The herald and news. [volume] (Newberry S.C.) 1903-1937, 1915-08-27
TREASURY TO EXPAND
CREDIT FOR COTTON
PLAN TO MEET ANY NEEDS OF
SOUTH BY GOLD DEPOSITS.
If Necessary, Secretary Says, Funds
VIII be Deposited Directly in
National Banks.

ment by Secretary McAdoo tat in
view of the action of the allies in put
ting cotton on the contraband list, he
would, if necessary, deposit $3O,000,000
in gold in federal reserve banks in At
lanta, Dallas and Richmond for the
purpose of enabling the reserve banks
to rediscount loans on cotton secured
by warehouse receipts made by ma
tional and State banks belonging to
the federal reserve system.
The gold would be deposited tempo
rarily, at least, without interest
charge. 1t was explained that if it
appeared the object could be accom-
plished with greater efficiency there
by, the deposits would be made d.
rectly with the national banks agreeing
to lend the money on cotton at a rate
not to'exceed 6 per cent.
Secretary McAdoo authorized the an
nouncement from l3is summer home at
North Haven, Maine. 1t came at the
close of day of speculation in official
circles as to the nature Of steps which
the entente powers have indicated they
will take to uphold the cotton market
in the face of t3eir contranband order.
An Unusual Need.
ain the exercise of the discretion
given to MIN by law" read the treas
ury statement, Secretary McAdoo said
that the government, for the time be-
ing, charge no interest on these de-
posts in federal reserve banks, that
such action is justified by the unusual
situation respecting cotton caused by
the European war; that he considers
it mas duty to use every available
means in his power to help the cotton
producer of the South in the circum-
stances; that it is matter for econo-
mic importance to the entire nation
tat those who have produced the cot
ton crop shall have fair opportunity
to dispose of it gradually and in an
orderly manner, so they may not be
forced through inability to market
their cotton gradually to sell it at
sacrifice prices.
"The secretary said that mis- chief
object was to create basis for such
an elarge credit in tie South that
the banks will have ample resources
to extend to producers such accom-
modations that they will be able to
carry cotton in warehouses for rea-
sonable length of time until it can be
marketed advantageously.
For Low Rates.
"In order to accomplish this, he said
that tie national and State banks
which are members Of the federal re-
serve system should make loans on
warehouse receipts for insured cotton
at low rates of interest; that the banks
can well afford to carry cotton for pro-
ducers at per cent, especially if they
are able to rediscount cotton paper at
a much lower rate than per cent;
that II. O credit resources of the banks
of the country are greater than ever
before in our history and that there
is no reason why banks should not, in
cooperation with the merchants of the
South, help the cotton producers with
loans at low rates in the present pecu-
liar situation.
"The federal reserve board, the Sec
retary said, had a right to determine
the rate of interest which the federal
reserve banks can charge member
banks on notes or loans secured by
insured and warehoused cotton redis-
counted with federal reserve banks.
He 6as been unable to consult his col
leagues Of the federal reserve board
on account of his absence from Wash
ington, but feels confident of their CO.
operation in every reasonable way.
May Be Made Directly.
"Mr. McAdoo said, however, that
should it appear that the object in view
could be accomplished with greater ef-
fciency to the cotton producers, tie
merchants and the banks of the South
by depositing government funds in the
national banks direct instead of in the
federal reserve banks, he would take
that course and make deposits in such
national banks as would give him the
assurance t3at the money so deposited
or the credit based thereon would be
loaned on cotton insured or ware
housed and at a rate Of interest not to