Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1915-08-31
FINANCING OF COTTON
From Regional Reserve Bank
Gives Important Information.

Circular From Regional Reserve Bank
Gives Important information.
Following Is a circular letter recent
| ly sent out by the regional reserve
bank at Richmond, to member banks
throughout the cotton state within its
territory:
To the Member Bank addressed:
In anticipation Of the possible
needs Of those soon to be interested in
the movement Of the larger staple
crops of the country, the Federal re-
serve board, in published circular,
has suggested to the several reserve
banks that they take steps to enlist
the active interest Of member banks
in financing the crops, and to arouse
prompt and hearty cooperation of
those chiefly concerned, whether farm
er, merchant or manufacturer.
The Federal reserve bank of Rich
mond is able and ready, through its
member institutions, to render any as
sistance needed in the district served
by 1t in this particular connection, and
at the same time to care fully for
such other current demands as may
be made upon it.
While grain crops will be heavy,
their care will hardly require special
thought or treatment, but should 1t
be found that their orderly movement
and their ultimate sale, free under
pressure, can be promoted by any ser
vice possible for the reserve bank to
render, such service will be available.
The situation with respect to cotton
Is different and may require ware
houses, and receipts should be on
standard forms, which should be signed
manually and in ink, Evidence Of
proper insurance should accompany
each warehouse receipt. Certain ware
houses issue insured receipts. In
such cases, 1t would be proper for the
interested member bank to satisfy it.
self, Of the capital responsibility Of the
warehouseman and the personnel Of its
management, in order to be able to
certify to the same when called upon.
In accepting and holding warehouse re-
ceipts from any source, the reserve
bank would expect It's members to be
in position, If called upon, to verify
thefacts set out in any particular GER
tificate, by inspection or otherwise.
Receipts should show grades and
weights Of the stored cotton, and must
be in negotiable form.
Notes pledging the staple should be
Of the usual collateral form, giving
the right to call for additional secur-
ity in case Of necessity. While the
amount per bale advanced to the
pledger will be at the discretion Of the
member bank, the reserve bank in ac-
cepting such papers would discrimi-
nate in favor Of transactions fairly
margined. 1t would be unwise to
await the actual presence Of matured
crop before undertaking to make ar
rangements for its financing and the
storage Of such part Of 1t as 1t may be
desirable to liquidate gradually. and it
therefore Is recommended that men,
ber banks at once proceed to advise
with their interested customers with a
view to having them promptly make
advance arrangements, both with their
bank and with their responsible ware
housemen.
All notes must bear the endorse
ment Of a member bank. While the
law will not permit the reserve banks
to accept under discount notes secured
by a pledge Of cotton when the notes
are made by those purchasing the
staple for speculation or investment
purposes, the reserve banks will serve
one Of their chief and proper aims
when they accept from member banks
notes made by planters growing and
owning the cotton, by spinners who
have bought it for manufacturing pur-
poses, or by merchants accepting cot
ton in settlement Of accounts or as Sc
curity from growers. Notes made by
planters may be accepted by reserve
bank when having maturity up to
six months from the date on which the
reserve bank receives the paper. In
this connection, however, it is well to
advise that the aggregate amount of
paper having a maturity beyond 80
days which a reserve bank may hold at
any time is limited to 80 per cent of
the paid in capital Of any particular
reserve bank, which, in the case OF
this bank, would be about s3,000,000
1t therefore would be wise for single
makers, in drawing their notes against
cotton, to make them Of different ma
say in excess Of $1,000. not only with
the view Of permitting the reserve
bank wide latitude Of action, but in
order to facilitate the gradual and or
derly liquidation Of the cotton in the
presence Of fair market conditions.
The lien laws Of the several states
interpose serious obstacles to the free
and safe acceptance Of warehouse re-
ceipts as collateral. 1t therefore Is
important that member banks in ac-
cepting cotton as collateral satisfy
themselves and be in position If asked
to certify to the reserve bank. that no
liens are outstanding against the cot
ton as accepted.
Cotton mills desiring to purchase
their raw material in excess Of a
value for which open credit can readily
be obtained, may store the cotton in
warehouse not under their own con-
troll, when the note Of such mill, with
warehouse receipt attached, will be
altogether acceptable at the reserve
bank for any maturity up to 80 days
from the date of rediscount by the
bank and when the note bears the en-
dorsement Of q member bank.
With assurances to our member In
stitutions that this hank greatly de-
sires to aid them in the situation dis
cussed in this communication, with the
least possible trouble to them and their
customers and inviting their full CO.
operation, We remain,