part of its lawful reserve. (Sec. 20, Act Dec. 23, 1913.) § 283. Appointment of Examiners — Examinations of Member Banks.— See § 131 and § 217 ante. § 284. Salaries of Examiners — Expense of Examination. — See § 131, page 129. § 285. Special Examination of Members by Reserve Banks. — — In addition to the examinations made and conducted by the Comptroller of the Currency, every Federal reserve bank may, with the approval of the Federal reserve agent or the Federal 301 Reserve Board, provide for special examination of member banks within its district. The expense of such examinations shall be borne by the bank examined. Such examinations shall be so conducted as to inform the Federal reserve bank of the condition of its member banks and of the lines of credit which are being extended by them. Every Federal reserve bank shall at all times furnish to the Federal Eeserve Board such information as may be demanded concerning the condition of any member bank within the district of the said Federal reserve bank. (Sec. 21, Act Dec. 23, 1913.) See Regulation H of Federal Reserve Board, Series of 1917, under Section 9 of the Act. § 286. Limitation of Visitorial Powers.— No bank shall be subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by Congress, or by either House thereof or by any committee of Congress or of either House duly authorized. (Sec. 21, Act Dec. 23, 1913.) See Regulation H of Federal Reserve Board, Series of 1917, under Section 9 of the Act. § 287. Examination of Reserve Banks by Board— The Federal Eeserve Board shall, at least once each year, order an examination of each Federal reserve bank, and upon joint application of ten member banks the Federal Eeserve Board shall order a special examination and report of the condition of any Federal reserve bank. (Sec. 21, Act Dec. 23, 1913.) Examinations of Federal Reserve Banks. — Board declines to permit clearing-house examiners or any examiners representing a member bank or group of member banks to examine a Federal Reserve Bank. (Informal Ruling of Board, Sept. 9, 1915.); § 288. Fees, Commissions, Gifts, etc., Prohibited to Officers, Employees, etc., of Member Banks, and to Bank Examiners — Exceptions. — (a) No member bank and no officer, director, or em- 302 ployee thereof shall hereafter make any loan or grant any gratuity to any bank examiner. Any bank officer, director, or employee violating this provision shall be deemed guilty of a misdemeanor and shall be imprisoned not exceeding one year or fined not more than $5,000, or both; and may be fined a further sum equal to the money so loaned or gratuity given. Any examiner accepting a loan or gratuity from any bank ex- amined by him or from an officer, director, or employee thereof shall be deemed guilty of a misdemeanor and shall be imprisoned one year or fined not more than $5,000, or both, and may be fin fid a further sum equal to the money so loaned or gratuity given, and shall forever thereafter be disqualified from holding office as a national bank examiner. (b) Xo Xational bank examiner shall perform any other service for compensation while holding such office for any bank or officer, director, or employee thereof. Xo examiner, public or private, shall disclose the names of borrowers or the collateral for loans of a member bank to other than the proper officers of such bank without first having obtained the express permission in writing from the Comptroller of the Currency, or from the board of directors of such bank, except when ordered to do so by a court of competent jurisdiction, or by direction of the Congress of the United States, or of either House thereof, or any committee of Congress, or of either House duly authorized. Any bank examiner violating the provisions of this subsection shall be imprisoned not more than one year or fined not more than $5,000, or both. (c) Except as herein provided, any officer, director, employee, or attorney of a member bank who stipulates for or receives or consents or agrees to receive any fee, commission, gift, or thing of value from any person, firm, or corporation, for procuring or endeavoring to procure for such person, firm, or corporation, or for any other person, firm or corporation, any loan from or the purchase or discount of any paper, note, draft, check, or bill of exchange by such member bank shall be deemed guilty of a mis- demeanor and shall be imprisoned not more than one year or fined not more than $5,000, or both. 303 (d) Any member bank may contract for, or purchase from any of its directors or from any firm of which, any of its directors is a member, any securities or other property, when (and not otherwise) such purchase is made in the regular course of busi- ness upon terms not less favorable to the bank than those offered to others, or when such purchase is authorized by a majority of the board of directors not interested in the sale of such securities or property, such authority to be evidenced by the affirmative vote or written assent of such directors : Provided, however, That when any director, or firm of which any director is a member, acting for or on behalf of others, sells securities or other property to a member bank, the Federal Reserve Board by regulation may, in any or all cases, require a full disclosure to be made, on forms to be prescribed by it, of all commissions or other considerations received, and whenever such director or firm, acting in his or its own behalf, sells securities or other property to the bank the Fed- eral Eeserve Board, by regulation, may require a full disclosure of all profit realized from such sale. Any member bank may sell securities or other property to any of its directors, or to a firm of which any of its directors is a member, in the regular course of business on terms not more favor- able to such director or firm than those offered to others, or when such sale is authorized by a majority of the board of directors of a member bank to be evidenced by their affirmative vote or writ- ten assent: Provided, however, That nothing in this subsection contained shall be construed as authorizing member banks to pur- chase or sell securities or other property which such banks are not otherwise authorized by law to purchase or sell. (e) Xo member bank shall pay to any director, officer, at- torney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank. (f) If the directors or officers of any member bank shall knowingly violate or permit any of the agents, officers, or direc- tors of any member bank to violate any of the provisions of this section or regulations of the board made under authority thereof, every director and officer participating in or assenting to such 304 violation shall be held liable in his personal and individual capacity for all damages which the member bank, its shareholders, or any other persons shall have sustained in consequence of such violation. (Sec. 22, Act Dec. 23, 1913, as amended by Sec. 11, Act June 21, 1917, and further by Sec. 5, Act Sept. 26, 1918; 40 Stat. L., 970.) INTERPRETATION OF SECTION 22 OF THE FEDERAL RESERVE ACT. — Any violation of the provisions of Section 22 of the Federal Reserve Act by officers, directors, or employes of a member bank constitutes a crime, punishable by fine or imprisonment. No ruling or interpretation by the Federal Reserve Board would afford any protection to a person subsequently indicted by a Federal Grand jury for any such violation, it not being within the province of the Federal Reserve Board to make an official ruling on the provision of this section. Whether or not a contemplated transaction comes within the prohibited part of this section is a question which should be determined by the counsel for the bank in each case. (Opinions of Counsel of Board, April 9, 1915, and Aug. 14, 1917.) § 289. Liability of Stockholders of National Banks.— See § 46, page 57, Part I. § 290. Loans on Heal Estate by National Banks.- -See § 18, page 23, Part I. § 291. Foreign Branches of National Banks. — Any National banking association possessing a capital and surplus of $1,000 ; 000 or more may file application with the Federal Eeserve Board for permission to exercise, upon such conditions and under such regu- lations as may be prescribed by the said board, either or both of the following powers : First: To establish branches in foreign countries or depen- dencies or insular possessions of the United States for the further- ance of the foreign commerce of the United States, and to act if required to do so as fiscal agents of the United States. (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916; 40 Stat. L., 755.) Branch Banks. — A foreign branch established by a National bank is not an independent corporation, and the creditors of the branch are 305 general creditors of the parent bank. (Opinion of Counsel of Board, Feb. 8, 1917.) Real Estate Loans by Foreign Bbanches. — A branch bank of a National bank established in a foreign country, under authority of Section 25, may make loans on real estate located within 100 miles of the branch, provided such loans conform in all other respects to the provisions of Section 24. (Opinion of Counsel of Board, Nov. 17, a917.) Reserves of Foreign Branches. — Section 19 of the Federal Reserve Act, which prescribes reserves to be carried by member banks, does not apply to foreign branches of National banks; but, under the special power vested in the Federal Reserve Board by Section 25 to prescribe conditions and regulations under which foreign branches may be established, it is authorized to prescribe the amount, character, and location of reserve to be maintained against deposits received in such branches. (Opinion of Counsel of Board, October 7j 1918.) § 292. Power of National Banks to Take Stock in Corporations Transacting Foreign Business. — Second. To invest an amount not exceeding in the aggregate ten per centum, of its paid-in capital stock and surplus in the stock of one or more banks or corporations chartered or incorporated under the laws of the United States or of any State thereof, and principally engaged in inter- national or foreign banking, or banking in a dependency or insular possession of the United States either directly or through the agency, ownership, or control of local institutions in foreign coun- tries, or in such dependencies or insular possessions: Until January 1, 1921, any National banking association, with- out regard to the amount of its capital and surplus, may file ap- plication with the Federal Reserve Board for permission, upon such conditions and under such regulations as may be prescribed by said board, to invest an amount not exceeding in the aggregate five per centum of its paid-in capital and surplus in the stock of one or more corporations chartered or incorporated under the laws of the United States or of any State thereof and, regardless of its loca- tion, principally engaged in such phases of international or for- eign financial operations as may be necessary to facilitate the ex- port of goods, wares, or merchandise from the United States or 20 306 any of its dependencies or insular possessions to any foreign coun- try: Provided, however, That in no event shall the total invest- ments authorized by this section by any one National Bank exceed ten per centum of its capital and surplus. Such application shall specify the name and capital of the banking association filing it, the powers applied for, and the place or places where the banking or financial operations proposed are to be carried on. The Federal Eeserve Board shall have power to approve or to reject such application in whole or in part if for any reason the granting of such application is deemed in- expedient, and shall also have power from time to time to increase or decrease the number of places where such banking operations may be carried on. (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by Act, Sept. 17, 1919; 41 Stat. L., -.) § 293. Reports and Examination of Foreign Branches, Etc. — Every National banking association operating foreign branches shall be required to furnish information concerning the condition of such branches to the Comptroller of the Currency upon de- mand, and every member bank investing in the capital stock of banks or corporations described above shall be required to fur- nish information concerning the condition of such banks or cor- porations to the Federal Reserve Board upon demand, and the Federal Eeserve Board may order special examinations of the said branches, banks, or corporations at such time or times as it may deem best. (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916, and further by Act Sept. 17, 1919; 41 Stat. L., — .) § 294. Powers of Board Over Corporations in Which National Banks Own Stock. — Before any National bank shall be permit- ted to purchase stock in any such corporation the said corporation shall enter into an agreement or undertaking with the Federal Eeserve Board to restrict its operations or conduct its business in such manner or under such limitations and restrictions as the said board may prescribe for the place or places wherein such business is to be conducted. If at any time the Federal Eeserve 307 Board shall ascertain that the regulations prescribed by it are not being complied with, said board is hereby authorized and em- powered to institute an investigation of the matter and to send for persons and papers, subpoena witnesses, and administer oaths in order to satisfy itself as to the actual nature of the transactions referred to. Should such investigation result in establishing the failure of the corporation in question, or of the National bank or banks which may be stockholders therein, to comply with the regulations laid down by the said Federal Reserve Board, such National banks may be required to dispose of stock holdings in the said corporation upon reasonable notice. (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916 ; 39 Stat. L., 755.) § 295. Accounts of Foreign Branches. — Every such National banking association shall conduct the accounts of each foreign branch independently of the accounts of other foreign branches established by it and of its home office, and shall at the end of each fiscal period transfer to its general ledger the profit or loss accrued at each branch as a separate item. (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916; 39 Stat. L., 756.) § 296. Exception to Prohibitions of Clayton Act.— Any di- rector or other officer, agent, or employee of any member bank may, with the approval of the Federal Reserve Board, be a director or other officer, agent, or employee of any such bank or corporation above mentioned in the capital stock of which such member bank shall have invested as hereinbefore provided, without being subject to the provisions of section eight of the Act approved October fifteenth, nineteen hundred and fourteen, entitled "An Act to sup- plement existing laws against unlawful restraints and monopolies, and for other purposes." (Sec. 25, Act Dec. 23, 1913, as amended by Act Sept. 7, 1916 ; 39 Stat. L., 756.) § 297. Banking Corporations Authorized to do Foreign Bank- ing Business (the Edge Bill).— Sec. 25 (a). Corporations to be organized for the purpose of engaging in international or foreign banking or other international or foreign financial operations, or 308 in banking or other financial operations in a dependency or in- sular possession of the United States, either directly or through the agency, ownership, or control of local institutions in foreign countries, or in such dependencies or insular possessions as pro- vided by this section, and to act when required by the Secretary of the Treasury as fiscal agents of the United States, may be formed by any number of natural persons, not less in any case than five. Such persons shall enter into articles of association which shall specify in general terms the objects for which the association is formed and may contain any other provisions not inconsistent with law which the association may see fit to adopt for the regula- tion of its business and the conduct of its affairs. Such articles of association shall be signed by all of the persons intending to participate in the organization of the corporation and, thereafter, shall be forwarded to the Federal Reserve Board and shall be filed and preserved in its office. The persons signing the said articles of association shall, under their hands, make an or- ganization certificate which shall specifically state: First. The name assumed by such corporation, which shall be subject to the approval of the Federal Eeserve Board. Second. The place or places where its operations are to be car- ried on. Third. The place in the United States where its home office is to be located. Fourth. The amount of its capital stock and the number of shares into which the same shall be divided. Fifth. The names and places of business or residence of the per- sons executing the certificate and the number of shares to which each has subscribed. Sixth. The fact that the certificate is made to enable the persons subscribing the same, and all other persons, firms, companies, and corporations, who or which may thereafter subscribe to or purchase diares of the capital stock of such corporation, to avail themselves of the advantages of this section. The persons signing the organization certificate shall duly ac- knowledge the execution thereof before a judge of some court of 309 record or notary public, who shall certify thereto under the seal of such court or notary, and thereafter the certificate shall be for- warded to the Federal Reserve Board to be filed and preserved in its office. Upon duly making and filing articles of association and an organization certificate, and after the Federal Eeserve Board has approved the same and issued a permit to begin busi- ness, the association shall become and be a body corporate, and as such and in the name designated therein shall have power to adopt and use a corporate seal, which may be changed at the pleasure of its board of directors; to have succession for a period of twenty years unless sooner dissolved by the act of the shareholders own- ing two-thirds of the stock or by an Act of Congress or unless its franchises become forfeited by some violation of law ; to make con- tracts; to sue and be sued, complain, and defend in any court of law or equity; to elect or appoint directors, all of whom shall be citizens of the United States; and, by its board of directors, to appoint such officers and employees as may be deemed proper, define their authority and duties, require bonds of them, and fix the penalty thereof, dismiss such officers or employees, or any thereof, at pleasure and appoint others to fill their places; to pre- scribe, by its board of directors, by-laws not inconsistent with law or with the regulations of the Federal Eeserve Board regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers and employees appointed, its prop- erty transferred, and the privileges granted to it by law exercised and enjoyed. Each corporation so organized shall have power, under such rules and regulations as the Federal Eeserve Board may prescribe: (a) To purchase, sell, discount, and negotiate, with or without its indorsement or guaranty, notes, drafts, checks, bills of ex- change, acceptances, including bankers' acceptances, cable trans- fers, and other evidences of indebtedness; to purchase and sell, with or without its indorsement or guaranty, securities, including the obligations of the United States or of any State thereof, but not including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restrictions as the Federal Eeserve Board may im- 310 pose; to issue letters of credit; to purchase and sell coin, bullion, and exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the Federal Eescrve Board may prescribe, but in no event having liabilities outstanding thereon at any one time exceeding ten times its capital stock and surplus ; to receive deposits outside of the United States and to receive only such deposits within the United States as may be incidental to or for the purpose of carrying out transactions in foreign coun- tries or dependencies or insular possessions of the United States; and generally to exercise such powers as are incidental to the powers conferred by this Act or as may be usual, in the determina- tion of the Federal Eeserve Board, in connection with the trans- action of the business of banking or other financial operations in the countries, colonies, dependencies, or possessions in which it shall transact business and not inconsistent with the powers spe- cifically granted herein. Nothing contained in this section shall be construed to prohibit the Federal Eeserve Board, under its power to prescribe rules and regulations, from limiting the ag- gregate amount of liabilities of any or all classes incurred by the corporation and outstanding at any one time. Whenever a cor- poration organized under this section receives deposits in the United States authorized by this section it shall carry reserves in such amounts as the Federal Eeserve Board may prescribe, but in no event less than ten per centum of its deposits. (b) To establish and maintain for the transaction of its busi- ness branches or agencies in foreign countries, their dependencies or colonies, and in the dependencies or insular possessions of the United States, at such places as may be approved by the Federal Eeserve Board and under such rules and regulations as it may prescribe, including countries or dependencies not specified in the original organization certificate. (c) With the consent of the Federal Eeserve Board to purchase and hold stock or other certificates of ownership in any other cor- poration organized under the provisions of this section, or under the laws of any foreign country or a colony or dependency thereof, or under the laws of any State, dependency, or insular possession 311 of the United States, but not engaged in the general business of buying or selling goods, wares, merchandise or commodities in the United States, and not transacting any business in the United States except such as in the judgment of the Federal Reserve Board may be incidental to its international or foreign business: Provided, however, That, except with the approval of the Federal Eeserve Board, no corporation organized hereunder shall invest in any one corporation an amount in excess of ten per centum of its own capital and surplus, except in a corporation engaged in the business of banking, when fifteen per centum of its capital and surplus may be so invested: Provided further, That no cor- poration organized hereunder shall purchase, own, or hold stock or certificates of ownership in any otker corporation organized hereunder or under the laws of any State which is in substantial competition therewith, or which holds stock or certificates of own- ership in corporations which are in substantial competition with the purchasing corporation. Nothing contained herein shall prevent corporations organized hereunder from purchasing and holding stock in any corporation where such purchase shall be necessary to prevent a loss upon a debt previously contracted in good faith; and stocks so purchased or acquired in corporations organized under this section shall within six months from such purchase be sold or disposed of at public or private sale unless the time to so dispose of same is extended by the Federal Eeserve Board. No corporation organized under this section shall carry on any part of its business in the United States except such as, in the judgment of the Federal Reserve Board, shall be incidental to its international or foreign business: And provided further, That except such as is incidental and preliminary to its organization no such corporation shall exercise any of the powers conferred by this section until it has been duly authorized by the Federal Re- serve Board to commence business as a corporation organized un- der the provisions of this section. No corporation organized under this section shall engage in commerce or trade in commodities except as specifically provided in this section, nor shall it either directly or indirectly control or 312 fix or attempt to control or fix the price of any such commodi- ties. The charter of any corporation violating this provision shall be subject to forfeiture in the manner hereinafter provided in this section. It shall be unlawful for any director, officer, agent, or employee of any such corporation to use or to conspire to use the credit, the funds, or the power of the corporation to fix or control the price of any such commodities, and any such person violating this provision shall be liable to a fine of not less than $1,000 and not exceeding $5,000 or imprisonment not less than one year and not exceeding five years, or both, in the discretion of the court. No corporation shall be organized under the provisions of this section with a capital stock of less than $2,000,000, one-quarter of which must be paid in before the corporation may be author- ized to begin business, and the remainder of the capital stock of such corporation shall be paid in installments of at least ten per centum on the whole amount to which the corporation shall be limited as frequently as one installment at the end of each suc- ceeding two months from the time of the commencement of its business operations until the whole of the capital stock shall be paid in. The capital stock of any such corporation may be in- creased at any time, with the approval of the Federal Reserve Eoard, by a vote of two-thirds of its shareholders or by unani- mous consent in writing of the shareholders without a meeting and without a formal vote, but any such increase of capital shall be fully paid in within ninety days after such approval; and may be reduced in like manner, provided that in no event shall it be less than $2,000,000. No corporation, except as herein provided, shall during the time it shall continue its operations withdraw or permit to be withdrawn, either in the form of dividends or other- wise, any portion of its capital. Any National banking associa- tion may invest in the stock of any corporation organized under the provisions of this section, but the aggregate amount of stock held in all corporations engaged in business of the kind described' in this section and in section twenty-five of the Federal Reserve Act as amended shall not exceed ten per centum of the subscrib- ing bank's capital and surplus. 313 A majority of the shares of the capital stock of any such cor- poration shall at all times be held and owned by citizens of the United States, by corporations the controlling interest in which is owned by citizens of the United States, chartered under the laws of the United States or of a State of the United States, or by firms or companies, the controlling interest in which is owned by citizens of the United States. The provisions of section eight of the act approved October 15, 1914, entitled "An Act to supple- ment existing laws against unlawful restraints and monopolies, and for other purposes, as amended by the Acts of May 15, 1916, and September 7, 1916, shall be construed to apply to the direc- tors, other officers, agents, or employees of corporations organized under the provisions of this section: Provided, however, That nothing herein contained shall (1) prohibit any director or other officer, agent or employee of any member bank, who has procured the approval of the Federal Eeserve Board from serving at the same time as director or other officer, agent or employee of any corporation organized under the provisions of this section in whose capital stock such member bank shall have invested; or (2) pro- hibit any director or other officer, agent, or employee of any cor- poration organized under the provisions of this section, who has procured the approval of the Federal Eeserve Board, from serving at the same time as a director or other officer, agent or employee of any corporation in whose capital stock such first-mentioned corporation shall have invested under the provisions of this section. No member of the Federal Eeserve Board shall be an officer or director of any corporation organized under the provisions of this section, or of any corporation engaged in similar business organ- ized under the laws of any State, nor hold stock in any such corporation, and before entering upon his duties as a member of the Federal Eeserve Board he shall certify under oath to the Sec- retary of the Treasury that he has complied with this requirement. Shareholders in any corporation organized under the provisions of this section shall be liable for the amount of their unpaid stock subscriptions. No such corporation shall become a member of any Federal reserve bank. Should any corporation organized hereunder violate or fail to 314 comply with any of the provisions of this section, all of its rights, privileges, and franchises derived herefrom may thereby be for- feited. Before any such corporation shall be declared dissolved, or its rights, privileges, and franchises forfeited, any noncompli- ance with, or violation of such laws shall, however, be determined and adjudged by a court of the United States of competent juris- diction, in a suit brought for that purpose in the district or ter- ritory in which the home office of such corporation is located, which suit shall be brought by the United States at the instance of the Federal Eeserve Board or the Attorney General. Upon adjudication of such noncompliance or violation, each director and officer who participated in, or assented to, the illegal act or acts, shall be liable in his personal or individual capacity for all damages which the said corporation shall have sustained in con- sequence thereof. No dissolution shall take away or impair any remedy against the corporation, its stockholders, or officers for any liability or penalty previously incurred. Any such corporation may go into voluntary liquidation and be closed by a vote of its shareholders owning two-thirds of its stock. Whenever the Federal Eeserve Board shall become satisfied of the insolvency of any such corporation, it may appoint a receiver who shall take possession of all of the property and assets of the corporation and exercise the same rights, privileges, powers, and authority with respect thereto as are now exercised by receivers of National banks appointed by the Comptroller of the Currency of the United States: Provided, liowever, That the assets of the corporation subject to the laws of other countries or jurisdictions shall be dealt with in accordance with the terms of such laws. Every corporation organized under the provisions of this section shall hold a meeting of its stockholders annually upon a date fixed in its by-laws, such meeting to be held at its home office in the United States. Every such corporation shall keep at its home office books containing the names of all stockholders thereof, and the names and addresses of the members of its board of directors, together with copies of all reports made by it to the Federal Ee- serve Board. Every such corporation shall make reports to the Federal Eeserve Board at such times and in such form as it may 315 require; and shall be subject to examination once a year and at such other times as may be deemed necessary by the Federal Re- serve Board by examiners appointed by the Federal Eeserve Board, the cost of such examinations, including the compensation of the examiners, to be fixed by the Federal Eeserve Board and to be paid by the corporation examined. The directors of any corporation organized under the provisions of this section may, semiannually, declare a dividend of so much of the net profits of the corporation as they shall judge expedient; but each corporation shall, before the declaration of a dividend, carry one-tenth of its net profits of the preceding half year to its surplus fund until the same shall amount to twenty per centum of its capital stock. Any corporation organized under the provisions of this section shall be subject to tax by the State within which its home office is located in the same manner and to the same extent as other cor- porations organized under the laws of that State which are trans- acting a similar character of business. The shares of stock in such corporation shall also be subject to tax as the personal prop- erty of the owners or holders thereof in the same manner and to the same extent as the shares of stock in similar State corporations. Any corporation organized under the provisions of this section may at any time within the two years next previous to the date of the expiration of its corporate existence, by a vote of the share- holders owning two-thirds of its stock, apply to the Federal Eeserve Board for its approval to extend the period of its corporate exist- ence for a term of not more than twenty years, and upon certified approval of the Federal Eeserve Board such corporation shall have its corporate existence for such extended period unless sooner dis- solved by the act of the shareholders owning two-thirds of its stock, or by an Act of Congress or unless its franchise becomes forfeited by some violation of law. Any bank or banking institution, principally engaged in foreign business, incorporated by special law of any State or of the United States or organized under the general laws of any State or of the United States and having an unimpaired capital sufficient to en- title it to become a corporation under the provisions of this sec- 31G tion ma}', by the vote of the shareholders owning not less than two-thirds of the capital stock of such bank or banking associa- tion, with the approval of the Federal Reserve Board, be con- verted into a Federal corporation of the kind authorized by this section with any name approved by the Federal Reserve Board : Provided, however, That said conversion shall not be in contra- vention of the State law. In such case the articles of association and organization certificate may be executed by a majority of the directors of the bank or banking institution, and the certificate shall declare that the owners of at least two-thirds of the capital stock have authorized the directors to make such certificate and to change or convert the bank or banking institution into a Fed- eral corporation. A majority of the directors, after executing the articles of association and the organization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a Federal corporation. The shares of any such corporation may continue to be for the same amount each as they were before the conversion, and the directors may continue to be directors of the corporation until others are elected or appointed in accordance with the provisions of this section. When the Federal Reserve Board has given to such corporation a certificate that the pro- visions of this section have been complied with, such corporation and all its stockholders, officers, and employees, shall have the same powers and privileges, and shall be subject to the same du- ties, liabilities, and regulations, in all respects, as shall have been prescribed by this section for corporations originally organized hereunder. Every officer, director, clerk, employee, or agent of any cor- poration organized under this section who embezzles, abstracts, op willfully misapplies any of the moneys, funds, credits, securities, evidences of indebtedness or assets of any character of such cor- poration; or who, without authority from the directors, issues or puts forth any certificate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, debenture, draft, bill of exchange, mortgage, judgment, or decree; or who makes any false entry in any book, report, or statement of such 317 corporation with intent, in either case, to injure or defraud such corporation or any other company, body politic or corporate, or any individual person, or to deceive any officer of such corpora- tion, the Federal Reserve Board, or any agent or examiner ap- pointed to examine the affairs of any such corporation; and every receiver of any such corporation and every clerk or employee of such receiver who shall embezzle, abstract, or willfully misapply or wrongfully convert to his own use any moneys, funds, credits, or assets of any character which may come into his possession or under his control in the execution of his trust or the performance of the duties of his employment; and every such receiver or clerk or employee of such receiver who shall, with intent to injure or defraud any person, body politic or corporate, or to deceive or mislead the Federal Reserve Board, or any agent or examiner ap- pointed to examine the affairs of such receiver, shall make any false entry in any book, report, or record of any matter con- nected with the duties of such receiver; and every person who with like intent aids or abets any officer, director, clerk, employee, or agent of any corporation organized under this section, or re- ceiver or clerk or employee of such receiver as aforesaid in any violation of this section, shall upon conviction thereof be impris- oned for not less than two years nor more than ten years, and may also be fined not more than $5,000, in the discretion of the court. Whoever being connected in any capacity with any corporation organized under this section represents in any way that the United States is liable for the payment of any bond or other obligation, or the interest thereon, issued or incurred by any corporation or- ganized hereunder, or that the United States incurs any liability in respect of any act or omission of the corporation, shall be pun- ished by a fine of not more than $10,000 and by imprisonment for not more than five years. (Act approved December 24, 1919 ; 41 Stat. L., — .) 318 REGULATION K OF FEDEEAL RESERVE BOAED. (Series of 1920.) T. Organization. Any number of natural persons, not less in any case than five, may form a Corporation * under the provisions of Section 25 (a) for the purpose of engaging in international or foreign banking or other in- ternational or foreign financial operations or in banking or other financial operations in a dependency or insular possession of the United States either directly or through the' agency, ownership, or control of local institutions in foreign countries or in such dependencies or insular possessions. II. Articles of Association. Any persons desiring to organize a corporation for any of the pur- poses defined in Section 25 (a) shall enter into articles of association' (see Federal Reserve Board Form 151 which is suggested as a satis- factory form of articles of association) which shall specify in, general terms the objects for which the Corporation is formed, and may contain any other provisions not inconsistent with law which the Corporation may see fit to adopt for the regulation of its business and the conduct of its affairs. The articles of association shall be signed by each person intending to participate in the organization of the Corporation and when signed shall be forwarded to the Federal Reserve Board in whose office they shall be filed. III. Organization Certificate. All of the persons signing the articles of association shall under their hands make an organization certificate (Federal Reserve Board Form 152) which shall state specifically: First. The name assumed by the Corporation. Second. The place or places where its operations are to be car- ried on. Third. The place in the United States where its home office is to be located. Fourth. The amount of its capital stock and the number of shares into which it shall be divided. Fifth. The names and places of business or residences of persons executing the organization certificate and the number of shares to which each has subscribed. * Whenever these regulations refer to a Corporation spelled with a capital C, they relate to a corporation organized under Section 25 (a) of the Federal Reserve Act. 319 Sixth. The fact that the certificate is made to enable the persons subscribing the same and all other persons, firms, companies, and corporations who or which may thereafter subscribe to or purchase shares of the capital stock of such Corporation to avail themselves of the advantages of this section. The persons signing the organization certificate shall acknowledge the execution thereof before a judge of some court of record or notary- public who shall certify thereto under the seal of such court or notary. Thereafter the certificate shall be forwarded to the Federal Reserve Board to be filed in its office. IV. Title. Inasmuch as the name ot the Corporation is subject to the approval of the Federal Reserve Board, a preliminary application for that ap- proval should be filed with the Federal Reserve Board on Federal Reserve Board Form 150. This application should state merely that the organization of a Corporation under the proposed name is con- templated and may request the approval of that name and its reserva- tion for a period of 30 days. No Corporation which issues its own bonds, debentures, or other such obligations will be permitted to have the word "bank" as a part of its title. No Corporation which has the word "Federal" in its title will be permitted also to have the word "bank" as a part of its title. So far as possible the title of the Corporation should indicate the nature or reason of the business con- templated and should in no case resemble the name of any other cor- poration to the extent that it might result in misleading or deceiving the public as to its identity, purpose, connections or affiliations. V. Authority to Commence Business. After the articles of association and organization certificate have been made and filed with the Federal Reserve Board, and after they have been approved by the Federal Reserve Board and a preliminary permit to begin business has been issued by the Federal Reserve Board, the association shall become and be a body corporate, but none of Its powers except such as are incidental and preliminary to its organization shall be exercised until it has been formally author- ized by the Federal Reserve Board by a final permit generally to commence business. Before the Federal Board will issue its final permit to commence business, the president o'r cashier, together with at least three of the directors, must certify (a) that each director elected is a citizen of the United States; (6) that a majority of the shares of stock is owned by citizens of the United States, by corporations the controlling in- 320 terest in which is owned by citizens of the United States, chartered under the laws of the United States, or by firms or companies the controlling interest in which is owned by citizens of the United States; and (c) that of the authorized capital stock specified in the articles of association at least 25 per cent, has been paid in in cash and that each shareholder has individually paid in in cash at least 25 per cent, of his stock subscription. Thereafter the cashier shall certify to the payment of the remaining installments as and when each is paid in, in accordance with law. VI. Capital Stock. No Corporation may be organized under the terms of Section 25 (a) with a capital stock of less than $2,000,000. The par value of e'ach share of stock shall be specified in the articles of association and no Corporation will be permitted to issue stock of no par value. If there is more than one class of stock the name and amount of each class and the obligations, rights, and privileges attaching thereto shall be set forth fully In the articles of association. Each class of stock shall be so named as to Indicate to the investor as nearly as possible what is its character and to put him on notice of any unusual attributes. VII. Transfers of Stock. Section 25 (a) provides in part that — A majority of the shares of the capital stock of any such cor- poration shall at all times be held and owned by the citizens of the United States, by corporations the controlling interest in which is owned by citizens of the United States, chartered under the laws of the United States or of a State of the United States, or by firms or companies, the controlling interest in which is owned by citizens of the United States. In order to insure compliance at all times with the requirements of this provision after the organization of the Corporation, shares of stock shall be issuable and transferable only on the books of the Corporation. Every application for the issue or transfer of stock shall be accompanied by an affidavit of the party to whom, it is desired to issue or transfer stock, or by his or its duly authorized agent, stating — In the case of an individual. — (a) Whether he is or Is not a) citizen of the United States and if a citizen of the United States, whether he is a natural born citizen or a citizen by naturalization,, and if naturalized, whether he remains for any purpose in the allegiance of any foreign sovereign or state; (h) Whether there is or is not any arrangement under which he is to hold the shares or any of the shares which he desires to have issued or transferred to him, in trust 321 for or in. any way under the control of any foreign state or any foreigner, foreign corporation, or any corporation under foreign control, and if so, the nature thereof. In the case of a corporation. — (a) Whether such corporation is or is not chartered under the laws of the United States or of a state of the United States. If it is not, no further declaration is necessary, but if it is, it must also be stated (&) whether the controlling interest in such corporation is or is not owned by citizens of the United States, and (c) whether there is or is not any arrangement under which such corporation will hold the shares or any of the shares if issued or transferred to such corporation, in trust for or in any way under the control of any foreign state or any foreigner or foreign corporation or any corporation under foreign control, and if so, the nature thereof. In the case of a firm- or company. — (a) Whether the controlling interest in such firm or company is or is not owned by citizens of the United States and, if so, (b) whether there is or is not any arrange- ment under which such firm or company will hold the shares or any of the shares if issued or transferred to such firm or company in trust for or in any way under the control of any foreign state or any foreigner or foreign corporation or any corporation under foreign control and if so, the nature thereof. The board of directors of the Corporation, whether acting directly or through an agent, may, before making any issue or transfer of stock, require such further evidence as in their discretion they may think necessary in order to determine whether or not the issue or transfer of the stock would result in a violation of the law. No issue or transfer of stock which would cause 50 per cent, or more of the total amount of stock issued or outstanding to be held contrary to the provisions of the law or these regulations shall be made upon the books of the Corporation. The decision of the board of directors in each case shall be final and conclusive and not subject to any question by any person, firm, or corporation on any ground whatsoever. If at any time by reason of the fact that the holder of any shares of the Corporation ceases to be a citizen of the United States, or, in the opinion of the board of directors, becomes subject to the control of any foreign State or foreigner or foreign corporation or corporation under foreign control, 50 per cent, or more of the total amount of capital stock issued or outstanding is held contrary to the provisions of the law or these regulations, the board of directors may, when apprised of that fact, forthwith serve on the holder of the shares in question a notice in writing requiring) such holder within two months to transfer such shares to a citizen of the United States, or to a firm, company, or corporation approved by the board of directors as an eligible stockholder. When such notice has been given by the board of directors the shares of stock so held shall cease to confer any 21 322 vote until they have been transferred as required above and if on the expiration of two months after such notice the shares shall not have been so transferred, the shares shall be forfeited to the Corporation. The board of directors shall prescribe in the by-laws of the Corpora- tion appropriate regulations for the registration of the shares of stock in accordance with the terms of the law and these regulations. The by-laws must also provide that the certificates of stock issued by the Corporation shall contain provisions sufficient to put the holder on notice* of the terms of the law and the regulations of the Federal Reserve Board defining the limitations upon the rights of transfer. VIII. Opebations in the United States. No Corporation shall carry on any part of its business in the United States except such as shall be incidental to its international or foreign business. Agencies may be established in the United States with the approval of the Federal Reserve Board for specific purposes, but not generally to carry on the business of the Corporation. IX. Investments in the Stock of Othee Corporations. It is contemplated by the law that a Corporation shall conduct its business abroad either directly or indirectly through the ownership or control of corporations, and it is accordingly provided that a Corporation may invest in the stock, or other certificates of ownership, of any other corporation organized — (a) Under the provisions of section 25 (a) of the Federal Reserve Act; (b) Under the laws of any foreign country or a colony or dependency thereof; (c) Under the laws of any State, dependency, or insular possession of the United States; provided, first, that such other corporation is not engaged in the general business of buying or selling goods, wares, merchandise, or commodities in the United States; and second, that it is not transact- ing any business in the United States except such as is incidental to its international or foreign business. Except with the approval of the Federal Reserve Board, no Corpora- tion shall invest an amount in excess of 15 per cent, of its capital and surplus in the stock of any corporation engaged in t/he business of banking, or an amount in excess of 10 per cent, of its capital and surplus in the stock of any other kind of corporation. No Corporation shall purchase any stock in any other corporation organized under the terms of section 25 (a) or under thte laws of any State, which is in substantial competition therewith, or which holds stock or certificates of ownership in corporations which are in sub- 323 stantial competition with the purchasing Corporation. This restriction, however, does not apply to corporations organized under foreign laws. X. Branches. No Corporation shall establish any branches except with the approval of the Federal Reserve Board, and in no case shall any branch be established in the United States. XI. Issue of Debentures, Bonds, and Promissory Notes. Approval of the Federal Reserve Board. — No Corporation shall make any public or private issue of its debentures, bonds, notes, or other such obligations without the approval of the Federal Reserve Board, but this restriction shall not apply to notes issued by the Corporation in borrowing from banks or bankers for temporary purposes not to exceed one year. The approval of the Federal Reserve Board will be based solely upon the right of the Corporation to make the issue under the terms of this regulation and shall not be understood in any way to imply that the Federal Reserve Board has approved or passed upon the merits of such obligations as an investment. The Federal Reserve Board will consider the general character and scope of the business of the Corporation in determining the amount of debentures, bonds, notes or other such obligations of the Corporation which may be issued by it. Application. — Every application for the approval of any such issue by a Corporation shall be accompanied by (1) a statement of the condition of the Corporation in such form and as of such date as the Federal Reserve Board may require; (2) a detailed list of the securi- ties by which it Is proposed to secure such issue, stating their maturi- ties, indorsements, guaranties, or collateral, if any, and in general terms the nature of the transaction or transactions upon which they were based; and (3) such other data as the Federal Reserve Board may from time to time require. Advertisements. — No circular, letter, or other document advertising the issue of the obligations of a Corporation shall state or contain any reference to the fact that the Federal Reserve Board has granted its approval of the issue to which the advertisement relates. This requirement will be enforced strictly in order that there may be no possibility of the public's misconstruing such a reference to be an approval by the Federal Reserve Board of the merits or desirability of the obligations as an investment. XII. Sale of Foreign Securities. Approval of the Federal Reserve Board. — No Corporation shall offer for sale any foreign securities with its indorsement or guaranty, 324 except with the approval of the Federal Reserve Board, but such approval will be based solely upon the right of the Corporation to make such a sale under the terms of this regulation and shall not be understood in any way to imply that the Federal Reserve Board has approved or passed upon the merits of such securities as an investment. Application. — Every application for the approval of such sale shall be accompanied by a statement of the character and amount of the securities proposed to be sold, their indorsements, guaranties, or col- lateral, if any, and such other data as the Federal Reserve Board may from time to time require. Advertisements. — No circular, letter, or other document advertising the sale of foreign securities by a Corporation with its indorsement or guaranty shall state or contain any reference to the fact that the Federal Reserve Board has granted its approval of the sale of the securities to which the advertisement relates. XIII. Acceptances. Kinds. — Any Corporation may accept drafts and bills of exchange drawn upon it which grow out of transactions involving the importa- tion or exportation of goods, provided, however, that except with the approval of the Federal Reserve Board, and subject to such limitations as it may prescribe, no Corporation shall exercise its power to accept drafts or bills of exchange if at the time such drafts or bills are pre- sented for acceptance it has outstanding any debentures, bonds, notes, or other such obligations issued by it. Maturity. — No Corporation shall accept any draft or bill of exchange with a maturity in excess of six months except with the approval of the Federal Reserve Board. Limitations. — (1) Individual drawers: No acceptances shall be made for the account of any one drawer in an amount aggregating at any time in excess of 10 per cent, of the subscribed capital and surplus of the Corporation, unless the transaction be fully secured or repre- sents an exportation or importation of commodities and is guaranteed by a bank or banker of undoubted solvency. (2) Aggregates: When- ever the aggregate of acceptances outstanding at any time (a) exceeds the amount of the subscribed capital and surplus, 50 per cent, of all the acceptances in excess of the amount shall be fully secured; or (6) exceeds twice the amount of the subscribed capital and surplus, all the acceptances outstanding in excess of such amount shall be fully secured. (The Corporation shall elect whichever requirement (a) or (b) calls for the smaller amount of secured acceptances.) Reserves. — Against all acceptances outstanding which mature in 30 days or less a reserve of at least 15 per cent, shall be maintained, and against all acceptances outstanding which mature in more than 325 30 days a reserve of at least 3 per cent, shall be maintained. Reserves against acceptances must be in liquid assets of any or all of the following kinds: (1) cash; (2) balances with other banks; (3) bankers' acceptances; and (4) such securities as the Federal Reserve Bo^rd may from time to time permit. XIV. Deposits. In the United States. — No Corporation shall receive in the United States any deposits except such as are incidental to or for the purpose of carrying out transactions in foreign countries or dependencies of the United States where the Corporation has established agencies, branches, or where it operates through the ownership or control of subsidiary corporations. Deposits! of this character may be made by individuals, firms, banks, or other corporations, whether foreign or domestic, and may be time deposits or on demand. Outside the United States. — Outside the United States a Corporation may receive deposits of any kind from individuals, firms, banks, or other corporations, provided, however, that if such Corporation has any of its bonds, debentures, or other such obligations outstanding it may receive abroad only such deposits as are incidental to the conduct of its exchange, discount, or loan operations. Reserves. — Against all deposits received in the United States a re- serve of not less than 13 per cent, must be maintained. This reserve may consist of cash in vault, a balance with the Federal Reserve Bank of the district in which the head office of the Corporation is located, or a balance with any member bank. Against all deposits received abroad the Corporation shall maintain such reserves as may be required by local laws and by the dictates of sound business, judg- ment and banking principles. XV. General Limitations and Restrictions. Liabilities of one borroioer. — The total liabilities to a Corporation of any person, company, firm, or corporation for money borrowed, in- cluding in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed 10 per cent, of the amount of its subscribed capital and surplus, except with the approval of the Federal Reserve Board: Provided, however, That the discount of bills of exchange drawn in good faith against actually existing values and the discount of commercial or business paper actually owned by the person negotiating the same shall not be considered as money borrowed within the meaning of this paragraph. The liability of a customer on account of an acceptance made by the Corporation for his account is not a liability for money borrowed 326 •within the meaning of this paragraph unless and until he fails to place the Corporation in funds to cover the payment of the acceptance at maturity or unless the Corporation itself holds the acceptance. Aggregate liabilities of the Corporation. — The aggregate of the Corporation's liabilities outstanding on account of acceptances, average deposits, domestic and foreign, debentures, bonds, notes, guaranties, indorsements, and other such obligations shall not exceed at any one time ten times the amount of the Corporation's subscribed capital and surplus except with the approval of the Federal Reserve Board. In determining the amount of the liabilities within the meaning of this paragraph, indorsements of bills of exchange having not more than six months to run, drawn and accepted by others than the Corporation, shall not be included. Operations abroad. — Except as otherwise provided in the law and these regulations, a Corporation may exercise abroad not only the powers specifically set forth in the law but also such incidental powers as may be usual in the determination of the Federal Reserve Board in connection with the transaction of the business of banking or other financial operations in the countries in which it shall tran- sact business. In the exercise of any of these powers abroad a Cor- poration must be guided by the laws of the country in which it is operating and by sound business judgment and banking principles. XVI. Management. The directors, officers, or employees of a Corporation shall exercise their rights and perform their duties as directors, officers, or em- ployees, with due regard to both the letter and the spirit of the law and these regulations. For the purpose of these regulations the Cor- poration shall, of course, be responsible for all acts of omission or commission of any of its directors, officers, employees, or representa- tives in the conduct of their official duties. The character of the management of a Corporation and its general attitude toward the purpose and spirit of the law and these regulations will be considered by the Federal Reserve Board in acting upon any application made under the terms of these regulations. XVII. Reports and Examinations. Reports. — Each Corporation shall make at least two reports an- nually to the Federal, Reserve Board at such times and in such form as it may require. Examinations. — Each Corporation shall be examined at least once a year by examiners appointed by the Federal Reserve Board. The cost of examinations shall be paid by the Corporation examined. 327 H XVIII. Amendments to Regulations. These regulations are subject to amendment by the Federal Reserve Board from time to time, provided, however, that no such amendment shall prejudice obligations undertaken in good faith under regulations in effect at the time they were assumed. § 298. Maintenance of Standard of Value — Parity of Forms of Money — Gold Reserve.— All provisions of law inconsistent with or superseded by any of the provisions of this Act are to that extent and to that extent only hereby repealed : Provided, Nothing in this Act contained shall be construed to repeal the parity provision or provisions contained in an Act approved March fourteenth, nine- teen hundred entitled "An Act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other* purposes," and the Secretary of the Treasury may for the purpose of maintaining such parity and to strengthen the gold reserve, borrow gold on the security of United States bonds authorized by section two of the Act last referred to or for one-year gold notes bearing interest at a rate of not to exceed three per centum per annum, or sell the same if necessary to obtain gold. When the funds of the Treasury on hand justify, he may purchase and re- tire such outstanding bonds and notes. (Sec. 26, Act 1913.) § 299. Emergency Currency.— Sec. 27, of Act Dec. 23, 1913, as amended by Act August 4, 1914, which made several changes in the Act of May 30, 1908, known as the "Aldrich-Vreeland Act" and extended the provisions of that Act to June 30, 1915, has expired by limitation. § 300. Reduction of Capital Stock of National Banks. — See § 29, page 43, Part I. § 301. Saving Clause. — If any clause, sentence, paragraph, or part of this Act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the remainder of this Act, but shall be confined in its operation to the clause, sentence, paragraph, or 328 part thereof directly involved in the controversy in which such judgment shall have been rendered. (Sec. 29, Act Dec. 23, 1913.) § 302. Reservation of Right to Amend, Alter, or Repeal. — The right to amend, alter, or repeal this Act is hereby expressly reserved. (Sec. 30, Act Dec. 23, 1913.) § 303. Opinions of Counsel of Board on Negotiable Instru- ments, Law, etc. — The following are short digests of opinions by the Counsel of the Federal Reserve Board construing the Nego- tiable Instruments, Law, or affecting only National banks. Negotiability of Bills of Exchange. — Negotiability of a bill of ex- change is not affected by provisions which waive demand, notice, and protest, which waive homestead exemption rights; and which provide for the costs of collection and attorney's fees. (Opinion of Counsel of Board, April 13, 1916.) A bill, however, made payable with "collection charges" is non- negotiable while one payable with "exchange" is negotiable. (Opinion, of Counsel of Board, Oct. 8, 1917.) Acceptances — Where Payable. — An acceptance to pay at a particu- lar place different from the residence of the acceptor is a general ac- ceptance, unless it expressly states that the bill is to be paid there and not elsewhere, and does not render the bill non-negotiable. (Opin- ions of Counsel of Board, Feb. 27, 1917, and Dec. 20, 1918.) "WArvES of Demand, Notice axd Protest. — The acceptor of a bill of exchange is the principal debtor. The law requires that notice of de- mand and protest be given to parties secondarily liable in case of dishonor. This right to receive notice is a personal one which may be waived by the parties entitled thereto — that is, the drawer and in- dorsers; but such waiver has no effect on the acceptor or principal debtor. (Opinion of Counsel of Board, Feb. 13, 1915.) Qualified Acceptances. — A bill of exchange drawn payable "at sight" and accepted payable in three months is a qualified or condi- tional acceptance, and the maker and prior indorsers are released. The instrument in effect becomes the promissory note of the acceptor, and would not come within the exception to Section 5200 as a "bill of exchange" drawn in good faith against actually existing value. (Opinion of Counsel of Board, July 25, 1916.) 329 Presentment of Bills for Acceptance. — The drawer and indorsers of a bill of exchange made payable on a date specified in, the bill are not discharged by a failure to present for acceptance, unless the bill expressly provides that it must be presented for that purpose, or unless it is payable elsewhere than at the residence or place of busi- ness of the drawee. (Opinion of Counsel of Board, Oct. 17, 1916.) Bills Payable With Attorney's Fees or Collection Charge. — While a bill containing a provision for payment of the costs of collection and attorney's fees, if it is dishonored at maturity, is a valid negotiable instrument, a bill drawn for a fixed sum "with collection charges" is not a negotiable instrument unless it is so drawn as to show that no collection charges are to be included unless the bill is dishonored at maturity. (Opinion of Counsel of Board, July 10, 1918.) Ncbes and Bills Rediscounted. — A note or bill rediscounted in good faith by a member bank which is no longer owned or held by the bank need not be included as a liability of the maker to the bank, within the meaning of Section 5200, Revised Statutes. Notes or bills rediscounted under 1 an agreement to repurchase, or which are merely credited to the account of the bank offering them for redis- count, are subject to the limitations of Section 5200. (Opinion of Counsel of Board, August 7, 1918.) Trade Acceptance Providing for Extension of Ttme. — A note or draft containing a provision for an extension of time should not be approved for general use by the, Federal Reserve Board. (Opinion of Counsel of Board, July 25, 1918.) Trade Acceptance Providing for Discount If Paid at Certain Time Before Maturity. — A trade acceptance providing for a fixed discount, if paid at a certain time before maturity, should not be approved for general use by the Federal Reserve Board. (Opinion of Counsel of Board, August 1, 1918.) Sight Drafts Accepted Payable at a Future Date. — A sight draft which is" accepted by the drawee, payable at a future date, is a quali- fied acceptance which the holder may refuse to take, but if such an acceptance is taken by the holder, the drawer and indorsers are re- leased unless tkey have either expressly or impliedly authorized the holder to take a qualified acceptance or unless they subsequently as- sent thereto. (Opinion of Counsel of Board, May 7, 191 J.) Bills Payable to the Order of the Drawee. — A bill made payable to the order of the drawee is not negotiable until the drawee as payee 330 has Indorsed it. When it has been accepted and indorsed by the drawee it is a valid negotiable instrument in the hands of a third party, and the drawer is not released, since the terms of his order have been specifically complied with. (Opinion of Counsel of Board, Dec. 13, 1917.) Drafts Payable With Interest. — A provision in a draft or bill of exchange that it is payable "with interest at the rate of — ■ — ' per cent, per annum after maturity if payment is delayed" does not affect the negotiability of the instrument. (Opinion of Counsel of Board, Feb. 19, 1917.) Usurious Charges by National Banks. — Where a National bank, in addition to' charging interest at the highest legal rate, requires a bor- rower to give an additional note, accept a certificate of deposit for a like amount, and put up such certificate as additional collateral to his entire loan the transaction appears to be usurious. (Opinion of Counsel of Board, March 12, 1917.) National Bank Examinations. — The Comptroller of the Currency instructs National bank examiners to leave with each National bank upon the completion of its examination, a bill covering its assessment for the examination, with instructions that the National banks de- posit with the Federal Reserve Bank of their district, in the name of the Comptroller of the Currency, to the credit of the Treasurer of the United States, the amount of the bill. (Opinion of Counsel of Board, May, 1917.) National Banks as Insurance Agents. — Regulations under which National banks may act as insurance agents and as brokers or agents in making or procuring loans on real estate under the amendment covering such action passed by Congress in 1916, issued from the office of the Comptroller of the Currency. No such bank shall in any case guarantee either the principal or interest of any such loans or assume or guarantee the payment of any premium on insurance policies issued through its agency by its principal or guarantee the truth of any statement made by an assured in filing his application for Insurance (Opinion of Counsel of Board, March, 1917.) Loans on Improved Farm Lands. — Section 24 authorizes any Na- tional bank to loan on unencumbered and improved farm land up to 50 per cent of its actual value. What proportion of the land used as security must be improved or cultivated must necessarily depend upon" the facts of each case. (Opinion of Counsel of Board, July 19, 1917.) 331 Loans Secubed by Farm Loan Bonds. — A loan on the security of a farm-loan bond should not be classified as a loan on real estate, and National banks may legally discount notes secured by such bonds. (Opinion of Counsel of Board, June 10, 1918.) Section 5200. — If Bank A, which has discounted a note for one of its customers later sells that note without recourse to Bank B, such note becomes subject to the limitations imposed by Section 5200 so far as Bank B is concerned. (Opinion of Counsel of Board, Dec. 12, 1917.) PART THREE Acts of a General Nature, Sections of Eevised Statutes and Eegulations, Not Included in Parts I and II, Affecting National Banks. CHAPTER I. The Clayton Act and the Kern Amendment.* Section 304. Passage and Title of Act. 305. Interlocking Directors — Banks with Total Resources of Over Five Killion — Private Bankers. 306. Interlocking Directors — Cities of Over Two Hundred Thousand — Exceptions to Act. 307. The Kern Amendment — Exceptions to Act — Substan- tial Competition. 308. Eligibility to Serve Out Term. 309. Federal Reserve Board to Enforce Compliance with Act When Applicable to Banks. 310. Method of Enforcing Compliance — Service of Com- plaint — Right to Be Heard — Order to Cease Viola- tions. 311. Application by Board to Circuit Court of Appeals to Enforce Order — Procedure Before Court. 312. Appeal by Injured Party to Circuit Court of Appeals. 313. Exclusive Jurisdiction of Circuit Court of Appeals. 314. Expedition of Court Proceedings. 315. Method of Serving Complaints, Orders, etc. § 304. Passage and Title of Act.