Renewal of Mortgage Loans. The Federal Reserve Board has recently received various inquiries as to the question of renewing mortgage loans made for a year under authority of the Federal Reserve Act. One such recent communication raises the following questions: (1) Whether a national bank under authority of section 24 of the Federal Reserve Act may renew a loan made for one year, accepting as collateral security a mortgage or deed of trust on the same property as the original loan. (2) Whether a new mortgage or deed of trust must be executed in case such renewal is accepted. (3) Whether a note made for one year and discounted by a national bank under authority of section 24 of the Federal Reserve Act, as amended, may be carried after maturity as an asset of the bank upon payment of interest in advance without treating such note as overdue paper. Inquirers have been advised in reply to such questions that the Act provides specifically that "no loan made upon the security of such real estate as distinguished from farm land shall be made for a longer time that one year." Any note taken by a national bank, therefore, as evidence of a loan against real estate other than farm land, must mature within one year from the date of its discount. At the expiration of one year the bank must have the right to require payment and to proceed to foreclose the mortgage, should such action be necessary. Any agreement entered into between the bank and the borrower at the time the loan is made, to renew the note at maturity, would not constitute a compliance with the terms of the statute, but it seems clear, nevertheless, that if the bank has the option to require payment of a note at its maturity at the end of one year, it may, should it so desire, make a new loan to the same parties and upon the same security for a further period of one year. In order to obviate the necessity of executing a new renewal or renewals of the note described therein, provided, however, the bank does not in any way obligate itself to grant such renewals, for the statute places a limitation on the loan made by the bank. The manifest purpose of the statute is to place the bank in a position where it can, if it desires, liquidate the loan at the expiration of one year, thereby preventing its funds from being tied up for a longer period. If the mortgage or deed of trust executed as security for the loan places the bank in a position where it can proceed against the property taken as security in case of default in payment and the loan is not made for a longer period than one year, the statute will have been complied with, even though the mortgage or deed of trust is drawn so as to permit the bank to make a new loan on the same security for a period not to exceed one year, upon the maturity of the note first taken. In all cases payment and cancellation of the maturing note should be required, and if the original note is carried in the assets of the bank after maturity, it should be treated and reported as overdue paper. Clayton Act Decisions. The Federal Reserve Board has taken action on 1,335 applications for permission under the Kern amendment, granting 1,195 and refusing 140. No records exist to show the number of directors who have surrendered bank directorates in accord with the provisions of the act without filing any application. The subtotals of the districts are as follows: No. 1-Boston. No. 2-New York No. 3-Philadelphia.. No. 5-Richmond. No. 6-Atlanta.. No. 7-Chicago.. No. 9-Minneapolis. No. 10-Kansas City. No. 11-Dallas.. mortgage or deed of trust, there would seem to No. 12-San Francisco. be no legal objection to having the original mortgage or deed of trust so drawn as to cover 1 One of which was refused in part. Four of which were disapproved in part. 1 Changes in ownership of gold during period Sept. 21, 1916, to Oct. 19, 1916, equal 5.3 per cent of obligations settled. a Withdrawals have exceeded balance plus deposits. Gold settlement fund-Summary of transactions, Sept. 22, 1916, to Oct. 19, 1916, inclusive. Gold settlement fund-Summary of transactions, Sept. 22, 1916, to Oct. 19, 1916, inclusive-Continued. INFORMAL RULINGS OF THE BOARD. Below are reproduced letters sent out from time to time over the signatures of the officers or members of the Federal Reserve Board which contain information believed to be of general interest to Federal Reserve Banks and member banks of the system: Loans on Farm Land. I wish to acknowledge receipt of your letter af September 27, 1916, relating to the construction of Regulation G of the Federal Reserve Board. The Federal Reserve Act as originally passed by Congress authorized any national bank to make loans on improved and unencumbered farm land under certain specified conditions. In an act approved September 7, 1916, this section of the Federal Reserve Act was amended so as to authorize any national bank to loan on any other improved and unencumbered real estate, as distinguished from farm land, provided such real estate is located within 100 miles of the place in which the loaning bank is located. Under the terms of the amended law and the regulation of the Board a loan on real estate other than farm lands, which will, of course, include city or town property, must not be for a period longer than one year, nor shall the amount of any such loan exceed 50 per cent of the actual value of the property by which the loan is secured. OCTOBER 3, 1916. Member Bank Reserves. In reply to yours of the 3d instant, you are advised that under the regulations of the Board member banks are now permitted to carry with their Federal Reserve Bank any portion of their reserve heretofore required to be maintained in their own vaults. It is, of course, understood that the aggregate in vault with the Federal Reserve Bank, and with the approved reserve agent, must equal the total amount required by law to be maintained. OCTOBER 4, 1916. Clayton Act Interpretations. Your letter of September 28, 1916, addressed to the Secretary of the Treasury, has been referred to this office for attention. Section 8 of the Clayton Antitrust Act relating to interlocking bank directorates does not attach any penalty for noncompliance with its provisions. Section 11 of that_act, however, authorizes the Federal Reserve Board to serve a complaint upon any person violating the provisions of section 8, stating its charges and containing a notice of a hearing. If the Board upon hearing believes the law is being violated, it shall, under the terms of section 11, serve an order requiring the person complained of to desist from such violations and to resign the directorships held contrary to law. Upon failure to obey such order the Board may apply to the Circuit Court of Appeals of the United States for its enforcement. In the proceedings before the Circuit Court findings of fact before the Board shall be conclusive, though new evidence may be introduced by either party, and the judgment and decree of the Circuit Court is final, except that it is subject to review by the Supreme Court of the United States upon certiorari. OCTOBER 4, 1916. wish to state that in the opinion of Counsel for In reply to your letter of the 6th instant, I the Board the acts of a director of a member bank as director, after October 15, 1916, are valid even though he should later be adjudged disqualified to serve as such by a circuit court of appeals as provided under section 11 of the Clayton Act. It is understood, however, that acts after the decree of the circuit court of appeals denying the right to serve as director would not merely be invalid but also in contempt of court. OCTOBER 14, 1916. Real Estate Loans. In answer to your letter of October 11, I beg to call your attention to the following letter sent out by the Board on September 13, 1915, |