The Bridgeport evening farmer., 1914-11-13

its def1nftinn of commercial paper and it's reguIations which will govern the rediscount of that paper when the new system is. put itno efTect NneNt Monday A circular from Gov. Ham lin to all the Federal reserve banks setting for the general discount. pol icy of the board also was made public. ] These documents are of direct inter est to every business man in the c0un- try. for they fix the conditions Wn1cn must be met by. them to make tne1r paper negotiable under the new sys- tenn. The policy which he set forth for the reserve banks to all practical purposes will fix the policy also of the member banks in the matter of dis; counts.
 The policy liked on by the board is as liberal as the requirements of safe ty permit. Single as, well as double name paper is admitted to redisoount with the Federal reserve banks, and the easiest possible rules for the ac- ceptance of single name paper to such transactions are laid down.
 The board attaches great import ance to it's decision that until Jan uary 15 shall not be required that a statement of condition accompany each bill sold to a reserve bank This 1iberality Is exercised in order that there be no avoidable delay on the part of the reserve institutions in get ting down to business.
 Credit Bureau Plan
 It will be required after that date. however. that a brief statement of condition be stamped on every redis- counted bill, giving references to standardized files of data as to the credit qualifications of the firms or persons originally issuing the bills, It is predicted that this procedure even tuaIly will lead to the development of a central credit bureau which may be used by all the reserve banks of the new system.
 Another important announcement was that the Federal Reserve Board had fixed 25 per cent of the paid in capital as the amount up to which a Federal reserve bank may discount notes, drafts and bills drawn for az rfculturaI purposes or drawn on live stock. This is the provision of the new system which is counted on to aid the farmers.
 Here is the statement sent by Gov. Ham1in to all Federal reserve banks:
 1'In view of the impending opening of the Federal reserve banks the Fed eraI Reserve Board deems it proper to outline in this circular in broad general terms the discount policy which ft>believes might be pursued to advantage by the Federal reserve
 
 Acute Stage Passed.
 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 to the utmost degree of efficiency and make. available it's own resources that ftsmay provide for its own needs and replace the facilities suddenly destroyed by n1~,eri channels of credit and trade.
 The directors and governors of the Federal reserve banks at a! conference in Washington on October 20 and z1 recommended that the banks should be opened without attempting at the outset to perform all the functions and duties contemplated in the acr but that they be prepared to acceH,s deposits of reserves payable in lawful money, to discount bills of exchange and commercial paper, and to accept the deposit (after the reserve pay ments had been made9 of checks drawn by member banks on any Fed eral reserve bank or member banks in in the reserve and central reserve cit les within their respective districts
 It was the opinion of the confer. ence that arrangements for the ex- ereise of the additional powers grant ed by the act to the Federal reserve banks, be completed as rapidly as the establishment of safe and efficient or ganiations would permit. The Federal Reserve Board is in accord with these suggestions.
 Big Balance Due Europe
 Tt should be borne in mind that al- though our exports are showing a gratifying increase there is still a large cash balance due to European countries for which gold may be de- manded and that large quantity of American securities held abroad may be returned to the United States, while on the other hand more than $36O,- 00e,0 of emergency currency must be gradually retired
 NO one can estimate the duration of the war or predict what will be the financial and commercial conditions when peace shalFfbe restored. Our own industrial. development has been greatly facilitated by foreign capital and we have been accustomed to bor- row large sums annually in Europe and to sell American securities there, which attracted foreigners by tbeir higher rate of return compares q with European Investments.
 ..It is probable that at the end o1 the war interest rates in Europe will be higher than they have been in the past and greater investment returns will be yielded. The tremendous de struction os property and waste oi capital will not only check the flow of European savings to the United States, but may dispose foreign invest ors to return the securities they now hold. Lower money rates in this country would be likely to accentua ate | this tendency, while on the other hand l higher rates and larger investment re- | turns on our side would check it. s.,This function Of the Federal re- serve banks is therefore of a twofo character They should extend credit facilities. particularly where the ab- normal conditions now prevailing have created emergencies ciernanding l prompt. accommodation; and on the other hand they must protect the gold holding of this country, that suck holdings may remain adequate to meei the demands .madc upon them.