A NONTECHNICAL SUMMARY OF ALL AMENDMENTS TO THE FEDERAL RESERVE ACT THROUGH

MARCH 4, 1923, SHOWING THE PURPOSE

AND EFFECT OF THE CHANGES MADE

SUMMARY OF ALL AMENDMENTS TO THE FEDERAL
RESERVE ACT.

The following is a brief explanation of the various amendments to the Federal reserve act. It consists of two parts: Part I, which contains a discussion of the various acts which specifically amended the text of the Federal reserve act; and Part II, which contains a discussion of those acts which did not change the text of the Federal reserve act, but which in effect amended the substance of the act.

PART I. ACTS SPECIFICALLY AMENDING THE FEDERAL RESERVE ACT. The following acts specifically amended the Federal reserve act:

ACT OF AUGUST 4, 1914.

Section 27 of the Federal reserve act as originally enacted amended section 9 of the Aldrich-Vreeland Act of May 30, 1908, by reenacting that part relating to the tax rates on national-bank notes secured otherwise than by bonds of the United States. The act of August 4, 1914, amended section 27 of the Federal reserve act so as to add to the above-named section of the Aldrich-Vreeland Act a proviso authorizing the Secretary of the Treasury to suspend the limitations imposed by sections 1, 3, and 5 of the Aldrich-Vreeland Act on the issue of such additional national-bank notes and to extend the privileges of the Aldrich-Vreeland Act to all qualified State banks and trust companies which had joined the Federal reserve system or might contract to do so within a limited time. This amendment has become inoperative by reason of the expiration by limitation on June 30, 1915, of the Aldrich-Vreeland Act.

ACT OF AUGUST 15, 1914.

Reserves. This act amended section 19 of the Federal reserve act SO as to permit State banks or trust companies which were then coming into the system to continue to keep their reserves with other State banks or trust companies during three years within which the change was to be made from the old system to the Federal reserve system.

ACT OF MARCH 3, 1915.

Acceptances. This act amended section 13 (paragraphs 3, 4, and 5) so as to authorize the Federal Reserve Board, in its discretion, to increase the amount of acceptances based on the importation or exportation of goods which a member bank of the system may make and which a Federal reserve bank may discount.

ACT OF SEPTEMBER 7, 1916.

Reserves. Section 11 was amended by the addition of a new subsection (m) which authorized the Federal Reserve Board, upon an affirmative vote of not less than five of its members, to permit member banks to carry in the Federal reserve banks any portion of their reserves then required to be held in their own vaults.

Deposits with Federal reserve banks. Section 13 was amended sc as to authorize Federal reserve banks to receive on deposit from member banks all checks and drafts payable on presentation, and also, for collection, maturing bills. Prior to the amendment the Federal reserve banks were authorized to receive on deposit only those checks and drafts which were drawn upon solvent member banks and other Federal reserve banks. The amendment also authorized any Federal reserve bank to receive from other Federal reserve banks solely for purposes of exchange or of collection checks and drafts payable upon presentation within its district and maturing bills payable within its district.

Rediscounts.-Section 13 was further amended so as to provide that the indorsement by a member bank of notes, drafts, and bills of exchange discounted with its Federal reserve bank should be deemed to constitute a waiver of demand, notice and protest by the member bank, as to its own indorsement exclusively. Prior to the amendment member banks were required to execute waivers of demand, notice and protest.

Section 13 was further amended so as specifically to provide that certain notes, drafts, and bills of exchange having a maturity of 90 days, exclusive of days of grace, might be admitted to discount. Prior to this amendment the statute was silent on the question as to whether the maturity included days of grace.

Section 13 was further amended so as to provide that the discount of notes, drafts, and bills of exchange drawn for agricultural purposes or based on live stock and having a maturity not exceeding six months shall be limited to a certain percentage of the total assets of the Federal reserve bank. Prior to this amendment, the discount of such paper was limited to a certain percentage of the capital of a Federal reserve bank instead of its total assets.

By another amendment to section 13, the aggregate of notes, drafts, and bills bearing the signature of any one borrower (other than bills of exchange drawn against actually existing values) which may be discounted for a member bank, is limited to 10 per cent of the unimpaired capital and surplus of the member bank. Prior to this amendment, Federal reserve banks were not permitted to discount notes or bills bearing the signature or indorsement of any one person, company, firm, or corporation to an amount in excess of 10 per cent

of the capital and surplus of the member bank, whether such person, firm, or corporation was the borrower or not.

Acceptances.-Prior to this amendment, member banks were permitted to accept only such drafts or bills of exchange as grew out of transactions involving the importation or exportation of goods. This act amended section 13 so as to broaden greatly the powers of member banks with regard to acceptances. Under section 13, as so amended, member banks are permitted to accept drafts or bills of exchange:

(a) Which grow out of transactions involving the importation or exportation of goods,

(b) 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,

(c) Which are secured at the time of acceptance by warehouse receipts or other such documents conveying or securing title covering readily marketable staples,

(d) 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 furnishing dollar exchange as required by the usages of trade in the respective countries, dependencies, or insular possessions.

In enacting this amendment Congress inadvertently omitted from section 13 that provision which permitted national banks with the approval of the Federal Reserve Board to accept up to 100 per cent of their capital and surplus in transactions involving imports or exports. This provision, however, was restored by the act of June 21, 1917, below.

Advances to member banks.-This act further amends section 13 so as to authorize Federal reserve banks to make advances to member banks on their promissory notes for a period not exceeding 15 days, such notes being secured by notes, drafts, bills of exchange, or bankers' acceptances eligible for rediscount or for purchase by Federal reserve banks, or by bonds or notes of the United States.

Member banks as insurance agents and real-estate brokers.-Section 13 was further amended so as to permit national banks located and doing business in places with a population not exceeding 5,000 inhabitants to act as agents for fire, life, or other insurance companies, and also to act as brokers or agents for others in making or procuring loans on real estate located within 100 miles of the place in which the bank is located.

Banking accounts for foreign correspondents.-Section 14, subsection (e), was amended so as to permit Federal reserve banks, with the