— An Act entitled "An Act to supplement existing laws against unlawful restraints and mon- * The following Is that part of the Clayton Anti-trust Act, as amended, which relates to banks, banking associations and trust companies. 333 334 opolies, and for other purposes" was approved by Congress, Oc- tober 15, 1914. § 305. Interlocking Directors — Banks with Total Resources of Over Five Million — Private Bankers. — That from and after two years from the date of the approval of this Act no person shall at the same time be a director or other officer or employee of more than one bank, banking association or trust company, organized or operating under the laws of the United States, either of which has deposits, capital, surplus, and undivided profits aggregating more than $5,000,000 ; and no private banker or person who is a director in any bank or trust company, organized and operating under the laws of a State, having deposits, capital, surplus, and undivided profits aggregating more than $5,000,000, shall be eligible to be a director in any bank or banking association organized or operating under the laws of the United States. The eligibility of a director, officer, or employee under the foregoing provisions shall be deter- mined by the average amount of deposits, capital, surplus, and un- divided profits as shown in the official statements of such bank, banking association, or trust company filed as provided by law during the fiscal year next preceding the date set for the annual election of directors, and when a director, officer, or employee has been elected or selected in accordance with the provisions of this Act it shall be lawful for him to continue as such for one year thereafter under said election or employment. (Sec. 8, Act Oct. 15, 1914.) Status of State Member Banks. — State banks or trust companies may have common officers and directors with other State banks and trust companies whether or not any of such banks or trust companies are members of the Federal Reserve System. (Opinion of Attorney General, Sept. 10, 1917.) Savings and Loan Associations. — A savings' and loan association Is a bank within the meaning of that part of Section 8 of the Clayton Act which relates to interlocking bank directorates. (Opinion of Counsel of Board, Feb. 3, 1916.) So is a Morris plan bank. (Informal Ruling of Board, June 13, 1917.) 335 Non-Member Banks in District of Columbia. — A State bank or trust company which is incorporated under the laws of a State, but which is doing business in the District of Columbia, subject to limitations and restrictions imposed by the acts of Congress, is subject to the provisions of Section 8 of the Clayton Act which relate to banks organ- ized or operating under the laws of the United States. (Opinion of Counsel of Board, Sept. 12, 1916; opinion of Attorney General, Sept. 10, 1917.) Definition and Interpretation of Term "Private Banker." — The Board interprets the term "private banker" to include partnerships or individuals who are engaged in the banking business, as that term is generally understood, — including those partnerships and individuals who solicit or receive deposits subject to check, who do a foreign exchange, acceptance, loan or discount business, or who purchase and sell and distribute issues of securities by which capital is fur- (nished for business or public enterprises. The term "private banker" is interpreted not to include the ordinary stock, note, or commodity broker, unless a substantial proportion of his profits are derived from, or a substantial part of his business con- sists in, one or more of the banking activities described, nor is it in- terpreted to include partnerships or individuals using only their own funds in making loans of investments. No private banker whose partnership* or firm assets aggregate more than five million dollars is eligible, under the terms of the Clayton Act, to serve as a director of any member bank, and no private banker, regardless of the amount of partnership or firm assets, is eligible to serve as a director, other officer or employee of any member bank lo- cated in a city of more than 200,000 inhabitants, if such firm or partner- ship is located in the same city. The Kern amendment to the Clayton Act does not authorize the Fed- eral Reserve Board to grant permission to such private bankers to serve as officers or directors of a member bank even though it appears that they are not in substantial competition with such member bank. (Announcement of Board, Oct. 6, 1916.) Large National Bank and Small State Bank. — Clayton Act does not prohibit an officer or director of a National bank with total assets exceeding $5,000,000 from serving at the same time as an officer and director in a State bank or trust company with total assets of less than $5,000,000, provided the banks in question are not both located in the same city of 200,000 or more inhabitants. (Informal Ruling of Board, Nov. 1, 1915.) 336 Large State Bank and National Bank. — Clayton Act prohibits a person who is a director of a State bank with resources of more than $5,000,000 from serving at the same time as a director of a National bank, regardless of size or location of the National bank. But see Kern amendment. (Informal Ruling of Board, March 4, 1916.) Large Trust Company and Small National Bank. — Under Clayton Act a person may not serve as a director of a trust company with a capital of $1,000,000 and total resources of over $5,000,000 in a city of over 200,000 inhabitants and at the same time as a director and officer of a National bank having a capital of $50,000 and total re- sources of $2,000,000 in a municipality of less than 20,000 inhabitants. Under the Kern amendment, however, a person may, with the consent of the Federal Reserve Board, serve both institutions provided the trust company is not in substantial competition with the member bank. (Informal Ruling of Board, June 8, 1916.) Two Small National Banks. — There is nothing in the Clayton Act which prohibits a person from serving at the same time as a director in two National banks located in a city of less than 200,000 inhabitants provided neither bank has deposits, capital, surplus, and undivided profits aggregating more than $5,000,000. (Informal Ruling of Board, July 6, 1916.) Fiscal Year. — "Fiscal Year" as used in paragraph 1, Section 8, of the Clayton Act refers to the fiscal year of the institution of which the person in question is a director. (Informal Ruling of Board, Sept. 13, 1916.) § 306. Interlocking Directors — Cities of Over Two Hundred Thousand — Exceptions to Act. — No bank, banking association or trust company, organized or operating under the laws of the United States in any city or incorporated town or village of more than two hundred thousand inhabitants, as shown by the last preceding decennial census of the United States, shall have as a director or other officer or employee any private banker or any director or other 1 officer or employee of any other bank, banking association or trust company located in the same place: Provided, That nothing in this section shall apply to mutual savings banks not having a capital stock represented by shares: Provided further, That a di- rector or other officer or employee of such bank, banking associa- tion, or trust company maj be a director or other office or em- 337 ployee of not more than one other bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in the other: And provided further, That nothing contained in this section shall for- bid a director of Class A of a Federal reserve bank, as defined in the Federal Beserve Act, from being an officer or director or both an officer and director in one member bank. (See. 8, Act Oct. 15, 1914.) Interpretation of Clayton Antitrust Act. — All three paragraphs of Section 8 of the Clayton Antitrust Act, relating to interlocking directo- rates, become effective from and after two years from the date of the approval of that act — that is, October 15, 1916. This statute, being a Federal statute, can not relate to the qualifica- tions of directors of State banks or trust companies, but merely pro- vides that persons who are private bankers, or directors, officers, or employes of such banks or trust companies, shall, under certain condi- tions, be ineligible to serve as directors, officers, or employes of banks organized or operating under the laws of the United States. (Opinion of Counsel of Board, Nov. 21, 1914.) Provisos to Clayton Act Cumulative. — An officer, director, or em- ploye of a member bank, who would otherwise come within the pro- hibitory language of the Clayton Act, may serve as a director, officer, or employe of one other bank where the entire capital of one is owned by stockholders in the other, and at the same time, under the Kern amendment, may, with the consent of the Federal Reserve Board, serve as an officer, director, or employe of not more than two other banks which are not in substantial competition with the member bank. (Opinion of Counsel of Board, July 13, 1916.) Memder of Bank's Executive Committee. — Held that under the Clay- ton Act a person ineligible as a director may not serve as a member of a bank's executive committee. Prohibition is not only against di- rectors but "other officers or employes." (Informal Ruling of Board, Nov. 13, 1916.) Mutual Savings Bank Without Capital Stock. — Clayton Act does not prohibit a person, from serving at the same time as a director of a mutual savings bank not having a capital stock represented by shares and as a director of a member bank, regardless of whether the two institutions are in substantial competition. (Informal Ruling of Board, July 1, 1916.) 22 338 Banks in Suburban Districts. — Any bank located within the cor- porate limits of any city of more than 200,000 inhabitants comes within the prohibitions of the act, even though it be located in a suburban district. (Informal Ruling of Board, April, 1919.) Advisory Committee of Member Banks. — The members of an ad- visory committee of a National bank are not necessarily officers, di- rectors or employes of such bank within the meaning of Section 8 of the Clayton Antitrust Act. They can not be directors unless elected by the shareholders; and whether they are officers or employes depends entirely on the scope of the rights and duties assigned to them by the board of directors. (Opinion of Counsel of Board, Jan. 22, 1916.) § 307. The Kern Amendment — Exceptions to Act* — Substantial Competition.— 'And provided further, That nothing in this Act shall prohibit any officer, director, or employee of any member bank or class A director of a Federal reserve bank, who shall first procure the consent of the Federal Eeserve Board, which board is hereby authorized, at its discretion, to grant, withhold, or revoke such consent, from being an officer, director, or employee of not more than two other banks, banking associations, or trust compa- nies, whether organized under the laws of the United States or any State, if such other bank, banking association, or trust company is not in substantial competition with such member bank. The consent of the Federal Eeserve Board may be procured be- fore the person applying therefor has been elected as a class A director of a Federal reserve bank or as a director of any member bank. (Sec. 8, Act Oct. 15, 1914, as amended by Act May 15, 1916.) The duty imposed upon the Federal Reserve Board in passing upon any application made under authority of this amendment is to de- termine whether or not the two banks in question (or either of them) are in substantial competition with the member bank. If both are nonmember banks the Act does not require that they shall not be in substantial competition with each other. * For exception to Act in case of member banks and corporations transacting foreign business in which member banks hold stock, see Sec. 25, Federal Reserve Act, § 296. 339 It should be borne in mind that the Act does not vest an arbitrary discretion in the Board to permit the same person to serve on the board of directors of any two or more banks, when such banks come within the restrictive language of the Act as originally passed; but it merely confers authority upon the Board to permit interlocking di- rectorates when such banks are not in substantial competition, within the meaning of the Act. Substantial Competition. — It is manifest that no fixed rule can be prescribed by which this question can be automatically determined. The facts in each case must be carefully considered and it is the duty of the board to withhold its consent in any case in which it would defeat the purposes of the Act to permit the same person to serve as an officer, director, or employe of more than one bank. If the two banks in question are not competitors in any respect, no question arises. If they do compete, the very difficult question arises whether or not the competition is "substantial." In general, two banks coming within the prohibition of the original Act would be deemed to be in substantial competition within the mean- ing of the language used in the amendment if the business engaged in by such banks under natural and normal conditions conflicts or interferes, or if the cessation of competition between the two would be injurious to customers, or would-be customers, or would probably result in appreciably lessening the volume of business or kinds of business of either institution. It is realized that some difficulty will be experienced in the appli- cation of this test. It is necessary that consideration should be given — (1) To the size in aggregate resources of banks involved. (2) To the character of business engaged in, i. e., the extent of com- mercial business and extent of purely investment or trust company business of the two institutions. (3) "Whether the operations of the two banks cover the same geo- graphical territory. (4) Whether the two banks actually compete to any appreciable ex- tent in any important activity, for example, (a) in soliciting deposits on demand or on time from other banks or individuals, (&) in the purchase or sale of commercial paper or other securities, (c) in the purchase or sale of foreign exchange, (d) in soliciting trusteeships, etc. (Instructions of Board, July 6, 1916.) Forms for use in obtaining the consent of the Federal Reserve Board will be furnished by the Board upon request. These forms when properly executed should be filed with the Federal Reserve Agent of the district in which the applicant resides. 340 Statement by Board, Sept. 19, 1916. — The Board has considered each case on its own merits, but has taken the general position that the mere purchase by two banks of commercial paper in the open market, or the making of time or demand loans on collateral securities having a wide market, or the purchasing of such securities, need not neces- sarily or invariably be considered as indicating "substantial competi- tion" within the meaning of the Kern Amendment. It is, however, the view of the Board that "substantial competition" must be held to exist in cases where the resources of the banks are of such magni- tude, or of such character that the ability of the banks jointly to grant or to withhold credit, or otherwise to influence the conditions under which credit may be obtained, might constitute them a dominant factor in the general loan market, even though the character of the deposits carried by the institutions in question might be quite different. All applications granted are, in accordance with the terms of the Kern amendment, subject to revocation by the Federal Reserve Board. Duration of Permits. — Where the Federal Reserve Board has once granted permission to a person to serve at the same time as a di- rector of two or more institutions under the provisions of the Kern amendment to Section 8 of the Clayton Act, that permission is con- tinuing and good until revoked by the Federal Reserve Board. (In- formal Ruling of Board, Oct., 1917.) § 308. Eligibility to Serve Out Term. — When any person elec- ted or chosen as a director or officer or selected as an employee of any bank or other corporation subject to the provisions of this Act is eligible at the time of Ins election or selection to act for such bank or other corporation in such capacity his eligibility to act in such capacity shall not be affected and he shall not become or be deemed amenable to any of the provisions hereof by reason of any change in the affairs of such bank or other corporation from what- soever case, whether specifically excepted by any of the provisions hereof or not, until the expiration of one year from the date of Ins election or employment. (Sec. 8, Act Oct. 15, 1914.) The obvious purpose of this provision is to permit a director or of- ficer to serve out his term where, at the time of his election, the bank has aggregate resources of less than $5,000,000 or the city has less than 200,000 inhabitants, but during the succeeding year the resources are increased to an amount In excess of $5,000,000 or the population becomes more than 200,000. 341 § 309. Federal Eeserve Board to Enforce Compliance with Act When Applicable to Banks. — That authority to enforce compli- ance with sections two, three, seven and eight of this Act by the persons respectively subject thereto is hereby vested : in the Inter- state Commerce Commission where applicable to common carriers, in the Federal Eeserve Board where applicable to banks, banking associations and trust companies, and in the Federal Trade Com- mission where applicable to all other character of commerce, to be exercised as follows. (Sec. 11, Act Oct. 15, 1914.) § 310. Method of Enforcing Compliance — Service of Compliant — Right to Be Heard — Order to Cease Violations.— 'Whenever the commission or board vested with jurisdiction thereof shall have reason to believe that any person is violating or has violated any of the provisions of sections two, three, seven and eight of this Act, it shall issue and serve upon such person a complaint stating its charges in that respect, and containing a notice of a hearing upon a day and at a place therein fixed at least thirty days after the service of said complaint. The person so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the commission or board requiring such person to cease and desist from the violation of the law so charged in said complaint. Any person may make application, and upon good cause shown may be allowed by the commission or board, to intervene and appear in said proceeding by counsel or in person. The testimony in any such proceeding shall be reduced to writing and filed in the office of the commission or board. If upon such hearing the commission or board, as the case may be, shall be of the opinion that any of the provisions of said sections have been or are being violated, it shall make a report in writing in which it shall state its findings as to the facts, and shall issue and cause to be served on such person an order requiring such person to cease and desist from such violations, and divest itself of the stock held or rid itself of the directors chosen contrary to the provisions of sections seven and eight of this Act, if any there be, in the manner and within the time fixed by said order. Until a transcript of the record in such hearing shall have been 342 filed in a circuit court of appeals of the United States, as herein- after provided, the commission or board may at any time, upon such notice and in such manner as it shall deem proper, modify or set aside, in whole or in part, any report or any order made or issued by it under this section. (Sec. 11, Act Oct. 15, 1914.) Enforcement of Provisions of Act. — Section 8 of the Clayton Act as to interlocking bank directorates does not attach any penalty for non- compliance with its provisions. Section 11, however, authorizes the Federal Reserve Board to serve a complaint upon any person violating the provisions of Section 8 with notice of hearing. Board may after hearing serve an order requiring the person complained of to desist from such violations and resign the directorships held contrary to law. Failure to obey the order may be followed by application to the Circuit Court of Appeals of the United States for its enforcement. (Informal Ruling of Board, Oct. 4, 1916.) § 311. Application by Board to Circuit Court of Appeals to En- force Order — Procedure Before Court. — If such person fails or neglects to obey such order of the commission or board while the same is in effect, the commission or board may apply to the circuit court of appeals of the United States, within any circuit where the violation complained of was or is being committed or where such person resides or carries on business, for the enforcement of its order, and shall certify and file with its application a transcript of the entire record in the proceeding, including all the testimony taken and the report and order of the commission or board. Upon such filing of the application and transcipt the court shall cause notice thereof to be served upon such person and thereupon shall have jurisdiction of the proceeding and of the question determined therein, and shall have power to make and enter upon the plead- ings, testimony, and proceedings set forth in such transcript a de- cree affirming, modifying, or setting aside the order of the com- mission or board. The findings of the commission or board as to the facts, if supported by testimony, shall be conclusive. If either party shall apply to the court for leave to adduce additional evi- dence, and shall show to the satisfaction of the court that such ad- ditional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding before 343 the commission or board, the court may order such additional evi- dence to be taken before the commission or board and to be adduced upon the hearing in such manner and upon such terms and condi- tions as to the court may seem proper. The commission or board may modify its findings as to the facts, or make new findings, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by testimony, shall be conclusive, and its recommendation, if any, for the modification or setting aside of its original order, with the return of such addi- tional evidence. The judgment and decree of the court shall be final, except that the same shall be subject to review by the Su- preme Court upon certiorari as provided in section two hundred and forty of the Judicial Code. (Sec. 11, Act Oct. 15, 1914.) § 312. Appeal by Injured Party to Circuit Court of Appeals. — Any party required by such order of the commission or board to cease and desist from a violation charged may obtain a review of such order in said circuit court of appeals by filing in the court a written petition praying that the order of the commission or board be set aside. A copy of such petition shall be forthwith served upon the commission or board, and thereupon the commission or board forthwith shall certify and file in the court a transcript of the record as hereinbefore provided. Upon the filing of the transcript the court shall have the same jurisdiction to affirm, set aside, or modify the order of the commission or board as in the case of an application by the commission or board for the enforcement of its order, and the findings of the commission or board as to the facts, if supported by testimony, shall in like manner be conclusive. (Sec. 11, Act Oct. 15, 1914.) § 313. Exclusive Jurisdiction of Circuit Court of Appeals. — The jurisdiction of the circuit court of appeals of the United States to enforce, set aside, or modify orders of the commission or board shall be exclusive. (Sec. 11, Act Oct. 15, 1914.) § 314. Expedition of Court Proceedings.— Such proceedings in the circuit court of appeals shall be given precedence over other 344 cases pending therein, and shall be in every way expedited. No order of the commission or board or the judgment of the court to enforce the same shall in any wise relieve or absolve any per- son from any liability under the antitrust Acts. (Sec. 11, Act Oct. 15, 1914.) § 315. Method of Serving Complaints, Orders, etc. — Com- plaints, orders, and other processes of the commission or board under this section may be served by anyone duly authorized by the commission or board, either (a) by delivering a copy thereof to the person to be served, or to a member of the partnership to be served, or to the president, secretary, or other executive officer or a director of the corporation to be served; or (b) by leaving a copy thereof at the principal office or place of business of such person; or (c) by registering and mailing a copy thereof addressed to such person at his principal office or place of business. The verified return by the person so serving said complaint, order, or other process setting forth the manner of said service shall be proof of the same, and the return post-office receipt for said com- plaint, order, or other process registered and mailed as aforesaid shall be proof of the service of the same. (Sec. 11, Act Oct. 15, 1914.) CHAPTER II. Government Depositories. Section 316. Duty of Disbursing Officers. 317. Provisions for Deposit by Certain Postmasters. 318. Misappropriating Postal Funds or Property — Pun- ishment for — Prima Facie Evidence — Deposits, etc., Permitted. 319. Deposit of Proceeds of Sale of Liberty Bonds. 320. Eeserve Requirements not Applicable to Government Deposits. 321. Government Deposits in Federal Land Banks. 322. Regular and Special Depositories. 323. Penalty for Unauthorized Deposit of Public Money. 324. Penalty for Unauthorized Receipt or Use of Public Money. § 316. Duty of Disbursing Officers. — It shall be the duty of every disbursing officer having any public money intrusted to him for disbursement to deposit the same with the Treasurer or some one of the assistant treasurers of the United States, and to draw for the same only as it may be required for payments to be made by him in pursuance of law; and draw for the same only in favor of the persons to whom payment is made, and all transfers from the Treasurer of the United States to a disbursing officer shall be by draft or warrant on the Treasury or an assistant treasurer of the United States. In places, however, where there is no Treas- urer or assistant treasurer, the Secretary of the Treasury may, when he deems it essential to the public interest, specially author- ize in writing the deposit of such public money in any other public depository, or, in writing, authorize the same to be kept in any other manner, and under such rules and regulations as he may deem most safe and effectual to facilitate the payments to public 345 346 creditors. (Rev. Stat. U. S. Sec. 3620, as amended by Act Feb. 27, 1877, Sec. 1; 19 Stat. U. S., 249.) [The Act of March 2, 1907, 34 Stat. U. S., 1166 authorizes army of- ficers to keep in their possession restricted amounts of public funds.] It will be noted that such deposits can not be made with banks in places where there is a Subtreasury. Second, That the designation of a member bank as a Government Depositary under Sec. 5153, R. S., as amended by Sec. 15 of the Federal Reserve Act, does not author- ize it to receive such deposits, but in order to become a Depositary for such funds, a Regular Depositary must be further designated specially for the purpose. Third, The provision that the Secretary may "in writing authorize Disbursing Officers' Funds to be kept in any other manner, as he may deem most safe and effectual to facilitate the payments to public creditors;" up to the present time has only been used for Disbursing Officers in out of the way places, permitting them to hold their own funds at their own risk, but generally when so situated disbursing officers keep their funds in some Depositary in New York, and local banks are glad to secure eastern exchange by cashing their New York drafts. § 317. Provisions for Deposit by Certain Postmasters. — Any postmaster, having public money belonging to the Government, at an office within a city or town where there is no Treasurer or assistant treasurer of the United States, or designated depositary, may deposit the same temporarily, at his own risk and in his offi- cial capacity, in any National or State bank in the State in which the said postmaster resides, or in which his office is located, or within a reasonable radius of his post-office in an adjacent State, but no authority or permission is or shall be given for the pay- ment to or receipt by a postmaster or any other person, of interest, directly or indirectly, on any deposit made as herein described. (Rev. Stat. IT. S. Sec. 3847, as amended by Act May 27, 1908; 35 Stat. U. S., 415.) Every Postmaster who makes any such deposits shall report quarterly to the Postmaster General the name of the bank where such deposits have been made, and also state the amount which may stand at the time to his credit. It will be seen from this provision of the law that arrangements for 347 deposits referred to in this section are to be made, not with the Post- master-General, but with the local Postmaster. § 318. Misappropriating Postal Funds or Property — Punish- ment for — Prima Facie Evidence — Deposits, etc., Permitted. — Whoever, being a postmaster or other person employed in or con- nected with any branch of the postal service, shall loan, use, pledge, hypothecate, or convert to his own use, or shall deposit in any bank or exchange for other funds or property, except as authorized by law, any money or property coming, into his hands or under his control in any manner whatever, in the execution or under color of his office, employment, or service, whether the same shall be the money or property of the United States or not; or shall fail or refuse to remit to or deposit in the Treasury of the United States or in a designated depository, or to account for or turn over to the proper officer or agent, any such money or property, when re- quired so to do by law or the regulations of the Post Office Depart- ment, or upon demand or order of the Postmaster General, either directly or through a duly authorized officer or agent, shall be deemed guilty of embezzlement ; and every such person, as well as every other person advising or knowingly participating therein, shall be fined in a sum equal to the amount or value of the money or property embezzled, or imprisoned not more than ten years, or both. Any failure to produce or to pay over any such money or property, when required so to do as above provided, shall be taken to be prima facie evidence of such embezzlement; and upon the trial of any indictment against any person for such embezzlement, it shall be prima facie evidence of a balance against him to pro- duce a transcript from the account books of the Auditor for the Post Office Department. But nothing herein shall be construed to prohibit any postmaster depositing, under the direction of the. Postmaster General, in a National bank designated by the Secre- tary of the Treasury for that purpose, to his own credit as post- master, any funds in his charge, nor prevent his negotiating drafts or other evidences of debt through such bank, or through United States disbursing officers, or otherwise, when instructed or required so to do by the Postmaster General, for the purpose of remitting 348 surplus funds from one post office to another. (Act March 4, 1909, Sec. 225; 35 Stat. U. S., 1133.) The Postoffice Department has found very little occasion for availing itself of this last-mentioned provision, except that in various sections of the country designated Depositaries have been authorized to receive surplus money-order funds for the convenience of local Postmasters, as otherwise it is necessary for the Postmasters to purchase exchange to transfer such funds. These deposits are reported to the Treasury De- partment like other deposits, and the latter credits the Postoffice De- partment. § 319. Deposit of Proceeds of Sale of Liberty Bonds. — That the Secretary of the Treasury, in his discretion, is hereby authorized to deposit in such banks and trust companies as he may designate the proceeds, or any part thereof, arising from the sale of the bonds and certificates of indebtedness authorized by this Act, or the bonds previously authorized as described in section four of this Act, and such deposits may bear such rate of interest and be subject to such terms and conditions as the Secretary of the Treasury may prescribe: Provided, That the amount so de- posited shall not in any case exceed the amount withdrawn from any such bank or trust company and invested in such bonds or certificates of indebtedness plus the amount so invested by such bank or trust company, and such deposits shall be secured in the manner required for other deposits by section fifty-one hundred and fifty-three, Eevised Statutes, and amendments thereto. (Sec. 7, Act April 24, 1917.) § 320. Reserve Requirements Not Applicable to Government Deposits. — That the provisions of section fifty-one hundred and ninety-one of the Eevised Statutes, as amended by the Federal Eeserve Act and the amendments thereof, with reference to the reserves required to be kept by National banking associations and other member banks of the Federal Eeserve System, shall not apply to deposits of public moneys by the United States in designated depositaries. (Sec. 7, Act April 24, 1917.) See § 280 under Federal Reserve Act. 349 § 321. Government Deposits in Federal Land Banks. — That all Federal land banks and joint stock land banks organized under this Act, when designated for that purpose by the Secretary of the Treasury shall be depositaries of public money, except receipts from customs, under such regulations as may be prescribed by said Secretary; and they may also be employed as financial agents of the Government ; and they shall perform all such reasonable duties, as depositaries of public money and financial agents of the Gov- ernment, as may be required of them. And the Secretary of the Treasury shall require of the Federal land banks and joint stock land banks thus designated satisfactory security, by the deposit of United States bonds or otherwise, for the safekeeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government. No Government funds deposited under the provisions of this section shall be invested in mortgage loans or farm loan bonds. (Sec. 6, Act July 17, 1916; 39 Stat. L., 365.) § 322. Regular and Special Depositaries. — See § 30 under Na- tional Bank Act and § 255 under Federal Reserve Act. Practically all of the following annotations are taken from Treasury- Circular No. 176, dated December 31, 1919, and constitute the regu- lations governing Public Money deposits in regular depositary banks. All previous regulations and instructions inconsistent herewith are superseded. Except as otherwise specifically provided, nothing contained In this circular affects deposits by postmasters to the credit of their official disbursing accounts, the deposit of court funds by United States courts and their officers, or the deposit of Postal Savings funds, in cases where such deposits are not for credit by the depositary in the account of the Treasurer of the United States. Unless specifically extended thereto by the Secretary of the Treasury, nothing contained in this circular applies to or governs the deposit of public moneys in Federal land banks or joint stock landi banks under the act approved July 17, 1916, as amended, or the deposit of public moneys or the payment of Government warrants and checks outside of the continental United States, except to' the extent specifically extended by the Secretary of the Treasury from time to time. The Secretary of the Treasury may withdraw or amend at any time or from time to time any or all of the provisions of this circular. 350 Deposit of Public Moneys. — All public moneys shall bo deposited with the Treasurer of the United States, Federal Reserve Banks and branches, Assistant Treasurers of the United States, and regular National bank depositaries, and, with special depositaries under the act approved September 24, 1917, as amended and supplemented. All deposits of public moneys hereunder (except with such special de- positaries) shall be for credit to the account of the Treasurer of the United States. Classes of Depositaries. — The established policy of the Treasury Department is to designate and maintain balances with regular Na- tional bank depositaries of public moneys only at points where a depositary is necessary to meet the requirements of Government of- ficers for cash for pay-roll or other expenditures, and then only if there is no Federal Reserve Bank or branch located at or near the point. National banks when designated by the Secretary of the Treasury, however, may be depositaries of public moneys with a maximum qualification, for the sole purpose of receiving deposits made by United States courts and their officers, by postmasters, or by other duly authorized Government officers, for credit to their official disbursing accounts elsewhere than with the Treasurer of the United States, provided that such depositaries qualify, before receiv- ing deposits, by pledging as collateral security for such deposits, in- cluding interest thereon, securities of the classes hereinafter described to an amount, taken at the rates provided, at least equal to such deposits. National bank depositaries designated with a maximum qualification for this purpose alone are not thereby authorized to accept any other deposits hereunder. Deposits arising from the pro- ceeds of sale's of bonds, notes, and Treasury certificates of indebtedness of the United States, and the payment of income and profits taxes, may be made from time to time with special depositaries of public moneys under the act of Congress approved September 24, 1917, as amended and supplemented. Other deposits of public moneys are maintained with the several Federal Reserve Banks, pursuant to the provisions of Section 15 of the Federal Reserve Act, as amended. All inactive National bank depositaries are being discontinued, pursuant to action already taken by the Secretary of the Treasury. Regular Depositaries — Cash Deposits. — All cash received by col- lectors of internal revenue, collectors of customs, depository post- masters, and other depositors of public moneys shall be deposited, if the depositor is located in the same city with a Federal Reserve Bank or branch bank, with such Federal Reserve Bank or branch bank, and in other cases with the regular National bank depositary or de- 351 positaries with which the depositor has been making such deposits, unless and until otherwise instructed by the Secretary of the Treasury: Provided, however, That depositors located in the District of Columbia shall make such deposits direct with the Treasurer of the United States. Payments made by postal or express money order shall be handled, subject to collection, in the same mianner as cash. Regular Depositaries — Checks and Drafts. — All checks received by any Government officer are received subject to collection, and in the event that any check can not be collected or is lost or destroyed before collection, appropriate action must be taken by the depositor in the same manner as if no check had been received. Payments made by check are not effective unless and until the check has actually been duly collected and paid. All checks shall be handled through the Federal Reserve Banks. Bank drafts shall be handled in the same manner as checks. Regular Depositaries — Certificates of Deposit. — Certificates of de- posit shall be issued, until further notice, on the following forms: Internal Revenue, Form 15 (National Banks) ; Customs, Form) 1% (National Banks) ; Public Lands, Surveys and Patent Fees, Form 1A (National Banks); Army, Navy, Judiciary, and Indian, Form 1 (Na- tional Banks); Surplus Money Order Funds, Forms 6594 and 6594A; Surplus Postal Funds, Form 6598; Deposits for official checking ac- count with Treasurer of United States, Form 6599; and Sales of War-Savings securities, Form 1312. The original of each certificate of deposit (unless otherwise specifically instructed, as in cases where the funds represented thereby are not to be covered into the Treasury by warrant) shall be transmitted to the Secretary of the Treasury (Division of Public Moneys), through the office of the Treasurer of the United States, with the transcript on Form 17 (National Banks), on which the credit appears. The other certificates of deposit in the set should be disposed of in accordance with the instructions which appear on the certificate, and one copy may be retained by the de- positary for its own records. Federal Reserve Banks and branches shall see that the face of each certificate in any set of certificates of deposit covering in whole or In part items other than cash for which immediate credit is given, bears a legend reading as follows: "This certificate of deposit issued subject to deduction for uncollectible items." It is of the utmost importance that certificates of deposit be properly issued, and in this connection, depositaries should give special attention to two points, viz.: (1) The name and title (if any) of the depositor, as John Doe, receiver of public moneys, »t, in cases where the deposit is made by one person for account of another per- 352 son, John Doe, receiver of public moneys, through Richard Roe; and (2) the account or purpose for which the deposit is received, as Sales of public lands, or Sales of War-Savings securities, with a notation of the series, which should be clearly indicated in order to enable the Treasury Department to classify the deposit and credit the proper receipt account at the same time that the depositary is charged with the amount of the deposit. Depositaries receiving deposits of Internal Revenue receipts are particularly requested to use great care in specifying upon the face of certificates of deposit on Form 15 (Na- tional Banks) deposits of "Income and Profits Taxes" separate and distinct in each case from deposits of Miscellaneous Internal Revenue Collections (formerly called "Ordinary"). It is not necessary, how- ever, to make any further separation of classes of Internal Revenue deposits on the face of certificates of deposit on Form 15 (National Banks). National bank depositaries are not authorized to maintain any collection account for deposits of public moneys, but are required to give immediate credit in the Treasurer's account and to issue certifi- cate of deposit for the full amount of all public moneys deposited with them for credit in the Treasurer's account in accordance with this circular. Except pursuant to specific instructions to that effect from the Secretary of the Treasury, no deposits of checks will be made here- under with National bank depositaries for credit to the account of the Treasurer of the United States. Regulab Depositaeies — Excess Balances. — National bank deposi- taries, whenever they hold funds to the credit of the Treasurer of the United States in excess of the authorized balance, shall make imme- diate transfer of such excess funds to the Treasurer or an Assistant Treasurer of the United States, or to the Federal Reserve Bank of the district, or, in special cases, to branches of Federal Reserve Banks. Na- tional bank depositaries, whenever they hold funds to the credit of other Government officers, in excess of the collateral value of the security deposited therefor, shall promptly report the facts to the Secretary of the Treasury, Division of Public Moneys, and deposit additional security to cover such deposits. Regulab Depositaeies — Collatebal Secubitt fob Deposits. — From the date of this circular (Dec. 31, 1919) and until further notice, securities of the following classes, and no others, will be accepted as security for deposits of public moneys with regular National bank depositaries, and at the rates below provided: (a) Bonds, notes, and Treasury certificates of indebtedness of the United States, of any issue, including outstanding interim certificates or receipts for payments therefor; all at par. 353 (b) Bonds of the Federal Land Banks, bonds of the War Finance Corporation, bonds of Porto Rico and the District of Columbia, and bonds and certificates of indebtedness of the Philippine Islands; all at par. (c) The 3y 2 per cent, bonds of the Territory of Hawaii at 90 per cent, of market value; and other bonds of said Territory at market value, not to exceed par. All securities to be deposited as collateral security for such de- posits must be deposited with the Treasurer of the United States. On or before June 30, 1920, National bank depositaries will be required to substitute securities of the classes above described for all securities not falling within said classes deposited with the Treasurer of the United States as security for such deposits. Regular Depositabies — Payment of Government Warrants and Checks. — Each regular National bank depositary with an authorized balance to the credit of the Treasurer of the United States, will cash Government warrants and checks drawn on the Treasurer of the United States when they are presented and properly indorsed by responsible holders who guarantee all prior indorsements thereon, in- cluding the indorsement of the drawer when the check is drawn in his favor. Regular National bank depositaries are not required to charge Government warrants and checks cashed by them in the ac- count of the Treasurer of the United States, except in cases where checks drawn on the Treasurer of the United States are deposited for the official credit of the drawer or the credit of other Govern- ment officers in the account of the Treasurer of the United States and in cases where cash is furnished to a Government officer upon the warrant or check for pay-roll or other expenditures. Regular Depositaries — Interest on Deposits. — Each National bank depositary will be required to pay interest at the rate of 2 per cent, per annum on daily balances. Interest will be calculated on an actual days' basis, and shall be paid semiannually on January 1 and July 1 in each year, 1 per cent, for each six-months' period. Special Depositaries. — The following annotations are taken from Treasury Circular No. 92 and amendments and supplements thereto. Any incorporated bank or trust company in the United States desir- ing to participate in deposits of public moneys arising from the sale of bonds, notes, or profits taxes under Section 8 of the Act Sept. 24, 1917, as amended and supplemented, may make application to the Federal Reserve Bank of its district, on Form H 2, hereto attached, and accompany such application by a certified copy of resolutions duly 23 354 adopted by its board of directors, in Form J 2, hereto attached. In fixing the maximum amount of deposits for which it will apply, the applicant bank or trust company should be guided by the amount of the payments which it expects to have to make, for itself and its customers, on account of allotments of such bonds and certificates, and, as well, by any statutory limitations upon the amount of deposits which the applicant bank or trust company may receive from any one depositor. Any application may be rejected or the applicant may be designated for a smaller maximum amount than that applied for. After receiving the recommendation of the Federal Reserve Bank, the Secretary of the Treasury will designate 1 approved depositaries. Special Depositaries — Collateral Security. — Designated depositar- ies will be required, before receiving deposits, to qualify by pledging, as collateral security for such deposits, securities of the following classes, to an amount, taken at the rates below provided, at least equal to such deposits: (a) Bonds and certificates of indebtedness of the United States Government, of any issue, including bonds of the Liberty Loans and interim certificates or receipts for payments there- for; all at par. (6) Bonds issued under the United States farm loan act and bonds of the Philippine Islands, Porto Rico and the District of Columbia; all at par. (c) The 3% per cent, bonds of the Territory of Hawaii at 90 per cent, of market value; and other bonds of said Territory at market value. (d) Bonds of any State of the United States, at market value; and approved notes, certificates of indebtedness and warrants is- sued by any State of the United States, at 90 per cent, of market value. (e) Approved bonds of any county, city or political subdivision in the United States; and approved notes, certificates of indebted- ness and warrants issued by any county or city in the United States which are direct obligations of the county or city as a whole; all at 90 per cent, of market value; but not includ- ing any such bonds which, at the date of this circular, are at a market price to yield more than 5% per cent, per annum, nor any such other obligations which at the date of this circular are at a market price to yield more than 6 per cent, per annum, if held to. maturity, according to standard tables of bond values. (/) Approved dollar bonds and obligations of foreign Governments (and of the dependencies thereof) engaged in war against 355 Germany, issued since July 30, 1914, at 90 per cent, of the market value thereof in the United States, and approved dollar bonds and obligations of any province or city within the territory of any such foreign Government or dependency, issued since July 30, 1914, at 75 per cent, of the market value thereof in the United States. (g) Approved bonds, listed on some recognized stock exchange and notes, of domestic railroad companies within the United States; approved equipment trust obligations of such do- mestic railroad companies; and approved bonds and notes of domestic electric railway and traction companies, telephone and telegraph companies, electric light, power, and gas com- panies, and Industrial companies, secured (directly or by the pledge of mortgage bonds) by mortgage upon physical pro- perties in the United States and listed on some recognized stock exchange: all at 75 per cent, of market value; but not including any such bonds or obligations which, at the date of this circular, are at a market price to yield more than 6*4 per cent, per annum, nor any such notes which at the date of thia circular are at a market price to yield more than 7% per cent, per annum, if held to maturity, according to stand- ard tables of bond values. (Ji) Commercial paper and bankers' acceptances, having maturity at the time of pledge of not to exceed six months, exclusive of days of grace, and which are otherwise eligible for re- discount or purchase by Federal Reserve Banks; and which have been approved by the Federal Reserve Bank of the dis- trict in which the depositary is located; at 90 per cent, of face value. All such commercial paper and acceptances must bear the indorsement of the depositary bank or trust company. No security shall be valued at more than par. No State or municipal bond, obligation, or evidence of indebtedness shall be accepted if the State or municipality has made default in payment of principal or interest during the past 10 years. The right is reserved to call for additional collateral security at any time. The approval and valuation of securities is committed to the several Federal Reserve Banks, acting under the direction of the Secretary of the Treasury. The withdrawal of securities, the pledge of addi- tional securities, and the substitution of securities shall be made from time to time as required or permjitted by the Federal Reserve Banks acting under like direction. Special Depositaries — Securities Committees and Custody of Se- curities. — Each Federal Reserve Bank is authorized to designate a 356 committee, or committees, to be composed of experienced bankers, in such city or cities in its district as may be deemed necessary, to be known as the securities committee. Each securities committee shall consist of not more than three nor less than two members, who shall serve without compensation. It shall be the duty of such securities committee to examine the lists of securities tendered as collateral security for deposits and to transmit them promptly to the Federal Reserve Bank of the district with the committee's recommendation. All securities accepted as collateral security for deposits hereunder must be deposited with the Federal Reserve Bank of the district in which the depositary is located or, by the direction and subject to the order of such Federal Reserve Bank, with a custodian or custod- ians designated by it, and under rules and regulations prescribed by it. Special Depositaries — Making and Withdrawal of Deposits. — 'Each qualified depositary will be required to open and maintain for the account of tbe Federal Reserve Bank of its district, as fiscal agent of the United States, a separate account for deposits to be made hereunder, to be known as the "War Loan Deposit Account." Qualified depositaries will be permitted to make payment by credit when due of amounts payable on subscriptions made by or through them/ for Treasury certificates of indebtedness and for Liberty Bonds. In order to make payment by credit the depositary must notify the Federal Reserve Bank of the district by letter or telegram to reach it on or before the date when such payment is due, and must on said date Issue a certificate of advice to such Federal Reserve Bank stating, that a sum specified (in addition to all other amounts stand- ing to the credit of said fiscal agent with such depositary) has been deposited with such depositary for the account of such Federal Re- serve Bank, as fiscal agent of the United States, in the War Loan Deposit Account. The unexpended cash proceeds, if any, of the sale of any issue of certificates or bonds will be deposited among the qualified depositaries as nearly as may be in proportion to the subscriptions made by and through them for such issue. All deposits and withdrawals will be made by the Federal Reserve Banks by direction of the Secretary of the Treasury. The amount deposited with any depositary shall not in the aggre- gate exceed at any one time (c) the maximum amount for which it sball have been designated as a depositary, nor (6) the aggregate amount of the collateral security pledged by it taken at the rates hereinbefore provided. All deposits will be payable on demand with- out previous notice. 357 Special Depositaries — Interest on Deposits.— 'Each depositary will be required to pay interest at the rate of 2 per cent, per annum on the average daily balance maintained during the period of the deposit. Interest payments must be made when deposits are finally withdrawn, but not less frequently than quarterly. Special Depositaries — Forms.- Form H-2 — Public Moneys. APPLICATION FOR DEPOSITS. To the Federal Reserve Bank of...., fiscal agent of the United States: The undersigned bank or trust company, in accordance with tbe provisions of Treasury Department Circular No. 92, dated October 6, 1917, as amended and supplemented April 10, 1918, and pursuant to due action of its board of directors, hereby makes application for the deposit of public moneys with it from time to time under the act of Congress approved September 24, 1917, as amended by the act approved April 4, 1918, the aggregate amount of such deposits not to exceed at any one time $ ; and assigns and agrees to pledge, from time to time, to and with the Federal Reserve Bank of ., as fiscal agent of the United States, as collateral security for such deposits as may be made from time to time pursuant to this application, securities of the character and amount required by said circular. i By President (Vice President). Street City or town . . , State , Form J-2 — 'Public Moneys. RESOLUTIONS AUTHORIZING APPLICATION FOR DEPOSITS. I hereby certify that the following resolutions were duly adopted at a meeting of the board of directors of the below-named bank (trust company), which meeting was duly called and duly held on the day of , 192.., a quorum being present, and that the said resolutions were spread upon the minutes of said meeting: Resolved, That, in accordance with the provisions of Treasury De- partment Circular No. 92, dated October 6, 1917, as amended and supplemented April 10, 1918, this bank (trust company) make appli- cation for the deposit of public moneys with it from time to time 358 under the act of Congress approved September 24, 1917, as amended by the act approved April 4, 1918, the aggregate amount of such de- posits not to exceed at any one time $. 4 ; and assign and agree to pledge from time to time to and with the Federal Reserve Bank of i- . • • , as fiscal agent «f the United States, as collateral security for such deposits as may be made from time to time pursuant to such application, securities of the character and amount required by said circular; and Resolved, That the president, or any vice president, or cashier, or secretary, of the undersigned bank (trust company) is hereby author- ized to make application, assignment, and agreement as aforesaid and from time to time to deliver to and pledge with said Federal Reserve Bank, or any custodian or custodians appointed by it, securities of the undersigned bank (trust company) of a character and amount at least sufficient to secure such deposits according to the terms of said Treasury Department circular, and from time to time to' withdraw securities and to substitute other securitiesi and to pledge and deposit additional securities. In witness whereof I have hereunto signed my name and affixed the seal of the of Cashier (Secretary). Form K — Public Moneys. CERTIFICATE OF ADVICE. (Title of bank or trust company.) (Location.) 192. (Date.) I hereby certify that there has been deposited this day with the above bank (trust company), to the credit of the Federal Reserve Bank of , as fiscal agent of the United States, War Loan Deposit Account, to be held subject to withdrawal on de- mand, the sum of .dollars, consisting of payment for f principal Bonds - • I accrued interest , principal Certificates of indebtedness | accrued int erest Total $ . • .i Cashier or Vice President. 359 (The depositary will forward this to the Federal Reserve Bank of ) Resolution for Withdrawal of Bonds Held to Secure Public Moneys. At a meeting of the Board of Directors of the Bank of held at the Banking House, , 192 . . the following resolution was adopted: RESOLVED, that the Treasurer of the United States be, and he is hereby, authorized to withdraw $ U. S. Bonds, held for account of this Bank as security for public moneys, and described as follows : $ 4. . of the Loan of , and that be, and is hereby, authorized to' sell, assign, and transfer the same, and to appoint one or more attorneys for that purpose* I hereby certify that the above is a true extract from the minutes of said meeting. [Seal of bank] Cashier, and Secretary of the Board of Directors. Note. — No' official of the Treasury can sell or assign for the bank. The bank's agent or other person must be appointed. The Treasurer's receipts for the bonds to be withdrawn must be forwarded to the Treasurer with this resolution. Court Bankruptcy and Post-Office Funds. — Provision is made in Sections 995 and 996, Revised Statutes, that "all moneys paid into any court of the United States or received by the officers thereof, in any case pending or adjudicated is such court, shall be forthwith deposited with the Treasurer, an Assistant Treasurer, or a Designated Depositary of the United States, in the name and to the credit of such court: Provided, That nothing therein shall be construed to pre- vent the delivery of any such money upon security, according to agreement of parties, under the direction of the court." But that (Sec. 996, R. S.) no money deposited as aforesaid shall be withdrawn except by order of the judge or judges of said courts respectively, in term or in vacation, to' be signed by such judge or judges, and to be entered and certified of record by the clerk; and every such order shall state the .cause in or on account of which it is drawn. But moneys in court deposited in a designated depositary of the -United States are not public moneys of the United States and a court cannot order such bank to pay to a party to a suit interest on a deposit made by the clerk of the court. (Chatham & Phoenix Nat. Bank v. Guaranty Trust Co., 256 Fed. Rep., 90.) 360 A Court of Bankruptcy shall designate by order banking institu- tions as depositaries for the money of bankrupt estates, as convenient as may be to the residences of trustees; and shall require bonds to the United States subject to their approval. (Bankruptcy Act,- July 1, 1898, Vol. 30, Sec. 61, Chap. 7, page 562.) National bank depositaries designated with a maximum qualifica- tion for the sole purpose of receiving deposits made by United States Courts and their officers, by postmasters for credit to their official disbursing accounts, and by other Government officers authorized to maintain disbursing accounts elsewhere than with the Treasurer of the United States are not authorized to receive deposits for credit to the account of the Treasurer of the United States. Such deposi- taries are required to forward to the Treasurer of the United States at the end of each week, and at the end of each month, a report on Form 17 (National Banks), showing the aggregate amounts of such deposits, and to the Secretary of the Treasury, Division of Public Moneys, at the end of each week, and at the end of each month, a report on Form 7 (National Banks), showing in detail the deposits to the credit of the local postmaster, the United States court or its officers, and other authorized special accounts. Bankruptcy funds and postal savings deposits should not be included in these reports. § 323. Penalty for Unauthorized Deposit of Public Money. — Whoever, being a disbursing officer of the United States, or a person acting as such, shall in any manner convert to his own use, or loan with or without interest, or deposit in any place or in any manner, except as authorized by law, any public money intrusted to him ; or shall, for any purpose not prescribed by law, withdraw from the Treasurer or any assistant treasurer, or any authorized! depositary, or transfer, or apply, any portion of the public money intrusted to him, shall be deemed guilty of an embezzlement of the money so converted, loaned, deposited, withdrawn, transferred, or applied, and shall be fined not more than the amount embezzled, or imprisoned not more than ten years, or both. (Act March 4, 1909, Sec. 87; 35 Stat. U. S., 1105.) § 324. Penalty for Unauthorized Receipt or Use of Publio Money. — See § 177 under National Bank Act, page 181. CHAPTER III. Postal Savings Depositories. Section 325. Deposit of Postal Savings Funds in Banks — Mini- mum Pate of Interest — Security Furnished by- Banks, etc. 326. Eepeal of Conflicting Laws. 327. Prohibition Against Charge of Exchange, etc., by Banks. 328. Postal Savings Bonds Not Receivable As Security for Circulating Notes. § 325. Deposit of Postal Savings Funds in Banks — Minimum Rate of Interest — Security Furnished by Banks, etc. — That postal savings funds received under the provisions of this act shall be deposited in solvent banks, whether organized under National or State laws, and whether member banks or not of the Federal re- serve system established by the act approved December twenty- third, nineteen hundred and thirteen, being subject to National or State supervision and examination, and the sums deposited shall bear interest at the rate of not less than two and one-fourth per centum per annum, which rate shall be uniform throughout the United States and Territories thereof ; but five per centum of such funds shall be withdrawn by the board of trustees and kept with the Treasurer of the United States, who shall be treasurer of the board of trustees, in lawful money as a reserve. The board of trustees shall take from such banks such security in public bonds or other securities, authorized by act of Congress, or supported by the taxing power, as the board may prescribe, approve, and deem sufficient and necessary to insure the safety and prompt payment of such deposits on demand. The funds received at the postal savings depository offices in each city, town, village, and other lo- cality shall be deposited in banks located therein (substantially in 361 363 proportion to the capital and surplus of each such bank) willing to receive such deposits under the terms of this act and the regula- tions made by authority thereof: Provided, however, If one or more member banks of the Federal reserve system established by the act approved December twenty-third, nineteen hundred and thirteen, exists in the city, town, village, or locality where the postal savings deposits are made, such deposits shall be placed in such qualified member banks substantially in proportion to the capital and surplus of each such bank, but if such member banks fail to qualify to receive such deposits, then any other bank located therein may, as hereinbefore provided, qualify and receive the same. If no such member bank and no other qualified bank exists in any city, town, village, or locality, or if none where such deposits are made will receive such deposits on the terms prescribed, then such funds shall be deposited under the terms of this act in the bank most' convenient to such locality. If no such bank in any State or Territory is willing to receive such deposits on the terms prescribed, then such funds shall be deposited with the treasurer of the board of trustees and shall be counted in making up the reserve of five per centum. Such funds may be withdrawn from the treasurer of said board of trustees, and all other postal savings funds, or any part of such funds, may be at any time withdrawn from the banks and savings depository offices for the repayment of postal savings depositors when required for that purpose. If at any time the postal savings deposits in any State or Territory shall exceed the amount which the qualified banks therein are willing to receive un- der the terms of this act, and such excess amount is not required to make up the reserve fund of five per centum hereinbefore pro- vided for, the board of trustees may invest all or any part of such excess amount in bonds or other securities of the United States. When, in the judgment of the President, the general welfare and! interests of the United States so require, the board of trustees may invest all or any part of the postal savings funds, except the reserve fund of five per centum herein provided for, in bonds or other securities of the United States. The board of trustees may in its discretion purchase from the holders thereof bonds which have been or may be issued under the provisions of section ten of the 363 act of June twenty-fifth, nineteen hundred and ten. Interest and profit accruing from the deposits or investment of postal savings funds shall be applied to the payment of interest due to postal savings depositors, as hereinbefore provided, and the excess thereof, if any, shall be covered into the Treasury of the United States as a part of the postal revenue: Provided further, That postal sav- ings funds in the treasury of said board shall be subject to dis- position as provided in this act, and not otherwise: And provided further, That the board of trustees may at any time dispose of bonds held as postal savings investments and use the proceeds to meet withdrawals of deposits by depositors. For the purpose of this act the word "Territory" as used herein shall be held to include the District of Columbia, the District of Alaska, and Porto Eico, and the word "bank" shall be held to include savings banks and trust companies doing a banking business. (Sec. 2, Act May 18, 1916.) Eligibility of Banks. — The Act of May 18, 1916 (amending Sec. 9 of the act of June 25, 1910), prescribes that the funds received at postal savings depositary offices in each city, town, village, or other locality shall be deposited in solvent banks located therein, whether organized under National or State laws, and whether member banks or not of the Federal Reserve System established by the Act approved December 23, 1913, being subject to National or State supervision and examination, willing to receive such deposits under the terms of the Act and the regulations made by authority thereof. The word "bank" as used in the law includes savings banks and trust companies doing a banking business. If one or more member banks of the Federal Reserve System exist in any city, town, village, or locality where postal savings deposits are made, such deposits are required to be placed in such member banks, provided they qualify to receive them, substantially in propor- tion to the capital and surplus of each such bank; but if such member banks fail to qualify to receive the deposits, then any other banks located therein and eligible as hereinbefore provided may qualify to receive them, and the deposits shall be placed in such qualifying banks substantially in proportion to their capital and surplus. If no bank eligible to qualify exists in any city, town, village, or locality, or if none where such deposits are ma'de will receive them on the terms prescribed, then such funds shall be deposited under the terms of said act in the bank most convenient to such locality. If no such 364 bank in any State or Territory is willing to receive such deposits on the terms prescribed, then the same are required to bei deposited with the Treasurer of the Board of Trustees. The law requires that 5 per centum of the postal savings funds shall be withdrawn by the Board of Trustees and kept with the Treasurer in lawful money as a reserve. Quaijfication of Banks. — Any eligible bank desiring to qualify for deposits of postal savings funds shall transmit to the Third Assistant Postmaster General, Division of Postal Savings, Washington, D. C, an application accompanied by a report showing fully the condition of the bank on a day not more than one month prior to the date of such application. Such report shall be sworn to by the president or cashier and attested as correct by two members of the board of directors, who shall also certify the amount of paid-in capital and unimpaired surplus, exclusive of undivided profits. Blank application forms may be ob- tained from the Third Assistant Postmaster General, Division of Postal Savings, Washington, D. C. No deposits will be made in any bank until it shall have complied with these provisions and deposited securi- ties which meet the requirements. Upon receipt of the application, properly completed, from a bank authorized to qualify under the law, the Third Assistant Postmaster General will inform such bank of the initial amount of bonds or other securities which it will be required to deposit as security for postal savings funds. A minimum initial deposit of bonds of the total par value of $5000 will be required from a bank qualifying at a first-class postof&ce; of the total par value of $1000 at a second or third class office; and of the total par value of $500 at a fourth class office; but no deposit of bonds of a total par value less than $500 will be accepted. If war- ranted by the anticipated deposits, greater initial amounts of securities than those above specified may be required. Bonds or securities conforming to the requirements and in the amount specified in the notification of the Third Assistant Postmaster General shall be forwarded by the bank directly to the Treasurer of the United States, Washington, D. C.