Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1914-12-11
the member bank, with a Federal Re.

Bank, Charleston: Henry Schachte
Prest, Germania Savings Bank, Char
lesion; E. H. Pringle, Jr, v. Prest.
Bank of Charleston, N. B. A., E. w
Robertson, Prest., National Loan &
Exchange Bank, Columbia; c. G. Row.
land, Prest., Commercial Bank, New
berry.
Il enclose for your information, an
unofficial analysis Of the plan which
has been substantially followed in the
completed draft, and also a typical
bank statement showing. how bank
can ease itself by participating in the
discount more freely all classes Of good
paper that may be offered to 1t.
Very truly yours.
Nv. P. G. Harding,
Member, Federal Reserve Board.
Hon. Jno. L. McLaurin,
State Warehouse Commissioner.
Columbia, s. c.
Now, this means that we have two
avenues Of relief:
1st. The Wade loan fund.
End. The discount feature Of the
Federal Reserve Act.
In both cases the situation Is square
ly up to the banks in South Carolina.
The Federal government offers the
II we fail to take advan-
tage Of the opportunity we are respon-
sible for the consequences.
Wade Fund.
have been carefully over the papers
sent me by Mr.. Harding and will en-
deavor to explain them 80 the average
man can understand it. The Wade plan
contemplates a loan for one year direct
upon cotton on the basis Of six cents
per pound. There Is q loan committee
in each state who pass upon applica-
tions, and they will soon make some
announcement as to South Carolina.
found in New York that the mere state
ment by the secretary Of the treasury
that the loan fund was complete had a
steadying effect on the market and
created q better feeling in financial
circles toward cotton.
An Example.
In order to illustrate the operation of
the Wade plan, will suppose the case
of farmer who has just written me
that he has six hundred bales Of cot
ton in state warehouse and desires a
loan Of $4,000. Mr.. Harding said that
one Of the difficulties that he was ex-
periencing was the title Of the cotton
and weights and grades-that banks
were objecting to responsibility on that
score This can cause no trouble In
South Carolina, as our state receipt
covers title, weight and grade. Sup
posing that the six hundred bales av-
erage middling and five hundred
pounds in weight, the receipts would
be attached to a note for $4,000. $3,750
would be given my friend in Glass B
certificates bearing interest at the rate
Of six per cent. $11,250 would be CIV
en- him in cash, less three per cent
which Is retained by the loan commit
tee as a guarantee fund to cover
losses that may occur in making loans
and the expense Of disbursing the loan
fund. The expense, 1t Is stated, will
not exceed one-eighth Of one per cent
The loan is made for period Of one
year, and on the approval Of the com
mittee may be renewed for another six
months.
When the farmer sells his cotton and
retires his $15, 1000 note, he pays inter-
est on the $11,250, at the rate Of six pei
cent for the time he has the money
He would also pay interest on the 3
certificate, but this interest he himself
would get. The three Per cent Ii held
until the liquidation Of the entire fund
Is complete. The borrower pays six
and one-eighth per cent straight inter-
est, which includes his share Of the
operating expenses, but does not in
clude losses to come out Of the three
per cent.
The terms Of the loan forbid any one
to charge commissions for conducting
the negotiation for the loans. The
banks are expected to do this gratis for
their customers, and can afford to do
so, as they will receive the money on
deposit or debts due.
Now, with the Federal Reserve Act,
we have a further enlargement OF
their sphere Of usefulness.
The committee appointed by Mr.
McAdoo, after congratulating him
ceipts, said: THAT the average mar
ket value Of middling cotton for the
past six years has been in excess OF
twelve cents per pound" That cotton
does not deteriorate when properly
warehoused," ETC., etc. 1T can there
fore be carried over until the restora-
ton Of normal business conditions en-
ables the worlds consumption to alb
sorb 1t. The committee therefore Is of
the opinion that every effort should be
made to assist the producers to hold
their cotton for a price that will mini
miZe their loss" ETC., etc. The COM
mittee then suggested eight cents per
pound as the basis for loans.
In the Currency Act just put into
operation there Is conferred ample
power to protect the producers Of cot
ton against loss from lack Of an ade
quate currency. The Southern Reserve
districts are suffering from our avail
able funds being tied up In the very
commodity which we are trying to
hold. There are, however, sources
open to the Central board, Of which
that can meet the situation The under
lying principle Of the Federal Reserve
act Is that 1t Is possible to marshall all
Of the assets Of the entire system at It's
weakest point, instead of, as hereto
fore, each bank being left to stand or
fall alone.
Under Section 10, sub head B, five
members Of the Reserve Board in
Washington; can, by an affirmative
vote, require other Federal Reserve
banks to- re-discount paper which has
been discounted by the Richmond
bank, and this with or without the en-
dorsement Of the member bank. So far
as can see there are no limitations to
the amount Of such discounts.
Under Section Is of the Act, Federal
Reserve notes are issued at the discre-
ton Of the Federal Reserve Board IN
Washington, for the purpose Of making
advances to Federal Reserve banks.
The only collateral security required is
a collateral equal to the amount Of the
Federal Reserve notes issued, and is
defined as being the notes and bills &C
cepted under the provisions Of Section
13, which have quoted, as entitled to
discount without reference to the CAPT.
tai stock and surplus Of the bank,
when for agricultural purposes based
on actual existing values" to-wit,
warehouse receipts for cotton, as con-
strued by Mr.. McAdoos statement last
August, and the letter Of Mr.. Harding
above set forth
Again, under Section Is, the secre-
tary Of the treasury can deposit, from
the general fund, any money In the
treasury except the five per centum
fund for the redemption Of outstanding
national bank notes and the funds pro-
vided in the Act itself for the redemp-
ton Of the Federal Reserve notes.
believe that money should be is
sued as nearly direct to the people as
possible. 1t belongs to the people; 1t Is
made by their agent, the government,
whose fat imparts legal tender with
out which II Is not money. Its true
economic function Is as a measure OF
value in exchanging the fruits Of labor.
This new currency law, properly un-
dor.tood opd tuioalv admin tered Ia