Sec. 16. Fed. Res. notes, to be issued at the discretion of the Fed. Res. Board for the purpose of making advances to Fed. Res. banks through the Fed. Res. agents as hereinafter set forth and for no other purpose, are hereby authorized. The said notes shall be obligations of the U. S. and shall be receivable by all Nat. and member banks and Fed. Res. banks and for all taxes, customs, and other public dues. They shall be redeemed in gold on demand at the Treas. Dept. of the U. S., in the city of Washington, D. C., or in gold or lawful money at any Fed. Res. bank.

Any Fed. Res. bank may make application to the local Fed. Res. agent for such amount of the Fed. Res. notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Fed. Res. agent of collateral in amount equal to the sum of the Fed. Res. notes thus applied for and issued pursuant to such application. The collateral security thus offered shall be notes, drafts, bills of exchange, or acceptances acquired under the provisions of Sec. 13 of this Act, or bills of exchange indorsed by a member bank of any Fed. Res. Dist. and purchased under the provisions of Sec. 14 of this Act, or bankers' acceptances purchased under the provisions of said Sec. 14, or gold or gold C't'fs.; but in no event shall such collateral security, whether gold, gold C't'fs., or eligible paper, be less than the amount of Fed. Res. notes applied for. The Fed. Res. agent shall each day notify the Fed. Res. Board of all issues and withdrawals of Fed. Res. notes to and by the Fed. Res. bank to which he is accredited. The said Fed. Res. Board may at any time call upon a Fed. Res. bank for additional security to protect the Fed. Res. notes issued to it.

Every Fed. Res. bank shall maintain reserves in gold or lawful money of not less than 35% against its deposits and reserves in gold of not less than 40% against its Fed. Res. notes in actual circulation: Provided, however, That when the Fed. Res. agent holds gold or gold C't'fs. as collateral for Fed. Res. notes issued to the bank such gold or gold C't'fs. shall be counted as part of the gold reserve which such bank is required to maintain against its Fed. Res. notes in actual circulation. Notes so paid out shall bear upon their faces a distinctive letter and serial number, which shall be assigned* by the Fed. Res. Board to each Fed. Res. bank. Whenever Fed. Res. notes issued through one Fed. Res. bank shall be received by another Fed. Res. bank they shall be promptly returned for credit or redemption to the Fed. Res. bank through which they were originally issued or, upon direction of such Fed. Res. bank, they shall be forwarded direct to the Treas. of the U. S. to be retired. No Fed. Res. bank shall pay out notes issued through another under penalty of a tax of 10% upon the face value of notes so paid out. Notes presented for redemption at the Treas. of the U. S. shall be paid out of the redemption fund and

Federal Reserve Act returned to the Fed. Res. banks through which they were originally issued, and thereupon such Fed. Res. bank shall, upon demand of the Secy. of the Treas., reimburse such redemption fund in lawful money or, if such Fed. Res. notes have been redeemed by the Treas. in gold or gold C't'fs., then such funds shall be reimbursed to the extent deemed necessary by the Secy. of the Treas. in gold or gold C't'fs., and such Fed. Res. bank shall, so long as any of its Fed. Res. notes remain outstanding, maintain with the Treas. in gold an amount sufficient in the judgment of the Secy. to provide for all redemptions to be made by the Treas. Fed. Res. notes received by the Treas., otherwise than for redemption, may be exchanged for gold out of the redemption fund hereinafter provided and returned to the reserve bank through which they were originally issued, or they may be returned to such bank for the credit of the U. S. Fed. Res. notes unfit for circulation shall be returned by the Fed. Res. agents to the Comptroller of the Currency for cancellation and destruction.

The Fed. Res. Board shall require each Fed. Res. bank to maintain on deposit in the Treas. of the U. S. a sum in gold sufficient in the judgment of the Secy. of the Treas. for the redemption of the Fed. Res. notes issued to such bank, but in no event less than 5% of the total amount of notes issued less the amount of gold or gold C't'fs. held by the Fed. Res. agent as collateral security; but such deposit of gold shall be counted and included as part of the 40% reserve hereinbefore required. The board shall have the right, acting through the Fed. Res. agent, to grant in whole or in part or to reject entirely the application of any Fed. Res. bank for Fed. Res. notes; but to the extent that such application may be granted the Fed. Res. Board shall, through its local Fed. Res. agent, supply Fed. Res. notes to the bank so applying, and such bank shall be charged with the amount of such notes issued to it and shall pay such rate of Int. as may be established by the Fed. Res. Board on only that amount of such notes which equals the total amount of its outstanding Fed. Res. notes less the amount of gold or gold C't'fs. held by the Fed. Res. agent as collateral security. Fed. Res. notes issued to any such bank shall, upon delivery, together with such notes of such Fed. Res. bank as may be issued under Sec. 18 of this Act upon security of U. S. 2% Govt. bonds, become a first and paramount hen on all the assets of such bank.

Any Fed. Res. bank may at any time reduce its liability for outstanding Fed. Res. notes by depositing, with the Fed. Res. agent, its Fed. Res. notes, gold, gold C't'fs., or lawful money of the U. S. Fed. Res. notes so deposited shall not be reissued, except upon compliance with the conditions of an original issue.

The Fed. Res. agent shall hold such gold, gold C't'fs., or lawful money available exclusively for exchange for the outstanding Fed. Res. notes when offered by the reserve bank of which he is a director. Upon the request of the Secy. of the Treas. the Fed. Res. Board shall require the Fed. Res. agent to transmit to the Treas. of the U. S. so much of the gold held by him as collateral security for Fed. Res. notes as may be required for the exclusive purpose of the redemption of such Fed. Res. notes, but such gold when deposited with the Treas. shall be counted and considered as if collateral security on deposit with the Fed. Res. agent.