Imágenes de páginas
PDF
EPUB

LAW DEPARTMENT.

The following opinions of counsel have been authorized for publication by the Board since

the last edition of the Bulletin:

Provisos to Clayton Act Cumulative.

An officer, director, or employee of a member bank, who would otherwise come within the prohibitory language of the Clayton Act, may serve as a director, officer, or employee of one other bank where the entire capital of one is owned by stockholders in the other, and at the same time, under the Kern amendment, may, with the consent of the Federal Reserve Board, serve as an officer, director, or employee of not more than two other banks which are not in substantial competition with the member bank. JULY 13, 1916.

SIR: There has been submitted to this office for an opinion the question of whether an officer, director, or employee of a member bank may, under the proviso contained in paragraph 2 of section 8 of the Clayton Act, serve as a director, other officer, or employee of not more than one other member bank where the entire capital stock of one is owned by stockholders in the other, and at the same time, under the Kern amendment, serve as an officer, director, or employee of not more than two other banks which are not in substantial competition with the member bank, provided the consent of the Federal Reserve Board is first obtained.

As originally enacted, section 8 of the Clayton Act contained three exceptions to its prohibitory provisions, which exceptions were incorporated in paragraph 2 of the section as provisos and read as follows:

(1) That nothing in this section shall apply to mutual savings banks not having a capital stock represented by shares.

(2) That a director or other officer or employee of such bank, banking association, or trust company may be a director or other officer or employee of not more than one other bank or trust company organized under the laws of the United States or any State where the entire capital stock of one is owned by stockholders in

the other.

(3) That nothing contained in this section shall forbid a director of Class A of a Federal Reserve Bank, as defined in the Federal Re

[blocks in formation]

The amendment to the Clayton Act, May 15, 1916, known as the Kern amendment, constitutes a further exception and is added as a fourth proviso to the second paragraph of section 8. The amendment reads as follows:

And provided further, That nothing in this act shall prohibit any officer, director, or employee of any member bank or Class A director of a Federal Reserve Bank, who shall first procure the consent of the Federal Reserve Board * * * from being an officer, director, or employee of not more than two other banks * * * if such other bank, * * is not in substantial competition with such member bank.

*

According to the usual rules of construction, a proviso takes out of the operation of the body of the enactment that which otherwise would be within it. It restrains the generality of the previous provisions. (Savings Bank v. United States, 86 U. S., 227-236.)

In the case of Deitch v. Staub (115 Fed. Rep., 309) the court said, on page 314:

The primary and usual office of a proviso is to except something out of a statute which would otherwise be within it. Its use is to take special instances out of a general class. (Suth St. Const., secs. 222, 223; Gibbons v. Ogden, 9 Wheat., 191, 6 L. Ed., 23.)

See also Georgia Banking Co. v. Smith (128 U. S., 174).

Applying this rule to the three provisos mentioned above and to the Kern amendment which follows them and forms a fourth proviso, it is apparent that each takes out of the operation of the prohibiting clauses of the statute that which otherwise would be forbidden. The substance of the amendment is that nothing in the prohibitory clauses of the Act as it stood at the time the amendment was passed should prevent an officer, director, or employee of a member bank from serving as an officer, director, or employee of not more than two other banks which are not in sub

stantial competition with the member bank, provided the consent of the Federal Reserve Board is first obtained.

In the opinion of this office, therefore, an officer, director, or employee of a member bank who would otherwise come within the prohibitory language of the Act may serve as a director, officer, or employee of one other bank or trust company where the entire capital stock of one is owned by stockholders in the other, and at the same time, under the Kern amendment, may serve as an officer, director, or employee of not more than two other banks which are not in substantial competition with the member bank, if the consent of the Federal Reserve Board is first obtained. Respectfully,

M. C. ELLIOTT, Counsel.

To Hon. CHARLES S. HAMLIN,
Governor Federal Reserve Board.

Member Bank Acceptances.

When a member bank purchases its own acceptance before maturity such acceptance need not be included in the aggregate of acceptances authorized by section 13.

