General Statutory Provisions

Indorsement

Any Federal Reserve bank may discount notes, drafts, and bills of exchange 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.

Opinions Of Counsel And Rulings

In Connection With Indorsement of Member Banks

Indorsement As Waiver

A simple written indorsement will be regarded as satisfactory and as coming within the terms of the law.

Effect of not bearing "without recourse." - If a note is otherwise eligible for rediscount, the fact that it bears a "without recourse" indorsement of a non-member bank will not affect its eligibility.

Rediscount For Non-Member Bank In Connection With Promissory Notes

General Statutory Provisions

Rediscounts For Non-Members

No member bank shall act as the medium or agent of a non-member bank in applying for or receiving discounts from a Federal Reserve bank except by permission of the Federal Reserve Board.

Opinions Of Counsel And Rulings

Relating to Rediscount of Promissory Notes for Non-Member Banks

Rediscount Of Paper Acquired From Non-Member Banks

It would be necessary in each case for the officers of the Federal Reserve bank to determine whether or not the proceeds of such discounts are to be used for the purpose of making a loan to a non-member bank. If the money thus borrowed is to be relent to a non-member hank, rediscount should not be accepted without the permission of the Federal Reserve Board. If, on the other hand, a member hank had in good faith acquired from a non-member bank by rediscount, notes which are eligible under the regulations of the Board for rediscount with a Federal Reserve bank, and such notes were held as part of the assets of the member bank, there would seem to be no objection to the Federal Reserve bank accepting such rediscounts, provided the officers are satisfied that the member bank did not extend accommodation to the non-member bank with a view of rediscounting notes so acquired with the Federal Reserve bank. This is one of the cases which must be left very largely to the judgment and discretion of the officers of the Federal Reserve bank, and the determination must be reached by them on the facts of the case.

Rediscount Of Paper Indorsed By Non-Member Bank

The limitations on the rediscount of paper bearing the signature or indorsement of any one borrower should not be held to refer to the indorsement of a non-member bank on paper rediscounted with a member bank. It is true that in such case the non-member bank is contingently liable if the paper is not paid at maturity, but the Board is inclined to the view that this language refers to paper bearing the signature or indorsement of borrowers or customers of the member banks and not to the indorsement of other banks. A non-member bank could not, of course, obtain indirect accommodations from the Federal Reserve bank through the medium or agency of a member bank except with the permission of the Federal Reserve Board. But, if a member bank had acquired eligible paper in due course by rediscount from a non-member bank, the member bank should hardly be precluded from rediscounting this paper with the Federal Reserve bank because it bears the indorsement of the non-member bank.

Rediscount Of Drafts And Trade Acceptances

Regulations of Federal Reserve Board