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FEDERAL RESERVE BOARD
X-4693
WASHINGTON
ADDRESS OFFICIAL. CORRESPONDENCE TO
Octo"bor 13, 1926.
THEFEDERAL.RESERvEaoARo
SUBJECT:
~I.'OPIC FO:ii THE GOVE..,:mORS 1 COl'I?ERENCE.
Dear Sir:
The Bonrd has voted to place u1xm the prograr.1
for the next conference of G·JVernors the question whether
the J:3onrd 1 s Regulation A shJuld be ru:1ended so as to make
eligible for redisCJ1,.;11t .::>r purchase by Federal reserve
"'::ln.nks a "'oru1kers 1 ac.:::eptance 'irawn ·:;y an elevator or
warehouse coqoa..'1y and secured by teroinal warehouse
receipts issued by the elevator or warehouse
co:.~9~1y
that draws the draft •
. For your inforr:..-JatiJn
il1
c:m:1cction wi t}·l
this r.:atter thoro are enclosed herewith copies of
certain corrosiJoadoaco and r.:enoranda die.cussing this
questiJn.
Vcry trul;/ y::mrs,
Walter
t. Ed.J.y,
Socrcbxy.
To all
&~vernors.
http://fraser.stlouisfed.org/ Enclosure~:;
Federal Reserve Bank of St. Louis
X-4693-a
Aut:;ust 23, 1926.
Mr. E. P.. K0nzcl,
Deputy Govorn.:>r,
]\;doro1 Reserve Ba..'1k of New York,
New York City, New York.
Dear Mr. Kcnzcl:
I have your letter of AUo-ust 20th with reference
to bro1kers• acceptru1ces drawn by an elevator or warehouse
co;:~pany a..11d secured by terr~:inal warehouse receipts of the
co:::;pany that draws the draft.
You state that you assume
that the Board• s action in :postponing tho c:msideration of
a:1 a:-.1enc1L1er. . t to Regu.la tio11 A on this subject U...'1 til ~u tor the
~ext Governors' Conference would not necessarily preclude
a ruling by tho Board along t~e lines irdicated in the last
paragraph of Governor YJung's letter to Y.r. Eddy dated July
26th.
At the t~ne when the Board decided to refer this
::1atter to the next Governors' Conference it had under consideration l:·O t only the :proposed ar.1Cnd:.1en t to RCE:,i.1.la t ion A but
also thG :proposal m::.de in Governor Young's letter that the
Board so interpret its :present regulations as t·:> make eligiole
the acceptances under consideration.. The :Board's action ·in
deferring this matter was intended to include both of these
:proposals and consideration of the entire subject was :postponed
until the next Conference of Governors.
Very truly yours,
(sibned) J. C. Noell,
J. C. Noell,
Assistant Secretary.
F E D E. It .A.. L. it J S E It V ll .'B A. N lC
O'i Ill YO!nt
.A.ugu.et 20, 1926.
J. C. Noell, lleq.,
Aasfstan.t Secretary, :hdwa.l Roaervo :Board, '
Washington,
D.C.
Dear Mr. lloell:
I have your letter of :August 18, advising me that after
careful consideration the Board has decided to refer back to the Conterence of Governors for further conaidera.tion
at).
aa1dment to Sec'ion
X (3) of Reglllation A. which was discuaaed. at the laat conference, and
tha.nk ;rou for the information.
I assume· that this would not n.-..ar'-17 preclude a ruling
by the :SOard meanwhile along the linea indicated in the last paragraph
of Governor Youn.g•a letter to Mr. Zd.dr, dated July 26, 1926.
If that
were done it would, I think, serve the llinneapolis and St. Paul btmka
quite as well during the approaching grain soason, which is almost upon
us and which, fr011 aU accounta, I surmise will bring pretty hea'f7 demands on the ba.nlta in that section.
Very truly yours,
(signed)
:z. :a.
lt.
a.
Eonzol
lCEmz.ol,
Depu't7 Govamor.
X-4693-c
August 18,
1926.
Mr • .:a. A. Young, Governor,
Foderul Reserve Bank of Minneapolis,
Minneapolis,
Minn.
Dear Sir:
Tho Board has given careful consideration to
the matter of adopting an amendment to section X(3) of
its Regulation A as proposed by the last Governors' Conference so as to Dk~e eligible for rediscount or purcbase
by Federal reserve banks a bankers' acceptance drawn by an
elevator or warehouse company and secured by terminal
warehouse receipts of the elevator or warehouse comJanY ·
that drmvs the draft •.
