Member banks are permitted to make acceptances of the kinds described in Section 10 of this chapter. The aggregate amount of acceptances based upon foreign and domestic shipments of goods and upon warehouse receipts, made by a single bank, may not exceed one-half of its paid-up and unimpaired capi tal and surplus ; except that the amount may be in creased to one hundred per cent with the approval of the Board, provided that the amount of domestic ac ceptances shall in no case exceed fifty per cent. The same limitation is placed upon acceptances based upon drafts drawn by foreign banks for the purpose of creating dollar exchange.
National banks located in places having a popula tion of less than 5,000 may perform the ordinary functions of insurance agents under such regulations as may be prescribed by the Comptroller of the Cur rency.
13. Loans on real of the most impor tant advantages which state banks had over national banks under the National Banking Act was their greater freedom in making loans, especially loans on real estate. The Federal Reserve Act permits a na tional bank outside of the central reserve cities to make loans secured by improved and unencumbered farm land situated within its district or within a ra dius of 100 miles of the bank, irrespective of district lines. These loans may not run for longer than five years. National banks outside of central reserve cities may also, make loans upon improved and un encumbered real estate other than farm land located within 100 miles of the bank; but such loans may not be made for a longer time than one year. In both
cases, the amount loaned cannot exceed 50 per cent of the actual value of the property offered as security. The total amount of real estate loans made by a single bank may equal 25 per cent of its capital and surplus or one-third of its time deposits. The ad jective "unencumbered" is significant. It indicates that the bank must hold a first mortgage on all prop erty accepted as security for a loan.
It is not to be expected that the average national bank will do much long-time loaning on real estate any more than it might be expected that a man would hang himself if he were permitted to do so. Most of the banks are engaged primarily in a commercial banking business, and the bulk of their deposits are on demand. For them to make long-time loans on real estate or anything else would be suicidal. It is a well established principle that a bank which has most of its deposits subject to check must limit most of its loans to short maturities in order to keep its assets in a liquid state.• Any banks which have a considerable amount of time deposits can afford to lend for comparatively long periods of time.