New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-02-28
Clearing House Committee
Defines Commercial Paper
at It's Request.
PLEDGES AID TO MAKE
NEW LAW A SUCCESS
FavOrs Use Of AcceptanceS
Abroad as Factor in Open
Discount Market.

yesterday TO tho recent request Of NJ C.
Elliott, secretary Of the reserve bank or
canizatlon committee. AT Washington
asking the association Tor definitions OF
the terms used I'm the federal reserve act
Commercial transactions and com
mercial purposes" and more particularly
OF commercial paper Tor tho uses OF re.
discount with the federal reserve bank
under tho new currency law. The Clear
ing House committee has given the mat
ter its careful attention for some time
In giving out tho letter IN reply 20 Mr.
EUiotts request the members Of the COM
m.ttee declared thar il was tho attitude
Of the Clearing House Association FOB as
sist IN every way iu making the now cur
rcncy law a success and 50 10 define
commercial paper that the intent OF the
bin 10 make the now circulation both safe
and elastic may bc carried out NJ the
anne time tho committee had I'm mind tho
recognition of tho present customs and
use Of notes in commercial business and
the avoidance Of upsotung present bust
ness methods
Tho committee did not attempt 50 much
technical definition OF the terms men
toned by Mr. Elliott, but essentially ex
pressed its views as 20 how the Fedora
Reserve Board. acting within the powers
conferred upon IL by the federal reserve
act. shall determine or define what shall
be treated as commercial paper eligible
to discount I'm order 10 carry out the true
purpose Of the act
The committee pointed out that the re
serve act did not intend that all paper
which might boy strict construction come
within the definition Of commercial paper
should be eligible for discount AZ fed
cral reserve bank. tho fundamental re-
quirement being that the paper shall be
used not only i'm connection with the com
mcrce Of the country. but that 1t shall he
either directly used in tho purchase OF
commodities or that tho proceeds shall be
intended TO be so used, so that il Will
have the presumptiye security OF the com
modities. or the avsils Of a resale there
o. back OF H.
Referring 10 the custom in this country
Of sellers OF commodities granting dis
, counts for what arc known as cash pay
ments. resulting IN the practical abandon
ment or former trade methods whereby
the purchaser gave his note 10 the order OF
the seller in completion Of the transac-
ton. and in the establishment Of the prac-
tice Of bank borrowings by purchasers
for tho procurement Of FUNDS with which
IN discount their bills. the committee
urged II as a matter Of the utmost I'm
nortance that there should he general
restoration Of the former conditions IN
this respect The use OF acceptsncea
abroad is q prime factor IN the open dls-
count market. the committee declared, and
2 similar system should prevail in this
country
The committee. in its reply proceeded
10 define promissory notes and bills OF
exchange in the classes OF paper mon
toned. so as 20 he eligible for discount, as
follows:
4 written instrument negotiable. ~
form. made by a merchant or manuiaci-
uror. or q corporation engaged IN either
Of such occupations. whereby the maker
contracts 30 pay. at some fixed or deter
minablo future time. a definite sum OF
money stated therein for the procurement
OF funds 10 be used in payment for goods.
wares or merchandise intended for resal,
in some form hut not in the form OF real
uropertv and not merely for investment.
and which shall bear the Endorsement Of
tho navee and which has not been issued
for tho purpose Of carrying or trading In
stocks. bonds or other investment securl-
ties. and which shall have maturity in
conformity with the requirements OF the
federal reserve act.
written instrument. negotiable In form,
whereby the maker contracts 20 pay az
some fixed o. doterminable future time.
"a IN. order Of some merchant, msnufact-
urer farmer. dealer I'm livestock or asrl-
cultural products, or mine owner, or
CORPORATION engaged in any such occupa-
ton. a definite sum OF money stated
therein. representing in whole or in part
the purchase price OF goods. wares or
merchandise purchased by the maker
from the payee and intended for resale
in some form. but not In the form Of real
property. and not merely for investment,
and which shall bear the Enforcement OF
the payee and which shall not have been
issued for the purpose OF carrying or trad
ing in stocks bonds or other investment
securities, and which shall have d mstur-
ity in conformity with the requirements
OF the federal reserve act
draft o. bill OF exchange for the
purposes OF the act, may be defined as:
An unconditional order in writing ad
dressed bv the merchant manufacturer,
farmer. dealer in livestock or agrioult-
ursl products. or mine owner, or
c,rroration engaged in any such occu-
,ction TO another person or corporation.
signed by the person or corporation Civ
ing f.. requiring the person o. corpora
ton 10 whom IL Is addressed 10 pay, at
q fixed or determinsble future time,
sum certain In money 10 order. and
which shall have been accepted by the
drswee. and shall have been drawn for
the purchase price OF goods. wares or
rcrchandise SOD by the drawer 10 the
drawee and intended for resale in some
form. but not in the form OF real prop
erty and not merely for Investment: and
shall not have been issued. drawn or
accepted for the purpose OF carrying or
trading In stocks. bonds or other invest
mont securities and which shall have
maturity in conformity with the require
ments Of the federal reserve act
The usual and customary form OF
notes. drafts and bills OF exchange which
are directly secured by staple agricult-
urll products. or other goods. wares Or
m .rchsndise. and such As have been
issued or drawn for the purpose Of pUr-
rb,sfnc or Of carry ing or trading IN