American Bank & Trust Co. v. Federal Reserve Bank of Atlanta

Background

Several country banks sued a regional Federal Reserve Bank (the Atlanta Reserve Bank) after it routed increasing volumes of checks through the federal reserve system and collected them without paying exchange charges. The plaintiffs said this practice reduced their ability to earn exchange fees and to use deposited funds, and they sought broad relief. The District Court found no evidence of an intent to coerce or injure the plaintiff banks, granted only a narrow injunction preventing publication that would falsely suggest those banks had agreed to remit at par, and otherwise denied relief. The Circuit Court affirmed that decree.

Reasoning

The central question was whether the Federal Reserve Bank had the legal power to collect checks on nonmember banks within its district without paying exchange and to use its superior facilities for par collection. The opinion explains that Congress authorized reserve banks to collect checks payable on presentation within their districts and amended the law to allow collection for affiliated nonmembers under certain conditions. The courts found that the reserve bank’s actions were within the scope of those statutory powers, that there was no wrongful intent, and that the losses shown by the country banks were the ordinary consequences of legitimate competition, not an actionable legal injury.

Real world impact

The decision means regional reserve banks may continue to collect checks at par when they can do so without paying exchange, even if that hurts some country banks’ exchange income and short-term balances. The banks are protected only against misleading publications implying assent; they cannot bar the reserve banks from using superior facilities or refuse lawful collections that comply with the statute.