Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1914-11-12
FEDERAL RESERVE
CONTINUED from Page One)

the other hand higher interest rates
and larger investment returns on our
side would check it,
THE function of the Federal Re-
serve bank is, therefore of two
fold character. They should extend
credit facilities particularly where the
abnormal conditions now prevailing
have created emergencies demanding
prompt Accommodations and on the
other hand, they must protect the
gold holdings of this country in or
der that such holdings may remain
adequate to meet demands that may
be made upon them. While credit
facilities should be literally extend
ed in some parts of the country, 1t
would appear advisable to proceed
with caution in districts not in need
of immediate relief and to await the
effect of the release of reserves and
of the change which the credit me-
chanism of the country is about to
experience before establishing a def
mite discount policy.
while the most acute stage of the
recent financiaI emergency appears to
have passed, the conditions in other
United States should organize and
make available it's own resources in
| order that it may provide for it's own
needs and replace the facilities sui,
| denly destroyed by the closing of 50
| many of the accustomed channels of
credit and trade
In defining commercial paper the
board announced certain basic prin-
ciples. In brief they are:
THAT no bill shall be admitted to
re-discount by a reserve bank. the pro-
| ceeds of which have been or are to
| be applied to a permanent Investment.
Matuities of discounted bills, the board
holds, should be well distributed, so
| that reserve bank should be- in a
position to liquidate one-third of all
| it's investments within 80 days.
Bills presented for re-discount
should be essentially f-liquidating,'
which the board explained means that
! they should represent some distinct
| step in the productive or distributive
process and be of such character that
it is reasonably sure that they can
be collected at maturity.
In addition to these principles, the
| DOdIQ ISqQlISS tudl SuSn PeiPSi NC Ch'
dorsed by the member bank offering it
| for re-discount; that the endorser
bank waive demand notice and pro-
test; that such paper be issued or
drawn for agricultural, industrial or
commercial purposes or the proceeds
of which have been so used that If in
the form Of acceptance they must be
| based on transactions involving the
| OF 1c
and have a maturity of not longer
than three months. Acceptances must
| be Endorsed by member bank and
the total amount offered by any MEM
Der bank shall not exceed one-half its
paid-up capital and surplus. The ag-
/ gregate of paper bearing the endorse
ment of any one person, corporation
or firm, rediscounted for any one bank
shall not at any time exceed 10 per
cent. of the uniTnpaired capital and
surplus, this not to. apply to bills of
exchange drawn against actually ex-
listing values.
Paper drawn for trade in stocks and Sc
curities will not be acceptable, nor will
such paper drawn for more invest
ments, and the board interprets this
phraseology of the lord to exclude paper,
the proceeds of which may be used in
investments in land plant machinery,
permanent improvements or transactions
of similar nature. The purchase of COM
modties for merely speculative purposes
would constitute a s.mere" investment in
the eyes of the board and be excluded.
The board also announced that for the
present it has fixed the limit which a
reserve bank may re-discount paper for
agricultural purposes based on live
stock having not more than six months
maturity at % per cent of the capital OF
the banks This limit may be increased
in agricultural districts in time of need.
In its discussion of two and one name
\ paper the board announced that 1t Is
hoped TO establish a central credit bu-
reau for the benefit of all reserve banks
in which the financial record of the big
borrowing corporations, firms and indi-
viduals will be kept.
Until January Is next, a written state
ment of an officer of a bank applying
for the re-discount of any bill that 1t is
to be used for the purpose designated
will be sufficient After that date, how
ever, no paper will be 're-discounted I'M
less it bears on it's face evidence that It
is eligible under the boards regulations,
and that the seller has given statement
to the member bank 1850
The information will be open to exam
liners and copies shall be furnished on
request to the reserve board