* Either registered or coupon bonds will be accepted, but all registered bonds shall be registered in the name of "The Treasurer of the *To facilitate examination as to legal acceptability of securities, banks are requested to forward, at the time the securities are tendered, for the use of the Solicitor for the Postoffice Department, certified copies of final legal opinions as to the validity of such securities, or, if such opinions are not available, certified transcripts of the recorded proceedings, including certificates covering the due execution and sale of such bonds. 365 United States, in trust for the — Bank, of — < n-i as security for postal savings funds." The Treasurer of the United States will dispose of maturing coupons and checks covering interest accruing on registered bonds as directed by the banks. The Third Assistant Postmaster General will inform the Treasurer of the United States of the amounts of securities which the respective banks are required to deposit. Upon receipt of such securities, the Treasurer shall determine, as matter of fact, whether the securities conform to the requirements of these regulations. He shall then submit a statement of his findings to the Solicitor for the Postoffice Department, who shall determine, as matter of law, whether such securities are legally acceptable under the Act of May 18, 1916, and the regulations herein set forth, and who for that purpose shall have access to the securities. No securities shall be accepted until their legal acceptability has been determined by the Solicitor for the Postoffice Department. If such bonds are accepted, the Treasurer shall issue his receipt therefor in duplicate, forwarding the original to the Third Assistant Postmaster General with advice of his action, and the duplicate to the bank depositing the securities. If the bonds are held not to conform to the requirements of the law or these regulations, they shall be retained subject to the order and at the risk of the bank for whose account they were tendered, and the bank so notified. If the bonds are insufficient in amount, the bank shall be requested by the Treasurer to furnish additional bonds. On receipt of notice from the Treasurer of the United States that the securities required of any bank have been received and accepted, the Third Assistant Postmaster General will notify such bank that it has qualified to receive deposits of postal savings funds. He will state the amount fixed as the maximum balance which may be held by such bank, and will instruct the proper postmaster to make de- posits therein. Secubity fob Deposits. — The Board of Trustees prescribes and ap- proves such security in public bonds or other securities, authorized by act of Congress or supported by the taxing power, as it deems sufficient and necessary to insure the safety and prompt payment on demand of postal savings deposits, and fixes the value at which the securities so prescribed and approved shall be accepted for the purposes named. Such securities, in the amount so specified, shall bo deposited with the Treasurer of the Board of Trustees. The Board of Trustees will accept as security for postal savings deposits, at the respective values herein fixed, negotiable interest- bearing bonds or securities, issued under express constitutional or statutory provisions, of the following classes, viz.: 366 (a) Bonds of the United States, of the Philippine Islands, of the District of Columbia, and of Porto Rico, will be accepted at their par value. (b) Bonds of any State of the United States and of the Territory of Hawaii will be accepted at their market value, but if such market value is above par, they will be accepted at their par value. (c) Bonds of any city or county in the United States having a population of over 30,000 as shown by the latest reports of the Bureau of the Census, and bonds of any school district in the United States in which the whole or the major portion of any such city is in- cluded, which city, county, or school district has been in existence for a period of ten years, which for a period of ten years previously has not defaulted in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it, and whose net funded indebtedness does not exceed 10 per cent, of the valuation of its taxable property, to be ascertained by the last pre- ceding valuation for the assessment of taxes, will be accepted at 90 per cent, of their market value, but if such market value is above par, they will be accepted at 90 per cent, of their par value. (d) Bonds of any city, town, borough, or village in the United States, having a population of over 20,000 and not exceeding 30,000, as shown by the latest reports of the Bureau of the Census, and bonds of any school district in the United States in which the whole or the major portion of any such municipality is included, which city, town, borough, village, or school district has been in existence for a period of ten years, which for a period of ten years previously has not defaulted in the payment of any part of either principal or Interest of any funded debt authorized to be contracted by it, and whose net funded indebtedness does not exceed 10 per cent, of the valuation of its taxable property, to be ascertained by the last pre- ceding valuation for the assessment of taxes, will be accepted at 80 per cent, of their market value, but if such market value is above par, they will be accepted at 80 per cent, of their par value. (e) Bonds of any other city, town, county, or other legally consti- tuted municipality or district in the United States, which has been in existence for a period of ten years, which for a period of ten years previously has not defaulted in the payment of any part of either principal or interest of any funded debt authorized to be con- tracted by it, and whose net funded indebtedness does not exceed 10 per cent, of the valuation of its taxable property, to be ascertained by the last preceding valuation for the assessment of taxes, will be accepted at 75 per cent, of their market value, but if such market value is above par, they will be accepted at 75 per cent, of their par value. 367 The term "net -funded indebtedness" for the purposes of (c), (d), and (e) above, is hereby defined to be the difference between the legal gross indebtedness of a city, town, county, or other legally constituted municipality or district (including the amount of the bonds of any civil division whose territorial limits are approximately coterminous therewith) and the aggregate of the following items, when included in such legal gross indebtedness: (a) The total of all sinking funds accumulated for the redemption of such gross indebtedness, except sinking funds applicable to bonds hereafter described in this section. (5) The amount of outstanding bonds or other debt obligations, made payable from current revenues. (c) The amount of outstanding bonds issued for the purpose of providing the inhabitants of a municipality with public utilities: Pro- vided, That evidence is submitted showing that the income from such utilities has proved to be sufficient for maintenance, for payment of interest on such bonds, and for the accumulation of a sinking fund for their redemption. (d) The amount of outstanding improvement bonds, issued under laws which provide for the levying of special assessments against abutting property: Provided, That evidence is submitted showing that assessments are levied in sufficient amounts to insure the payment of interest on the bonds and the redemption thereof. The Board of Trustees reserves the right to' reclassify the secu- rities acceptable for deposits and to change the valuation at which they will be accepted. Under no circumstances will securities of other classes than those above named be accepted. Bonds of the several classes described in (&), (c), (d), and (e), to be acceptable as security, shall be the general obligations of the States, Territories, counties, cities, towns, or other political divisions by or in behalf of which they are issued, and payable, either directly or ultimately, without limitation to a special fund, from the proceeds of taxes authorized to be levied upon all the taxable real and personal property within the territorial limits of such political divisions: Pro- vided, That in any case where the rate of tax may be subject to a con- stitutional or statutory limit, the Solicitor for the Postoffice Depart- ment may require satisfactory evidence that, notwithstanding such limit, the interest and principal of the bonds can be paid after making due provision for current expenses, interest and principal of outstanding debts, and other necessary charges. Obligations of the general class embracing what are commonly known as "revenue bonds," "temporary bonds," "temporary notes," "certificates of indebtedness," "warrants," and the like obligations, whether issued in anticipation of tho collection of taxes, assessments, 368 or other revenues, or of the sale of bonds or other obligations, or for similar purposes, will not be accepted as security for postal savings deposits: Provided, That, In applying this regulation, consideration will be given to the legal status of the obligations submitted rather than to the nomenclature employed in designating such obligations. Bonds which In all other respects are found to be legally acceptable as security under the postal savings act and these regulations will be construed, as a matter of law, to conform to those provisions men- tioned above which relate to term of existence and nondefault, under the following conditions: (a) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district in the United States which was, subsequently to the issuance of such bonds, consolidated with, or merged into, an existing political division which meets the requirements of these regulations, will be deemed to be the bonds of such political division: Provided, that such bonds were assumed by such political division under the statutes and appropriate proceedings the effect of which is to make such bonds general obligations of such assuming political division, and payable, either directly or ultimately, without limitation to a special fund, from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (6) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district of the United States which was, subsequently to the issuance of such bonds, wholly succeeded by a newly organized political division, who'se term of existence, added to that of such original political division, or of any other political division so succeeded, is equal to a period of 10 years, will be deemed to be bonds of such succeeding political division: Provided, That during such period none of such political divisions shall have de- faulted in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it. And provided fur- ther, That such bonds were assumed by such new political division under statutes and appropriate proceedings the effect of which is to make such bonds general obligations of such assuming political divis- ion, and payable, either directly or ultimately, without limitation to a special fund, from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (c) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district in the United States which, prior to such issuance, became the successor of one or more, or was formed by the consolidation or merger of two or more, pre-existing political divisions, the term of existence of one or more of which, added to that of such succeeding or consolidated political division, is 369 equal to a period of 10 years, will be deemed to be bonds of a po- litical division which has been in existence for a period of 10 years: Provided, That during such period none of such original, succeeding, or consolidated political divisions shall have defaulted in the pay- ment of any part of either principal or interest of any funded debt authorized to be contracted by it. The Treasurer of the Board of Trustees shall make examinations semiannually, or oftener if he deems it necessary, of the securities which have been accepted from qualified banks, and whenever, in his judgment, any of such securities have so far depreciated in value as to make desirable the deposit of additional or new securities, he shall inform the Third Assistant Postmaster General of the name of the bank, the kind and amount of the securities, and the amount of the depreciation. The Third Assistant Postmaster General will notify the Treasurer and the bank of the amount of additional or new securities which the bank shall deposit, and upon their receipt by the Treasurer, the procedure provided as to their acceptance or rejection, and as to the return of the original securities, if new secu- rities are required, shall be followed. Apportionment of Deposits. — When more than one bank in any city, town, village, or locality has qualified to receive postal savings funds, deposits, of such funds shall be apportioned substantially upon the basis of capital and surplus as required by the Act of May 18, 1916, and shall be made to the credit of the Board of Trustees in such rotation and amounts as will effect such apportionment, until the deposits reached the maximum balance authorized for any bank. The banks concerned will be fully informed in the premises. An apportionment of postal savings funds will apply in the case of each qualified bank only to funds deposited after the date as of which the bank qualified. After any apportionment of funds has been made in a given locality, no other bank will be allowed to qualify to receive postal savings deposits except as of the 1st day of January, April, July, or October, unless the maximum amount of deposits applied for by the banks already qualified has been reached and such banks have not qualified for additional funds. When a qualified member bank of the Federal Reserve System in which the deposits have reached the maximum authorized balance declines or fails to furnish additional collateral and a local nohmember bank qualifies to receive deposits, the member bank must await the next quarterly reapportionment date before qual- ifying for additional funds. Applications to qualify under a reappor- tionment of the funds of any depository office shall be forwarded in sufficient time to reach the Third Assistant Po'stmaster General, 24 370 Division of Postal Savings, before the 15th day of December, March, June, or September. When the capital or surplus of a depository bank is increased or reduced after it has qualified as a depository, the president or cashier shall promptly certify to the Third Assistant Postmaster General, Di- vision of Postal Savings, the amount of such bank's paid-in capital and unimpaired surplus, exclusive of undivided profits, after such in- crease or reduction, in order that proper reapportionment of the de- posits may be made among the banks affected as of the dates first above named. Interest. — Until further notice, banks which have qualified to receive deposits of postal savings funds will be required to credit the Board of Trustees with interest at the rate of two and one-half per cent, per annum, as of January 1 and July 1 in each year, upon the average daily balances of postal savings funds deposited with such banks, as shown by the audited accounts of postmasters and other agents of the Postal Savings System. Such interest shall be computed and entered as required by instructions on the back of Form PS 510. The Board of Trustees will, from time to time, make such changes in the rate of interest to be paid by qualified banks as it may deem proper, subject to the minimum rate prescribed by the Act of May 18, 1916, the rate adopted being uniform throughout the United States and Territories thereof. Deposits of Funds in Banks. — Postmasters who' deposit in qualified banks will be instructed to make all such deposits to the credit of the Board of Trustees, Postal Savings System, and will be required to make daily deposits of all excess postal savings receipts amounting to $10 or more, except on the 25th day of each month, when all cash on hand amounting to $1 or more shall be deposited. On receipt of a deposit of such funds the bank shall issue a cer- tificate of deposit, in duplicate, on Form PS 400, in the name of the postmaster or other officer or agent making the deposit. The duplicate shall be immediately delivered or forwarded to the postmaster or other officer or agent making the deposit and the original certificates shall be forwarded by the bank at the close of each calendar week to the Third Assistant Postmaster General, Division of Postal Savings. All original certificates on hand at the end of a month, even though covering only part of a week, shall be forwarded. Qualified banks will be supplied with blank certificates, Form PS 400, Excess Deposits. — If any postmaster shall deposit in a qualified bank an amount in excess of the maximum balance authorized, such bank shall immediately notify the Third Assistant Postmaster General, 371 Division of Postal Savings, and, until otherwise directed, shall tranfer such excess at the' close of business each day to the Treasurer of the United States at Washington or to the Assistant Treasurer of the United States in one of the following cities: New York, Philadelphia, Boston, Baltimore, Cincinnati, Chicago, St. Louis, New Orleans, or San Francisco. Such transfer shall be made to the credit of the "Board of Trustees, Postal Savings System, on account of returnable deposits." Should additional funds beyond the amount for which a bank has qualified become available for deposit, the bank, in order to receive further deposits, will be required to furnish additional securities in the manner heretofore provided. When the volume of deposits in a qualified bank approaches the maximum balance which it is au- thorized to receive, and it appears that funds will be available in the near future for deposit in excess of' such balance, the bank may, if it so desires, forward additional bonds directly to the Treasurer of the United States without awaiting instructions from the Third Assistant Postmaster General, who should, however, be promptly notified of such action. Withdrawals by Postmasters. — All postal savings funds are re- quired to be deposited to the credit of the Board of Trustees. In order to provide a postmaster who' deposits in bank with funds for meeting withdrawals by depositors, one bank, especially designated for the purpose, will be authorized to honor his official checks, drawn against the Board of Trustees' account, and not exceeding a specified amount in any one calendar month. The amount of the credit thus fixed may be added to the proportion of deposits assigned to the desig- nated bank, but shall be secured by bonds, subject to the payment of interest, and included in the maximum balance which such bank is authorized to receive. Such credit may be increased from time to time by the Third Assistant Postmaster General. Withdrawals by Board of Trustees. — Whenever postal savings funds are to be withdrawn from a qualified bank by the Board of Trustees for investment in bonds or other securities of the United States, or for other purposes, the Third Assistant Postmaster General will draw a draft on the bank, or will direct the bank to deposit the required amount to the credit of the "Board of Trustees, Postal Sav- ings System," with the Treasurer or an assistant treasurer of the United States, or other authorized agent. On receipt of such deposit the Treasurer, assistant treasurer, or- other agent shall issue a certificate of deposit in duplicate in the name of the depositing bank, and forward the original certificate to the Third Assistant Postmaster General, Division of Postal Savings, and the duplicate to the bank. 372 Withdrawals of Securities by Banks. — Whenever a bank desires to relinquish the whole or a part of its postal savings deposits or to withdraw such of its securities as do not cover deposits, it shall notify the Third Assistant Postmaster General, Division of Postal Savings, and shall forward to him the duplicate receipt or receipts issued by the Treasurer of the United States at the time the securities were deposited, together with a duly attested and certified copy of a resolu- tion of its board of directors authorizing such withdrawal and speci- fying the disposition to be made of the securities. The Third Assistant Postmaster General will direct the bank as to the disposition to be made of the relinquished depo'sits, and after such disposition will transmit both the original and duplicate receipts to the Treasurer of the United States, who shall then dispose of the bonds as directed by the bank. If the entire amount of securities deposited is not withdrawn, the Treasurer shall return the receipts to the Third Assistant Postmaster General, indorsing thereon the amount of securities withdrawn, and the Third Assistant Postmaster General will transmit the duplicate receipt to the bank. If the entire amount of securities deposited is withdrawn, the receipts shall be cancelled and retained by the Treasurer. Registered bonds withdrawn for any reason shall be assigned by the Treasurer directly to the bank for whose account they were pre- viously held, except in the cases hereafter mentioned, and except where United States bonds are called for redemption, in which case they shall be assigned directly to the Secretary of the Treasury. If the duplicate receipt issued to a bank covering securities deposited shall be lost, stolen, or destroyed, and can not be produced when a withdrawal of bonds is to be made, an affidavit setting 1 forth the facts shall be executed by an officer of the bank and forwarded to the Third Assistant Postmaster General, who may authorize the Treasurer of the United States to accept such affidavit in lieu of the missing receipt. When a bank desires to substitute securities in lieu of those already deposited, it shall notify the Third Assistant Postmaster General, Di- vision of Postal Savings, inclosing the Treasurer's duplicate receipt for the bonds to be withdrawn, and a duly certified and attested copy of a resolution of its board of directors authorizing, such substitution. The Third Assistant Postmaster General will then forward to the Treasurer both the original and duplicate receipts for the bonds to be withdrawn and direct the bank to forward to the Treasurer the securities to be substituted. If they are accepted, the Treasurer shall issue new receipts to the Third Assistant Postmaster General and to the bank and dispose of the securities withdrawn as requested by the bank. 373 When banks desire to exchange with one another securities de- posited by them, they shall forward to the Third Assistant Postmaster General lists of such securities, accompanied by duly attested and certified copies of resolutions of their boards of directors authorizing such exchanges and the Treasurer's duplicate receipts covering such securfties. If the exchanges are approved, the Third Assistant Post- master General will so inform the Treasurer, who shall simultaneously withdraw from deposit and assign the securities and redeposit them for account of the respective banks, issuing new receipts in duplicate therefor. Resolution for Withdrawal of Bonds Held as Security for Postal- Savings Funds. — At a meeting of the Board of of the Bank of ....held at their banking house.., 192.., the following resolutions were adopted'. Resolved, that the Board of Trustees of the Postal Savings System be, and they are hereby, authorized to withdraw $ bonds, held by the Treasurer of the United States: in trust, as security for postal- savings funds, and described as follows: $ of the Loan of. $ of the Loan of. $ of the Loan of. $ of the Loan of. and that the Treasurer of the United States is hereby authorized to forward said bonds to Resolved, That , be, and is hereby, author- ized to sell, assign, and transfer the same and to appoint one or more attorneys for that purpose. I Hereby cretify that the above is a true extract from the minutes of said meeting. impress i corporate seal Secretary of the Board of HERE N. B. — This resolutien should be properly executed and certified, with the, seal of the bank impressed, and forwarded to the Board of Trus- tees of the Postal Savings System, Washington, D. C., whenever bonds held as security for postal-savings funds are to be withdrawn, to- gether with the Treasurer's receipt covering the bonds to be with- drawn. 374 The person authorized to assign the bonds should not be the person who certifies to the above resolution. Failure of Banks to Repay Deposits or Otherwise to Orserye Reg- ulations. — Any qualified bank which shall fail to comply with these regulations shall be liable to be disqualified. In the event of such disqualification the Third Assistant Postmaster General will direct the bank as to the disposition to be made of its postal savings deposits. If a qualified bank shall fail or decline to repay postal savings de- posits and accrued interest thereon, when so required by the Third Assistant Postmaster General, he will authorize and direct the Treas- urer of the United States to invite bids for the purchase of securities deposited by such bank and to sell such portion thereof as may be necessary to reimburse the Board of Trustees in the amount which the bank has failed or declined to pay, and to assign and deliver such securities to the purchaser upon payment therefor. The proceeds from such sale shall be deposited by the Treasurer to the credit of the Board of Trustees as directed by the Third Assistant Postmaster General. Any portion of such securities or the proceeds thereof remaining after the Board of Trustees has been fully reimbursed shall be returned to the bank or to its receiver or other legal representative. If it shall appear to the Treasurer that the immediate sale of such securities as above provided would not realize a sufficient amount to reimburse fully the Board of Trustees he shall so inform the Third Assistant Postmaster General, who may direct that such sale be deferred.. Reports. — At the close of each month, or oftener if required, each qualified bank shall render to the Third Assistant Postmaster General, Division of Postal Savings, a statement on Form PS 510 of the postal savings fund account as shown by its books, giving all information called for by said form, a supply of which will be furnished to each bank. This report is necessary for the audit of the accounts of postmasters and banks, and shall be rendered in every case when funds are on deposit, even though no transactions occurred during the month. Each bank shall forward all paid checks or drafts with the monthly statement of account in which credit is claimed for their payment. Each bank shall furnish at any time to a duly authorized representa- tive of the Board of Trustees any information requested as to its postal savings transactions. Advertisements by Banks. — A qualified bank may advertise that it is a "United States depository for postal savings funds," but no other form of advertisement is authorized by the Board of Trustees. 375 § 326. Repeal of Conflicting Laws.— That all laws or parts of laws in conflict with the provisions of this act are hereby repealed. (Sec. 17, Act May 18, 1916.) § 327. Prohibition Against Charge of Exchange, etc., by Banks. — No bank in which postal savings funds shall be deposited shall receive any exchange ©r other fees or compensation on account of the cashing or collection of any checks or the performance of any other service in connection with the postal savings depository system. (Sec. 8, Act June 25, 1910.) § 328. Postal Savings Bonds Not Receivable As Security for Circulating Notes.— That no bonds authorized by this act shall be receivable by the Treasurer of the United States as security for the issue of circulating notes by National banking associations. (Sec. 10, Act June 25, 1910.) CHAPTER IV. Currency and Monet. Section 329. Gold Dollar As Standard Unit of Value. 330. Maintenance of Gold Reserve of One Hundred and Fifty Million — Sale of Bonds to Replenish Re- serve. 331. Establishment of Divisions of Issue and of Redemp- tion. 332. Cancellation of Treasury Notes and Issue of Silver Certificates. 333. Issue of Gold Certificates. 334. Issue of Silver Certificates, 335. Subsidiary Silver Coinage. 336. Recoinage of Uncurrent Subsidiary Silver Coin. 337. Melting of Silver Dollars— Sale of Bullion. 338. Purchase of Silver Ore. 339. Sales of Silver Bullion — Purposes of. 340. Reimbursement for Loss in Melting Silver Dollars. 341. Federal Reserve Bank Notes — Issuance of to Prevent Contraction of Currency. 342. Federal Reserve Bank Notes — Retirement of — Tax on. 343. Exportation of Silver Coin or Bullion. 344. International Bimetallism. 345. Issue of Treasury Notes. 346. Legal Tender — Foreign Coins. 347. Legal Tender— Gold Coin. 348. Legal Tender — Standard Silver Dollars. 349. Legal Tender — Subsidiary Silver Coins. 350. Legal Tender — Minor Coins. 351. Legal Tender — United States Notes. 352. Legal Tender — Demand Treasury Notes. 376 377 353. Legal Tender — Interest-Bearing Notes. 354. Legal Tender — National Bank Notes — Federal Re- serve Notes. 355. Legal Tender — Gold and Silver Certificates. 356. Legal Tender— Gold Certificates. 357. Legal Tender— Act March 14, 1900. 358. Regulations Governing the Issue, Exchange and Re- demption of Money. § 329. Gold Dollar As Standard Unit of Value.— That the dol- lar consisting of twenty-five and eight-tenths grains of gold nine- tenths fine, as established by section thirty-five hundred and eleven of the Revised Statutes of the United States, shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard, and it shall be the duty of the Secretary of the Treas- ury to maintain such parity. (Act March 14, 1900, Sec. 1; 31 Stat. U. S., 45.) § 330. Maintenance of Gold Reserve of One Hundred and Fifty Million — Sale of Bonds to Replenish Reserve.— 'That United States notes, and Treasury notes issued under the Act of July fourteenth, eighteen hundred and ninety, when presented to the Treasury for redemption, shall be redeemed in gold coin of the standard fixed in the first section of this Act, and in order to secure the prompt and certain redemption of such notes as herein provided it shall be the duty of the Secretary of the Treasury to set apart in the Treasury a reserve fund of one hundred and fifty million dollars in gold coin and bullion, which fund shall be used for such redemption purposes only, and whenever and as often as any of said notes shall be redeemed from said fund it shall be the duty of the Secretary of the Treasury to use said notes so redeemed to restore and maintain such reserve fund in the manner follow- ing, to wit: First, by exchanging the notes so redeemed for any gold coin in the general fund of the Treasury ; second, by accepting deposits of gold coin at the Treasury or at any subtreasury in ex- change for the United States notes so redeemed; third, by procur- 378 ing gold coin by the use of said notes, in accordance with the pro- visions of section thirty-seven hundred of the Eevised Statutes of the United States. . If the Secretary of the Treasury is unable to restore and maintain the gold coin in the reserve fund by the fore- going methods, and the amount of such gold coin and bullion in said fund shall at any time fall below one hundred million dollars, then it shall be his duty to restore the same to the maximum sum of one hundred and fifty million dollars by borrowing money on the credit of the United States, and for the debt thus incurred to issue and sell coupon or registered bonds of the United States, in such form as he may prescribe, in denominations of fifty dollars or any multiple thereof, bearing interest at the rate of not exceeding three per centum per annum, payable quarterly, such bonds to be payable at the pleasure of the United States after one year from the date of their issue, and to be payable, principal and interest, in gold coin of the present standard value, and to be exempt from the payment of all taxes or duties of the United States, as well as from taxation in any form by or under State, municipal, or local authority; and the gold coin received from the sale of said bonds shall first be covered into the general fund of the Treasury and then exchanged, in the manner hereinbefore provided, for an equal amount of the notes redeemed and held for exchange, and the Secretary of the Treasury may, in his discretion, use said notes in exchange for gold, or to purchase or redeem any bonds of the United States, or for any other lawful purpose the public interests may require, except that they shall not be used to meet deficiencies in the current revenues. That United States notes when redeemed in accordance with the provisions of this section shall be reissued, but shall be held in the reserve fund until exchanged for gold, as herein provided ; and the gold coin and bullion in the reserve fund, together with the redeemed notes held for use as provided in this section, shall at no time exceed the maximum sum of one hundred and fifty million dollars. (Act March 14, 1900, Sec. 2; 31 Stat. U. S., 45.) Section 7 of the Federal Reserve Act provides that the net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to supplement the gold reserve ot y held against outstanding United States notes, or shall be applied to the reduction of the outstanding bonded indebtedness of the United States under regulations to be prescribed by the Secretary of the Treasury. § 331. Establishment of Divisions of Issue and of Redemption. — That there be established in the Treasury Department, as a part of the office of the Treasurer of the United States, divisions to be designated and known as the division of issue and the division of redemption, to which shall be assigned, respectively, under such regulations as the Secretary of the Treasury may approve, all records and accounts relating to the issue and redemption of United States notes, gold certificates, silver certificates, and currency cer- tificates. There shall be transferred from the accounts of the gen- eral fund of the Treasury of the United States, and taken up on the books of said divisions, respectively, accounts relating to the reserve fund for the redemption of United States notes and Treasury notes, the gold coin held against outstanding gold cer- tificates, the United States notes held against outstanding cur- rency certificates, and the silver dollars held against outstanding silver certificates, and each of the funds represented by these ac- counts shall be used for the redemption of the notes and certificates for which they are respectively pledged, and shall be used for no other purpose, the same being held as trust funds. (Act March 14 1900, Sec. 4; 31 Stat. U. S, 46.) § 332. Cancellation of Treasury Notes and Issue of Silver Cer- tificates.— That it shall be the duty of the Secretary of the Treas- ury, as fast as standard silver dollars are coined under the pro- visions of the Acts of July fourteenth, eighteen hundred and ninety, and June thirteenth, eighteen hundred and ninety-eight, from bullion purchased under the Act of July fourteenth, eighteen hundred and ninety, to retire and cancel an equal amount of Treasury notes whenever received into the Treasury, either by ex- change in accordance with the provisions of this Act or in the or- dinary course of business, and upon the cancellation of Treasury notes silver certificates sbnll be issued against the silver dollars so coined. (Act March 14, 1900, Sec. 5; 31 Stat. U. S., 47.) 380 § 333. Issue of Gold Certificates. — That the Secretary of the Treasury is hereby authorized and directed to receive deposits of gold coin with the Treasurer, or any assistant treasurer of the United States, in sums of not less than twenty dollars, and to issue gold certificates therefor in denominations of not less than ten dollars, and the coin so deposited shall be retained in the Treasury and held for the payment of such certificates on demand, and used for no other purpose. Such certificates shall be receivable for customs, taxes, and all public dues, and when so received may be reissued, and when held by any National banking association may be counted as a part of its lawful reserve: Provided, That whenever and so long as the gold coin and bullion held in the reserve fund in the Treasury for the redemption of United States notes and Treasury notes shall fall and remain below one hundred million dollars the authority to issue certificates as herein provided shall be suspended : And provided further, That whenever and so long as the aggregate amount of United States notes and silver certificates in the general fund of the Treasury shall exceed sixty million dollars the Secretary of the Treasury may, in his discre- tion, suspend the issue of the certificates herein provided for : And provided further, That of the amount of such outstanding certifi- cates one-fourth at least shall be in denominations of fifty dol- lars or less: And provided further, That the Secretary of the Treasury may, in his discretion, issue such certificates in denomina- tions of ten thousand dollars, payable to order : And provided fur- ther, That the Secretary of the Treasury may, in his discretion, re- ceive, with the assistant treasurer in New York and the assistant treasurer in San Francisco, deposits of foreign gold coin at their bullion value in amounts of not less than one thousand dollars in value and issue gold certificates therefor of the description herein authorized: And provided further, That the Secretary of the Treasury may, in his discretion, receive, with the Treasurer or any assistant treasurer of the United States, deposits of gold bullion bearing the stamp of the coinage mints of the United States, or the assay office in New York, certifying their weight, fineness, and value, in amounts of not less than one thousand dollars in value, and issue gold certificates therefor of the description herein author- 381 ized. But the amount of gold bullion and foreign coin so held shall not at any time exceed two-thirds of the total amount of gold certificates at such time outstanding. And section fifty-one hun- dred and ninety-three of the Revised Statutes of the United States is hereby repealed. (Act March 14, 1900, Sec. 6; 31 Stat. U. S., 47; Act March 4, 1907, Sec. 1 ; 34 Stat. U. S., 1289 ; Act March 2, 1911 ; 36 Stat. U. S., 965, as amended by Act June 12, 1916 ; 39 Stat. L., 225.) § 334. Issue of Silver Certificates.— That hereafter silver cer- tificates shall be issued only of denominations of ten dollars and under, except that not exceeding in the aggregate ten per centum of the total volume of said certificates, in the discretion of the Secretary of the Treasury, may be issued in denominations of twenty dollars, fifty dollars, and one hundred dollars; and silver certificates of higher denomination than ten dollars, except as herein provided, shall, whenever received at the Treasury or re- deemed, be retired and cancelled, and certificates of denominations of ten dollars or less shall be substituted therefor, and after such substitution, in whole or in part, a like volume of United States notes of less denomination than ten dollars shall from time to time be retired and cancelled, and notes of denominations of ten dollars and upward shall be reissued in substitution therefor, with like qualities and restrictions as those retired and cancelled. (Act March 14, 1900, Sec. 7; 31 Stat. U. S, 47.) The act of February 28, 1878, authorized the issue of silver cer- tificates in sums of not less than ten dollars. The act of March 3, 1887, authorized the issue of one, two, and five dollar certificates. The section supersedes these acts as to all new issues. § 335. Subsidiary Silver Coinage. — That the Secretary of the Treasury is hereby authorized to use, at his discretion, any silver bullion in the Treasury of the United States purchased under the Act of July fourteenth, eighteen hundred and ninety, for coinage into such denominations of subsidiary silver coin as may be neces- sary to meet the public requirements for such coin : Provided, That the amount of subsidiary silver coin outstanding shall not 383 at any time exceed in the aggregate one hundred millions of dol- lars. Whenever any silver bullion purchased under the Act of July fourteenth, eighteen hundred and ninety, shall be used in the coinage of subsidiary silver coin, an amount of Treasury notes issued under said Act equal to the cost of the bullion contained in such coin shall be cancelled and not reissued. (Act March 14, 1900, Sec. 8; 31 Stat. U. S., 47.) § 336. Recoinage of Uncurrent Subsidiary Silver Coin. — That the Secretary of the Treasury is hereby authorized and directed to cause all worn and uncurrent subsidiary silver coin of the United States now in the Treasury, and hereafter received, to be recoined, and to reimburse the Treasurer of the United States for the difference between the nominal or face value of such coin and the amount the same will produce in new coin from any moneys in the Treasury not otherwise appropriated. (Act March 14, 1900, Sec. 9; 31 Stat. U. S., 48.) § 337. Melting of Silver Dollars— Sale of Bullion.— That the Secretary of the Treasury is hereby authorized from time to time to melt or break up and to sell as bullion not in excess of three hundred and fifty million standard silver dollars now or here- after held in the Treasury of the United States. Any silver cer- tificates which may be outstanding against such standard silven dollars so melted or broken up shall be retired at the rate of $1 face amount of such certificates for each standard silver dollar so melted or broken up. Sales of such bullion shall be made at such prices not less than $1 per ounce of silver one thousand fine and upon such terms as shall be established from time to time by the Secretary of the Treasury. (Act April 23, 1918, Sec. 1.) § 338. Purchase of Silver Ore.— That upon every such sale of bullion from time to time the Secretary of the Treasury shall immediately direct the Director of the Mint to purchase in the United States, of the product of mines situated in the United States and of reduction works so located, an amount of silver equal to three hundred and seventy-one and twenty-five hundredths grains 383 of pure silver in respect of every standard silver dollar so melted or broken up and sold as bullion. Such purchases shall be made in accordance with the then existing regulations of the Mint and at the fixed price of $1 per ounce of silver one thousand fine, delivered at the option of the Director of the Mint at New York, Philadelphia, Denver, or San Francisco. Such silver so purchased may be resold for any of the purposes hereinafter specified in sec- tion three of this Act, under rules and regulations to be established by the Secretary of the Treasury, and any excess of such silver so purchased over and above the requirements for such purposes, shall be coined into standard silver dollars or held for the purpose of such coinage, and silver certificates shall be issued to the amount of such coinage. The net amount of silver so purchased, after making allowance for all resales, shall not exceed at any one time the amount needed to coin an aggregate number of standard silver dollars equal to the aggregate number of standard silver dollars theretofore melted or broken up and sold as bullion under the pro- visions of this Act, but such purchases of silver shall continue until the net amount of silver so purchased, after making allowance for all resales, shall be sufficient to coin therefrom an aggregate num- ber of standard silver dollars equal to the aggregate number of standard silver dollars theretofore so melted or broken up and sold as bullion. (Act April 23, 1918, Sec. 2.) § 339. Sales of Silver Bullion — Purposes of. — That sales of silver bullion under authority of this Act may be made for the purpose of conserving the existing stock of gold in the United States, of facilitating the settlement in silver of trade balances adverse to the United States, of providing silver for subsidiary coinage and for commercial use, and of assisting foreign govern- ments at war with the enemies of the United States. The alloca- tion of any silver to the Director of the Mint for subsidiary coin- age shall, for the purposes of this Act, bo regarded as a sale or re ale. (Act April 23, 1918, Sec. 3.) § 340. Reimbursement for Loss in Melting Silver Dollars. — That the Secretary of the Treasury is authorized, from any moneys 384 in the Treasury not otherwise appropriated, to reimburse the Treasurer of the United States for the difference between the nominal or face value of all standard silver dollars so melted or broken up and the value of the silver bullion, at $1 per ounce of silver one thousand fine, resulting from the melting or breaking up of such standard silver dollars. (Act April 23, 1918, Sec. 4.) § 341. Federal Reserve Bank Notes — Issuance of to Prevent Contraction of Currency. — That in order to prevent contraction of the currency, the Federal reserve banks may be either permitted or required by the Federal Eeserve Board, at the request of the Secretary of the Treasury, to issue Federal reserve bank notes, in any denominations (including denominations of $1 and $2) auth- orized by the Federal Reserve Board, in an aggregate amount not exceeding the amount of standard silver dollars melted or broken up and sold as bullion under authority of this Act, upon deposit as provided by law with the Treasurer of the United States as security therefor, of United States certificates of indebtedness, or of United States one-year gold notes. The Secretary of the Treasury may, at his option, extend the time of payment of any maturing United States certificates of indebtedness deposited as security for such Federal reserve bank notes for any period not exceeding one year at any one extension and may, at his option, pay such certificates of indebtedness prior to maturity, whether or not so extended. The deposit of United States certificates of indebted- ness by Federal reserve banks as security for Federal reserve bank notes under authority of this Act shall be deemed to constitute an agreement on the part of the Federal reserve bank making such deposit that the Secretary of the Treasury may so extend the time of payment of such certificates of indebtedness beyond the original maturity date or beyond any maturity date to which such certificates of indebtedness may have been extended, and that the Secretary of the Treasury may pay such certificates in advance of maturity, whether or not so extended. (Act April 23, 1918, Sec. 5.) § 342. Federal Reserve Bank Notes — Retirement of — Tax on. — That as and when standard silver dollars shall be coined out of 385 bullion purchased under authority of this Act, the Federal reserve banks shall be required by the Federal Reserve Board to retire Federal reserve bank notes issued under authority of section five of this Act, if then outstanding, in an amount equal to the amount of standard silver dollars so coined, and the Secretary of the Treasury shall pay off and cancel any United States certificates of indebted- ness deposited as security for Federal reserve bank notes so retired. That the tax on any Federal reserve bank notes issued under authority of this Act, secured by the deposit of United States cer- tificates of indebtedness or United States one-year gold notes, shall be so adjusted that the net return on such certificates of indebtedness, or such one-year gold notes, calculated on the face value thereof, shall be equal to the net return on United States two per cent bonds, used to secure Federal reserve bank notes, after deducting the amount of the tax upon such Federal reserve bank notes so secured. That except as herein provided, Federal reserve bank notes issued under authority of this Act, shall be subject to all existing provisions of law relating to Federal reserve bank notes. (Act April 23, 1918, Sees. <6, 7, and 8.) § 343. Exportation of Silver Coin or Bullion — That the pro- visions of Title VII of an Act approved June fifteenth, nineteen hundred and seventeen, entitled "An Act to punish acts of inter- ference with the foreign relations, the neutrality, and the foreign commerce of the United States, to punish espionage, and better to enforce the criminal laws of the United States, and for other pur- poses," and the powers conferred upon the President by subsection (b) of section five of an Act approved October sixth, nineteen hundred and seventeen, known as the "Trading with the Enemy Act," shall, in so far as applicable to the exportation from or ship- ment from or taking out of the United States of silver coin or silver bullion, continue until the net amount of silver required by section two of this Act shall have been purchased as therein pro- vided. (Act April 23, 1918, Sec. 9.) § 344. International Bimetallism.— That the provisions of this Act are not intended to preclude the accomplishment of Lnterna- 25 386 tional bimetallism whenever conditions shall make it expedient and practicable to secure the same by concurrent action of the leading commercial nations of the world and at a ratio which shall insure permanence of relative value between gold and silver. (Act March 14, 1900, Sec. 14; 31 Stat. TJ. S. 49.) § 345. Issue of Treasury Notes.— That whenever and so long as the outstanding silver certificates of the denominations of one dollar, two dollars, and five dollars, issued under the provisions of section seven of an Act entitled "An Act to define and fix the standard of value, to maintain the parity of all forms of money issued or coined by the United States, to refund the public debt, and for other purposes," approved March fourteenth, nine- teen hundred, shall be, in the opinion of the Secretary of the Treasury, insufficient to meet the public demand therefor, he is hereby authorized to issue United States notes of the denomina- tions of one dollar, two dollars, and five dollars, and upon the issue of United States notes of such denominations an equal amount of United States notes of higher denominations shall be retired and cancelled: Provided, however, That the aggregate amount of United States notes at any time outstanding shall re- main as at present fixed by law: And provided further, That nothing in this Act shall be construed as affecting the right of any National bank to issue one-third in amount of its circulating notes of the denomination of five dollars, as now provided by law. (Act March 4, 1907, Sec. 2; 34 Stat. U. S. 1289.) § 346. Legal Tender — Foreign Coins- No foreign gold or silver coins shall be a legal tender in payment of debts. (Rev. Stat. U. S. 3584.) The coinage by the Government of Philippine Islands of the various silver and minor coins for use in the islands is authorized and the legal-tender quality of such coins as well as of the gold coins of the United States in the islands is prescribed by the Act of July 1, 1902, c. 1369, sees. 76-83, 32 Sflat. L., 710, and the Act of March 2, 1903, c. 980, sec. 4, 32 Stat. L., 953. 387 § 347. Legal Tender — Gold Coin.- The gold coins of the United States shall be a legal tender in all payments at their nominal value when not below the standard weight and limit of tolerance provided by law for the single piece, and when reduced in weight below such standard and tolerance, shall be a legal tender at valuation in proportion to their actual weight. (Rev. Stat. U. S. 3585.) § 348. Legal Tender — Standard Silver Dollars.— That there shall be coined at the several mints of the United States, silver dollars of the weight of 412% grains Troy of standard silver * * *• which coins together with all silver dollars hereto- fore coined by the United States, of like weight and fineness, shall be a legal tender, at their nominal value, for all debts and dues, public and private, except where otherwise expressly stipulated in the contract. (Act Feb. 28, 1878, Sec. 1; 20 Stat. U. S. 25.) § 349. Legal Tender — Subsidiary Silver Coins. — That the pre- sent silver coins of the United States of smaller denominations than one dollar shall hereafter be a legal tender in all sums not exceeding ten dollars in full payment of all dues public and pri- vate. (Act June 9, 1879, Sec. 3; 21 Stat. U. S. 8.) § 350. Legal Tender — Minor Coins.— The minor coins of the United States shall be a legal tender, at their nominal value, for any amount not exceeding twenty-five cents in any one payment. (Eev. Stat. U. S. 3587.) § 351. Legal Tender — United States Notes— United States notes shall be lawful money, and a legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt. (Rev. Stat. U. S. 3588.) § 352. Legal Tender — Demand Treasury Notes.— Demand Treasury notes authorized by the Act of July 17, 18G1, chapter 5, and the Act of February 12, 1862, chapter 20, shall be lawful 388 money and legal tender in like manner as United States notes. (Eev. Stat. IT. S. 3589.) § 353. Legal Tender — Interest-Bearing Notes. — Treasury notes issued under the authority of the Acts of March 3, 1863, chapter 73, and June 30, 186-A', chapter 172, shall be legal tender to the same extent as United States notes, for their face value, excluding interest: Provided, That Treasury notes issued under the act last named shall not be a legal tender in payment or redemption of any notes issued by any bank, banking association, or banker, calculated and intended to circulate as money. (Eev. Stat. U. S. 3590.) § 354. Legal Tender — National Bank Notes — Federal Reserve Notes.— See § 81 for reference to National bank notes and § 25G for reference to Federal Eeserve Notes. § 355. Legal Tender— Gold and Silver Certificates.— That the Secretary of the Treasury is authorized and directed to receive de- posits of gold coin with the Treasurer or assistant treasurers of the United States, in sums of not less than twenty dollars, and to issue certificates therefor in denominations of not less than twenty dollars each, corresponding with the denominations of United States notes. The coin deposited for or representing the certifi- cates of deposit shall be retained in the Treasury for the payment of the same on demand. Said certificates shall be receivable for customs, taxes, and all public dues, and when so received may be reissued ; and such certificates, as also silver certificates, when held by any National banking association, shall be counted as part of its lawful reserve; and no National banking association shall be a member of any clearing house in which such certificates shall not be receivable in the settlement of clearing-house balances: Provided, That the Secretary of the Treasury shall suspend the issue of such. gold certificates whenever the amount of gold coin and gold bullion in the Treasury reserved for the redemption of United States notes falls below one hundred million dollars; and the provisions of section fifty-two hundred and seven of the Ee- vised Statutes shall be applicable to the certificates herein author- 389 ized and directed to be issued. (Act July 12, 1882, Sec. 12; 22 Stat. U. S. 165.) See the following section for additional and more recent pro- visions relating to gold certificates. See also § 333. § 356. legal Tender — Gold Certificates.- That gold certificates of the United States payable to bearer on demand shall be and are hereby made legal tender in payment of all debts and dues, public and private. That all Acts or parts of Acts which are inconsistent with this Act are hereby repealed. (Act December 24, 1919.) § 357. Legal Tender— Act March 14, 1900.— That nothing con- tained in this Act shall be construed to affect the legal-tender quality as now provided by law of the silver dollar, or of any other money coined or issued by the United States. (Act March 14, 1900, Sec. 3; 31 Stat. U. S. 46.) § 358. Regulations Governing the Issue, Exchange and Redemp- tion of Money. — The following regulations govern the issue, exchange, and redemp- tion of the paper money and the gold, silver, and minor coin of the United States, and the redemption of National bank notes, Federal re- serve notes, and Federal reserve bank notes by the Treasurer of the United States. I. — Issue of United States Paper Currency. 1. New United States paper currency is issued upon request in re- turn for United States paper currency unfit for circulation, Federal reserve notes, Federal reserve bank notes, National bank notes, sub- sidiary silver coin, or minor coin, received for redemption or exchange. 2. Gold certificates are issued by the Treasurer or any Assistant Treasurer upon a deposit of gold coin. 3. Silver certificates are issued by the Treasurer or any Assistant Treasurer upon a deposit of standard silver dollars. II. — Issue of Gold Coin. 4. Gold coin is issued by the Treasurer or any Assistant Treasurer for gold certificates, United States notes, or Treasury notea of 1890, 390 and will be sent by mail (postage and insurance deducted), unless otherwise requested, in which case the charges for transportation are to be paid by the consignee on delivery of the coin. III. — Issue of Standard Silver Dollars, Subsidiary Silver Coin, and Minor Coin. 6. Standard silver dollars are Issued by the Treasurer or any Assist- ant Treasurer in redemption of silver certificates or Treasury notes of 1890, and will be sent by mail (postage and insurance deducted), un- less otherwise requested, in which case the charges for transporta- tion are to be paid by the consignee on delivery of the coin. 6. Subsidiary silver coin (halves, quarters, and dimes) and minor coin (1-cent bronze and 5-cent nickel) are issued upon a deposit of United States currency, national bank notes, Federal reserve notes or Federal reserve bank notes, with the Treasurer or any Assistant Treasurer ot National bank depositary, and the coin will be sent from the nearest subtreasury by mail (postage and insurance deducted), unless otherwise requested, in which case the charges for transporta- tion are to be paid by the consignee on delivery of the coin. Subsidiary silver coin and minor coin are also issued for drafts on New York, Baltimore, Boston, Chicago, Cincinnati, New Orleans, Philadelphia, St. Louis, or San Francisco, payable to the order of the Assistant Treasurer of the United States in the city on which drawn, or for drafts drawn on Washington, payable to the order of the Treas- urer of the United States. The drafts should be forwarded directly to the office to whose order they are payable, with advice of the kind and denominations of coin desired. 7. Application for new coin must be made to the Treasurer of the United States. When such coin is available for issue, and after de- posit of an equivalent amount in other funds has been made as directed by the Treasurer, the coin will be sent from the mints by mail (postage and insurance deducted), unless otherwise requested, in which case the charges for transportation are to be paid by the consignee on de- livery of the coin. IV. — Redemption of Paper Currency. 8. United States notes and gold certificates are redeemable in gold coin; Treasury notes of 1890 in gold coin or silver dollars and silver certificates in silver dollars by the Treasurer and Assistant Treasurers. National bank notes and Federal reserve bank notes are redeemable in lawful money of the United States by the Treasurer, but not by the Assistant Treasurers. 391 Federal reserve notes are redeemable in gold by the Treasurer, but not by the Assistant Treasurers. United States notes, Treasury notes of 1890, fractional currency notes, Federal reserve notes, Federal reserve bank notes, National bank notes, gold certificates, and sliver certificates, unfit for circulation, when not mutilated so that less than three-fifths of the original proportions re- mains, will be redeemed at their face value in new currency. 9. United States notes, Treasury notes of 1890, fractional currency notes, gold certificates, silver certificates, National bank notes, Fed- eral reserve notes, and Federal reserve bank notes, when mutilated so that less than three-fifths, but clearly more than two-fifths of the orig- inal proportions remains, are redeemable by the Treasurer only, at one-half the face value of the whole note or certificate. Fragments not clearly more than two-fifths are not redeemed, unless accompanied by the evidence required in paragraph 10. 10. Fragments less than three-fifths are redeemed at the face value of the whole note when accompanied by an affidavit of the owner or other persohi having knowledge of the facts that the missing portions have been totally destroyed. The affidavit must state the cause and manner of the mutilation, and must be subscribed and sworn to before an officer qualified to administer oaths, who must affix his official seal thereto, and the character of the affiant must be certified to be good by such officer or some one having an official seal. Signatures by mark (X) must be witnessed by two persons who can write, and who must give their places of residence. The Treasurer will exercise such dis- cretion under this regulation as may seem to him needful to protect the United States from fraud. Fragments not redeemable are returned. Blank forms for affidavits are not furnished. The department can not make reimbursement for currency totally destroyed. V. — Retubns foe Paf-eh Currency. 11. For remittances received for redemption. — For remittances from a place where there is no subtreasury, returns will be made in new United States paper currency by mail (postage and insurance de- ducted), unless otherwise requested, in which case the charges for transportation are to be paid by the consignee; or, if desired, in sub- sidiary silver coin or in minor coin by mail (postage and insurance deducted), unless otherwise requested, in which case the charges for transportation are to be paid by the consignee on delivery of the coin. For remittances from a place where there is a subtreasury, returns will be made in new United States paper currency by mail (postage and insurance deducted), unless otherwise requested, in which case 392 the charges for transportation are to be paid by the consignee, or subject to the convenience of the Treasury, by the Treasurer's checks. Exchange, subject to the convenience of the Treasury, will be fur- nished for currency or coin received for redemption on which the transportation charges have been prepaid. VI. — Redemption or Exchange of Sieves and Minor Coin. 12. Standard silver dollars may be presented for exchange into silver certificates only. Subsidiary silver coin (halves, quarters, and dimes) and minor coin (1-cent bronze and 5-cent nickel), assorted by denomina- tions, in separate packages, may be presented in sums or multiples of $20 to the Treasurer or any Assistant Treasurer for redemption in lawful money. The words "sums or multiplies of $20" apply to sub- sidiary silver and minor coin separately. "When coin is forwarded the charges must be prepaid. 13. Coins should be shipped loose in cloth bags. Shipments put up in wrappers, envelopes, or rolls of paper will not be received. Not more than $1,000 in silver coin, $300 in 5-cent pieces, or $100 in cents should be shipped in one bag or package. 14. No foreign or mutilated silver coin, or coin to which paper or any other substance is attached, or upon which any name or adver- tisement is stamped or impressed, will be received. Coin is mutilated when punched, clipped, chipped, or otherwise appreciably reduced in weight by any means except natural abrasion. Silver coin so mutilated or reduced will be stamped by the receiving officer with a distinguish- ing mark before it is returned to the depositor. Silver coin not mu- tilated, but defaced otherwise than as above described, where it can be clearly and readily identified as to denomination and genuineness, will be redeemed. 15. Minor coin that is so defaced as not to be readily identified, or that is punched or clipped, will not be redeemed. Pieces that are stamped, bent, or twisted out of shape, or otherwise imperfect but showing no material loss of metal, will be redeemed. 16. When gold, silver, or minor coin is shipped for credit of the 5 per cent, redemption fund or as a transfer of funds, it should be stated on the shipping tag attached to the bag as well as in the letter of advice. VII. — Transmission of Paper Currency to the Treasurer. 17. Paper currency for redemption must be assorted by kinds and denominations, and each 100 notes or less inclosed in a paper strap marked with the amount. Each 1,000 notes, as nearly as convenient, in straps, should be inclosed in a paper band likewise marked. In 393 large consignments, two such parcels laid flat, face to back, with two others directly upon them, never more than 4,000 notes in one package, should be firmly tied with two cords and sealed up in stout paper, forming a compact package about 6 by 8 by 12 inches. With each package should be inclosed a memorandum giving an inventory of the contents, the sender's name and address, and the disposition to be made of the proceeds. VIII. — Addbess on Packages Sent to Washington. 18. All packages should be addressed to the Treasurer of the United States only. If addressed otherwise, it involves delay and risk. They should be double wrapped, the outside wrapper bearing the owner's name and address and the inside package being marked with the amount and kind of currency. 19. United States notes, Treasury notes of 1890, gold certificates, and silver certificates may be sent in the same package and should be marked "Unfit United States currency for redemption." National bank notes, Federal reserve notes, and Federal reserve bank notes may be sent in the same package marked "National and Federal reserve currency for redemption," but each kind should be under separate straps. The failure to indicate on packages the kind of notes inclosed causes delay in making returns. A letter of advice should be mailed for each day's consignment of United States cur- rency, and a separate one for National and Federal reserve currency. No package should contain more than 4,000 notes. IX. — Shipment of Unfit Notes to Washington. 20. Charges are paid by the Government on unfit National bank notes, Federal reserve notes, and Federal reserve bank notes when sent to the department at Washington, charges collect. No charges are paid by the Government on any other kind of currency sent for redemption. 21. All charges must be prepaid by the sender on shipments for exchange or redemption of gold coin, standard silver dollars, sub- sidiary silver coin, and minor coin. 22. National bank depositaries must pay all charges incurred by them on account of transfer of public funds. 23. In order to save time and expedite shipments in return for currency redeemed when the amounts are large, orders should be for original packages of 4,000 notes each of the same denomination, that is, ones in packages of $4,000; twos, $8,000; fives, $20,000; tens $40,000; and so on. 24. The Government has no contract for carrying money or other 394 securities, and shipments will be made as herein provided unless specific instructions are received designating the particular manner in which the same is desired. X. — Shipments of Moneys from Washington. 25. For shipments of paper currency from Washington and from and between subtreasuries, arrangements have been made with the Postoffice Department for ones, twos, and fives to move at parcel-post rates with the usual parcel-post weight limits. On each package of ones, or twos, there is a ten-cent registration fee, and on fives the registration fee is twenty-five cents. These packages are treated and handled in the same manner as first-class registered mail. Tens, twenties, and above, move at first-class rates with ten-cent registra- tion fee. Shipments are insured for full value. 26. The law provides for free registration of United States currency sent to the Treasurer of the United States for redemption. There will, therefore, be no registration fee in that case, but before ship- ment the local postmaster should be consulted as to the requirements under section 914 of the Postal Laws and Regulations. National bank notes, Federal reserve notes, and Federal reserve bank notes, require the registration fee. 27. On all shipments of money by mail from banks or others to the Treasurer of the United States, postage must be prepaid at first- class rates. The limit of weight is four pounds for each package. 28. As to insurance for full value on currency in transit by regis- tered mail, details pertaining to the Government's contract for same, and instructions to banks whereby they may avail themselves of the privileges and benefits of this new method of transportation of cur- rency, together with the rate for insurance between their locality and the Treasury in Washington, will be furnished upon inquiry addressed to the Secretary of the Treasury, Division of Public Moneys (Mail insurance). XI. — General Information. 29. Paper currency presented for redemption, or for credit of the Treasurer at the offices of the Assistant Treasurers, must be assorted by kinds and denominations and inclosed in paper straps. The straps must not contain more than 100 notes each, and the amount of the contents must be plainly marked thereon. 30. The Act of June 30, 1876 (19 Stats. U. S., 64), requires that all United States officers charged with the receipt or disbursement of pub- lic moneys, and all officers of National banks, shall stamp or write in plain letters the word "counterfeit," "altered," or "worthless" upon all fraudulent notes issued in the form of and intended to circulate as 395 money which shall be presented at their places of business; and if such officers shall wrongfully stamp any genuine note of the United States or of the National banks, they shall, upon presentation, redeem such notes at their face value. 31. Counterfeit notes found in remittances from banks are canceled and returned for the purpose of enabling the owner to make reclama- tion, and after such use they must be returned to the Treasurer of the United States for transfer to the Secret Service Division of the Treasury Department. 32. Counterfeit notes found in remittances from individuals are canceled and sent to the Secret Service Division. The sender is ad- vised of the fact and informed that, if he will communicate with the chief of that division, arrangements may be made to have such notes submitted for reclamation. 33. Counterfeit coins found in remittances to the Treasurer are can- celed and sent to the Secret Service Division, a receipt for the same being returned to the sender, who may communicate with the chief of that division if he desires to have such coin submitted for rec- lamation. 34. Counterfeit coin received at the subtreasuries is retained, to be called for by agents of the Secret Service at certain stated periods. A receipt is issued to the sender or depositor, when desired, to enable him to make reclamation for coin so retained. 35. In case of the loss or destruction of a Treasury warrant or one of the Treasurer's checks, payment of the original warrant or check is stopped upon notification of loss, and a form of bond of idemnity is furnished for the issue of a duplicate upon application therefor. CHAPTEE V. REGULATIONS OF TREASURY DEPARTMENT TO UNITED STATES BONDS RELATING Section 359. Kegulations of Treasury Department Regarding U. S. Bonds. § 359. Regulations of Treasury Department Regarding United States Bonds. — Bonds of the United States. — The original issues of bonds of the United States under the several authorizing acts of Congress are di- vided into coupon and registered bonds. Of these issues the following are the bonds outstanding and bearing interest, May 1, 1920: Title of loan and date of author- Rateof ■When redeemable or izing act. Denominations. Int. payable Four per cent. Loan of 1925: Per Ct. July 14, 1870, and Jan. 14, $50; $100; $500; $1000.. 