Perth Amboy evening news., 1923-04-13
.U.S. RESERVE
URGES CHANGE
Federal System Opposes
Check DiScounts-Would
Have Checks Paid at Par

WASHINGTON, April 10 CBy
The Associated Pressl-Bankera,
bank depositors, business and com
mercial concerns generally are all
deeply interested in the outcome of
the efforts of the federal reserve
banks throughout the country to
compel banks TO pay at par checks
drawn upon them.
Particularly among what are com
monty referred to as country banks.
1t has become the practice to charge
a commission or exchange for re-
hitting funds to clearing banks in
the payment OF checks drawn upon
them by depositors. The practice IS
said to have brought the banks con-
siderable income, and for that rea-
son they are strenuously contesting
the position of the federal reserve
banks which would cut 1t of.
Some states have come to the re-
lief OF the banks INDUCING in the
practice by enacting laws which
would authorize its continuance.
This was the case in North Carolina.
When the federal reserve bank at
Richmond. Va. decided to extend
III 'par-clearance" into that state it
encountered opposition from the
Farmers and Merchants Bank of
Monroe and eleven other banks.
The federal reserve bank at At
lanta. Ga. had a similar experience
with banks in that state.
The North Carolina banks de-
tended themselves under the act of
1881 of the general assembly of
that state which authorized banks
and trust companies to charge a
zoe tor RENTING funds in payment
OF checks drawn upon them. The
state courts of North Carolina,
however, held the state law uncon-
stitutional on the ground that 1t
was in conflict with the federal re-
serve act, and hat it contravened
fhs legal tender provisions OF the
federal constitution.
The United States district court
FOR Northern Georgia without going
into the merits OF the controversy
dismissed proceedings brought by
the American Bank and Trust Com-
pany and other banks of Georgia on
the ground of want of equity. and
its action was approved by the
court OF appeals.
When this case reached the su-
pEsn1e court, that court took notice
OF some of the charges made by the
Georgia banks. The opinion, writ
ten by Justice Holmes, referred 10
lI1cLuQQ6 "IllAll II Nd5 dbSSILC0 ItlC
Federal Reserve Bank of Atlanta in
tended to use to force the Georgia
J. anks TO cash checks at par, giving
most attention to the declaration
that the Atlanta reserve bank in
ito accumulate checks upon
fhe country banks until they reached
\ large amount, and then to cause
them to be presented for payment
the counter Or by other de-
detailed to require payment in
rash IN such wise as to compel the
plaintiffs (the Georgia banks) to
so much cash in their
vaults as to drive them out of bust
Less or force them. If able, to sub
nit to the defendants federal re-
bank's) scheme"
Pointing out that an action would
3e against a man who through dis
interested ma~levolence'' caused a
run upon a bank and ruined 1t, JUS
ice Holmes stated that "a similar
If less complete in its effect
to be expected from the course
the defendants are alleged to
intend" The supreme court con-
that the United States did |
1ot intend by that (the federal re-
serve act) statute to sanction this
sort of warfare upon legitimate
,reatiops of the states" and it sent
case back to the district court
% be tried OF its merits.
After such a trial the district court
a decree Diminishing the COM
OF the Georgia banks, and the |
fifth circuit court OF appeals affirmed
he decree Thus the Georgia case is
in the supreme court for the
time, where it has been
by the North Carolina case. !
Because of the Importance of an
Early decision the two cases have
been advanced for oral argument on
April %. It is expected that n final
decision will be handed down at
present term OF court.
The federal reserve banks declare
he two cases are regarded by them
as essentially test cases" and en-
the importance of business
generally OF having their position
sustained. pointing out that while
n individual instances # MAJ not be
x much moment whether a small
commission or exchange" is
by the bank upon which
he check is drawn. it is Of ma
importance to know when
upon banks not members Of
he Ederal reserve system accumu-
ate in large numbers whether the
iull face value of the checks will be
.'eceived. Should the email banks
- permitted to charge exchanges"
or csshing checks, # will be neces-
AIRY, the federal banks declare, for
houses TO adjust themselves
accordingly, and either require their
iustomsrs TO pay the cost