The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1914-10-31

act, as now amended, permits the most
liberal use Of the discount privilege.
with commercial paper as security,
and the notes Of the member banks,
secured by their customers paper, in
turn secured by warehouse receipts
will give the member banks as much
credit with the federal reserve banks
as they can safely secure with cot
ton bonds as collateral to their notes.
To put it plainly, a more liberal dis
count privilege would lead to danger
Gus imitation; and it is likely that the
banks in this State, having in the
spring made their usual loans in New
York and the East, and having since
increased these loans and also having
taken out the emergency currency,
are now carrying as large a liability
as they can safely do. Technically
this would seem to apply only to the
national banks, but in fact it applies
very generally to the State banks as
we'll which have borrowed through
national banks in this State and else
tional banks, and such State banks as
enter the federal reserve system, can
make use Of the cotton bonds with the
federal reserve bank.
1t would appear therefore, that
even if the cotton bonds are issued
: and the issue held to be valid, the
banks are not in position to utilize
} them for the relief Of the cotton pro-
ducers; certainly to no greater extent
than they could utilize warehouse re-
ceipts if the federal reserve banks
were in operation. Except through
the banks. how can the State put
out these bonds? Can the State sell
an issue of S25,0O0,OOO or borrow
that amount on the bonds and deposit
} the proceeds in the banks of the State
! This is not, in the judgment of the
best posted financiers, possible; and
were it possible the State would not
} be able to protect itself by lien on
the cotton of any kind.
The only other scheme is to pay
out the bonds on cotton as purchase
: money or a loan. Undoubtedly the
State could get rid Of it's bonds in this
5 way-or at least some Of them-but
the writer would prefer to have a bale
Of cotton, with a market price of six
: cents. than a $50 bond of this sort.
Such a bond issue would clearly be in
: violation of the provision of the fed
eral constitution which prohibits any
: State issuing bill of credit. That is
the Bankhead scheme, and it is a wild
, one.
In this connection it should be said
that the fact that Mr.. Harding, men,
' Der of the federal reserve board, has
, given certain assurances to the South
Carolina committee does not inspire
= any confidence at all, for Mr.. Harding
;. is on record as having endorsed the
t Bankhead plan, and that endorse
ment is sufficient to nullify confidence
e in his judgment.
s AS a practical matter of finance it
| has been shown that the bond scheme
I will not relieve the situation Even if
| it would relieve the present money
. stringency in this State, what effect
: would it have otherwise?
1 With the State taking care of his
| cotton crop this year by what is
!, practically a valorization plan, the
farmer would be tempted, even if he
> reduced his acreage, to fertilize as
heavily as possible next spring and
produce as much cotton as possible.
= The result would be that next year.
, and as long as the war lasts, the State
: would have to take care Of the cotton
crop, piling bond issue on bond ISSUE
{ But it may be said, the war will end
, before that comes about. Well, if the
war ends within six months, the de-
, mand for cotton will readjust the mar
, ket and no bond issue at all will be
necessary.
AS a matter Of equity-laying aside
: all questions of legality and constitu-
tionality--let the bond issue be con-
sidered. The farmers constitute the
most numerous class of our citizen
ship, but their preponderance in num-
bers does not give them any prior
claim to the paternalism of the State.
There are hundreds Of railroad men
out of employment in this State be-
cause the cotton crop is not moving
to the ports and freight has fallen off;
there are hundreds of merchants,
town merchants, town merchants, who
do no business with farmers direct,
who are suffering; there are hundreds