The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-11-04
REDISCOL|NT RATES
TO BANKS RAISED
Federal Reserve Jumps Charge
Schedule IA Per Cent. to
81 Per Cent.
EFFECTIVE IMMEDIATELY
Strong Says Result Of Desire
to Make Reductions in Bank
and U. s. Loans Meet.


The Federal Reserve Bank OF New
York has increased its rates OF redis-
count from e-quarter Of per cent. to
three-quarters of per cent, effective
Immediately. Announcement of this step
was made yesterday afternoon by Gov
ernor Benjamin Strong. In making the
announcement Governor Strong explained
that it was the natural result Of a desire
to make a reduction in bank loans cor
responding to the reduction in Govern
ment loans which is now in progress
This, he said, would insure an orderly
return Of normal credit conditions.
1.-THE reason for the advance in rates
announced to-day by the Federal Reserve
Bank of New York." the Governor said,
''is tho evidence that some part of the
great volume of credit resulting from
both Government and private borrowing
which war finance required, as 1t lie re-
leased from time to time from Govern
ment needs, is being diverted to specula-
tive employment rather than to reduc-
ton of bank loans AS the total value OF
the Governm ant's loans is now in course
Of reduction corresponding reductions in
bank loans and deposits should be made
m order to insure an orderly return to
normal credit conditions"
The step is very important in the way
of defiation. With the entrance OF the
Government into the money market on
very large scale to take care OF its wal
needs there was created a tremendous
amount OF credit which had not been In
existence Now, when the Government
Is reducing those loans that surplus
| credit Is finding its way back into COM
mere al channels, and II is understood to
be the desire of the banking interests to
diminish that superfiuous credit rather
than have it applied to speculative enter
prise.
The Increases in rediscount rates run
from one-quarter of 1 per cent to three
quarters of l per cent. The new sched-
ule. in which yesterdays change is the
first one OF importance to be made since
| April 1918, is as follows:
ADVANCES.
For advances not exceeding fifteen days TO
member banks on their promissory notes
New old
| Rate. Rate.
| PC PC.
| United States certificates OF In
debtedness, Liberty bonds, Vic.
! tory and customers notes Sc
United States certificates of in.
| dehtedness bearing AS interest. AZ 4
| Eligible commercial paper.......... IA
REDIsCoUNTs.
Notes, drafts. bills of exchange
| having maturities at time OF re-
| discount of not more than
Including rediscouni;. for not eI:
| ceeding fifteen days, of eligible
| paper having maturlties nj times
OF rediscount of more than ff-
Notes. drafts, bills Of exchange
| having ulRturtties Of not in eX-
| cess OF ninety days secured by
Liberty bonds or Victory notes. al AZ
/ Trade and bankers acceptances
having maturities at times OF re.
discount OF not more than ninety
Agricultural paper having maturi.
ties al times of rediscount of
| more than ninety days, but not
more than six months
The rediscount rate. in the new SEIZED.
ule, Is increased to the same level as the
bearing rate of the certificates. In the
case OF trade and bankers acceptances
having maturities at times of reds
count of not more than ninety days, the
rate for which has been increased to Az
per cent in the new schedule there was
u Val ldIGt VI rates ulueF the pan mere
tofore existing. Prior to the effective
ness OF the new rates bankers accep
tances of short maturity were reds
counted at 4 per cent. and others o.
longer maturity at IA per cent, ant
thus the increase ranges from 4 of J
per cent. to y OF l per cent. The rat,
on trade acceptances is unchanged.
4 Another plan adopted by the Fedora
Reserve Bank of New York and just an
nounced by Gov. Strong is tho decision
TO receive for collection at par check,
drawn on all private bankers in thi.
district. Tho announcement of that de
parture' reads as follows:
For two and one-half years the Fed
eral Reserve Bank OF New York ha!
been collecting for its member banks al
checks drawn on incorporated banks ant
trust companies in this Federal Reserv.
district which comprise almost the en-
tire volume of checks originating In tn,
district. In order that the check collec
, tlon service within the district may b,
complete, arrangements have been mad,
which will enable us on and after No
vember 1 to receive checks drawn on al
private bankers In this district, In nc
cordance with our time schedule. Thes
arrangements win not include the collec
ton OF checks drawn on savings banks
which will still be handled separately a
collection Items"