PRIA, Government Policy, Made Personal

Summary

Federal Reserve banks may buy or discount bills of exchange payable on sight or on demand when those bills come from the domestic shipment or export of nonperishable, easily sold farm and other staple goods and are backed by bills of lading or other shipping papers that show or protect title. The Board of Governors of the Federal Reserve System can set rules and limits for this practice. If one of a Reserve bank’s member banks endorses a bill, that endorsement is treated as the bank waiving demand, notice, and protest for that endorsement only. All such bills must be sent quickly for collection and payment must be requested with reasonable promptness after the goods arrive. No bill may be held by a Federal Reserve bank for more than ninety days. When figuring the discount, Federal Reserve banks may estimate how long each bill will run to compute interest up front, and then make an adjustment after the bill is paid so the discount matches the bill’s actual life.

Title 12, §344

Banks and Banking, Source: USLM XML via OLRC

Upon the indorsement of any of its member banks, which shall be deemed a waiver of demand, notice, and protest by such bank as to its own indorsement exclusively, and subject to regulations and limitations to be prescribed by the Board of Governors of the Federal Reserve System, any Federal reserve bank may discount or purchase bills of exchange payable at sight or on demand which grow out of the domestic shipment or the exportation of nonperishable, readily marketable agricultural and other staples and are secured by bills of lading or other shipping documents conveying or securing title to such staples: Provided, That all such bills of exchange shall be forwarded promptly for collection, and demand for payment shall be made with reasonable promptness after the arrival of such staples at their destination: Provided further, That no such bill shall in any event be held by or for the account of a Federal reserve bank for a period in excess of ninety days. In discounting such bills Federal reserve banks may compute the interest to be deducted on the basis of the estimated life of each bill and adjust the discount after payment of such bills to conform to the actual life thereof.

Notes & Related Subsidiaries

Editorial Notes

Codification Section is comprised of the fourth par. of section 13 of act Dec. 23, 1913, as amended. The act of Mar. 4, 1923, split the second par. of section 13, as amended in 1916 (39 Stat. 752), into two pars., the first of which constitutes the first par. of section 343 of this title and the second as this section, making it the third par. of section 13. However, the third par. became the fourth par. when act July 21, 1932, added a new par. to follow the second par. For further details, see Codification note set out under section 343 of this title. For classification to this title of other pars. of section 13, see Codification note set out under section 342 of this title.

Amendments

1928—Act May 29, 1928, amended part of first sentence preceding proviso.

Statutory Notes and Related Subsidiaries

Change of Name

section 203(a) of act Aug. 23, 1935, changed name of Federal Reserve Board to Board of Governors of the Federal Reserve System.

§344 Discount or Purchase of Bills to Finance Agricultural Shipments