JULY 25, 1916.

SIR: Section 13 of the Federal Reserve Act as amended by an act approved March 3, 1915, provides in part as follows:

Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation or exportation of goods having not more than six months' sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus, except by authority of the Federal Reserve Board, under such general regulations as said board may prescribe, but not to exceed the capital stock and surplus of such bank, and such regulations shall apply to all banks

alike regardless of the amount of capital stock and surplus.

The opinion of this office has been requested on the question of whether or not acceptances of a member bank purchased by it before maturity would continue to be treated as acceptances within the meaning of this provision and subject to the limitations imposed. In other words, if we assume that a member bank has accepted drafts or bills of exchange drawn upon it to an amount equal to its capital and surplus, and before the maturity of such acceptances it purchased and carried in its assets 25 per cent of its own acceptances, would such bank be regarded as having outstanding acceptances equal to 100 per cent or acceptances equal to 75 per cent of its capital and surplus ?

In the opinion of this office the purchase of such an acceptance cancels the obligation of the bank, and so long as it is held by the bank it does not constitute a liability which may be regarded as an acceptance. When the member bank executes its acceptance of a draft or bill of exchange it enters into a contract or obligation to pay at maturity the amount specified therein. Whether this payment is made at or before maturity the obligation is discharged. In this view member banks might legally deduct from the amount of acceptances outstanding those purchased and held by such member banks in considering the limit provided by section 13 as amended.

Of course, if a member bank subsequently disposed of its acceptance, either by sale or hypothecation, thus renewing its obligation to pay it at maturity, the acceptance should be included in the amount outstanding. Respectfully,

M. C. ELLIOTT, Counsel. To Hon. CHARLES S. HAMLIN, Governor Federal Reserve Board

[blocks in formation]

GENERAL BUSINESS CONDITIONS.

There is given on the preceding page a summary of business conditions in the United States by Federal Reserve districts. The reports are furnished by the Federal Reserve Agents, who are the chairmen of the boards of directors for the several districts. Below are the detailed reports as of approximately July 23:

DISTRICT NO. 1-BOSTON.

While business in almost all lines continues good, the conservative tendency which was evident last month in many lines of trade still continues. The pressure to place new orders and to stock up heavily with raw material which was so prevalent a month or two ago, has, for the most part, disappeared. Bankers and business men have for a good while been urging caution. The present trend of business is more along the lines which these men have advocated and which tends to more permanent prosperity. Apart from munition and allied trades, general business is apparently receiving fewer foreign orders and domestic demands are more in evidence.

The money market continues firm, although rates are not up to the high level reached in the early part of the month, and the tendency, owing to the increasing ease in the New York market following the influx of gold, is downward. The surplus reserves of the Boston banks during the last month have reached a lower point than at any time since the inauguration of the Federal Reserve system. Call money, 3 to 34 per cent; commercial paper, 4 to 4 per cent for six months; year money, 4 to 4 per cent; town notes, fall maturities, 3 per cent upward; 90-day bankers' acceptances, 23 per cent upward.

Loans and discounts of the Boston Clearing House banks on July 15 show an increase of $4,194,000 over the preceding month, and demand deposits have decreased $10,610,000 in the same time. The amount due to banks on July 15 was $129,105,000 as compared with $135,521,000 on June 17. The excess reserve

53038-16- -5

of the Boston banks decreased from $33,769,000 on June 17 to $16,680,000 on July 15.

Exchanges of the Boston Clearing House for the week ending July 15 were $233,064,423 as compared with $171,806,604 for the corresponding week last year, and $180,740,253 for the week ending June 17, 1916.

Building and engineering operations in New England continue to show a considerable increase over the corresponding period last year. From January 1, 1916, to July 19, 1916, these contracts amounted to $114,890,000, or about $18,500,000 more than for the same period a year ago.

