Stock Values.

Your letter quoting the resolution passed by your board of directors with reference to stock values to be paid to withdrawing banks has been received. You suggest that banks surrendering stock in the Federal Reserve Bank will be paid par plus 3 per cent up to December 31, 1915, and at the rate of one-fourth of 1 per

cent each month thereafter.

Assuming that the amount set aside for losses represents an actual and not merely an arbitrary estimate of the executive committee, the interest calculated to December 31 would seem clearly to represent the amount withdrawing banks are entitled to receive on stock surrendered.

As to the one-fourth of 1 per cent allowed since that time, if this represents the actual earnings of the bank, the plan is in accordance with the provisions of the Act; but if the earnings show an excess over this amount, it will be necessary to pay the withdrawing banks the actual book value of the stock, provided it is not in excess of par plus one-half of 1 per cent per month since December 31.

FEBRUARY 23, 1916.

Trade Acceptances.

You say in your letter, "If no mention were made on the draft of the transaction being based on an importation of goods, I take it that the acceptance might be classed as a trade acceptance." The fact that importation or exportation is involved does not exclude the character of a trade acceptance at all. Quite the contrary. You will have seen from our letter of January 21 that we have provided that trade acceptances which originate through importations from foreign countries and which are indorsed by banks or bankers may, if necessary, be taken within the range of bankers' acceptances; that is, between 2 per cent and 4 per cent. There is, therefore, no reason at

all why you should not buy this paper on a satisfactory basis without being subject to the 50 per cent or 100 per cent limit. MARCH 4, 1916.

Holding Political Office.

drawals.

(series of 1915), which relates to savings acRegulation E of the Federal Reserve Board counts, provides in part that—

"The term 'savings accounts' shall be held to include those accounts of the bank in respect to which, by its printed regulations, accepted by the depositor at the time the account is opened

"(a) The pass book, certificate, or other similar form of receipt, must be presented to the bank whenever a deposit or withdrawal is made, and

"(b) The depositor may at any time be required by the bank to give notice of an intended withdrawal not less than 30 days before a withdrawal is made."

It is therefore suggested that the form should require presentation of the pass books in case of a deposit and also in case of a withdrawal of the whole or any part of the deposit, and the depositor should, over his signature, accept the terms prescribed.

MARCH 9, 1916.

The following opinions of counsel have been authorized for publication by the Board since the last edition of the Bulletin: Liquidating Member Banks.

Any member bank, even though its shareholders have voted to go into liquidation, may file an application, under the provisions of section 18 of the Federal Reserve Act, with the Treasurer to sell bonds deposited with him for the purpose of securing circulation, provided such application is made prior to the surrender of its stock in the Federal

Reserve Bank.

MARCH 9, 1916.

SIR: There has been referred to this office for an opinion the question of whether a member bank in liquidation can file with the Treasurer of the United States an application to sell for its account at par and accrued interest United States bonds which are held to secure circulation.

Section 18 of the Federal Reserve Act provides in part

After two years from the passage of this act and at any time during a period of twenty years thereafter, any member bank desiring to retire the whole or any part of its circulating notes, may file with the Treasurer of the United States an application to sell for its account, at par and accrued interest, United States bonds securing circulation to be retired.

National Bank v. Caslin (41 Minn., 552). A bank, therefore, does not relinquish the rights and privileges of a member of the Federal Reserve System, nor cease to be such merely by a vote to go into voluntary liquidation.

Section 5 of the Federal Reserve Act provides in part that:

"When a member bank reduces its capital stock it shall surrender a proportionate amount of its holdings in the capital of said Federal Reserve Bank, and when a member bank its holdings of the capital stock of said Federal voluntarily liquidates it shall surrender all of Reserve Bank and be released from its stock subscription not previously called. In either case the shares surrendered shall be canceled. * * *"'

From this it is clear that when a member bank liquidates it is required to surrender its stock in its Federal Reserve Bank. Since a

bank becomes a member of a Federal Reserve

Bank by subscribing to and being allotted stock, it follows that it does not cease to be a member until such stock is surrendered and canceled.

