New-York tribune., 1919-12-12
Discount Rates on
Govt War Paper
Advanced Again
Local Federal Reserve Bank
Acts to Remove Discrimi.
nation Against Acceptances
and Commercial Loans

The Federal Reserve Bank Of New
York yesterday afternoon announced
further increase of rates to member
banks on advances and rediscounts Sc
cured by government war paper. I'm
like the raising of rates on November
8, which marked the first step toward
reducing war imitation and preceded the
smash in security prices On the Stock
Exchange, the new change does not
affect the rates on commercial paper
and acceptances.
Yesterdays adjustments tend to
equalize rates and TO remove the diff
terential in favor OF war, paper in Re-
serve Bank charges and against ac-
ceptances and commercial paper. Paul
81. Warburg and other sponsors of &C.
ceptances have urged this move for
some time on the ground that the dis
counting of war paper at most favored
rates was retarding the development Of
the acceptance market and hindering
the financing Of commercial transac-
tions.
The new shift in rates makes it
more expensive in effect for the banks
TO carry undigested Liberty bonds and
certificates Of Indebtedness. However,
the various banks Of New York agreed
10 carry their customers who bor-
only for one year after the fourth
Liberty Loan and for six months after
the Victory Loan. and are at present
free to change the rates. Many banks
have recently slightly increased the
rate, and may not therefore pass on
the Reserve Banks increases TO their
customers.
May Discourage Expansion
AS far as the stock market is con-
cerned, Yesterdays changes consti-
tute q further expression Of the policy
announced early last month. Although
they will make the cost Of credit to
member banks greater and perhaps dis
courage an expansion Of loans, observ-
ers point out that the market is in a
far different technical position than it
was before the shakeout which preceded
the general increase in rates on Novem-
Ter 3. The approval OF the Federal
Reserve Board at Washington was re-
ceived yesterday, and an announcement
OF the new schedule was made after
the close OF trading at the exchange.
Under the new schedule the rate on
advances not exceeding fifteen days to
member banks on their promissory
notes secured by all certificates OF in
debtedness will be Az per cent. This
change abolishes the A.. per cent rate
on certificates bearing on their face 4 Il
per cent interest. The rate on II per
cent certificates will remain unchanged
Up to November 3 the rate on ali ad-
vances secured by certificates was 4 per
cent. Some Of the IA per cent certii-
Gates was per cent. Some of the 4 i
per cent certificates outstanding mature
n February, but most Of them fall due
On March IS, tax payment day, and! &C
cording 20 bankers, are we'll distributed d
among taxpayers and not congested in
the hands OF the banks.
Moreover. the rate OF advances 70
member banks secured by Liberty
bonds, Victory notes and customers
notes secured b. either Of the fore
going was yesterday raised from 4 L
20 4s4 per cent. Before November 3
This rate was 4 per cent.
The only rediscount rate changed
yesterday was that for notes. drafts
and bills OF exchange having a maturity
of not in excess Of ninety days secure
by Liberty bonds or Victory notes
This was brought up from IA per cent
20 AZ per cent. Before Novembe
, the rate was IL per cent The redis
count rate for trade acceotances and
bankers acceptances having a maturity
al time Of discount of not more than
ninety days is ONLY 4 l., ,oer cent