Q. 12. Is not rediscounting very complicated?

A. No. Items intended for rediscount are listed on an application blank and forwarded to the Federal Reserve bank, which gives credit on the day of receipt, and notifies the applying bank by telegram of the amount placed to its credit.

Q. 13. How does the Federal Reserve bank collect notes rediscounted with it?

A. By sending them to the discounting member bank about a week before maturity with the request that it collect them as agent for the Federal Reserve bank. On the day each note matures, it is charged to the account of the discounting member bank.

Q. 14. What information is a bank required to furnish concerning paper offered for rediscount?

A. In applying for rediscount the member bank lists the names of makers and indorsers, amounts, maturities, etc., and the proper officer certifies that to the best of his knowledge and belief the paper has been used for a commercial, industrial, or agricultural purpose.

Q. 15. How is the member bank to assure itself that the paper has been issued for such a purpose?

A. The knowledge of the officers will usually enable them to make the certificate, but if they are in doubt and the member bank has a financial statement of the borrower or an indorser engaged in business or agriculture, which shows a reasonable excess of quick assets over current liabilities, the statement may be taken as evidence that the paper has been issued for a commercial or agricultural purpose.

Q. 16. Must financial statements of borrowers be furnished when applying for rediscount?

A. The regulation of the Federal Reserve Board requires that whenever a member bank has re-discounted or offers for rediscount at the Federal Reserve bank obligations of one name to the extent of $5,000 or more (or in the case of banks having a capital of less than $50,000, a sum equal to 10 per cent of the paid-in capital of the bank), it shall have in its own files a statement in respect to one of the names on the paper. The purpose of this requirement is to stimulate member banks to build up their credit files and to make it possible for them to get statements from borrowers who have heretofore been unwilling to give statements. No statements are required to be submitted to the Federal Reserve bank with the application for rediscount, but the member bank indicates on its application all names in respect to which it has statements on file, and the Federal Reserve bank, if it desires copies of any of these statements, will later ask for them. -The Federal Reserve Board makes no requirements whatever regarding statements from the smaller borrowers.

Collections, Transfers, and Currency Shipments economical check collection

Q. 17. What service does the Federal Reserve bank render in connection with the collection of checks and drafts?

A. The Federal Reserve bank collects at par for member banks checks on over 21,000 banks in all parts of the United States, including all national banks and a considerably larger number of state institutions, as shown in a par list furnished to all member banks. It is optional with every member bank whether or not it collects its checks through the Federal Reserve bank.

Q. 18. Is there any charge for these services?

A. No.

Q. 19. When is credit given for checks collected?

A. For checks on banks in the Borough of Manhattan, received before 9 a.m., immediate credit is given. Checks on Boston, Philadelphia, Richmond, Norfolk, and Baltimore are available one day after receipt. For other checks in this and near-by districts credit is given two days after receipt and checks on more distant points are credited four and eight days, respectively, after receipt.

Q. 20. How should checks be sent to the Federal Reserve bank for collection?

A. In the same manner as remitted to other correspondents, except that they should be classified according to time of availability - i.e., one-day items listed together and totaled, two-day items, likewise, etc.

Q. 21. Can checks be sent direct to other districts or must they all be sent through the Federal Reserve Bank of New York?

A. Arrangements for direct sending may be made, in which case the checks are sent to the Federal Reserve bank of the receiving district, as, for instance, banks in Rochester having checks on banks of the Chicago district can send these items direct to the Federal Reserve Bank of Chicago and receive credit with the Federal Reserve Bank of New York at the time the checks are due to be paid, this being accomplished by the Rochester bank's sending a duplicate remittance slip to the Federal Reserve Bank of New York at the time of mailing the original remittance and items to the Federal Reserve Bank of Chicago. The moment the checks are collected in Chicago the funds automatically become reserve to the member bank in New York. Q. 22. How are items on member banks in this Federal Reserve District handled? A. Items drawn on a member bank are mailed to it, and the member bank, upon receipt of the items, forwards in payment draft on the Federal Reserve bank or other funds available on the day of receipt, thus keeping the transactions separate from its reserve account. Q. 23. Suppose the member bank has not sufficient available exchange with which to make the remittance? A. The member bank may ship currency or specie from its own vaults at the expense of the Federal Reserve bank. Q. 24. What are the advantages of collecting checks and drafts through the Federal Reserve bank? A. (1) Greater economy in collecting these items and avoidance of the necessity of maintaining balances with correspondents in various cities in order to obtain check collection facilities. (2) The most direct routing of items possible, with corresponding reduction in the length of time items are outstanding, which results in the elimination of float and enables member banks and their customers to learn at the earliest possible moment whether items have been paid or dishonored, and to have the funds represented begin earning interest more quickly.