This being true, there would seem to be no reason why a bank in liquidation which has not surrendered its stock should not be entitled to

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."

A bank becomes a member of the Federal Reserve System by subscribing to the capital stock of the Federal Reserve Bank of the district in which it is located, and upon issue of such stock to it is entitled to all the rights and privileges of a member. A member is not dissolved by a vote of its shareholders to go into voluntary liquidation, but continues to exist as a person in law capable of suing and being sued until its affairs and business are completely settled. National Bank v. Insurance Company (104 U. S., 54, 74), Merchants'

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

Warrants Issued in Anticipation of 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 the income of a State or other political unit, does not include the proceeds of a anticipation of the receipt of the proceeds of municipal sale of public securities. Warrants which are issued in bonds are not, therefore, eligible for purchase under the provisions of this section.

MARCH 7, 1916.

SIR: The question has been raised whether warrants issued in anticipation of the sale of bonds the purchase of which is contracted for by a reliable buyer are warrants issued "in anticipation of the receipt of assured revenues," as provided by section 14.

The American and English Encyclopædia of Law states that "the word 'revenue' is more generally used to designate the income of the Government arising from taxation, duties, and the like. The proceeds of lands or public stock sold would not be included as a part of the revenue of a State."

The Supreme Court of the United States, in a discussion of the meaning of the word "revenue," said, in the case of United States v. Norton (91 U. S., 568), that, though the lexical definition of the term "revenue" is very comprehensive and would probably be broad enough to include the proceeds of public lands and the proceeds arising from the sale of public securities, nevertheless the term the term "revenue laws" is, as a matter of common knowledge, never applied to cases of this kind. The Court of Appeals of New York, in the case of People v. N. Y. Central R. R. (24 N. Y., 485, 490), specifically held that "revenue" generally designates the income of the Government arising from taxation, duties, and the like and does not include the proceeds of a sale of public stock.

Story on the Constitution, section 880, in discussing the meaning of the term "bills for raising revenue," as used in the Constitution, says that "no one supposes that a bill to sell any of the public lands, or to sell public stock, is a bill to raise revenue in the sense of the Constitution."

It seems reasonably clear, therefore, that the term "revenue," as used in paragraph (b) of section 14 of the Federal Reserve Act and as defined by the Supreme Court and other cases, is not sufficiently broad to include the proceeds of a sale of bonds, even though the sale is assured by a binding contract with the purchaser. As applied to the income of an indi

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vidual, the term "revenue" would undoubtedly include such receipts, but as applied to the income of a State or other political unit the courts generally agree that it has a narrower and more technical meaning which, they say, expressly excludes the proceeds of the sale of public securities. Respectfully,

M. C. ELLIOTT, Counsel.

To Hon. C. S. HAMLIN,

Governor Federal Reserve Board.

Loans on Farm Land.

Loans on farm land come within the limitation imposed by section 5200 of the Revised Statutes of the United States. No national bank, therefore, may loan to any one person, firm, or corporation on the security of real estate an amount exceeding 10 per cent of the capital and surplus of such bank.

MARCH 23, 1916.

SIR: I am in receipt of yours of the 22d asking for opinion of this office on the following question: Whether loans made by national banks on the security of farm land, under the provisions of section 24 of the Federal Reserve Act, are subject to the limitations imposed by section 5200, Revised Statutes.

Section 5200 provides that:

The total liabilities to any association, of any person, or of any company, corporation, or firm for money borrowed, including in the liabilities of a company or firm the liabilities of the several members thereof, shall at no time exceed one-tenth part of the amount of the capital stock of such associations, actually paid in and unimpaired, and one-tenth part of its unimpaired surplus fund: Provided, however, That the total of such liabilities shall in no event exceed thirty per centum of the capital stock of the association. But 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 sanre shall not be considered as money borrowed.

Section 24 of the Federal Reserve Act provides that:

Any national banking association not situated in a central reserve city may make loans secured by improved and unencumbered farm