The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1914-10-28
kohn On COTTON BONDS.
COMMENTS ON THE ATTITUDE or
FEDERAL authorities.
Question TO be Voted On-Short Time
Until General Election for People
to Consider Proposition.
News and Courier,

Columbia, Oct. 24.-The dispatches
In the morning papers indicate that
the federal reserve board looks with
favor upon the proposed South Caro-
lima cotton bonds. OF course this Is
good as far as 1t goes. but It is Just
as well In this connection to take into
consideration these facts:
The farmer who might get cotton"
bonds has no standing with the fed
eral reserve banks.
The State banks that are not men,
bers OF the system have no more right
to money from the federal reserve
banks than they have from the Bank
OF England.
The national banks. or member
State banks. cannot use the bonds ex
cept as collateral. and they can use
any other security that they now hold
as collateral.
The primary obligation and debt is
from the bank ieself, that is. the mon
ey Is lent to the bank on its note, and
not on the security.
AZ q basis for emergency currency
cotton bonds or any other kind of
bonds could not extend the right of
the bank to secure emergency cur
rency beyond the present law. and
the understanding Is that those en-
titled to emergency currency have
gotten all that they can. with the ex-
ception Of less than a million dol
lars.
OF course State banks can join the
federal reserve system. but they first
have to be examined and then quail
fed.
The total capitalization Of the Rich
mond group bank when all is paid In
will be about five million dollars, and
II Is entirely reasonable to suppose
that other States will want some of
this money.
A serious situation is that practical
fy all Of the banks in this State have
borrowed from New York or else.
where the amount Of their capital. and
II Is doubtful. IL the federal reserve
system will lend banks additionally to
any extent when they have already
borrowed to the full limit Of the pres.
ent national bank law. which restricts
banks to borrowing not more than
their capital and surplus.
The federal authorities have simply
said. II the press dispatches are un-
derstood. that they will accept cot
ton" bonds as collateral. The first
thing to do IL to get the banks to &C.
cept the bonds 80 that they con be |
pledged as collateral. and the banks |
now have tho right to use collateral
that they have on hand.
Washington does not undertake to |
protect South Carolina againat leaks
or losses In the proposed bond issue.
but plays the game perfectly safe by
looking to the notes Of the banks as
the primary obligation.
II the Federal Government had
agreed, or would agree. to lend money
to the State on the bonds 1t
would be different story, but exactly
how II is figured out TINT the banks
that are already burdened with bills
ma ya hla md that hoyo Co<<ou D,oo<t
cally all Of the emergency currency to
which they are entitled are to get
more Of this currency to be loaned on
cotton II another matter.
The mere fact that the federal gov
government will recognize cotton"
bonds as collateral with a note that
they already regard as perfectly good
Is not answering the score Of objec-
tions that we're mado to the bond is
sue on the floor Of the house.
Had the vote been taken prior to
the visit to Washington the house
would have balked on the bond issue
and 1t would probably have been de-
feated. What effect the report Of
Messrs. Stevenson and Dick will have
II entirely problematic. but IL these
two members are enthusiastic over the
bond Issue as result Of thei, Wash
ington trip the chances are that the
bond issue will pass the house. There
Is no prospect Of the bill passing
however. as 1t went through the SEN
ate. and there are very many members
who. in their heart Of hearts. are ut
terly opposed to q bond issue and be-
lieve that 1t will mean a burden on
the people Of the state for genera
tions. but who are embarrassed first
because they feel that they have to do
something. and second. because they
are unwilling to be charged with
being afraid to submit any proposition