2. Section 28 of the National Bank Act of June 3, 1864, after providing that a national banking association may hold real estate "necessary for its immediate accommodation in the transaction of its business" and such other real estate and mortgages thereupon as it may have taken to secure debts previously contracted, provides that "Such associations (national banks) shall not purchase or hold real estate in any other case or for any other purpose...." (a) What is the reason for the above provision? (b) Would it be wise to make a similar prohibition on savings banks? 3. Describe the clearing house and define its economic advantages. 4. If there are twenty banks in a town and no clearing house, how many collections would have to be made by all the banks daily assuming that each day depositors of each bank receive checks on the other nineteen banks? 5. Does a clearing house enable the banks that belong to it to get along with a smaller cash reserve? CHAPTER 9 THE FEDERAL RESERVE ACT REFERENCES. _Conway, Thomas, Jr._, The financial policy of the Federal reserve banks. J. P. E., 22: 319-331. 1914. _Federal Reserve Board_, The Federal Reserve Bulletin. Monthly. *_Phillips_, ch. XXXI. _Scott, W. A._, Banking reserves under the Federal Reserve Act. J. P. E., 22: 332-344. 1914. _White_, bk. III, ch. XXII and appendices D and E. _Willis, H. P._, The Federal Reserve Act. A. E. Rev., 4: 1-24. 1914. QUESTIONS. 1. Name and contrast the different kinds of banks in the United States. 2. How are notes issued under the Federal Reserve Act? 3. If on a given date the surplus reserve (i.e., the reserve in excess of the legal minimum reserve required by law to be held against deposits) of the New York Associated Banks amounts to $11,000,000, and the deposits on the same date amount to $1,164,000,000, what is the total cash reserve held by the banks on said date? What would it have been in 1912? 4. The "New York Times" of December 8, 1916, said: "The rediscounting of commercial paper at the Federal Reserve Bank of New York by some of the city's largest banks on Wednesday had the effect yesterday of improving general money market conditions. Call loans which were made at 15 per cent. on Monday, and as high as 10 per cent. on Tuesday, and touched seven per cent. Wednesday, were placed yesterday at from three to five per cent. Most of the loans were made at four and one-half per cent., the renewal rate, and the closing quotation was three per cent. Time money rates were easier."