4 Redeemable at pleasure $50; $100; $500; $1000; $5000; $10,000 of the United States after Feb. 1. 1925. Consols of 1930: Mar. 14, 1900 — 'Coupon $50; $100; $500; $1000. . 2 Payable at pleasure Registered .... $50; $100; $500; $1000; of the United States $5000; $10,000; $50,000 after 30 years from Panama Canal Loan, 1916-1936: Apr. 1, 1900. June 28, 1902, and Dec. 21, 1905 — Coupon $20; $100; $1000 2 Redeemable at pleasure $20; $100; $1000; $10,000 of the United States after 10 years from Aug. 1, 1906, and pay- able 30 years from Panama Canal Loan, 1918-1938: that date. June 28, 1902, and Dec. 21, 1905 — Coupon $20; $100; $1000 $20; $100; $1000; $10,000 2 Redeemable at pleasure of the United States after ten years from Nov. 1, 1908, and pay- able 30 years from that date. Panama Canal Loan, 1961: Aug. 5, 1909. Feb. 4, 1910, and Mar. 2, 1911 — Coupon $100; $500; $1000 3 Payable 50 years from Registered. . . . $100; $500; $1000; $10,000 June 1, 1911. Postal Savings Bonds: June 25, 1910 — Coupon 2% Redeemable at pleasure Registered $20; $100; $500 of the United States New series issued July 1 and after 1 year from Jan. 1 of each year; first date of issue, and series Issued July 1, 1911. payable 20 years from that date. 396 397 Interest on the Consols of 1930 is payable on the first days of Jan- uary, April, July and October; on the Panama Canal Loan, 1961, on the first days of March, June, September and December; on the Postal Savings Bonds on the first days of January and July; on the other loans listed above interest is payable on the first days of February, May, August and November. Titles of Liberty Bonds and Victory Notes, Denominations, Interest Payment Dates, and Periods During Which Transfer Books of Registered Bonds and Notes Are Closed. First Liberty Loan. First Liberty Loan 3% per cent, bonds of 1932-1947 (First 3y 2 's). Coupon bonds: $5o, $loo, $5oo, $l,ooo. Registered bonds: $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo, $5o,ooo, $loo,ooo. Interest payable semiannually on June 15 and December 15. Transfer books closed from close of business May 15 to opening of business June 16, and from close of business November 15 to opening of business December 16. First Liberty Loan Converted 4 per cent, bonds of 1932-1947 (First 4's). First Liberty Loan Converted 4% per cent, bonds of 1932-1947 (First 4%'s). First Liberty Loan Second Converted 4% per cent, bonds of 1932-1947 (First Second 4y 4 's). Coupon bonds: $5o, $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo. Registered bonds: $5o, $loo, $5oo, ?l,ooo, $5,ooo, $lo,ooo, $5o,ooo, $loo,ooo. Interest payable semiannually on June 15 and December 15. Transfer books closed from close of business May 15 to opening of business June 16, and from close of business November 15 to opening of business December 16. Second Liberty Loan. Second Liberty Loan 4 per cent, bonds of 1927-1942 (Second 4's). Second Liberty Loan Converted 4% per cent, bonds of 1927-1942 (Second 4%'s). Coupon bonds: $5o, $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo. Registered bonds: $5o, $loo, ?5oo, $l,ooo, $5,ooo, $lo,ooo, $5o,ooo, $loo,ooo. Interest payable semiannually on May 15 and November 15. Transfer books closed from close of business April 15 to open- ing of business May 16, and from close of business October 15 to opening of business November 16. 398 Third Liberty Loan. Third Liberty Loan 4*4 per cent, bonds of 1928 (Third 4 1 / 4's). Coupon bonds: $5o, ?loo, $5oo, $l,ooo, $5,ooo, $lo,ooo. Registered bonds: $5o, $loo, $5oo, ?l,ooo, $5,ooo, $lo,ooo, $5o,ooo, $loo,ooo. Interest payable September 15, 1918, and thereafter semiannually on March 15 and September 15. Transfer books closed from close of business February 15 to opening of business March 16, and from close of business August 15 to opening of business September 16. Fourth Liberty Loan. Fourth Liberty Loan 4*4 per cent, bonds of 1933-1938 (Fourth 4%'s). Coupon bonds: $5o, $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo. Registered bonds: $5o, $loo, $5oo, $l,ooo, $5,ooo, $lo,ooo, $5o,ooo, $loo,ooo. Interest payable April 15, 1919, and thereafter semiannually on April 15 and October 15. Transfer books closed from close of business March 15 to open- ing of business April 16, and from close of business September 15 to opening of business October 16. Victory Liberty Loan. Victory Liberty Loan 4% per cent, convertible notes of 1922-1923 (Victory 4%'s). Victory Liberty Loan Z% per cent, convertible notes of 1922-1923 (Victory 3%'s). Coupon notes: $5o, ?loo, $5oo, $l,ooo, $5,ooo, $lo,ooo. Registered notes: $5o, ?loo, $5oo, $l,ooo, $5,ooo, $lo,ooo, ?5o,ooo, ?loo,ooo. Interest payable December 15, 1919, and thereafter semiannually on June 15 and December 15, and on May 20, 1923. Regis- tered notes have coupons attached thereto for interest pay- able December 15, 1919. Transfer books closed from close of business May 15 to open- ing of business June 16, and from close of business November 15 to opening of business December 16, in each of the years 1920, 1921, and 1922; transfer books will also be closed from close of business April 20, 1923, In preparation for interest payment May 20, 1923. Bonds or the District of Columbia and of the Insular Possessions of the United States. — The Treasury Department acts as registering 399 and transfer agent for certain issues of bonds of the District of Co- lumbia and of the Governments of Porto Rico and the Philippine Is- lands. The regulations in regard to transactions in United States bonds are applicable to similar transactions in District of Columbia or insular bonds registered by the Treasury Department. RULES AND REGULATIONS CONCERNING TRANSACTIONS IN LIBERTY BONDS and Victory Notes. — These Rules and Regulations, with the excep- tions noted, govern also transactions in United States bonds issued prior to April 24, 1917. General Provisions. — Exchanges and transfers of Liberty bonds and Victory notes may be made only as between bonds and notes of the same issue and series. Bonds or notes presented for exchange or transfer must be delivered to the Secretary of the Treasury, Division of Loans and Currency, Washington, or to a Federal Reserve Bank, at the risk and expense of the respective owners, with all transporta- tion charges prepaid. No charge for interchange or transfer is im- posed by the United States. Deliveries of coupon bonds or notes issued upon exchange, unless made in person to the owner or his duly authorized representative, will be made at the expense and risk of the owner. Deliveries of registered bonds or notes issued upon exchange or transfer, unless made in person to the registered owner or his duly authorized representative, will be made by registered mail without expense to, but at the risk of, the registered owner. Full information as to transportation charges and risks upon bonds and notes presented for exchange or transfer, or issued upon exchange or transfer, and as to special arrangements for the shipment of coupon bonds and notes by registered mail insured when transactions are submitted through incorporated banks and trust companies to the appropriate Federal Reserve Bank, will be found in the latter part of this chapter under the caption "Transportation Charges and Risks Upon Bonds and Notes." Exchanges of coupon bonds or notes of different denominations may be effected immediately at any Federal Reserve Bank, or at the Treas- ury Department, Washington, at any time. Transactions involving exchanges of registered bonds or notes of different denominations, exchanges of coupon and registered bonds or notes, or transfers of registered bonds or notes, and other transactions involving the issue, cancellation, or transfer of registered bonds or notes, may be pre- sented to a Federal Reserve Bank, as well as to the Treasury Depart- ment, Washington, but can be effected only at the Treasury Depart- 400 ment, and when presented to a Federal Reserve Bank will be referred to the Department. In order to prepare for the payment of interest, the transfer books of registered bonds and notes close at the Treasury- Department, Washington, one month in advance of each date for the payment of registered interest and reopen on the day following such interest payment date.* No exchange as between coupons and regis- tered bonds or notes, nor transfers of registered bonds or notes, may be effected for a particular loan while the transfer books of that loan are closed, and bonds or notes presented for such exchange or transfer must actually have been received at the Treasury Department in Washington before the transfer books close.t If the bonds or notes presented for such exchange or transfer are received at the Treasury Department after the transfer books close, the transaction will be effected only upon the reopening of the books. Interest on registered bonds and notes, unless covered by coupons appertaining thereto, will be paid on each interest payment date to the registered holders of record on the date when the transfer books closed in anticipation of such interest payment date. The Treasury Department and the Federal Reserve Banks handle each class of transaction and each issue and series of bonds and notes separately. The transactions can not be intermingled, and should be submitted separately and so far as possible in the forms hereinafter set forth. Transactions will be expedited if submitted to Federal Re- serve Banks, fiscal agents of the United States. Persons submitting bonds and notes for interchange or transfer are earnestly requested to observe the instructions and suggestions contained in this circular, and to use the respective forms hereto attached. In case any date for the closing of the transfer books falls on a Sunday or legal holiday, the bo'oks will be closed on the day pre- ceding such date, and in case any date for the opening of the transfer books falls on a Sunday or legal holiday, the books will reopen on the day following such date. Registered bonds or notes which have coupons attached thereto for the interest payable on any interest payment date will be treated, in respect of such coupons, like coupon bonds or notes; that is to say, the interest payable on such interest payment date will be paid upon *This applies to transfer books of the 2 per cent. Consols of 1930, but books on all other "Old loans" close 15 days previous to payment of interest. tTransfers to the Treasurer of the United States in trust for a National bank to secure its circulation is permitted, however. 401 presentation and surrender of such coupons and not by check to the holders of record, the transfer books will not close in anticipation of such interest payment date, and such coupons when unmatured must be attached to the registered bonds or notes presented for exchange or transfer. Such coupons are payable to bearer and are not pro- tected, in the course of transportation or otherwise, by the regis- tration of the bond or note to which they appertain. Insurance ar- rangements may be effected in respect of such coupons as for coupon bonds and notes. Interchange of Bonds and Notes of Different Denominations — Ex- changes of Coupon Bonds or Notes for Coupon Bonds or Notes of Other Denominations.— Coupon bonds or notes may be presented at any time for exchange for an equal face amount of coupon bonds or notes in any other authorized denomination of the same issue and series. Coupon bonds or notes so' presented must have all matured coupons detached and all unmatured coupons attached, and the coupon bonds or notes delivered on exchange will have corresponding matured coupons detached and unmatured coupons attached. Specific instruc- tions fo'r the issue and delivery of the new coupon bonds or notes must accompany the bonds or notes presented for exchange. (Use Form L. & C. 227, copies of which, or of a substantially similar form, may be obtained from any Federal Reserve Bank or from the Treasury Department.) Same — Exchanges of Registered Bonds or Notes for Registered Bonds or Notes of Other Denominations. — Registered bonds or notes may be presented at any time for exchange fo'r an equal face amount of registered bonds or notes inscribed in the same name in any other authorized denomination of the same issue and series. Inasmuch as such exchanges involve no change of ownership, no assignment of registered bonds or notes so presented is necessary, and such ex- changes may be made even during the periods when the transfer books are closed. Specific instructions for the issue and delivery of the new registered bonds or notes must accompany the bonds or notes presented for exchange. (Use Form L. & C. 227, copies of which, or of a substantially similar form, may be obtained from any Federal Reserve Eank or from the Treasury Department.) Interchange of Coupon and Registered Bonds and Notes — Ex- changes of Coupon Bonds or Notes for Registeued Bonds or Notes. — Coupon bonds or notes may be presented for exchange for an equal face amount of registered bonds or notes in any authorized denomi- nation of the same issue and series. Such exchanges may not be 20 402 effected during any period when the transfer books o'f the loan in question are closed, but the coupon bonds or notes may nevertheless be presented for exchange during any such period. Matured interest coupons must be detached from, and all unmatured coupons must be attached to, the bonds or notes presented for exchange; provided, however, that if presented during a period when the transfer books are closed, the coupon maturing at the end of such period should be detached. Registered bonds or notes issued upo'n exchange requested while the transfer books are open will bear interest from the last preceding interest payment date. Registered bonds or notes re- quested while the transfer books are closed but issued upon the open- ing of the transfer books following the interest payment date will bear interest from such date. Full instructions for the issue and delivery of the registered bonds or notes to be issued upon exchange should accompany the coupon bonds or notes presented. (Use Form L. & C. 142, copies of which, or of a substantially similar form, may be obtained frdm any Federal Reserve Bank or from the Treasury Department.) Same — Exchanges of Registered Bonds or Notes for Coupon Bonds or Notes.* — Registered bonds or notes may be presented for exchange for an equal face amount of coupon bonds or notes in any authorized denomination of the same issue and series. Registered bonds or notes so presented for exchange should be assigned to "The Secretary of the Treasury for exchange for coupon bonds/notes," and such as- signments must be witnessed and acknowledged and will be governed otherwise by the same regulations as provided in the case of trans- fers. Assignments must not be made to "The Secretary of the Treas- ury" or to "The Secretary of the Treasury for exchange." Specific instructions for the issue and delivery of the coupon bonds or notes to be issued upon exchange must accompany the registered bonds or notes presented. (Use Form L. & C. 143, copies of which, of of a substantially similar form, may be obtained from any Federal Reserve Bank or from the Treasury Department.) Such exchanges may not be made during any period when the transfer books of the loan in ques- tion are closed. Coupon bonds or notes delivered upon such exchange will have all matured coupons detached, and if registered bonds or notes are presented for exchange during a period when the transfer books are closed the exchange will be made only after the transfer books reopen following the interest payment date, and interest on the registered bonds or notes will be paid to the holders of record ♦Registered bonds of issues authorized prior to April 24, 1917, can not be exchanged for coupon bonds. 403 at the time the transfer books closed next preceding such interest payment date. If the registered bonds or notes are presented to a Federal Reserve Bank, delivery of the coupon bonds or notes to be issued upon exchange may be made by the Federal Reserve Bank, when so authorized by the Secretary of the Treasury, Division of Jx»ans and Currency, but only after the registered bonds or notes have been transmitted to the Treasury Department and the registra- tion discharged. Transfers of Registered Bonds and Notes — Assignments. — In or- der to effect the transfer of a registered bond or note, the registered holder thereof, or some one duly authorized to act for him, must go before one of the officers authorized by the Secretary of the Treasury to witness assignments, must establish his identity, and in the pres- ence of such witnessing officer nrust execute an assignment on the form appearing on the back of the bond or note. No alterations or erasures should be made in assignments; assignments bearing altera- tions or erasures not explained to the satisfaction of the Treasury Department will be rejected. Detached assignments will not be ac- cepted. Assignments of registered bonds and notes should be made to the transferee, or, if desired, to the Secretary of the Treasury for transfer into the name of the transferee, who should be named. As- signments must not be made to "The Secretary of the Treasury for transfer," or to "The Secretary of the Treasury." Registered bonds and notes may be assigned in blank, but when so assigned are in effect payable to bearer and lack the protection which registration affords. If the assignment is made by any one other than the reg- istered owner, appropriate evidence of the authority of such person must be produced and must accompany the bond or note, unless already on file with the Secretary of the Treasury. Powers of at- torney to assign registered bonds or notes must be acknowledged In the presence of one of the officers authorized to witness assignments. Registered bonds or notes presented for transfer or exchange with assignments which are Imperfect or not supported by the required authority, will be passed for transfer or exchange only when the imperfections have been corrected or the required authority furnished; if in the meantime the transfer books close in anticipation of an interest payment, action with respect to any such transfer or ex- change will not be taken until the transfer books reopen, and interest accordingly will be paid to the holder of record at the time the transfer books closed. Where a bond is to be divided among two or more parties, the assign- ment should state the name of each and the amount to be issued to 404 him. If only a part of a bond is assigned a new issue for the re- mainder will be made to the former payee of the whole bond: Pro- vided, liowever, That the amount assigned shall correspond with one or more of the denominations in which the bonds are issued. In affixing his signature to an assignment the assignor should sign in the exact form in which his name appears on the face of the bond, or if the assignor is other than the payee of the bond he should sign in the exact form in which his name appears in the power of authority. If the bond be issued to a firm, the assignment must be subscribed in the name of the firm by a member thereof who is possessed of au- thority to sign for the firm, of which authority the officer witnessing the signature must be satisfied; if issued to joint owners, co-trustees, joint executors, administrators, or guardians, each person must sign for himself; if to a corporation or company, the authority of the person who assigns the bonds should be granted by a resolution of the board of directors, designating the officer or other person by name, and a certified copy of such resolution, under seal, should be furnished the department. This resolution should be certified by some officer of the corporation or company other than the one authorized to ex- ecute assignments. In case an officer is not designated by name a certificate under seal mlust be furnished setting forth the name of the person in such office. Where the charter or by-laws of a corporation or company, or a resolution of its board of directors, authorizes the holder of a par- ticular office to execute assignments of bonds, a certified copy of charter, by-laws, or resolution should be furnished, together with a certificate tinder seal giving the name of the person holding sucb office. When on account of death, or from any other cause, such per- son ceases to act, before the bonds held by him are assigned, it will be necessary for the successor in said office to file evidence of his election or appointment. All such evidence of authority will be placed on file in the depart- ment, and, if general and permanent in its character, need not be reproduced in subsequent transactions under the same power, if proper reference be made thereto. An assignment made by mark (x) must be witnessed by at least one person besides the officer verifying the assignment. A bond standing in the maiden name of a woman who has married since its issue should be assigned in such a manner that both maiden /name and married name will appear in her signature to the assign- ment, I. e., Mary Jones, now by marriage Mary Brown. Bonds should be assigned to a married woman in her personal name and not in the name of her husband, i. e., Mrs. Mary Brown, not Mrs. John Brown. 405 Assignments by Attorney in Fact. — A person entitled to assign bonds may, by a duly executed power of attorney, appoint an attorney in fact for that purpose. By virtue of the authority so conferred, the attorney can execute the assignments in the same manner as the prin- cipal and, provided the power of attorney authorizes him to do so, he may appoint one or more substitutes to act in his place. An assign- ment by an attorney in fact or his substitute to himself individually is void unless sanctioned by a court of competent jurisdiction; in which case a certified copy of the court order must be filed with the department. Where in a foreign countr3 r it is the custom to file powers of at- torney in public offices and furnish certified copies therefrom, a certi- fied copy, properly authenticated by a United States diplomatic or consular officer, or commercial agent, may be accepted; but in all other cases the original power of attorney must be filed with the department. No officer of the Treasury of the United States should be selected as such attorney. Powers of attorney authorizing the assignment of bonds should be sent, for record, to the Secretary of the Treasury, Division of Loans and Currency. Powers of attorney to assign or transfer registered bonds must be acknowledged in the presence of one of the officers authorized to witness assignments. The following form may be used: FORM OF POWEB OF ATTORNEY Know all men oy these presents: That I , do hereby appoint my at- torney to sell and assign any and all United States bonds now standing (or which may hereafter stand) in my name, or which may be assigned to me, granting to said attorney full power to appoint one or more substitutes for that purpose, hereby ratifying and confirming all that may be lawfully done by virtue hereof. Witness my hand and seal this the day of A. D. 192. . . [seal] Executed before me this the day of A. D., 192. . . [official seal.] Note. — To be verified in accordant with instructions contained under head of acknowledgments. 406 The above form is for general authority. If it is desired to grant specific authority only, the form should be modified by striking out the words "any and all" and write after the word "assign" the amount and description of the bonds. Forms of Resolittions Grafting Authority to Assign Registered Bonds. — Form 2405. resolution. Permanent and full authority to assign registered bonds that are transferable on the books of the Treasury Department. At a regular meeting of the board of directors of the , held at on the day of A. D., 192 . . , it was Resolved that , the president, and the be, and they are hereby, jointly and severally, authorized and empowered to sell, assign, and transfer all or any United States registered bonds, or registered bonds of any description now standing, or which may here- after be registered in the name of upon the books of the United States Treasury Department, and to appoint one or more attorneys for that purpose; and also, all or any United States registered bonds, or registered bonds of any description which are transferable on the books of the Treasury Department which this now owns and holds, or may hereafter acquire, by assignment or mesne assignments from the party in whose name the same is inscribed, with full power to appoint a substitute; and also, as the representative of this , all or any United States registered bonds, or registered bonds of any description which are transferable on the books of the Treasury De- partment which this Is, or shall be, authorized and empowered to sell, assign, and transfer as attorney for the owners and holders thereof, with full power to appoint a substitute. I certify the foregoing to be a true copy from the minutes. [seal] , Secretary of the Board of This resolution should be certified by some officer of the institution other than the one empowered to assign the bonds. It is recommended that resolutions be adopted only at regular meet- ings. But when passed at a special meeting, the certificate must be signed by two officers. 407 Form 2406. resolution for assignment of united states bonds. At a regular meeting of the board of , of the held 192. ., it was, on motion resolved that be, and .... hereby authorized and empowered to sell and assign* United States kegistered bonds now standing, or which may hereafter stand, in the name of this , and to appoint one or more attorneys for that purpose. I certify that the above is a true copy from the minutes. [seal] , Secretary of Board of *N. B. — To make this authority general and permanent, write after the word "assign" any or all. To make this authority special or specific, write after the word "assign" the amount and description of the bonds to be assigned. In the former case the authority remains in force until revoked, and covers all present or future assignments; in the latter it ceases and terminates with the transaction specified. This resolution should be certified by some officer of the institution other than the one empowered to assign the bonds. It is recommended that resolutions be adopted only at regular meet- ings. But when passed at a special meeting the certificate must be signed by two officers, Form No. 2407. Form 2407. resolution for assignment of united states bonds. We certify that at a special meeting of the board of of held at , on the day of 192 . .,, at o'clock m, the following resolution was adopted and is now in full force, viz.: Resolved that be, and hereby authorized and empowered to sell and assign* United States registered bonds now standing, or which may hereafter stand, in the name of this and to appoint one or more attorneys for that purpose; and we certify that notice was duly given personally to all members of the said board of of the said time and place of said meeting, and of the object thereof, for more than days prior thereto, and in time to enable 408 all to attend said meeting; and that at such meeting so held a quorum of all the members of said board was present and voted for the adop- tion of said resolution. (Signature) (Title) (Signature) , (Title) [seal] *N. B. — To make this authority general and permanent, write after the word "assign" any or all. To make this authority special or specific, write after the word "assign" the amount and description of the bonds to be assigned. In the former case the authority remains in force until revoked, and covers all present or future assignments; in the latter it ceases and terminates with the transaction specified. Use form No. 2406 for resolutions adopted at regular meetings. FORM OF AUTHORITY UNDER BY-LAWS. At the annual meeting of the stockholders of the of , held , 192 . . , was duly elected president, and was duly elected cashier; and as such they are jointly or sev- erally empowered by the by-laws (a certified copy of which is hereto annexed) to sell and assign any and all United States bonds now stand- ing (or which may hereafter stand) in the name of this bank (or institution). , Secretary. [CORPORATE SEAL.*] *If the bank or institution has no corporate seal, an affidavit of one of the officers to that effect should accompany the authority. Officers Authorized to Witness Assignments. — The following offi- cers are authorized to witness the execution and acknowledgment of the assignment of United States registered bonds and notes: Judges and clerks of United States courts; United States district attorneys; United States collectors of customs; United States collectors of internal revenue; Assistant treasurers of the United States at Boston, New York, Philadelphia, Baltimore, Cincinnati, Chicago, St. Louis, New Or- leans, and San Francisco; Executive officers of the Federal Reserve Banks located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, 409 St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco, and of the branches thereof; Executive officers (authorized to perform acts attested under the seal of their respective institutions) of incorporated banks and trust companies in the United States (including incorporated savings banks), whether or not members of the Federal Reserve System, and the branches thereof, domestic and foreign, and of incorporated banks and trust companies in Alaska and the insular possessions of the United States doing business under Federal charter or organized under Federal law; and, in addition, man- agers of branches of such incorporated banks and trust companies whose signatures are certified to the Treasury Department under the seal of the parent institution; Commanding officers of the Army, Navy, and Marine Corps of the United States (for members of the military and naval establish- ments of the United States) ; Diplomatic and consular representatives and commercial agents of the United States on duty abroad; Registered bonds and notes may also be assigned at the Treasury Department, "Washington. If in a foreign country, assignments should be made before a diplomatic or consular representative or commercial agent of the United States; if no such officer is accessible, the assign- ment may be made before a notary public, or other competent officer, but his official character and jurisdiction must be duly certified to the Treasury Department. A Notaby Public, a Justice of the Peace, or a Commissioner of Deeds is Not Authorized to Witness an Assignment. — In the event that none of the officers authorized to witness assignments is readily accessible, the Secretary of the Treasury will, upon application, make special provision for the particular case. In all cases the witnessing officer must affix to the assignment his official signature, title, address, and seal, and the date of the assignment; officers of incorporated banks and trust companies must affix the seal of the bank or trust company. If the officer does not possess an official seal that fact should be made known and attested. Witnessing officers must require positive identification of assignors as known and responsible persons. No officer of the United States, at home or abroad, is authorized to charge a fee for witnessing the assignment of United States registered bonds or notes, and banks and trust companies generally impose no charge for the service. Powers of Substitution. — Powers of substitution must be acknowl- fffgod in the same manner as powers of attorney and should likewise follow the same general form. 410 Form of Power of Substitution to Sell and Assign Bonds. — Knoio all men ty these presents, That , by virtue of authority conferred upon in and by the letter of attorney of dated do hereby substitute and appoint Attorney for , and in name to sell and assign ( $ ) U. S % Registered Bonds, Act now- standing in the name of on the books of the Treasury Department; hereby ratifying and con- firming all that may be lawfully done by virtue hereof. Witness hand and seal this .. day of , 19... Executed in the presence of of the in the State of (The seal should always be impressed. ) Assignments in Case of Death of Registered Owner. — In case of the death of the holder of registered bonds or notes, if the decedent leave a will which is duly admitted to probate, or die intestate and the estate is administered in a court of competent jurisdiction, assign- ment may be made only by the duly appointed representative of the estate. Assignments made by executors or administrators, or other duly appointed representatives, must be supported by a duly executed certificate under seal from the court appointing such representative, dated not more than 90 days prior to the execution of the assignments, showing the appointment and qualification of such representative and that the appointment is still in force, or, in the absence of such a certificate, by duly certified copies of the representative's letters of appointment. If the decedent die intestate and the gross value of the estate, both real and personal, does not exceed $250 in value, or the estate of such decedent is expressly exempt from administration under the laws of the State of the decedent's domicile, assignments by the person or persons entitled to the bonds or notes under the laws of the State of the decedent's domicile may be recognized, without administration, upon presentation of proof satisfactory to the Secretary of the Treasury that the funeral expenses and debts of the decedent have been paid or provided for, and that such person or persons are entitled to the bonds or notes. Such proof will, in general, Include affidavits of the persons claiming to be entitled, setting forth all the facts in detail, supported by affidavits of at least two disinterested persons, and by the official certificate or other proof of death of the registered holder; and in cases where any of the persons entitled are 411 minors or under disability no assignment will be permitted unless to them, or upon compliance with the Treasury Department regulations as to assignments by or for such persons. The Secretary of the Treasury may also require in any such case a bond of indemnity with satisfactory sureties. Foreign Successorship Assignments. — "Where a payee, at the time of his death, was a resident of a foreign country, the party claiming to direct and execute the transfer must furnish an exemplified copy of the will or other instrument conveying the requisite authority, duly certified under the hand and seal of the proper officer, attested by the certificate of a United States diplomatic or consular officer or com- mercial agent or, if there be none such accessible (which fact shall, in such case, be certified), by that of a notary public or other com- petent officer, to the effect that such exemplified copy is executed and granted by the proper tribunal or officer and is in due form and according to the laws of that country. The assignment should be ex- ecuted as hereinbefore directed. Assignments in Case of Disability of Registered Owner. — In case of mental disability or other legal incompetency of the holder of registered bonds or notes, assignments may be made by the guardian or other legally appointed representative of the holder upon presenting (proof satisfactory to the Secretary of the Treasury of his appointment and authority to assign such bonds or notes. Assignments for Minors. — Bonds or notes registered in the name of a minor or of a guardian for a minor may be assigned during minority only by the guardian legally appointed by a court of competent jurisdiction, or otherwise legally qualified, or pursuant to order or decree of a court of competent jurisdiction; provided, however, that in cases where such bonds or notes have been purchased by the natural guardian of the minor out of his own funds as a gift to the minor, or otherwise purchased for the benefit of the minor, and registered in the name of the minor, or in the name of such natural guardian for the minor, and the entire gross value of the minor's estate, both real and personal, does not exceed $250, assignments by the natural guar- dian for transfer or for exchange into coupon bonds or notes, may be recognized upon presentation of proof satisfactory to the Secretary of the Treasury that the proceeds of the bonds or notes so assigned are necessary, and are to be used for, the support or education of the minor. The Secretary of the Treasury may also require in any such case a bond of iBdemnity with satisfactory sureties. 412 Bonds or Notes Registered in the Names of Two oe More Persons. — "When bonds or notes are registered in the names of two or more persons, in substantially the form "John Jones and Mary Jones," or "John Jones or Mary Jones," or "John Jones and Mary Jones, or the survivor," the bonds or notes are deemed to be held in joint ownership, with right of survivorship, and during the lives of the co-owners the Treasury Department will require assignments by all in cases of transfer. Interest will be paid to any one of such co- owners. In case of the death of any such co-owner, the Department will, upon satisfactory proof of death and survivorship, recognize the survivor or survivors as owners, and will honor assignments by such survivor or survivors without regard to any administration of the es- tate of the deceased co-owner. Bonds and notes should not be registered in the form "John Jones or Mary Jones, or either of them," but, if so registered, assignments by all the co-owners will be required in cases of transfer, and no right of survivorship will be recognized. Presentation or Registered Bonds or Notes for Transfer. — After the assignment of a registered bond or note has been duly executed, the bond or note should be forwarded, at the risk and expense of the owner, direct to the Secretary of the Treasury, Division of Loans and Currency, Washington, D. C, or to a Federal Reseve Bank, accompanied by specific instructions for the issue and delivery of the new bond or note, which must in all cases be in accordance with the assignments. (Use Form L. & C. 144, copies of which, or of a substantially similar form, may be obtained from any Federal Reserve Bank or from the Treasury Department.) New Bonds. — Registered bonds received for transfer are canceled, and new bonds in their stead are issued in the name of the assignee. These bear interest from the first day of the interest period in which the transfer shall have been made. The Department endeavors to make returns on the same day that the bonds are received, but since the issuance of the several Liberty issues it usually takes several days to complete the process. The Department makes no charge for trans- ferring bonds. When bonds are sent or returned by express the entire expense thus incurred must be borne by the party sending or receiving the bonds. Bonds received for transfer during the period the books are closed against such transfers will be reissued as soon as the books reopen. Change of Name or Correction of Name of Owners of Registered Bonds or Notes. — Assignments to cover change of name or correction of name of the owner must be witnessed and acknowledged as pro- vided in the case of transfers. If a bond or note stands in the 413 maiden name of a woman who has since married and it is desired (1) to transfer the bond or note to another person, or (2) to correct the registration record, the bond or note should be appropriately- assigned in such manner that both maiden name and married name appear in the signature to the assignment; e. g., Miss Mary Jones, now by marriage, Mrs. Mary Brown. A married woman's personal (legal) name must be used and not her husband's. If an error has been made in inscribing the name of the owner of a registered bond or note, the owner should return the bond or note to the Secretary of the Treasury, Division of Loans and Currency, for correction. If the directions for the issue of such bond or note were transmitted by a bank or trust company or through a Federal Reserve Bank, the bond or note should be returned by the owner through such bank or trust company, or Federal Reserve Bank, accompanied by full explanation and instructions. Bonds or notes so returned for correction should be assigned to the owner in the correct name and assigned by him in the name as it appears on the face of the) bond or note. If the correction involves a substantial change in name, the Department may require additional certification. Change of Address of Owners of Registered Bonds or Notes. — Checks issued in payment of interest on United States registered bonds or notes are mailed to registered holders at their addresses of record. Notification of any change in address of any registered holder should be sent immediately to the Secretary of the Treasury, Division of Loans and Currency, Washington, D. C. In giving such notification, the serial number, denomination, and title of the bonds or notes involved must be given, the old and new addresses set forth, and the request signed in same manner as the bonds or notes are inscribed. (Use Form L. & C. 228, copies of which, or of a substan- tially similar form, may be obtained from any Federal Reserve Bank or from the Treasury Department.) Ordinarily it will not be possible to take notice of a change in address during any period when the transfer books of the loan in question are closed. Nonrecettt or Loss of Interest Checks. — If an interest check is not received within a reasonable period after an interest payment date, or if the check is lost after recedpt, the fact of non-receipt or loss should be reported to the Secretary of the Treasury. Division of Loans and Currency, "Washington, D. C, with request that payment of such check be stopped. This notification should include a descrip- tion of the registered bonds or notes, the title of the loan, and the serial numbers and denominations of the bonds or notes. If the check subsequently is recovered, request for the removal of the stoppage 414 should likewise be sent the Secretary of the Treasury, Division of Loans and Currency. Duplicates for lost interest checks may be secured upon compliance with the Treasury Department regulations, as to which full information may be obtained upon, application to the Secretary of the Treasury, Division of Loans and Currency. Address fob Communications. — All communications relating to United States registered bonds or notes and interest thereon should be addressed to The Secbetaby of the Tbeasuby, DrvisiON of Loans and Curbency, Washinqton, D. C, except that communications relat- ing to bonds or notes presented to a Federal Reserve Bank should be addressed to that bank. Lost, Stolen, ob Destboyed Bonds ob Notes. — Coupon bonds and notes are payable to bearer and title thereto passes by delivery; if they are lost or stolen the Treasury Department can grant no relief under existing law, but if destroyed, duplicates may be issued. In case of the loss, theft, or destruction of registered bonds or notes, the bonds or notes may be replaced, unless assigned in blank. All cases of lost, stolen, or destroyed bonds or notes should be reported to the Secretary of the Treasury, Division of Loans and Currency, Wash- ington, D. C. The Treasury Department assumes no responsibility- whatever with respect to coupon bonds or notes so reported, but if subsequently the coupon bonds or notes are presented for exchange or otherwise, attempt will be made to advise the person who reported the loss. In cases of registered bonds or notes reported lost, stolen, or destroyed, caveats will be entered against the transfer, exchange, or payment of such bonds or notes. In the event that bonds or notes reported lost, stolen, or destroyed subsequently are recovered, report thereof should be made to the Secretary of the Treasury. The law requires with respect to claims for the issue of duplicates of destroyed coupon bonds or notes that the bonds or notes shall be identified by number and description; accordingly, all holders of coupon bonds or notes should keep a careful and authentic record of their holdings. Full information with respect to submitting claims for the issue of duplicate bonds or notes may be had upon application to the Secretary of the Treasury, Division of Loans and Currency, Washington, D. C. MuTn.ATED ob Defaced Bonds ob Notes. — If through accident, inad- vertence, or otherwise, bonds or notes have become mutilated or de- faced, the bonds or notes may be forwarded to the Secretary of the Treasury, Division of Loans and Currency, Washington, D. C, prefer- ably through the appropriate Federal Reserve Bank, accompanied by 415 affidavits furnishing proof of the ownership of the bonds or notes and setting forth the circumstances under which the mutilation or deface- ment occurred. The Department will give appropriate consideration to each case and advise the owner whether relief can be given by the issue of new bonds or notes. Conversions of Liberty Bonds or Victory Notes. — Holders of First Liberty Loan Converted 4 per cent, bonds of 1932-1947 and of Second Liberty Loan 4 per cent, bonds of 1927-1942 have the privilege of converting their bonds into 4*4 per cent, bonds pursuant to the ex- tension of the conversion privilege, in accordance with the provisions of Treasury Department Circular No. 137, dated March 7, 1919, as amended and supplemented June 10, 1919, to which reference is hereby made. There is no other conversion privilege now open to holders of Liberty Bonds. Reference is also made to Treasury Department Cir- cular No. 158, dated September 8, 1919, which prescribes further rules and regulations as to the exchange and conversion of 4 per cent, coupon Liberty bonds. Under the terms of said Department Circular No. 137, as amended and supplemented, bonds of the First Liberty Loan Converted and of the Second Liberty Loan Converted issued upon conversion of 4 per cent, bonds pursuant to the extension of conversion privilege, bear interest at the rate of 4% per cent, per annum from the semi-annual interest payment date next succeeding the date of presentation for conversion. Anything herein to the contrary not- withstanding, (a) coupon bonds issued upon such conversions may be exchanged for coupon bonds of other denominations or for registered bonds before the date when they begin to bear interest at 4*4 per cent, per annum, and in that event the bonds issued upon exchange will not begin to bear interest until such date, and (b) no transfers of registered bonds heretofore or hereafter issued upon such con- versions, nor exchanges of such registered bonds for coupon bonds, will be effected in advance of the semi-annual interest payment date from which the respective bonds bear interest at the rate of 4 1 /! per cent, per annum. In case such registered bonds are presented for transfer or exchange in advance of such semi-annual interest payment date, the transfer or exchange will be effected as of such date. De- livery of the bonds to be issued upon such transfer or exchange may be made in advance of such date, but the interest at the rate of 4 per cent, per annum to such semi-annual interest payment date shall be paid as if such delivery had not been made. Treasury Department Circular No. 139, dated May 20, 1919, to which reference is hereby made, prescribes rules and regulations under which the two series of Victory notes may be converted. 416 Transportation Charges and Risks on Bonds or Notes. — Trans- portation charges and risks upon bonds and notes presented to the Treasury Department, Washington, or a Federal Reserve Bank, for exchange or transfer, or for other purposes included within the scope of this circular, must be borne by the holders of the bonds or notes presented, and the bonds or notes must be delivered with all trans- portation charges prepaid. Registered bonds and notes to be de- livered upon exchange or transfer, or otherwise, unless delivered in person to the registered owner or his duly authorized representative, v/ill be delivered by registered mail without expense to, but at the risk of, the registered owner, except that such bonds or notes will be delivered by express at the risk and expense of the registered owner if written request for such delivery be made. Coupon bonds and notes to be delivered upon exchange or otherwise, unless de- livered in person to the owner or his duly authorized representative, will be delivered at the owner's risk and expense, and, in the absence of other written instructions and remittances to cover expenses, will be delivered by express collect. Inasmuch as the cost of transporta- tion of coupon bonds and notes by express is greater than by registered mail insured, holders of bonds and notes are advised to consult with their own banks and trust companies in cases where transactions in- volve the transportation of coupon bonds or notes, for arrangements may be made as between Federal Reserve Banks and incorporated banks and trust companies for the transportation of such coupon bonds or notes, for arrangements may be made as between Federal Reserve Banks and incorporated banks and trust companies for the transportation of such coupon bonds and notes to and *rom Federal Reserve Banks by registered mail insured, the charges in each case to be paid by the respective holders and to be remitted by the in- corporated banks and trust companies to the Federal Reserve Banks. Such arrangements for the transportation of coupon bonds and notes by registered mail insured can not be effected if transactions are sub- mitted direct to the Treasury Department, Washington, instead of through an incorporated bank or trust company to the appropriate Federal Reserve Bank. Transportation charges and risks on bonds and notes transmitted between Federal Reserve Banks and the Treas- ury Department under the provisions of this circular will be borne by the United States. Called Bonds. — All United States called bonds, forwarded for re- demption, should be addressed to the Secretary of the Treasury, Di- vision of Loans and Currency. When registered bonds are so for- warded, they should be assigned to "the Secretary of the Treasury for redemption." Assignments must be dated and properly acknowledged as prescribed in the note printed on the back of each bond. 417 Where checks in payment of registered bonds are desired in favor of anyone but the payee, the bonds should be assigned to the "Secre- tary of the Treasury for redemption for account of" — (here insert the name of the person or persons to whose order the check should be made payable.) A party can not, as attorney, assign bonds for redemption for ac- count of himself as an individual. Regulations in Regard to Coupons Detached from* Called Bonds. — In accordance with the decision of the Attorney General of the United States, dated January 29, 1\878, the Treasury Department regards a coupon detached from a bond of the United States as a separate obligation, the holder of which is entitled to receive the face value thereof at any time after its maturity on presentation. The rule is therefore established that United States coupon bonds which have been called for redemption should have attached to them, when pre- sented for payment, all of the unmatured coupons. If any such cou- pons are missing, their face value will be deducted from the proceeds of the bonds when redeemed, and will be held in the Treasury for the redemption of such missing coupons when they are presented. Detached coupons belonging to called bonds, maturing on dates sub- sequent to the date of maturity of the bonds, will not be paid at the sub-treasuries in the United States, but should be forwarded to the Treasury Department at Washington for payment. Interest on Registered Bonds. — Interest on registered bonds is paid by checks drawn at the Treasury Department. These checks are sent by mail when the postoffice address is known; otherwise they are held until called for by the payees thereof. Interest checks may be collected by agents of payees duly authorized by powers of attorney acknowledged before one of the officers au- thorized to witness the assignments of registered bonds or before a notary public. If in a foreign country powers must be acknowledged before a United States diplomatic or consular officer, or a commercial agent, or a notary public. Unclaimed Interest and Unpaid Checks. — The interest on registered bonds of the loans authorized previously to the funded loans author- ized by the Act of July 14, 1870, which has been returned to the Treasury as unclaimed can be collected only in person or by attorney /at the office of the Treasurer of the United States in Washington. For the convenience of the public and to save charges, powers of attorney to collect such specified unclaimed interest may be made in favor of the Chief of the Division of Loans and Currency of the Secretary's office. 27 418 Interest checks should not be held by the payee, but should promptly be presented for payment, and when any interest check) has been issued for a longer period than three full fiscal years it will be paid only through the settlement of an account by the Treasury Depart- ment, and for this purpose any such check should be transmitted to the Secretary of the Treasury for the necessary action. Ixdobsements on Inteeest Checks. — [Requirements of the account- ing officers of the Treasury Department] (a) When interest checks are presented for payment, the indorsement of the payee must be in ink or indelible pencil and must correspond exactly with the name as printed on the face of the check. Checks are drawn to the order of the person in whose favor a registered bond is inscribed. If any variation appears between the correct name of the payee and his name as printed on the face of the check or his name as inscribed on the facet of a bond, the incorrect check, or bond, or both, should be re- turned to the department for correction. (6) Officials must indorse with full title of their office; firms, with the usual firm signature. Stamped indorsements must be guaranteed by the presenting bank, known to be responsible. (c) Indorsements by mark (X) must be witnessed by two persons who can write, and who must give their places of residence. (d) When the Secretary of the Treasury has been notified that the payee of a bond is an infant, checks issued in payment of interest thereon are delivered and paid only to the guardian of such infant, who must file with the Auditor for the Treasury Department evidence (1) of guardianship; (2) that his authority is in force; and (3) of the identity of his ward with the payee of the bonds. Neither the father nor the mother of the infant has the right to indorse such interest checks. (e) Indorsements by an agent, attorney, guardian, executor, ad- ministrator, or trustee of an estate are not recognized unless evi- dence of authority has been filed with the Auditor for the Treasury Department. In the four last-named cases the certificate, under seal, of the probate court is required. Indorsements by an agent, attorney, guardian, executor, administrator, or trustee mu|st agree exactly with the name as it appears on the certificate of authority. If the name of the principal differs in the certificate from the name as it appears on the bond or interest check, the fact that they relate to one and the same person must be set forth in the certificate, other- wise it will be returned for correction. (f) An indorsement by a firm, joint-stock company, corporation, or bank, when made in due course of business, will be deemed suffi- 419 cient without the previous filing of a certificate of authority accom- panying said check, if such indorsement is guaranteed by the bank presenting such indorsed check for collection, provided such pre- senting bank is considered responsible by the officer called upon to make such payment. (<7) Unless checks drawn to the order of corporations or associa- tions are presented for payment as set forth in the foregoing para- graph (/) evidence of authority, except in the case of presidents, vice presidents, cashiers, or assistant cashiers of banks, must pre- viously be filed with the Auditor for the Treasury Department or accompany the check. Such evidence should be in the form of a certified copy, under seal, of an extract from the by-laws, showing the authority of the officer to indorse for the corporation or society and giving his name and the date of his election, or in the form of a resolution adopted by the official board of such corporation or society, designating by name and title the officer or officers empowered to collect interest. If the corporation or society have no seal, the instru- ment must be acknowledged before a notary public or other competent officer under his seal. (h) Interest checks issued in the name of a woman who marries after having acquired a bond should be Indorsed under the former name as it appears on the face of the check, and also In her married name, with sufficient explanation to show that both names refer to the same person, as: "Mary Smith, now by marriage, Mary S. Brown." Issue of Duplicate Interest Checks. — Advice of nonrecelpt or loss. — In the event of the nonreceipt or loss of an interest check the owner, better to protect his interest, should in writing notify the department, describing the check, giving, If possible, its date, number and amount, and the title of the loan for interest on which the check was drawn, and requesting that payment of same be stopped, preliminary to the issue of a duplicate. Thereupon the department will furnish special instructions to be followed in obtaining a duplicate check. PART FOUR SPECIAL ARTICLES ON SUBJECTS OF INTEREST TO NATIONAL BANKS CHAPTER I. Organization De Novo. Section 360. Methods of Organizing. 361. Number of Corporators. 362. Corporators — Natural Persons. 363. Married Women As Corporators. 364. Infants As Corporators. 365. Corporators — Action by Agent or Attorney. 366. The Subscription Paper. 367. Capital Requirements. 368. Entire Stock to Be Taken by Bona Fide Subscribers. 369. Professional Promoters. 370. Temporary Stock Certificates. 371. Application to Comptroller to Organize. 372. Form of Title. 373. Investigation by National Bank Examiner. 374. Organization Papers. 375. Articles of Association — Form. 376. Signing of Articles. 377. Executed in Duplicate. 378. Naming Directors in Articles. 379. Sliding Scale of Directors. 380. Qualification of Directors. 381. Election of Directors. 382. Number of Directors. 383. Provision for Increase of Capital Stock. 384. Provision for Lien on Stock. 385. Organization Certificate — Form. 420 421 Section 386. Who May Be Shareholders. 387. Signing and Acknowledgment. 388. Affixing Seal. 389. Execution of Organization Certificate. 390. Filing of Organization Papers. 391. When Association a Body Corporate. 392. Oath of Directors. 393. Official Signatures. 394. By-Laws. 395. Payment on Stock. 396. Book Entry of Payments on Subscriptions. 397. Certificate of First Payment on Stock — Form. 398. Payment of Deferred Installments on Capital. 399. Deposit of Bonds. 400. The Circulation Privilege. 401. Order for Circulation. 402. Commencement of Business — Issue of Comptroller's Certificate. 403. Publication of Certificate. 404. Services of Attorney. 405. Eegulation of Comptroller. § 360. Methods of Organizing. — In organizing a National bank one of three methods may be pursued, according to exist- ing conditions. 1. De Novo — Creating a new bank. 2. Reorganization of State or private bank or co-partnership. 3. Conversion of an incorporated State bank. The following chapters will deal with the second and third methods. § 361. Number of Corporators.— Section 5133 IT. S. R. S. pro- vides that any number of natural persons, not less in any case than five, may organize a National bank. § 362. Corporators — Natural Persons.— The corporators must be natural persons (Sec. 5133, Rev. Stat.) — that is, human beings, as distinguished from artificial beings which exist only in contem- 422 plation of law, such as corporations and joint-stock companies. The reason for excluding these merely legal entities is obvious. Such powers as they have are limited, and in most cases they are not authorized to become corporators of another artificial being, and their participation in the organization might give rise to questions affecting its validity. Partnerships, equally with cor- porations are excluded under the terms of the statute as corpora- tors, but may be stockholders of a bank if not prohibited by the laws of the State in which the bank is located. § 363. Married Women As Corporators. — Whether a married woman can be a corporator will depend upon the law of the State in which she resides and where the bank is to be located. If by the State law she is authorized to make a contract, and has the capacity to bind herself to all the liabilities and obligations of a shareholder, there is no reason why she should not participate in forming the corporation. Evidence of her right should accompany papers executed. § 364. Infants As Corporators. — An infant — that is, a person under legal age — should never be allowed to become a corporator, for his contract would not be binding and he could repudiate it upon becoming of age. § 365. Corporators — Action by Agent or Attorney.— There seems to be no reason why a corporator may not execute the papers by an agent or attorney. In the case of the organization of a rail- road corporation, it was said by the Court of Appeals of New York, that the instrument of incorporation might be executed by a duly authorized agent. (Matter of N. Y., L. E. and W, R. R. Co., 90 1ST. Y., 12.) There is nothing in the National banking law to re- quire a different rule in the organization of a National bank, but this procedure is not recommended and it is thought best to have the corporators execute all papers personally. "Where this is impossible the following form of power of attor- ney may be used: Know all men by these presents that I — ■ — , of , do hereby appoint , of , my attorney, for me and in 423 my name to sign and execute all papers and instruments that it shall be proper and necessary for the corporators of the National banking association to be located in the of , county of , State of , and to be known as the , and to subscribe for shares in the original capital stock of the said — i — — ; hereby ratifying and confirming all that my said attorney shall lawfully do by virtue hereof. In witness whereof I have hereunto set my hand this day of — , 192—. [Signature.] State of , County of , ss: On this — day of — , 19 — , before me, a notary public in and for the State and county aforesaid, appeared , known to me to be the person who executed the foregoing instrument, and acknowledged that he executed the same. [Signature of notary.] [Seal of notary.] Such a power if used should be filed in the office of the Comp- troller of the Currency with the other papers. § 366. The Subscription Paper.— The law does not require a preliminary subscription for the stock of the proposed bank, though such subscription is advisable, and is frequently the means of greatly facilitating the organization. By it the persons are brought together in a mutual contract, and are thus enabled to come to a full understanding on matters preliminary to the organ- ization of the bank, about which there may be great difference of opinion. To postpone doing so until the articles of association are presented for signature to the various persons who are to be- come corporators might cause confusion and delay. For example, it is well to have an understanding as to what provisions the arti- cles of association shall contain; who shall be named as the first directors of the bank; where the banking house shall be located; the exact number of shares each person interested is to have, and it frequently happens that persons are willing to become share- holders only upon prescribed conditions; that a certain man shall be president; that the banking house shall be located on a certain street, etc.; so it will be seen that the chances of misunderstand- ings and future disagreements are very materially lessened if the conditions are plainly set forth in a subscription paper. 424 The signing of the subscription paper does not necessarily con- stitute one a member of the corporation which is afterwards formed ; and should the other subscribers refuse to admit him to participa- tion in the organization, he would have only an action for damages. But when requested to do so by those promoting the organization, each subscriber would be bound to join in the execution of all the instruments necessary that the corporators should execute for the formation of the corporation. Should any subscriber refuse to exe- cute these instruments, and his refusal have the effect of preventing an organization, or greatly delay it, a court of competent jurisdic- tion might upon petition of the other subscribers, decree specific performance. (See Lindley on Partnership, p. 925, and cases there cited.) We earnestly recommend that subscriptions be taken at a prem- ium of ten or twenty per cent, to cover expenses and to show a sur- plus in opening. This often avoids impairment of capital during the first year. Where a surplus is not created by the payment of a premium on the stock, it is recommended that no dividends be paid until a sub- stantial surplus has been accumulated from the earnings of the bank. Where the stock is sold at a premium of 20% the net earnings may be distributed without carrying any part thereof to surplus as is provided by Sec. 5199 U. S. E. S. Form op Subscription Paper. — We whose names are hereunto signed do hereby subscribe, in the proportions hereinafter set opposite our respective names, for the stock of a National banking association to be organized under the laws of the United States with a capital stock of thousand dollars, divided into shares, of the par value of one hundred dollars each, the said National banking association to be located in the of , State of , and to be called "The ." Signatures. | Address. | Occupation. | Net Financial Worth ] Shares. A shareholder must be worth at least double the amount subscribed. The law requires that 50 per cent, of the capital stock of a National bank shall be paid in cash and permits the payment of the additional 425 50 per cent, in five equal monthly installments, but there would appear to be no objection to the incorporation in the subscription contract of a provision that the entire amount due on each share shall be paid at the call of the directors. § 367. Capital Requirements. — The minimum capital require- ments depend upon the population of the place, and are as fol- lows: $25,000 where the population does not exceed 3,000; $50,0G0 where the population does not exceed 6,000; $100,000 where the population does not exceed 50,000; $200,000 where the population exceeds 50,- 000. National banks organized in suburban districts included within the corporate limits of a city must have the amount of capital re- quired by law for a bank organizing in that city. § 368. Entire Stock to Be Taken By Bona Fide Subscribers. — In some of the States, in the formation of corporations, where it is not definitely determined to whom the shares are to be issued and how many shares to each, a limited number of persons take the entire issue for subsequent distribution; but this method is not deemed lawful in the organization of a National bank. The Comptroller holds that every share shall have been placed when the organization certificate is executed, in order that the certificate may contain the name, address and holdings of stock of every shareholder. § 369. Professional Promoters. — The exclusion of professional promoters from the organization is required by the Comptroller as an application to receive his approval must represent a local demand for banking accomodations. § 370. Temporary Stock Certificates. — In case subscriptions to stock are paid in installments, temporary certificates may be issued and the amount of each payment credited thereon. When all in- stallments have been paid the temporary certificates should be sur- rendered and cancelled and permanent certificates of stock issued in lieu thereof. 426 The following is a form of temporary certificate in general use : No. Tempobaby Cebtificate. — shares. This is to certify that is entitled to — shares of the capital stock of the National Bank of ■ — , capital $ — > — , and that upon payment of all installments, amounting to $ >, and sur- render of this temporary certificate, a certificate of stock will be is- sued. Witness the seal and the signatures of the president and cashier of the bank. Dated , 192—. The — i — i — National Bank of By , , Cashier. President. Payments on Account of Capital. paid First installment, per cent., amounti Second Third Fourth « _____ << ■< Fifth , State of , with capital of $ — , to succeed the bank of > — . Popu- lation, . We request that the title be reserved and that the necessary in- structions be sent to -, who is an actual resident of the place where the proposed bank is to be located. Signatures of applicants- Residences. Business- Financial strength, in figures. Shares to be subscribed for. The signers of this application are known by me to be reputable citizens; the information in reference to their business and financial standing is in my opinion correct, the statement as to population au- thentic, and I am of the belief that the conditions locally are such as to insure success if the bank is organized and properly managed. , Judge of Court. , Postmaster. , Mayor. READ these instructions carefully. The name of the place should form a part of the title, thus, "The First National Bank of A ," but the name of the State should not be included. Consideration will not be given to an application for a title, in- cluding the word "First," if a National bank exists at the given locality; nor tti an application for a title identical with that of a National bank heretofore in existence, nor to one materially similar to that of a National, State, or other bank existing in the place. 428 The application must be signed by at least five prospective share* holders, preferably the proposed officers or directors, and should be indorsed by three prominent persons, judge of court, postmaster, and mayor, or other public officials. The correspondent should be a resident of the place where the bank is to be located, a prospective shareholder, and, if possible, an officer or director of the proposed bank. It is not necessary for the applicants to subscribe for the entire issue of stock. Only the actual number of shares to be held by each should be stated, and each applicant should be worth financially twice the value of the stock for which he subscribes. The following shows the National, State, or private banks with which the applicants are, or have been, connected either as officers or directors. Applicant. Institution. Position. Period. (Date) (Signed) * Correspondent. *N. B. — The correspondent is requested to furnish, as early as pos- sible, a list of the prospective officers and directors of the proposed organization and a statement showing their previous connection, if any, with other banking institutions. Care should be taken in executing this form. All the informa- tion called for should be given and the instructions followed to the letter. In furnishing a list of prospective officers and directors it must be remembered that the president and a majority of the directors should be residents of the place where the bank is located. Printed headings on the stationery of an organizing bank should indicate clearly that the bank is "organizing." The banks perma- nent letterhead should contain the charter number and as this cannot be obtained prior to issuance of charter, the bank's station- ery is unavoidably delayed. § 372. Form of Title.