American Bank Trust Co v. Federal Reserve Bank of Atlanta

• Decision Date: 11 June 1923
• Docket Number: No. 717,717
• Citation: 43 S.Ct. 649,262 U.S. 643,67 L.Ed. 1153
• Parties: AMERICAN BANK & TRUST CO. et al. v. FEDERAL RESERVE BANK OF ATLANTA et al
• Court: U.S. Supreme Court

262 U.S. 643

43 S.Ct. 649

67 L.Ed. 1153

AMERICAN BANK & TRUST CO. et al.

v FEDERAL RESERVE BANK OF ATLANTA et al.

No. 717.

Argued April 30, and May 1, 1923.

Decided June 11, 1923.

Mr. Alexander W. Smith, of Atlanta, Ga., for appellants and petitioners.

Mr. John W. Davis, of New York City, for respondents and appellees.

Mr. Justice BRANDEIS delivered the opinion of the Court.

After the decision in this case reported in 256 U. S. 350, 41 Sup. Ct. 499, 65 L. Ed. 983, an answer was filed which denied, in large part, the allegations of the bill. Then, by an amended answer, the Federal Reserve Bank disclaimed any intention of demanding payment in cash, when presenting checks at the banks, and averred its willingness to accept payment in drafts, either on the drawee's Atlanta correspondent or on any other solvent bank, if collectible at par. The District Court heard the case upon the evidence. It found that the Federal Reserve Bank was not inspired by any ulterior purpose to coerce or to injure any nonmember bank which refused to remit at par. It found that the evidence was insufficient to sustain any charge that the Federal Reserve Bank was exercising its rights so as to injure or oppress plaintiff banks. And it found, specifically, that the evidence did not sustain the charge that the Federal Reserve Bank accumulated checks upon nonmenber country banks until they reached a large amount and then caused the checks to be presented for payment over the counter, in order to compel plaintiff banks to keep in their vaults so much cash that they would be obliged either to agree to remit at par or to go out of business. With regard to publication on the par list of the names of nonassenting banks, the District Court held that the evidence did not justify a finding that such publication was made in order to injure or oppress plaintiff banks. But it was of opinion that insertion of their names might lead to the belief that the plaintiff banks had agreed to remit at par. An injunction was, therefore, granted against inclusion of their names on the par list. The relief sought was in all other respects denied. The decree left the Federal Reserve Bank free to publish that it would make collection at par of checks upon any bank in any town, thus including those in which plaintiffs had their respective places of business. 280 Fed. 940. These findings were approved by the Circuit Court of Appeals, and the decree was affirmed. 284 Fed. 424.

The case is here on an appeal taken by the plaintiffs. The evidence was conflicting. No adequate reason is shown why the concurrent findings of fact made by the two lower courts should not be accepted by us. Luckenbach v. W. J. McCahan Sugar Refining Co., 248 U. S. 139, 145, 39 Sup. Ct. 53, 63 L. Ed. 170, 1 A. L. R. 1522. Whether on the undisputed facts plaintiffs were entitled to additional relief is the main question for decision. In order to decide that question it is necessary to consider the course of business formerly prevailing and the changes wrought by the attempt to introduce universal par clearance and collection of checks through the Federal Reserve Banks.

A large part of the checks drawn on country banks are sent to payees who reside in places other than that in which the drawee bank is located. Payment of such a check is ordinarily secured through the payee's depositing it in his local bank for collection. This bank ordinarily used, as the means for presenting the check to the drawee, a clearing house and/or correspondent banks. Formerly when he check was so presented, the drawee ordinarily paid, not in cash, but by a remittance drawn on his balance in some reserve city or by a credit with some correspondent. This process of collection yielded to the country bank a twofold profit. It earned some profit by the small service charge called exchange, which it made for the remittance or the credit. And it earned some profit by using the depositor's money during the period (sometimes weeks) in which the check was traveling the often circuitous route, with many stops, from the payee's bank to its own, and also while the exchange draft was being collected. These avenues to profit are, in large measure, closed by the Federal Reserve Banks' course of action. These banks do not pay any exchange charges to the drawee. And their superior facilities so shorten the time required to collect checks that the drawee bank's balances available for loans are much reduced. Largely because of the fact that the reserve banks thus make the collection without any deduction for exchange, most checks on country banks are now routed through the reserve banks. Although there is, as the District Court found, no intentional accumulation or holding of checks in order to embarrass, the advantages offered by the Federal Reserve Banks have created a steady flow in increased volume of checks on country banks so routed. That the action contemplated by the Federal Reserve Bank will subject the country banks to certain losses is clear.¹ In order to protect them from the resulting loss it would be necessary to prevent the Federal Reserve Banks from accepting the checks for collection. For these banks cannot be compelled to pay exchange charges or to abandon superior facilities.

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