FIGURE 34. Form 5504: statement given by depositor to Federal reserve bank, showing certificate of deposit (for government funds) in which check lost after deposit, or uncollectible, is included. PAGE 35A. Application by national bank for fiduciary powers B. Reverse of Fig. 35A. 36A. Page 1 of application of national bank for fiduciary powers: Federal Reserve Board form No. 61A. B. Page 2 of Federal Reserve Board form No. 61A. c. Page 3 of Federal Reserve Board form No. 61a. 632 ... 682 683 687 37. Supplementary application of national bank for additional fiduciary 40A. Page 1 of national bank examiner's report of condition of bank examined 755 756 42. Request for verification of items forwarded by or held for national bank under examination 770 43. Request to borrower for verification of collateral pledged with national bank under examination 772 44A. Federal reserve bank examiner's report of condition of bank examined 775 776 c. Federal reserve bank examiner's comments on bank examined D. "Follow sheet" used by Federal reserve bank examiner. 45. Request to correspondent for verification of account with bank under examination by Federal reserve bank 780 46A. Federal reserve bank examiner's analysis of member bank's earnings and expenses B. Federal reserve bank examiner's analysis of large borrowers maintaining small balances c. Federal reserve bank examiner's analysis of hidden assets and liabilities and losses 47A. Application for permission to serve several banks as director, officer, or employee B. Reverse of Fig. 47A. c. Statement of bank's condition submitted in connection with application for permission to serve several banks as director, officer, or employee 796 D. Reverse of Fig. 47c. . 48A. Report of condition by a national bank to the comptroller of the currency FEDERAL RESERVE CHAPTER I FUNDAMENTAL IDEAS A REVIEW of banking experience in the United States during the ten years since the organization of the Federal Reserve System reveals a process of integration. This process is gradually resulting in the establishment of a genuine "banking system." While, prior to the Federal Reserve Act of 1913, there had been as many "systems" as there were states, with the national system superimposed upon all, it required the coming of the Federal Reserve System, with its provisions for organization and oversight on a basis embracing banks included in all of the different systems, to bring about the creation of a real system in the national sense, both geographically and from the broadest viewpoint of banking organization. We have in fact to-day a banking system in the sense that there is provision both for general organization and for the establishment of uniform relationships between the individual member bank on the one hand and the reserve bank on the other. The reflex effect of this development has been very great. It has tended to bring about a reorganization of the state banking systems with a view to higher uniformity among themselves, in as much as all have found it desirable, if not necessary, to adapt themselves to the general scheme of banking requirements established under the Federal Reserve Act and under the administrative rulings issued in accordance therewith. Furthermore, the regulations of the Federal Reserve Board, although certainly possessing no mandatory quality outside of the membership of the Federal Reserve System (which has never contained more than about one-third of all the incorporated banks in the country), have nevertheless acquired a very extensive and powerful influence over banking methods and conditions in the country at large. Meaning of Banking Practice Besides recognizing the existence of a definite system of the sort thus indicated, it is possible also to note the growth of a uniform plan 1 and method of what may be called "banking practice," more or less coextensive with the banking system. The term banking practice is frequently employed in current writings to describe the internal organization or office practice of banks in their routine operations. Thus, for example, such matters as bookkeeping and accounting, statement analysis, assignment of duty as between different employees, and the like are often designated in works on banking as banking practice. This is not the sense in which the term is employed in the present volume. By banking practice is meant here the custom or habit of bankers, "bankers" being defined to include chiefly those who possess executive oversight or those who are vested with the exercise of executive duty in connection with the functions which they are called upon to perform. This conception of banking practice involves no extended reference to banking theory. By "banking theory" is meant the underlying doctrine or principles of general banking service, especially in its relation to the economic organization of society. Such doctrine has no necessary dependence upon technic in any sense; it has to do with the essential results of the larger economic kind that are to be expected from the performance of banking functions. It is the intermediate ground between theory and internal management that is here designated by the term banking practice, or, from another point of view, "banking operation." Banking practice so defined has been greatly standardized and unified in recent years; particularly in operations occurring under or in connection with the Federal Reserve System, rapid progress has been made in the direction of a recognized and prevalent executive procedure, varying but little in detail under specified circumstances. Sources of Banking Law This development of banking practice has been directly influenced by, and has itself reflexly influenced, the growth of banking law. Present sources of banking law in the United States remain, as they have always been, two in number, (1) Federal and (2) state, and the administrative agencies of regulation, subject to these codes of law, are similarly classified. Federal control, however, must now be recognized as subdivided into two main branches, (1) that of the Federal Reserve Board and (2) that of the Comptroller of the Currency. These two authorities occupy fields which are by no means identical, and from time to time they issue rulings and orders which are more or less conflicting and inconsistent one with another. Nevertheless the development of a greater degree of unanimity and uniformity has proceeded along the lines of system, growth, and identity of practice. Bank method and regulation are also being generally reshaped through the influence of the Federal Reserve System. The decade 1913 to 1923 will always occupy an important position in the history of American finance and banking, not merely because it covers the period of a war and a crisis during which financial transactions assumed an unexampled complexity and magnitude, but also because it was the period of a vast body of far-reaching legislation which greatly exceeded in breadth and significance all legislation on the same or similar subjects that had been passed for half a century preceding. It is enough to remind the reader that this decade witnessed adoption of the Federal Reserve Act together with amendatory statutes adopted before the end of the period; of the Federal Farm Loan Act, with its provision for two extensive systems of mortgage banking headed by the Federal land banks and the joint-stock land banks; of the act establishing the War Finance Corporation with its capital of $500,000,000 drawn from the Treasury and its, at times, very extensive practical interference with the development of agricultural lending throughout the country; of the Agricultural Credits Act of 1923, with its provision for 12 "Federal intermediate credit banks"; of the numerous and extensive revisions of state banking statutes designed to bring these codes into greater or less harmony with the Federal Reserve Act; of an extensive body of state legislation on rural credit institutions, including both land banks and coöperative credit asociations; and in addition an immense variety of financial measures which provided for and grew out of the great operations of the Government, designed to provide for the conduct of the war and the adjustment of the claims that in various ways resulted from it. Yet the great body of legislation which thus accumulated would not of itself have brought about the far-reaching changes in what we have called banking practice had it not been for continuous effort to adapt and apply the legislation, much of it crude or inconsistent, which was thus placed on the statute books. In this undertaking a place of first importance must be assigned to the Federal Reserve Board for its gradual working out of systematic regulations which, as applied and adapted by the Federal reserve banks, have laid the foundations of a scientific banking practice whose main outlines can now be traced. The Federal Reserve Board and reserve banks are to be regarded as exercising a fundamental unifying influence, even though the regulations and practices to which they have given birth have not the force of law. Because the Federal reserve banks' requirements as to eligibility of paper must be complied with in order to obtain rediscount opportunities, the general requirements laid down by the Board have been more uniformly observed than could possibly have been assured under any other conditions. This has rendered the regulations of the Board and, subordinate to them, those of the Federal reserve banks an ef |