— The name of the place in which the bank is to be located must constitute a part of the title. If the name of the place is selected as the distinguishing part of the 429 title, it must not also be added. Thus, if the title is to be, "The Omaha National Bank," the words "of Omaha" must not be added. The addition of the name of the State is not allowed. It is best to make the title brief, not using unnecessary words, nor a long name or compound word as the distinguishing part. The title "The First national Bank of " will not be granted in case a National bank exists in the place, nor will the title of any National bank before existing, nor a title liable to be confounded with that of another National or State bank, nor the title of Second National Bank where such title would be a misnomer on account of the existence of two or more National banks in the place. § 373. Investigation by National Bank Examiner. — When an application is transmitted it should be accompanied by a draft for $100, payable to the order of the Comptroller of the Cur- rency, to cover the expense of investigation. Upon receipt of this draft the chief national-bank examiner for the district will be directed to detail an examiner to make the investigation, the examiner being requested to arrange with the local correspondent in the case as to the date when the investigation is to be made. In making this investigation the examiner is instructed to give full consideration to ail factors entering into the proposition. Among other matters to be considered are; first, the general character and experience of the organizers and of the proposed officers of the new bank; second, the adequacy of existing bank- ing facilities and the need of further banking capital; third, the outlook for the growth and development of the town or city in which the bank is to be located ; fourth, the methods and banking practices of the existing bank or banks, the interest rates which they charge to customers, and the character of the service which as quasi-public institutions they are rendering to their community ; fifth, the reasonable prospects for success of the new bank if efficiently managed. In every case where there is a protest, the examiner is directed to see and personally interview those for and against the proposi- tion. 430 In addition to securing a report from the examiner, made after a personal investigation, the Comptroller obtains a report from the Federal reserve bank of the district; from the State banking de- partment, and from such other sources as he may deem advisable. § 374. Organization Papers. — When the application to organize has been approved by the Comptroller, he forwards to the appli- cants blank organization papers, with specific instructions for their execution, and expects the organization to be completed within the 60 day's for which title has been reserved. Extensions however, are granted for cause. Written forms will be accepted only in exceptional cases, as a great amount of labor is involved in examining papers thus prepared, which is avoided by the use of printed forms. The organization blanks are as follows: Articles of Associa- tion, Organization Certificate, Oaths of Directors, Signatures of Officers, By-Laws, Certificate as to Payment on Capital Stock, Order for Circulation. In the case of reorganization a Certificate of Directors in regard to assets purchased from the old bank is required, and if a con- version of a State bank, there is an additional form for share- holders to authorize conversion. The execution of these papers is a very simple matter, but mis- takes are very frequently made through carelessness. For example : the Corporate Title is not inserted exactly as approved by the Comptroller, perhaps abbreviated or name of State added; names of persons mispelled; errors made in jurat; oaths of directors antedating organization certificate, etc. Care should be taken to prepare the papers correctly, so as to avoid the delay incident to their return by the Comptroller for correction. We will gladly examine and file these papers with the Comptroller, and our long experience often saves delay and extra work. § 375. Articles of Association — Form. — This is the first instru- ment to be executed. Sec. 5133 Revised Statutes provides that the Articles "shall specify in general terms the object for which the association is formed, and may contain any other provisions 431 not inconsistent with law which the association may see fit to adopt for the regulation of its business and conduct of its affairs." The following is the form furnished by the Comptroller: ARTICLES OF ASSOCIATION. (Executed in duplicate.) For the purpose of organizing an association to carry on the business of banking under the laws of the United States, the undersigned sub- scribers for the stock of the association hereinafter named do enter into the following articles of association: First. The title of this association shall be "The ■ ." Second. The place where its banking house or office shall be located, and its operations of discount and deposit carried on, and its general business conducted, shall be . Third. The board of directors shall consist of — shareholders. The first meeting of the shareholders for the election of directors shall be held at on the , or at such other place and time as a majority of the undersigned shareholders may direct. Fourth. The regular annual meetings of the shareholders for the election of directors shall be held at the banking house of this asso- ciation on the second Tuesday of January of each year; but if no election shall be held on that day it may be held on any other day, according to the provisions of Section 5149 of the Revised Statutes of the United States, and all elections shall be held according to such regulations as may be prescribed by the board of directors not incon- sistent with the provisions of the National banking law and of these articles. Fifth. The capital stock of this association shall be dollars, divided into shares of one hundred dollars each;* but the capital may, with the approval of the Comptroller* of the Currency, be increased at any time by shareholders owning two-thirds of the stock, according to the provisions of an act of Congress approved May 1, 1886; and in case of the increase of the capital of the association each share- holder shall have the privilege of subscribing for such number of shares of the proposed increase of the capital stock as he may be entitled to according to the number of shares owned by him before the stock is increased. Sixth. The board of directors, a majority of whom shall be a quorum to do business, shall elect one of its members president of this association, who shall hold his office (unless he shall be dis- qualified, or be sooner removed by a majority vote of the board) for the term for which he was elected a director. The directors shall have power to elect a vice president, who shall also be a member of the board of directors, and who shall be authorized, in the absence 433 or inability of the president from any cause, to perform all acts and duties pertaining to the office of president, except such as the presi- dent only is authorized by law to perform, and to elect or appoint a cashier and such other officers and clerks as may be required to transact the business of the association; to fix the salaries to be paid to them, and continue them in office, or to dismiss them as, in the opinion of a majority of the board, the interest of the associa- tion may demand. The directors shall have power to define the duties of the officers and clerks of the association, to require bonds from them, and to fix the penalty thereof; to regulate the manner in which elections of directors shall be held, and to appoint judges of the elections; to make all by-laws that it may be proper for them to make, not in- consistent with the law, for the general regulation of the business of the association and the management of its affairs, and generally to do and perform all acts that it may be legal for a board of directors to do and perform under the Revised Statutes aforesaid. Seventh. This association shall continue fOr the period of twenty years from the date of the execution of its organization certificate, unless sooner placed in voluntary liquidation by the act of its share- holders owning at least two-thirds of its stock, or otherwise dissolved by authority of law. Eighth. These articles of association may be changed or amended at any time by shareholders owning a majority of the stock of the association, in any manner not inconsistent with law; and the board of directors or any three shareholders may call a meeting of the shareholders for this or for any other purpose, not inconsistent with law, by publishing notice thereof for thirty days in a newspaper pub- lished in the town, city, or county where the bank is located, or by mailing to each shareholder notice in writing thirty days before the time fixed for the meeting. In witness whereof we have hereunto set our hands this day of . (To be signed by at least five natural persons, preferably the ap- plicants.) The articles may be varied to meet the views of the corporators, and any provisions may be inserted which are not inconsistent with the National banking laws, but, unless conditions specially 433 require, it is advisable to conform to the form provided by the Comptroller of the Currency. It will be noted that this form of articles of association provides for the annual meeting of shareholders on the second Tuesday of January, but any day of the month may be selected, as the law (Sec. 5145) provides only that the meeting be held in January. § 376. Signing of Articles.— It is unnecessary for more than five of the subscribers to the capital stock to act as incorporators and sign the articles of association. Those who sign the articles must also sign and acknowledge the organization certificate. In executing the organization papers, each person should sign his Christian name and surname in full, as is usually done in the execution of deeds and other legal instruments, and must sign his name the same way in every instance. § 377. Executed in Duplicate. — The law requires that a copy of the articles of association shall be filed in the office of the Comptroller of the Currency. It often happens that the original articles in the possession of the bank are lost or destroyed. For this reason it has become the practice to execute them as well as the organization certificate, in duplicate, and to file with the Comptroller one of these instead of a copy. § 378. Naming Directors in Articles.— Instead of providing, as in the form given (Article 3), for a meeting of shareholders to elect directors, the incorporators may designate, if they choose, in the articles the persons who shall constitute the first board of directors. In this event the third article in the preceding form should be made to read as follows: The board of directors shall consist of shareholders, and the following persons (here insert their names) are hereby appointed di- rectors of this association, to hold their offices as such until the reg- ular annual election takes place, pursuant to the fourth article of these articles of association, and until their successors are chosen and have qualified. 28 434 § 379. Sliding Scale of Directors. — The third section, if desired, may be made to provide for what is termed a sliding scale instead of a fixed number of directors; in other words, a minimum and maximum number of directors, in which event the section should read as follows: The board of directors shall consist of not less than (insert mini- mum number) nor more than (insert maximum number) shareholders; and the following persons (here insert their names) are hereby ap- pointed directors of this association, to hold their offices as such until the regular annual election takes place, pursuant tc the fourth article of these articles of association, and until their successors are chosen and have qualified. The number of directors elected at each annual meeting shall constitute the board for the year, all vacancies to be filled in accordance with the provisions of Section 5148. The advantage of a sliding scale is that the shareholders are enabled to elect annually any number of directors within the limits of the scale without amending the articles of association. If a vacancy occurs after the shareholders have elected a certain number of directors for the year it must be rilled just as though the articles called for a fixed number of directors. § 380. Qualification of Directors. — Section 5146, E. S., pro- vides that a director of a National bank must be a citizen of the United States, and at least three-fourths of the Board must have resided in the State or Territory where the bank is located for the year just preceding their election, and must be resident there- in while directors; (Note, this requires four of five, etc.) The Comptroller further requires that the President and a majority be residents of the place. Each director also must own and free from pledge at least five shares of stock if capital is only $25,000, and ten shares if more than that. He need pay for this stock only as the regular payments on the stock of the bank are re- quired. § 381. Election of Directors. — Section 5145, E. S., provides that a National bank shall have at least five directors, and they may be either elected at a shareholders' meeting, to be held before the 435 bank is chartered, or appointed in the articles. It is required that the annual election be held in January, even though a bank is organized and directors elected or appointed only shortly before that time, and though no change in the Directory may be desired. Cumulative voting at shareholders' meetings is not permissible. § 382. Number of Directors. — In fixing the number of directors, it is well, as before stated, to adopt a sliding scale in the articles of association, to avoid the necessity of calling a special meeting of stockholders to change the articles, in case it is deemed expedient at the annual meeting to increase or decrease the number. The form is given on a preceding page. We would suggest a board of at least seven members — as the law requires that the reports of condi- tion, made five times during the year, shall be attested by not less than three directors; so that with a smaller board it will be seen the liberty of the members to be absent from the place is curtailed. § 383. Provision for Increasing Capital Stock. — It was origin- ally required to provide in the articles of association for increase of the capital stock (Section 5142, Eevised Statutes), but such a provision is no longer necessary, for the Act of May 1, 1886, au- thorizes shareholders owning two-thirds of the shares, with the ap- proval of the Comptroller, to increase the capital stock at any time and to any amount. § 384. Provision for lien on Stock.— Formerly it appears to have been not unusual, for the persons forming an association, to incorporate in either the articles of association or the by-laws, and in stock certificates, a provision to the effect that no shareholder, when indebted, either directly or indirectly, to the bank, could transfer his stock without the consent of the directors. This is a very common provision in the articles of association and by-laws of other than National banks and of moneyed corporations gen- erally, and is, no doubt, an excellent one where the policy of* the law admits of it. But the Supreme Court of the United States has held that any such regulation adopted by a National bank is void, because the bank would thus acquire an interest in its own stock in violation of Section 5201, Revised Statutes. (Bank v. Lanier, 11 Wall., 3G9.) 436 § 385. Organization Certificate — Form.— The next step is to execute an organization certificate. This should be done either at the same time or subsequent to the execution of the articles of association. The provisions to be made in this certificate are specially set forth in the statute (Section 5134, Revised Statutes), viz.: First. The name assumed by such association, which name shall be subject to the approval of the Comptroller of the Currency. Second. The place where its operations of discount and deposit are to be carried on, designating the State, Territory, or District and the particular county and city, town, or village. Third. The amount of capital stock and the number of shares into which the same is to be divided. Fourth. The names and places of residence of the shareholders and the number of shares held by each of them. Fifth. The fact that the certificate is made to enable such per- sons to avail themselves of the advantages of the National Bank Act. Every one of these provisions must be stated clearly and de- finitely in the certificate, but nothing else should be included in it. The place where its business is to be carried on refers to the town or city and not to the particular building or street number. FORM OF ORGANIZATION CERTIFICATE. (Executed in duplicate.) We, the undersigned, whose names are specified in article fourth of this certificate having associated ourselves for the purpose of organiz- ing an association for carrying on the business of banking, under the laws of the United States, do make and execute the following organiza- tion certificate: First. The title of the association shall bei "The ." Second. The said association shall be located in the of county of , and State of — , where its operations of discount and deposit are to be carried on. Third. The capital stock of this association shall be dollars ($ ), and shall be divided into < — shares of one hundred dollars each. Fourth. The name, financial worth— net, and the residence of each shareholder of this association, with the number of shares held, are as follows: 437 Name Financial worth — net Residence No. of shares Note. — The names, etc., of all the shareholders must be given. Fifth. This certificate is made in order that we may avail ourselves of the advantages of the aforesaid laws of the United States. In witness whereof we have hereunto set our hands this day of . (To be signed and acknowledged by those who have signed the ar- ticles of association.) (Acknowledgment must be made before judge of court or notary public and authenticated by the seal of such court or notary.) State of , County of ss: Before the undersigned, a of personally appeared , to me well known, who severally acknowledged that they executed the foregoing certificate for the purposes therein mentioned. Witness my hand and seal of office this — day of . OFFICIAL SEAL OF OFFICER. i . § 386. Who May Be Shareholders.— If any shares are listed in the name of an Executor, Guardian or Trustee, the estate, party or parties represented also must be stated, with address and amount held for each, evidence of Trusteeship, and authority to subscribe. An Administrator has no authority to subscribe for stock, as his duty is merely to close up the estate and he has no authority to make investments. Stock subscriptions should not be taken in the name of an estate. If the heirs subscribe it should be in their individual names. No subscriptions should be received in the name of any State, county, township or municipality. For shares listed in the name of an Order, or Society evidence is 438 required of authority under its Charter or articles and that the Order is responsible financially and legally in case of assessment. § 387. Signing and Acknowledgment. — The persons signing the articles of association must also sign the organization certificate (Section 5134, Revised Statutes), and, in addition, each person signing such certificate is required to acknowledge his signature thereto before a notary public or a judge of some court of record. (Section 5135, Revised Statutes.) In acknowledging signatures see that names are properly spelled if inserted by notary or person other than incorporators. The acknowledgment must be made be- fore one of the officers specified above, but before no other. The acknowledgment can not be taken by the clerk of the court. The fourth subdivision of the organization certificate should give the name, etc., of each subscriber, but signatures are not de- sired here and the names should be typewritten if possible. § 388. Affixing the Seal.— The acknowledgment must be au- thenticated by the seal of the notary or court. This requirement is not dispensed with by any State law, that notaries are not re- quired to have seals, and no certificate from a State officer or other evidence, that the attesting officer is a notary public and qualified to take acknowledgments, will answer in place of a seal. The seal of the court may, of course, be affixed by the clerk of the court, but it must not be understood because the clerk may affix the seal that the acknowledgment may be taken by him. § 389. Execution of Organization Certificate. — The organiza- tion certificate must be signed by the same persons who execute the Articles of Association; others also may sign if for any special reason their signatures are desired, but they must be subscribers to the stock of the proposed bank, and it is usually found that complications arise from adding other signatures. The names of those who sign the application for permission to organize the bank must appear in the organization certificate as corporators or at least as shareholders, otherwise waiver of right to participate in the organization of any one or more such appli- 439 cants, not participating, must be furnished to the Comptroller. In the event that less than a majority of the applicants are parties to the organization either as corporators or stockholders, the Comp- troller will not permit the organization to proceed until waivers are submitted and satisfactory information furnished as to the character and financial standing of the successors to the non- participating applicants. § 390. Filing of Organization Papers. — It is customary for parties to execute all papers at the same time and rorward all together to the Comptroller; but if this cannot be done and there is occasion to become a body corporate promptly in order to take legal action on some matter, the execution and filing of the Articles and Organization Certificate will be sufficient for the pur- pose. (Sec. 5136, E. S.) This however, should not be done until after the Comptroller has approved the application to organ- ize. The duplicate set of papers should not be sent to the Comp- troller, but filed with the bank's records, and be available for in- spection by the Bank Examiner. § 391. When Association a Body Corporate. — When the articles of association and organization certificate have been executed and filed with the Comptroller, the association can then enter into con- tracts as a corporation, call for payments upon capital stock and transact in its corporate name and capacity any business inciden- tal and necessarily preliminary to beginning the banking business. No other business, however, can be transacted until receipt of telegram from the Comptroller that he has issued charter. (Sec. 5136, E. S.) (McCormick v. Market National Bank, 165 IT. S., 538.) The lease or purchase of a banking house may not be contracted for until the bank has been fully organized and chartered, never- theless the parties interested may secure an option, and thus hold the property until the lease or purchase can be legally made. The Comptroller should be promptly advised of the date on which the bank begins business. § 392. Oath of Directors.— The articles of association and or- ganization certificate having been executed, the directors appointed 440 in the articles or elected by the shareholders should then take the oath required by Sec. 5147, R. S. This may be taken singly or jointly as is most convenient. They must not antedate the ex- ecution of the articles and organization certificate. They should be administered by an officer having an official seal, and promptly sent to the Comptroller. If a director appointed or elected fails to take the oath required, in a reasonable length of time, the Board may declare his place vacant and elect a new member. Every director must own in his own right at least ten shares of stock, unless the capital is $25,000, in which case he must own in his own right at least five shares. Blank forms for directors' oaths are furnished by the Comptrol- ler, but written or typewritten oaths if in legal form may be accepted. Form of Oath of Dibectob. — State of , County of , ss: I, the undersigned, director of The , located at — ! , being a citizen of the United States, and resident of the State of ' — , do solemnly swear (affirm) that I will, so far as the duty devolves on me, diligently and honestly administer the affairs of said association; that I will not knowingly violate, or willing permit to be violated, any of the provisions of the statutes of the United States under which this association has been organized; and that I am the owner in good faith and in my own right, of the number of shares of stock required by said statutes, subscribed by me or standing in my name on the books of the said association; and that tbe same is not hypothecated or in any way pledged as security for any loan or debt. Subscribed and sworn (affirmed) to before the undersigned this day of , 19&— . [official seal of offices.] , Notary Public. Note. — Each director when elected must take oath of office, and, un- der Section 5147, U. S. R. S., the oath should be transmitted to the Comptroller of the Currency immediately after the election. If the of- ficer administering the oath has no seal, a certificate of the proper State, county, or court official, to the effect that such officer is author- ized to take acknowledgments, must be attached. 441 In case two or more directors qualify jointly the following form should be used : Form of Joint Oath of Directors. — i State of ; County of , ss: We, the undersigned, directors of The ■, located at being citizens of the United States, and all residents of the State of 1 — , do, each for himself, and not one for the other_solemnly swear (affirm) that we will severally, so far as the duty devolves on us, diligently and honestly administer the affairs of said association; and that we will not knowingly violate, or willingly permit to be violated, any of the provisions of the Statutes of the United States under which said association has been organized; and each, for himself, does solemnly swear (affirm) that he is the owner in good faith, and in his own right, of the number of shares of stock required by said statutes, subscribed by him or standing in his name on the books of the said association; and that the same is not hypothecated, or in any way pledged as security for any loan or debt. Signature Signature Subscribed and sworn (affirmed) to before the undersigned this ■ day of , 19—. [official seal of officer.] 1 , Notary Public. At least three-fourths of the directors must have resided in the State in which the bank is located for at least one year immedi- ately preceeding their election and must reside therein during their continuance in office. § 393. Official Signatures.— The Comptroller requires that the official signatures of the officers of the bank shall be furnished with the organization papers, and as soon as the directors have made payment of at least 50% on the requisite number of shares 442 and have taken oath, the officers should be elected to avoid any delay in the execution of papers of the association requiring their signatures. The seal of the bank is required to attest the signatures; yet, if it has not been made, the signatures should be forwarded, and later the Comptroller will send another blank for execution with seal. This paper must not antedate the Oaths of Directors. The form is as follows: OFFICIAL SIGNATURES OF OFFICEES OF THE -, LOCATED AT -, IN THE STATE OF Office Original signatures Date of election or appointment Names of predecessor President Vice-President Vice-President Cashier Assistant Cashier [SEAL OF BANK.] IMPORTANT. The following instructions should be observed to avoid return of paper for correction: (1) Insert title and place of location of bank. (2) Give the signatures of officers, with date of election or appoint- ment. (3) In case of a vacancy, the word "None" should appear in the space for the signature of the officer. (4) Affix seal of bank in the place designated. (5) The signatures of all of the officers, with date of election or appointment of each, and name of predecessor, are required. § 394. By-laws. — The Comptroller requires that a copy of By- Laws adopted be filed with Organization Papers, and that they provide for at least a monthly meeting of Directors, and that the action of the Discount Committee shall be approved or disap- proved by the Board and a record made in the Minute Book. See next chapter for form of by-laws and instructions. § 395. Payment on Stock. — Section 5168, E. S., requires that at least fifty per cent, of the capital stock shall be paid in and 443 certified to the Comptroller before a National bank can be char- tered. The law is construed by the Comptroller as requiring pro rata payments on the first (fifty per cent.) instalment and sub- sequent instalments of capital by each and every shareholder listed in the organization certificate or by his assignee. Payments must be made in cash and not in assets of another bank, promissory notes, or other evidences of debt. The directors may call for the payment of 50 per cent, of the capital stock at any time, unless the stock has been taken on some agreement to the contrarj^. Of the unpaid balance at least 10 per cent, must be paid each month, beginning one month from the date of the issue of charter. This section merely prescribes the time within which the capital must be paid in. The second and subsequent payments of course are not restricted to 10 per cent, each, as the capital stock may be paid if desired in larger amounts and in advance of the time required by law. It is suggested that the subscribers authorize the directors to call for any or all payments of stock at any time that they may deem best. § 396. Book Entry of Payments on Subscriptions. — Payments on subscriptions to capital stock should not be carried to stock account, nor entered in reports of condition to the Comptroller as capital stock until these payments are certified to the Comptroller. Prior thereto they should be credited to shareholders in a separate account and entered in the reports to the Comptroller under head- ing "Liabilities other than those stated" or "capital paid in, not certified." § 397. Certificate of First Payment on Stock — Form. — When at least fifty per cent, of the capital stock has been paid in it is required by Section 5168, Revised Statutes, that this be certified to the Comptroller by the president or cashier and a majority of the directors of the bank. The certificate should cover all amounts paid in on capital but should not include payments on surplus. The form of such certificate is as follows : 444 CERTIFICATE OF PAYMENT OF FIRST INSTALLMENT OF CAPITAL STOCK AND COMPLIANCE WITH LEGAL REQUIREMENTS. The undersigned officers and directors of The — ■ , located at , now organizing under the provisions of the Revised Statutes of the United States authorizing the organization of National banking associations, do hereby certify that of the authorized capital stock of $ there has been paid into said bank in cash, as permanent capital, $ — , exclusive of any payments on surplus, and that no part of this sum is represented by promissory notes or other evidences of debt; and that each shareholder has individually paid in cash fifty per cent, of his stock subscription; also, that the name and place of residence of each director, and the amount of stock individually owned in good faith, are as follows: Name of director* Place of residence (Town or city and State) Number of shares of stock *The names, etc., of all the directors of the association must appear on this page. A majority of the directors, exclusive of the president or cashier, must sign on the following page and make acknowledgment. It is further certified that the association has in good faith compiled with all of the provisions that are required to be complied with before receiving authority to commence the business of banking. Directors. State of- County of — , SS'. Before the undersigned, a ■ of President, or Cashier. personally appeared the above-named directors and other officers of the aforesaid National bank, and made oath that the foregoing certificate and the matters and things therein set forth are true, to the best of their knowledge and belief. 445 Witness my hand and seal of office this day of , 192 — . [official seal of officek.] < , It will also be necessary to send to the Comptroller a statement showing the total amount collected on stock subscriptions. The difference between this amount and the expenditures in connection with the organization should be deposited with a disinterested bank, and the president or cashier of the depositary bank requested to certify to the Comptroller the amount on deposit to the credit of the organizing bank. The depositary bank should also be requested to advise the Comptroller whether any loan was made to any of the officers, directors, or stockholders of the new institution, and, if so, on what security. § 398. Payment of Deferred Installments on Capital.— The five remaining installments must also be paid in money and certified to the Comptroller by the president or cashier, under seal of the bank. Installments are due monthly from the date of the issu- ance of the Comptroller's certificate of authority to commence business. (Sec. 5140.) The form of installment certificate is as follows: certificate of payment of capital stock. , 192—. To the Comptroller of the Currency, Washington, D. C. Sir: It is hereby certified that the installment, amounting to ■ ■ dollars, has been paid in cash on account of the capital stock of The — , located at ■ — , the certification of payments to date being as follows: First installment (at organization), % — . Second installment, $ . Third installment, $ . Fotirth installment, % . Fifth installment, $ — . Sixth installment, $ 1 — . Total, $ . Cashier. 44G State of , County of , ss: Subscribed and sworn to this — i day of , 192 — . [official seal of officer.] Notary Public. Note. — The second and subsequent payments need not be restricted to 10 per cent, each, as the capital stock of the bank may be paid, if desired, in advance of the time required by law. Do not include in certificates a fraction of a dollar or any payments on surplus. No payments on account of subscriptions to the capital stock should be carried to stock account, or entered in reports of condition as capital stock, until date of certification to the Comptroller. Pending such certification payments should be carried in a separate account to the credit of shareholders and entered in reports to the Comptroller as "Liabilities other than those stated." For the legal method of enforcing the payment of subscriptions to capital stock see Section 5141, U. S. E. S. § 399. Deposit of Bonds. — Under Section 17 of the Federal Beserve Act, as amended by the Act of June 21, 1917, it is no longer compulsory for a National bank to deposit bonds with the Treasurer of the United States before being authorized to com- mence business. But if a bank desires to issue circulating notes, United States registered bonds of designated issues, must be delivered to the Treasury for transfer to and deposit with the Treasurer of the United States in trust for the association to the account of which they are to be credited. See Chapter V on Bonds and Circulation. Coupon bonds can be exchanged for registered bonds by send- ing them to the Treasury with a request that they be exchanged and that the registered bonds be issued to and deposited with the Treasurer of the United States in trust for the Association in- terested. The Comptroller of the Currency will authorize the payment of interest on bonds to the bank depositing them, and the Treasurer of the United States will pay the interest by check, to the order of the bank, payable at the office of any United States Assistant Treasurer or at any United States Depository. 447 When a National bank becomes a government depository proper bonds must also be deposited with the Treasurer of the United States as security for the public money. § 400. The Circulation Privilege. — Every National bank en- joys the privilege of issuing, at its pleasure, its own bank notes. However, the maximum amount which it may issue cannot exceed the amount of its paid-in capital stock. In addition to the advantage of distributing its distinctive cur- rency within its business territory, the maintenance of a circula- tion account yields to the issuing bank an undoubted profit of about 1% more than can be derived by merely lending out the net cost of the bonds that must be deposited with the Treasury. Upon purchasing and depositing with the Treasury Depart- ment acceptable bonds, the bank will thereupon receive circulat- ing notes in an amount equal to the par value of the bonds de- posited. The bank thus not only has the use of an amount of money equal to the par value of its bonds, but enjoys the interest paid by the government upon the latter. The expenses incident to the issuance of circulation are relatively small. Bonds for circu- lation purposes cannot be procured from the Treasury Department, but our facilities are such that we can supply the needs of the banks in this particular, deposit their bonds and attend to all the necessary details at the Treasury. We gladly furnish all infor- mation needed as to the kinds of bonds accepted by the Department, the price of the same, and the profits to be derived from circulation based on the respective issues of bonds secured at prevailing prices. For further details see Chapter V, Part IV. § 401. Order for Circulation. — A National banking association is entitled to circulating notes to the amount of the face value of the U. S. bonds deposited as security therefor, and is entitled to a total amount equal to its capital stock paid in and certified to the Comptroller of the Currency. An order for plates and notes may be sent to the Comptroller, with the organization papers. The plate, however, must bear the charter number and this cannot be ascertained until charter is actually issued. 448 The Comptroller has not executed any orders for $1 and $2 National bank notes. § 402. Issue of Comptroller's Certificate — Commencement of Business.- If after all the organization papers have been filed the Comptroller is satisfied that the requirements of law have been complied with he will give the bank a certificate authorizing it to commence business and will wire the bank its charter number and authority to begin business. The bank may open upon receipt of this telegram and need not wait for the Comptroller's formal cer- tificate. A bank should have a suitable banking house or room and a vault or safe before beginning business. The Comptroller should be promptly advised of the date on which the bank opens. § 403. Publication of Certificate.— The bank must publish the Comptroller's certificate for at least sixty days in a newspaper published in the city or county where the bank is located. (Section 5170, E. S.) An insertion in a weekly newspaper or a weekly edition of a daily is sufficient. The oath of the publisher that the certificate has been published for the time required, with printed copy of certificate attached, cut from the newspaper, must be filed in the Comptroller's office. § 404. Services of an Attorney. — The execution of the papers required in the organization of a National bank, although not a complex matter, yet involves considerable detail, so that unless great care is exercised mistakes will occur. As attorneys for National banks from about the institution of the National system, the publishers of this work have found it is the exception rather than the rule when the papers are correctly executed. Many of the organizing banks, therefore, send their papers to us with authority to make such corrections as we can lawfully make, since if sent direct to the Comptroller the papers are returned to the bank for correction, even in cc^e of slight errors. In case there are errors required to be corrected by the organizers themselves, we save delay by wiring information as to corrections which must 449 be made. These may be made in their duplicate papers, and for- warded to us to file. Our firm, from long experience and personal acquaintance with the Treasury officials and from giving personal attention to the interests of the banks, can guarantee good service in these and all other matters requiring the services of an attorney. § 405. Regulation of Comptroller.— The Comptroller, as here- tofore, publishes each application for authority to organize a National bank, but prior to formal approval he refers each case to the member in Congress of the district; to the National Bank Examiner ; and the State Bank Supervisor for all possible informa- tion, particularly as to the standing of the applicants, the demand for a bank in the place, and the prospects of success if it is estab- lished and conservatively managed. Generally speaking, the Comptroller will not authorize the establishment of a bank at a place where, by reason of apparent lack of business, there is little likelihood of its success, or where existing banking facilities, either National or State, are unques- tionably ample, or where the character or financial ability of the proposed incorporators is evidently doubtful. Further, the Comptroller holds that the demand for a bank should emanate from the business interests of the community, not be created by non-resident promoters, interested merely in compensation for soliciting stock subscriptions, furnishing supplies, etc. For this reason in every case applicants are required to state whether a contract, written or verbal, has been entered into for the compensation of any one for placing the stock or otherwise aiding in the organization of the bank, in order that the Comp- troller may be fully advised as to the situation. When application to organize is formally approved, the title is reserved for sixty days, and during this time it is expected that bona fide subscriptions to the entire capital stock will be obtained and the organization papers executed and filed. An extension of time for good reason may be obtained. The Comptroller looks to the organizers of a bank to select Directors who can and will give proper attention to the bank's 29 450 interests. The Statute provides that three-fourths of the Board be residents of the State, but the Comptroller further expects the Directors to be selected from local stockholders, and requires that the President and a majority be residents of the place. In addition to the preliminary investigation above referred to, a final examination is sometimes made to determine whether all provisions of law and the conditions imposed by the Comptroller have been complied with. This is only required in rare cases. The question of By-Laws will be treated in the next chapter. CHAPTEE II. By- Laws. Section 406. General Instructions. 407. Form of By-Laws. § 406. General Instructions.— The power to adopt by-laws for a National bank is conferred on the directors by the National Bank Act (Sec. 5136, E. S.), and is generally incorporated in the articles of association. It is a requisite of every valid by-law of a National bank that it shall be consistent with the National bank- ing laws and with the articles of association; a by-law which is inconsistent with either the law or the articles is void. Directors often fall into the error of supposing that because they have power to amend the by-laws they may change them in any respect, but, as before stated, no amendment must conflict with provisions of the articles of association, as these provisions can be changed only by amendment of the Articles by the stockholders, and then only in conformity with law. Thus, a by-law prescribing the number of directors the bank shall have, and how many shall constitute a quorum, can not be amended by the directors to conflict with any provision of the articles of association. The Comptroller requires that provision be made in By-Laws for at least a monthly meeting of the Board of Directors, the appoint- ment of Examining and Discount Committees, the approval or disapproval by the Board at their meetings of all loans and dis- counts and the recording of their action in the Minute book. A copy of the by-laws is required to be filed with the Comp- troller, and should be sent to him with the organization papers. § 407. Form of By-Laws. — The following form of by-laws has been found to cover the general requirements of National banks, but may be modified in any manner not inconsistent with law or articles of association. 451 452 BY-LAWS OF THE [HERE INSEBT THE TITLE OF THE BANK], OBGANIZED UNDEB THE NATIONAL BANKING LAWS OF THE UNITED STATES. ANNUAL MEETING. Section 1. The regular anual meetings of the shareholders of this bank for the election of directors shall be held at its banking house on the day in January of each year provided in the articles of associa- tion, between the hours of 10 and 4 of said day. It shall be the duty of the board of directors, within one month prior to the time of said election, to appoint three shareholders to be judges of said election, who shall hold and conduct the same, and who shall, after the elec- tion has been held, notify under their hands the cashier of this bank of the result thereof and the names of the directors-elect. Sec. 2. The cashier, upon receiving the returns of the judges of the elections as aforesaid, shall cause the same to be recorded upon the minute book of the bank, and shall notify the directors-elect of their election and of the time at which they are required to meet at the banking house of the bank for the purpose of organizing the new board. If at the time fixed for the meeting of the directors-elect there is not a quorum in attendance, the members present may adjourn from time to time until a quorum is secured, and no business shall be transacted prior to taking the oath of office as prescribed by law. Sec. 3. If, for any cause, the annual election of directors is not held on the date fixed in the articles of association, the directors in office shall order an election to be held on some other day, of which special election notice shall be given in accordance with the requirements of section 5149, United States Revised Statutes, judges appointed, returns made and recorded, and the directors-elect notified, according to the provisions of sections one and two of these by-laws. OFFICERS. Sec. 4. The officers of this bank shall be a president, vice-president (who shall be members of the board of directors), cashier, and such other officers as may be from time to time required for the prompt and orderly transaction of its business, to be elected or appointed by the board of directors, by whom their several duties shall be pre- scribed. Sec 5. The president shall hold his office for the current year for which the board of which he shall be a member was elected, unless he shall resign, become disqualified, or be removed; and any vacancy occurring in the office of president or in the board of directors shall be filled by the remaining members. Sec 6. The cashier and the subordinate officers and clerks shall be 453 appointed to hold their offices, respectively, during the pleasure of the board of directors. Sec. 7. The cashier of this bank shall be responsible for all the moneys, funds, and valuables of the bank, and shall give bond, with security to be approved by the board, in the penal sum of dollars conditioned for the faithful and honest discharge of his duties as such cashier, and that he will faithfully apply and account for all such moneys, funds, and valuables, and deliver the same to the order of the board of directors of this bank, or to the person or persons au- thorized to receive them. Sec. 8. The president of this bank shall be responsible for all Buch sums of money and property of every kind as may be intrusted to his care or placed in his hands by the board of directors or by the cashier, or otherwise come into his hands as president, and shall give bond, with security to be approved by the board, in the penal sum of dollars, conditioned for the faithful discharge of his duties as such president, and that he will faithfully and honestly apply and account for all sums of money and other property of this bank that may come into his hands as such president, and pay over and deliver the same to the order of the board of directors, or to any other person or per- sona authorized by the board to receive the same. Sec. 9. The teller shall be responsible for all such terms of money, property, and funds of every description as may from time to time be placed in his hands by the cashier, or otherwise come into his possession as teller; and shall give bond, with security to be approved by the board, in the penalty of ' — dollars, conditioned for the honest and faithful discharge of his duties as teller, and that he will faithfully apply, account for, and pay over all moneys, property, and funds of every description that may come into his hands, by virtue of his office as teller, to the order of the board of directors aforesaid, or to such person or persons as may be authorized to demand and receive the same. SEAL. Sec. 10. The following is an impression of the seal adopted by the board of directors of this bank: Impression of seal. conveyance of real estate. Sec. 11. All transfers and conveyances of real estate shall be made by the association, under seal, in accordance with the orders of the board of directors, and shall be signed by the president or cashier. 454 INCREASE OF STOCK. Sec. 12. Whenever an increase of stock shall be determined upon, in accordance with law, it shall be the duty of the board to notify all the shareholders of the same, and to cause a subscription to be opened foi such increase of capital. In the increase of capital each share- holder shall have the privilege of subscribing for such number of shares of the new stock as he may be entitled to subscribe for, ac- cording to his existing stock in the bank. If any shareholder fails to subscribe for the amount of stock to which he may be entitled, the board of directors may determine what disposition shall be made of the privilege of subscribing for the unsubscribed stock. BANKING HOUBS. Section. 13. This bank shall be opened for business from o'clock a. m. to — ■ o'clock p. m. of each day of the year, excepting Sundays and days recognized by the laws of this State as holidays. dibectobs' meetings. Sec. 14. The regular meetings of the board of diiectors shall be held on the of each month. When any regular meeting of the board of directors falls upon a holiday, the meetings shall be held on such other day as the board may previously designate. Special meetings may be called by the president, cashier, or at the request of three or more directors. discount committee. Sec. 15. There shall be a committee, to be known as the discount committee, consisting of the president, cashier, and directors appointed by the board every — i — — months, to continue to act until succeeded, who shall have power to discount and purchase bills, notes, and other evidences of debt, and to buy and sell bills of exchange; and who shall, at each regular meeting of the board of directors, submit in writing a report of all bills, notes, and other evidences of debt dis- counted and purchased by them for the bank since their last report. The board of directors shall approve or disapprove the report of the discount committee, such action to be recorded in the minutes of the meeting. minute book. Sec. 16. The organization papers of this bank, the returns of the judges of the elections, the proceedings of all regular and special meetings of the directors and of the shareholders, the by-laws and any 455 amendments thereto, and reports of the committees of directors shall be recorded in the minute book; and the minutes of each meeting shall be signed by the president and attested by the cashier. TBANSFEBS OF STOCK. Seo. 17. The stock of this bank shall be assignable and transferable only on the books of this bank, subject to the restrictions and pro- visions of the National banking laws; and a transfer book shall be provided in which all assignments and transfers of stock shall be made. Sec. 18. Transfers of stock shall not be suspended preparatory to the declaration of dividends; and, unless an agreement to the contrary shall be expressed in the assignments, dividends shall be paid to the shareholders in whose name the stock shall stand at the date of the declaration of dividends. Sec. 19. Certificates of stock, signed by the president and cashier, may be issued to shareholders and the certificate shall state upon the face thereof that the stock is transferable only upon the books of the bank; and when stock is transferred, the certificates thereof shall be returned to the bank, canceled, preserved, and new certificates issued. EXPENSES. Sec. 20. All the current expenses of the bank shall be paid by the cashier, who shall every six months, or oftener if required, make to the board a detailed statement thereof. CONTRACTS. Sec. 21. All contracts, checks, drafts, etc., and all receipts for cir- culating notes received from the Comptroller of the Currency shall be signed by the president or cashier. EXAMINATIONS. Sec. 22. There shall be appointed by the board of directors a com- mittee of members, exclusive of the president and cashier, whose duty it shall be to examine every six months the affairs of this bank, count its cash, and compare its assets and liabilities with the ac- counts of the general ledger, ascertain whether the accounts are cor- rectly kept, and the condition of the bank corresponds therewith, and whether the bank is in a sound and solvent condition, and to recom- mend to the board such changes in the manner of doing business, etc., as sball seem to be desirable, the result of which examination shall 456 be reported in writing to the board at the next regular meeting there- after. Sec. 23. The board of directors shall have power to change the form of the books and accounts when deemed expedient and define the man- ner in which the affairs of the bank shall be conducted. QUOKUM. Sec. 24. A majority of all the directors is required to constitute a quorum to do business. Should there be no quorum at any regular or special meeting, the members present may adjourn from day to day until a quorum is in attendance. In the absence of a quorum no busi- ness shall be transacted. CHANGES IN BY-LAWS. Sec. 25. These by-laws may be changed or amended by the vote of a majority of the directors. CHAPTER III. Reorganization of State and Private Banks. Section 408. General. 409. Payment of Capital. 410. Examination. 411. Contract with Old Bank. 412. Taking Over Assets of Old Bank. 413. Certificate Regarding Assets — Form. 414. Reorganization of a Private Bank. 415. Business Uninterrupted. 416. Services of an Attorney. § 408. General. — Wihere it is proposed to reorganize a State or private bank as a National banking association it is necessary to close the old bank in conformity with the provisions of the laws of the State under which it is operating, and then effect a new organization in conformity with the provisions of the National Banking Act. The procedure in so far as incorporation is con- cerned is identical with that required in the original organization of a National bank. The controlling motive in reorganizing rather than converting in such case is generally the desire to effect such a distribution of stock as will result in the best interests of the bank, and occasion- ally to provide for a more satisfactory investment of capital and other loanable funds. The liquidation of the old bank and the organization of the new should be carried on concurrently in order to save time and not have an interruption in business. When the proposed incorporators of the National bank have filed an application with the Comptroller of the Currency for reservation of title and authority to organize, and approval thereof is received, they may immediately proceed with the organization of the association. 457 458 § 409. Payment of Capital.— The Comptroller construes the law as requiring the payment of capital stock of a National bank in cash, not in notes or other evidences of debt; it therefore will be found advisable to collect from the most liquid assets of the State bank the amount necessary to enable the shareholders to pay their subscriptions to the stock of the National bank ; that is, fifty per cent, prior to being authorized to begin business, and the balance in monthly installments of ten per cent. each. The di- rectors may then contract with the liquidating agent of the closed bank for the assumption of liabilities to depositors and other creditors on a transfer of an equivalent amount of assets of a character which can be held by a National bank. In case a State bank wishes to effect a change to the National system without delay, and a sufficient amount of the assets cannot be converted at once into cash to enable the stockholders to make the 50 per cent, payment on capital required, loans may be made to the stockholders of the State bank by that bank, so that the shareholders may be able to pay the assessment on their stock in the new bank. Notes given for this purpose, however, can not be acquired by the new bank. A portion of the capital paid in may at once be re-invested in assets of the State bank, such as bank build- ing, etc., thus really returning the payments on stock to the stock- holders for their interests in the assets of the liquidating bank. In acquiring assets of the old bank the directors must be governed by the provisions of the National bank act relating to their charac- ter and volume. § 410. Examination. — When the application is forwarded it should be accompanied, as in other cases, by a draft for $100, pay- able to the order of the Comptroller of the Currency, to cover the expense of investigation. Upon receipt of this draft the chief national-bank examiner for the district will be directed to detail an examiner to make the investigation, the examiner being in- structed to arrange with the local correspondent in the case as to the date when the investigation is to be made. The examiner will be instructed to make a thorough examination of the condition of the bank which the national bank is to succeed, and to report upon 459 the character of its assets and the manner in which its business has been conducted. He will also be required to report upon the char- acter and financial standing of the applicants, the ability of the active executive officers of the bank to be succeeded, whether they have the confidence of the community, and the prospect of success of the new bank. In addition to securing a report from the examiner, the Comp- troller will also obtain a report from the Federal reserve bank of the district; from the State banking department, and from such other sources as he may deem advisable. § 411. Contract With. Old Bank. — Upon receipt of charter, the authority to begin business, the directors have authority to enter into a contract with the directors or liquidating agent of the State bank which the national bank lias been organized to succeed for the assumption of liabilities to depositors and other creditors of the State institution, and the taking over of a like amount of assets in payment for such assumption. The surplus of assets over liabilities may be purchased for cash or left with the liquidating agent for collection and distribution to the shareholders of the state bank. Xo assets however can be acquired which are not of satisfactory value and which do not conform in character to the requirements of the national bank and Federal reserve bank acts. A duly executed and properly signed copy of the contract in ques- tion should be filed with the Comptroller of the Currency. § 412. Taking Over Assets of Old Bank.— Acting under such a contract bills receivable and other assets should be listed, care- fully scrutinized and properly endorsed; the banking house, if purchased, deeded to the new bank, and the deed recorded; all general and individual accounts closed and transferred and new accounts opened and old pass books called in and new books issued. § 413. Certificate Regarding Assets — Form. — The organization papers should be accompanied by a statement of the directors to the effect that no assets the holding of which contravene the pro- visions of the National banking law will be purchased or other- 460 wise acquired by the association, the statement being in the follow- ing form and language: STATEMENT, NONACQUIBEMENT OF PROHIBITED ASSETS. We, the undersigned, a majority of the board of directors of the National Bank of — , in the of . State of , hereby certify that any assets which may be purchased or otherwise acquired by said National bank from the Bank of ■ , will not include real estate, except banking premises, stocks, loans secured by real estate, except such as are permitted by section 24 of the Federal Reserve Act, nor any loan in excess of 10 per cent, of the capital stock of the National bank actually paid in and unimpaired, and 10 per cent, of unimpaired surplus fund. Directors. Subscribed and sworn to before me, this day of , 192 — . [notarial seal.] , "Notary Public. § 414. Reorganization of a Private Bank.- The reorganization of a private bank requires a similar proceeding to that of a State bank, except that it is presumed the proprietors have authority, as individuals, to terminate their business and sell and transfer the assets to the National bank. § 415. Business "Uninterrupted. — By liqudating the State bank and organizing the national bank concurrently arrangements can be made for the National bank to begin business simultaneously with the closing of the State or private bank which it succeeds, without a cessation of business. § 416. Services of an Attorney.— The publishers maintain a legal department which will examine reorganization papers before filing with the Comptroller, and furnish any further information and advice desired. CHAPTER IV. Conversion of State Bank to National. Section 417. Provisions of Law. 418. Necessity for Incorporation. 419. Capital of Bank. 420. Application to Convert. 421. Prohibited Assets. 422. Examination. 423. Authorization by Shareholders. 424. Authority for Conversion — Form. 425. Execution of Papers. 426. Articles of Association — Form. 427. Organization Certificate — Form. 428. Branches. 429. Appointment and Signatures of Officers. 430. Certificate of Payment of Capital. 431. Continuation of Directors. 432. Certificates of Stock. 433. Status of Converted Bank. 434. Conversion or Beorganization. § 417. Provisions of Law. — Section 5154, U. S. R. S., as amended by section 8 of the Federal Reserve Act provides in sub- stance that any bank incorporated by special law or organized under the general laws of any State with an unimpaired capital sufficient to entitle it to become a National bank may, by the vote of the shareholders owning not less than fifty-one per centum of its capital stock, and with the approval of the Comptroller of the Currency, be converted into a National bank, with any name approved by the Comptroller: Provided, however, that said con- version is not in contravention of the State law. The articles of association and organization certificate may be executed by a majority of the directors of the bank, and the certi- 461 462 ficate shall declare that the owners of fifty-one per centum of the capital stock have authorized the directors to make such certificate and to change or convert the bank into a national association. A majority of the directors, after executing the articles of association and the organization certificate, shall have power to execute all other papers and to do whatever may be required to make its organization perfect and complete as a National association. § 418. Necessity for Incorporation. — A bank proposing to con- vert to a National bank must be a State institution incorporated either by special charter or under some general statute. The Solicitor of the Treasury has held in a recent opinion that a trust company organized under State laws may be permitted to convert to a National bank under the provisions of this section, provided it complies with all the conditions of law, and divests itself of all its trust company business, except such as the Federal Eeserve Board might specifically authorize it to retain as provided by the Federal Eeserve Act. § 419. Capital of Bank. — A State bank converting must have a capital paid in and unimpaired of not less than the amount pre- scribed by the National Bank Act (See Sec. 367). When it is necessary to increase capital the increase must be legally effected under State law prior to conversion. It depends upon the re- quirements of the laws of the State in which the bank is located whether it is better to increase under State laws, and then con- vert, or to put the State bank in liquidation and reorganize. Sometimes considerable delay is avoided by taking the latter course. When a bank increases its capital before conversion the Comptroller requires as evidence of pajonent of such increase a certificate of the State officer with whom the certificate of increase is filed. Conversion papers cannot be lawfully executed prior to effecting the necessary increase. § 420. Application to Convert.— The first step in the process of converting a bank incorporated under State laws into a National bank is for the board of directors to file a formal application with the Comptroller of the Currency asking for the approval of said 463 conversion and naming the title desired. The Comptroller then orders an examination of the bank, and if its condition is found to be satisfactory and the title selected is available the bank will be so notified and conversion papers furnished. The following is the form of notice to be submitted of intention to convert a State bank into a National banking association : APPLICATION TO CONVEET A STATE BANK INTO A NATIONAL BANKING ASSOCIATION. The name of the place should form a part of the title, thus, "The First National Bank of A ," but the name of the State should not be included. Consideration will not be given to an application for a title in- cluding the word "First," if a National bank exists at the given locality; nor to an application for a title identical with that of a National bank heretofore in existence, nor to one materially sim- ilar to that of a National, State, or other bank existing in the place. — , 192—. TO the COMPTBOLLEB OF THE CUBBENCT, Washington. Sib: Notice is hereby given that we, the undersigned, being a ma- jority of the board of directors of "The ," having a paid in and unimpaired capital of $ ■ , intend to convert the said bank into a National banking association, in accordance with the provisions of section 5154 of the Revised Statutes of the United States as amended by section 8 of the Federal Reserve Act, under the title "The ," to be located at , county of — ■ , State of — with capital of % . Population — »— — >. TVe request that the title be reserved for a period of sixty days and the necessary conversion papers and instructions sent to ■ — , at , hereby agreeing that any assets of the State bank which can not be legally held by a National bank will be disposed of before certificate authorizing conversion and the commencement of business as a National banking association is issued. Signatures of directors Residences 464 § 421. Prohibited Assets. — Under the national banking laws any association may make loans on personal security, and any national banking association not situated in a central reserve city is author- ized by section 24 of the Federal reserve act to make loans secured by improved and unencumbered farm land situated within its Fed- eral reserve district or within a radius of 100 miles of the place in which such bank is located, irrespective of district lines, and may also make loans secured by improved and unencumbered real estate located within 100 miles of the place in which such bank is located, irrespective of district lines ; but no loan made upon the security of such farm land shall be made for a longer time than five years, and no loan made upon the security of such real estate as distin- guished from farm land shall be made for a longer time than one year, nor shall the amount of any such loan, whether upon such farm land or upon such real estate, exceed 50 per cent, of the actual value of the property offered as security. Any such bank may make such loans, whether secured by such farm land or such real estate, in an aggregate sum equal to 25 per cent, of its capital and surplus or to one-third of its time deposits. National banks are prohibited from investing in real estate other than that necessary to the conduct of the business of the bank, and are restricted, with certain exceptions, in the volume of accommo- dations to any one person, company, corporation, or firm, etc., to 10 per cent, of the capital stock of the association actually paid and unimpaired and 10 per cent, of its unimpaired surplus fund. The courts have held that it is ultra vires of a National banking associa- tion to invest in the stock of another corporation. State banks pro- posed to be converted and holding prohibited assets are expected to dispose of them prior to being authorized to begin business as a National ba nkin g association, and conversion may be expedited by the directors signing an agreement that such assets will be collected immediately or otherwise disposed of. § 422. Examination. — When an application to convert is for- warded it should be accompanied by a draft for $100, payable to the order of the Comptroller of the Currency, to cover the expense of examination. Upon receipt of this draft the chief national 4G5 bank examiner for the district is directed to detail an examiner to make the investigation, the examiner being instructed to arrange with the officers of the bank as to the date when the examination is to be made. The examiner investigates the character and finan- cial standing of the officers and directors, and reports on the manner in which the State bank has been managed, what the officers have accomplished in the community, and also as to the probability of the success of the bank as a national bank. The examiner is also in- structed to prepare a list of the assets of the State bank that do not conform to the provisions of the national bank act or the Federal reserve act. In addition to securing the report from the examiner, the Comp- troller will also obtain a report from the Federal Eeserve bank of the district; from the State bank department and from other sources. § 423. Authorization by Shareholders. — When the application to convert has received the Comptroller's approval, a meeting of the shareholders of the State bank should be called, the notice of the meeting required by the laws of the State or the articles of association or incorporation, having been given. At this meeting a resolution should be adopted by a vote representing not less than 51 per cent, of the capital stock of the bank authorizing the board of directors to change and convert the bank into a National bank- ing association under the provisions of Section 5154, IT. S. E. S., and acts amendatory thereof; also authorizing the directors, or a majority thereof, to make and execute the articles of association and organization certificate, and all other papers and certificates, and to do all acts necessary to conversion of the bank into a Na- tional banking association. § 424. Authority for Conversion — Form. — The following is the form furnished by the Comptroller of the Currency for reporting the resolution adopted by the shareholders: 30 4GG ATJTHOBITY FOB CONVERSION OF BTATE BANK. At a meeting of the shareholders of -, held on the notice of the proposed meeting required hy the laws of the State or the articles of association or incorporation of said bank having been given, it was resolved that the board of directors of this bank be authorized to change and convert said bank into a National banking association under the provisions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof; and we do also authorize the said directors, or a majority thereof, to make and execute the articles of association and organization certificate required to be made or contemplated by said statutes; and also to make and execute all other papers and certificates and to do all acts necessary to convert the said bank into a National banking association; and to do and perform all such acts as may be necessary to transfer the assets of every description and character of the said State bank to the National banking association into which it is to be converted, so that the said conversion may be absolute and complete; and we do hereby assume, and authorize the said directors to assume, as the name of the National banking association into which the said State bank is to be converted, "The "; and we do hereby appoint , who are now the directors of the said State bank, to be the directors of the said National bank, to hold their offices as such directors until the regular annual election of directors is held, pur- suant to the provisions of said Revised Statutes, and until their suc- cessors are chosen and qualified; and we do hereby authorize the said directors of the said National bank to continue in office the officers of the said State bank, or to appoint or elect others, as to them may seem best. The foregoing resolution was adopted by the following vote, repre- senting not less than 51 per cent, of the capital stock of — i , no one having acted as proxy who is not authorized to so act under the laws of the State. Name of shareholder Residence Name of proxy No. of shares Total number of shares voted in favor of the resolution, Total number of shares voted against the resolution, Total number of shares represented at the meeeting, Total number of shares of capital stock. ■ 467 I hereby certify that this is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on the date mentioned. [seal of bank.] , President or Cashier. Subscribed and sworn to before me this — — day of , A. D. . [seal of notary.] , Notary Public. § 425. Execution of Papers. — In the case of a conversion, the articles of association and organization certificate are executed by the directors, and not by the shareholders, and a majority of the directors fulfills the requirements of the law. § 426. Articles of Association — Form.