the conversion of agricultural or live stock financing companies. These corporations like national banks are regulated by the Comptroller of the Currency and are subject to examination by his staff. They must have a capital of at least $250,000. Not less than one half of it must be paid up in cash and the balance must be paid in within six months. Any member bank of the Federal reserve system may apply to the Comptroller for permission to invest in these corporations an amount up to ten per cent of the member bank's capital and surplus. These corporations do business directly with the public, making loans upon warehouse receipts and live stock mortgages at whatever rate of interest is allowed in the state where the corporation is located. The principal powers which are to be exercised subject to the regulation of the Comptroller are as follows:

1. To make advances upon, to discount, rediscount, or purchase, and to sell or negotiate, with or without its indorsement or guaranty, notes, drafts, or bills of exchange, and to accept drafts or bills of exchange, which

A. Are issued or drawn for an agricultural purpose, or the proceeds of which have been or are to be used for an agricultural purpose; B. Have a maturity, at at the time of discount, purchase or acceptance, not exceeding nine months; and C. Are secured at the time of discount, purchase, or acceptance by warehouse receipts or other like documents conveying or securing title to non-perishable and readily marketable agricultural products, or by chattel mortgages or other like instruments conferring a first and permanent lien upon live stock which is being fattened for market.

2. To make advances upon or to discount, rediscount, or purchase, and to sell or negotiate with or without its indorsement or guaranty, notes secured by chattel mortgages conferring a first and paramount lien upon maturing or breeding live stock or dairy herds, and having a maturity at the time of discount, rediscount, or purchase not exceeding three years.

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3. To issue collateral trust notes or debentures with a maturity of not more than three years. These debentures are to be secured by an equal amount of notes or drafts which are held by the corporation.

4. To deal in bonds of the United States and to act as its fiscal agent.

Before starting business each corporation must deposit with the Federal reserve bank of its district U. S. bonds equal to 25% of its capital. Thereafter it must keep on deposit bonds equal to seven and one half per cent of its total indebtedness.

The same act provided for the organization of national agricultural credit corporations with a capital of $1,000,000, which do not have the right to do business with the public but are instead institutions of rediscount. They may rediscount notes which are eligible under the act for credit corporations and members of the Federal reserve system. They may also purchase paper from cooperative agricultural associations if it is secured by warehouse receipts or other documents of title. All paper that is purchased or rediscounted must have a maturity of not more than nine months. These corporations are not required to deposit bonds.

224. The War Finance Corporation. During the Great War the U. S. Government organized the War Finance Corporation. A capital of $500,000,000 was authorized and the Government purchased its stock to the amount of $455,000,000 to enable the corporation to make advances on proper security for "purposes necessary and contributory to the war." After the armistice ended the Great War, Congress authorized the Corporation to make advances for a period of five years to persons engaged in export trade and to persons financing those people who were engaged in export trade. In August 1921 the powers of the Corporation were extended and enlarged. Since

conditions were such that there was an accumulation in the United States of agricultural products which could not be marketed in an orderly manner, the Corporation was given authority to make advances to assist exports or to assist the orderly marketing of products throughout the season in the United States. Advances can be made to cooperative marketing associations, or to banks or other financial institutions who are making loans to people for agricultural purposes, both producing and marketing. In exceptional cases the Corporation can purchase paper the proceeds of which have been devoted to agricultural purposes. The Corporation greatly augments the funds available for farmers and helped the agricultural interests to pass through the critical months of 1921-1922. Crops did not need to be sold in a glutted market. Previous loans were renewed by banks, and new ones made where necessary. The powers of the Corporation to make loans for agricultural purposes is an emergency measure and expires on February 29, 1924.

225. International or foreign banking. - Section 25 of the Federal reserve act permits national banks to participate in foreign banking in three ways, subject to the regulation of the Federal Reserve Board.

1. If it has $1,000,000 capital and surplus it can establish a foreign branch. Up to 1922 only two national banks had used this privilege. The First National Bank of Boston had one branch in Buenos Aires; the National City Bank of New York had numerous branches in Latin America, one in France, one in Italy, and one in Belgium.

2. If it has $1,000,000 capital and surplus (from Sept. 1919 to Dec. 1920 the limit as to capital was eliminated) it can invest an amount not to exceed "in the aggregate 10% of its paid-in capital and surplus in the stock of one or more banks or corporations" of this country which do foreign banking, provided these corporations enter into an

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agreement with the Federal Reserve Board to let it regulate operations. There are a number of foreign banking corporations in New York organized under state laws which are thus cooperating with the Federal Reserve Board. They have numerous foreign branches.

3. Any national bank can invest up to 5% of its capital and surplus in the stock of a foreign banking corporation organized according to the terms of the Federal reserve act, but its aggregate investment in all corporations doing foreign banking must not exceed 10% of its capital and surplus.

State banks are usually allowed to invest a portion of their capital and surplus in other banks. Therefore they too may become interested in international banking.

While banking corporations to do foreign banking have been organized under state laws it was not until the Federal reserve act was amended in 1919 that Federal incorporation of such corporations was possible. One may be organized by five or more natural persons with a minimum capital stock requirement of $2,000,000. The majority of the capital stock must always be held by citizens of the United States or American owned corporations of this country. The corporation is prohibited from carrying on any of its business in the United States except such as, in the judgment of the Federal Reserve Board, is incidental to its international or foreign business.

Not only is this federal incorporation of a foreign banking corporation unique, but also its power to invest in foreign securities and against these and other assets to sell its own debentures, bonds or promissory notes. Such powers enable these banks to extend longtime credits. The method used will enable Americans indirectly to make foreign investments. The main purpose of the act is to permit Americans to start foreign banks, in order that the

American importer and exporter will have additional facilities for the financing of foreign business.

226. Regulation of banks. Whether a bank be under national or state control it is subject to regulation. This is provided for by laws giving banks the right to do certain things and only those things, restricting the manner in which those powers may be performed, or making their execution subject to regulations to be made by some person or board. In general the legislation covers such points as: how and by whom a bank may be organized; the maintenance of a certain capital and surplus; the duties and responsibilities of stockholders, directors, and officers; the powers of the bank; the management of trust funds; the maintenance of reserves against deposits; the restrictions on loans, discounts, and investments; the powers and methods of the state or national officers or board in supervising the activities of banks; and the penalties for the violation of statutes by any officer or director. To carry out its laws each state has an executive department headed by a commissioner or superintendent who is assisted by a staff of bank examiners. The national government has boards and a comptroller of the currency who is an officer in the U. S. Department of the Treasury. He is assisted by deputies, clerks, and a staff of examiners. The provisions of state laws vary greatly. One must examine the statutes of his own state if he is to know them, but the general character of state legislation is illustrated by the operation of the national banking laws. In fact the National bank act has been used as a model for many of the state statutes.