Evening star., 1914-11-12
MUCH H|GH-GRADE PAPER
PUT UNDER THE BAN
Definition of Commercial" Variety
Will Keep Regional Bank Officials
Busy Revising Offerings.
All Assets Are Not Rediscountable.
Mergenthaler's Excellent Record
and Its Statistical Position.
BY I. A. FLEMING.

L. a.. IL
Commercial paper" as defined by the
| FEDERAL reserve board, notes given to
seller for commodities purchased by
one who would resell to consumers and
| commodities. must not go into perma-
| nent investment. The definition. while
not literal. Is in effect as stated, and
as bankers generally understand the
strict definition of the term.
But paper presented for discount by
| merchants to bankers. with intent to
| use proceeds for the liquidation of bills
| for goods purchased cannot be taken
as strictly within the meaning of the
| law. Moreover, 1t is not intended that
even the highest grade of paper. issued
| in like manner by highly rated con-
| Germs. shall be admitted as rediscount-
able under this construction.
Paper drawn by the retail merchants
for a bill of goods Is available for re-
discounting by member bank IN the
regional reg bank: where the a. accoihliuua nhn pnav
require temporary accommodation, Is
not rediscountable.
| But the regional bank officials Will
have to go far back of paper offered
complete history. Whether they would
throw out the paper of highly rateo
| concern, such as commercial paper
brokers have offered for years to bank
ers, remains to be seen. The necessary
Endorsement of the member bank pre-.
senting such paper for rediscount
would seem to make 1t safe enough.
and the regional officials will probably
| be liberal in ruling.
Limitations of half surplus and capi-
tai as to the amount of rediscounts
to upset entirely the suggestions of
the sponsors of the new currency meas
ure in the Senate. when before the
Bankers Association Of this city this
more bank failures under this law.
| Why? Bank failures are due to in
ability to realize on assets. Under
this act the member bank can redis-
| count and rediscount, until every dol
lar of its assets has been rediscounted
and obligations paid. There can then
be no failure"
Half of capital and surplus will give
member banks a fair discount leeway.
but with banks carrying enormous de-
posits and having even $50.000.000 capi-
tai and surplus. the rediscounting priv
ilege would not amount to much in
time of trouble, especially when COL
lateral loans and a large part Of the
paper in hand would not be redis-
countable with the regional bank.
1t would be possible for banks then
to take out, under higher interest,
amounting to tax, some emergency
currency. but this measure would be
| no great relief.
New York Still in It.
Under the circumstances a part of
the rediscounting Of member banks
will be left to New York banks, un-
less. perforce. the ruling should be
made making 1t imperative that MEM
ber banks offer all discounts to their
regional banks.
In normal times. with lessened ex-
penses and ample funds the New York
contingent might make lower rates,
and this would force the federal re-
serve board to make a low discount
rate. perhaps lower than 1t could we'll
afford
However. the workings Of the system
are yet in embryo. with the opening
four days away. In q year from now
the financial world will know more of
the system.
Remove Restriction.
vising transactions between members
of the stock exchange has removed
all restrictions attending the sale of
one Of publicity.
publicity of prices. though just why
there Is any reason for secrecy re-
mains to be explained.
Investors are not children. II they
have losses to take the fact that they
are in the dark as to the value Of their
securities ought not to be any satis-
| faction to them.
The action taken was important, in
indicating improved and improving
conditions, but any attempt to make
trades on the quiet should be dis
couraged. Every one would rather
know prices than have to guess, and
perhaps have to part with securities
below market value
| Cotton Trade.
Beginning today. according to a cable
from the president of the Liverpool
Cotton Exchange. there will be "un-
restricted trading in May and June
delivery of American and Egyptian
cotton, except that the price must not
be lower than 4.25 for May-June and
rs for May.
New York Cotton Exchange is pre-
pairing to open unrestricted.
! Mergenthaler.
Mergenthaler earnings for the last
| fiscal year were $2,547.S49, equal to
1890 per cent on stock.
# Disbursements to shareholders dur
ing last twenty years have been as
| 1olloWS, 1V12 III 1850, 10 per cent III
1896. 1914 per cent in 1897. 20 per cent
in 189s-1900. 13h per cent in 1901 and
is per cent in 1902-19l4. From Au-
gust, 1894. to October. 1914. the stock
holders have received in dividends
s32.969,154. or 1915 per cent. on the
present outstanding capital stock.
During that period, surplus after
dividends has always exceeded 100000
and in 1907 amounted to $1,522,000.
In the past nine years. according to
the balance sheet of the company. in
vestments have increased from $l46,212
to $3,727,O49, bills and accounts re-
ceivable, from S3,030,574 to $6,305.333.
while in the same time patents. fran
chises and good will have been written
down from $685.. .494 to $4.000,000.
Following Is condensed income ac-
lcount, with comparisons for five years:
Year. Net earnings. Dividends Surplus.