G. NATIONAL BANKS AS INSURANCE AGENTS.

XIII-G, 100. Copy of regulations issued by Comptroller of the Currency governing the operation of national banks as insurance agents and as brokers or agents in making or procuring loans on real estate. 1917 Bulletin, p. 164. (See 5136 R. S., 101.)

H. DOLLAR EXCHANGE ACCEPTANCES.

Foreign Countries in Which Such Drafts Are Permissible.

XIII-H, 100. The eligibility for acceptance of drafts drawn for the purpose of furnishing dollar exchange depends upon "the usages of trade in the respective countries, dependencies, or insular possessions.' In other words, the purpose in view in making such acceptances is that of "furnishing dollar exchange as required by the usages of trade."

On the other hand, where it is customary to make remittance in payment of foreign debts by checks rather than by three-month bankers' drafts, it can not be said that bankers' acceptances are required by the usages of trade. The board therefore refused to issue permits to accept drafts drawn in England or France, for between those countries and the United States it has been customary to make remittance by check or cable transfers. 1916 Bulletin, p. 665. The board has designated the following as countries whose usages of trade require the furnishing of dollar exchange, so that member banks may accept drafts drawn upon them by banks or bankers in such countries: Australia, New Zealand, and other Australasian dependencies; Argentina, Bolivia, Brazil, British Guiana, British Honduras, Chile, Colombia, Costa Rica, Cuba, Dutch East Indies, Dutch Guiana, Ecuador, French Guiana, French West Indies, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Porto Rico, San Salvador, Santo Domingo, Trinidad, Uruguay, and Venezuela. 1916 Bulletin, p. 665; 1918 Bulletin, p. 938; 1920 Bulletin, p. 1175; 1921 Bulletin, p. 188; 1922 Bulletin, pp. 50 and 680.

XIII-H, 101. General permission.-Where the Federal Reserve Board has granted permission to a member bank to accept drafts drawn upon it for the purpose of furnishing dollar exchange with respect to any country, the member bank is entitled to exercise similar accepting powers with respect to all countries that have been or hereafter may be designated by the board as countries whose usages of trade require the furnishing of dollar exchange. 1918 Bulletin, p. 1119; 1922 Bulletin, p. 680.

XIII-H, 200. Formalities of application.-A national bank must show that the usages of trade in the country in which the drafts are drawn are such as to require the drawing of drafts of this character. Applications will not be granted if it appears that the drafts are to be drawn merely because dollar exchange is at a premium in the country where the drafts are to be drawn. 1920 Bulletin, p. 835.

Limitation Upon Dollar Exchange Acceptances.

XIII-H, 300. The limitation 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. 1917 Bulletin, p. 528. (See XIII-E, 800-802.)

I. DEBENTURES OF FEDERAL INTERMEDIATE CREDIT BANKS AND NATIONAL AGRICULTURAL CREDIT CORPORATIONS.

XIII-I, 100. Purchase by Federal reserve banks of Federal intermediate credit bank debentures.-Acting under the provisions of section 13a, the board by resolution authorizes Federal reserve banks in their discretion to purchase debentures issued by Federal intermediate credit banks in accordance with the terms of the agricultural credits act of 1923, provided such debentures have a maturity at the time of purchase not in excess of six months. 1923 Bulletin, p. (See XIV, 205.)

1194.

SECTION 14.

General Classes of Paper Eligible for Purchase.

XIV, 100. Commercial notes.-Federal reserve banks may purchase in the open market "cable transfers," "bankers' acceptances," and "bills of exchange of the kinds and maturities made eligible for rediscount." But commercial notes, although qualified for rediscount under section 13, can not be purchased in the open market under section 14. 1915 Bulletin, pp. 360, 365. (See XIV, 111.)

XIV, 101. Commodity loans-Single-name paper. Under section 14 a Federal reserve bank can purchase from member banks commodity loans without indorsement by member banks, provided such loans are evidenced by two-name paper. One-name paper is not eligible for purchase in the open market. 1915 Bulletin, p. 406.

XIV, 102. Bankers' acceptances for capital purposes.-A draft drawn upon and accepted by a nonmember bank, the proceeds of which are to be used for the purchase of raw material and the payment of labor used in manufacturing, is not eligible for purchase in the open market. 1916 Bulletin, p. 65. (See XIII-C, 401.)

XIV, 103. Bills 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. Under the negotiable instruments law, where the drawer and drawee are the same person, the holder may treat the instrument at his option either as a bill or a note, but so far as the eligibility of paper for purchase in

the open market is concerned, such a bill is not two-name paper, since the drawer and drawee are the same party. In substance, therefore, the instrument is a promissory note and so ineligible for purchase. 1916 Bulletin, p. 462.

XIV, 104. Bankers' acceptances secured by a bill of sale.-A banker's acceptance drawn for the purpose of purchasing goods and secured by a bill of sale of stock on hand is not eligible for purchase by Federal reserve banks under the provisions of Regulation B, series of 1916. since a bill of sale is not a receipt similar to a warehouse or terminal receipt, but is in substance merely a chattel mortgage. Nor is the acceptor secured by a pledge of goods sold and in storage, as required in Regulation B, supra, since the term "storage" means storage with some party other than the borrower or drawer. 1916 Bulletin, p. 684. (See XIII-E, 404-406.)

XIV, 105. Bills payable elsewhere than in the United States.-A bill payable elsewhere than in the United States is not eligible for purchase as a banker's acceptance under the provisions of Regulation A and Regulation B, series of 1917, although eligible in all other respects. (NOTE.-Under Regulations A and B, series of 1923, bankers' acceptances need not be payable in the United States. See pp. 120, 123.) 1918 Bulletin, p. 520.

