The Birmingham age-herald., 1913-08-01
Over $25,OOO,OOO to Be De-
posted in National Banks
of the South to Aid
Crop Movement
ANTICIPATES MONEY
STRINGENCY OF THE
SUMMER AND FALL
For First Time in History Govern
ment Will Accept Prime Com
mercial Paper as Security.
Plan Is Already Well
Under Way

Washington, July 3f,--Twenty-five 10
nifty million dollars of government
funds Will be deposited in the ma
tionaI banks of the south and west mt
once by Secretary MeAdoo TO faciI-
itate the movement of crops. Federal,
state and municipal bonds and prime
commercial paper Will be accepted ms
security for the money. upon which the
banks viii pay 2 per cent interest.
The motive of Secretary McAdoo in
establishing this new policy. is to antici-
pate the money stringency in the late
summer and fall, which invariably ac-
companies the marketing and move
ment of crops. especially when the
crops are unusually large as the har-
vest now beginning forecasts. He in
tends to take time by the foreloclx and
prevent or minimize the usual tightness
of money.
In a statement tonight the Secretary
made the significant answer that govern
ment bonds would be accepted at par as
security for the new deposits and that the
additional money would be placed only
with banks which have taken out at least
40 per cent of their authorized circulation.
Bonds Depressed
United States per cent bonds, serving
as security for most of the national bank
circulation have been depressed recently
TO new low market records, dropping to
95& during the past few days. The Sec
retary's willingness TO accept these bonds
at par as security for the $25,0oo,oOo TO $50,
Oc0.oD0 of promised deposts,and the. .induce-
ment to the national banks to increase
their circulation UP to the 40 per cent limit
is expected to help in restoring the parity
OF the depressed rs by creating new
market for them.
iso.- the FIRST time II. history the govern
ment will accept prime commercial paper
S security for deposits. The privilege will
be granted. announced the Secretary, I'M
order to make these special deposits
available to the banks on securities readi-
~ within their reach.
'srhe commercial paper shall be first
passed on and approved by the clearing
house committees of the cities In which
the banks offering such paper may be-
heated announced Mr.. McAdoo. IAN
commercial papers and bonds must finally
be passed upon and accepted by the Sec
retary.i
Approved commercial paper viii be ac-
cepted as security for the deposits at 50
per cent OF its face value, and high class
state municipal and other bonds, exclu-
sive of government bonds. at IS per cent
of their market value.
Additional Deposits
The additional deposits viii be placed
with the national banks in the two er
three principal cities in each of the states
where harvesting now is in progress ana
where the demand for money for moving
the crops most conveniently can be met.
The Secretary said 1t would not be practl-
cable to scatter the deposits among the
smaller cities, especially in view of the
character of securities necessary.
The banks will be required to return
the money to the public treasury when
the crops have been moved. The pres
ent suggestion is, Mr. McAdoo said,
that Is per cent be repaid in December;
80 per cent in January; 80 per cent In.
February, and 25 per cent in March
next
steps are now being taken to. carry
out the plan,' added the Secretary, so
that the funds may be promptly avail
able for the movement of crops"
Names of banks to receive the deposits
ana otnef details Oh tHt dTTdiiStilt
will be announced later.
This new policy is the antithesis Of
that adopted by former Secretary Of
the Treasury MacVeagh, who a year.
ago declined to make government de-
posits to relieve the tight money mar
ket on the ground that the moderate
surplus of federal funds at that time
s should he held a reserve to be util-
ized at some possible critical stage.
Anticipate Situation
With the net balance in the general
fund today amounting to nearly $132,-
900, 900, Secretary McAdoo has taken
the stand that the government should
anticipate the situation by placing de-
posits where and at the time they are
needed.
If the fun s5o0O0.000 is deposited
this step will temporarily almost double
the governments deposits with the
banks which now hold 5000 900 Of
federal funds
Just as Secretary McAdoo was an
nouncing his plan. Senator Tillman of
South Carolina was Issuing statement
declaring that unless Congress acted
quickly and provide an emergency cur
rency, the cotton planters of the south
would lose hundred million dollars
through inability to get money TO
move their crops.