The Leon reporter. (Leon, Iowa) 1887-1930, 1915-07-01

principle either the authority or the
| duty to impose restrictions of a char
acter calculated to embarrass prop
erly conducted State banks in apply
ing for membership, or to impair
their usefulness in well-defined
field of banking. 1t has endeavored
in the regulations merely to provide
a reasonable limitation, SO that loans
or investments of this character
shall not be SO excessive in amount
as to impair the liquid condition of
bank.
Within the limits thus described, it
will be the policy Of the Board to de-
termine the eligibility Of State banks
for membership in the Federal Re-
serve system by means of examina-
ton. Since admission to the system
will be looked upon as an evidence
of the banks strength, examinations
for admission must disclose clearly
the condition of an applying bank
and the character of it's management.
These examinations must, therefore,
be thorough and effective, and be
under the direction of the Federal
Reserve Board, but the Board will
endeavor to avoid unnecessary addi-
tional expense to the banks by dis
pensng with separate and independ-
ent examinations so far as practic-
able by adopting a method Of joint
or supplementary examination in
conjunction with State banking
authorities. The Board plans to
draw freely upon the examiners and
auditors in the employ of the respec-
tive reserve banks and to use their
services for the purpose of thus sup
plementing examinations conducted
by the banking departments of the
several States. 1t is hoped, there
fore that in passing upon applica-
tions for membership, the Board and
the several Federal Reserve Banks
will have the cooperation of State
banking authorities, SO that every
qualified applying bank may be ad-
mitted to membership and all not
qualified excluded.
With respect to the matter of
status, there are important differ
ences between the membership of ma
tional banks and OF State banking in
situations in the Federal Reserve
Banks. Membership of national
banks is not elective, but is prescrib
ed by the law. So long as bank is
a national bank it must be member
Dduh. w uSll IL SCdoCo W NC q AhOA1A
Der bank it ceases by the same fact
to be a national bank. the law hav-
ing provided no method by which a.
national bank can severe it's rela-
tions with a Federal Reserve Bank
except by the process of liquidation.
All this is set forth in definite terms
in the Federal Reserve Act.
The situation of the State banks is
fundamentally different. National
banks are member banks as a matter
of necessity; State banks become
member banks as matter of choice.
Membership in Federal Reserve
Bank is an incident in the life of a
State institution, not an essential
part of it's being; and its continued
existence as a State institution
would not be threatened or inter-
rupted if it's membership should
cease, it's status being fixed by the
laws of it's State, not, as in the case
of national banks, by the Federal Re-
serve Act The conditions of mem
bership of State institutions are,
Furthermore, prescribed only in gen
eral terms in the act, the further and
final elaboration of them being left
to the Federal Reserve Board, which
is vested with the necessary discre-
tionary authority. In view of this
discretionary authority, the Board
believes it a duty to define clearly
terms and conditions upon which
State banks and trust companies
may withdraw from membership,
since otherwise those charged with
the management of these lnstltu-
tons might not feel authorized to
enter a system under which by future
regulation the scope of their opera
tons might be restricted. 1T is not
to be expected that much use will be
made of the withdrawal privilege;
indeed. it is the belief of the Board
that as the system develops member
ship therein will carry with it guar
antics of safety and security when
will be of inestimable value; at the
same time it recognizes the RESPONSE
bilities of those intrusted with the
management of the. State institutions
and has, therefore, in the appended
regulation clearly defined the condl-
tons upon which any State instltu-
ton may withdraw from MEMBER
ship.
CHARLES S. HAML1N,
n. PARKER WILLIS, Governor.