That nothing in this or any other section of this act shall be construed as prohibiting a member or nonmember bank from making reasonable charges, to be determined and regulated by the Federal Reserve Board, but in no case to exceed 10 cents per $100 or fraction thereof, based on the total of checks and drafts presented at any one time, for collection or payment of checks and drafts and remission therefor by exchange or otherwise; but no such charges shall be made against the Federal reserve banks.

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, any Federal reserve bank may discount notes, drafts, and bills of exchange arising out of actual commercial transactions; that is, notes, drafts, and bills of exchange issued or drawn for agricultural, industrial, or commercial purposes, or the proceeds of which have been used, or are to be used, for such purposes, the Federal Reserve Board to have the right to determine or define the character of the paper thus eligible for discount, within the meaning of this act. Nothing in this act contained shall be construed to prohibit such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise from being eligible for such discount, and the notes, drafts, and bills of exchange of factors issued as such making advances exclusively to producers of staple agricultural products in their raw state shall be eligible for such discount; but such definition shall not include notes, drafts, or bills covering merely investments or issued or drawn for the purpose of carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at the time of discount of not more than ninety days, exclusive of grace.

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 Federal Reserve Board, any Federal reserve bank may discount or purchase bills of exchange payable at sight or on demand which are drawn to finance the domestic shipment of nonperishable, readily marketable staple agricultural products 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.

The aggregate of [such] notes, drafts, and bills [bearing the signature or indorsement of any one borrower, whether a person, company, firm, or corporation, upon which any person, copartnership, association, or corporation is liable as maker, acceptor, indorser, drawer, or guarantor, rediscounted for any [one] member bank, shall at no time exceed [10 per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values.] the amount for which such person, copartnership, association, or corporation may lawfully become liable to a national banking association under the terms of section 5200 of the Revised Statutes, as amended: Provided, however, That nothing in this paragraph shall be construed to change the character or class of papers now eligible for rediscount by Federal reserve banks.

Any Federal reserve bank may discount acceptances of the kinds hereinafter described, which have a maturity at the time of discount of not more than ninety days' sight, exclusive of days of grace, and which are indorsed by at least one member bank: Provided, That such acceptances if drawn for an agricultural purpose and secured at the time of acceptance by warehouse receipts or other such documents conveying or securing title covering readily marketable staples may be discounted with a maturity at the time of discount of not more than six months' sight exclusive of days of grace.

Any member bank may accept drafts or bills of exchange drawn upon it having not more than six months' sight to run, exclusive of days of grace, which grow out of transactions involving the importation or exportation of goods; or which grow out of transactions involving the domestic shipment of goods provided shipping documents conveying or securing title are attached at the time of acceptance; or which are secured at the time of acceptance by a warehouse

receipt or other such document conveying or securing title covering readily marketable staples. No member bank shall accept, whether in a foreign or domestic transaction, for any one person, company, firm, or corporation to an amount equal at any time in the aggregate to more than ten per centum of its paid-up and unimpaired capital stock and surplus, unless the bank is secured either by attached documents or by some other actual security growing out of the same transaction as the acceptance; and no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus: Provided, however, That the Federal Reserve Board, under such general regulations as it may prescribe, which shall apply to all banks alike regardless of the amount of capital stock and surplus, may authorize any member bank to accept such bills to an amount not exceeding at any time in the aggregate 100 per centum of its paid-up and unimpaired capital stock and surplus: Provided further, That the aggregate of acceptances growing out of domestic transactions shall in no event exceed 50 per centum of such capital stock and surplus.

Any Federal reserve bank may make advances to its member banks on their promissory notes for a period not exceeding fifteen days at rates to be established by such Federal reserve banks, subject to the review and determination of the Federal Reserve Board, provided such promissory notes are secured by such notes, drafts, bills of exchange, or bankers' acceptances as are eligible for rediscount or for purchase by Federal reserve banks under the provisions of this act, or by the deposit or pledge of bonds or notes of the United States.

Section 5202 of the Revised Statutes of the United States is hereby amended so as to read as follows:

"No national banking association shall at any time be indebted, or in any way liable, to an amount exceeding the amount of its capital stock at such time actually paid in and remaining undiminished by losses or otherwise, except on account of demands of the nature following:

"First. Notes of circulation.

"Second. Moneys deposited with or collected by the association.

"Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto.

"Fourth. Liabilities to the stockholders of the association for dividends and reserve profits.

"Fifth. Liabilities incurred under the provisions of the Federal reserve act. "Sixth. Liabilities incurred under the provisions of the War Finance Corporation act.

"Seventh. Liabilities created by the indorsement of accepted bills of exchange payable abroad actually owned by the indorsing bank and discounted at home

or abroad.

"Eighth. Liabilities incurred under the provisions of section 202 of Title II of the Federal farm loan act, approved July 17, 1916, as amended by the agricultural credits act of 1923."

The discount and rediscount and the purchase and sale by any Federal reserve bank of any bills receivable and of domestic and foreign bills of exchange, and of acceptances authorized by this act, shall be subject to such restrictions, limitations, and regulations as may be imposed by the Federal Reserve Board.

That in addition to the powers now vested by law in national banking associations organized under the laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between the said association and the insurance company for which it may act as agent; and may also act as the broker or agent for others in making or procuring loans on real estate locate within one hundred miles of the place in which said bank may be located receiving for such services a reasonable fee or commission: Provided, howev r, That no such bank shall in any case guarantee either the principal or intere t of any such loans or assume or guarantee the payment of any premium on nsurance policies issued through its agency by its principal: And provided further, That the bank shall not guarantee the truth of any statement made by an ssured in filing his application for insurance.

