They are owned by all the National banks in the continental United States, which are required by the Federal Reserve Act to subscribe to the stock, and by an increasing number of State banks and trust companies, which may subscribe under certain conditions. These stockholders, or member banks as they are usually called, have been required to subscribe 6% of their capital and surplus toward the capital stock of the district banks. Of this, one-half was paid in by May 6, 1915, and the remainder is payble upon call of the Federal Reserve Board. These "member banks" are entitled to receive a cumulative dividend of 6% upon paid-in subscriptions; the remainder of the net earnings will be used for additions to surplus until it reaches 100% of the subscribed capital stock of such bank, after which only 10% of the net earnings shall be paid into the surplus account, and all additional net earnings shall be paid to the United States Government as a franchise tax. As amended June 21, 1917, the principal provisions of the Federal Reserve Act regarding the membership of State banking institutions in the Federal Reserve System are as follows:

(a) Subject to the provisions of the Federal Reserve Act and the regulations of the Federal Reserve Board, State banks becoming members of the Federal Reserve System retain full charter rights and statutory rights; they may continue to exercise all corporate powers granted by the States in which created, and are entitled to all privileges of member banks. They are, however, required to conform to the reserve and capital requirements of the Federal Reserve Act and to the provisions of the law imposed on National banks which prohibit them from lending on or purchasing their own stock, and which relate to the withdrawal or impairment of their capital stock or to the payment of unearned dividends. They must be incorporated banks.

(b) A member State bank may withdraw from the Federal Reserve System after giving six months notice to the Federal Reserve Board, upon surrender and cancellation of its holdings of capital stock in the Federal Reserve bank, but a Federal Reserve bank shall not cancel, during any one calendar year, more than 25% of its capital stock, except by express authority of the Federal Reserve Board. A member bank surrendering stock for cancellation is entitled to receive therefor a refund of its cash paid subscription, with interest at the rate of one-half of one per cent per month from date of last dividend, if earned; the amount refunded in no case to exceed the book value of the stock at that time.

(c) Unless the laws of the State in which it is organized impose such restrictions, a member State bank is not subject to the restrictions imposed on National banks limiting the amount of loans to any one person, firm or corporation. A Federal Reserve bank may not, however, rediscount for a State bank, notes, drafts or bills of exchange (exclusive of bills of exchange drawn against actually existing values and of commercial paper actually owned by the person negotiating the same), of any one borrower who is indebted to such State bank in an amount greater than 10% of the capital and surplus of such bank. A member State bank is required to furnish a Federal Reserve bank with a certificate to this effect, before a note, draft, or bill of exchange will be rediscounted.

(d) A member State bank is required to make reports of condition and of the payment of dividends to the Federal Reserve bank of its district, not less than three such reports being required annually.

(e) A member State bank is subject to examination under direction of the Federal Reserve Board, but is not subject to the provisions of the Revised Statutes requiring two examinations annually by examiners appointed by the Comptroller of the Currency. Examinations by State authorities and reports thereon will be accepted in lieu of examinations under direction of the Federal Reserve Board, if approved by the directors of the Federal Reserve bank. .