Richmond daily register. (Richmond, Madison County, Ky.) 1917-1978, 1921-06-14

a period Of four more years and the
bank knows that is worth some
thing. The banker says he does't care
primarily about either. What he
cares about is the wheat. He favored
a studied market value and at con-
sentative basis, not at high basis
in a choppy market-because any
body with sense knew that 1920
markets on wheat were not conserva-
tive or stable markets, but choppy
markets. Here the association and
the banks agreed.
The bank has on hand a paper
that is rediscountable by the Fed.
eral Reserve Bank by direct written
ruling from the Federal Reserve
Board. If he is a member of the
Federal Reserve system, he dis
counts direct with the Spokane
branch and gets the money. IL not,
he keeps the paper or sells it to his
city correspondent. The city CORES
pendent may sell it again, or may
discount that paper.
A NEUTRALITY-SUSPICIOUS. any paper
matured and the product is not sold?
MR.. SAPIRO-We pay the draft
as it natures, because the co-opera.
products in its different pools all
the time and therefore averages the
prices. We always keep money for
that purpose and we always keep
selling.
But we struck a problem that was
worse than that. Our banks can
rediscount twice their capital and
surplus. Take a county like Whit
man County, in Washington-they
produce nothing but wheat. All their
demands come in at one time. Thess
banks lent the limit on this par
ticular type Of paper. They lent ths
limit to outside growers. They sud
denly found out that they had in the
Federal Reserve Bank paper twics
their capital and surplus The Fed.
eral Reserve Bank notified them
and they notified US. They said,
No more Of your paper goes to u.
We want to help you but we cannot
do anything for you. We cannot get
any more money. Our city cores
pondents say they cannot get any
more for us and the Federal Reserve
Bank has closed on u.s.
We had that come from group
Of places all at one time. We said,
'|:Ie growers have to have money
The Grain Bonds.
So Mr.. Jewett found a plan-ths
best yet. Here was the solution
-ShOrt-time bonds, the same kind
Of commercial paper that Armour
and Swift and a lot of Eastern
manufacturing people put out every
year to tide them over the peak Of
production. They are for three,
six or nine months. When we first
tried it out we issued half a mil.
lion s per cent bonds, dated De.
cember I, 1920, all payable in Juns,
1921, all six months commodity
bonds. We deposited all of the
bonds with the Lincoln Trust Com.
pany of Spokane. We made a writ.
ten agreement with that bank that
we would deposit warehouse re-
ceipts or grain tickets with them.
For every bushel of wheat repre-
scented by the receipt or ticket they
delivered to US one dollars worth
of bonds. If we deliver warehouse
receipts for a thousand bushels or
wheat they deliver up to US ons1
thousand dollars in bonds in units
of 500 or multiples thereof. Then
we sell the bonds. People would
know it was a short-time commod-
ity bond, secured in each case for
each dollar for one busheI oil
wheat represented by a receipt snl
the Lincoln Trust Company, andl
that if we sold any Of that wheatl
we would not only be putting asidel
$1.04 for each bushel. but in addf-l
ton surplus as additional securitys
for the rest of these bonds if the,
trust company called on us forl
more money to act as collateral orI
more warehouse receipts. So aS|
we sold the wheat we kept some OIL
the so-called surplus money aboveI
the payment amounts on hand. III
necessary We could put more in al
collateral.
y MEMBER: Were they Offered
to the public?
MR.. SAPIRO: With EFeat trepida.
ton we started to sell them to thu
public. We didn't know how theS
would take them. Our eyes werR
opened when we sold in Spokane and
vicinity hundred and fifty THOUSAND
dollars worth of the bonds in thirtt
days. Before we knew it we haf
i demand for more than we could
offer. The banks loosened I'D. VA
suddenly found a real medium 70
growers paper offered for the firsN
time in the United States with
specific nonperishable commodity ia
hind it. We found that the peopIk
asking for it were not the man OF
the street who doesn't know abotS
bonds, but the bank, the big me-
chants. They came in with talef
about how every bond they bougEk
with long maturity had been goinl4
down. They wanted to get SOM
kind of bond that had a short-tiu
maturity, in which they could pr&
their money for six months and 20
all the money back in six MONTHS
some bond which had security %
hind it of some specific commoditH
that they knew about, like wheat q
cotton.
l went to New York and took it u
with couple OF bankers there. AE
their request they represent ind
dentally three of the largest banl&
in New York City, I am supposed
report back with some kind of propkt
sition as to how much the Northwest
ern wheat States-that is the assoc
atoms of Montana, Idaho, Washin s.
ton and Oregon-are going to put Oh
in these bonds this year. They wa ~
to know if they cannot underwrik
them in New York. 1 am IikewiN-
supposed to meet with the representa-
tiveS of the second largest pap l.
house in the United States to Ia +
over the proposition. They want I'll
underwritten and as
talking of buying as much as $25,0Q
900 worth of bonds.
The fly in the ointment is with s
little local banks. We don't want
put<all our paper out that way.
want to keep our banking system
it is. We want TO put into bonds on
the amount the local banks cam
handle on the draft and acceptau
system.
The Extremes Meet Happily.
want you to know that it is TIL
bond phase that attract
r. d.,