Evening star., 1924-07-11
NEW.CHECK MOVE
TO PROTECT BANKS
Federal Reserve Makes Sug-
gestion to Members in
Fifth District.
Bf CHAS. II. SHAEE'FE.R

protection Of member banks of the
nith federal reserve district in the
clearing and collection of checks ts
urged locally touay in a special
bulletin from the Federal Reserve
Bank of Richmond
Inc current urge is rendered per-
tlnent by recent decision of
supreme court handed down in
case which has become known as the
Malioy case, suit of MaIloy Broth
ers OF Quitman, Ca, against the
Richmond institution. The decision
of the court in this case was TO the
effect that although federal reserve
bank, acting under the Federal Re
serve Boards regulations, had the
right to send a check direct to a
drawee bank, 1t had no right to ac-
cept anything but money in pay
ment unless expressly authorized to-
do SO.
Under existing regulations member
banks warrant their own authority
to give federal reserve banks the au-
thority to handle their customers
checks subject to the terms and cor
ditionS of these regulations and
agree to indemnify the federal re
serve banks against loss through
failure to have such authority. IL
is, therefore, suggested to member
banks, which have not taken proper
steps to protect themselves in the
manner described, that their deposi-
tors be required to enter into an
agreement or contract with them
which will give them full protection.
Text of Special Bulletin.
The following form was prepared
by the counsel of the Federal Re
serve Bank of Richmond, is offered
as a remedial suggestion:
The depositor agrees that checks
on this bank are credited subject to
final payment. and if not good at the
close of the day on which deposited
may be returned
"All items not on this bank are ac-
cepted as the agent of the depoSitor
for collection for his account and at
through any federal reserve bank for
collection, in accordance with the
terms of its circulars and the regu-
lations of the federal reserve board,
and may be presented or sent for
collection to the drawee OF any other
subagent for collection and remit
tance by cash or bank draft.
This bank shall not be liable for
the negligence, insolvency or other
default of any such subagent, but
shall have the right to charge back
the amount of any item for which
final and actual payment is not re-
ceived, regardless of whether OF not
the item itself can be returned.
Special Cases Noted.
1t should be taken into account by
member banks, the circular states,
there may be local practices and Gus
toms in various places which might
render other provisions advisable IN d
~
checks. and any contract used by any
particular bank should be drawn with
reference to its own conditions and
methods of business. For instance, the
first paragraph of suggestions has no
reference to checks which may be col
lected through a federal reserve bank
1t may not be generally applicable or
necessary, but it is inserted because
in many states such a provision is
necessary to avoid a line of decisions
by various courts to the effect that the
act of crediting to a depositor a check
on the bank which receives the deposit
amounts TO the final payment of the
check.
Transit Company Report.
The Washington Rapid Transit Com
pany operated d a deficit of S671 DUR
ing June, compared with a profit of
s3,976 in the preceding month. A de-
crease of approximately $4,000 pay
were the major contributing factors to
the unfavorable showing.
Ten-cent passengers in June totaled
1906, as compared with SS.l19 the
previous month. while those purchas-
ing tokens aggregated 241 992 as
compared with 252,250 the preceding
period.
Total operating revenues for the
period amounted TO 2S,0SS. with ex-
penses totaling s26,993
Railway Common Still Higher.
Common stock of the Washington
Railway and Electric Company touch
ed another new high, 1873. on the
initial sale today. but declined frac-
tionally TO 79L2, at which price, it
closed. The issue was in very good
demand total of 31O shares chang
ing hands.
The new 6s of the Washincton Rail
way and Electric Company proved
conspicuous on the investment side
of the market. total of $4,000, face
value. selling al 80 and 9914.
Fifty shares of Merchants Transfer
and Storage Company brought 112
SHORT-TERM SECURITIES