§414 — Title 12 Banks and Banking | U.S. Code

Summary

The Board of Governors of the Federal Reserve can approve fully, approve partly, or deny any Federal Reserve bank’s request for Federal Reserve notes. If approved, the Board, acting through its local Federal Reserve agent, supplies the notes. The bank is charged for the notes it gets and must pay interest at a rate the Board sets. The interest applies only to the amount equal to the bank’s outstanding Federal Reserve notes minus any gold certificates the local agent holds as collateral. When the notes are delivered, they immediately become the first and highest claim on all the bank’s assets. That priority also covers notes issued under the law that are secured by 2 percent U.S. government bonds.

Title 12, §414

Banks and Banking — Source: USLM XML via OLRC

The Board of Governors of the Federal Reserve System 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 Board of Governors of the Federal Reserve System shall, through its local Federal Reserve agent, supply Federal Reserve notes to the banks so applying, and such bank shall be charged with the amount of the notes issued to it and shall pay such rate of interest as may be established by the Board of Governors of the Federal Reserve System on only that amount of such notes which equals the total amount of its outstanding Federal Reserve notes less the amount of gold certificates held by the Federal Reserve agent as collateral security. Federal Reserve notes issued to any such bank shall, upon delivery, together with such notes of such Federal Reserve bank as may be issued under subchapter XIII 11 See References in Text note below. of this chapter upon security of United States 2 per centum Government bonds, become a first and paramount lien on all the assets of such bank.

Notes & Related Subsidiaries

Editorial Notes

References in Text

Subchapter XIII of this chapter, referred to in text, was in the original “section 18 of this Act”, meaning section 18 of act Dec. 23, 1913, ch. 6, 38 Stat. 251, known as the Federal Reserve Act. section 18 of the act was classified generally to subchapter XIII (§ 441 et seq.) of this chapter. Codification Section is comprised of fourth par. of section 16 of act Dec. 23, 1913. For classification to this title of other pars. of section 16, see Codification note set out under section 411 of this title.

Amendments

1968—Pub. L. 90–269 repealed first sentence provisions that Board of Governors require each Federal Reserve bank to maintain on deposit in the Treasury a sum in gold certificates sufficient, in the judgment of the Secretary of the Treasury, for redemption of Federal Reserve notes issued to such bank, but not less than 5 percent of total amount of notes issued less amount of gold certificates held by the Federal Reserve agent as collateral security, and counting and including such deposit of gold certificates as part of the 25 percent reserve formerly required by section 413 of this title to be maintained against Federal Reserve notes in actual circulation and substituted in the first, formerly second sentence, “Board of Governors of the Federal Reserve System” for “Board”. 1945—Act June 12, 1945, substituted in first sentence “25 per centum reserve required by section 413 of this title to be maintained against Federal Reserve notes in actual circulation” for “40 per centum reserve required by section 413 of this title”. 1934—Act Jan. 30, 1934, amended first sentence.

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.

§414 Authority of Board of Governors Respecting Issuance of Notes; Interest; Lien