Evening star. [volume] (Washington, D.C.) 1854-1972, 1915-09-11
CREDIT POSSIBILITIES
GREATLY INCREASED
New Regulations by Federal Reserve
Board Will Enable Banks to Use
Millions More Cash.
Ruling Comes at Time When It
May Make Easier Allies Finan-
cial Operations.
BY I. A. FLEMING.

BY reason of the new regulations of
the federal reserve board regarding
the purchase, sale and rediscount of
acceptances, the credit possibilities of
the member banks have been enor-
mously increased.
Acceptances. while a common form
of banking credits in other countries
and not unknown in the United States
before the present war, were not at
all numerous, and have become more
plentiful and better known largely
through the efforts of the National
City Bank of New York in it's South
american enterprises and discounts on
coffee bills. the truest form of accept
ances-drafts payable after stated
period secured bv bill of lading for
a definite commodity either being i'm
ported into or exported from the coun-
trv.
Under the new regulations banks NAV
purchase or rediscount acceptances OF
ninety DAYS maturity or under up to
half of the amount of their capital and
surplus. the regulation. of course. re-
iatins to the banks that are members
OF the federal reserve system.
With the consent OF the federal re-
serv. board. nroba hl~ after hearing
the facts in any special case. the trans
action NAV be enlarged to an amount
equal to the capital and surplus of the
bank or banks in the transaction.
Any regional bank NAV redisrount
acceotances for anv member bank un
70 the amount of the CAPITAL stock and
surplus of the member bank for which
thA reserve institution is rediscounting.
It is further provided that the aggre-
gate of notes and bills bearing the in
1orsement of any one person. company.
firm or cornoration. rediscounted for
any one bank. shall at no time exceed
10 per cent of the capital and surplus
81 said bank. except that this restric-
ton does not apply to discount of bills
Of exchange. drawn in good faith
against actually existing values.
The bill must not be renewed after
the goods have been surrendered to the
purchaser or consignee, except for such
AGREED upon at the time of the openins
of the credit as a condition Incidental
to the Importation or exnortation in
volved. provided that the bill must not
whereby the holder thereof is obligated
to renew the same at maturity.
She Credit Possibilities.
Under the revised regulations the
credit possibilities of the 1906 mem
her banks In the federal reserve sys-
tenn will be increased many fold. While
unquestionably in line with the policy
of the federal reserve board to make
the advantages OF membership IN the
system so attractive that all fiscal In
situations may see and be duly i'm
pressed. the action just taken is GER
tainly step in making it easier for
the great gathering of American bank
ers that met with Mr.. Morgan and the
allies fiscal representatives 90 meet
demands on them for loans. within the
bounds OF reason and time.
The capital and surplus of the mem
Der banks of the federal reserve sys-
tenn is about $1,so0,00o.00 according
to the report Of the controller of the
currency, June %, 1915. The excess
reserves of the banks then reporting
was some S77S.63S.000
With the right to rediscount accep-
tances on the new regulations and to
extend from time to time, within rea--
son. and at the low rates made by the
regional banks, the command of credit
by the American banker is sure to be
a mighty factor in future financial
operations-and the acceptances are to
be expressed in dollars and cents.