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ited in the bank's commercial department. It was ruled that those proceeds constituted trust funds and could be used in the bank's commercial department only upon the deposit of counter security in its trust department. Consideration of other circumstances under which similar deposits would constitute a deposit liability under section 19, rather than trust funds. 1921 Bulletin, p. 1435. (See XI (k), 705; XIX, 506-507.)

XI (k), 705. Certain considerations incident to use of trust fundsDistinction between trust funds and other deposits.--A national bank receiving trust funds may, if permitted by the terms of the trust, employ them commercially in two ways; it may transfer them to its own commercial department for use therein, as provided in section 11(k), or it may make a general deposit of the funds in another institution for the account of its trust department.

Funds received by a bank to meet a corporate debtor's maturing obligations may or may not constitute trust funds. If the bank acts as trustee under a deed of trust for the holders of the obligations which are to be paid, a presumption arises that the funds are trust funds. If the bank has no duty to the holders of the obligations, and

. no special duty with regard to handling the funds, except to pay the obligations when presented, the presumption would be that the transaction gave rise to an ordinary deposit liability.

In any event, all funds received by a bank in the course of its commercial or fiduciary business must be treated either as deposits against which reserves must be carried, or as trust funds subject to the ordinary restrictions and safeguards imposed upon the custody and use of trust funds. 1922 Bulletin, p. 572. (See XIX, 507.) Miscellaneous.

XI (k), 800. Investment by national banks of their own funds.The provisions of the national bank act and the provisions of the Federal reserve act relating to investments made by national banks of their own funds have no application to investment of funds held in trust and not belonging to the national banks. 1919 Bulletin, p. 143. (See XI (k), 803.)

XI(k), 801. A national bank located in Hawaii.--The Federal Reserve Board may properly authorize national banks located in Hawaii to exercise the fiduciary powers authorized by section 11(k). 1919 Bulletin, p. 366.

XI (k), 802. Right of national banks in Missouri exercising trust powers to use the words Trust Companyas part of the corporate title.- Opinion of the United States District Court, Western Division, Western District of Missouri, rendered March 27, 1920, sustaining the right of a national bank in Missouri, which had received the

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board's permission to act in fiduciary capacities, to use the words “Trust Company” as part of its corporate name with the approval of the Comptroller of the Currency, and to advertise that it is engaged in the business of a trust company, contrary to the provisions of a State statute. (Fidelity National Bank & Trust Co. v. Enright, 264 Fed. 236.) 1920 Bulletin, p. 497. (See also XI (k), 102.)

XI(k), 803. Real estate loans by national banks exercising trust powers.—A national bank authorized by the board to exercise trust powers may not invest any of its own funds directly, or by subterfuge, in loans on real estate, except in accordance with the provisions of section 24 of the act. Trust funds held by a national bank as trustee, however, may be invested in loans on farm lands or real estate to the same extent as a State trust company would be authorized to invest under the laws of a State, if it were acting as trustee under the same instrument, without regard to the provisions of section 24. 1920 Bulletin, p. 949. (See XI (k), 800.)

XI(k), 804. Exercise of fiduciary powers by national banks outside of State where located. There is no provision in the Federal reserve act or the national bank act which would prevent a national bank having trust powers from exercising such powers in States other than that in which it is located. This question depends on the laws of the other States in which the powers are proposed to be exercised. 1921 Bulletin, p. 816.

SECTION 11(m).
Limitations Upon the Rediscount Power of Federal Reserve Banks.

XI(m), 100. Rediscount of paper offered by State banks.--Section 11(m) authorizes Federal reserve banks to rediscount for member banks notes, drafts, and bills bearing the signature or endorsement of any one borrower "in excess of the amount" set forth in sections 9 and 13. While it is true that a Federal reserve bank may not under section 9 discount for a State bank any of the paper of any one borrower, if the State bank has made loans to that borrower in excess of 10 per cent, nevertheless under section 11(m), a State member bank, irrespective of whether or not it has loaned in excess of 10 per cent to one borrower under his regular line of credit, may offer for rediscount with the Federal reserve bank paper of that borrower which is secured by Government obligations of the kinds specified in section 11(m), provided the aggregate of all rediscounts does not exceed 20 per cent of the member bank's capital and surplus. (NOTE.-- The provisions of section 11(m) expired by limitation on Oct. 31, 1921.) 1919 Bulletin, p. 361; 1919 Bulletin, p. 1055. (See IX, 604; XIII-D, 100. See also secs, 9 and 13.)



Deposits of Unfit Currency for Redemption.

XIII-A, 100. A Federal reserve bank may refuse to accept deposits of currency where the member bank making the deposit accumulates unfit currency and offers it for the purpose of imposing on the Federal reserve bank the expense of shipment to Washington for redemption. Such a refusal is not a discrimination as prohibited in section 4. If a Federal reserve bank, after previous notice, accepts such deposits subject to charging the expense to the depositing bank, it may properly assess the charge of shipment. 1916 Bulletin, p. 115. Deposits by Federal Farm Loan Bank.

XIII-A, 101. There are no provisions either in the Federal reserve act or in the Federal farm loan act which authorize a Federal reserve bank to receive on deposit generally funds of Federal farm loan banks. 1917 Bulletin, p. 379. (See XIII-A, 103.) Deposits by Nonmember Banks.

XIII-A, 102. That part of section 13, as amended by the act approved June 21, 1917, which authorizes the 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 properly require the depositing bank to maintain a balance sufficient to cover checks drawn against the depositing bank as well as items received from that bank. 1917 Bulletin, p. 617. Deposits by Farm Land Banks.

