Fifth. Liabilities incurred under the provisions of the Federal Reserve Act.

Rediscount Subject to Restrictions.-The rediscount by any federal reserve bank of any bills receivable and of domestic and foreign bills of exchange, and of acceptances authorized by this act, shall be subject to such restrictions, limitations, and regulations as may be imposed by the Federal Reserve Board.

OPEN-MARKET OPERATIONS.

§ 14. Cable Transfers, Bankers' Acceptances and Bills of Exchange. Any federal reserve bank may, under rules and regulations prescribed by the Federal Reserve Board, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers and bankers' acceptances and bills of exchange of the kinds and maturities by this act made eligible for rediscount, with or without the indorsement of a member bank.

Powers. Every federal reserve bank shall have power:

(a) To deal in gold coin and bullion at home or abroad, to make loans thereon, exchange federal reserve notes for gold, gold coin, or gold certificates, and to contract for loans of gold coin or bullion, giving therefor, when necessary, acceptable security, including the hypothecation of United States bonds or other securities which federal reserve banks are authorized to hold;

(b) To buy and sell, at home or abroad, bonds and notes of the United States, and bills, notes, revenue bonds, and warrants with a maturity from date of purchase of not exceeding six months, issued in anticipation of the collection of taxes or in anticipation of the receipt of assured revenues by any State, county, district, political subdivision, or municipality in the continental United States, including irrigation, drainage and reclamation districts, such purchases to be made in accordance with rules and regulations prescribed by the Federal Reserve Board;

(c) To purchase from member banks and to sell, with or without its indorsement, bills of exchange arising out of commercial transactions, as herein before defined;

(d) To establish from time to time, subject to review and determination of the Federal Reserve Board, rates of discount to be charged by the federal reserve bank for each class of paper, which shall be fixed with a view of accommodating commerce and business;

(e) To establish accounts with other federal reserve banks for exchange purposes and, with the consent of the Federal Reserve Board, to open and maintain banking accounts in foreign countries, appoint correspondents, and establish agencies in such countries wheresoever it may deem best for the purpose of purchasing, selling, and collecting bills of exchange, and to buy and sell with or without its indorsement, through such correspondents or agencies, bills of exchange arising out of actual commercial transactions which have not more than ninety

days to run and which bear the signature of two or more responsible parties.

GOVERNMENT DEPOSITS.

§ 15. General Fund of Treasury.-The moneys held in the general fund of the Treasury, except the five per centum fund for the redemption of outstanding national bank notes and the funds provided in this act for the redemption of federal reserve notes may, upon the direction of the Secretary of the Treasury, be deposited in federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United States; and the revenues of the government or any part thereof may be deposited in such banks, and disbursements may be made by checks drawn against such deposits.

No Public Funds Deposited in Any Bank not Belonging to the System. No public funds of the Philippine Islands, or of the postal savings, or any government funds, shall be deposited in the continental United States in any bank not belonging to the system established by this act: Provided, however, That nothing in this act shall be construed to deny the right of the Secretary of the Treasury to use member banks as depositaries.

NOTE ISSUES.

§ 16. Federal Reserve Notes.-Federal reserve notes, to be issued at the discretion of the Federal Reserve Board for the purpose of making advances to federal reserve banks through the federal reserve agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in gold on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or in gold or lawful money at any federal reserve bank.

Application. Any federal reserve bank may make application to the local federal reserve agent for such amount of the federal reserve notes hereinbefore provided for as it may require.

Collateral. Such application shall be accompanied with a tender to the local federal reserve agent of collateral in amount equal to the sum of the federal reserve notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes and bills, accepted for rediscount under the provisions of section 13 of this act, and the federal reserve agent shall each day notify the Federal Reserve Board of all issues and withdrawals of federal reserve notes to and by the federal reserve bank to which he is accredited. The said Federal Reserve Board may at any time call upon a federal reserve bank for additional security to protect the federal reserve notes issued to it.

Reserves. Every federal reserve bank shall maintain reserves in gold or lawful money of not less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum

against its federal reserve notes in actual circulation, and not offset by gold or lawful money deposited with the federal reserve agent.

Notes, How Paid Out and Returned.-Notes so paid out shall bear upon their faces a distinctive letter and serial number, which shall be assigned by the Federal Reserve Board to each federal reserve bank. Whenever federal reserve notes issued through one federal reserve bank shall be received by another federal reserve bank they shall be promptly returned for credit or redemption to the federal reserve bank through which they were originally issued. No federal reserve bank shall pay out notes issued through another under penalty of a tax of ten per centum upon the face value of notes so paid out.

Notes Presented for Redemption at the Treasury.-Notes presented for redemption at the Treasury of the United States shall be paid out of the redemption fund and returned to the federal reserve banks through which they were originally issued, and thereupon such federal reserve bank shall, upon demand of the Secretary of the Treasury, reimburse such redemption fund in lawful money or, if such federal reserve notes have been redeemed by the Treasurer in gold or gold certificates, then such funds shall be reimbursed to the extent deemed necessary by the Secretary of the Treasury in gold or gold certificates, and such federal reserve bank shall, so long as any of its federal reserve notes remain outstanding, maintain with the Treasurer in gold an amount sufficient in the judgment of the Secretary to provide for all redemptions to be made by the Treasurer. Federal reserve notes received by the Treasury, otherwise than for redemption, may be exchanged for gold out of the redemption fund hereinafter provided and returned to the reserve bank through which they were originally issued, or they may be returned to such bank for the credit of the United States. Federal reserve notes unfit for circulation shall be returned by the federal reserve agents to the Comptroller of the Currency for cancellation and destruction.

