in the United States stipulate that a reserve of not less than 13 per cent. must be maintained against all such deposits. This reserve may consist of cash in vault, a balance with the Federal reserve bank of the district in which the head office of the Corporation is located, or a balance with any member bank. In the matter of deposits received abroad, the regulations require that reserves against such deposits be governed by local laws, and by the dictates of sound business judgment and banking principles.

General Limitations and Restrictions

Exercising the power conferred upon it to fix such general limitations and restrictions as may be deemed necessary, the Federal Reserve Board has ruled that the total liabilities to a Corporation of any person, company, firm, or corporation for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed 10 per cent. of the amount of its subscribed capital and surplus, except with the approval of the Board.

It is stated, however, that the discount of bills of exchange drawn in good faith against actually existing values, and the discount of commercial or business paper actually owned by the person negotiating the same, shall not be considered as money borrowed within the meaning of this regulation. The Board has also decided that the liability of a customer on account of an acceptance made by the Corporation for his account is not a liability for money borrowed within the meaning of this regulation unless and until he fails to place the Corporation in funds to cover the payment of the acceptance at maturity, or unless the Corporation itself holds the acceptance.

Except with the approval of the Federal Reserve Board, the aggregate liabilities of a Corporation outstanding on account of acceptances, average domestic and foreign deposits, debentures, bonds, notes, guaranties, indorsements, and other such obligations shall not exceed at any one time ten times the amount of the Corporation's subscribed capital and surplus. In determining the amount of liabilities within the meaning of this regulation, indorsements of bills of exchange having not more than six months to

run, drawn and accepted by others than the Corporation, shall not be included.

Advantages of New Legislation

From the foregoing analysis of the terms of the Edge Bill and the regulations of the Federal Reserve Board governing the operations of corporations organized under the Act, it will be apparent that important new legislation has been provided for the promotion of the foreign commerce of the United States. It is not the intention here to discuss at length the advantages of this bill, but merely to sum up in a general way the manner in which its provisions may be utilized for the purpose of facilitating American export trade.

Adequate machinery for the financing of this nation's exports has heretofore been lacking, and the difficulty of meeting the credit requirements of foreign buyers has been an impediment to the full development of this business. In the present period of reconstruction in Europe, there is a special need for some method whereby the financing of American exports may be facilitated, and the Edge Bill affords a practical means for the accomplishment of that object. To what extent it will prove effective, will depend mainly upon the measure of support which the corporations formed under the Act may receive from investors in this country.

Support of Investors Essential

That the support of investors is essential to the successful operation of corporations organized under the Edge Bill may be judged from the fact that the funds which such corporations may advance to foreign purchasers of American goods must, in the last analysis, come from the investing public here. While these corporations may extend financial accommodation to foreign buyers, they are enabled to do so only through the sale of their own debentures or other obligations to the investors of this country, the money so raised being employed in paying for goods exported to purchasers abroad. Without the support of investors, therefore, such corporations would not be in a position to operate.

The operations of these corporations, it is important to note, are not confined to Europe alone; they may operate in any and all foreign countries, and even in the dependencies and insular possessions of the United States. The number of these corporations, moreover, is not limited by law; any number of them may be incorporated that meet the provisions of the Act and have the approval of the Federal Reserve Board.

Powers of Corporations Varied

As previously stated, such corporations have power, subject to the regulations of the Federal Reserve Board, to purchase, sell, discount, and negotiate notes, drafts, checks, bills of exchange, acceptances, and other evidences of indebtedness. They may also lend and borrow money, and may accept deposits within certain specified limitations. These corporations have authority, in short, to conduct general banking operations.

An essential part of the business of a Corporation formed under the Act, as has already been shown, is the offering of its own debentures or other obligations to the investing public. Such debentures or other obligations, when secured by collateral satisfactory to the Federal Reserve Board, may be sold to anyone who may care to purchase them. It is with the funds obtained through the issue of its debentures or other obligations that the Corporation is enabled to make advances to foreign buyers, and thus aid in the financing of American exports.

After the passage of the Edge Bill, its sponsor, Senator Edge of New Jersey, made a statement in explanation of the purposes and workings of the Act, and this statement is reproduced herewith, in part:

"Now that the so-called Edge Export Finance Bill has be come a law, through approval by the President, it may be well to call attention to two features of the measure. First, it is not merely and solely a financial measure, and, second, it is not compulsory. Sound business is based on sound finance, and the new law is designed to strengthen both the foundation and the superstructure. It provides the authority and procedure for financing the American export trade, but it compels neither the Government nor private enterprise to embark on the venture.

"From impoverished purchasers, an export finance corpora

tion accepts collateral satisfactory to the Federal Reserve Board, and against this issues debentures for sale to investors, the money so raised going to the American producers or exporters. Under the Federal Reserve Act, banks may not rediscount paper of more than 90 days' maturity; under the Edge Act, paper is not rediscounted, but is held as collateral for the debentures. Finally, through government supervision exercised by the Federal Reserve Board, the safety of all transactions is assured throughout as far as is humanly possible-the vendors are paid real cash, so run no risk, and the stockholders of the corporations and the purchasers of the debentures are safeguarded by the Federal Reserve Board."

Chapter XI

T

THE FEDERAL BILL OF LADING ACT

HE Federal Bill of Lading Act, which went into effect January 1, 1917, renders the bill of lading a complete negotiable instrument and prescribes the conditions under which it shall be issued. By this new law, the liabilities of the railroads are more clearly defined and the danger of loss through fraudulent bills of lading is much lessened. Rules are laid down for the cancellation of spent bills, and duplicate bills of lading are regulated. This Act is of unusual importance to the business and banking world, and a digest of it is here given, as the bill of lading, in the last analysis, is not only a receipt for goods delivered, but also represents the ownership and is the basis for acceptances and bills of exchange, both domestic and foreign.

The Act governs bills of lading issued by any common carrier for the transportation of goods in any territory of the United States, or the District of Columbia, or from a place in a State to a place in a foreign country, or from one State to another, or from a place in one State to a place in the same State through another State or foreign country.

Two Kinds of Bills of Lading Defined

Two kinds of bills of lading are defined: the straight bill and the order bill.

A straight bill is one which states that the goods are consigned or destined to a specified person. It is not negotiable and must be so marked by the carrier.

An order bill is one in which the goods are consigned to the order of any person, and is always negotiable, unless upon its face and by written agreement the shipper distinctly specifies to the contrary. Order bills may not be issued in parts or sets for the transportation of goods to any place in the United States on the