Substitution

It is held that there is no objection to permitting mills to substitute other warehouse receipts for cotton receipts during the life of an acceptance.

Maturity

(For maturity see "Bank Acceptances Based on Domestic Shipments of Goods").

Amount Bank May Accept For One Interest

(Regarding the above, see "Bank Acceptances Based on Imports and Exports").

Aggregate Amount Bank May Accept

(See "Bank Acceptances based on Domestic Shipments of Goods").

Investments In Acceptances By Member Banks

General Statutory Provisions

U. S. Revised Statutes, Section 5200, as Amended

Ten per cent limit on liability of any one interest to a national bank; exceptions. - The total liabilities to any association, of any person, or of any company, corporation, or firm for money borrowed, including any liabilities of a company or firm, and the liabilities of the several members thereof, shall at no time exceed ten percentum of the amount of the capital stock of such association, actually paid in and unimpaired, and ten percentum of its unimpaired surplus fund; provided, however, that:

1. The discount of bills of exchange drawn in good faith against actually existing values;

2. The discount of commercial or business paper actually owned by the person, company, corporation, or firm, negotiating the same; and

3. The purchase or discount of any note or notes secured by not less than a like face amount of bonds of the United States issued since April 24, 1917, or certificates of indebtedness of the United States; shall not be considered as money borrowed within the meaning of this section; but the total liabilities to any association, of any person, or of any company, corporation, or firm, upon any note or notes purchased or discounted by such association and secured by such bonds or certificates of indebtedness shall not exceed (except to the extent permitted by rules and regulations prescribed by the Comptroller of the Currency, with the approval of the Secretary of the Treasury) ten percentum of such capital stock and surplus fund of such association.

Opinions Of Counsel And Rulings

In Connection with Investments in Acceptances by Member Banks Purchase or Discount of Acceptances of Other Banks

Bills Of Exchange Include Bank Acceptances

Bills of exchange may be taken as including acceptances, since a bill does not lose its characteristics as such when accepted by the drawee.

Bills Discounted Before Acceptance

A bill of exchange discounted before acceptance may be said to be drawn against actually existing value only when it is accompanied by shipping documents, warehouse receipts, or other papers securing title to the goods sold.

Bills Secured By Shipping Documents Or Pledge Of Goods

A bill secured by shipping documents, or by the pledge of goods actually sold, might be discounted by a member bank before acceptance without being subject to the limitations imposed by Section 5200, since this would constitute a bill drawn in good faith against actually existing value.

Bills Discounted After Acceptance

If the bill is discounted after acceptance it may be treated as drawn against actually existing values, if drawn against the drawee at the time of, or within a reasonable time after, the shipment or delivery of the goods sold. There must be reasonable grounds to believe, at the time the bill is drawn, that the goods are in existence in the hands of the drawee either in their original form or in the shape of the proceeds of their sale.

Acceptance Discounted After Removal Of Attached Documents

When such bill has been accepted by the drawee and the documents attached have been removed, though the direct obligation of the drawee to pay such bill at maturity may be said to be substituted for the "actual value" against which the bill was originally drawn, nevertheless, when discounted by a bona fide owner for value, its discount would not be subject to the limitations of Section 5200 since it would still come within the classification of commercial or business paper actually owned by the person negotiating the same.

Should the drawee who accepts the bill, however, attempt to discount it with a member bank it would be subject to the limitations of Section 5200 since in that case the party primarily liable would in effect borrow money from the bank on its own obligation.

Discount Of Acceptances As Business Paper

It is held by the Board that if a firm is a bona fide owner for value of the acceptances of any particular institution and such acceptances are sold to or discounted with a member bank, the acceptances could no doubt be treated as commercial or business paper actually owned by the party negotiating them and would therefore be excepted from the limitations imposed by Section 5200, Revised Statutes.