Deposit in Treasury for Redemption of Federal Reserve Notes.The Federal Reserve Board shall require each federal reserve bank to maintain on deposit in the Treasury of the United States a sum in gold sufficient in the judgment of the Secretary of the Treasury for the redemption of the federal reserve notes issued to such bank, but in no event less than five per centum; but such deposit of gold shall be counted and included as part of the forty per centum reserve hereinbefore required.

Right to Grant or Reject Application.-The board shall have the right, acting through the federal reserve agent, to grant in whole or in part or to reject entirely the application of any federal reserve bank for federal reserve notes; but to the extent that such application may be granted the Federal Reserve Board shall, through its local federal reserve agent, supply federal reserve notes to the bank so applying. and such bank shall be charged with the amount of such notes and shall pay such rate of interest on said amount as may be established by the Federal Reserve Board, and the amount of such federal reserve

notes so issued to any such bank shall, upon delivery, together with such notes of such federal reserve bank as may be issued under section 18 of this act upon security of United States two per centum government bonds, become a first and paramount lien on all the assets of such bank.

Federal Reserve Bank may Reduce Liability.-Any federal reserve bank may at any time reduce its liability for outstanding federal reserve notes by depositing, with the federal reserve agent, its federal reserve notes, gold, gold certificates, or lawful money of the United States. Federal reserve notes so deposited shall not be reissued, except upon compliance with the conditions of an original issue.

Redemption of Notes.-The federal reserve agent shall hold such gold, gold certificates, or lawful money available exclusively for exchange for the outstanding federal reserve notes when offered by the reserve bank of which he is a director. Upon the request of the Secretary of the Treasury the Federal Reserve Board shall require the federal reserve agent to transmit so much of said gold to the Treasury of the United States as may be required for the exclusive purpose of the redemption of such notes.

Federal Reserve Bank may Substitute Collateral.-Any federal reserve bank may at its discretion withdraw collateral deposited with the local federal reserve agent for the protection of its federal reserve notes deposited with it and shall at the same time substitute therefor other like collateral of equal amount with the approval of the federal reserve agent under regulations to be prescribed by the Federal Reserve Board.

Notes for Circulation-Form and Tenor.-In order to furnish suitable notes for circulation as federal reserve notes, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved in the best manner to guard against counterfeits and fraudulent alterations, and shall have printed therefrom and numbered such quantities of such notes of the denominations of $5, $10, $20, $50, $100, as may be required to supply the federal reserve banks. Such notes shall be in form and tenor as directed by the Secretary of the Treasury under the provisions of this act and shall bear the distinctive numbers of the several federal reserve banks through which they are issued.

Notes Held for Delivery.-When such notes have been prepared, they shall be deposited in the Treasury, or in the subtreasury or mint of the United States nearest the place of business of each federal reserve bank and shall be held for the use of such bank subject to the order of the Comptroller of the Currency for their delivery, as provided by this act.

Expenses Incidental to Issue and Retirement. The plates and dies to be procured by the Comptroller of the Currency for the printing of such circulating notes shall remain under his control and direction, and the expenses necessarily incurred in executing the laws relating

to the procuring of such notes, and all other expenses incidental to their issue and retirement, shall be paid by the federal reserve banks, and the Federal Reserve Board shall include in its estimate of expenses levied against the federal reserve banks a sufficient amount to cover the expenses herein provided for.

Examination of Plates, Dies, and so Forth.-The examination of plates, dies, bedpieces, and so forth, and regulations relating to such examination of plates, dies, and so forth, of national bank notes provided for in section 5174 Revised Statutes, is hereby extended to include notes herein provided for.

Appropriation.-Any appropriation heretofore made out of the general funds of the Treasury for engraving plates and dies, the purchase of distinctive paper, or to cover any other expense in connection with the printing of national bank notes or notes provided for by the act of May 30, 1908, and any distinctive paper that may be on hand at the time of the passage of this act may be used in the discretion of the Secretary for the purposes of this act, and should the appropriations heretofore made be insufficient to meet the requirements of this act in addition to circulating notes provided for by existing law, the Secretary is hereby authorized to use so much of any funds in the Treasury not otherwise appropriated for the purpose of furnishing the notes aforesaid: Provided, however, That nothing in this section contained shall be construed as exempting national banks or federal reserve banks from their liability to reimburse the United States for any expenses incurred in printing and issuing circulating notes.

Deposit from Member Banks or Federal Reserve Banks.-Every federal reserve bank shall receive on deposit at par from member banks or from federal reserve banks checks and drafts drawn upon any of its depositors, and when remitted by a federal reserve bank, checks and drafts drawn by any depositor in any other federal reserve bank or member bank upon funds to the credit of said depositor in said reserve bank or member bank.

Charges. Nothing herein contained shall be construed as prohibiting a member bank from charging its actual expense incurred in collecting and remitting funds, or for exchange sold to its patrons. The Federal Reserve Board shall, by rule, fix the charges to be collected by the member banks from its patrons whose checks are cleared through the federal reserve bank and the charge which may be imposed for the service of clearing or collection rendered by the federal reserve bank.

Regulations Governing Transfer of Funds and Clearing-house.The Federal Reserve Board shall make and promulgate from time to time regulations governing the transfer of funds and charges therefor among federal reserve banks and their branches, and may at its discretion exercise the functions of a clearing-house for such federal reserve banks, or may designate a federal reserve bank to exercise such functions, and may also require each such bank to exercise the functions of a clearing-house for its member banks.