Court Opinion

ID: 6832358
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:56:27.500105+00
Date Added: 2024-06-11T16:04:36.068138
License: Public Domain

FOSTER, Circuit Judge
(dissenting).
Section 16 of the Federal Reserve Act provides that every Federal Reserve Bank shall receive on deposit at par from member banks cheeks and drafts drawn upon any'of its depositors. Section 13 of the act, as amended, provides that any Federal Reserve Bank may receive such deposits from member banks, but does not specify at par, and further provides that both member and nonmember banks may make reasonable charges for collection or payment of cheeks and drafts and. remission thereof by exchange or otherwise, provided no such charges shall be made against the Federal Reserve Banks.
In this ease it appears that the appellee does not give immediate credit for checks deposited by member banks, drawn on other member banks. Regulation J provides for-holding such cheeks in suspense for a period sufficiently long to allow for collection in the ordinary course of events before credit is given. This is a plain violation of section 16 of the act. Receiving checks for collection is not receiving them on deposit.
It is idle to say that to give immediate *869credit to checks deposited would require the Reserve Bank to lend millions of its money without interest. In nearly all cases a crediting of the check and subsequent collection would be a mere matter of bookkeeping. If the Reserve Bank applied clearing house methods, as they are authorized to do, probably most of the items could he handled in the bank.
The danger of loss to the Reserve Bank is also infinitesimal. The member hanks are stockholders of the Reserve Bank in proportion to their own capital and surplus. In the event of the failure of a member bank, the Reserve Bank has a first lien on its stock. The member bank is also required to keep a certain percentage of its total deposits on deposit with the Reserve Bank, in this instance 3 per cent, of the time deposits and 7 per cent, of its general deposits. If the cheek deposited were not in fact paid, the Reserve Bank could immediately charge it against the deposit. If that reduced the deposit below the legal requirement, the penalty provided by the act could be applied. The penalty usually enforced for a reduction of the required deposit below the minimum is to charge the discount rate and 2 per cent, additional on the deficit until repaid.
The Reserve Bank has the right to make frequent examinations of the member banks, and to call for statements of their affairs whenever thought necessary. So they have ample opportunity to judge of the solvency of the member hanks. The minimum deposit required by the act is subject to cheek, so no violation'of the law would occur, if occasionally these deposits were reduced below the minimum. Of course, the statute should not be construed to require the Reserve Bank tq give immediate credit, regardless of the solvency of the depositor and the payee of the cheek, nor to give credit, if there be cause to suspect that the check is not genuine, or for any other reason will not be paid when presented.
If it be conceded arguendo that, by construing the two sections together, discretion is vested in the appellee to take cheeks from member hanks drawn on other member banks in the same reserve district merely for collection, then it seems to me the appellee is on the other horn of the dilemma. It can hardly be said the charge made for payment or collection of such checks is a charge made against «the Federal Reserve Bank.
It is contended that, although the Federal Reserve Bank receives checks in the manner above indicated, that is to say, for collection, they receive them on deposit for collection, and must credit them at par when collected; consequently a collection charge would still be made against the Reserve Bank, which would be illegal.
The Supreme Court, in Farmers’ Bank v. Federal Reserve Bank, 43 S. Ct. 651, 653, 262 U. S. at page 653 (67 L. Ed. 1157, 30 A. L. R. 635) said this: “Par clearance does not mean that the payee of a check, who deposits it with his bank for collection, will be credited in his account with the face of the check if it is collected. His bank may, despite par clearance, make a charge to him for its service in collecting the check from the drawee bank. It may make such a charge, although both it and the drawee hank are members of the federal reserve system; and some third bank which aids in the process of collection may likewise make a charge for the service it renders.”
The argument that the Reserve Bank must inevitably credit the face of the check when collected is not sound. Section 13 does not require it, nor does a reasonable construction of section 16. It seems to me to be clearly the intention of Congress that the Federal Reserve Bank shall give to its member banks immediate credit for cheeks drawn on other member banks in the same district.
If I am wrong in this conclusion, then it inevitably follows that the member banks have the right to make collection and exchange charges on such checks, as the charge cannot be said to be made against the Reserve Bank when the check is merely held for collection.
For these reasons I respectfully dissent.