— The wording of the first part of the articles of association should be as follows : Form of Articles of Association. We, the undersigned, directors of the , having been author- ized by a vote of shareholders owning not less than fifty-one per cent, of the capital stock of said bank to change and convert the said bank into a National banking association, under the provisions of Section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof, and to execute articles of association, do hereby, in our own behalf, and in behalf of the stockholders whom we represent, make and execute the following articles of association: First. The title of the association into which the said State bank is to be changed and converted shall be "The . From this point the articles will follow the form given under organization de novo. (See Chapter I.) § 427. Organization Certificate — Form. — The following is the form for organization certificate furnished by the Comptroller of the Currency in cases of conversion : ORGANIZATION CERTIFICATE. We, the undersigned directors of the ■ , having been duly authorized by a vote of shareholders owning not less than fifty-one per cent, of its capital stock to change and convert said bank into a National banking association, and to make the necessary organization 468 certificate, under the provisions of section 5154 of the Revised Statutes of the United States, or of acts amendatory thereof, do sign and execute the following organization certificate, which we hereby declare we are authorized to make by a vote of shareholders owning not less than fifty-one per cent, of the capital stock of the said State bank. First. The title of this association shall be "The — ." Second. The said association shall be located and continued in the of , county of , and State of — i , where its opera- dollars tions of discount and deposit are to be carried on. Third. The capital stock of this association shall be — ($ ), divided into shares of < — dollars each, as it is now divided in the said State bank. Fourth. The name and residence of each of the stockholders of the said State Bank, which is to become a National bank under the pro- visions of the Revised Statutes aforesaid, and the number of shares of dollars each held by each stockholder are as follows: Name No. of shares Fifth. This certificate is made in order that the said State bank and the stockholders thereof may avail themselves of the advantages of the aforesaid Revised Statutes, and that the said State bank may be changed and converted into a National banking association under the foregoing title. In witness whereof we have hereunto set our hands this day of— . The signatures of a majority of directors required. Acknowledgment must be before a notary public or judge of court and authenticated by the seal of such notary or court. State of County of Before the undersigned, a of personally appeared directors of the aforesaid State bank, to me well known, who severally 469 acknowledged that they executed the foregoing certificate for the pur- poses therein mentioned. Witness my hand and seal of office this day of . [official seal of officer.] , § 428. Branches. — In case a State bank converting to a National bank has one or more Branch banks, it will be necessary to insert in the above form of organization certificate after the name of the State in the second section "with Branch at ," and add to section third "of which amount $ has been assigned and trans- ferred to the Branch of this Bank at ." § 429. Appointment and Signatures of Officers. — If officers of the converting bank are serving an unexpired term the form for official signatures which is given under organization de novo should be interlined to read "appointed at a meeting of the directors of the State bank held ." § 430. Certificate of Payment of Capital. — This is a certificate of the president or cashier of the bank to the Comptroller, showing that the amount of paid-in and unimpaired capital of the bank converting meets the legal requirement. The following is the form : CERTIFICATE RELATIVE TO PAYMENT OF CAPITAL STOCK OF STATE BANK CON- VERTING INTO NATIONAL BANK. It is hereby certified that the <— Bank of which is to be converted into "The National Bank of——," in conformity with the provisions of section 5154 of the Revised Stat- utes of the United States, and acts amendatory thereof, authorizing the conversion of "any bank incorporated by special law or any banking institution organized under a general law of any State," has a paid in and unimpaired capital of $ — . President or Cashier. State of , County of Subscribed and sworn to before the undersigned, a of the said county, this day of ■ — , 192 — . [OFFICIAL SEAL OF OFFICEB.] ' ', [Official Title.] 470 § 431. Continuation of Directors.— Duly qualified directors of a State bank being converted into a National bank may continue as directors, regardless of the number of shares owned, until the first annual election is held when, to- be eligible for re-election, they must own the number of shares required by the National Bank Act. The oaths should be taken as directors of the National bank. Unless officers are reappointed by the directors of the National bank subsequent to their qualification, the form requir- ing the signatures of the officers of the National bank should show date of appointment by the directors of the State bank. The minimum number of directors for a National bank is five, and if the State bank has less than that number an increase must be made under State law prior to conversion. § 432. Certificates of Stock. — A State bank converting to a National bank is not required to issue new certificates of stock, al- though it is preferable to do so. If the old certificates are retained they should be stamped to show the new corporate title and date of the changed jurisdiction. The shares may continue to be for the same amount as they were before the conversion. § 433. Status of Converted Bank. — In the conversion of a State bank there is not a dissolution of the State corporation, but merely a change of title and governmental supervision; the bank is liable for all obligations and may enforce all contracts made with it while a State corporation. (See Metropolitan National Bank v. Claggett, 141 U. S., 520.) In the case of Casey v. Galli (94 U. S., 673) the Supreme Court of the United States held that no authority from a State is necessary to enable a State bank to become a National banking association. Since that decision, how- ever, the provisions of section 5154 U. S. R. S. have been amended by the Federal Reserve Act, so that a State bank can not be con- verted to a National bank if such conversion is forbidden by the laws of the State. § 434. Conversion or Reorganization. — It is impossible to de- termine without some knowledge of the status of a bank and local 471 conditions which plan is preferable in changing to the National system. We will be glad to give applicants the benefit of our long experience, and are glad to render every possible assistance in examining and filing organization papers and in obtaining Na- tional charter. CHAPTEE V. Bonds and Circulation. Section 435. The Circulation Privilege. 436. Order for Plates and Circulation — Form. 437. Deposit of Bonds. 438. What Bonds Are Acceptable. 439. Treasury Procedure. 440. Profits on Circulation Accounts. 441. Withdrawal of Bonds — Forms. 442. Withdrawal Under Sec. 18 of Federal Reserve Act. 443. Circulation Bonds as Security for Public Moneys. 444. Witnessing Destruction of Mutilated Currency — An- nual Examination of Bonds. 445. The Five Per Cent. Fund. 446. Same — Keeping Fund Intact. 447. Same — Redemptions of Mutilated Notes. 448. Same — Remittances. 449. Ledger Accounts Covering Circulation. 450. The Circulation Account. 451. The Five Per Cent. Fund Account. 452. Method of Verifying Remittances. 453. Disposition of Notes Redeemed. 454. Issue of New Circulating Notes. 455. Legal Tender and Lawful Money — What Is. 456. Tax on Circulation — Form for Making Return. 457. Same — Requirement and Penalty for Failure. 458. Same — How Payment Made. 459. Same — Percentage Assessed and Period. 460. Same — Computing Amount. 461. Tax Required Only on Actual Circulation. 472 | 473 § 435. The "Circulation" Privilege. — Any National bank may issue its own bank notes up to an amount equal to the full amount of its paid-in capital stock. This right exists without the formal- ity of making an application to the Comptroller of the Currency. § 436. Order For Plates and Circulation — Form.— When a Na- tional bank wishes to issue circulating notes it should forward to the Comptroller of the Currency, in the following form, an order for the engraving of the plates and the printing of the cur- rency. It takes the Bureau of Engraving and Printing at least forty days to fill an original order, at a cost of $130 per plate. Check to cover this cost should accompany the order. The Comp- troller has declined to accept orders for $1 and $2 National bank notes and will probably continue this policy. ORIGINAL ORDER FOR PLATES AND CIRCULATION. Charter No. — — . National Bank of 19- To the Comptroller of the Currency. Sir: You are requested to have plates engraved for this bank, and circulating notes printed therefrom, as follows: No. of sheets ordered Denominations on sheets fL,fL,$L,fL. 85, 85, #>. 85 810, $10, #10, $10... ?10,$10, 810, 820... $50, 850. 850, SI 00. Total. Value per sheet 14 8 20 40 50 250 Amount of order Respectfully, Cashier. Note. — The act of October 5, 1917, provides for the issuance of $1 and $2 notes, repealing the act of June 3, 1864, which prohibited National banks from being furnished with notes of less denomination than $5 after the resumption of specie payments. 474 Circulation may be ordered from any one or more of the plates listed above, but no bank shall receive or have in circulation at any- one time more than $25,000 in notes of the denominations of $1 and $2. The restriction as to the issue of $5 notes to one-third of a bank's circulation has been repealed, and notes of that denomination may be issued in any amount desired not in excess of the capital stock against the deposit of bonds. It will ordinarily require about 40 days to engrave the plate and to print circulating notes, but the order will not be acted upon until either bonds are deposited for circulation or a draft in payment of cost of engraving is received by the Comptroller. Bank plates cost $130 each for originals and $120 each for duplicates when the originals are worn out. § 437. Deposit of Bonds.— Legally acceptable bonds of a par value equal to the amount of circulation to be issued may then be deposited at any time with the Comptroller of the Currency. It is advisable, however, not to deposit the bonds until the printing of the currency has been completed, as the bank ordinarily can use its funds to better advantage, during the interval, than by having them merely invested in the low income-producing bonds that bear the circulation privilege. § 438. What Bonds Are Acceptable. — The only bonds now ac- ceptable to the Treasury to secure circulation are the 2 per cent. Consols of 1930, the 2 per cent. Panamas of 1936 and 1938, and the "Old Fours" of 1925. The Consols bear no date of maturity, merely being redeemable on and after April 1, 1930, at the pleas- ure of the Government. It is hardly likely that these bonds will be redeemed at a time when the Government has outstanding large quantities of bonds bearing over 4 per cent, interest. The Panamas are pa3-able August 1st and November 1st, 1936 and 1938, re- spectively. The}' may be redeemed at any time at the Govern- ment's pleasure. The fours are redeemable merely at the pleasure of the Government on and after February 1, 1925. When the lat- ter are used as security for circulation they are subject to a tax of 1 per cent, per annum, payable semi-annually, while the tax on the 2 per cent, bonds is y 2 of 1 per cent, per year. We make a specialty of dealing in these bonds. Representing 475 as we do a majority of the National banks in the country, we are constantly in touch with liquidating banks which desire to dis- pose of their bonds, and we can supply the needs of purchasing banks at reasonable prices, which include, without additional charge, attending to all details at the Treasury. § 439. Treasury Procedure.— In depositing the bonds care should be taken to have them assigned to "The Treasurer of the United States in trust for" the issuing bank. After the bonds are deposited and temporary receipts taken therefor, the bonds are sent to the Division of Loans and Currency, where they are can- celled and new bonds issued in their stead. The new bonds are returned in several days to the Comptroller, who deposits them with the Treasurer of the United States. The former then author- izes the Issuing Division to ship the new currency directly to the bank by registered mail insured. The Treasurer retains the bonds and in due course forwards to the issuing bank his official duplicate receipt therefor. § 440. Profits on "Circulation" Accounts.— Obviously a certain annual profit can be secured from the maintenance of a circula- tion account over and above the interest derived from lending out the money used to purchase the bonds at the prevailing in- terest rates. Either 2 per cent, or 4 per cent, interest is received on the bonds in which the bank has invested, and as the Govern- ment supplies the bank with a like amount of currency, the lat- ter may be loaned out at the prevailing interest rates. The 2 per cent, or 4 per cent, derived from the bonds therefore repre- sents the gross additional profit. From this gross profit, how- ever, must be deducted the tax on circulation, Treasury expenses for shipments of renewed currency (estimated at $63.00 a year), and loss of interest on the 5 per cent, redemption fund which must be maintained against outstanding circulation. When the bonds are purchased at a premium, the deductions should in- clude a sinking fund, to be set aside each year, to retire the pre- mium on the bonds and improved at the prevailing rate of in- terest. Thus a circulation account of $100,000, based upon 2 476 per cent. Consols, purchased at 101, would yield the issuing bank a yearly profit of $1,135.00 over and above the profit derived from lending out the net cost of the bonds, assuming money at 5 per cent. The increased profit from a like amount, based on 4 per cent, bonds of 1925, purchased at 106^, would be $1,546.00 a year. The profit on greater or less amounts of circulation will be proportionate. § 441. Withdrawal of Bonds — Forms. — Circulating notes may be retired and the bonds withdrawn, with the consent of the Comptroller of the Currency and the approval of the Secretary of the Treasury, upon deposit of a like amount of lawful money with the Treasurer or an assistant treasurer of the United States, to provide for the redemption of the currency secured by such bonds. Authority to make the withdrawal should be substantially in the following form, wherein the bank's agent should be desig- nated as the one authorized to dispose of the bonds. If the desig- nated agent is an official of the bank, the resolution should be certified by some other officer of the association. Care should be taken to impress the seal of the bank on the form. AUTHORITY TO WITHDRAW BONDS. -, 19—. At a meeting of the board of directors of the — Bank of held at their banking house, ■ , 19 — , the following resolu- tion was adopted: Resolved, That the Comptroller of the Currency be, and he is hereby. authorized to withdraw $ U. S. bonds deposited with the Treasury of the United States by this bank to secure circulation, and described as follows: $ of the loan of ?■ — <* of the loan of $ of the loan of $ of the loan of and that be, and is hereby authorized to sell, assign, and transfer the bonds, and to appoint one or more attorneys for that purpose. 477 I hereby certify that the foregoing is a true extract from the minutes of said meeting. [SEAL OF BANK.] — , Cashiei-, and Secretary of the Board of Directors. Note. — The Treasurer's receipts for the bonds proposed to be with- drawn must be forwarded (with this form properly filed) to the Comptroller of the Currency. When a bank desires to retire its circulation and sell its bonds and designates our company as its agent to dispose of the bonds, we are always glad to deposit for the bank the necessary amount of lawful money, withdraw and sell the bonds, reimburse our- selves out of the proceeds and remit the balance to the bank. The amount of lawful money required to be deposited against release of the bonds is usually somewhat less than the amount of circulation maintained by the bank, as proper credit is given for mutilated currency in the Treasury awaiting redemption and for the balance existing in the redemption fund. In forwarding to us resolutions of withdrawal, care should be taken to enclose the United States Treasurer's duplicate receipt for the bonds. Where a bank's board of directors has passed a resolution in the above form authorizing the withdrawal of its bonds and has appointed an agent to dispose of the bonds, this agent may in turn appoint an attorney to attend to the business for him by executing a power of substitution on the following form: Powek of Substitution. To be acknowledged by the constituent at the Treasury Department, Washington, or before some one of the officers duly authorized by the Secretary of the Treasury to witness assignments of United States registered bonds, as follows: Judges and clerks of United States courts; United States district attorneys; collectors of customs; collec- tors of internal revenue; assistant treasurers of the United States; executive officers of federal reserve banks (and their branches), of national banks, and of other banks and trust companies incorporated under the laws of any State, authorized by such bank or trust com- pany to perform acts attested by the seal of such bank or tru3t com- pany. If in a foreign country, acknowledgment should be made before 478 a diplomatic or consular representative of the United States, or, in their absence, a notary public. In all cases the officer must add his official designation, residence, and seal, if he has one. If the acknowl- edgment is taken in a foreign country before a notary public, his official character must be attested by a diplomatic or consular representative of the United States. A Notary Public in the United States is not authorized to attest this paper. Know all men by these presents, That 1 , by virtue of authority conferred upon in and by the letter of attorney of , dated do hereby substitute and appoint Attorney for , and in name to sell and assign ($ ) U. S. — i % Registered Bonds, Act now standing in the name of ■ ■ ■ on the books of the Treasury Department; hereby ratifying and confirming all that may be lawfully done by virtue hereof. Witness hand and seal this day of , 19 — . Executed in the presence of — of the—- , in the State of . (The seal should always be impressed.) § 442. Withdrawal Under Sec. 18 of Federal Reserve Act — Section 18 of the Federal reserve act provides that any member bank desiring to retire the whole or any part of its circulating notes may file 'with the Treasurer of the United States an appli- cation to sell for its account, at par and accrued interest, United States bonds securing circulation to be retired. The Federal Eeserve Board is permitted in its discretion to re- quire Federal reserve banks to purchase such bonds from the banks whose applications have been filed "with the Treasurer of the United States, the Federal reserve banks, however, not being permitted to purchase an amount to exceed $25,000,000 of such bonds in any one year. There is no suggestion at the present time that any acquisition or purchase of bonds under this section is contemplated by the Board. As the prices on all bonds with the circulation privilege is above par, it would be more advantageous to the banks to sell their bonds in the open market. 479 § 443. Circulation Bonds as Security for Public Moneys. — A number of National banks are using 2 per cent, government bonds as security for public money accounts, such as govern- ment deposits and postal savings funds. Unless the bonds are being held for some particular purpose, it would seem advantage- ous to withdraw and sell them and substitute therefor lower-priced and higher income-producing bonds, such as the Liberty issues. Liberty bonds, while not acceptable as security for circulation, may be used to secure public moneys. Banks may realize a nice profit by making an exchange of this kind. § 444. Witnessing Destruction of Mutilated Currency — Annual Examination of Bonds.— After a National bank has issued cir- culation and its mutilated notes come in to the Treasury for redemption, the law requires that they be counted and destroj^ed in the presence of an officer or agent of the bank who shall cer- tify to such destruction. It is also required that a duly authorized officer or agent of the bank make an annual examination of the bonds deposited with the United States Treasurer to secure cir- culation and certify the results of such examination. We per- form these services for a majority of the National banks of the country, acting under the following form of power of appoint- ment, approved as to form by the United States Treasury. Form of Power or Attorney to National Bank Agent to "Witness Destruction of Mutilated Notes and to Examine Bonds of Bank. Knoio all men by these presents, That , of Washington, D. C, are severally and separately hereby appointed the true and lawful agents of the National bank of to witness for and in behalf of said bank the destruction of its circu- lating notes, as required by Section 5184 of the Revised Statutes of the United States relating to National banks and Act of Congress approved June 23, 1874. Also to examine and compare the bonds deposited in the office of the Treasurer of the United States, in trust for said bank, with the books of the Comptroller of the Currency and the accounts of said Association, as shown by the transcripts which may be furnished from time to time; and if said bonds are found to be correct, and to agree with said books and transcripts, to execute to the said Treas- 480 urer certificates in accordance with the requirements of Section 5166 of the Revised Statutes of the United States relating to National banks. In witness whereof, I have hereunto set my hand and affixed the corporate seal of said bank this day of , 19 — . [Seal of Bank.] President or Cashier. Form of Statement of U. S. Bonds Held by U. S. Treasurer. The following is a statement of the United States bonds held by the Treasurer of the United States in trust for the National — bank of ■ on the day of , 19 , from the books of the said Association, and is furnished for comparison with the records of the Comptroller of the Currency and for making ex- amination of said bonds deposited with the Treasurer of U. S., as required by Section 5166, Revised Statutes. TITLE OF BONDS [Numbers and denominations of bonds not required- Give only total amount of each class.] Amount of Bonds on Deposit with the Treasurer of.'the U. S. as Security. For Circul'g Notes For Gov't Deposits 2 per cent. Consols of 1930 3 per cent. Loan of 1908-1918 4 per cent. Loan of 1925 2 per cent. Panama Canal Loan 1936 Total- Office of Comptroller of the Currency. Correct as to bonds held for security of circulating notes. Cashier. For Comptroller of the Currency. § 445. Same — The Five Per Cent. Fund. — This section requires, in lieu of the reserve on circulation abolished by the preceding sec- tion, a deposit equal to five per cent, of its circulation by each bank, in lawful money, with the United States Treasurer for the redemption of its circulation. The deposit so made cannot be counted by a National bank as a part of its lawful reserve. 481 On any additional circulation issued to National banks on a further deposit of bonds a similar deposit is required. In estimating the circulation upon which the deposit is required, the bank must include all notes of its issue in its possession, signed or unsigned, as well as those in actual circulation. § 446. Same — Keeping Fund Intact. — Upon receipt of advices of redemption, banks are required to remit to the Treasurer to make good their five per cent, fund, without awaiting the receipt of the notes fit for circulation, or the certificate of destruction of the notes unfit for circulation as this fund is required to be kept intact for further redemption of notes. Banks which have made deposits of lawful money of the United States for the retirement of a portion of their circulation, and those whose notes have been destroyed without reissue, are re- quired to maintain the five per cent, deposits only on the remainder. Banks which have voted to go into liquidation must maintain the full five per cent, deposit, until lawful money of the United States is deposited for the retirement of their outstanding circu- lation. All of their notes redeemed, whether fit or unfit for cir- culation, are charged to the five per cent, fund and destroyed. When the deposit is made, the excess of the five per cent, fund over the amount required to cover the expenses of redemption and any tax due is surrendered, the redemption of the balance of the circulation outstanding having been provided for by the lawful money deposit. § 447. Same — Redemptions of Mutilated Notes.- The redeemed notes of the several National banks are assorted, prepared for delivery, and charged to their five per cent, accounts, and advices of redemption are forwarded to them, in regular rotation, follow- ing an alphabetical arrangement; and no departure from this practice can be made for the accommodation of any bank. If the amount due does not exceed the five per cent, deposit of the bank, the notes fit for circulation are forwarded to it by ex- press, and the notes unfit for circulation are delivered to the Comp- troller of the Currency on the same day that the advice of redemp- 31 483 tion is issued. If the bank's five per cent, account is overdrawn by the redemption, a sufficient amount of the notes to cover the overdraft is held until it is made good. 'The law requires the return of the redeemed notes fit for circu- lation to the respective associations by which they were issued, and the delivery of those unfit for circulation to the Comptroller of the Currency for destruction, and no other disposition can be made of them. All of the redeemed notes of banks which have made a deposit of United States notes for the retirement of all or a portion of their circulation are charged to that deposit. § 448. Same — Remittances. — The Department Begulations in effect at the date of this publication, but subject to amendment at any time, provide for reimbursement of the five per cent, fund in any of the following ways : 1. By a check on Boston, New York, Baltimore, New Orleans, Chicago, St. Louis or San Francisco, collectible through the Clear- ing House, payable to the assistant treasurer of the United States in the city on which drawn and forwarded direct to such officer. ( Drafts on subtreasury cities should not be forwarded to the Treas- urer of the United States at Washington, D. C.) 2. By a deposit of lawful money with any assistant treasurer of the United States. (This does not contemplate direct shipments of currency to subtreasuries and banks not located in a subtreasury city should make such deposits through their correspondents.) 3. By a remittance of lawful money direct to the Treasurer of the United States in Washington, D. C. § 449. Ledger Accounts Covering Circulation.— The circulating notes of a National bank require two accounts — a "circulation" account and a "five per cent, fund" account. § 450. The "Circulation" Account.— 1. Credit this account with circulation received from the Comptroller on the first and any subsequent United States bond deposit made by the bank with United States Treasurer. 483 2. When notices are received from the United States Treasurer of redemptions made, debit this account with the amounts re- ported by him. Credit the "five per cent, fund" account. See par. 2 below. 3. When the Treasurer returns notes redeemed as fit for cir- culation or when the Comptroller sends new notes for mutilated notes redeemed and destroyed, credit this account with amount of these notes. By keeping this "circulation" account the bank's books will al- ways show the amount of circulation issued to the bank. This item is called for in the regular reports to the Comptroller of the Currency and is also the basis for semi-annual tax on average amount of notes in Circulation — any notes on hand not in circu- lation, even though counted in the cash, are not subject to taxation. § 451. The "Five Per Cent. Fund" Account. — 1. Debit this ac- count with the remittance to the United States Treasurer, re- quired by law, for the "five per cent, fund," viz.: an amount equal to five per cent, of the circulation issued to the bank. 2. When notices of redemptions are received from the Treas- urer, credit the amounts redeemed to this account. Debit the "circulation" account. See par. 2 above. 3. When the bank makes remittances to cover redemptions re- ported by the United States Treasurer to reimburse the "five per cent, fund" for amounts paid out by the Treasurer, debit the "five per cent, fund" account. The Treasurer calls for remittances when he advises banks of redemptions, and states how remittances can be made, either by check or lawful money deposits. We, the publishers of this work, make these deposits with the Treasurer for a number of the banks we represent and without charge, the banks sending us New York or other Eastern exchange for the amount required. The redemp- tions cover two kinds of notes, those in good condition, called "fit for circulation," and others mutilated or worn, called "unfit for circulation"; the former are returned to the issuing banks. The Treasurer will not deliver these notes to an attorney or send 484 to a correspondent, holding that the law requires direct return to the bank of issue. (The Treasurer prepays the charges on such notes and assesses the banks annually pro rata for the total amount expended.) The notes "unfit for circulation" are sent to the Comptroller of the Currency for destruction and issue of new currency for amount destroyed, to be forwarded by the Comp- troller direct. The remittance of new currency may be short on account of the redemption of a half note; in such case the account on the bank's books will show the difference, which stands to the credit of the bank on the Comptroller's books until another redemption of a half note. If a bank wishes, it can cut a note and forward half for redemption to add to the credit of the for- mer half redeemed in order to get credit for a full note, and carry the other half of note cut, in cash, until another redemption of a half, when the one held in cash can be sent on to remedy the mat- ter again. The Comptroller makes no record of the several series of issue or numbers on notes destroyed, but only of denominations and amounts, as noted in certificate of destruction sent to the bank; from these certificates may be kept a record of the amounts of each denomination destroyed, if desired; further, as new circulation is received from the Comptroller from time to time it may be well to keep a record of numbers of the notes, the bank's number (lower left-hand corner of notes) and the Treasury number (op- posite right-hand corner). Under Section 8, Act of July 12, 1882, National banks making deposits of lawful money for the retirement in full of their cir- culation are, at the time of the deposit, assessed for the cost of transporting and redeeming the notes then outstanding, a sum equal to the average cost of the redemption of National bank notes during the preceding year, and any notes redeemed during the year then current are included in the assessment. § 452. Method of Verifying Remittances of Mutilated Notes.— Packages of National bank notes received for redemption at the Treasury Department are charged to, and receipted for, by the counters, with the seals unbroken; and the counters are required 485 to count, return, and obtain a receipt for the contents of each package before receiving another. An inventory of the contents according to the amounts marked on the straps is made imme- diately on opening the package, and the contents of each strap are separately proved. Discrepancies are noted on the proper strap, which is returned to the owner. "Shorts" are at once re- ported and verified by the teller in charge. The packages are charged to the counters by the amounts on the wrappers, and any discrepancy between these amounts and the contents is reported as an "over" or a "short" by inventory. § 453. Disposition of Notes Redeemed. — The notes are then as- sorted and examined by experts. The currency fit for circulation is sent to the several banks of issue, and that which is unfit for circulation is cancelled by cutting off the signatures of the presi- dent and cashier, then done up in packages and delivered daily to the Comptroller of the Currency, who has it examined, counted, and schedules made for the banks, of what is to be destroyed each da}'. After this count the notes are then delivered to the agent of the bank, who examines and counts them and verifies the amount. The package is then checked off from the schedules in the presence of four witnesses, representing the Secretary of the Treasury, the United States Treasurer, the Comptroller of the Currency and the bank the notes of which are to be destroyed. It is then deposited in a box and locked, then, accompanied by the witnesses, taken to the macerator and ground into pulp. New currency is sent the banks for the same. Frequently notes are pronounced unfit for circulation though apparently in good con- dition, but they are notes so thoroughly worn that they would bear but little further use, and the expense of new notes is so very small that it is not a consideration. § 454. Issue of New Circulating Notes. — The issue of new cir- culating notes to National banks is under the control of the Comp- troller of the Currency, and all shipments of new notes are made bv his office direct to the bank. 486 § 455. Legal Tender and Lawful Money — What Is.— Gold coin, standard silver dollars, subsidiary silver, minor coins, United States notes and Treasury notes of 1890 have the legal tender quality as follows: Gold coin is legal tender for its nominal value when not below the limit of tolerance in weight; when he- low that limit it is legal tender in proportion to its weight; stan- dard silver dollars and Treasury notes of 1890 are legal tender for all debts, public and private, except where otherwise expressly stipulated in the contract; subsidiary silver is legal tender to the extent of $10, minor coins to the extent of 25 cents, and United States notes for all debts, public and private, except duties on imports and interest on the public debt. Gold certificates have recently been made legal tender. Silver certificates and National bank notes are non-legal-tender money. Silver certificates, how- ever, are receivable for all public dues, and National bank notes are receivable for all public dues except duties on imports, and may be paid out for all public dues, except interest on the public debt. The term "lawful money" is understood to apply to every form of money which is endowed by law with the legal tender quality. (See Opinions of Attorneys-General, vol. 17, p. 123.) § 456. Tax on Circulation — Form for Making Return. — Na- tional banks are required, under Eev. Stat., Sec. 5214, amended by Act March 3, 1883, and Act of March 14, 1900, to pay semi- annual duty on their notes in circulation, and in Section 5215 it is made the duty of the Treasurer of the United States to pre- scribe the form for making return by each National Bank of the average amount of its notes in circulation for each half year for the purpose of assessment. The following is the form: Semi-annual Return of Circulation Subject to Duty. Return of the average amount of Notes of the • National Bank of — , State of — i , in circulation for the six months ending the 31st day of — ■ — , 19 — , with the duty thereon, made pursuant to the provisions of Section 5215, Revised Statutes of the United States, and the act of March 14, 1900, in order to enable the Treasurer of the United States to assess the duty on circulation imposed by Section 5214 of said statutes, as amended by Section 1 487 of "An act to reduce internal revenue taxation, and for other pur- poses," approved March 3, 1883, and the said act* of: March 14, 1900. Average amount of notes in circulation for the period based on XJ. S. two per cent. Consols of 1930, and U. S. bonds of Panama Canal loan. $ Duty on average amount of notes in circulation based on U. S. two per cent. Consols of 1930, and U. S. bonds of Panama Canal loan, at one-fourth of one per cent., $ ■ ■ Average amount of notes in circulation for the period based on any or all other U. S. Bonds, $ Duty on average amount of notes in circulation based on all other U. S. Bonds at one-half of one per cent., $- Total amount of duty, I, — ' , of the above-named National bank, do solemnly swear that the above is a true statement of the average amount of notes of said bank in circulation for the time named. Subscribed and sworn to before me, this — — ■ day of 19—. (seal) § 457. Same — Requirement and Penalty for Failure.— This re- turn, with each blank filled with the proper amount as indicated, and subscribed and sworn to by the president or cashier of the bank before an officer qualified to administer oaths, must be sent to the Treasurer of the United States within ten days from the first days of January and July, respectively, in each year, under a penalty of two hundred dollars, and payment must be made within the months of January and July. § 458. Same — How Payment Made. — Payment may be made by deposit of the amount of duty to the credit of the Treasurer of the United States, with him, or with any Assistant Treasurer, Federal reserve bank, or National bank depositary. Triplicate certificates should be issued therefor, the "original" of which must 488 be forwarded to the Secretary of the Treasury, the "duplicate" to the Treasurer, and the "triplicate" held by the bank making the deposit as its voucher therefor. The certificate must state that the deposit is on account of semi-annual duty. No other receipt will be issued. If there is no depositary convenient, payment may be made by draft on New York (collectible through the Clearing House) to the order of the Treasurer, or by remittance to him in lawful money of the United States, or notes of National banks, for which the Treasurer will issue his certificate of deposit, and send the duplicate to the bank. § 459. Same — Percentage Assessed and Period.— The duty on circulating notes is one-half of one per centum on the average amount outstanding for the six months based on all United States bonds, except the two per cent, bonds; on notes based on two per cent, bonds the duty is one-fourth of one per cent, on the average amount of notes in circulation for the six months. Liability begins on the first days of January and July in each year, unless a bank had at that time no circulation outstanding, in which case it begins with the date of the first issue of notes, and terminates on the 30th day of June or the 31st day of De- cember (as the case may be), date of commencement and termi- nation both included. Banks that have before made returns will report for the full semi-annual term of 181, 182, or 184 days, as the case may be; and banks that have not before made returns will report their circulating notes from and including the date of their first issue. § 460. Same — Computing Amount.— To ascertain the average amount, add together the daily balances of the notes in circula- tion from the proper date of the commencement of the liability to duty (including for each Sunday and holiday the balance of the preceding business day), to and including the 30th day of June, or the 31st day of December, as the case may be. The ag- gregate of daily balances for the first six months of any year will be divided by 181 — the number of days from January 1 489 to June 30, except in leap year, Avhen the sum will be divided by 182. The aggregate of daily balances for the last six months of any year will be divided by 184 — the number of days from July 1 to December 31. Banks not making daily statements, and obtaining their aver- ages from weekly statements, should add together the weekly bal- ances, including for each day in any fractional part of a week one-seventh of the weekly balance next preceding such fractional part. The aggregate of balances for the first six months of any year will be divided by the number of weeks from January 1 to June 30 (25 and six-sevenths or 26, as the case may be). The aggregate of balances for the last six months will be divided by 26 and two-sevenths — the number of weeks from July 1 to De- cember 31. Banks having circulation subject to duty for a period less than a half year, which make their estimates from daily balances, will divide the aggregate of the balances of the item for the time for which it is liable to duty by the number of days in the half year; and banks which make their estimates from weekly balances, by the number of weeks and the fractions thereof in the half year. The quotient thus found will be the average amount subject to duty for each six months, respectively, and should be entered in the return, and duty computed thereon at the full semi-annual rate. A bank retiring its circulation, or any portion of it, is relieved from duty on the amount retired from the time of making the deposit of lawful money to redeem the same. A bank which has gone into liquidation, in making its final re- turn, must estimate duty upon circulation to the time of making the deposit of lawful money with the Treasurer of the United States to redeem the same. The item should be averaged for the full six months, according to the foregoing rule, and the duty calculated at the prescribed rate. The amount thus determined! is the correct proportion for the time for which the item is liable. § 461. Tax Required Only on Actual Circulation.— It should be noted that the provision of the Revised Statutes as to duty 490 on the circulation of National banks applies only to the currency of National banks actually in circulation; that is, it does not include circulating notes of the bank received from the Comp- troller of the Currency, or in transit from him, which have not been put into circulation by the bank, nor does it include the circulating notes redeemed by the United States Treasurer, which have not been returned to the bank, and put in circulation again, or notes redeemed and destroyed for which new circulating notes are issued until such new notes are received and put in circulation. CHAPTEE VI. Consolidation or National Banks. Section 462. Provisions of the Law. 4'63. Consolidation of National Bank With State Bank. 464. Procedure. 465. Argument Between Directors. 466. Certificate of Increase in Capital and Payment of Cash. 467. Heeting and Resolution of Shareholders. 468. Certificate of Comptroller. 469. Transfer of Bonds and Other Assets. 470. Dissenting Shareholders — Eights of. 471. Services of an Attorney. 472. Liquidation for Consolidation — Methods of Consoli- dation. 473. Same — Form of Eesolutions. 474. Same — Procedure. § 462. Provisions of the Law.— The Act of November 7, 1918, provides an easy and simple method whereby two or more Na- tional banks located in the same place may, with the Comptroller's approval, consolidate into one under the charter of either and on such terms and conditions as may be lawfully agreed upon by the majority of the directors of each bank and ratified and confirmed by at least a two-thirds vote of the stockholders of each association. (The full text of this act is given under § 33.) § 463. Consolidation of National Bank With State Bank. — The Act of November 7, 1918, applies only to cases where all the institutions desiring to consolidate are National banks, and it is impossible to consolidate thereunder a National bank with a State bank or trust company. If a State bank or trust company 491 492 desires to consolidate with a National bank and avail itself of the privileges of this act, it must first convert into a National bank. This can usually be done without much difficulty. § 464. Procedure. — National banks proposing to consolidate under this act should advise the Comptroller, outlining the gen- eral plan under consideration and requesting his approval. After the Comptroller has approved the general plan and furnished forms and instructions, the directors of both banks should enter into an agreement and call a special meeting of the shareholders to obtain ratification. A copy of the agreement should then be sent to the Comptroller and his approval obtained before the shareholders' meetings. If the shareholders of both banks ratify and confirm the agreement, certified copies of the resolutions should be sent to the Comptroller, who will then issue his certificate approving the consolidation. The actual consolidation may then be completed. No deed or other transfer is necessary or required. The new bank by the mere operation of the law holds and enjoys all the rights and property of the consolidating banks. § 465. Agreement Between Directors. — As soon as forms and instructions are received from the Comptroller, the majority of the directors of each institution should enter into an agreement covering the terms of consolidation. If the model form of agree- ment does not include all the points that it may be desirous to cover, the Comptroller should be advised of the desired changes and additions and his approval obtained to the amended form. The following is the model form of agreement: AGBEEMENT OF CONSOLIDATION BETWEEN THE AND THE UNDER THE TITLE OF THE ' ' — ! — This agreement made between the and the , each located in , and each acting pursuant to a resolu- tion of its board of directors and by a majority of said boards, pur- suant to the authority given by, and In accordance with the pro- visions of an act of the Congress of the United States entitled, "An act to provide for the consolidation of national banking associa- tions," approved on the 7th day of November, 1918, witneBseth as follows: 493 1. The — i — i — — (hereafter referred to as the ) and the — i (hereafter referred to as the — < ) are hereby consolidated under the charter of the said first-named association as hereby modified. 2. The name of the consolidated association shall be " — ." 3. The amount of capital stock of the consolidated association shall be ■ dollars ($ ), divided into — • ■ shares ( > — ) of one hundred dollars ($100.00) each, subject to the right to change the amount of said capital hereafter as is now or shall hereafter be authorized by law. On the date of consolidation its surplus shall be dollars ($ — ' ). Said capital, surplus, and undivided profits at the date of consolidation shall then aggregate dol- lars ($ ! — ). Of this capital ( ' — ■) shares shall be allotted to the present shareholders of the , being shares for each share now held by them, and ( ) shall be allotted to the present shareholders of the , being for each share now held by them. The assets contributed by each of said associations shall, upon the effective date of the consolida- tion, be passed upon and be acceptable to a committee of six, three to be appointed by the board of directors of each association, and the shareholders of the present shall furnish net assets above all liabilities of that association equal to of the capital and surplus of the consolidated bank, and the present shareholders of the shall furnish net assets equal to — — — . Such assets of either association as it shall not consider desirable to carry into the con- solidation, or as shall not be necessary to make up its contribution, to the capital, surplus, and undivided profits, as aforesaid, shall be transferred by it, before the effective date of the consolidation, to a trustee or trustees for the ultimate benefit of its shareholders, upon whatever terms and under whatever conditions shall be deemed proper. In the event that there is not sufficient net assets in either association to make good its proportion of capital and surplus of ($ — •) herein provided for, the shareholders of the asso- ciation not having sufficient assets to make good its proportion shall pay the difference in cash. 4. The directors of the consolidating associations shall constitute the board of directors of the consolidated bank for the remainder of the current year, 5. This consolidation shall become effective when it shall have been ratified and confirmed by the affirmative vote of the share- holders of each of said associations owning at least two-thirds of its capital stock outstanding, at a meeting to be held pursuant to a call by the directors heretofore made, and shall have been approved by the Comptroller of the Currency of the United States. 494 Witness the signatures and seals of said associations, this — day of , 19 — , each hereunto set by the president and attested by its cashier, pursuant to a resolution of its board of directors, acting by a majority thereof, and witness the signatures hereto of a majority of each of said boards of directors. The ■ , By , Attest: President. Cashier. Directors of The National Bank of The By Attest: President. Cashier. Directors of The ■ National Bank of State of , County of On this day of — i , 192 — , before me, a notary public for the State and county aforesaid, personally came , as president, and , as cashier of the — National Bank of , and each in his said capacity acknowledged the foregoing instrument to be the act and deed of said association and the seal affixed thereto to be its seal; and came also , , , being a majority of the board of directors of said association, and each of them acknowledged said instrument to be the act and deed of said association and of himself as a director thereof. Witness my official seal and signature this day and year aforesaid. Notary Public, 1 County. My commission expires State op County of , ss: On this day of , 192 — , before me, a notary public for the State and county aforesaid, personally came , as president, 495 and , as cashier of the — National Bank of , and each in his said capacity acknowledged the foregoing instrument to be the act and deed of said association and the seal affixed thereto to be its seal; and came also , , , being a majority of the board of directors of said association, and each of them acknowledged said instrument to be the act and deed of said association and of himself as a director thereof. Witness my official seal and signature this day and year aforesaid. Notary Public, County. My commission expires ■ — — i — . § 466. Certificate of Increase in Capital and Payment of Cash. — If the agreement of consolidation provides for an increase in capital of an amount in excess of the total capital of the exist- ing banks, or if there is a provision requiring the paying in of cash in addition to the transfer of assets to equalize the value of the capital stock, or for some other reason, a certificate to that effect must be furnished, sworn to by the president or cashier. The increase, of course, must be paid in cash and the certificate must so state. The following is the form of certificate : Certificate of Payment of Capital in Connection With Consolidation of the National Bank of and the National Bank of Whereas, a contract was entered into on the day of , 19 , between The National Bank of , and The National Bank of , providing for the consolidation of these two associations under the charter of and under the title of " Whereas, Said contract provided that the capital of the consolidated association should be % , and the Surplus % and that the shareholders of The National Bank should fur- nish net assets above all liabilities of that association, equal to % of said capital and surplus, and that the shareholders of The National Bank should furnish net assets equal to $ of said capital and surplus. And Whereas, Said contract further provided that in the event there is not sufficient net assets in either institution to make good its pro- portion of tbe capital and surplus of $ , the shareholders 496 of the association not having sufficient assets to make good its pro- portion shall pay the difference in cash. Now, It is hereby certified that the shareholders of The National Bank have furnished net assets, above all liabilities, amount- ing to ($ ), and have paid in cash the sum of ($ ), equal to $ of the capital and surplus of the consolidated bank; and that share- holders of The National Bank have furnished net assets, above all liabilities, amounting to (? ), and have paid in cash the sum of ($ ), equal to $ of the capital and surplus of the consolidated bank. seal of bank President or Cashier Subscribed and sworn to before me this day of A. D. 19 . Notary Public Notary Public County. My commission pires In the event that the capital of the consolidated bank is less than the combined capital of the existing banks, it will be neces- sary to secure the consent of the Federal Reserve Board to the reduction, as in other cases of reduction of capital by National banks. § 467. Meeting and Resolution of Shareholders. — After the agreement of consolidation has been signed by a majority of the directors of each bank, acknowledged before a notary public, and its provisions approved by the Comptroller, it must be submitted to the shareholders of both banks at a special meeting called for that purpose. Notice of the meeting of the shareholders of each association to vote upon this agreement must be published for four consecutive weeks in some newspaper published in the place where the banks are located, and if no newspaper is published in that place, then in a paper published nearest thereto. This notiee must state the time, place and object of the meeting. In addition to this published notice, the law requires the same notice to be sent to each shareholder of record by registered mail at least 497 ten days prior to the meeting. The shareholders' meetings may be called and held at the same time and thus save delay. The directors' agreement must be ratified and confirmed by the affirma- tive vote of the shareholders of each bank owning at least two- thirds of its capital stock. The following is the form of resolu- tion for adoption by the shareholders : RESOLUTION PROVIDING FOR THE CONSOLIDATION OF THE NATIONAL BANK OF , NO. , AND THE — I NATIONAL BANK OF , NO. . At a meeting of the shareholders of the 1 held on — — , at the hour of , at the banking house of the association in the town or city of , notice having been given of the time, place and object of the meeting for four consecutive weeks in the , a newspaper published in the place where said association is located, and notice having been sent to each shareholder of record by regis- tered mail at least 10 days prior to said meeting, the following reso- lution was adopted by the vote of shareholders of the , owning at least two-thirds of its outstanding capital stock: "Whereas, the directors of the , located in the town or city of , county of , and State of , have entered into an agreement with the board of directors of the , located in tbe town or city of , county of , and State of , providing for the consolidation of the two associations into one national bank under the charter of the , and under the title of ' ' in accordance with the provisions of the act of Congress approved November 7, 1918, said agreement entered into between the two boards of directors reading as follows: [There must be inserted here in full an exact copy of the agreement between the directors of the banks. The names of all the directors who sign the agreement and the officers before whom they acknowledge it should be typewritten.] Therefore be it "Resolved, That the agreement entered into between the directors of the National Bank of and the 1 — National Bank of be ratified and confirmed, and that these banks be con- solidated under the charter of the , and under the title of ' — ■ ,' with capital stock of ($ ), such consolidation to become effective immediately upon its approval by the Comp- troller of the Currency." The foregoing resolution was adopted by the following vote repre- senting two-thirds or more of the capital stock of the association outstanding, no director, other officer, or employee having acted as proxy. 498 Stock voted for resolution. Name of shareholder. Residence. Name of Proxy. No. of shares. Stock voted against resolution. Name of shareholder. Residence. Name of Proxy. No. of shares. BECAPITULATION. Total number of shares voted in favor of resolution Total number of shares voted against resolution Total number of shares represented at meeting Total number of shares of capital stock ■ I hereby certify that this is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on the date mentioned. [seal of bank.] , President. Subscribed and sworn to before me this day of , A. D. 192—. [seal of notaby.] , Notary Public, County. My commission expires — ■ . Certified copies of the resolutions of ratification and confirmation should be sent to the Comptroller. It is always advisable to adjourn the shareholders' meetings on call of the chairman in order that they may be reassembled without delay in the event that the Comptroller requires further action. § 468. Certificate of Comptroller. — Upon receipt of resolutions from the shareholders evidencing compliance with the legal re- 499 quirements, etc., the Comptroller will issue his certificate approv- ing the consolidation, and upon request will telegraph advice of his final approval upon receipt of which the consolidation can be actually completed. § 469. Transfer of Bonds and Other Assets. — A National bank consolidating under this act is not required to deposit lawful money for its outstanding circulation, but its assets and liabili- ties shall be reported by the continuing bank. All the rights, franchises and interests of a National bank so consolidated in and to every species of property, personal and mixed, and choses in action are transferred to and vested in the National bank into which it is consolidated without any deed or other transfer. The continuing bank holds and enjoys all these rights of property franchises and interests in the same manner and to the same extent as they were held and enjoyed by the National bank con- solidated with it. Bonds held by either bank contemplating consolidation under this act in excess of the amount of capital of the consolidated bank must be withdrawn prior to the date on which the consolidation is approved by the Comptroller's Office. These bonds will be re- leased upon the deposit of lawful money to retire outstanding circulation, provided the resolution of the directors authorizing the withdrawal and the Treasurer's duplicate receipts for the bonds have been furnished. If bonds are to be transferred to the consolidated association, it will be necessary to furnish the Treasurer's receipts therefor, and the bonds will be transferred to the Treasurer of the United States in trust as security for circulation of the consolidated bank with- out other authority than that contained in the agreement and reso- lution for consolidation. • § 470. Dissenting Shareholders — Rights of. — When the con- solidation has been completed and approved by the Comptroller, any shareholder of either of the associations so consolidated who has not voted for such consolidation may give notice to the di- rectors of the association in which he is interested within twenty 500 days from the date of the certificate of approval of the Comp- troller that he dissents from the plan of consolidation as adopted and approved. He shall be entitled then to receive the value of the shares held by him, to be ascertained by an appraisal made by a committee of three persons, one to be selected by the share- holder, one by the directors, and the third by the two so chosen. In case the value so fixed shall not be satisfactory to the share- holder, he may within five days after being notified of the ap- praisal appeal to the Comptroller of the Currency, who shall cause a reappraisal to be made, which shall be final and binding. If reappraisal exceeds the value fixed by the committee, the bank must pay the expenses of the reappraisal; otherwise the appellant must pay the expenses. The value so ascertained and determined is a debt due and must be paid to said shareholder from the bank. The share so paid must be surrendered and after due notice sold at public auction within thirty days after the final appraisement. § 471. Services of an Attorney. — The publishers have handled many consolidations under this act and will be pleased to give every help and assistance possible. § 472. Liquidation for Consolidation — Methods of Consolida- tion. — Consolidation other than under the Act of Nov. 7, 1918, can be accomplished only by pursuing one of the following methods : First. Without an increase of capital the directors of the absorb- ing bank may enter into a contract with the directors or agents of the liquidating association to purchase its assets, assume liabili- ties to depositors and other creditors, and to pay the value of assets purchased in excess of liabilities to depositors and other creditors, less any expenses incident to liquidation. Second. By increasing the capital stock of the absorbing bank to an amount equal to that of the liquidated bank, the additional shares may be sold to stockholders of the latter, consent thereto having been previously obtained from shareholders of the absorb- ing association. The National Bank Act makes no provision for the allotment of new stock when a bank increases its capital but under the com- 501 mon law, where it has not been modified by statute, when a cor- poration has adopted a resolution to increase its capital, the share- holders of the corporation have the right to participate in the increase in proportion to the number of shares held by each and waiver of that right should be obtained before allotting any of the shares to others. Provision having thus been made for shareholders of the closed bank, the directors of the continuing bank are at liberty to contract for the purchase of assets and the assumption of liabilities to de- positors and other creditors of the liquidated bank. Ag the law is construed as requiring the payment of capital, original or on account of increase, in money, and not in "notes or like evidences of debt," the right to accept stock or assets repre- senting stock of the closed bank and to issue therefor certificates in the continuing bank is not recognized. In every such case shareholders of the closed association are paid the value of their stock either in cash or cashier's checks, the proceeds being avail- able in payment of shares to which they may be entitled in the absorbing corporation. Third. The remaining method is to place the interested banks in voluntary liquidation, under section 5220 of the United States Revised Statutes, organize anew under a different corporate title, and acquire, in the manner hereinbefore outlined, the business of the liquidating associations. This method enables the incor- porators to place the stock as they may determine. In any event there should be a contract covering the transfer of assets and assumption of liabilities, and an examination of the assets to be taken over will be made by a National bank examiner at the expense of the bank acquiring the assets. § 473. Same — Form of Eesolutions. — Forms of resolutions re- lating to assumption of liabilities of a liquidated association, and transfer of bonds on deposit to secure circulation, to be executed and filed with the Comptroller of the Currency, arc as follows: 502 RESOLUTION ASSUMING THE LIABILITIES OF AN ASSOCIATION PLACED Iff LIQUIDATION FOR FUKPOSE OF CONSOLIDATION. I, , cashier of the National Bank of , hereby certify that at a meeting of the board of directors of said association, held on the day of -, a resolution was adopted relative to the consolidation of the — National Bank of with the asso- ciation first mentioned, under section 5223 of the Revised Statutes of the United States, which resolution is in the words following: "Resolved, That this association as a part of the consideration for the purchase of all the assets of the ■ — National Bank of — , does hereby assume all the liabilities of said National Bank of 1 — , including the redemption of its circulating notes." And, in pursuance of said resolution, the National Bank of , has acquired all the assets of the said National Bank of , and assumed all its liabilities, including the redemption of its circulating notes, the association last mentioned having been placed in voluntary liquidation in conformity with the provisions of, sections 5220 and 5221 of the United States Revised Statutes for the purpose of consolidation. , [seal.] Cashier and Secretary of the Board of Directors. RESOLUTION AUTHORIZING WITHDRAWAL AND ASSIGNMENT OF BONDS AS A RESULT OF CONSOLIDATION. At a meeting of the board of directors of , held at its banking house on — , the following resoution was adopted: Resolved, That the Comptroller of the Currency be, and he is here- by authorized to withdraw $ , U. S. bonds, deposited with the Treasurer of the United States by this bank to secure circulation, and described as follows: $ — < per cent, of the loan of , and that the Treasurer U. S. be, and is hereby authorized to assign and transfer the same to said Treasurer in trust for , which association assumes the liabilities of the said , including the redemption of its circulat- ing notes. I certify that the above is a true extract from the minutes of said meeting , [seal of bank.] Cashier and Secretary of Board of Directors. Note. — The Treasurer's receipts for the bonds proposed to be with- drawn must be forwarded, with this form properly filled, to the Comp- troller of the Currency. § 474. Same — Procedure. — No rights exist, or are conferred by 503 law, upon the shareholders of a liquidating association as share- holders of the bank with which its business is being consolidated, nor can such shareholders become shareholders of the absorbing bank, except through the voluntary action of shareholders of the latter. Assuming that shareholders of the liquidated bank are to become shareholders of the continuing association, it becomes neces- sary for the shareholders of the latter association to increase the capital stock to the requisite amount in conformity with the pro- visions of the Act of May 1, 1886, and to waive their right to participate in the increase in order that the stock can be sold to shareholders of the closed association. The right to participate in an increase in the capital stock of a bank exists at common law and is generally written into the articles of National banking associa- tions. Waiver of that right is essential to enable the stock to be sold to others. When shareholders of the continuing bank have effected an increase in capital, and authorized the sale of the stock to share- holders of the liquidated bank, the directors of the former may contract with the directors or liquidating agent of the closed asso- ciation for the assumption of liabilities to depositors and other creditors, on transfer of an equivalent amount of assets, and for the purchase of assets representing shareholders' interests, to enable shareholders, with the proceeds, to pay for stock to be issued to them. It is not regarded as essential that the payment for such assets should be made in actual money, as a check (cashier's) or draft will answer the purpose as constituting a demand obligation, to be satisfied either in cash or in stock to be issued to the shareholders as a result of the contemplated consolidation. Where consolidation is effected without making provision for shareholders of the liquidated bank by increasing the capital of the continuing association, the consolidation resolves itself into a mere purchase of the business of the closed bank which may carry with it an assumption of liabilities to depositors and other creditors, offsetting an equivalent amount of assets transferred, and the pay- ment in cash of the liquidating value of assets representing share- holders' interests. A contract of that character may be entered 504 into between the absorbing bank and the directors or liquidating agent of the closed association. In some instances where consolidation of business only is deemed advisable, it has been found preferable to place the associations interested in voluntary liquidation in conformity with Section 5220 of the Revised Statutes, and organize a new bank. When the capital stock has been paid in, as required by law, and charter issued, the association may acquire the business of the liquidated banks in the manner hereinbefore outlined. This course is fre- quently found advisable where it is desired to effect a change in the personnel of the shareholders and to start business with a "clean sheet/' Assets of the closed banks, not purchased by the new association, are ordinarily placed in charge of liquidating agents for collection and pro rata distribution to shareholders of record at date of liquidation. CHAPTER VII. Increase and Reduction of Capital Stock, Restoration of Impaired Capital, Change of Name or Location. Section 475. Increase of Capital Stock — Application to Increase. 