The commonwealth. (Greenwood, Miss.) 1896-1923, 1912-10-04

southern banks Is considered IN cou-
nectiOn with the value Of the cotton
crop, It Ia at once obvious why tnsy
must call on New York and on Eu'
rope for help when that crop ID 10 Do
moved from the producer to the man
%ufacturer.
Business Done In Cash.
1t should be mentioned In the Do
ginning that the local cotton business
is done in cash. Hence a buyer or
cotton factor, will arrange with his
local bank to. obtain funds II he wishes
to purchase cotton. He gives as Sc
curity his note, with warehouse. or
compress, receipts, or the railroad
bills Of lading covering a certain mum
Der Of bales OF cotton. Conservative
banks do not advance on this form Of
security more than their capital stock
and surplus, and SO the movement OF
cotton is costly and dit1cult. When
the cotton factor buys 1000 bales and
gets a loan for, say, 100000. the local
bank knows that within three or four
days 1t will be called upon for $6O,OOo
IN currency, which must come out OF
its reserves or be sent to It from re-
serve city banks. Approximately $780,
900, 900 of currency Ia sent annually
into the South to help finance this
crop.
New York Gets Profit.
Who gets the proat7 New York
bankers and brokers. They reap In
this way several million dollars q
year. The South pays the bill.
And, In addition. the mere cost oil
shipping the currency costs country
banks In the south, 1t is estimated
$40, 900 a year. aside from the inter
est which must be paid for It,
The first reason for this expense Ia
the lack of actual currency. Another
is the use of actual cash where credit
exchanges might be more generally
used, Still another is the inslasticity
Of our currency system.
Uniform Discount Rate.
II the local southern bank which
took the cotton factors paper for $780,
600 could turn that over to some cen
tral reserve agency and get currency
with which to finance another cotton
fhctor, then the enormous wealth
brought out of the soil would make
for instant prosperity instead OF Great
ing a financial stringency, 1t would
enlarge credit, instead OF Gripping or
hamperlng It.
Reform Of our banking laws might
we'll include a system OF acceptances,
such are in use in Europe. An a~
oeptance Is, in effect, q draft bearing
a banks Endorsement. For instance
the buyer Of cotton has an arrange
ment with his bank whereby II
agrees to stand back Of the purchas
er's promise to pay q draft against
him. When the draft for the cost Of
the cotton is received at this bank, II
accepts" 1t. writing that fact across
tho face OF the draft, with the date
So far as the holder Of the paper ID
concerned, It Is the banks obligation,
Such paper 10 rated higher than
government bonds abroad. 1t has an
International market
Coming Cotton into Money.
A uniform discount rate. effective
snly on redisoounts for banks, would
tend to eQualiEe interest rates
throughout the country, At present
these vary from ~ and three pc,
cent. In New York to IL and Is pei
cent. in rural districts. The united re
serve agency would fix q rate which
would be uniform between banks
throughout the country, SO that the
local bank In Mississippi could get
funds at a much smaller price than Il
possible now. The rates throughout tn,
country probably would vary some
what, but the variation would be moth
ing like what 1t Ia now: and the small
banks would profit equally with the
farmers and merchants they serve,
Proper revision OF our banking lawt
would work for the greater prosperity
of the south, and would aid materially
in the easy movement OF It's great
staple, cotton. 1t would make 1t pos
sible for the banks OF the south to
take care Of the south's business, II
would provide abundant funds wher
they were needed. and would convert
into cash at once the south's greatest
source of wealth.