XIV, 106. Finance bills.-A Federal reserve bank may not discount under section 13, nor may it purchase under section 14, drafts which in substance are finance bills. 1918 Bulletin, p. 1120. (See XIII-C, 401.)

XIV, 107. Drafts drawn abroad and secured by foreign warehouse receipts. A draft drawn abroad, payable in the United States in dollars and secured by a foreign warehouse receipt covering readily marketable staples stored in a warehouse located in a foreign country, is ineligible for purchase in the open market under the terms of the board's existing regulations. (NOTE. Such a draft may be eligible under Regulation B, series of 1923. See p. 122.) See p. 122.) 1919 Bulletin, p. 740. (See XIII-E, 410; XIV, 111.)

XIV, 108. Regulation B, series of 1921, authorizing the openmarket purchase of six months' acceptances growing out of foreign transactions. 1921 Bulletin, p. 545.

XIV, 109. Purchase of bankers' acceptances direct from accepting banks. Federal reserve banks are authorized to purchase bankers' acceptances with or without the indorsement of a member bank from individuals, corporations, or banks, and under this authority may purchase such acceptances from the drawer or the accepting bank with no indorsement other than that of the accepting bank. Such acceptances, however, should be purchased at the prevailing

rate for commercial paper and not at the preferential rate applicable to bankers' acceptances as such. While such acceptances are not within the 10 per cent limitation of section 13 applying to the discount of member banks' paper evidencing loans to one borrower, Federal reserve banks may, in their discretion, refuse to purchase acceptances having only the indorsement of the accepting bank and will be justified in refusing to purchase such acceptances made for one borrower from a member bank in an amount which, when added to the amount of other paper bearing the same borrower's signature or indorsement, is in excess of 10 per cent of the member bank's capital and surplus. 1921 Bulletin, p. 699. (See XIII-E, 311.)

XIV, 110. Regulation B, series of 1922, authorizing the open-market purchase of six-months bankers' acceptances drawn by cooperative associations to finance the orderly marketing of nonperishable agricultural staples and secured by warehouse receipts covering such staples. (This regulation is superseded by Regulation B, series of 1923, which is still more liberal in its provisions. See p. 122.) 1923 Bulletin, p. 19.

XIV, 111. Acceptance, discount, and open-market purchase of bankers' acceptances. The substance of a letter written by the board's general counsel and containing a full discussion of a number of questions arising under the provisions of law and of the board's regulations which deal with the acceptance, discount, and open-market purchase of bankers' acceptances.

(1) A Federal reserve bank is not authorized by the board's regulations or otherwise to purchase an acceptance made by a member bank which the member bank had no authority to make, but a Federal reserve bank may, under Regulation B, purchase acceptances made by other institutions than member banks and may also purchase acceptances made by State member banks under acceptance powers not conferred by section 13. Federal reserve banks may also, under section 14, purchase acceptances which, under section 13, they are not authorized to discount.

(2) Federal reserve banks are authorized to purchase in the open market all classes of acceptances which are made eligible for rediscount under section 13, and may also purchase certain additional classes of acceptances not eligible for rediscount. These additional classes of acceptances are specified in Regulation B. (See p. 122.) 1923 Bulletin, p. 316. (See XIII-E, 112; XIV, 100.)

Eligibility of Bonds, Warrants, Etc.

XIV, 200. Revenue bonds.-Revenue bonds having a maturity at the time of issue of more than six months may be eligible for purchase, if at the time of purchase the maturity does not exceed six months. A municipal franchise which is actually taxed and in

cluded in a city's return of taxable property falls within the language "taxable property" as used in Regulation F, series 1915, (1) (c) 3. 1915 Bulletin, p. 221; 1916 Bulletin, p. 524.

XIV, 201. Warrants issued in anticipation of assured revenue.— Definition of term "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 income of a State or other political unit, does not include the proceeds of a sale of public securities, such as municipal bonds. Consequently warrants which are issued in anticipation of the receipt of the proceeds of municipal bonds are not eligible for purchase under the provisions of section 14. 1916 Bulletin, p. 170.

XIV, 202. Warrants.-Under paragraph VII of Regulation E, series of 1916, a Federal reserve bank may purchase in the open market through a member bank warrants which could not properly be purchased in the open market under paragraphs I and III of Regulation E. 1917 Bulletin, p. 29.

XIV, 203. Warrants.-The Federal Reserve Board may, under the provisions of Regulation E, series of 1916, 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 such taxes are due, but before the penalty attaches for their nonpayment, provided that experience has demonstrated that the due date produces sufficient taxes to pay the warrants at maturity. 1917 Bulletin, p. 32.

XIV, 204. Nonnegotiable warrants.-A Federal reserve bank should not buy a nonnegotiable warrant. In considering the purchase of warrants issued by a municipality, it would be well to ascertain what the sinking-fund requirements are with reference to bonded obligations of the municipality and whether or not these requirements are being complied with. 1917 Bulletin, p. 193. (See also Regulation E, series of 1923, p. 127.)

XIV, 205. Federal land bank bonds which mature in 1938 are not eligible for purchase by Federal reserve banks, since, although the Federal farm loan act authorizes Federal reserve banks to buy and sell such bonds, it expressly requires that such transactions be subject to the same limitations as are contained in section 14(b). This section restricts the maturity from date of purchase to six months, except for United States bonds. 1918 Bulletin, p. 1216. (See XIII-I, 100.)

Discount Rates of Federal Reserve Banks.

XIV, 300. Power to fix discount rates.-Congress has delegated, and may lawfully do so, the power to fix discount rates to Federal