Exports for the port of Boston for June, 1916, amounted to $13,315,376, as compared with $11,255,012 for May, 1916, and $9,848,865 for June, 1915. Imports for June, 1916, amounted to $16,063,583, a decrease of $3,491,566 from May, 1916, and an increase of $2,147,830 over June, 1915.

8

Receipts of the Boston post office for June, 1916, show an increase of $85,531.37, or about 12 per cent over June, 1915, and receipts for the first 15 days of July were $34,250.18, or per cent, over the same period last year. Boston & Maine Railroad reports net operating income after taxes for May, 1916, as $1,488,873, as compared with $754,968 the corresponding month last year. New York, New Haven & Hartford Railroad reports net operating income after taxes for May, 1916, as $2,200,583, as compared with $1,738,273 for May, 1915.

Crop conditions continue favorable, but the prospect for hay, which was very promising, is not so bright, due to the wet weather, which has made harvesting difficult and caused much damage to this crop. The potato crop is somewhat late, but all indications tend toward a good yield. The apple crop promises to be abundant.

Business in the boot and shoe industry is less active. Retailers purchased heavily earlier in

the year and, therefore, are not disposed to add to their stock at the present level of prices. Leather is very high and this has necessitated advances in the price of shoes. It is still a little early for the new season's orders to begin to come in heavily.

The wool business in general is not as good as it was a month or two ago, due to a large extent to the fact that mills bought wool to cover many of their orders at the time of making contracts and still have quite a supply on hand. Taking over all of the wool in England by the British Government and placing an embargo on wool coming from New Zealand and Australia has very materially increased the demand for American wool, and this wool is now selling at a higher price than at any time for over 30

years.

Reports from the cotton-mill centers indicate that with the beginning of another season there has been some revival of buying and the impression given is that buyers are more willing to enter into contracts now than they have been for some time.

DISTRICT NO. 2-NEW YORK.

The outstanding feature during the last month was the sharp advance in money rates. Commercial paper sold on June 1 at 3 to 3 per cent, but is now 4 to 4 per cent. Call loans were made on July 10 at 6 per cent, the highest rate at this time of year since 1907. Large shrinkages occurred in prices of certain speculative shares, and stock exchange securities are generally lower. The firm outlook in the commercial paper market caused some borrowers to provide earlier than usual for fall requirements. Higher money here was followed by an advance to 6 per cent in the Bank of England rate, which had remained at 5 per cent since August 8, 1914.

In the last six months of 1915 the New York Clearing House members increased deposits about 800 millions and loans about 700 millions, but between December 31, 1915, and July 16, 1916, these deposits decreased about 160 millions and loans have been reduced

about 70 millions. The actual figures on July 16 were: Loans, etc., $3,188,833,000; deposits, $3,307,037,000; and excess reserves, $95,109,470.

The industrial situation shows little or no change. Some slackening in the domestic demand for steel products, and the seasonal quietness in leather manufacturing is partly offset by increased orders in both lines for export. It is reported that exports of unfinished steel to Europe are nearly double the quantity sent last year. Mills and factories are busy. Labor is still scarce. A banker from outside New York City reports that in his section wages have been advanced as much as the industries can stand, yet there are but few signs of saving and thrift and many evidences of increased expenditure for luxuries.

There is less than usual mid-year dullness in wholesale and retail trade. The hot weather in July stimulated the distribution of summer goods, which had accumulated on account of the inclement weather which prevailed in the spring and early summer.

Farmers in northern New Jersey are well satisfied with the condition of the crops in that section and are harvesting more hay than they have had for years. In New York State, however, the agricultural outlook is not encouraging. Aside from hay it seems probable that all crops will be under the average. Pastures are in good condition, and the dairying industry is prospering.

Statistics of the present compared with those compiled a year ago show large increases in exports, imports, and bank clearings, higher railroad earnings, and postal receipts, more new incorporations, greater activity in building, and fewer failures.

The United States Steel Corporation at the first of July reported unfilled orders decreased 300,000 tons, after showing continuous increases for many months.

Bradstreets's index number shows the third successive decline in commodity prices since April 1, 1916.

« AnteriorContinuar »