The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1915-09-04
LIGHT ON COTTON FUNDS.
Federal Reserve Board Answers III
Quirics by senator Smi u on Capital
and Rate OF Discount.

Columbia, Aug. "0.---ln reply to a |
letter asking the Federal reserve |
board for Information in reference to /
the amount of capital available for |.
financing the cotton, and the rate or |
discount at which this capital is to |
be loaned. Senator L. ID. Smith has |
received the following:
The following letter is the reply Of !
Mr.. Hiamlin, the governor Of the Fed !
eral reserve board:
Il beg to acknowledge your letter
of August 20, in which you ask vheth-
er Il member bank is restricted in re-
discounting with "a Federal reserve
banR to the amount of its capital and
surplus. You further ask whether
the condition of the Federal reserve
banks is such that the present cotton
crop can be properly financed by this
system, and what is to be the rate of
rediscount of the Southern regional
banks.
Replying to your latter question
first. L would say that the board has
now before it for consideration the
subject of a special commodity rate
which would be applicable to cotton
and other non-perishablc crops. | Will
see that you are advised of any regu-
latiOn we may issue with regard TO
this.
Answering your first question, l
would say that Il member bank, in OBJ
tanning rediscounts of it's commercial
paper, is not restricted to the amount
Of it's capital and surplus. The limita-
ton which you may have in mind is
that imposed by Section 5,2O2 of the
Revised Statutes, Of which / enclose q
copy, which, as amended by Section
l3 OF the Federal Reserve Act eX-
presSly eXempts liabilities incurred
under the provisions of the Federal
Reserve Act, and rediscount by
national bank would be a liability in
CURED under said Act.
So, also, no limit is imposed as to
the amount of commercial paper
which Federal reserve bank may
discount for a member bank, with the
the 10 per cen. limitation imposed on
national banks by Section $500. | en-
close herewith copy of this limita-
ton. The amount Of rediscount
would necessarily depend upon the
condition of the Federal reserve bank,
and the proper discretion OF the di-
rectors, but the action OF the directors
must be governed by the provisions
of Section 4 of the Federal Reserve
Act. prescribing that the directors of
each Federal reserve bank shall, SUBJ
jest to the provisions of law and or
ders of the Federal reserve board. ex-
tend to each member bank such dis
counts, advancements and accommo-
dations rs may be safely and reason
ably made, with due regard for the
claims and demands OF other men,
Der banks"
/ | also quote the following from a
letter handed to me by Mr. Will
liams, cOmptKOller of the currency.
which was given TO the press:
"The actual figures show that the
present condition of the national
banks of this country and their abil-
ity to meet any legitimate demands
which may be made upon them is un-
surpassed. They have never before
been so strong and so thoroughly pre-
pared to granple with and handle
successfully any problem, however
large, which may be presented to
them, as they are today. These figures
show that the national banks of this
country and the twelI e Federal re-
serve banks, exclusive of the State
banks and trust companies, have at
this time an unemployed loaning ca
paclty sufficient to enable them, if
need be, to carry for our own people
at market value the entire cotton crop.
and half hi not the whole of the
wheat crop and tobacco crop. which
1t is not, Of course, conceivable that
they will be asked to do. and also
finance, until the purchasers can pay
rus in gold. or it's equivalent. a thou
sand million dollars or so of exports
of foodstuffs or manufactured nro-
ducts to be shipped to the rest of the
world