476. Same — Meeting of Shareholders. 477. Same — Increase from Surplus. 478. Same — Right of Shareholders to New Stock. 479. Same — Price of New Stock. 480. Reduction of Capital Stock — Application to Reduce. 481. Same — Meeting of Shareholders. 482. Same — Rights of Shareholders. 483. Restoration of Impaired Capital. 484. Same — Notice from Comptroller. 485. Same — Notice to Shareholders. 486. Same — Resolution of Shareholders. 487. Same — Certificate of Payment of Assessment. 488. Same — Sale of Stock of Delinquent Shareholders. 489. Same — Appointment of Receiver. 490. Change of Name and Location. § 475. Increase of Capital Stock — Application to Increase. — A National bank may with the consent of the Comptroller and by a vote of shareholders owning two-thirds of the shares increase its capital stock to any sum approved by the Comptroller (Act May 1, 1886, See § 27.) A bank that contemplates increasing its capital stock should write the Comptroller, as his approval is necessary, and state the amount of the proposed increase. This should be done before formally submitting the question to the shareholders. If the con- dition of the bank warrants the increase the Comptroller will advise the bank of his approval and send instructions and blank forms. 505 " , 506 FORM OF APPLICATION TO INCREASE CAPITAL. • 19—. To the Comptroller of the Currency, Washington, D. C. Sir: Acting under the authority of a resolution of the board of directors, I request approval of this application to increase the capital stock of The National Bank of from $ to $ , and that the proper blanks and instructions be furnished. The stock is to be sold at % — per share, and the present share- holders will be permitted to subscribe for new stock in proportion to the amount of stock now held by them. It is proposed to declare a dividend of per cent to enable shareholders to make payment on the new stock. The purchase of the business of the Bank is >. — • con- templated in connection with this increase. On this date the books of this bank show the following: Capital $ Surplus $ Undivided profits $ Total deposits $ Total resources i. . . $ President or Cashier. § 476. Same — Meeting of Shareholders — The next step is to call a special meeting of shareholders on 30 days' notice and secure the adoption of a suitable resolution authorizing the increase. This meeting must be duly called, and the resolution must receive the votes of shareholders representing at least two-thirds of the existing stock. Shareholders who cannot be present may be repre- sented by proxy, but no officer, director or employee of the bank can act as proxy. Then subscriptions for the new stock may be taken. When all the new stock shall have been subscribed and paid for in cash, the payment should be certified to the Comptroller of the Currency by the President or cashier. A portion of a proposed increase will not be approved by the Comptroller. The whole amount as stated in the shareholders reso- lution must be paid in and certified. The increase becomes effective on the date of the issue of the 507 Comptroller's certificate, and the books of the bank should not be changed nor the certificates of stock issued prior thereto. After the adoption of the resolution it is suggested that the meeting be adjourned to meet on call of the banks' officers so that if there are any defects in the resolution they may be corrected without an additional 30 day notice and delay. FORM OF BESOLUTION TO INCREASE CAPITAL STOCK. No. National At a meeting of the shareholders of The — Bank of , held on , thirty days' notice of the proposed business having been given, it was Resolved, That, under the provisions of the act of May 1, 1886, the capital stock of this association be increased in the sum of $ , making the total capital $ 1 — . The foregoing resolution was adopted by the following vote, repre- senting not less than two-thirds of the capital stock of the associa- tion, no director, other officer, or employe having acted as proxy. Name of shareholder. Residence. Name of Proxy. No. of shares Total number of shares voted in favor of the resolution Total number of shares voted against the resolution.. Total number of shares represented at the meeting. . . . Total number of shares of capital stock I hereby certify that this is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on the day mentioned. [SEAL OF BANK.] — President or Cashier. Subscribed and sworn to before me, this A. D. 19—. [SEAL OF NOTARY.] day of Notary Public. FORM OF NOTICE OF SPECIAL SHAREHOLDERS' MEETING. You are hereby notified that a special meeting of the stockholders of the Bank will be held at its banking rooms in , on 508 , at o'clock ■, to consider and vote upon the ques- tion of increasing the capital stock of the bank from $ ■ — to $ , and for the transaction of such other business as may properly come before the meeting. ■ , Cashier. PROXY FOR SPECIAL MEETING OF STOCKHOLDERS. Know all men by these presents, that I, the undersigned stockholder in the , do hereby constitute and appoint — my true and lawful attorney with power of substitution for and in my name to vote upon all the stock of said , standing in my name, at the special meeting of the stockholders of said bank, to be held at its banking rooms in , on , at o'clock , or at any adjournment thereof, on the question of the proposed increase in capital stock of said national bank, with all the powers the under- signed should possess if present personally at said meeting, or any adjournment thereof, hereby revoking all previous proxies. In witness whereof, I hereunto set my hand this day of , 19 . Witness to signature: Number of shares CERTIFICATE OF INCREASE OF CAPITAL STOCK. No. ■ . National Bank of 19—. To the Comptroller of the Currency, Washington, D. C. It is hereby certified that the capital stock of National • Bank of has been increased pursuant to the provisions of the act of Congress approved May 1, 1886, in the sum of — dollars, all of which has been paid in cash, not in promissory notes or other like evidences of debt, and that the paid-up capital stock of the bank now amounts to dollars. [seal of bank.] , President or Cashier. State of , County of , ss: Subscribed and sworn to before me, this day of , A. D. 19—. [SEAL of notary.] , Notary Public. 509 § 477. Same — Increase From Surplus. — There is no authority in law for the declaration of a stock dividend by a National bank. Neither the surplus fund nor the undivided profits can be used, except by the declaration of a dividend by the board of directors in the Tegular course, in which event the shareholders, if they so desire, may use the dividend checks in payment to the extent of their subscriptions to the additional capital. Such portion only of the surplus fund as exceeds the amount required by law to be accumulated, 20 per cent, of the capital, can be capitalized in the manner indicated. If the dividend checks are accepted in pay- ment of subscriptions to the stock, the certificate covering pay- ment of the money should be accompanied by a complete report of the dividend, and advice that all dividend checks have been in- dorsed b} r the shareholders and returned to the bank. In order to facilitate matters, if desired, authority may be obtained from the shareholders in advance of the issuance of the dividend checks to credit the dividend upon subscriptions to the new capital stock. If it is desired to do this a form similar to the following should be used : FORM OF AUTHORITY TO CREDIT DIVIDEND UPON STJSCRIPTTON FOR NEW CAPITAL STOCK. Know all men by these presents, that , cashier of , is hereby authorized and instructed to credit upon the subscription of the undersigned to the increased capital stock of the to be authorized at the stockholders' meeting on the sum of dollars ($ — ■ ), which the undersigned is entitled to receive in accordance with vote of board of directors of said bank passed , declaring a dividend of ($ ■ — ) per share upon the out- standing capital stock of said bank. And said is hereby further authorized to indorse for me the check in payment of said dividend to be issued in my name by said ( and to apply the proceeds in payment of said subscrip- tion to capital stock. ■ ■ — . [seal.] Date ■ . Witness: § 478. Same— Right of Shareholders to New Stock.— While there is no provision in the National bank act covering this ques- 510 tion, under the common law when the capital stock of a corpora- tion is increased by the issuance of new stock each holder of the original stock has the right to offer to subscribe for and to demand from the corporation such a proportion of the new stock as the number of shares already owned by him bears to the whole num- ber of shares before the increase. This right must be exercised within a fixed or reasonable time, and if a shareholder fails to avail himself of it he is barred by laches or acquiescence of his right to contest the disposition of the stock to some one else. But the safer course and the one which the directors and officers should follow generally is to have the waiver given in writing. In this matter each shareholder is bound only by his own action and not by any vote of the other shareholders even if they own two-thirds of the stock. In the event that the shareholder desires to subscribe to the stock his subscription can be made on a form similar to the following : SUBSCRIPTION TO NEW CAPITAL STOCK. Date Cashier , The underigned hereby subscribes for ( ) shares of the capital stock of the of the issue of capital stock authorized by the stockholders of the said bank at a special meeting held on ; and the undersigned hereby agrees to cause payment for such shares of stock to be made to said bank at at the rate of per share on or before . In the event of failure to make said payment in the said time as herein specified, then this subscription and any rights I may have to subscribe for the said new stock shall be canceled and void. (Signed) , Street City . State § 479. Same — Price of New Stock. — It is customary to incor- porate in the resolution for the increase of capital a provision fixing the price of the new stock or conferring upon the directors author- ity to do so. This price may be fixed at either the par value, book value or market value of the stock. 511 If the stock of a National bank is worth more than par, and the new issue is being sold at par, the issuance of new stock naturally will depreciate the book value of all the stock of the bank. The shareholder who does not desire to subscribe to the new stock, but wishes to protect his equity in the assets of the bank, should be given the right to subscribe and be permitted to assign this right to other parties for such consideration as he may be able to obtain therefor. This is the course followed in other corporations. The following is a form for such assignment: FOBM OF ASSIGNMENT OF BIGHT TO SUBSCRIBE TO NEW CAPITAL STOCK. The National Bank of . Subscription icarrant. This is to certify that , a stockholder of record of the National Bank of on this date, holding shares of the ■ — National Bank of , is entitled to subscribe for shares of the increased capital stock of said bank at $ — per share on , and up to and including . Not valid after This right may be assigned by properly witnessed signature on the form printed below. The National Bank of , By , Cashier. For value received, hereby sell, assign, and transfer unto all my rights to subscribe for the within shares of the increased capital stock of the National Bank of subject to the conditions attached by said bank to said rights. Witness: § 480. Reduction of Capital Stock — Application to Reduce. — A national banking association may, with the consent of the Comp- troller of the Currency and of the Federal Reserve Board, and by a vote of shareholders owning not less than two-thirds of the shares, reduce its capital stock to any sum not below the minimum amount required by Sec. 5138 U. S. R. S. (Sec. 5143 U. S. R. S. as amended by Sec. 28 of the Federal Reserve Act.) An association that contemplates reducing its capital stock should 512 -advise the Federal reserve bank and the Comptroller of the pro- posed action before formally submitting the question to the share- holders, and the application for authority to reduce the capital should be accompanied by a letter from the Federal reserve bank of the district giving its views with reference to the proposed reduction. No special form of application is required. On receipt of the application the Comptroller will advise the bank wlrnt conditions, if any, it will be necessary to comply with before the reduction can be approved. If the bank has not been examined within a brief period before the time the application is made, or if the last examination did not show it to be in a satis- factory condition, the Comptroller may order a special examina- tion before passing upon the application to reduce the capital stock. Any losses which may have been sustained must be charged off, and if the bank has any loans which are excessive or will become excessive by reason of the reduction, they must be reduced to the limit prior thereto. The Comptroller requires the correction of any other conditions that are shown to be unsatisfactory by the ex- aminer's report. If the proposition is approved the Comptroller will send instructions and blank forms. § 481. Same — Meeting of Shareholders. — The next step is to call a special meeting of the shareholders, giving them notice of the date and object of such meeting, in conformity with the articles of association of the bank, unless said notice is unanimously waived. At this meeting shareholders may be represented by proxy, but no director, other officer, or employee can legally act as proxy and vote the stock of another shareholder. The shareholders should then adopt a resolution authorizing a reduction of the stock. The votes in favor must represent at least two-thirds of the entire stock (two-thirds of a quorum is not sufficient.) After the resolution has been adopted by the shareholders, it is suggested that it would be advisable to adjourn the meeting to a fixed date, or to meet at call of the officers of the bank, so that, if upon examination of the resolution it is found to be in any way in- 513 formal, a new resolution can be adopted without the necessity of again giving the 30 days' notice. The reduction becomes operative upon the issuance of the Comp- troller's certificate of approval, prior to which the circulation of the bank must be reduced (if excessive) to not more than the amount of the capital after reduction, by a deposit of lawful money with the Treasurer of the United States and the withdrawal of a like amount of bonds. Upon transmitting a copy of the resolution adopted by the direc- tors authorizing the withdrawal of bonds it should be accompanied by the Treasurer's duplicate receipts for the securities. If the re- ceipts have been lost or destroyed an affidavit to that effect must be sent with the resolution. FORM of notice of special meeting of shaeeholdebs. You are hereby notified that a special meeting of the stockholders of the — Bank, will be held at its banking rooms in on , at o'clock to consider and vote upon the ques- tion of reducing the capital stock of the bank from $ , to $ — , and for the transaction of such other business as may properly come before the meeting. Cashier. FORM OF PROXY FOR SPECIAL MEETING OF STOCKHOLDERS. Know all men by these presents, that I, the undersigned stock- holder in the — , do hereby constitute and appoint , my true and lawful attorney with power of substitution for, and in my name to vote upon all the stock of said, , standing in my name at the special meeting of the stockholders of said bank, to be held at its banking rooms in — — < — , on — ■, at o'clock , or at any adjournment thereof, on the question of the proposed reduction in capital stock of said national bank, with all the powers the undersigned should possess if present personally at said meeting, or any adjournment thereof, hereby revoking all provious proxies. In witness whereof, I hereunto set my hand this — ■ — ' — day of , 19 . Witness to signature: Number of shares 33 514 FORM OF RESOLUTION TO BEDUCE CAPITAL STOCK. NO. — . The National ■ — Bank of (Date.) . At a meeting of the shareholders of The National Bank of — >. , held on — ■ , thirty days' notice of the proposed business having been given, at which shareholders were present, representing ' — shares of stock of this association, it was Resolved, That, under the provisions of Section 5143, U. S. Re- vised Statutes, and of the acts amendatory thereof, the capital stock of this association be reduced in the sum of ? , leaving the total capital after said reduction $ — ■ . The foregoing resolution was adopted by the following vote, repre- senting not less than two-thirds of the capital stock of the associa- tion, no director, other officer, or employe having acted as proxy: Name of shareholder. Residence. Name of Proxy. No. of shares. Total number of shares voted in favor of the resolution. Total number of shares voted against the resolution... Total number of shares represented at the meeting Total number of shares of capital stock I hereby certify that the foregoing is a true and correct report of the vote and of the resolution adopted at a meeting of the share- holders of this bank, held on . [SEAL OF BANK.] , President or Cashier. Subscribed and sworn to before me, this day of > — , A. D. 19—. [official seal of officeb.] , Notary Public. § 482. Same — Rights of Shareholders.— Each shareholder has the right to participate in the reduction in proportion to the num- ber of shares then held, and receive cash for the stock surrendered, unless, as a condition precedent thereto, the whole or a portion of the amount is to be used to charge off losses. In this event the assets so charged off belong to the shareholders and should be 515 trusteed and the proceeds distributed among the shareholders of record at the time of the reduction. With the consent of all the shareholders, the assets may be realized upon by the bank and the proceeds carried to profit account. If, however, some of the shareholders are willing to surrender enough of their stock to make up the whole amount of the reduc- tion, there is no necessity of disturbing the holdings of the other stockholders. No part of the capital set free by reduction can be carried to sur- plus or to undivided profits without the unanimous consent of the shareholders. When the reduction is made the shareholders should return their old stock certificates. New certificates for the capital as reduced should then be issued. The issuance of fractional shares is not unlawful, but is a matter for determination by the board of directors. § 483. Restoration of Impaired Capital. — The Comptroller takes the initial steps to restore an impairment of capital stoclc. After the notice of impairment is received, the duty of submitting the matter to the shareholders is in the hands of the directors but they cannot lay the assessment themselves. For this purpose it is necessary to call a meeting of the shareholders who must levy the assessment upon themselves. The assessment is enforceable only against the stock and no action will be against a stockholder per- sonally. (Commercial Bank v. Weinhard, 192 U. S., 243.) § 484. Same — Notice From Comptroller. — If the Comptroller discovers from the examination of a National bank that its capital is impaired through losses exceeding the amount of its surplus and undivided profits, he writes and advises the bank that the losses should be charged off without delay. A formal notice of impair- ment of capital is enclosed with instructions to make the deficiency good by assessment of the stock or to place the bank in voluntary liquidation as required by law. If the directors or shareholders purchase unconditionally for cash sufficient of the worthless assets to restore the capital the formal notice of impairment will be withdrawn. 516 § 485. Same— Notice to Shareholders.— Upon receipt of notice of impairment from the Comptroller, the directors should give each and every shareholder immediate notice of a special meeting to be held in thirty days to vote either for the assessment or for liquida- tion. Haste is necessary in order that the directors may be in a position at the end of three months to advertise (under Sec. 4, Act June 30, 1876) the sale of the stock of any delinquent shareholder in order to make good his proportion of the assessment. The following is the form of notice to be sent to shareholders : NOTICE TO SHAREHOLDERS OF IMPAIRMENT OF CAPITAL. -, 19- Sir: You are hereby notified that this association has received notice from the Comptroller of the Currency that its capital stock has become impaired and that under the provisions of Section 5205, United States Revised Statutes, this deficiency in the capital stock must be made good by assessment upon the shareholders pro rata to the amount of capital stock held by each, or the bank placed in liquidation. You are hereby notified that a meeting of the shareholders of this association will be held on the day of at for the pur- pose of considering and voting upon the question of paying the assess- ment or placing the bank in liquidation. If an assessment is determined upon, it must be paid in within three months from the date of the Comptroller's notice, , 19 — . Section 5205, United States Revised Statutes, provides that — "Every association which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the share- holders pro rata for the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon all bonds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until otherwise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as provided by law, for three months after receiving notice from the Comptroller, a receiver may be appointed to close up the business of the association, according to the provisions of section fifty-two hundred and thirty-four." This section was amended by section 4, act of June 30, 187C, as follows: "That the last clause of section fifty-two hundred and five of said 517 statutes is hereby amended by adding to the said section the follow- ing proviso: " 'And provided, That if any shareholder or shareholders of such bank shall neglect or refuse, after three months' notice, to pay the assessment, as provided in this section, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after thirty days' notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto) to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders.' " Directors of § 486. Same — Resolution of Shareholders. — If the shareholders at the meeting vote an assessment on the stock to restore the im- pairment a report of the resolution should be sent to the Comp- troller on the following form: RESOLUTION TO RESTORE IMPAIRED CAPITAL. No. . At a Meeting of the Shareholders of the National bank of , held on , 19 due notice of the proposed business having been given, at which share- holders were present in person or by proxy, representing shares of the stock of this Association, it ivas — RESOLVED, That, under the provisions of Section 5205, U. S. Re- vised Statutes, the deficiency in the capital stock of this association amounting to $ sliall be made good by assessment upon the share- holders pro rata on the amount of capital stock held by each. The resolution was adopted by the folloicing vote: Name of shareholder. Residence. Name of Proxy* No. of shares Number of shares voted in favor of the resolution, in person Number of shares voted in favor of the resolution, by proxy Total — 518 Number of shares voted against the resolution, in person. Number of shares voted against the resolution, by proxy. Total Total number of shares represented at the meeting. seal I hereby certifiy that the above is a true and correct report of of the resolution adopted and vote at a meeting of the share- bank holders of this Bank held on ............... President or Cashier. Subscribed and sworn to before me, this day of A. D.. . . Seal of Notary. Notary Public. * No director, other officer, or employe of the association can legally vote the stock of any other shareholder. § 487. Same — Certificate of Payment of Assessment. — When the amount of the assessment has been entirely paid in it should be certified to the Comptroller on the following form : — r—. — National Bank of , — , , 192--. TO the COMPTEOLLEB OF THE CURRENCY, "Washington, D. C. It is hereby certified that the sum of dollars, necessary to make good an impairment of the capital stock of The , notice of which, dated , 192 — , was given by the Comptroller of the Currency under the provisions of section 5205, United States Re- vised Statutes, has been fully paid in cash, and that the paid-up capital stock of said bank now amounts to dollars. [seal of bank.] , Cashier. State of , County of I, , cashier of "The — National Bank of ," in the State of , do solemnly swear that the fore- going certificate by me subscribed is true. Subscribed and sworn to before me this day of , 192 — . [official seal of officer.] , 519 § 488. Same — Sale of Stock of Delinquent Shareholders. — Section 5205, United States Eevised Statutes, provides that if any shareholder or shareholders of such bank shall neglect or re- fuse, after three months' notice, to pay the assessment, as provided in that section, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after 30 days' notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto), to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or share- holders. § 489. Same — Appointment of Receiver. — The Comptroller, however, in his discretion, may appoint a receiver after three months. This, it would seem, makes it a matter of judgment for the directors or others most interested in the bank to make good the impaired stock of the delinquent stockholders and trust to the sale to reimburse themselves or to let the bank go into the hands of a receiver at the end of three months, if the Comptroller should insist on the appointment of a receiver. § 490. Change of Name and location. — A national banking association may, with the consent of the Comptroller of the Cur- rency and by the vote of shareholders owning at least two-thirds of the entire stock of the association, change its name or place where its operations are carried on to any other locality in the same State not more than 30 miles distant. When an association desires to change its title or location, the proposition should be submitted to the Comptroller of the Cur- rency for consideration; and, when approved, a meeting of share- holders called that the required vote may be obtained. Due notice of the meeting must be given and a certified copy of the resolution, under seal of the bank, sent to the Comptroller of the Currency, accompained by a copy of the resolution of the board of directors authorizing the Treasurer of the United States to 520 assign to the bank under its new title any bonds held by him as security for circulation, together with the Treasurer's duplicate receipts for the securities. An order for plate or plates and cir- culation to conform to change of title, etc., should also be sub- mitted. No change of name or location is valid until the Comptroller's certificate of approval is issued. (Act May 1, 1886.) The removal of a bank to a different street location but within the limits of the place where it was organized does not require any action by the shareholders or the approval of the Comptroller. It is entirely within the control of the board of directors unless the specific location is fixed by the articles of association, in which event action by the shareholders is necessary. In cases of removal evidence should be filed with the Comptroller to show that the new location is not more than 30 miles distant from the old. Where removal is to a larger place the capital stock must be increased to minimum required for said place. FORM OF RESOLUTION FOR CHANGE OF NAME OF BANK AND CERTIFICATION OF VOTE TO THE COMPTROLLER OF THE CURRENCY. National : — Bank of 19- At a meeting of the shareholders of the National bank of held on , thirty days', notice of the proposed business having been given, at which shareholders were present, in person and by proxy, representing — shares of capital stock, it was — Resolved, That, under the provisions of the Act of May 1, 1886, the corporate name of the National bank of ; — is hereby changed to . The above resolution was adopted by the following vote: Name of shareholder. Residence. Name of Proxy. No. of shares. Total number of shares voted in favor of the resolution Total number of shares voted against the resolution - Total number of shares represented at the meeting Total number of shares of capital stock of the bank 521 I hereby certify that the above is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of this bank held on . [SEAL OF BANK.] p President or Cashier. FORM OF RESOLUTION OF BOARD OF DIRECTORS FOR BOND TRANSFER IN CHANGE OF NAME OF BANK. 19—. At a meeting of the board of directors of the bank of held at their banking house, — , 19 — , the following resolution was adopted: Resolved, That the Comptroller of the Currency be, and he is here- by authorized to withdraw $ U. S. bonds, deposited with the Treasurer of the United States by this bank to secure circulation, and described as follows: of the loan of $ of the loan of of the loan of $ of the loan of and that the Treasurer of the U. S. be, and is hereby authorized to assign and transfer the same to the Treasurer of the U. S. in trust for the — i National Bank of to conform to change of title. I hereby certify that the above is a true extract from the minutes of said meeting. [SEAL OF BANK.] 1 , Cashier and Secretary of the Board of Directors. Note. — The Treasurer's receipts for the bonds proposed to be with- drawn must be forwarded (with this form properly filled) to the Comptroller of the Currency. CHAPTER VIII. Liquidation. Section 491. General. 492. Authority for Liquidation. 493. Procedure. 494. Form of Resolution. 495. Certification to Comptroller. 496. Notice to Creditors. 497. Withdrawal of Bonds. 498. Prohibition Against New Business. 499. Liquidating Agent, Appointment and Powers. 500. Reports by Liquidating Agent to Comptroller. 501. Election and Powers of Officers. 502. Payment of Dividends to Shareholders. 503. Liquidation to Sell Business or to Reorganize. 504. Liquidation by Expiration of Charter. 505. Certification of Closing by Expiration of Charter — Form. § 491. General.- The closing of the business of a National bank is either by voluntary liquidation or involuntarily by appointment of a receiver. The closing by receivership is treated fully in the first part of this work under the section of the Revised Statutes pertaining to receivership. Voluntary Liquidation may be for various purposes : an Asso- ciation may for some reason wish to discontinue business before its charter expires, or on expiration of its charter, without renew- ing. In either case the object may be : To close business ; to sell the business; to reorganize as a new association, or to consoli- date with another association. Liquidation for purposes of con- solidation is treated under Chapter VI on consolidation, but the procedure in all cases is practically the same. 522 523 § 492. Authority for Liquidation.- The law authorizes any National bank to go into liquidation by a vote of its shareholders owning two-thirds of its stock. (Eevised Statutes, 5220.) Noth- ing is said in the statute about the consent of the Comptroller of the Currency, but it will be found to facilitate the proceedings to give him notice in advance, that he may cause an examination of the bank to be made if he deems it necessary ; for until he is satis- fied that the bank is solvent, he will not consent to the withdrawal of the bonds of the bank deposited with the U. S. Treasurer, and, although a vote may have been taken to place the bank in liquida- tion, the Comptroller still has authority to appoint a receiver should he consider such action called for. § 493. Procedure.— By implication, Section 5144 E. S. requires that a vote of the stockholders be taken at a meeting called for the purpose in the manner provided for in the articles of association or by-laws. If the articles are in the usual form this may be done by publishing notice of the meeting for thirty days in a newspaper published in the town, city or county where the bank is located, or by mailing to each shareholder notice in writing thirty days before the time fixed for the meeting. The notice should expressly state that the purpose of the meeting is to consider, and to vote upon, the question of placing the bank in liquidation. It is necessary that shareholders owning at least two-thirds of the stock vote in favor of the liquidation ; the shareholders may vote by proxy at this, as well as at other meetings, but a director, other officer, clerk, teller or bookkeeper of the bank is prohibited by law from acting as such proxy. The shareholders should incorporate in the resolution for liqui- dation a provision either that liquidation shall begin immediately on the day the vote is taken, or at a determined future date. § 494. Form of Resolution. — The following is the form of reso- lution for liquidation and certification of vote to the Comptroller of the Currency and notice to be published, also form of oath of publisher. These forms are furnished by the Comptroller. 524 RESOLUTION FOR VOLUNTARY LIQUIDATION. At a meeting of the shareholders of The National Bank of , located at , held on , thirty days' notice of the proposed business having been given, it was Resolved, That the be placed in voluntary liquidation under the provisions of sections 5220 and 5221 of the United States Revised Statutes, to take effect ; and that be ap- pointed liquidating agent or liquidation committee of said bank; that liquidation shall be conducted in accordance with law and under the supervision of the board of directors, who shall require a suitable bond to be given by the said agent or committee in an amount to be fixed by the board of directors; that the said liquidating agent or committee shall render quarterly reports to the Comptroller of the Currency on the 1st of January, April, July, and October of each year showing the progress of said liquidation until said liquidation is completed; that said liquidating agent or committee shall render an annual report to the 1 shareholders on the date fixed in the articles of association for said annual meeting, at which meeting the share- holders may, if they see fit, by a vote representing a majority of the entire stock of the bank, remove the liquidating agent or committee and appoint another in place thereof; that a special meeting of the shareholders may be called at any time in the same manner as if the bank continued an active bank, and at said meeting the share- holders may, by a vote of the majority of the stock, remove the liqui- dating agent or committee; that the Comptroller of the Currency is authorized to have an examination made at any time into the affairs of the liquidating bank until the claims of all creditors have been satisfied, and that the National bank examiner will be compensated for his time and expense in making the examination in question. The foregoing resolution was adopted by the following vote, repre- senting at least two-thirds of the capital stock of the association, no director, other officer, or employe having acted as proxy. Name of shareholder. Residence. Name of Proxy. No. of shares 525 Stock voted against resolution. Name of shareholder. Residence. Name of Proxy. No. of shares. Stock not represented at meeting. Name of shareholder. No. of shares. Total number of shares voted in favor of the resolution,- Total number of shares voted against the resolution, — Total number of shares represented at the meeting, Total number of shares not represented at the meeting, . Total number of shares of capital stock, . I hereby certify, under authority of the board of directors, that the foregoing is a true and correct report of the vote and of the resolution adopted at a meeting of the shareholders of the aforesaid bank on the date mentioned. [seal of bank.] — ■ • , President or Cashier . Subscribed and sworn to before me, this day of , A. D. — . [seal of notary.] , Notary Public. § 495. Certification to Comptroller.— The evidence to be fur- nished to the Comptroller of the Currency of the fact of liquida- tion is a copy of the resolution of the shareholders certified by the cashier or president, under seal of the bank, that shareholders own- ing two-thirds of the stock have voted to place the bank in liquida- tion, and a copy of the notice calling the meeting, showing date of mailing or publication. § 496. Notice to Creditors.— Notice to note-holders and other creditors to present their claims for payment should be published, 526 as required by Section 5221 of the Revised Statutes, for a period of two months in a newspaper published in the city of New York, and also in a newspaper published in the city or town in which the bank is located. Notice in a weekly paper or in a weekly edition of a daily paper is sufficient. When publication has been made as required by section 5221 affidavits of the publishers should be sent to the Comptroller of the Currency. The following is a form of notice : The National Bank , located at , in the State of , is closing its affairs. All note holders and other creditors of the association are therefore hereby notified to present the notes and other claims for payment. President or Cashier. Dated, , 19—. The following is a form of affidavit of publication: AFFIDAVIT OF PUBLICATION. State of County of , ss: , being duly sworn, deposes and says that he is the publisher of 1, a newspaper published in the of , county of , State of , and that the annexed advertisement of the Certificate for Voluntary Liquidation of the National Bank of — : has appeared in each issue of said paper for a period of at least sixty days, beginning the — ■ day of — —— and end- ing the day of , 19 — . Subscribed and sworn to before me, 1 — , a in and for the State and County aforesaid, this day of , 19 — . [SEAL OF OFFICEB.] This oath is to be sent to the Comptroller with clipping of adver- tisement. § 497. Withdrawal of Bonds. — The bonds can be withdrawn as soon as the liquidation begins, provided the Comptroller of the Currency is satisfied that the bank is solvent, but the bank must first deposit with the Treasurer of the United States sufficient law- ful money to retire all its outstanding circulating notes, and pay any tax due on circulation and charges for redemptions over the amount to the credit of the bank in the five per cent, redemption 527 fund. Ordinarily, the five per cent, fund is ample to meet the tax and charges. In case this fund is more than sufficient or an ex- cessive amount is deposited, the excess will be returned to the depositing bank. This deposit must be made within six months from the date of going into liquidation. (Sec. 5222 R. S.) § 498. Prohibition Against New Business. — When the bank has been placed in liquidation it can not transact any new business and the power of its officers to bind the shareholders is only that which results by implication from the duty to wind up and close its affairs. (Richmond v. Irons, 121 U. S., 27; Schroder v. Manu- facturers' National Bank, 133 U. S., 67.) § 499. Liquidating Agent — Appointment and Powers. — When a National bank has been placed in voluntary liquidation the settle- ment of its affairs devolves by law upon its shareholders. The National Bank Act contains no provision giving the specific manner in which the affairs of a National bank shall be liquidated, and no reference is made in the law to the appointment of an agent or trustee in liquidation, except when a National bank has been placed in the hands of a receiver and the claims of all creditors other than shareholders have been satisfied. The general plan is for the shareholders in voting to place a Na- tional bank in liquidation to also appoint a liquidating agent or committee, and the United States Circuit Court of Appeals has held (Jewett v. United States, 100 Fed. Rep., 832) that while no such office as an agent in liquidation was known to the Statutes, yet it was one that had long been recognized by the courts. The liquidation should be conducted by the agent in accordance with law and under the supervision of the board of directors. The vote to liquidate and the appointment of a committee by the shareholders to liquidate the bank does not divest the directors of their general power and control over the management of the bank. Unless a liquidating agent is elected by the shareholders, the settlement of the affairs of the bank would appear to devolve upon the directors, who will be at liberty to continue one or more of the 528 officers or, in lieu thereof, to appoint an agent for the purpose of conducting liquidating proceedings. After a National bank has gone into voluntary liquidation no further supervision of its affairs is conferred upon the Comptroller by law. It is usual, however, for the banks to adopt a resolution providing that the liquidating agent or committee shall render quarterly reports to the Comptroller showing the progress of the liquidation until it is completed. The filing of these reports is of advantage to all interested, as it makes a permanent record of the liquidation. A creditor of a National bank in liquidation has the right to enforce the individual liability of shareholders provided for by sec- tion 5151 of the United States Revised Statutes by filing a bill in equity in the nature of a creditor's bill against the shareholders of the bank in any court of the United States having original juris- diction for the district in which the bank may have been located or established. Any shareholder of a National bank in liquidation who is dis- satisfied with the manner in which liquidation is conducted, has the right to go into court and ask for the appointment of a receiver in the same manner as a shareholder of any State corporation would be so authorized. All obligations of the bank become due and payable when the bank is legally closed, and they should be settled immediately. The assets remaining should be converted into money as promptly as possible and distribution made pro rata among the shareholders. The liquidating agent stands in the same relation to the bank as do the directors during its active existence; that is, any transac- tions in connection with the sale or other disposition of assets, and general transactions relating to liquidation, should be effected un- der the name of the association by the liquidating agent. § 500. Reports by Liquidating Agent to Comptroller. — The form of resolution for adoption by the shareholders which the Comptroller supplies provides that the liquidating agent or com- mittee shall render quarterly reports to him during the progress of liquidation. The following are the forms of reports: O/Vt/ CD «J o c"o co B -*-» OJ © rt ^■a - •2 ^ o 3 0JT3 5 Cm i £« m a, s £** p |sa 2 null o "sg-S Z .S-a- * s^ M S a Q u w Q Z H C4 .2j3 o 2 >> u C .C O a « o •St3 OJ m "K H 5^= CQ-S O a g « -» ~ O o >>-i2 01 n oj to t3 m ca « a .. 111 3 E-o B M fc &ti 2 S S "5 3 0) - m P -w a 0. a _.o — ■a d s3 > c a o S2B53.8.33 rHe»»'fl | u5toc-ooa)0'HNeoT)cioto ■IBpinbtj jo BpuBq ©m pOJJOJSU-BJJ tioi4Bpml)i! joa^Bp jb' BJSSSV 3-3 9) TJ « C m s - ■•o«j£ 01— .I- 1 - 2l>c O > C*J t, «' Cvi CO TT to a E- s - .2« to Su OJ «. <" "- £■0 3 .Sou "2-* S 3 O » 2 ■*? «>* - C to fc,T3 "" c 3 oj "■^ 3 & «3 ^ o «'8' H ! | i'3i5-ai! 5 « •° c a, ."3 OJ > o c*j Si 3 taJS — ■5 s |« § 8 oj 3~ rt to c to V rf § a ■a i£ o 4| eatJ «z«o S5«x "S'33 fc< cw-o EEEol £22» •M V( *4-« -* oj oj o oj 3 3 3J2 OOQo E3 5«3 5 £5 ^^Eli OJ OJ OJ ._ 3 3 3 HfcQQQ tDt^OOOlOt-HCMCO-^lOtOt^CO •J -I 1 1 ■5 >. R E "S bn a C 34 530 I j Si wo Sr 1 do |s •a *< £ ° Co a o> 5 a C-S V a ceo T3 (J 3.8 Ii a; -5 £ bo ■O .X « s £.2* b»& n IS II -a 5 3 a 3 aj 'am a° BjassB jjo-paSjBqD uiojj p3;D0[[00 JO ';G3J3)Ut *}U3J UIOJJ K'jijoJrt papiAipun iii 8SBaJ3U] ja^jBtib 3uunp piBd soi;;iR B !T[ «*; I u *& CQ ^ O — — i 0.2" s.a« I OS i — 3uipua ja^JBnb anp aouBiBg jLjo paSjBqo jo p[os 'pasituojd -UlOO S)3SSB UO 63SS0[ U10JJ sjijcud paptAtpun jo Btqdjns ■jpo*s [tnidBO jo uoiionpajj ja^jenb jo aujuuiSaq anp s^unomv sIKj I*. i-J co' oi ■* io od aidrtN ja^jvnb jo pua pusq uo aouBiBg ja^jBiib Sutjnp jjo-pa3JBqD jo 'p[og ■pasnuojduioD b^sssb uo sasso^ ja^JBnb Urn jnp suotjoanoQ ja^JBnb jo 3u;uuj3aq puBq uq »l£MOT'0>10«DfOOO)0>-ieMCO^lO 531 <3> CD &5 a 3 X cd TO -^ a'Sg 8g» ..•o«o a a> ■ . ed « rt S S •o533 « u u o rt '5 "5 "3 rt ^ k oj 3 i-IN CO Tf< l£5 se 3 "iS o 2 o ed t* jO*"*- ^ ~ V ~ : - O - ^ noo'ooo'o'o UOOOUOQO r-i N CO •>)< ift CX3 t- 00 O Q\ to 532 § 501. Election and Powers of Officers. — A National bank that has voted to go into liquidation may continue to elect officers and directors for the purpose of effecting liquidation, but after the ex- piration of the term of its charter the stock is not transferable so as to give the transferee the right to share in the election of direc- tors, and such transferee not being a shareholder is ineligible as a director under section 5145, United States Eevised Statutes. (Richards v. Attleboro National Bank, 148 Mass., 187; 3 N. B. C, 495.) After a National bank has gone into liquidation the officers have no authority to bind the shareholders by the transaction of any business except that necessarily involved in the winding up of its affairs unless such authority has been expressly conferred by the shareholders. (Schrader v. Manufacturers' National Bank, 133 U. S., 67; Richmond v. Irons, 121 IT. S., 27.) § 502. Payment of Dividends to Shareholders. — Where full set- tlements with shareholders are not effected at once, dividends should be paid to the shareholders from the assets collected by the liqui- dating agent and the amount thereof endorsed on the stock cer- tificates, when presented. When the assets have been fully paid to shareholders the certificates should be surrendered and cancelled. § 503. Liquidating to Sell Business or to Reorganize. — Where a bank is closed for the purpose of selling its business to another bank, or in contemplation of reorganization, all of the property of the bank may be legally disposed of at private sale with the unanimous consent of shareholders, provided, the claims of credi- tors having been paid or provided for. Any shareholder, however, who is not satisfied with the private offer may insist upon a public auction. Where the directors representing a majority of the stock of the closed bank organize a new bank they are at liberty as directors of the new association to buy the property of the closed bank at pub- lic sale, but have no right to buy it at a private sale at a price which they may put upon it themselves. Where, however, the price is a fair one and shareholders are allowed to participate in the reorganization, it is not likely that a court would order a pub- 533 lie sale, there being no reasonable prospect of benefit from such public sale. § 504. Liquidation by Expiration of Charter — The settlement of the affairs of a bank closed by expiration of the corporate ex- istence is the same as though the bank had been placed in liquida- tion by vote of shareholders during its legal life. Usually the board of directors is kept up to superintend the liquidation, or a liquidating agent or committee may be appointed for the purpose. No action on the part of shareholders is required to terminate the corporate existence of a National bank which has reached the end of its corporate life of twenty years. Expiration legally results from failure to effect extension. Bonds on deposit to secure circulation may be withdrawn at any time within six months of the date of expiration by depositing law- ful money for the redemption of outstanding notes of the bank. The corporate existence of a National bank the charter of which has expired by limitation is extended by Act of July 12, 1882, for the purpose of effecting liquidation and only for that purpose. § 505. Certification of Closing by Expiration of Charter — Form. — Certification of expiration of a bank's corporate existence must be made to the Comptroller of the Currency, under seal of the association, by the president or cashier, and notice to creditors that the association is closing published in a New York and local newspaper for a period of two months as in other cases of liquida- tion. certificate of expiration of corporate existence. National Bank . To the Comptroller of the Currency, Washington. Sir: It is hereby certified that the corporate existence of , located at , in the State of — , having expired at close of business on the day of , , the bank is now closing its affairs under the provisions of section 7 of the act of July 12, 1882. 534 In testimony whereof I have, by instruction of the board of directors of said association, hereto subscribed my name and affixed the seal of said association at , aforesaid, the day and year above written. [seal of bank.] ■ , President or Cashier. NOTICE. The National Bank , located at , in the State of , is closing up its affairs, its corporate existence having expired at close of business on the day of , . All note holders and others, creditors of said association, are therefore hereby notified to present the notes and other claims against the association for payment. President or Cashier. Dated , . Note. — The foregoing notice to be published for a period of two months in a newspaper in the city of New York, and also in a news- paper published in the place in which the bank is located. (See sec. 5221, Rev. Stat.) Certificates of the publishers that the required pub- lication has been made, together with a slip containing notice from one issue of each paper, should be sent to the Comptroller of the Currency. The settlement of the affairs of a bank, at expiration of charter, should be effected in the same manner as in the case of liquidation by resolution of shareholders. CHAPTER IX. Extension of Corporate Existence. Section 506. Provision for Extension. 507. Date of Expiration of Old Charter. 508. Application for Extension — Forms. 509. Consent of Shareholders — Forms. 510. Certificate of President or Cashier. 511. Authority to Sign. 512. Certificate of Extension. 513. Circulating Notes. 514. Bond Deposit with U. S. Treasurer. 515. Dissenting Shareholders. 516. Officers' Bonds. 517. Re-extension of Corporate Existence — Forms. 518. Reorganization Instead of Extension. 519. Same — Name of New Bank. 520. Same — Procedure. 521. Same— Liquidation of Old Association. § 506. Provision for Extension. — The Act of Congress approved July 12, 1882, provided that any National banking association, at any time within the two years next previous to the date of the expiration of its corporate existence under present law, and with the approval of the Comptroller of the Currency, may extend its period of succession, by amending its articles of association, for a term of not more than twenty years. The Act of Congress approved April 12, 1902, authorizes the Comptroller of the Currency in the manner provided by, and under the conditions and limitations of the Act of July 12, 1882, to extend for a further period of twenty years the charter of any National banking association extended under said act which shall desire to continue its existence after the expiration of its charter. 535 536 The course of procedure, on the part of an association, in effect- ing a second extension of charter is the same as in the case of a first extension. § 507. Date of Expiration of Old Charter.— The date of expira- tion of the old charter is determined by the date of execution of the organization certificate, as Section 5136 of the Eevised Statutes provides that all associations organized under it shall have suc- cession for twenty years from the date of the execution of the or- ganization certificate. If the paper is lost, or the date in any way uncertain, information can be obtained on application to the Comp- troller of the Currency. § 508. Application for Extension — Forms. — Under the Act of July_ 12, 1882, and the regulations of the Comptroller's office, banks are permited to file their application for extension with the proper papers at any time within two years prior to their expira- tion ; but usually application for extension is not made until within a few months prior to expiration of charter, and this gives the Comptroller sufficient time to satisfy himself as to the condition of the bank, and upon request the necessary blanks will be sent from that office. The formal amendment, certificate relative thereto, and request for approval to be executed and filed with the Comptroller are as follows: AMENDMENT OF ABTICLES OF ASSOCIATION OF NATIONAL BANK. In accordance with and in pursuance of the provisions of "An act to enable National banking associations to extend their corporate ex- istence, and for other purposes," approved July 12, 1882, we, the un- dersigned, shareholders of "The ," located at , in the county of and State of , owning the number of shares of the capital stock of said association set opposite our respective names, aggregating not less than two-thirds of the stock of said asso- ciation, do hereby consent and agree that the article of the articles of association of said National banking association be, and is hereby, amended to read as follows: "This association shall continue until close of business on , 19 — , unless sooner placed in voluntary liquidation by the act 537 of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." In witness whereof we, the undersigned, have hereto set our hands. Date of signing. Signature of share- holder. Address. Signature of proxy. Xo. of shares CERTIFICATE. To the Comptroller of the Currency, Washington, D. C. Sir: In pursuance of the provisions of "An act to enable National banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882, I hereby certify that shareholders owning not less than two-thirds of the capital stock of "The •" have consented in writing to the extension of the charter of said association; that the signatures to the attached amendment of the articles of association, executed in duplicate, are the true and correct signatures of said shareholders, or of their lawfully appointed at- torneys, and that one of the instruments, in all respects like the other, is on file in the bank. The foregoing certificate is made under seal of the association in accordance with a resolution of the board of directors adopted at a meeting held on the day of , 19—, in which the president or cashier was also authorized to make an application for the approval of the amended articles of association, a copy of which resolution has been recorded on the minute book of the bank. [seal of bank.] — i President or Cashier. (The above certificate should not be made prior to date on which the amendment is last signed.) REQUEST FOR APPROVAL. The Comptroller of the Currency is hereby requested to approve the foregoing amendment of the articles of association of said bank, ex- tending its corporate existence for twenty years, pursuant to the Act of Congress entitled "An Act to enable National banking associations 538 to extend their corporate existence, and for other purposes," approved July 12, 1882. President or Cashier. § 509. Consent of Shareholders — Forms.— The law does not provide that a meeting of the shareholders shall be held, as it is necessary only to secure the written consent of those representing two-thirds of the stock, and this may be done by sending in ad- vance to shareholders at a distance a power of attorney to be signed and returned, any person competent being empowered to act as attorney. The following form may be used for this purpose : PROXY FOB USE IX EXTENDING CORPORATE EXISTENCE OF NATIONAL BANKS. Know all men by these presents, that I, ' — , of , hereby constitute and appoint irrevocably > my true and lawful attorney, for me and in my name and stead to sign all necessary papers in connection with the extension of the corporate existence of the ' , under the Act of Congress approved July 12, 1882, or any amendment of said act, and I hereby consent that the article of the articles of association of the be so amended as to read as follows: "This association shall continue until close of business on , unless sooner placed in voluntary liquidation by the act of its share- holders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." I further grant unto my said attorney full power and authority to act in and concerning the premises as fully and effectually as I might do if personally present. In witness whereof I have hereunto set my hands this day of , in the year one thousand nine hundred and . Signed in presence of two witnesses: AUTHORITY OF BEPBESENTATIVE OF OTHEB COBPOBATION CONSENTING TO EXTENSION OF CORPORATE EXISTENCE OF NATIONAL BANK. 539 At a meeting of the of the of , held on the day of , it was voted that — ■ be, and he is hereby, appointed irrevocably as its attorney, with power of substitution, to consent to and sign, in its behalf, the amendment of the article of the articles of association of The — ■ National Bank , said amendment reading as follows: "This association shall continue until close of business on > , unless sooner placed in voluntary liquidation by the act of its share- holders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." "A true copy from the records." Attest: . [Affix seal.] These powers of attorney, signed by the shareholders, should not be sent to the Comptroller with the amendment to the articles of association, but retained in the files of the bank. If preferred, a shareholders' meeting may be called for a con- venient date to enable the shareholders to sign the necessary papers. Notice of the meeting may be sent by mail to each shareholder, or given by publication. At this meeting the shareholders may appear in person or by attorney, the power given to the latter being similar in form to that inserted above. § 510. Certificate of President or Cashier.— The amendment, certified by president or cashier, that shareholders of two-thirds of the stock have consented in writing to the extension and the re- quest for approval should be executed, and transmitted to the Comptroller, at least two months previous to the expiration of the corporate existence of the bank, in order that the Comptroller may have sufficient time to cause the special examination to be made, as required by Section 3 of the Act of July 12, 1882, and to enable the bank to comply with possible conditions before the time for renewal of charter. § 511. Authority to Sign.— If any shares of the bank stand in the name of administrators, executors, trustees, or guardians, and it becomes necessary to have the consent of the owners of these shares to make up the majority required to authorize the amend- ment, duly certified copies of the legal appointment of such ad- 540 ministrators, executors, trustees, or guardians should be obtained and filed with the bank's records relating to the extension. "When stock stands in the name of an assignee, who signs the amendment, there must be evidence showing that the shares of stock have been formally transferred to him, as such assignee, on the books of the bank. When the amendment is signed by an attorney acting for shareholders, properly executed power of at- torney should be required. § 512. Certificate of Extension.— After receipt of extension papers the Comptroller will order a special examination at the expense of the bank, and if its condition is found to be satisfactory a certificate approving extension will be issued on the date of ex- piration of the existing charter. § 513. Circulating Notes.— The law requires that circulating notes issued to the bank after the new period of succession begins shall be of different devices from those issued before; and this necessitates the procuring of new plates, which are prepared at the expense of the bank. A blank to enable banks to order the preparation of plates for the printing of new circulation will be furnished by the Comp- troller, and the order should be made out and sent with the exten- sion papers so that the plates may be engraved and the currency printed to be ready when the charter is renewed. The following is the form of order for plates and circulation : EXTENSION OF CHABTEE — ORDER FOR TLATES AND CrRCULATION. Charter No. ■. National Bank — , , 19— To the Comptroller of the Currency. Sir: As the corporate existence of this bank is to be legally extended for 20 years, you are requested to have new plates engraved, the cost to be paid upon demand, and circulating notes printed therefrom, as follows: 541 No. of sheets ordered. Denomination on sheets Value per sheet. Amount of order. $1, $1, $1, $1 $2, $2, $2, $2 $5, $5, $5, $5 $4 8 20 40 50 250 $ $10, $10, $10, $10 $10, $10, $10, $20) $50, S50, $50, $100 Total Respectfully, Cashier. Note.— The act of July 12, 1882, requires that circulating notes issued to banks subsequent to extension of corporate existence shall bear such devices as shall make them readily distinguishable from prior issues. The act of October 5, 1917, provides for the issuance of $1 and $2 notes, repealing the act of June 3, 1864, which prohibited national banks from being furnished with notes of less denomination than $5 after the resumption of specie payments. Circulation may be ordered from any one or more of the plates listed above, but no bank shall receive or have in circulation at any one time more than $25,000 in notes of the denominations of $1 and $2. The restriction as to the issue of $5 notes to one-third of a bank's circulation has been repealed, and notes of that denomination may be issued in any amount desired not in excess of the capital stock against the deposit of bonds. It will ordinarily require about 40 days to engrave the plate and to print circulating notes, but the order will not be acted upon until either bonds are deposited for circulation or a draft in payment of cost of engraving is received by the Comptroller. Bank plates cost $130 each for originals and $120 each for dupli- cates when the originals are worn out. This order should accohipany the amendment providing for the ex- tension of the corporate existence of the association. The following instructions should be strictly observed : The date on which each shareholder or his attorney signs the amendment should be entered in the column for that purpose. An attorney representing several shareholders need sign but once on a page, if the names of shareholders are bracketed. Residence and number of shares of each shareholder consenting to the extension must be given. 542 § 514. Bond Deposit with U. S. Treasurer.- No transfer of bonds is necessary, as the extended association is in all respects identi- cally the same as before extension, being placed in the same posi- tion as if the law had allowed it at the outset forty years from the date of its organization, of winch twenty have expired. § 515. Dissenting Shareholders.— Section 5 of the Act of July 12, 1882, conserves the interest of shareholders not desiring to continue their connection with the bank, but desiring to withdraw and to be paid the surrender value of their stock. The act provides that notice of intention to withdraw shall be given to the di- rectors within thirty days from the date of issue of certificate au- thorizing extension of the charter, and that a committee of ap- praisal shall be appointed — one member by the withdrawing share- holder, one by the bank, and a third by the two. The bank and the dissenting shareholder may select as members of the committee expert accountants or any other persons competent to perform the duties of appraisers. In case the value fixed is unsatisfactory to the shareholder, he may appeal to the Comptroller of the Cur- rency, whose appraisal shall be final and binding. The right of appeal is not given to the bank. In case the valuation fixed by the Comptroller exceeds the amount fixed by the committee, the expense of reappraisal must be borne by the bank; otherwise by the shareholder appealing. The law makes no provision for pay- ment of expenses incident to the first appraisal; hence it is in- cumbent upon the withdrawing shareholder and the bank to de- termine this question. The shares appraised and surrendered must, after due notice, be sold at public sale within thirty days after the final appraisal. Generally speaking, the market price of stock represents the surrender value, although, in some instances, the market price may be above or below the actual value of the stock. The proper course to pursue is to have a very careful examination made of the assets, taking into consideration the actual value of items exceeding the book value, and deducting items admittedly worth- less. The question of "good will" is not to be considered, al- though it may be of material value to a bank continuing business. 543 § 516. Officers' Bonds.— When the corporate existence of a Na- tional bank is extended, the renewal of bonds of officers and em- ployes should have consideration. § 517. Re-extension of Corporate Existence — Forms.— The Act of Congress approved April 12, 1902, provides that the Comp- troller of the Currency may, in the manner provided by and under the conditions and limitations of the Act of July 12, 1882, extendi for a further period of 20 years the charter of any National bank- ing association extended under said act which shall desire to con- tinue its existence after the expiration of its charter. The form of amendment and certificate follows: RE-EXTENSION OF CHARTER — AMENDMENT OF ARTICLES OF ASSOCIATION OF NATIONAL BANK. In accordance with and in pursuance of the provisions of "An Act to enable National banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882, and the amendment approved April 12, 1902, we, the undersigned, shareholders of "The ," located at , in the county of and State of -, owning the number of shares of the capital stock of said association set opposite our respective names, aggre- gating not less than two-thirds of the stock of said association, do hereby consent and agree that the — article of the articles of association of said National banking association be, and is hereby, amended to read as follows: "This association shall continue until close of business on ■ — >, 19 — , unless sooner placed in voluntary liquidation by the act of its shareholders owning at least two-thirds of its stock, or otherwise dissolved by authority of law." In witness whereof we, the undersigned, have hereunto set our hands. Date of signing. Signature of share- holder. Signature of proxy No. of shares. 544 , 19—. To the Comptroller of the Currency, Washington, D. C. Sir: In pursuance of the provisions of "An Act to enable National Banking associations to extend their corporate existence, and for other purposes," approved July 12, 1882, and the amendment approved April 12, 1902, I hereby certify that shareholders owning not less than two-thirds of the capital stock of "The ," have consented in writing to the re-extension of the charter of said asso- ciation, that the signatures to the attached amendment of the articles of association, executed in duplicate, are the true and correct signa- tures of said shareholders, or of their lawfully appointed attorneys, and that one of the instruments, in all respects like the other, is on file in the bank. The foregoing certificate is made under seal of the association in accordance with a resolution of the board of directors adopted at a meeting held on the — day of , 19 — , in which the presi- dent, or cashier, was also authorized to make an application for the approval of the amended articles of association, a copy of which reso- lution has been recorded on the minute book of the bank. [SEAL OF BANK.] , President or Cashier. (The above certificate should not be made prior to date on which the amendment is last signed.) The Comptroller of the Currency is hereby requested to approve the foregoing amendment of the articles of association of said bank, re-extending its corporate existence for twenty years, pursuant to the Act of Congress entitled "An act to provide for the extension of the charters of National banks," approved April 12, 1902. [SEAL OF BANK.] , President or Cashier. The other forms are similar to those used in connection with the original or first extension of charter. § 518. Reorganization Instead of Extension.— It may, however, be deemed best by those owning the controlling stock in a Na- tional bank about to expire not to avail themselves of the fore- going method of extension, but may prefer reorganization. There are obvious reasons for this. For example : In a twenty years' life the personnel of the stockholders of an association undergoes great 545 changes. The stock which was originally in the hands of active resident business men, who brought custom and business to the bank, by various vicissitudes falls into the possession of widows, heirs, and non-residents, whose only interest in the institution is to draw dividends. The active stockholders remaining in such associations will doubtless prefer in many instances to let the old association expire, and, with their proportion of the capital, joining with themselves other new capitalists such as they may think will add strength, form a new association to occupy the place vacated by the one which has expired. § 519. Same — Name of New Bank.