Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-08-03
Board Tells Regional Institu-
tons How They May AS
SiSt This Fall.
| PLAN APPLIED TO ALL
CEREALS IN COUNTRY
Special Attention. However, Is
Given to Cotton, Which Is Sensi-
tive to Abnormal Conditions.

available the resources of the federaf
reserve system in the annual fail move
ment of crops have been worked out
by the federal reserve board. Writ
ing to the twelve regional banks, the
board pointed out in a letter made
public today how E'embers of the sys-
tenn may help to finance the crop move
ment.
The boards action was taken. the
letter says, to forestall any possibility
of congestion of crops this fall or lack
of financial accommodation to move
them and to avoid a recurrence of the
stringency which in the past has
marked this movement.
Although the board applies its plan
to wheat, corn and all other cereals,
it devotes most attention to the cotton
crop, which, it says, is peculiarly SEN
sitive to abnormal conditions such as
now exist in the export trade.
Usually the crop movement has been
taken care of by government deposits
in banks or the issue of emergency
act, which expired last month. In place
of these agencies, the board states,
there is ample authority in the fed
eral reserve act to meet the situation
this fall.
Can Render Efficient Aid.
, "In view of the large surplus re-
serves now held by the federal re-
serve banks, by member banks and
by other banks throughout the coun-
try" says the boards letter. there
should be no difficulty in affording the
producers the assistance necessary to
enable them to market their products
in volume corresponding to the power
of the trade to absorb them. In order
to accomplish this end, 1t is suggested
that federal reserve banks adopt a
definite policy with reference to redls-
counting paper secured by documents
in satisfactory form evidencing the
ownership of stored agricultural prod
ucts. Through such policy, together
with proper methods of warehousing.
federal reserve banks can be a potent
factor in assisting the normal move
ment of staple agricultural products
from the field to the factory or to the
consumer. 1t Is recommended that
regulations governing the rediScount
of notes covering advances on such
products be issued by such of these
federal reserve banks whose members
are actively engaged in financing the
movement of such crops to the mar
ket."
Cotton Marketing Emphasized.
The board calls special attention to
the marketing of the cotton crop be-
cause it is clearly to the common in
terest that credits based upon this crop
be protected as far as possible from the
danger Of naturalization" 1t shows
that no staple commodity is subject to
greater variation in prices than cot
ton, and quotes figures showing an
average annual fuctuation on the New
York Cotton Exchange of 5.3S cents
per pound.
Sudden and violent fluctuations" it
continues, ARE clearly to the advantage
of neither the loaning banks, the pro-
Queer, the manufacturer. nor the con-
sumner. They offer, on the contrary, an
inviting field for the Spectator, and
should the federal reserve system, in
making possible the more normal
movement of the crop, be a contribut-
ing factor in reducing these f1uctua-
tions, it would have accomplished a
great public good"
The board suggests that the reserve
banks communicate with their mem bers
and others interested, and point out
that cotton producers, if they hope to
take advantage of the facilities of the
system for carrying cotton, should begin
at once arranging for its proper stor-
age and insurance as rapidly as ginned.
Federal reserve banks" says the let
ter, should particularly point out to
their members that they are prepared
to rediscount' the notes of farmers and
merchants, secured by proper ware
house receipts for cotton, and accom-
panied by evidence of insurance"
Form of Proposed Notes.
Member banks, the letter says, which
offer these notes to federal reserve
banks for rediscount, should be ready
to state the grade and market value of
the cotton, and the notes should be in
the customary collateral form, provid-
ing the right to call for additional Sc
curity in event of material decline in
market value.
The amount to be advanced would
be left primarily to the judgment OF
the member bank" says the letter.
The board suggests that the reserve
banks call attention of their member
banks to the desirability of reserving
storage space for such cotton as is to
be used as security for loans in locali-
ties where warehouse facilities are in
adequate. The letter says. that while
there Is not sufficient warehouse space
in the south to take care of the entire
cotton crop, there is probably ample
facility for the proper storage of all
cotton likely to be pledged for loans.
TT should be made plain" the board
warns, that compliance with the eS-
sential features of the plan herein out
lined. modified as circumstances may
demand, will be necessary for the nor
NAL marketing of this years crop and
for the proper protection of those who
are interested in it's movement, Wheth-
er banks, producers or manufacturers.