Any member bank may accept drafts or bills of exchange drawn upon it having not more than three months' sight to run, exclusive of days of grace, drawn under regulations to be prescribed by the Federal Reserve Board by banks or bankers in foreign countries or dependencies or insular possessions of the United States for the purpose of furnishing dollar exchange as required by the usages of trade in the respective countries, dependencies, or insular possessions. Such drafts or bills may be acquired by Federal reserve banks in such amounts and subject to such regulations, restrictions, and limitations as may be prescribed by the Federal Reserve Board: Provided, however, That no member bank shall accept such drafts or bills of exchange referred to in this paragraph for any one bank to an amount exceeding in the aggregate 10 per centum of the paid-up and unimpaired capital and surplus of the accepting bank unless the draft or bill of exchange is accompanied by documents conveying or securing title or by some other adequate security: Provided further, That no member bank shall accept such drafts or bills in an amount exceeding at any time the aggregate of one-half of its paid-up and unimpaired capital and surplus.

CONGRESS

AMEND THE MERCHANT MARINE ACT, 1928

FEBRUARY 25, 1930.-Referred to the House Calendar and ordered to be printed

Mr. WHITE, from the Committee on the Merchant Marine and Fisheries, submitted the following

REPORT

[To accompany H. R. 9592]

The Committee on the Merchant Marine and Fisheries to which was referred the bill H. R. 9592, amending section 407 of the merchant marine act, 1928, report the bill to the House with the following amendment and with the recommendation that as amended the bill be passed:

Insert after the figures "1928" in line 3 of page 1 the words in parentheses "United States Code, Title 46, Section 891k; 45th Statutes at Large, page 694."

In compliance with the Rules of the House, there follow the present law and the proposed amendment. The matter printed in italics represents the new matter added to the present section.

SEC. 407. Each contract for the carrying of ocean mails under this title shall be awarded to the lowest bidder who, in the judgment of the Postmaster General, possesses such qualifications as to insure proper performance of the mail service under the contract: Provided, however, That should the purchaser from the United States of a steamship line heretofore or hereafter established by the United States Shipping Board and operated on a route certified by the Postmaster General under the terms of section 402 make application and submit a proposal (conforming to the specifications) for the contract for carrying the mails thereon, the Postmaster General, without advertisement for bids, shall award the contract for such route to said purchaser on the proposal submitted and without regard to any other proposal, if (1) in the opinion of the Postmaster General said purchaser possesses (with the aid of contract so to be awarded) such qualifications as to insure proper performance of the mail service under said contract, (a) if the compensation does not exceed the maximum rates authorized by section 409, and (3) if the Shipping Board by the affirmative vote, duly recorded, of four members thereof shall determine that the awarding of the contract to such purchaser is in the public interest and will aid in carrying out the purposes of the merchant marine act, 1920, and the merchant marine act, 1928, and shall so certify to the Postmaster General.

By the merchant marine act, 1928, the policy is laid down that wherever practicable the ocean mail of the United States shall be carried on American ships with respect to which a contract is made under the act.

The law contemplates: The Postmaster General having certified the essential routes on which our mail shall move and a determination having been reached as to the type, size, speed, and other characteristics of the vessels to be employed, the regularity and frequency of their sailings, and as to other facts bearing upon their capacity to meet the requirements of the postal service to be inaugurated, that there shall be advertisements of these proposed routes and the submission of bids for contracts for the performance of the services. The act fixes graduated maxima rates of pay under the contracts, based upon the tonnage and speed of the vessels employed and the distance traveled.

These mail contracts require a definite service to the Government of the United States. They and the legislation authorizing them impose, in addition to the duty to carry the mail as and when stipulated, other obligations upon the contractor. The vessels to be employed must be built according to plans and specifications approved by the Secretary of the Navy or must be ships useful to the Government in time of emergency; they must carry a larger percentage of citizens as members of the crew than is required of other vessels; and they are liable to be taken or used by the Government in time of emergency under a limited liability for compensation. It is the avowed purpose also of those administering the law to demand in those cases where the maximum compensation is agreed upon that a substantial tonnage of new vessels with modern improvements and appliances shall be constructed in accordance with the latest and most improved types. It was the purpose of the legislation and of the Congress that the payments for this service and for the other advantages accruing to the Government from the contract should constitute a substantial award therefor and be a valuable aid to the holder of the contract in the development and operation of the steamship line employed. There were three prime reasons for this aid. It was desired to assure the successful operation in the foreign trade of those lines then established therein, which had been purchased from the Government; it was designed to encourage the purchase of other lines then being maintained by the Shipping Board and in due course to bring to an end governmental operation of ships in our trade; and it was hoped we might induce the building of new merchant ships to aid in the expansion of our trade and to serve as naval auxiliaries in time of war. It is proper to add that this interest in the ships, which had been or which were owned by the Government, was not exclusive of our concern for those companies which had built their own ships or had otherwise acquired them. Such companies were also eligible for participation in our mail service and in the benefits of the contracts authorized.

In the effort to administer the law a matter of controversy and of difficulty has arisen. Section 407 as it now appears provides that each contract shall be awarded to the lowest bidder, who, in the judgment of the Postmaster General, possesses such qualifications as to insure proper performance thereof. Standing by itself, this section would seem to admit of no doubt that the lowest bidder must receive the contract. It has been contended, however, that the section must be read and construed in the light of other provisions found in the merchant marine act of 1920 and of the reaffirmation of the purposes of that act by the legislation of 1928 in which section 407 is found.