— The proviso m Section 5 of the Act of July 12, 1882, prevents the use of the old name for a new association unless all the shareholders in the old bank are tendered shares in the new bank proportionately to those they held in the old; therefore unless this is done it will be necessary to select a title materially different from that of the expiring association, as the Comptroller otherwise will not give his approval. Furthermore, the Comptroller does not look with favor on the elimination of shareholders without cause, and may refuse to issue a new charter on this ground. § 520. Same — Procedure.— The new associates should make ap- plication to the Comptroller for authority to organize, and upon receipt of advice of approval and of organization blanks they should execute articles of association, organization certificate, oath of directors, and file these papers, with an order for circulation, in the office of the Comptroller of the Currency about two months prior to the expiration of the existence of the old bank. Fifty per cent, of the capital should be paid in and certified to the Comp- troller some time before the old bank expires. As circulating notes can not be delivered under forty-five days from date of issue of certificate authorizing the bank to begin busi- ness, it may be found advisable to complete the organization a suf- ficient time in advance of the expiration of the charter of the old bank and opening of the new to insure the delivery of notes at that time. 35 546 The shareholders of the new bank can put into it moneys they derive from the old. The assets of the old bank can be sold in such manner by its directors as will realize the most for its share- holders, and generally it is advantageous to sell to the new bank all that can be legally taken by it. No stockholder of the old bank can be compelled to take stock in the new bank. The transfer of deposits from the old bank to those of the new should be made by check or by agreement of the new bank to honor checks of depositors in the old bank, any de- positor being at liberty to withdraw his deposit either before or after the change. A set of new books, of course, should be opened by the new association. § 521. Same — Liquidation of Old Association. — The method of liquidating the old bank which goes out on expiration of charter is given in the chapter on Liquidation. General Index A PAGE Abstraction — Of bank's funds 170 Acceptances — Bankers, definition of 245, 266 Bankers, discount of 245 Bankers, exchange charges 240 Bankers, open market purchases of 265 Bankers, secured by bill of sale 267 Bills of exchange, negotiability of 252, 329 Bills of sale, acceptances secured by 267 Bills payable with attorney's fees or collection charges... 328 Branch of Reserve Bank, purchased by 268 Corporations in foreign banking business 324 Demand and sight bills, due date 259 Differential as to 253 Discount of 252 Documents attached 256 Documents not attached 264 Dollar exchange 261, 263 Domestic 254, 264 Drafts drawn abroad and secured by foreign warehouse receipt 255 Drafts drawn on sales corporations 246 Drafts payable with interest 330 Drawee, acceptance by 268 Drawee, bills payable to the order of 329 Excess of 10 per cent 254, 255, 258 Export of goods 258 Foreign 253, 255, 262, 274 Foreign correspondents 257 Idenification of specific goods 257 Importation of goods 254 Indorsed by member bank in another district, discount of. 252 Indorsement on bill of exchange 268 Limitations of 10 per cent 254, 255, 258 547 548 PACT Acceptances— Members banks' 252, 253, 256, 258, 261, 264 Member banks, purcbase of own 264 Non-member trust company 273 Open accounts of foreign purchasers 254 Open market purchases of 265 Presentment of bills for acceptance 329 Qualified , 328 Renewals of 252, 259 Security for 255, 259 Shipment by corporation to agent 259 Shipment of goods 258 Sight drafts, due date 259 Sight drafts accepted payable at a future date 329 Single-name paper 268 Stamp tax on 258 Trade, bills drawn against actually existing values 250 Trade, definition of 266 Trade, discount if paid at maturity 249 Trade, discount if paid before maturity 329 Trade, of retailers 246 Trade, open market purchases of 265 Trade, providing for extension of time 329 Trust receipts as security for 257 Waiver of demand, notice and protest 328 Warehouse receipts, as security for 255, 2.56, 257 Where payable 328 Accommodation paper 15 Accounts — Foreign branches of national banks 307 Actually Existing Values 106 Administrator — As shareholder of national bank 437 Liability of as shareholder 64 Power of national banks to act as 232 Advertisement — To creditors of insolvent bank 154 Advertising — As United States depository for postal savings funds 374 Savings accounts by national banks 293 Use of word "Federal" 266 Advisoey Council — 'Federal 238 Agencies — Foreign, establishment of, by Federal Reserve Banks . . . 274 Foreign, of Federal Reserve Bank of New York 275 Of National Banks 100 Agent — In Liquidation (see Liquidating Agent) Of Shareholders (see under Shareholders) Agricultural Paper — Agricultural implements, notes, discount or purchase of 246, 247 Chattel mortgages 246 549 PAGE Agricultural Paper — Definition of 244 Discount of 244 Note of dealer in live stock 247 Amount — Of capital required 33 Annual Meeting — Provisions in by-laws on 452 Meeting, of Shareholders 65 Report of Comptroller 4 Report of Federal Reserve Board 228 Application — For deposits of public moneys 357 To increase capital stock 505 To reduce capital 511 Appointment — Of examiners by Comptroller 129 Articles of Association , 8 Amendment of, for extension of charter 50, 536 Corporations authorized to do foreign banking business under the Edge Act 307 National Banks, execution of 433 National Banks, form of . ., 430 National Banks, naming of directors in 433, 434 State Bank, converting into National Bank 467 Assessment — Against shareholders 62, 63 By shareholders where capital impaired 112 Certificate of payment of, to restore capital 518 For expenses of Federal Reserve Board 227 Of tax on circulation 133 Assets — Of State Banks converting into National 46 Assignee — Power of National Bank to act as 252 Assignment" — For creditors by stockholder 59 Of open account, rediscount of, with Federal Reserve Bank 246 Of right to new capital stock 511 Of Registered Bonds 407, 408, 410, 411 Assumption — Of obligations of another bank „ 15 Attachment — 'Prohibited before final judgment against National Bank , 187 Attorneys — Employment of, by National Banks 16 Authority — To commence business 40 B Bad Debts— Definition of 112, 113 Bank — Guaranty Law 19 Banking Hours — Provisions in by-laws on 454 Banking House 20 Banking Powers— Of national banks 10 550 PAGE Bankruptcy — Law not applicable to national banks 149 Banks — (See National Banks, State Banks, Member Banks, Fed- eral Reserve Banks) Bills of Exchange — Acceptance of to furnish dollar exchange, 261, 263, 264 Definition of 243, 266 Discount of, by Federal Reserve Banks 240 Drawn against actually existing values 106, 250, 251 Foreign, purchase of, by Federal Reserve Banks 275 Indorsement on 268 Negotiability of 252, 328 Negotiability of, payable "in exchange" 288 Open market purchases of 265, 273 Bills of Lading — Security for acceptances 255 Bills of Sale — Acceptance secured by 267 Bills receivable as collateral, for rediscount at Federal Reserve Bank 248 Bimetallism — International 385 Boabd of Directors 68 Body Corporate — When association becomes a 439 Bonding — Of Federal Reserve Agents 231 Bonds — '(See United States Bonds, Coupon Bonds, Registered Bonds) District of Columbia and insular possessions of United States 399 Farm Loan, loans secured by 331 National Banks dealing in 12 Of Officers of National Banks 17 Revenue, purchase of by Federal Reserve Banks in open market 269 Books of Bank — Evidence in suit on assessment 63 Inspection of, by shareholders 130, 145 Borrowing of Money — By national banks 14 Branches — Conversion of State Banks with 47 Corporations authorized to do foreign banking business... 323 Excessive loans by national banks with 105 Foreign, of national banks, establishment of 304 Foreign, of national banks, examination of 306 Of Federal Reserve Banks 203, 204 Of Federal Reserve Banks, Directors of 203 Of national banks 1°° State bank converting into national bank 469 State bank, transactions and membership 225 Trust company members 225 551 PAGH Building & Loan Associations — Eligibility for membership 226 Building Company — Power of national bank to take stock in 21 Bubeau of Comptroller of Currency 2 Business Paper 107 By-Laws— Provisions of and form 442, 452455 C Called Bonds — United States, forwarded for redemption 416 Cancellation — Of circulating notes 97 Of Treasury notes and issue of silver certificates 379 Capital — Moneyed, definition of 135 Capital Stock — Amount of, required 33, 425 Application to increase 505, 506 Application to reduce 511 Assessment by shareholders 112 Assignment of right to new 511 Certificate of increase of 508 Certificate of payment of assessment to restore 518 Certificate of payment of, State bank converting into na- tional bank 469 Collection of taxes on shares of 141 Corporations authorized to do foreign banking busi- ness 312, 320 Deductions in taxation of 138 Enforcing payment of Ill Exemptions in taxation of 137 Failure to pay installments on 38 Form to credit dividend upon subscription for new 509 Impairment of 43, 111, 515 Increase of 41, 435, 505 Increase of, by consolidation 495 Increase of, when valid 42 Legal status of 39 Liability of subscribers to new stock 59 Lien of bank on, provision for 435 Limit of time for payment of 39 Lost certificates of 36 Meeting of shareholders to increase 506 Meeting of shareholders to reduce 512 Par value of 34 Payment for 37, 111 Payment for, on organization 442, 445 Price of new 510 552 PAGE Capital Stock — Reduction of 43, 327, 511 Restoration of, reduced by failure to pay installments 38 Restoration of impaired 515 Right of shareholders to subscribe to increase 42, 509 Rights of shareholders in reduction 514 Sale of, of delinquent shareholders 38, 519 State bank converted to national bank 458, 462 Taxation of, by states 134 Transfers of 34, 455 Transfers of, in liquidation 145 Valuation of, for taxation 136 When, must be paid in 37 Withdrawal of 112 Of Federal Reserve Banks, decrease of 212, 213 Of Federal Reserve Banks, dividends on 216, 217 Of Federal Reserve Banks, increase of 212, 213 Of Federal Reserve Banks, minimum 199, 203 Of Federal Reserve Banks, national banks required to subscribe to 200 Of Federal Reserve Banks, payment for, by State bank member 223 Of Federal Reserve Banks, shares 212 Of Federal Reserve Banks, State banks as members. . . 219, 223 Of Federal Reserve Banks, subscriptions, allotment to the United States 200, 202 Of Federal Reserve Banks, surrender of, by liquidating bank 217 Of Federal Reserve Bank, surrender of, State bank con- verted into national bank 216 Of Federal Reserve Banks, tax exemptions 218 Of Federal Reserve Banks, transfer of 202, 212, 216 Cashier — Authority to make leases 21 False representations of 16 Central Reseeve Cities 230 Reserves carried by member banks located in 295 Reserves carried by member banks not located in 294 Status of, under Federal Reserve Act 203 Central Reserve City Banks — Real estate loans by 25 Certificate — Comptroller's, in organization, publication of 448 Of authority to commence business 40 Of expiration of charter 533 Of increase of capital 508 Of increase of capital in consolidation 495 Of organization of Federal Reserve Banks 204 553 PAGE Certificate— Of organization of national bank 435-438 Of organization of State bank converting into national . . . 467 Of participation in note, rediscount of 248 Of payment of assessment on stock 518 Of shareholders vote for extension of charter 537, 539 Of stock, conversion of State bank into national 470 Of stock, lost certificates 36 Of stock, temporary, in organizing national bank 425 Certified Checks — Illegal certification 108, 175 Certified Copies — Of Comptroller's records as evidence 189 Of Organization Certificate as evidence 190 Change of Name and Location — Of national banks 49, 519 Charter — Application for extension of 536 Expiration of 53, 533, 536 Extension of 50, 535 Forfeiture of, for violation of law 161, 162 In liquidation 145 Re-extension of 543 Charter Number — To be printed on circulating notes 84 Chattel Mortgages — Agricultural paper secured by 246 Check Clearing and Collection — Bill of lading drafts, method of collecting 283 Collection of checks by Federal Reserve Banks 239 Federal Reserve Banks as collecting agents for member banks 283 Gold settlement fund of Federal Reserve Board 288 Negotiability of bills and notes made payable in "ex- change" 288 Non-member banks, collection of items on 287 Par collection, meaning of 287 Regulations of the Reserve Board on 284 Check3 — Certification of, illegally 108, 175, 222 Dealing in by national banks 16 Circular of Comptroller — On loaning powers of banks 102 On real estate loans 26 Circulating Notes (National Bank Notes) — Abatement of tax on, of insolvent banks 133 Amount of 81, 82 Appointment of receiver for failure to pay 147 As legal tender 388, 486 Banks extending charter 90 Bonds acceptable as security for deposit of 78, 474, 475 Bonds for security, annual examination of 479 Bonds for security, withdrawal of 476, 478 554' PAGE Cibculating Notes — Cancellation of 97 Change of, upon extension of charter 540 Charter number to be printed on 84 "Circulation" accounts 475, 482 Circulation privilege of national banks 447, 473 Collection of tax on 133 Counterfeit to be stamped 115 Counterfeiting, penalty for 176, 177 Countersigning unlawfully 169 Delivery of 81 Denomination of S2, 83 Deposit to redeem, by liquidating banks 91 Depreciation in value of bonds to secure 79 Destruction of, mode 98 Destruction of, power of attorney to agent to witness 479 Destroying and replacing mutilated 86 Disposition of redeemed, by Treasurer 97, 485 Expense of protest of 156 Expense of transporting and assorting 96 Failure to redeem 93, 94 Five per cent, fund account 480, 483 For what receivable 85 Forgery of, penalty 176, 177 Hypothecation of, prohibited 114 Imitation of, prohibited 182 Increase of 74 Increase of after retirement 76, 82 Issue of new 485 Issue of other, prohibited 86 Issuing, of closed banks prohibited 180 Ledger accounts 482 Less than one dollar prohibited 182 Liability of bank for unsigned 85 Lien on assets of bank 95 Limitation of 82, 85 Liquidating banks 91, 92, 93 Method of verifying remittances of mutilated notes 484 Mutilation of, prohibited 183 New, issue of 485 Order for 447, 473 Order for, on extension of charter 540 Plates and dies for printing 84, 96, 473 Power of attorney to agent to witness destruction of 479 Printing of 83 555 PAGE Circulating Notes — Protest of 93, 95 Receipt of as security prohibited 170 Redemption of 87, 481 Redemption of, of failed bank 95 Redemption of, of liquidating bank 92, 93 Refunding excess tax on 133 Remittances for redemption of 482, 484 Repeal of limit of 85 Retirement of 74, 89, 90 Returns of outstanding, for taxation 132 Sale of bonds to pay 95, 96 Signatures of officers forged 85 State taxation of 142 Tax on 131, 132, 486, 490 Tax on, of State banks 143 To be received at par 114 Transfer of bonds held to secure 79, 80 Uncurrent, not to be paid out 114 Withdrawal of bonds securing 476, 478 Circulation of State Banks — Tax on 143 Cities — Federal Reserve (see Federal Reserve Cities) City Real Estate: — Loans on 26 Citizenship of National Banks 185 Claims of United States Against Insolvent Banks 155 Class A, B and C Directors (see Directors of Federal Reserve Banks) Clayton Act and Keen Amendment 333 Clayton Act — Enforcement of compliance with provisions of. . 341, 342 Exceptions to provisions of 307, 313, 336 Interlocking directors 334 Interpretation of 337 Private bankers 334, 335 Clearing House — Federal Reserve Banks for member banks 283 Federal Reserve Board for Federal Reserve Banks 283 Power of national bank to join 17 Clearings — (See Check Clearing and Collection) Clerical Force — Federal Reserve Banks 206 Coin — Gold, dealing in, by Reserve Banks 268 Collateral — Bills receivable, for rediscount at Federal Reserve Bank 248 Debentures as 22 Discount of notes by Federal Reserve Banks 248 Receipt of circulating notes as, prohibited 170 Security for Federal Reserve notes 252, 277 556 PAGE Collateral — Substitution of, for Federal Reserve notes 281 To claims against insolvent bank 155 Collecting Agents — Reserve Banks as, for member banks 283 Collection of Tax — On circulation 133 On shares of stock 141 Collections — By national banks 16, 19 Exchange charge on bankers' acceptances 240 Power of Federal Reserve Banks to make 239 (See also Check Clearing and Collection) Commencement of Business — By national banks 40 Commercial Paper — Purchase of, by national banks 14 Commissions to Officers and Employes — Of member banks pro- hibited 301 Commodity Paper — Definition of 244 Discount of, by Reserve Banks 244, 247 Purchases of, by Reserve Banks from member banks 247 Compensation — '(See Salaries) Compounding Interest Illegally 124 Compensation — (See Salaries) Advertisement to creditors of insolvent banks 154 Annual report of 4 Application to, in organizing national bank 426 Appointment of 2 Appointment of Receiver by 147, 148 Approval of, for increase of capital 42 Assessment against shareholders by 62 Bond of 2 Bureau of 2 Certificate of, approving consolidation 498 Certificate of, authorizing commencement of business 40 Certificate of, extension of charter 51 Certificate of, organization of national bank 448 Certification to, of liquidation 525 Circular of, on loaning power of banks 102 Circular of, on real estate loans 26 Clerks of 3 Copies certified by, as evidence 189 Decision of, conclusive on impairment of capital 112 Deputy Comptroller 3 Eligibility to hold office in member bank 226 Examiners appointed by 129 Ex officio member of Federal Reserve Board 226 Injunction against, where obtainable 189 Judicial notice of acting comptroller 190 557 PAGE Comptboixeb of Currency — Liquidating agents' reports to 528 Prohibition against interest in national banks 3 Registry of bond transfers 80 Regulations of, on national banks as insurance agents 23 Regulations of, on organization 449 Report of, to Congress 4 Reports of national banks to 125 Salary 2,226 Supervisory power over receivers 150 Term of office 2 Condition Reports — (See reports) Consolidation of National Banks 47, 491-503 Agreement between directors 492 Dissenting shareholders, rights of 499 Liquidation for consolidation 500 Meeting and resolution of shareholders 496 Procedure 492 With State banks 491 Continuance of Liabilities — Under change of name 49 Contracts — Ultra vires, of national banks 18 Contributions — Political prohibited 181 Conversion — Of Liberty Bonds or Victory Bonds 415 Conversion of State Banks into National Banks 45, 461-470 Conversion of State Banks — Surrender of stock in Reserve Bank. 216 Conversion of State Banks with Branches 47, 469 Copies Certified by Comptroller as Evidence 189 Corporate Existence — Extension of 50, 535 In liquidation 145 Corporate Relations of Converting Banks 46 Corporate Powers of National Banks 9 Corporations Authorized to do Foreign Banking Business (Edge Act) 307 Acceptances 324 Articles of association 308, 318 Branches 323 Capital stock 312, 320 Deposits 325 General limitations and restrictions 325 Investment in the stock of other corporations 322 Issue of debentures, bonds, and promissory notes 323 Meeting of stockholders 314 Operations in the United States 322 Organization 308, 318 558 PAGE Corporations Authorized to do Foreign Banking Business — Powers of 309 Regulations of the Federal Reserve Board governing 318 Reports and examinations of 315, 32G Sale of foreign securities 323 Title 319 Corporations in which National Banks Own Stock — Powers of Federal Reserve Bank over 306 Corporations transacting foreign business, power of national banks to take stock in 305 Corporators of National Banks 421, 422 Counterfeit Notes or Coins 395 Counterfeiting national bank notes, penalty 176, 177 Counterfeits — Passing, selling, etc., prohibited 179, 180 Stamping of 115 Countersigning circulating notes unlawfully 169 Coupon Bonds — Coupons detached from called bonds 417 Exchange of, for bonds of other denominations 401 Exchange of, for registered bonds 76 Lost, stolen or destroyed 414 Courts — Jurisdiction of Federal in Receivership cases 152 Power of, to appoint Receiver 149 Credit Companies — Notes of, discount of 247 Creditors — Notice to, of liquidation 526 Creditors of Insolvent Bank — Advertisement to, by Comptroller.. 154 Claims of, how established 154, 156 Dividends to' 154, 156 Interest on claims of 155 Secured creditors 155 Cumulative Voting 55 Currency and Money — Address on packages sent to Washington . . 393 Cancellation of Treasury notes and issue of silver cer- tificates 379 Division of Issue and Redemption, establishment of 379 Exportation of silver coin or bullion 385 Federal Reserve Bank notes, issuance of 384 Federal Reserve Bank notes, retirement of 384 General information 394 Gold certificates, issue of 380 Gold dollar as standard unit of value 377 Issue of gold coin 389 Issue of standard silver dollars, subsidiary silver coin and minor coin 390 Issue of United States paper currency 398 559 PAGE Cubbency and Money — Legal tender — Federal Reserve notes 388 Legal tender — Foreign coins 386 Legal tender — Gold certificates 388, 389 Legal tender — Gold coin 387 Legal tender — Interest bearing notes 388 Legal tender — Minor coins 387 Legal tender — National bank notes 388 Legal tender — Silver certificates 388 Legal tender — Silver coins, subsidiary 387 Legal tender — Silver dollars 387 Legal tender — Treasury demand notes 387 Legal tender — United States notes 387 Maintenance of gold reserve, sale of bonds to replenish . . . 377 Melting of silver dollars and sale of bullion 382 Notes, shipment of unfit to Washington 393 Regulations governing the issue, exchange and redemp- tion of 389 Reimbursement for loss in melting silver dollars 383 Shipments of moneys from Washington 394 Silver bullion, sales of 383 Silver ore, purchase of 382 Subsidiary silver coinage 381, 382 Treasury notes, issue of 386 D Date of Liquidation 147 Debentures — Power of national banks to take as collateral 22 Debts — Bad, definition of 112, 113 Compounding, by receiver 151 Deceased Shabeholders — Liability of 58 Decrease of Capital Stock of Federal Reserve Banks 212 Deductions in taxation of shares of stock 138 Definitions — Agricultural paper 244 Bad debts 112, 113 Bankers' acceptances 245 Bills of exchange 243, 266 Commodity paper 244 Drafts 243 Promissory notes 243 Terms of Federal Reserve Act 198 Trade acceptances 243 Delinquent Shareholders — Sale of stock of 519 Demand and Sight Bills — Due date of, as acceptances 259 560 PAGH Demand Deposits — Definition of 292 Demand Notes — Discount of 248 Denomination of 1 Cibculating Notes 82, 83 Depositories — Government, classes of 276, 350 Disbursing officers, duty of 345 Federal Land Banks as 349 Penalty for unauthorized receipt or use of public money 181, 360 Penalty for unauthorized deposit of public money 360 Proceeds of sales of Liberty Bonds 348 Provisions for deposit by certain postmasters 346 Public moneys, deposit of 44, 350 Regular government depositories 350-353 Reserve requirements not applicable to government de- posits 348 Special government depositories 354-357 Deposits — By receivers of national banks 150 Demand, definition of 292 Gold coin and certificates deposited with Treasurer by Reserve Banks 288 Government — In Federal Reserve Banks 275 Postal funds in nonmember banks 276 Reserves against 297 Limit of, member with nonmember bank 296 Member bank's, in Reserve Banks 239 Nonmember bank's, in Reserve Bank 240 Of bonds to secure circulation 474, 475 Of bonds with Treasurer 74 Powers of national banks to receive 11 Savings 11, 294 Special 11 Tax on 142 Time 292-294 Time, reserve against 294 Unfit currency with Reserve Bank 240 When bank insolvent 166 Deputy Comptroller of the Currency 3 Deputy Federal Reserve Agent 210 Destruction of mutilated circulating notes, power of attorney to agent to witness 479 Destroying mutilated circulating notes 86, 98 Directors — Agreement between for consolidation 492 Board of 68 Disqualification of 69 561 PAGE Directors — Duty of, to preserve assets when examiner in charge.. 153 Election of, by shareholders 54, 65, 434 Fees, commissions, gifts, etc., to, forbidden 301 Interlocking, prohibited 333 Liability of, for excessive loans, false reports, etc 164 Liability of, for neglect 165 Liability of, for violations of law 161 Meetings of 454 Naming of, in articles of association 433, 434 No election at time appointed 69 Number of 435 Oath of 67, 440 Qualifications of 66, 434 Resignation of 69 State banks converting into national 46, 470 Suits against 153 Suits against by shareholders' agent 161 Suits against for violation of law 163, 164 Suits against, in liquidation 146 Term of office 65 Usurious loans permitted by 124 Vacancies, how filled 69 Of branches, of Federal Reserve Banks 203 Of Federal Reserve Banks, Chairman, appointment of 210 Of Federal Reserve Banks, Class A and Class B, election of 208 Of Federal Reserve Banks, Class C, appointment of 210 Of Federal Reserve Banks, Classification of 207 Of Federal Reserve Banks, Deputy Chairman, appointment of 210 Of Federal Reserve Banks, duties of 206 Of Federal Reserve Banks, national bank examiners as... 208 Of Federal Reserve Banks, nomination of , 209 Of Federal Reserve Banks, qualifications of 207, 211 Of Federal Reserve Bank, removal of 231 Of Federal Reserve Banks, residence, change in 207, 211 Of Federal Reserve Banks, term of office 207, 211 Discount Committee — Provisions in by-laws on 454 Discounts — Acceptances 252 Bills of exchange 240 Bills receivable as collateral 248 Collateral notes 248 Credit companies, notes of 247 Demand notes 248 Drafts 240 36 562 PAGE Discounts — Drafts payable on or before certain date 248 Excess of limitation when secured by war obligations 237 Excess of 10 per cent 250, 251 Finance companies, notes of 247 Indorsements on separate piece of paper 249 Limitation on, by Federal Reserve Banks. . . .248, 249, 250, 251 Limitations, one maker or indorser 250 Notes 240 Notes payable on or before a certain date 248 Paper secured by bonds or notes of the United States 249 Rates 249, 274 Rates, establishment of, by Federal Reserve Banks 274 Rates, forward discount rates 274 Rates, preferential, on member banks' notes 274 Readily marketable staples, definition of 249 Trade acceptances providing for discount if paid at ma- turity 249 Disqualification of Directors 69 Dissenting Shareholders — Rights of in consolidation 499 In extension of charter 542 District Attorney — Conduct of suits by 189 To represent national bank's receivers 153 District Court — Original jurisdiction of 187 Districts — Federal Reserve 192, 199 Diverse Citizenship 185 Dividends — Authority to credit upon subscription for new stock. . 509 Declaration of 113 In liquidation 14G, 532 Notification of special 127 Of Federal Reserve Bank stock 216, 217 Prohibition against, when capital impaired 112 Recovery of illegal 113 Refusal to declare 113 Reports of 127 To creditors of insolvent bank 154, 156 Division of Issue and Redemption — Establishment of 379 Dollar Exchange — Acceptances to furnish 261, 263, 264 Donations — By national banks 17 Double Liability of Shareholders 56, 57 Drafts— Defintion of 243 Discount of, by Federal Reserve Bank 240 Drawn on sales corporation, as acceptances 246 Payable on condition, rediscount of, with Reserve Bank. . . 245 563 PAGE Drafts — Payable on or before certain date, discount of, by Reserve Bank 248 Purchase of, at usurious rate 117 Duties of Examiners 129 E Earnings — Net, reports of 127 Earnings of Federal Reserve Banks paid into surplus fund 216 Edge Act — (Corporations authorized to do a foreign banking busi- ness) 307 Election — Class A and B directors of Federal Reserve Banks 208 Directors of national banks 54, 65, 433, 434 Of directors not held at time appointed 69 Embezzlement of bank's funds 170 Emergency Currency 327 Entries — False 170 Equity — Receiver may purchase real estate to protect 157 Estoppel against shareholders 61 Evidence — Certified copies as 189 Certified copy of Organization Certificate as 190 Examination — Corporations under Edge Act 315, 326 Expenses of, of national banks 156, 330 Federal Reserve Banks 301 Foreign branches of national banks 306 Member banks 300 Of books by shareholders 130, 145 Of United States bonds by bank's agent 81 Preliminary, of organizing banks 40, 429 Provisions in by-laws on, by directors 455 Special, of extended bank 51 State bank converting to national 458, 464 State bank members 219, 224 Trust department of national bank 236 Examiners — Appointment of 129, 300 As directors of Federal Reserve Bank 208 Duties of 129 In charge of bank 153 Loans to, prohibited 301 Powers of 129 Salaries of 129, 300 Service for compensation to any bank or officer prohibited . 302 Excess Loans 102 Liability of directors for 164 564 PAGE Excess Loans — Permission to discount excessive paper when se- cured "by war obligations 237 State bank members 224 Excess of 10 per cent., acceptances in 254, 255, 258 Exchange and transfer of Liberty bonds 399 Exchange Charges — 'Banker's acceptance 240 Exchange of Bonds 76, 79 Execution Prohibited Before Final Judgment 187 Executors — As shareholders 64, 437 Power of national bank to act as 232 Exemptions in taxation of shares of stock 137 Expenses — Of examination and receivership 156 Of Federal Reserve Board, assessment for 227 Expiration of Charter 53, 533 Exportation of silver coin o'r bullion 385 Extension of Charter 50, 535 Circulating notes after 90 Reorganization instead of 544 Shareholders dissenting to 542 F False Entries 170 False Reports — Liability of directors for making 164 Farm Land — Loans on by national banks 23, 330 Farm Loan Bonds — Loans secured by 331 "Federal"— Use of word 183, 226 Federal Advisory Council 238, 239 Federal Courts — Jurisdiction, in suits by and against national banks 185, 187 Jurisdiction in Receivership Cases 152 Federal Land Banks — As Government depositaries 349 Federal Question 168, 185 Federal Reserve Act — Definition of terms 198 Penalty for failure of national bank to accept terms of . . . 201 Federal Reserve Agents 210 Bonding of 231 Liability for Federal Reserve notes 281 Federal Reserve Bank Notes — Description of 277 Issuance and retirement of 384 Similarity to national bank notes 290 Federal Reserve Banks — Abolition of 199 Agencies, foreign, establishment of 274 As collecting agents for member banks 283 565 PAGE Federal Reserve Banks — Branches of 203, 201 Branches of, acceptances purchased by 268 Capital stock of (see Capital Stock) 199 Certificate of organization 204 Cities designated for location of 199 Clearing-house for member banks 283 Collecting agents 239 Corporate powers of 205 Directors of (see Directors of Federal Reserve Banks) 208 Directors of branches of 203 Discount of notes, drafts, and bills of exchange by 240 Dividends on capital stock of 216, 217 Earnings of, paid into surplus fund 216 Examination of 301 Examiners, appointment df 300 Fiscal agents of the Government 276 Franchise tax, earnings paid as 216 Liability of shareholders of 200 Liquidation of 231 Location of, power to change 199 Member banks, loans to, by 259, 260 Money order business by 206 Officer of, removal of 231 Officers and clerks of, tenure of office 206 Open market operations in gold coin and bullion 268 Open market purchases of acceptances and bills of ex- change 265 Open market purchases of notes, bonds, and warrants 269 Organization of 198, 203, 204 Publication of weekly condition statements of 229 Reorganization of 231 Rediscounts by, of paper of other Reserve Banks 229 Sale of United States Bonds to 74 Supervision over, by Reserve Board 232 Surplus fund, earnings paid into 216 Tax exemptions of 218 Title of, name of city in which lo'cated 200 Worthless assets, writing off 231 Federal Reserve Board — Annual report of 228 Clearing-house for Federal Reserve Banks 283 Comptroller of the Currency, ex officio member 226 Creation of 226 Enforcement of Clayton Act as applicable to banks 341 Expenses of 227 566 PAGE Federal Reserve Bo^rd — Gold settlement fund of 288 Governor of 227 Members of 226, 227 Organization of 226 Powers of, bonding of Federal Reserve Agents 231 Powers of, dealings of Reserve Banks in negotiable paper. 260 Powers of, issue, delivery and retirement of Federal Re- serve notes 230 Powers of, over corporations authorized to do foreign banking business 309 Powers of, over corporations in which national banks own stock 306 Powers of, rediscount by Reserve Bank of discounted paper of other Reserve Banks 229 Powers of, Reserve and Central Reserve cities 230 Powers of, suspension, liquidation or reorganization of Reserve Bank 231 Powers of, suspension of reserve requirements 229 Powers of, suspension or removal of officer or director of Reserve Bank 231 Powers of, supervision over Federal Reserve Banks 232 Powers of, Trustee powers to national banks 232 Powers of, visito'rial 229 Powers of, worthless assets, writing off 231 Quarters of 227 Regulations of (see Regulations) Secretary of the Treasury ex officio member of 226 Secretary of Treasury, supervision over 228 Vacancies, how filled 228 Weekly statement published by 22.5 Federal Reserve Cities — Designation o'f 199 Map showing location of 192 Federal Reserve Districts — Map outlining 192 Reduction of 199 Federal Reserve Notes — Collateral security for 252 Cost of 227 Delivery of 230 Deposit of, for credit or redemption 279 Deposit of silver certificates to reduce 281 Description of 277 Exchange of, for gold, gold certificates, or lawful money . . 281 Interest charges on 280 Issue of 230, 278 Legal tender 388 567 PAGE Federal Reserve Notes — Liability of Federal Reserve Agent for.. 281 Lien on assets of Federal Reserve Bank 279 Printing of 282 Redemption of 278 Reduction of outstanding 280 Reserve against 278 Retirement of 230, 281 Substitution of collateral for 281 Security for 277 Security for, notes and bills drawn for trading in Govern- ment obligations 278 Transportation charges on 279 Fees, commissions, etc., to officers and employees of member banks prohibited 301 Fiduciary po\vers granted to national banks 232 Finance or credit companies, discount of notes of 247 Fiscal Agents of the Government, Federal Reserve Banks as 276 Five Per Cent. Fund Account 480, 483 Five Per Cent. Redemption Fund — Not counted as reserve 300 Foreign Agencies — Establishment of by Federal Reserve Banks... 274 Foreign Agents — Of Federal Reserve Bank of New York 275 Foreign Branches of National Banks 304-307 Foreign Coins Not Legal Tender 387 Forfeiture of Charter for Violation of Law 161, 162 Forfeiture of Franchise, Appointment of Receiver 148 Forfeiture of Interest for Usury 119 Forgery of National Bank Notes, Penalty 176, 177 Form of Action to Enforce Shareholders' Liability 62 Forms — Affidavit of publication of notice of liquidation 526 Agreement for consolidation 492 Amendment of articles upon extension of charter 536 Application to convert a State bank into a national bank. 463 Application to increase capital stock 506 Application to organize a national bank 427 Articles of association, national banks 431 Articles of association, State bank converting into na- tional bank 467 Assignment of right to new stock 511 Authority fo'r conversion of State bank 466 Authority to credit dividend upon subscription for new stock 509 By-laws of national banks 452 Capital stock, payment of 444, 445 Certificate of expiration of charter 533 5G8 PAGE Forms — Certificate of payment of assessment 518 Certificate of payment of capital in consolidation 495 Certificate of payment of capital, State bank converting into national bank 469 Certificates of stock, temporary, in organizing national bank 426 Certificate of vote for extension of charter 537 Notice of expiration of charter 534 Notice of special shareholders' meeting 507, 513 Notice to creditors of liquidation 526 Notice to shareholders of impaired capital 516 Notification of special dividend 127 Oath of director of national bank 440 Order for circulation on extension of charter 540 Order for plates and circulating notes 473 Organization certificate, national bank 436 Organization certificate, State bank converting into na- tional 467 Power of attorney in organization of national bank 423 Power of attorney to agent to examine bonds 479 Power of attorney to agent to witness destruction of muti- lated circulating notes 479 Proxy in extending charter 538 Public moneys, application for deposits 357 Public moneys, certificate of advice 358 I Public moneys, resolution authorizing application for de- posits 357 Re-extension of charter 543 Reports of liquidating agent 529 Reserves, computation of 298 Resolution assuming liabilities of bank liquidated for consolidation 502 Resolution for assignment of U. S. bonds 406, 407 Resolution for change of name 520 Resolution for increase of capital 507 Resolution for liquidation 523, 524 Resolution ratifying consolidation 497 Resolution to reduce capital 514 Resolution to restore impaired capital 517 Signatures of officials of national banks 442 Subscription paper for organizing national bank 424 Subscription to new stock 510 Tax on circulation 486 "Withdrawal of bonds to secure circulation 476 569 PAGE Franchise — Forfeiture of 141, 161, 162 Tax, earnings of Federal Reserve Banks as 216 G Gifts to Officers and Employees of Member Banks prohibited 301 Gold — Against Federal Reserve notes in circulation 278 Dealing in coin and bullion by Federal Reserve Banks... 268 Deposit of, with Treasurer, by Federal Reserve Banks 288 Exchange of, for Federal Reserve notes 281 In gold settlement fund as reserve 288 Shipments of, to Treasurer, expenses of 289 Gold Certificates — Issue of 380 Legal tender 388, 389 Gold Coin — Issue of 389 Legal tender 387, 486 Gold Dollar as Standard Unit of Value 377 Gold Settlement Fund of Federal Reserve Board 288 Government Bonds — National banks dealing in 12 Government Depositories — (See Depositories, Government) Government Deposits — (See Deposits) Governor of the Federal Reserve Board 227 Guaranty by National Bank 15 Guaranty Laws of various States 19 Guaranty of Paper sold by National Banks 15 Guardians — As Shareholders 64, 437 Power of national banks to act as 232 H Hypothecation of Circulating Notes prohibited 114 I Illegal Taxation — Remedy for 142 Impaired Capital — Restoration of 515 Impairment of Capital Stock 43, 111 Imitation of Circulating Notes prohibited 182 Increase of Capital Stock 41, 505 Increase of Capital Stock in Consolidation 495 Increase of Capital Stock of Federal Reserve Bank 212 Increase of Circulating Notes 74 Indebtedness of National Banks, Limit on 107 Indictment fob Embezzlement, Abstraction, Misapplication, form Of 174, 175 570 PAGE Indictment for Making False Entries 175 Individual Liability of Shareholders 56, 57 Individuals — Loans to, by Federal Reserve Banks 248 Indobsement "without recourse" 247 Indobsement — On interest checks 418 On separate piece of paper 249 Infants — As Corporators o'f National Banks 422 As shareholders 61 Purchase of stock in name of 61 Injunction — Against appointment of Receiver 156 Against Comptroller where obtainable 189 Prohibited before final judgment 187 Insolvency — Meaning of 166 Insolvent Banks — Abatement of tax on notes of 133 Appointment of Receiver 148 Bankruptcy law not applicable to 149 Creditors of, claims, dividends, etc 154, 155 Deposits made when bank insolvent 166 Disposition of assets after payment to creditors 158 Meaning of insolvency 168 Preferences against 165, 166 Set-offs against 187 Surrender of Federal Reserve Bank stock held by 213 Taxation of 140 Transfers in contemplation of insolvency 165 Inspection of Books by Shareholders 130, 145 Instbuments Certified by Comptroller as Evidence 189 Insubance Agents — National Banks as 28, 330 Insubance on Lives of Officers 18 Interest — Compounding of illegally 124 Forfeiture of for usury 119 On bonds held as security for circulation 78 On Federal Reserve Notes 280 On registered bo'nds 417 Rate of, chargeable by National Banks 115, 116 Rates 249 To creditors of insolvent banks 155 Usurious charges by national banks 330 Ixtebest Checks — Issue of duplicate 419 Indorsements on 418 Non-receipt or loss of 413 Inteblocking Dibectobs — (See also Clayton Act) 334 Issue of Cibculating Notes 81 Issue of 2% Bonds 77 571 PAGE Issue of Unauthorized Notes prohibited 86 International Bimetallism 385 J Judgment Notes, Power of National Banks to Lend on 22 Judicial Notice of Acting Comptroller 190 Jurisdiction — District Court's original 187 In receivership cases 152 Of Courts to appoint receiver 149 Of State Courts in usury cases against National Banks... 123 Suits by and against National Banks 184 Suits by and against receivers 186 K Kern Amendment to Clayton Act — Substantial competition be- tween banks 339 Exceptions to act 338 L Lawful Money 92, 486 Against Federal Reserve notes in circulation 278 Exchange of, for Federal Reserve notes 281 Leases, Power of Cashier to Make 21 Ledger Accounts Covering Circulation 482 Legal Status of Capital Stock 39 Legal Tender — (See also Currency and Money) 486 Lending Money for Customers 16 Liabilities — Banks extending charter 51 Continuation of, under changed name of bank 49 Directors, for excessive loans, false reports 164 For neglect 165 For violations of law 161 For illegal certification of check 109 Of executors, trustees, etc., as shareholders 64 Of Federal Reserve agents for Federal Reserve notes 281 Of shareholders of Federal Reserve Banks 200 Of shareholders of national banks 56, 57, 304 Of shareholders of national banks in liquidation 147 Of shareholders of State member banks 225 Total, of any person to national bank 101 Liability of National Banks — False representations of cashier... 16 572 PAGE Liability of National Banks — Ultra vires purchase of stock 13 Liability of Pledge of Stock 60 Liberty Bonds 397 Conversions of 415 Exchange and transfer of 399 Rules and regulations concerning transactions in 399 License Tax 141 Lien — By national bank on own stock 109 Federal Reserve notes as, on assets 279 Provisions for, on capital stock 435 Limit of Liability of any Person to National Bank 101 Limit on Total Indebtedness of National Banks 107 Limitations — Acceptances 254, 255 Bills of exchange drawn against actually existing values, 250, 251 Member banks' acceptances 252 Rediscounts 248, 249, 250, 251 Of circulating notes 82, 85 Of visitorial powers 130 On real estate holdings of national banks 20 On real estate loans to one person 25 Limitations Under Section 13 — Rediscount of paper of one bor- rower for different member banks 251 Rediscounts, one maker or indorser 250 Liquidated Bank — Dividends accrued on Federal Reserve Bank stock 217 Liquidating Agent — Appointment and powers of 527 Reports of, to Comptroller 528, 529 Liquidating Committee — (See Liquidating Agent) Liquidation — Appointment of receiver after (voluntary liquida- tion) 146 By expiration of charter 523 Corporate existence in 145 Date of 147 Dividends to shareholders 146 Election and powers of officers 532 Expiration of charter 53 Federal Reserve Bank 231 For consolidation 500, 501 General instructions on 522 Inspection of books 145 Liability of shareholders 64, 147 New contracts 145 Notice of intention to go into 146 573 PAC3E Liquidation — Redemption of circulation 91, 92, 93 Shareholders' meeting 145 Suits against directors 146 Surrender of Federal Reserve Bank Stock 213, 215, 216 To sell business or to reorganize 532 Transfers of stock 145 Withdrawals of U. S. Bonds 526 List of Shareholders to be Furnished 115 Loaning Powers of National Banks 101 Loans — By national banks on own stock 109 Excess by national banks 102 Excess, by State bank members 224 Excess, liability of directors for 164 Funds in trust department of national bank 233 On city real estate 26 On improved farm lands 330 Real estate, by foreign branches of national banks 305 Real estate by national banks 23, 304 Secured by farm loan bonds 331 Security for, by national banks 12 Stock of other national banks Ill To individuals, by Federal Reserve Banks 248 To officers 16 Usurious, by national banks 118 Loans on Real Estate 23, 304 Circular of Comptroller of Currency 26 Limit of, to one person 25 National banks as agents in making 28 Location — Change of 49, 519 Location of Federal Reserve Bank, change of 199 Lost Certificates of Capital Stock 36 M Map Outlining Federal Reserve Districts 192 Married Women, as Corporators of National Banks 422 Liability of as shareholders 58 Meetings of Shareholders 54, 65 For liquidation 145 Increase capital stock 506 Notice of special meeting 507, 513 Proxy for special meeting 508, 513 Ratification of consolidation 496 Reduction of capital stock 512 574 PAQH Member Banks — Acceptances 253, 256, 258, 261 Advances to, by Federal Reserve Banks 259, 260 As agents for non-member banks in rediscounting 296 Building and loan associations as 226 Capital stock in Federal Reserve Bank 212 Deposits of, with non-member bank, limit of 296 Examination of 300 Fees, commissions, etc., to officers and employees of, pro- hibited 301 Loans to, by Federal Reserve Banks 259 Mutual Savings Banks as 225 Private bankers as 225 Reserves carried by 294, 295 State banks, applications to become 218, 223 Branches 225 Capital stock 223 Condition reports 219, 224 Eligibility 222 Examinations 219, 224 Excess loans 224 Liability of stockholders of 225 Regulations of Federal Reserve Board on 222 Restrictions on 219 Status under Clayton Act 334, 337 Withdrawal from Membership 220 Transfer of, from one district to another, dividends on Federal Reserve Bank stock 217 Voluntary liquidation, surrender of Federal Reserve Bank stock 213, 215, 216 Membership — Banks located outside of Continental United States. . 300 Minor Coins as Legal Tender 387 Minors — Assignments of Registered Bonds of 411 Minute Book — Provisions in by-laws on 454 Misapplication of Bank's Funds 170 Money — (See Currency and Money) Money Order Business by Federal Reserve Banks 206 Moneyed Capital — Meaning of 135 Municipal Bonds — Purchase of, by national bank 13 Mutilated Circulating Notes — Remittances of 484 Agent to witness destruction of 479 Redemption of 481, 484 Mutilation of Circulating Notes Prohibited 183 Mutual Savings Bank — Eligibility for membership 225 Not under prohibitions of Clayton Act 337 N PAGE Name — Change of 49, 519 Of national bank 428 "National" unauthorized use of, prohibited 183 National Bank Act — Penalty for violations of 161 National Bank Notes — (See also Circulating Notes) As legal tender 388, 486 Similarity to Federal Reserve Bank notes 290 National Banks — Liability of (see Liability of National Banks) Powers of (see Powers of National Banks) Advertising of savings accounts by 293 Agencies of 100 Articles of Association 8, 430, 435 As insurance and real estate agents 330 By-laws 442, 451 Branches of 100 Branches of State banks converting 47 Change of name and location 49, 519 Circulating notes of 81, 447 Citizenship of 185 Commencement of business by 40, 448 Consolidation of 47, 491 Conversion of State banks into 45, 216, 461, 471 Conversion of State banks with branches 47 Corporate powers of 9 Directors of 433 Excessive loans by 102 Excessive loans by with branches 105 Filing of organization papers 439 Foreign branches of 304 Indebtedness of, limit on 107 Interest chargeable by 115, 116 Interlocking directorates under Clayton Act 335, 336 Liability of stockholders 304 License tax not collectible against 141 Limit of liability of any person to 101 Loaning powers of 101 Loans on own stock prohibited 109 Loans on stock of other Ill Method of organizing 421 Organization of 8, 430 Place of business 99 Political contributions by, prohibited 181 576 PAGE National Banks — Real estate loans by 304, 330 Reports of, to Comptroller 125 Shareholders (see Shareholders) State bank reorganized as 457, 460 Suits by and against, jurisdiction 184 Taxation of, by states 134 Title of 428 Trust department of 236 Trust powers 232 Usury by 118 When a body corporate 439 Who may form 8 National Gold Banks no Longer in Existence 87 Neglect — Liability of Directors for 165 Negotiability — Acceptances, where payable 328 Bills and notes made payable in exchange 288, 328 Bills of exchange 252, 32S Bills payable to the order of drawee 329 Bills payable with attorney's fees or collection charge.... 329 Drafts payable with interest 329 Sight drafts accepted payable at a future date 329 Trade acceptance providing for extension of time 329 Net Earnings — Reports of 127 New Stock — Liability of subscribers to 59 Non-Member Banks — Collection of items on 287 Deposits of postal funds in 276 Member banks as agents for, in discounting 296 Member banks' deposits with, limit of 296 Non-Member Trust Company Acceptances — Purchase of, by Re- serve Banks 273 Notes — Demand, discount of 248 Discount of, by Federal Reserve Banks 240 Payable on or before certain date 248 Notice — Comptrollers', of impairment of capital 515 Intention to go into liquidation 146 Liquidation by expiration of charter 534 Special shareholders' meeting 507, 513 To creditors in liquidation 525 Notification of special dividend 127 O Oath — Directors of national bank 67, 440 Oath of Office — Members of Federal Reserve Board 227 577 PAGE Obligations of another bank, assumption of 15 Obligations of the United States defined 176 Officers — Authorized to witness assignments of bonds 408 Binding bank to pay draft 16 Bonds of 17 Bonds of, on extension of charter 543 Election of, in liquidation 532 Federal Reserve Bank, removal of 231 Federal Reserve Bank, tenure of office 206 Insurance on lives of 18 Loans to 16 Powers of, in liquidation 532 Powers of, to write insurance 29 President 70 Provisions in by-laws on 452 Signatures of 469 Tenure of office 17 Open Accounts — Assignment of, rediscount of, with Federal Re- serve Bank 246 Open Market — Gold coin and bullion, dealing in, by Reserve Banks 268 Purchases of acceptances and bills of exchange by Re- serve Banks 265 Purchases of notes, bonds, and warrants by Reserve Banks 269 Organization Certificate 8 Acknowledgment of 9 Certified copy of as evidence 190 Execution and form of 436, 438 State bank converting into national 467 Organization Committee — Reserve bank 198-205 Obganization of FEnERAL Reserve Banks 198, 203 Organization of National Banks 8, 430 Commencement of business 40 Preliminary examination 40 P Panama Canal Bonds — Deposit of 78 Paper — Commercial or business 107 Paper Currency — United States, issue of 389 Redemption of 390 Returns for 391 Transmission of, to Treasurer 392 Par Collection of Checks — (See Check Clearing and Collection) 37 578 PAGE Pae Value of Capital Stock 34 Parity of Forms of Monet 327 Partnership — Power of national bank to join 17 Payment for Capital Stock 37, 111 Payment of Usurious Interest' — Remedy 121 Penalty — Excessive loans 106 Failure of national bank to accept terms of Federal Re- serve Act 201 Failure of State bank member to make reports 219 Failure to make tax return on circulating note 487 Loan or gratuity to bank examiner 302. Loans to officers, etc., out of trust funds of national bank. 233 Officers or employees receiving fees, etc 302 Usury by national banks 118 Violation of National Bank Act 161 Place of Business of National Banks 99 Pledge — Liability of, of stock 60 Political Contributions Prohibited 181 Population in Determining Capital Stock 34 Postal Savings Bonds — Not receivable as security for circulating notes 375 Postal Savings Deposits 361 Advertisements by banks 374 Apportionment of 369 Deposit of funds in banks 370 Eligibility of banks 363 Excess deposits 370 Failure of banks to repay 374 Interest, rate of 361, 370 Qualification of banks 364 Reports of 374 Resolution of withdrawal of bonds held to secure 373 Withdrawal by Board of Trustees 371 Withdrawal by postmasters 371 Withdrawals of securities by banks 372 Postal Savings Funds — Deposit of, in non-member banks 276 Prohibition against charge of exchange by banks on 375 Repeal of conflicting laws 375 Powers — Corporate, of Federal Reserve Banks 205 Corporations authorized to do foreign banking business. . . 309 Examiners' 12 9 Federal Reserve Board's, over corporations authorized to do foreign banking business 309 579 PAGE Powers of National Banks — Accommodation paper 15 Agencies 100 Agents in making Real Estate Loans 28 Assuming obligations of another bank 15 Banking house 20 Banking powers 10 Borrowing of money 14 Branches 100 Clearing-house members ._ 17 Commercial paper 14 Collections 16, 19 Contract to pay for procuring business 17 Corporate powers 9 Dealing in checks 16 Dealing in stocks and bonds 12 Debentures as collateral 22 Deposits 11 Donations 17 Duty to dispose of stock properly acquired 13 Employment of attorneys 16 Government bonds, dealing in 13 Guaranty of paper sold by bank 15 Insurance agents 28 Insurance on lives of officers 18 Lending credit 15 Lending money for customers 16 Loaning powers 101 Loans on own stock 109 Loans on real estate 23 Loans on stock of other national banks Ill Loans to officers 16 Money equitably belonging to others 19 Partnership members 17 Purchase of commercial paper 14 Purchase of municipal bonds 13 Purchase of own stock 110 Purchase of stock in other national banks 13 Real estate holdings 20 Rediscounts 14 Security for loans 12 Stock in building companies 21 Stock in corporations transacting foreign business 305 Stocks taken as security for or in payment of debts 13 Stocks and bonds 12 580 PAGB Powers of National Banks — Subscriptions to Red Cross 19 Title to stock illegally purchased 13 Ultra vires contracts 13 Powers of President of Bank 70 Powers of Receiver 150 Powers of Substitution — Form of 409 Powers — State banks as members 224 Visitorial, limited 130 Preference — Shareholders' liability not entitled to 63 Preferences Against Insolvent Banks 165, 166 Presentment of Paper — After appointment of Receiver 149 President — Powers of 70 Price of New Capital Stock 510 Priority of Claims Against Insolvent Banks 155 Printing of Circulating Notes 83 Printing of Federal Reserve Notes 282 Private Banker — Definition and interpretation of term 335 Eligibility for membership 225 Re-organization as national bank 460 Privilege Tax 141 Privilege of Extended Banks 51 Procuring Business — Power of National Bank to pay for 17 Profits — Undivided 112 Promissory Note — Definition of 243 Promoters — Professional, in organizing national bank 425 Protest 1 — Of Circulating notes 93, 95, 156 Proxies — Form of for election of directors 66 Special meeting of shareholders 508, 513 Vote of shareholders by 54, 55 Public Moneys — Depositaries of 44 Unauthorized receipt of 181 Publication Certificate to Commence Business 41, 448 Notice of liquidation 526 Reports to Comptroller 125 Purchase by National Bank of Own Stock 110 Purchase of Drafts at Usurious Rate 117 Q Qualifications — Members of Federal Reserve Board 227 Qualifications of Directors 66 Quorum — Provisions in by-laws on 456 581 R PAQB Rate of Interest Chargeable by National Banks 115, 116 Rates, Discount — Establishment of, by Federal Reserve Banks... 274 Forward discount sales 274 Preferential, on member bank notes 274 Readily Marketable Staples — 'Definition of 249 Real Estate Agents — National banks as 330 Real Estate — Circular of Comptroller on real estate loans 26 Conveyance of, provisions in by-laws on 453 Limit of loans to one person 25 Loans on, by Central Reserve City Banks 25 Loans on, by foreign branches of national banks 305 Loans on, by national banks 23, 304, 464 Loans on city property 26 National banks as agents in making loans on 28 Power of national bank to purchase, hold and convey 20 Purchase of, by receiver to protect equity 157 Taxation of, of national banks by States 134 Receiver — Appointment by Court 149 Appointment of, after liquidation 146 Appointment of, for impairment of capital 519 Appointment of, for failure to pay circulating notes 148 Appointment of, in insolvency 148 Claims of creditors 154, 155 Contracts of 151 Debts compounded by 151 Deposit of funds by 150 Disposition of assets after payment to creditors 158 Duties of 150 Effect of appointment of 149 Expenses of, paid from assets 156 Injunction against appointment of 156 Jurisdiction of suits by and against 152, 186 Occupies same position as bank 153 Powers of 150 Power of national bank to act as 232 Preferences 165, 166 Purchase of real estate by 157 Sales by 151 Set-offs allowed by 167 Suits against directors 153 Suits by and against 152 State Courts and Statutes 152 582 PAGE Receiver — 'Supervisory power of Comptroller 150 Red Cross — Subscriptions to 19 Redemption Fund 87, 88 Redemption of Circulating Notes 87, 479 Disposition of notes redeemed 485 Redemption fund 180, 481 Remittances 482, 484 "Witnessing destruction of mutilated notes 479 Of failed bank 95 Of liquidating bank 91,92, 93 Redemption of Paper Currency 390 - Redemption and Exchange — Of silver and minor coin 392 Rediscounts — Assignment of open account 246 Bankers' acceptances with Reserve Banks 244 Between Federal Reserve Banks 229 By national banks 14 Drafts payable on condition 245 Indorsement "without recourse" 247 Member banks as agent for nonmember banks 296 Notes and bills, liability of maker to bank 329 Participation certificate in a note 247 Reduction of Capital Stock 43, 511 Re-extension of Charter 543 Registered Bonds 412-417 Exchange of coupon bonds for 76 Exchange for bonds of other denominations 401 Resolutions granting authority to assign, form of 406 Transfer of 403 Registry of bond transfers to and by Treasurer 80 Registrar of Stocks and Bonds — National bank as 232 Regulations of Comptroller on national banks as insurance agents 29 Regulations of the Federal Reserve Board — Governing corpora- : tions authorized to do foreign banking business (Edge Corporations) 318 A — Rediscounts under Section 13 241 B — Open-market purchases of bills of exchange, trade ac- ceptances, and bankers' acceptances 265 C — Acceptances by member banks of drafts and bills of exchange 262 E — Purchase of warrants 269 F — Trust powers of national banks 234 G! — Real estate loans 24 H— Membership of State banks and trust companies 222 588 PAGB Regulations of the Federal Reserve Board — I — Increase or de- crease of capital stock of Federal Reserve Banks 2i4 J — Check clearing and collection 284 Regulations of Treasury — Coupons detached from called bonds . . . 417 Issue, exchange and redemption of money 389 United States bonds 396 Regulations on Real Estate Loans 24 Remedy for Illegal Taxation 142 Remedy Where National Banks Charge Usury 118 Remittances for Redemption of Circulating Notes 482, 484 Removal of National Bank to Larger Place 49 Removal — Officer or director of Federal Reserve Bank 231 Renewals of Usurious Contracts 120 Reorganization Instead of Extension of Charter 544 Reorganization — Liquidation for purpose of 532 Reorganization of Reserve Bank 231 Reorganization of State Bank as National Bank 457-460 Replevin — Action of, against Receiver 167 Reports — Liquidating agents to Comptroller 528, 529 Of outstanding circulation 132 Penalty for failure to make, of condition 128 Verification of 128 Of Comptroller to Congress 4 Of postal savings funds in banks 374 To Comptroller, liability of directors for false 164 To Comptroller, publication of 125 Reports of Dividends and Net Earnings 127 Reserve Cities 230 Reserves by member banks in 295 Reserves by member banks not in 294 Status of, under Federal Reserve Act 203 Reserve Requirements Not Applicable to Government Deposits.. 348 Reserves — Against Federal Reserve Notes 278 Against Government deposits 298, 348 Against time deposits 294 Banks located in United States, but outside of Continental United States 300 Branches, foreign, of national banks 305 Calculation of, form for 297, 298 Carried by member banks located in central reserve cities 295 Carried by member banks located in reserve cities 295 Carried by member banks not located In reserve or cen- tral reserve cities 294 584 PAOB Reserves — Carried by member banks located in outlying districts of reserve cities 295 Deductions in determining 298 Deficient, tax on 229 Eligible paper as 29G Five percent redemption fund, as 295, 300 Form for computing 298 Gold 327 Gold, against Federal Reserve notes 278 Gold in gold settlement fund as 288 Suspension of requirements as to 229 Tax on deficient 229 "Withdrawal of required penalties 297 Residence of Directors of Federal Reserve Banks 207, 211 Resignation of Directors 69 Resolution — Assignment of United States bonds 407 Assuming liabilities of liquidated bank in consolidation.. 502 Applying for public moneys deposit 357 Of shareholders for change of name 520 Of shareholders for liquidation 523, 524 Of shareholders to ratify consolidation 497 Of shareholders to reduce capital 514 Of shareholders to restore impaired capital 517 Withdrawal of postal savings bonds 373 Restrictions on Loans to One Person 102, Restoration of Impaired Capital 515 Retirement of Circulating Notes 74, 89, 90 Retirement of Federal Reserve Notes 281 Returns fob Paper Currency 391 Rules and Regulations — Liberty bonds and Victory notes 399 S Safe Deposit Boxes 12 Salary — Assistants to Federal Reserve agents 210 Comptroller of the Currency 226 Directors of Federal Reserve Banks 210, 211 Examiners 129 Federal Reserve Agent 210 Federal Reserve Board members 226 Sale of Capital Stock for Failure to Pay Installments 28 Sale by Receivers of National Banks 151 Savings Accounts — Advertising of, by national banks 293 As time deposits 294 585 PAGE Savings Accounts — Definition of 293 Savings and Loan Associations — Under Clayton Act 334 Savings Banks, Mutual — Eligibility for membership 225 Savings Deposits 11 Seal— Of national bank 438, 453 Secbetaby of Tbeasuby — Eligibility to hold office in member bank. 226 Ex officio member of Federal Reserve Board 226 Secubity fob — Acceptances, substitution of 259 Federal Reserve notes 277 Promissory notes of member banks to Federal Reserve Bank 260 Set— Off 63, 167 Shabeholdebs — Administrator as 437 Agent for, after payment of creditors 158 Agent for, after receivership 158 Agent for, can sue directors 161 Agent for, cannot enforce liability of 63 Annual meeting of 65, 452 Assessment against 62, 63 Assessment by, where capital impaired 112 Authorization by, in converting State bank into national bank 465 Consent of, to extension of charter 538 Dissenting, rights of in consolidation 499 Dissenting to extension of charter 542 Dividends to, in liquidation 146, 532 Executors as 437 Guardians as 437 Infants as 61 Inspection of books by 130, 145 Liability of 56, 57, 304 Liability of executors, trustees, etc., as 64 Liability of, in liquidation 147 Liability of, of Federal Reserve Banks 200 List of, to be furnished 115 Married women as 58 Meetings of 54, 65 For liquidation 45 To Increase capital 506 To ratify consolidation 496 To reduce capital 512 Notice to, of impaired capital 516 Notice of special meeting of 507, 513 Proxy for special meeting of 508, 513 586 PAOB Shareholders — Resolution of, for change of name 520 Resolution of, for liquidation 523, 524 Rights of, in reduction of capital 514 Resolution of, ratifying consolidation 496 Rights of 34 After receivership 158 At elections 54 To subscribe to increase in capital 42, 509 Sale of stock of delinquent 519 Trustees as 437 Voting by 54 Who may be 437 Withdrawal of, on extension of charter 52 Shipments — Of Federal Reserve notes, charges on 279 Of moneys from Washington 289, 894 Of unfit notes to Washington 393 Sight Drafts — As acceptances 259 Signatures op Officers 441, 469 Silver Bullion — Sales of 383 Silver Certificates — As legal tender 388, 486 Deposit of, to reduce Federal Reserve notes 281 Issue of 379, 381 Silver Coin — Issue of 890 Redemption or exchange of 392 Silver Coinage — 'Subsidiary 381 Silver Coins — Subsidiary as legal tender 387, 487 Silver Coin or Bullion — Exportation of 885 Silver Dollars as Legal Tender 387 Silver Dollars — Melting of and sale of bullion 382 Silver Ore — Purchase of 383 Single Name — Paper as acceptance 268 Special Deposits with National Banks 11 Special Dividend — Notification of 127 Special Examination of Extended Bank 51 Special Shareholders' Meeting — Notice of 507, 513 Stakeholder — National bank as 11 Stamp Tax on Acceptances 258 On Federal Reserve Bank stock 218 On instruments issued by Reserve Banks 218 Standard of Value: — Maintenance of 327 Staples — Readily marketable, definition of 249 State Banks — Consolidation of, with national 491 Conversion of, into national 45, 461, 471 Surrender of Federal Reserve stock 216 587 PAGE State Banks — Conversion of, with branches 47, 469 Directors of, converting into national 470 Interlocking directorates under Clayton Act . . 335, 336 Membership in Federal Reserve System 218-225 Membership in Federal Reserve System, regulations of the Federal Reserve Board 222 Membership in Federal Reserve System, restrictions 219 Membership in Federal Reserve System, withdrawal from membership 220 Reorganization as national bank 457, 460 Tax on circulation of 143 State Courts — Jurisdiction of, In receivership cases 152 Jurisdiction in suits by and against national banks... 184, 186 Jurisdiction of, in usury cases against national banks 123 State Laws Regarding Usury by National Banks 123 State Statutes — Governing receivership cases 153 State Taxation of Circulating Notes 142 State Taxation of National Banks 134 Statute of Limitations — Shareholders' liability 62 Usurious contracts by national banks 119, 121 Stock (See also Capital Stock) — Collection of taxes on shares of. 141 Loans on and purchase of own 109, 110 Loans on, of other national banks Ill National banks dealing in 12 Power of national bank to take in building company 21 Power of national bank to take, in corporations trans- acting foreign business 305 Purchase of, procured by fraud 61, 64 Purchase of, in name of infant 61 Taken as security for or in payment of debts 13 Taxation of national bank, by States 134 Transfers of 59 Stockholders — (See Shareholders) Subscribers to New Stock — Liability of 59 Subscriptions to Capital Stock — Payment of 38, 425 Subscriptions to New Stock — Rights of shareholders 509, 511 Subsidiary Silver Coin as Legal Tender 486 Successive Assessments Against Shareholders 63 Suits — Against directors 15 3 Against directors by shareholders' agent 161 Against directors for violation of law 163, 164 By and against national bank receivers 152, 186 Jurisdiction of by and against national banks 184 Supervision Over Federal Reserve Banks 232 588 vAcn Supeevision Over Member Banks 220 Surplus 113 Earnings of Federal Reserve Banks paid into 216 Increase of capital from 509 Surrender of Federal Reserve stock when reducing 215 Suspension of Reserve Bank 231 Tax — License 141 Tax on Circulating Notes 131, 132, 486, 490 Tax on Deposits 142 Tax on Deficient Reserves 229 Tax— Privilege 141 Tax — Stamp, on acceptances 258 Taxation — Abatement of, on notes of insolvent banks 133 Circulating notes 131, 132, 486, 490 Collection of taxes on shares of stock 141 Exemption of Federal Reserve Banks 218 Insolvent national banks exempt from 140 Remedy for illegal 142 State, of circulating notes 142 Of real estate of national banks 134 Of shares of stock of national bank 134 United States bonds exempt from 143 Term of Office of Directors 65 Of Federal Reserve Banks 207, 211 Time Deposits — As demand deposits, when becoming payable within 30 days 293 Definition of 292 Open accounts 294 Reserve against 294 Savings accounts as 294 Title "Federal" Discouraged 183 Title "National" Prohibited to Other Banks 183 Title of National Bank 428 Total Indebtedness of National Banks — Limit on 107 Trade Acceptances — (See Acceptances, Trade) Transfers in Contemplation of Insolvency 165 Transfer of Assets in Consolidation 499 Transfers of Capital Stock 34 In liquidation 145 Sufficiency of 59 Transfers of Federal Reserve Bank Stock 212, 216 589 PAGE Tbansfebs of Membeb Banks From One District to Another — Dividends on Federal Reserve Bank stock 217 Transfers of Registered Bonds or Notes 403 Transfers of U. S. Bonds to and by Treasurer 79, 80 Transportation Charges and Risks on Bonds or Notes 41 G Treasurer of U. S. — Deposit of bonds with 74 Transfer of bonds to and by 79, 80 Deposit of gold coin and certificates with, by Federal Re- serve Banks 288 Treasury Notes — Issue of 386 Legal tender 387, 486 Trust Companies — Branches of 225 Members of Federal Reserve system 218 Trust Powers Granted to National Banks 232 Trust Receipts as Security for Acceptances 257 Trustee — As shareholder 64, 437 National bank as 232 U Ultra Vibes Contracts by National Banks 18 Undivided Profits 112 U. S. Bonds — Acceptable to secure circulation 474 As security for public moneys 479 Definition of 76 Deposit of, on organization of national bank 446 To secure circulation 74, 474, 475 Discount of paper secured by 249 Depreciation in value of, held to secure circulation 79 Examination of, by bank's agent 81 Exchange of 1-year notes for 30-year bonds 292 Exchange by Federal Reserve Banks of 2 per cent, bonds and 1-year notes ,, 290 Interchange of bonds and notes of different denominations 401 Interest checks on 418, 419 Issue of 1-year notes and 30-year bonds 291 Issue of 2 per cent, bonds 77 Liberty loan bonds and Victory notes 397 Mutilated or defaced 414 Power of attorney to agent to examine 479 Purchase of, by Reserve Banks 75, 269 Regulations of Treasury Department relating to 396 Resolution for assignment of 407 Sale of, for failure to pay circulation 95, 96 Sale of, to Reserve Banks 74 590 PAGE U. S. Bonds — Security for circulating notes 78, 474 Tax exempt 143 Transfer of, in consolidation 4, 99 Transfer of, on extension of charter 542 Transfer to and by Treasurer 79, 80 Transportation charges and risks on 416 Victory bonds 398 Withdrawal of, in liquidation 526 Withdrawal of, securing circulation 476, 478 United States Called Bonds forwarded for redemption 416 United States District Attorney to Conduct Suits 189 United States District Attorney to Represent Receivers 153 U. S. Notes— Legal tender 387, 486 Receipt of as collateral prohibited 170 U. S. Paper Currency — Issue of 389 Usury by National Banks 118 V Vacancies — Board of Directors, how filled 69 Directors of Federal Reserve Banks 211 Federal Reserve Board 228 Verification of Reports to Comptroller 128 Victory Loan 398 Violations of National Bank Act Penalty for 161 Visitorial Powers Limited 130, 301 Visitorial Powers of Federal Reserve Board 229 Voluntary Liquidation — (See Liquidation) Vote by Shareholders 54 Voting Trust 55 W Watver of Demand — Notice, and protest, acceptances 328 WArvER of Forfeiture of Usurious Interest 124 War Paper — Discount of, in excess of limitation 237 War Savings Stamps — Paper secured by, eligibility for discount.. 249 Warehouse Receipts — As security for acceptances 255, 256, 257 Warrants — Purchase of, by Federal Reserve Banks 269-273 Wife's Separate Estate as Security 22 Wilful Misapplication 172 Withdrawal of Bonds Securing Circulation 476, 47S Withdrawal of Capital Stock 112 Withdrawal of Shareholders on Extension of Charter 52 Witnessing Destruction of Mutilated Notes — Power of attorney to agent for 479 Worthless Assets — Writing off 231 it iiliiii iBiiHii mAi lmm FACILITY AA 000 835 066 j