The Edge Act became law in December, 1919. It allows federal incorporation of two kinds of banking institutions, which, however, are not clearly distinguished - one doing principally commercial banking, and the other modeled upon the "investment trust" of European countries doing an investment business. Five or more natural persons may procure a federal charter running twenty years, under a name approved by the Federal Reserve Board. Its capital must be at least $2,000,000, and one-tenth of the net proceeds must be carried to surplus until the amount thus set aside equals 20 per cent of the capital. A controlling interest in the corporation must at all times be owned either by 1. Citizens of the United States.

2. State or federal corporations in which the controlling interest is owned by citizens of the United States.

3. Firms or companies in which the controlling interest is owned by citizens of the United States.

National banks may invest in the stocks of the Edge corporations, but the aggregate amount of stock held by a bank in all Edge corporations together with its stock in those corporations described in Section 25 of the Federal Reserve Act as amended, authorizing national banks to establish branches abroad, may not exceed 10 per cent of its capital and surplus. The act provides for the conversion of state corporations into Edge corporations, with the approval of the board.

The directors of an Edge corporation must be citizens of the United States, and a member of the Federal Reserve Board is disqualified from being an officer, director, or shareholder, either in an Edge corporation or in a similar institution chartered by a state. The Clayton Act was amended to extend its prohibitions of interlocked directorates to the Edge corporations; but a director, officer, agent, or employee of a national bank may serve at the same time in an Edge corporation, with the permission of the Federal Reserve Board; and a director, officer, agent, or employee of an Edge corporation is not prohibited from serving, with the approval of the board, in any other corporation in which the Edge corporation has invested.