The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1914-11-12
SAFE ORGANIZATION
DESIRED FIRST OF ALL
When That Is Established, Other
Powers Will Be Called
Into Play.
COMMERCIAL PAPER" DEFINED
This Is Expected to Be Very Life
blood Of New Currency
System.

w ASiil ilNCIoN. November lime
scope OF the operations OF the twelve
Federal reserve banks to be "peneJ
for business on Monday Mas defined
Tor the first few months OF their cS-
istcncc In 4 circular issued to-day by
the Federal Reserve Board. For the
present. tho banks will not exercise
All functions given them by Congress.
Fhe board. corcurrinS with the bank
directors and governors, indorsed this
plan:
Acceptance OF deposits of reserves
from member banks.
Discount OF bills OF exchange and
commercial paper.
Acceptance of deposits of checks
drawn BY member bank. ON any re-
serve bank or member bank in a re-
serve or central reserve city within
their Federal reserve district.
othcr powers may be called into play
as the establishment OF safe and cf-
hcicnt organization permits.
GIVES ITS DEFINITION
OF COMMERCIAL PAPER
In lis circular the board gave the
long expected definition of commercial
paper. which is TO he the lifeblood
OF the new system, the basis for the
new Federal reserve currency. and the
means through which the nations cir
culatlng medium is expected to meet
the expansions and contractions OF
trade and Industry.
The rate OF discount was not am
nounccd. and probably will not be until
Monday. j, vii! be uniform in all
banks
The definition Of commercial paper is
broad, and relics to "a large degree
upon the language of the currency act
The board declined at tho present time
20 discuss the question OF double ard
single-name commercial paper Ii did
make IL clear. however, that 1; had a
preference for the .two-namc sort and
left no room for banks TO doubt that
IT expected careful Inquiry into one
name2paper presented for rediscount
Tho circular discussed tile conditions
'that nave arisen here through tho
var. and gave some insight into the
economic changes which might be cS-
pccted TO result.
1T should be borne in mind" i, said
that. although our exports are show.
ing gratifying Increase. there is still
countries for which gold may bc de.
manded. and ;hat large quantity OF
American securities held abroad may
be returned to tho United Statcx.: while
more than 100000. 900 emergency cur
rcncy must be gradually retired. No
one can estimate the duration OF the
war or predict what It's effect wili he
on financial or commercial conditions
when peace shall be restored. 1t Ia
probable that at the end OF the war in
tercsi rates i'll Europe VIII be higher
than in the past. ana greater invest
mcnt returns will be yielded. The tre-
mendous destruction OF property and
waste of capital will not onl" check
the bow OF European savings TO the
United states, but may dispose for
eign investors 10 return the securities
they now hold. Lower money rates in
this country would be likely to accen-
tuate this tendency. while higher in
turns on our side would check it
FUNCTION OF BANKS
OF TWOFoLD CHARACTER
THE function OF the Federal = re-
serve bangs is. therefore, OF two-fold
character They should extend credit
facilities particularly where present alb
normal. conditions have created cmer-
gencles demanding prompt accommo-
dations, and. on the other hand they
must protect the gold holdings OF this
country, In order that such holdings
may remain adequate TO meet demands
that may be made upon them.
while the most acute stage OF the
recent financial emergency appears to
have passed, the conditions in other
countries make it necessary that the
United States should organize and
make available it's own resources. in
order that IL may provide for it's own
needs. and replace the facilities sud-
denly destroyed by the closing OF SO
many OF the accustomed channels of
credit and trade"
In defining commercial paper, the
board announced these basic principles:
That no bill shall be admitted TO re-
discount by reserve bank. the pro-
ceeds of which have been or are to be
applied to permanent Investment.
Maturitics of discounted bills should
be we'll distributed, so that reserve
hank should bo I'm position TO ltqui-
date one-third OF all its investments
within thirty days.
Bills presented for rediscount should
be Essentially self-liquidating," which,
the board explained, means that they
should represent some distinct step IN
the productive or distributivc process,
and then OF such character that it is
reasonably sure they can be collected
at maturity.
MUST BE INDoRSED
ny BANK OFITI3RISG 1T
In addition, the board requires that
such paper be Endorsed by the member
bank Offering it for rediscount: that
the indorser bank waive demand notice
and protest.: that such paper be issued
or draw for agricultural, industrial or
comm merCial purposes, or tho proceeds
OF which have been so used; that, IL
in the form of acceptanccs, they must
be b8s sed on transactions invofving the
Importation or eNportation Of goods,
and have maturity of not longer.
than three months. Acceptances must
30 indorsed BY n member bank, and
the total amount offered by any mcm
ber bank Shall not exceed one-haIf OF
It's paid-up capital and surplus. Tho
aggregate OF paper bearing the i'm
dorsement of any one person, corpora =
tlon or frni rediscounted for any one
bank, shall not al any time exceed
10 nor cent of tho Unlmpa ircu ca ;itnl
and surplus. this not to apply toNbilis
OF exchange drawn against actually
existing valuas Paper drawn for trade
: :. (C:ontIn,Icd on second pn,cI15