The Hood River glacier. (Hood River, Or.) 1889-1933, 1914-11-26
think is probably the most vital section

icI dkIlCulhuTdls INDUSTRIAL or CONNER
cial purposes. or the proceeds Of which
have been used, or are to be used, fOl
such purposes, the federal reserv,
board to have the right to determine o.
define the character of the paper thu
eligible for discount within the mean
ing Of this act.
Nothing in this act contained shal
be construed TO prohibit such notes
drafts and bills of exchange secured By
staple agricultural products, or othei
goods, wares or merchandise, but sucl
definition shall not include notes, draft.
or bills OF exchange covering merel,
investmens or issued or drawn for ths
purpose of carrying or trading il
stocks, bonds or other investment Sc
curites, except bonds aud notes of tn,
Government of the United States"
The law provides that such paper
must have a maturity of not more thar
80 days except it be for agriculture
purposes, or based on live stock, wher
it may have maturity not exceeding
six months.
To quote furher:
ANY federal reserve bank may dis
count acceptances which are based or
the importation or expectation of good.
and which have maturity at time OF
discount of not more than three months
and endorsed by at least one member
bank"
Quoting again:
Amy member bank may accept
drafts or bills of exchange drawn upor
it and growing out of transactions in
volving the importation or expectation
of goods. having not more than six
months sight to rum"
Regarding these rediscount privilep
es accorded a federal reserve or mem
ber bank, i believe practical bankers
would have given other matters consid.
Grafton. At least questions of interpre-
tation arise, and it is only by exceed
ingly broad Interpretation in some in
stances and exact rulings in Others that
the federal reserve board can fully ad-
wise and instruct member banks as to
these functions. For instance, the law
provides that rediscounts must bear a
waiver of demand. notice and protest
by the discounting bank. The question
arises, Does this waiver apply to the
rediscounting member bank only, or to
other indorsers or guarantors on the
paper? A cursory opinion would lead
one to believe that the waiver applied
to the endorsement of the discounting
bank only. and if so, the discounting
bank should have the protection of pro-
test as against any other endorser and
guarantor.
Again, federal reserve bank can
haN
not purchase) notes, drafts and bills
of exchange. The query arises, Why
are drafts mentioned, when the defini-
tion of "bill of exchange under the
negotiable instruments law prevailing
in nearly all Of the states Of the Union
covers drafts and bills of exchange as
we'll.
The law gives the federal reserve
board the right TO determine or define
the character of the paper thus eligible
for discount. and in a ruling the board
has proclaimed in circular of instruc-
tions that paper offered for rediscount
under Section l3 of the law must con-
form with the following requirements
in addition to those prescribed in the law
itself:
Until January Is. 1915, the directors
OF federal reserve bank may accept
as evidence that the paper offered for
rediscount was uttered for agricultural,
industrial or commercial purposes
written statement from an officer of
the applying bank that of his own
knowledge and belief the original loan
was made for one of the purposes men
toned, and that the provisions of the
act and regulations issued by the board
have been complied with. From and
after that date, however, all paper
offered for rediscount shall show on its
face or by endorsement statement
substantially to the following effect:
Eligible for rediscount with federal
reserve banks under regulations of fed.
eral reserve board. Circular I3. Credit
File No., District No. .--- Name
of Bank)."
This certiciiate must be signed in
person by an officer of the APPLYING
bank. The credit file number required
in the certificate is for convenience in
referring to files in the Office of the
applying bank, from which must be
complete credit informa.
tion regarding the makers of the paper
and evidence of the character of the
transaction out of which it arose. These
files shall at all times be open to in
spection by examiners of the federal
reserve bank or the federal reserve
board, or examiners Of the comptroller
of the currency. and must be produced
upon demand. These credit files should
contain information giving the financial
responsibility of the borrower, includ-
ing his balance sheet, profit and loss
account, etc.
The credit statement should further
more kshow the maximum aggregate
amount to which the concern supplying
this paper expects to borrow on short
credit or sale of its paper, and the in
firm, or corporation giving the
statement obligates himself or itself to
explain the member banks consent be-
fore exceeding the agreed limit. The
affixing of the endorsement stamp men,
toned stating such paper to be eligible
for rediscounting will be considered O
solemn and binding declaration by the
member bank that the statement has
been examined from this point of view
and that the paper discounted complies
with all the requirements of the law
and the regulations imposed.
Whenever paper offered for redis-
count has maturity of more than
three but less than six months, and the
federal reserve bank has been satisfied
that the proceeds of the loans we're
used, or were to be used, for agricul-
turai purposes, or based upon livestock.
such paper, until further regulation is
prescribed by the federal reserve board,
may be rediscounted in an aggregate
amount not exceeding rs per cent of the
paid IN capital of the federal reserve
bank accepting the same.
Also, whenever bank acceptances are
offered for rediscount, it must appear
on the face of such acceptances that
the proceeds thereof are used, or are to
be used, in connection with the trans
action involving the importation or ex-
portation of goods that is to say, it