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to avoid shipping risks and expenses, some of the federal reserve banks keep gold in the vaults of these foreign agencies. See text, p. 80; and Act, sec. 14, par. (e).

• This is gold deposited with federal reserve agents as collateral for the issue of federal reserve notes. See text, pp. 51-52; and Act, sec. 16, pars. 8-7.

6 The gold redemption fund here mentioned is a fund held by the treasurer of the United States for the redemption of federal reserve notes in gold on demand. It is made up of deposits of gold from each federal reserve bank. Each bank's deposit must be sufficient in the judgment of the Secretary of the Treasury for the redemption of such federal reserve notes of the bank as are likely to be presented at the treasury for redemption; but in no case can the fund be less than five per cent of the total amount of notes issued less the amount of gold held by the federal reserve agents as collateral security for notes. Gold in the redemption fund is counted as part of the legal reserve required against federal reserve notes. See text, pp. 51-52; and Act, sec. 16, par. 4.

6 This item covers all kinds of money held by federal reserve banks except gold coin and gold certificates.

? This represents advances made by federal reserve banks to member banks. It consists of short-time commercial bills, notes, and bank acceptances, which have been rediscounted for member banks, and of one to fifteen day loans made to member banks against their notes collateraled by United States government securities and by commercial paper. The Federal Reserve Bulletin of each month gives an analysis of the kinds and maturities of the paper held. See text, pp. 61-64; Act, sec. 13, pars. 2-6; and Regulation A issued by the federal reserve board, June 22, 1917, Federal Reserve Bulletin, July 1, 1917, pp. 539-541.

8 The kinds of open-market operations which federal reserve banks may carry on are described in section 14 of the Act. See also text, pp. 42-44; and Regulation B issued by the federal reserve board, June 22, 1917, Federal Reserve Bulletin July 1, 1917, pp. 541-542.

9 These are United States government bonds, chiefly Liberty bonds, owned by federal reserve banks.

10 These are usually short-time treasury certificates of indebted


11 This item usually consists largely of municipal warrants.

12 Nine of the twelve federal reserve banks own bank premises, but some of the banks are not yet occupying their own premises.

18 These are items in process of collection, chiefly under the federal reserve clearing and collection system. See text, pp. 19-23; Act, sec. 16, pars. 14-18; and Regulation J issued by federal reserve board, June 22, 1917, Federal Reserve Bulletin, July 1, 1917, pp. 549-550.

14 Federal reserve bank notes are bond-secured bank notes, issued by federal reserve banks, in place of bond-secured national bank notes and silver certificates retired. (See note 23 below.) Except for the fact that they are issued by federal reserve banks, they are essentially like national bank notes. As in the case of the latter, the law requires that, for the purpose of their redemption in Washington, a five per cent redemption fund be maintained by the issuing bank in the United States treasury. See text, pp. 50-51; Act, sec. 18, par. 6; Act of June 20, 1874, sec. 3; and Act of April 23, 1918, secs. 5-8 (Appendix E).

16 This represents the net debit balance on a variety of accounts, including profit and loss account, gross earnings account, expense account, depreciation account, suspense account, unearned discount account, and the like.

16 The law requires every member bank to subscribe to stock in the federal reserve bank of its district to the amount of six per cent of the member bank's paid-in capital and surplus. One half of this subscription has already been paid and the other half is subject to the call of the federal reserve board. This item in the balance sheet accordingly represents three per cent of the combined paid-in capital and surplus of all meniber banks. See text, p. 31; and Act, sec. 2, par. 3.

17 The law provides that member banks shall receive out of the earnings of their federal reserve bank an annual, six per cent, cumulative dividend on their paid-in capital stock, and that the balance of the net earnings shall be paid to the United States Government as a franchise tax, “except that one-half of such net earnings shall be paid into a surplus fund until it shall amount to forty per centum of the paid-in capital stock of such bank.” See text, p. 59; and Act, sec. 7, par. 1.

18 The law authorizes the Secretary of the Treasury to use federal reserve banks as depositaries of public funds, except of certain specified trust funds. The Secretary began depositing pub-lic funds in federal reserve banks as early as September 4, 1915, and since that time has continually and extensively employed federal reserve banks as depositaries. See text, pp. 84-89; and Act, sec. 15; also Act of April 24, 1917, sec. 7; and Act of September 24, 1917, sec. 8.

19 Member banks are required by law to keep their entire legal reserves on deposit in the federal reserve bank of their district. See text, pp. 35-38; and Act, sec. 19.

20 These are liabilities of federal reserve banks to member banks and clearing-member banks arising out of the federal reserve clearing and collection system. They represent items in process of collection, the proceeds of which are not yet available to be drawn upon by the creditor banks. See text, pp. 70-75; and references cited in note 13 above.

21 This covers deposit credits of certain non-member banks in

the United States, of certain foreign banks of which the federal reserve banks are the American agencies, and of certain foreign governments. See text, pp. 70-71, 80; Act, sec. 14, par. (e); and Regulation J issued by the federal reserve board June 22, 1917, Federal Reserve Bulletin, July 1, 1917, pp. 549-550.

22 This item represents the total amount of federal reserve notes issued to the federal reserve banks and now outstanding (exclusive of the amount now held by federal reserve banks. See text, pp. 51-57; and Act, sec. 16.

23 These are the federal reserve bank notes described above in note 14. The net liability represents the total amount outstanding less the amount of cash deposited with the treasurer of the United States for the retirement of such notes. See text, pp. 5051; Act of March 4, 1907, sec. 4 amending Act of July 12, 1882.

24 This represents the net credit balance on a variety of miscellaneous accounts. It includes the excess of earned and unearned discount and interest over expenses and certain unproductive assets. Compare note 15 above.



(APPROVED Dec. 28, 1918) As amended Aug. 4, 1914 (38 Stat., 682; Chap.

225); Aug. 15, 1914 (88 Stat., 691; Chap. 252); Mar. 3, 1915 (38 Stat., 958; Chap. 93), Sept. 7, 1916 (39 Stat., 752; Chap. 461); June 21, 1917 (40 Stat., Chap. 32); Sept. 26, 1918; Sept. 17, 1919; and Dec. 24, 1919.

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.

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 synonymous and interchangeable. 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 Re

Definitions of terms.

serve 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. 2. As soon as practicable, the Secretary of the Treasury, the Secretary of Agricul Determina ture and the Comptroller of the Currency, act- tion

of dis

tricts. ing as “The Reserve Bank Organization 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 Reserve Board when organized: 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 Reserve 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 authority to act.

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 reserve districts and in designating the cities within such districts where such Federal reserve banks shall be severally located. The said committee shall su

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