to reduce their capital and remain members of the system. Member banks are also required by section 9 to conform to the provisions of law imposed on national banks which relate to the withdrawal of capital stock. National banks may not withdraw their capital stock except upon a reduction of capital, and no reduction may be made which would reduce the capital below the amount required for the organization of a national bank. The board rules, therefore, that a reduction of capital of a State member bank to an amount less than, would be required for the organization of a national bank would constitute a violation of the conditions of its membership and would subject it to expulsion from the system. 1923 Bulletin, p. 1195. Eligibility of Particular Kinds of Institutions for Membership.

IX, 300. A State bank with one or more branches is eligible for membership, if otherwise qualified, and after becoming a member it may continue the operation of such branches. 1915 Bulletin, p. 126.

IX, 301. Building and loan associations do not constitute banks. within the meaning of that word as used in the Federal reserve act and are therefore ineligible for membership. 1915 Bulletin, p. 212.

IX, 302. A private banker is not permitted by the terms of the Federal reserve act to become a member institution. 1917 Bulletin, p. 693.

IX, 303. A mutual savings bank without capital stock or stockholders is not eligible for membership in the Federal reserve system. 1917 Bulletin, p. 950. (See I, 100; IV, 104.)

IX, 304. Acceptance corporations are in the same relation to the Federal reserve system as private bankers and are ineligible for membership in the system. 1918 Bulletin, p. 634. (See XIII-E, 109.) Reports of Condition, Etc.

IX, 400. Statement of condition rendered to Comptroller of Currency under sections 5211 and 5212, Revised Statutes. Section 9 provides that "member banks" shall render statements of condition, etc. The term "member banks" includes State member as well as national member, hence State member banks must render such statements to the Comptroller of the Currency. (Since the amendment of June 21, 1917, State member banks make reports of condition to their respective Federal reserve banks, and not to the comptroller.) 1915 Bulletin, p. 319.

IX, 401. The Comptroller of the Currency may adopt, under the provisions of the Federal reserve act, the form of report of condition prescribed by the State authorities, provided that such reports show the resources and liabilities of such banks or trust companies under appropriate heads; or the comptroller may adopt so much of the form

used by national banks as he considers appropriate and necessary. (State member banks no longer make reports to the comptroller. See IX, 400.) 1916 Bulletin, p. 114..

Not Subject to Limitations of Section 5200.

IX, 500. State banks on becoming members of the Federal reserve system are not subject to the provisions of section 5200, R. S., but only to the limitations imposed by State laws. They are, however, subject to the provisions of sections 9 and 13 so far as their ability to rediscount the paper of any one borrower with a Federal reserve bank is concerned. (The limitations of section 9 have now been made to conform to those of section 5200, R. S.). 1917 Bulletin, p. 879. (See IX, 600, 604; XIII-D, 101. See also secs. 13 and 11(m), and sec. 5200, R. S.)

Limitations on Rediscount Power of Federal Reserve Banks.

IX, 600. Power of State banks to make loans to any one customer.— A State bank, which becomes a member of the Federal reserve system, may continue to make loans to one customer in excess of 10 per cent of its capital and surplus, provided it is authorized to do so under the laws of the State in which it is located. The obligations of any one customer to whom the bank has loaned more than 10 per cent of its capital and surplus would not, however, be eligible for rediscount with the Federal reserve bank. 1917 Bulletin, p. 696 (2). (See IX, 500, 604.)

IX, 601. Rediscounts of member State bank where loans are made to any one person in excess of 10 per cent of its capital and surplus.Where a State bank, which is a member of the Federal reserve system, has loaned to one of its customers an amount equal to 30 per cent of its capital and surplus, and has rediscounted two-thirds of this amount with a correspondent bank, the remaining one-third is eligible for rediscount with its Federal reserve bank. 1918 Bulletin, p. 638. (See 5200, R. S., 503.)

IX, 602. Rediscount of actually owned commercial or business paper for a member State bank.-Section 9 provides in effect that no Federal reserve bank shall discount for any State member bank any of the paper of any one borrower who is liable to that bank for borrowed money in excess of 10 per cent of its capital and surplus and that in determining to what extent a customer is liable to a State member bank, bills of exchange drawn against actually existing values and commercial or business paper actually owned shall not be considered. (The exceptions to this 10 per cent limitation have now been extended to include all the exceptions in section 5200, R. S. See IX, 604.) This provision does not, however, in any way broaden the limitation upon the rediscount power of Federal reserve banks contained in

section 13, which provides that, except for bills of exchange drawn against actually existing values, the Federal reserve bank may not discount for a member bank the paper of any one borrower in excess of 10 per cent of the discounting bank's capital and surplus. 1919 Bulletin, p. 1157 (1). (See XIII-D, 101, 204, 300.)

IX, 603. The provisions of section 9 limiting the amount of paper of any one borrower which may be rediscounted for a State member bank to 10 per cent of the capital and surplus of that bank relate to the total capital and surplus of the bank and not merely to the capital and surplus assigned under the terms of the State law to the commercial department of the bank. 1920 Bulletin, p. 495.

IX, 604. The Act approved July 1, 1922, amends section 9 so as to authorize Federal reserve banks to rediscount for a State member bank the eligible paper of any one customer of such bank, so long as the customer has not borrowed therefrom in excess of the limits prescribed for national bank loans in section 5200, R. S., thus putting State member banks and national banks on an equality in this respect. (It is to be noted, however, that if a State member bank lends to a single customer in excess of these limits, none of that customer's paper is eligible for rediscount.)

The provisions of section 5200 analyzed in tabular form showing the amounts which a national bank may lend to one customer under various circumstances.

