ARGUMENTS IN THE NEGATIVE 
and fiscal agents; to receive and maintain the legal reserves of member banks; upon 
ndorsement of member banks to discount notes, drafts and bills of exchange arising 
sut of actual commercial transactions but not ‘notes, drafts or bills covering merely 
nvestments or issued for the purposes of carrying or trading in stocks, bonds or other 
investment securities, except bonds and notes of the government of the United States’; 
to make advances to member banks on their promissory notes for not more than 15 
days at rates to be established by the federal reserve banks subject to the review and 
jetermination of the Federal Reserve Board, provided such promissory notes are secured 
sy ‘eligible paper, or by bonds, or notes of the United States; to receive federal reserve 
aotes upon deposit of eligible paper, or gold, or gold certificates, provided a gold re 
serve of not less than 40 per cent of such notes is maintained. 
“Federal reserve banks may also, under rules and regulations prescribed by the 
Federal Reserve Board, engage in ‘open-market operations,’ that is to say, purchase and 
sell in the open market at home or abroad cable transfers and bankers’ acceptances and 
bills of exchange of the kinds and maturities eligible for rediscount. They may dea 
in gold coin and bullion at home and abroad; buy and sell, at home and abroad, bonds 
and notes of the United States and bills, notes, revenue bonds and warrants with a 
maturity from date of purchase of not exceeding six months, issued by any state, county, 
fistrict, political subdivision or municipality in the United States, such purchases to 
se made in accordance with regulations prescribed by the Federal Reserve Board. 
They may purchase from member banks and sell bills of exchange arising out of com: 
mercial transactions and may ‘establish from time to time, subject to review and de- 
termination by the Federal Reserve Board, rates of discount to be charged by the 
federal reserve bank for each class of paper, which shall be fixed with a view of 
accommodating commerce and business.” They may establish accounts with other 
federal reserve banks with the consent and upon the order and direction of the Federal 
Reserve Board and, under regulations to be prescribed by said board, may open accounts 
and establish agencies in foreign countries for the purpose of purchasing, selling, and 
collecting bills of exchange. They may purchase and sell in the open market either 
from or to domestic banks, firms, corporations or individuals, acceptances of federal 
ntermediate credit banks and of national agricultural credit corporations wheneve: 
the Federal Reserve Board shall declare that the public interest so requires. 
“The foregoing provisions enable the federal reserve banks, without waiting for 
applications from their member banks for loans or rediscounts, to adjust the general 
credit situation by purchasing and selling in the open market the class of securities that 
they are permitted to deal in. The power ‘to establish from time to time, subject to 
review and determination by the Federal Reserve Board, rates of discount to be charged 
by the federal reserve bank’ appears in the act with the open-market powers. The two 
powers are correlative and enable the federal reserve banks to make their rediscount 
rates effective. The sale of securities does not lessen the total amount of credit avail- 
able but, by necessitating payment to the federal reserve banks, increases available credit 
in their hands ‘with a view of accommodating commerce and business’ as provided by 
the act.” (Raichle v. Federal Reserve Bank of New York, 34 F (2d) 910.) 
Open-Market 
Operations 
Credit 
"Continued on page 11)