against holding directorship in any other National bank, irrespective of location or size, beyond the three, not in competition provided for by the law. An advantage under the law is with the State banks and trust companies.

PRIVATE BANKERS NOT ELIGIBLE

The first paragraph of section eight of the statute is to the effect that no private banker or person who is a director in any State banking institutions, having deposits, capital, surplus and undivided profits aggregating more than $5,000,000, shall be eligible to be a director in any United States bank or banking association. It is a reasonable deduction that had Congress desired to preclude from a National bank a private banker who was connected with a $5,000,000 institution, that body would have omitted from the statute the words "private banker or." He is totally precluded from directorship in any bank that is a member of the Federal Reserve System.

SUBSTANTIAL COMPETITION

The Federal Reserve Board determines whether two banks in which directors, officers or employees interlock are in "substantial competition." It may permit or refuse interlocking, on its own interpretation of the amendment. This applies only in cases where one or the other banks come under jurisdiction.

to

The board has decided that consideration should be given

(1) The size in aggregate resources of banks involved. (2) The character of the business engaged in, i. e., the extent of commercial business and extent of purely investment or trust company business of the two institutions.

(3) Whether the operations of the two banks cover the same geographical territory.

(4) Whether the two banks actually compete to any appreciable extent in any important activity, for example

(a) in soliciting deposits on demand or on time from other banks or individuals; (b) in the purchase or sale of commercial paper or other securities; (c) in the purchase or sale of foreign exchange; (d) in soliciting trusteeships, etc.

PENALTIES

The board is instructed when a person is violating any of the provisions of the law, to serve a complaint stating charges, and specifying a hearing within thirty days. Any person may make application and be allowed to intervene and appear at the hearings. It is empowered to extend or withhold permission for dual positions within the statute, to make decisions and to issue orders forbidding violations. Failure to comply with the board's orders will result in an application to the circuit court of appeals of the United States, where the violations committed are within its jurisdiction or where the accused persons reside or are engaged in business. Judgment is final, subject to appeal to the United States Supreme Court. Violations of the statute are deemed misdemeanors and a conviction necessitates the penalty of a fine not exceeding the sum of $5000 or imprisonment of not more than one year, or both.

ADDENDUM

FEDERAL RESERVE BOARD'S PROGRAMME FOR CONTROL OF GOLD AFTER
THE WAR-BANK OF ENGLAND TO BE AGENT OF NEW YORK

AND OTHER MEMBER BANKS

December 25, 1916, the Federal Reserve Board authorized the appointment of the Bank of England as a foreign correspondent of the Federal Reserve Bank of New York, the first formal step by the board to establish financial connections abroad and thus strengthen the position of the United States as a world banker as well as to maintain the American dollar as a standard of exchange.

The Federal Reserve Bank of New York accordingly appointed the Bank of England as its agent and correspondent to buy, sell and collect bills of exchange. This is an exceptionally important financial event. This action is authorized by the last clause of section 14 of the Federal Reserve Act, which describes the functions of the federal reserve banks in open market transactions. It is stated that the effect will be to relieve the present situation in meeting the requirements of the largest foreign trade the United States has ever had and will greatly facilitate foreign exchange. Bank paper will be substituted for gold and the flow of gold to the United States will be controlled. Other federal reserve banks may participate in this agency.

It is also stated that authorization of this appointment is a part of other proceedings to establish financial connections that will strengthen our country as a creditor nation in the exceedingly great competition at the end of the war and to provide means to offset any tendency on the part of foreign bankers to withdraw our gold. This action places the Governments of the United States and Great Britain for the first time in direct financial relationship and this connection will open a channel through which American banks can purchase British securities to meet gold exportation.

412