Section 5200 does not, however, determine the amount of rediscounts which a Federal reserve bank may make for member banks, whether State or national; this is determined by the provisions of the Federal reserve act. 1922 Bulletin, p. 933. (See XI(m), 100: XIII-D, 100, 204.)

SECTION 11(b).

Discount Rates of Federal Reserve Banks.

XI(b), 100. Rediscount transactions between Federal reserve banks.On such transactions the rates of interest should be based upon 365 days to the year rather than 360 days to the year. (This ruling is superseded by XI(b), 101, below.) 1918 Bulletin, p. 109.

XI(b), 101. Rediscount transactions between Federal reserve banks.In figuring interest on such rediscount transactions the interest should be based on 360 days to the year rather than on 365 days to the year. Specifically revoking XI (b), 100. 1918 Bulletin, p. 744. (See XIIIC, 601.)

Reserve City.

SECTION 11(e).

XI(e), 100. Qualifications necessary to become.-A city to be qualified as a reserve city must have a population of 50,000, its national banks must have a combined capital and surplus aggregating

$3,000,000 and deposits of $10,000,000, and the city's application must be indorsed by at least 50 national banks located outside of the applying city. 1915 Bulletin, p. 49.

Federal Reserve Board.

SECTION 11(i).

XI(i), 100. Regulations governing State banks becoming members of the system. General discussion of powers and purpose of board in exercising the regulatory power conferred upon it by Congress in the Federal reserve act. The board does not expect to place any restrictions upon the exercise by State member banks of their charter powers, except when regulation is necessary to insure conformity with the terms of the law. 1916 Bulletin, p. 393.

Legal Decisions and Opinions.

SECTION 11(k).

XI(k), 100. Constitutionality of section 11 (k).--Case of First National Bank of Bay City v. Fellows, 244 U. S. 416. Brief of the Federal Reserve Board filed as amicus curiæ set forth in full. (1917 Bulletin, p. 255.) Opinion of the Supreme Court of the United States upholding the constitutionality of this section and confirming the power of Congress to confer upon national banks, as Federal instrumentalities, the right to exercise trust functions set forth in full. 1917 Bulletin, p. 534.

XI (k), 101. Exercise of trust powers in Illinois. Decision of the Supreme Court of Illinois denying writ of mandamus to compel a State official to issue to a national bank a license authorizing it to exercise trust powers. In a former proceeding involving the same question, the court had denied the writ on the grounds that the exercise of trust powers by national banks in Illinois was in contravention of State law, and that section 11(k) was unconstitutional. Subsequently the United States Supreme Court held section 11(k) to be constitutional. (See XI(k), 100). The second denial of the writ was on the ground that the former decision was res judicata and was conclusive until reversed or set aside, although the court. expressly admitted that this decision was erroneous under the United States Supreme Court decision. People v. Russell, 119 N. E. 617, 283 Ill. 520. (It is understood that the Illinois decision was subsequently set aside in an appropriate proceeding, and that licenses to exercise trust powers will be issued to national banks in Illinois having the requisite permission from the board.) 1918 Bulletin, p. 522.

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XI(k), 102. Exercise of trust powers in Missouri.-The assistant attorney general of Missouri holds that the Missouri superintendent of banks is required to receive from national banks, authorized by the board to exercise trust powers, deposits of securities tendered by

such banks in order to enable them to qualify without giving bond, in the same manner as such deposits are received from Missouri trust companies. Opinion dated June 12, 1919. 1919 Bulletin, p.

655. (See also XI(k), 802.)

XI(k), 103. Exercise of trust powers in New York.-Decision of the Supreme Court of New York rendered October 15, 1919, to the effect that since the enactment of section 11(k) of the Federal reserve act, as amended by the act of September 26, 1918, a State no longer has the power to prohibit the exercise of trust powers by national banks or to discriminate against national banks by prohibiting its courts from appointing them in fiduciary capacities when the laws of that State permit the appointment of competing State corporations in such capacities. In re Mollineaux, 179 N. Y. Supp. 90. 1919 Bulletin, p. 1059.

XI(k), 104. Exercise of trust powers in Connecticut. Decision of the Supreme Court of Connecticut, rendered April, 1920, holding that a State may not withhold from a national bank located within its borders the right to exercise fiduciary powers which competing State corporations are permitted to exercise, irrespective of whether the attempted discrimination by the State takes the form of an express statutory prohibition or is to be implied from the mere absence of permissive legislation. Hamilton v. State, 110 Atl. 54. 1920 Bulletin, p. 610.

XI(k), 105. Exercise of trust powers in Wisconsin.-Opinion of the Supreme Court of Wisconsin holding unconstitutional, so far as national banks are concerned, the Wisconsin law prohibiting State courts from appointing in a fiduciary capacity any corporation other than a trust company organized under the laws of Wisconsin. Appeal of Stanchfield, 178 N. W. 310. 1920 Bulletin, p. 700.

XI (k), 106. Exercise of trust powers in Pennsylvania.-Decision of the Superior Court of Pennsylvania upholding the right of national banks to act in fiduciary capacities in Pennsylvania, notwithstanding certain conflicts between State and Federal law with regard to the administration of corporations exercising trust powers. In re Turner's Estate, 80 Pa. Super. 88. 1923 Bulletin, p. 20.

XI (k), 107. Exercise of trust powers in Pennsylvania.-Decision of the Supreme Court of Pennsylvania affirming the decision of the Superior Court (XI (k), 106), and laying down the rule that whenever State laws or regulations conflict with Federal laws or regulations which deal with the exercise of trust powers by national banks, the former must yield, because Federal legislation and regulations on this subject are paramount. In re Turner's Estate, 277 Pa. 110. 1923 Bulletin, p. 560.