Evening capital and Maryland gazette., 1915-08-04
UNCLE SAM WILL LEND
MONEY ON THE CROPS.
Federal Bank Surplus to be Available
through the RediscOunting Of Notes
and Drafts On Stored Agrieui-
turai Products.

A4hut a0N@1~Aae
The Federal Reserve Board announc-
ed yesterday the new policy for the de-
mand for money with which 10 move
the crops. Heretofore the situation
hes been met by deposits Of public
funds in depository banks and through I
the emergency currency authorized 4
der the AIdrich-yreeland act
It is proposed that the situation shall Z
be met this year by the rediscount 4
privileges extended by the Federal Re
serve banks TO member banks. b.
which nots may be issued on redis
counts of notes drafts and bills Of ex- /
change secured by staple agricultural
products"
II was explained at the Office Of the
Federal Reserve Board that the relief
thus made possible was not necessa-
rily limited to the cotton states. but
was available to growers Of wheat and
other staples such as come out Of the
West and Northwest.
The plan, as outlined in letter sent
out by authority Of the Federal Re
serve Board to the various regional
banks addressed to the chairman Of the
boards OF directors of the banks is in
part as follows:
Section i3 Of the act gives specific
permission for the rediscounting for
member banks of notes. drafts and
+ bills Of exchange secured by staple
agricultural products. The manifest
intent Of this revision is to enable pro-
ducers TO market their crops IN nor
NAL and effective manner
I'm view Of the large surplus now
held by the Federal banks, by member
banks and by other banks throughout
the country. there should be no diff
Guilty in aftording thep roducers the
assistance necessary to enable them to
market their products in volume cor
responding to the power of the trade
( to absorb them.
"In order to accomplish this end it
( it is suggested that Federal Reserve
Z banks adopt a definite policy with ref
erence to rediscounting paper secur-
ed by documents in satisfactory form.
I evideneing the ownership Of stored
agricultural products
1T is recommended that regulations
governing the rediscount of notes
covering advances on such products
| be issued by such of these Federal Re
serve banks whose members are en-
gagged in financing the movement of
such crops TO the market
"In so doing, the object in view
should be to assist effectively as above
pointed out i'm the normal movement
of such products in orderly transfer to
the sonsumer. The carrying OF pro-
ducts in behalf of spectators is not
permitted under the law, and member
banks cannot certify the notes of spec
ulators as eligible. since the act does
not allow the rediscounting of notes,
drafts or bills of exchange covering
merely investments
Special attention is herewith di- |
rected to the marketing of the cotton |
crop. Cotton is peculiarly sensitive to |
abnormal conditions, such as now exist |
in our export trade, and il is clearly |
IN the common interest that credits |
cd upon thesec rops be protected as
far as possible from the danger of de- |
moralization such as existed during |
the autumn of 1914.
mo staple commodity is subject to |
greater variations in price than is |
cotton, which, during the past twelve |
years, has shown, according to figures |
based upon these crops be proteotedas |
New York Cotton Exchange, an aver |
age anual fluctuation of 5.SS cents per |
pound, the maximum price range dur
ing any year OF this period being 10.4O |
cents per pound in 1914 and the max
imum range -2.65 cents per pound in
the year 1906.
1t should be noted, however, that |
with two exceptions, there has been no |
very great difference in the average |
price of cotton for each of those twelve |
years, the exceptions being the year |
1905. when the average price during
the year in New York was $50 cents
per pound the lowest of the twelve
year period, and the other being the
year 1910, when the average price per
pound was 16.45 cents but the aver
age price for the entire twelve-year
period was - cents per pound.
"Suden and violent fluctuations are
clearly to the advantage of neither the
loaning banks, the producer, the man
lfactnrer nor the consumer. They
offer on the contrary an inviting field
for the speculator, and should the
Federal Reserve system in making
possible the more normal movement Of
the crop be a contributing factor in re-
ducing these fluctuations ii would
have accomplished great public good
"It is, therefore, recommended that
in pursuance of the policy already in
dicated the Federal Reserve banks
communicate with their members and
with others who may be interested for
the purpose Of directing attention to
teh steps which must be taken to Sc
cure the necessary cooperation.
1T is suggested that the Federal Re
serve banks point out to their men,
bers and to the public generally that
those who are engaged in cotton pro
duction, If they intend to take advant
age OF the facilities offered by the
hanks for carrying cotton, should begin
ct once to arrange for its proper stor-
age and insurance as rapidly as the
cotton is ginned.
Federal Reserve banks should par
ticularly point out to their members
that they are preparing to rediscount