XIII-A, 103. Federal reserve banks may properly receive deposits from the various farm land banks for the purpose of exchange or of collection, or for the purpose of paying farm-loan bond coupons, to the same extent as deposits may be received from nonmember banks for this purpose. 1917 Bulletin, p. 881; 1918 Bulletin, p. 435. (See XIII-A, 101.)


Nonmember Banks Advertising as "Clearing Members."

XIII-B, 100. A nonmember bank on becoming a clearing member of the Federal reserve system may advertise on its letterhead, etc., that it is a “clearing member of the Federal reserve system.” (This ruling is superseded by XIII-B, 101, below.) 1917 Bulletin, p. 879.

XIII-B, 101. A nonmember bank, although a clearing member of the Federal reserve system, may not advertise on its letterhead, etc., that it is a “clearing member” of the Federal reserve system (super



seding XIII-B, 100). Such banks may use this expression: “Nonmember depositor of the Federal reserve bank, through which checks on this bank are collectible." 1918 Bulletin, p. 1119; 1918 Bulletin,

p. 1216.

Collection Transactions in General.

XIII-B, 200. Federal reserve banks as collection agentsPower to act as.-Although there is no express provision in the act authorizing a Federal reserve bank of one district to act as agent for the collection of notes, drafts, and bills deposited with it by a Federal reserve bank of another district, nevertheless section 4, subsection 7, in granting the right to exercise “incidental powers” impliedly authorizes this power as incidental to the power to receive deposits granted in section 13. 1915 Bulletin, p. 104.

XIII-B, 201. Collection by Federal reserve banks of bill-of-lading drafts.-Federal reserve banks may not properly receive on deposit for immediate credit, subject to final payment, bill-of-lading drafts drawn on demand or at sight upon arrival of car, since bill-of-lading drafts of this character are ineligible for rediscount. (NOTE.-Under the act as amended March 4, 1923, sight and demand drafts are eligible for discount under certain conditions.) While such drafts may be received for collection and credit may be given when payment is received, the provisions of section 13 authorizing Federal reserve banks to receive on deposit "checks and drafts payable upon presentation" do not authorize Federal reserve banks to give immediate credit on the deposit of such drafts, even though they may be charged back to the account of the depositing bank if subsequently returned unpaid. 1918 Bulletin, p. 436. (See XIII-B, 205; XVI, 305.)

XIII-B, 202. Collection facilities of Federal reserve banks within and without the districts.-Under the provisions of section 13, a Federal reserve bank may receive from its own member banks for collection and credit when paid, maturing notes and bills, and drafts payable on presentation, whether payable within or without its own district. A Federal reserve bank may also collect checks and drafts payable upon presentation within its district and maturing notes and bills payable within its district when forwarded to it by another Federal reserve bank. (It can not directly perform this service for member banks located in another district.) Under section 16, a Federal reserve bank may receive from any member bank, within or without its district, checks and drafts drawn upon any of its member banks, but it may not collect for member banks outside of its district maturing notes and bills or drafts drawn upon firms other than its own member banks. 1919 Bulletin, p. 467.

XIII-B, 203. Collection of items for the account of another Federal reserve bank.-A Federal reserve bank may receive for collection

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maturing notes and bills drawn by or upon firms or individuals (not member banks) located within its own district, where such notes and bills are forwarded to it for collection by a member bank in another district for the account of the Federal reserve bank of that other district, provided that the Federal reserve bank for whose account the collection is being made has authorized its member bank to act as its agent in forwarding maturing items of this character for collection and credit. 1920 Bulletin, p. 276.

XIII-B, 204. Collection of bill-of-lading drafts received from nonmember bank for account of member bank.-A nonmember and nonclearing member country bank correspondent of a member bank may, with the authorization of the member bank, send bill-of-lading drafts direct to the Federal reserve bank for collection and credit to the member bank's account, provided the Federal reserve bank has received satisfactory notice from the member bank that the member bank has authorized the nonmember bank to act as its agent in forwarding the items for the member bank's account. 1920 Bulletin,


p. 948.

XIII-B, 205. Collection of demand bill-of-lading drafts.-A Federal reserve bank may not discount a demand draft. (NOTE.-Under the act as amended March 4, 1923, sight and demand drafts are eligible for discount under certain conditions.) Neither should it give a member bank immediate credit for a demand bill-of-lading draft, which requires several days for collection, since this would be in effect granting such bank a loan of the amount of the draft for the period required for collection and Federal reserve banks must receive eligible paper in return for loans made by them to member banks. Granting immediate credit for such drafts would also perpetuate the float evil. Such drafts receive credit only when the proceeds have been collected. 1921 Bulletin, p. 1080. (See XIII-B, 201; XVI, 305.)

XIII-B, 206. Charging back to member bank check returned for forgery-Decision of the Circuit Court of Appeals for the Second Circuit upholding the right of a Federal reserve bank to charge back to a member bank a check drawn on the Treasurer of the United States, which had been received for collection from the member bank and credited to its account, and which a year later was returned unpaid by the Treasurer of the United States because of forgery. The decision was based largely on the terms of the Federal reserve bank's collection circular, which specifically reserved to the Federal reserve bank the right to charge back checks drawn on the Treasurer of the United States. Closter National Bank v. Federal Reserve Bank of New York, 285 Fed. 138. 1923 Bulletin, p. 22.

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