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qt EX-OFFICIO MEMBERS WILLIAM G . McADOO SECRETARY OF THE TREASURY I t H Y i) W . P . 6 . H A R D I N G , GOVERNOR PAUL CHAIRMAN J O H N SKELTON WILLIAMS COMPTROLLER O F THE CURRENCY M . W A R B U R G , VICE GOVERNOR F R E D E R I C ^ DELANO ADOLPH C / W L A . « R C H A R L E S S . HAMLIN FEDERAL RESERVE BOARD H . P A R K E R W I L L I S , SECRETARY S H E R M A N P . A L L E N , ASST. SECRETARY AND FISCAL AGENT WASHINGTON ADDRESS REPLY TO FEDERAL RESERVE BOARD J a n u a r y 1 7 , 1$17« Dear S i r : I n a n s w e r t o i n q u i r i e s d e c e i v e d : f r o m some t a n k s a s t o proper m e t h o d s ox c l a s s i f y i n g t h e d i s c o u n t m a t e r i a l on h a n d u n d e r t h e s e v e r a l h e a d s shown i n t h e l o w e r p o r t i o n of Form 3 8 , e s p e c i a l l y u n d e r t h e head of " A g r i c u l t u r a l and l i v e - s t o c k p a p e r " , , I would s a y t h a t i t i s t h e d e s i r e of t h e Board t h a t t h e F e d e r a l r e serve tanks a s c e r t a i n i n a l l cases whether t h e o r i g i n a l loan has b e e n o b t a i n e d f r o m t h e r e d i s c o u n t i n g member bank f o r a g r i c u l t u r a l , i n d u s t r i a l o r c o m m e r c i a l p u r p o s e s so t h a t a l l d i s c o u n t i t e m s of t h e R e s e r v e Bank m i g h t be r e p o r t e d t o t h e Board p r o p e r l y c l a s s i fied. In c l a s s i f y i n g t h e d i s c o u n t m a t e r i a l t h e r e s e r v e banks s h o u l d i n t h e f i r s t p l a c e be g u i d e d by t h e s t a t e d p u r p o s e of t h e o r i g i n a l l o a n , a s r e p o r t e d by t h e r e d i s c o u n t i n g member b a n k , case t h i s purpose i s s t a t e d only i n g e n e r a l terms, as e . g. in "in a c c o r d a n c e w i t h S e c t i o n 1 3 " , t h e o c c u p a t i o n of t h e b o r r o w e r s h o u l d be u s e d a s a g u i d e i n c l a s s i f i c a t i o n . Thus, if John Smith, a ? m e r c h a n t , who i s a l s o .engaged i n f a r m i n g , g i v e s a n u n s e c u r e d note, t o Henry J o n e s ; engaged i n t h e f e r t i l i z e r b u s i n e s s , e n t i r e l y proper to report i t would seem t h e i t e m as " U n s e c u r e d c o m m e r t i a l and i n d u s t r i a l p a p e r " , u n l e s s t h e r e i s i n f o r m a t i o n on hand w h i c h makes 1948 980. - 2"— i t c l e a r t h a t J o n e s was t o u s e t h e p r o c e e d s of t h e l o a n f o r a g r i c u l t u r a l purposes* In c a s e t h e n o t e was s e c u r e d "by t w e n t y "bales of c o t t o n , i t would be p r o p e r t o r e p o r t i t a s "commercial and i n d u s t r i a l p a p e r - s e c u r e d " , u n l e s s t h e p u r p o s e of t h e l o a n was c l e a r l y s t a t e d t o Tie a g r i c u l t u r a l . „ Nor would i t make any d i f - f e r e n c e i n c l a s s i f i c a t i o n were t h e payee of t h e n o t e r e p o r t e d a s "farmer". In c a s e Farmer Smith g i v e s t o R i c h a r d J o n e s a n o t e s e c u r e d by a l i e n on 25 s t e e r s (documents a t t a c h e d t o n o t e or n o t ) i t would be p r o p e r t o r e p o r t t h e i t e m a s l i v e - s t o c k p a p e r , u n l e s s t h e r e i s i n f o r m a t i o n t o t h e e f f e c t t h a t t h e p r o c e e d s of t h e l o a n have "been o r a r e t o be u s e d f o r a g r i c u l t u r a l p u r p o s e s , I t i s c l e a r t h a t a l l s i x - m o n t h p a p e r i s t o be r e p o r t e d e i t h e r as a g r i c u l t u r a l o r live—stock p a p e r . Item " T o t a l " b i l l s d i s c o u n t e d " , shown i n t h e l o w e r h a l f of Form 3 8 , s h o u l d , of c o u r s e , e q u a l t o t a l of s u b d i v i s i o n 1 , - ( B i l l s d i s c o u n t e d - Members), i n t h e u p p e r h a l f <bf t h e f o r m . I t i s r e a l i z e d t h a t t h e above e x p l a n a t i o n s by no means exhaust a l l p o s s i b l e combinations, but i t i s thought t h a t they w i l l p r o v e h e l p f u l t o y o u r d i s c o u n t d e p a r t m e n t i n t h e p r e p a r a t i o n of t h e weekly s t a t e m e n t on Form 3 8 . Very t r u l y y o u r s , Vice Governor. %
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