Although this subject was discussed at the
last Conference of Governors, it was not on the program
and the stenographic record indicates that the Governors
had not had a sufficient opportunity to study the question. Since the Conference took place some question has
arisen as to whether the adoption of the a.>nendmen t to
the re5ulations in the form proposed would properly accomplish the desired purpose.
In view of these facts the Board oelieves
that this matter should be given further consideration
by the Governors' Conference before being acted upon
by tho Board and has accordingly decided to put it upon
tho program for further discussion at the next conference of Governors.
Very truly yours,
(signed) J. C. Noell
J. C. Noell,
Assistant Secretary.
GBV Qlv!C
1_82
X-4693-d
Aug~
Federal Reserve Eoard
Mr. Wyatt - General Counsel
10, 1926.
Bankers• acce~tances
secured by terminal warehouse receipts issued by the borrower.
Pu.rsua.nt to the instructions issued by the Board at
its meating of Au£ust 6th, I have drafted and respectfully submit herewith a proposed ruling which would permit Federal reserve
banks to rodisco1mt or purchase on the open market bankers' acceptances sec~·ed by registered terminal warehouse receipts issued by
the -borrowers when such receipts conform to the essential condi tior.s
prescribed in the attached correspondence.
I feel it my duty, however, to advise the Board that, in
my opinion, it would be unwise to issue a ruling of this kind and
that if the Board desires to make acceptances of this kind eligible
for rediscount, it would be much wiser to do so by means of an amendment to Regulation A along tho lines of that recom~ended by the last
Governors' Conference. I have, therefore, taken the liberty of
preparing and respectfully submit herewith a revised draft of the
proposed anendment to Regulation A which, in my judgment, will meet
most of the objections raised by Mr. Xenzel.
I respectfully request permission to discuss this subject orally with the Board when it comes u:p :for d.efini te action.
Res)eC tfu.ll;:.·,
(signed) Walter
W~ra.tt
Walter Wyatt,
General Cou.."ls el •
..
:184_
X-4693-e
( PROPOSED RULING OF T~ FEDERAL ::tESER.VE BOARD. )
BAL~RS 1 ACCEPTANCES SECURED BY TERMINAL GRAIN ELEVATOR OR WARE.HOUSE RECEIPTS ISSUED BY THE BORROWER.
Notwithstanding that provision of Section X(3) of
Regulation A which requires that, in order to be eligible for.
rediscount by Federal reserve banks, bankers' acceptances issued
to finance the storage of readily marketable staples must be
secured at the time of acceptance by warehouse, terminal or
other similar receipts, issued by a party independent of the
borrower, the Federal Reserve Board has ruled that Federal reserve banks may rediscount bankers' acce-.9tances drawn by terminal
grain elevator or warehouse compa~ies and secured by terminal
grain elevator or warehouse receipts issued by the drawers;
provided that:
(1) Such te1•minal grain elevator or warehouse company is
duly bonded and licensed and is regularly inspected by State or
Federal authorities with whom all receipts for grain and all
tra...."lsfers thereof are registered and without whose consent no
grain ca;1 be withdrawn;
(2) Unde:t• the laws of the State in which such terminal
grain elevator or warehouse is located, as interpreted by the
court£ of such State, such receipts give the holder good legal
tit::i.e to, or an effective legal lien on, grain of the amount
and quality for which such receipt is issued, wh5.ch title
or lien is good as against bona fide ptU'ch::,sers ru1d general
credi to1·s; end
( 3) Such accep tru1ces comply in a.ll o the:~ reopec ts with the
relevant provisions of the Federal Reserve Act cmd the regulations and rulings of the Federal Reserve Board.
'!his ruling is designed to give recognition to receipts
issued by terminal grain elevator or warehouse companies located
in certain States tho laws of which provide for the supervision
of such elevator or warehouse companies and the registration of
receipts to such an extent that in practical effect, the grain
is under the control of State officials independent of the issuing
warehouse or elevator. Such State supervision and control is
·
believed sufficient to warrant the Federal Reserve Board in making
an exception to its general rule that warehouse receipts securing
bankers' accept~~ces issued to finance the storage of readily
marketable staples must be issued by a party independent of the
borrower.
185
x.:..4693-f
?-ROPOSED AMENDM:ElT'r TO REGULATION A •
.BE IT RESOLVED by the Federal Reserve Board that Section
X (3) o£ Regulation A be amended to read as follows:
11 (3) The storage of readily marketable staples, provided that the bill is secured at the time of acceptance
by a warehouse, terminal, or other similar receipt, conveying security title to such staples, issued by a party
independent of ~ho customer or issued by a terminal grain
elev?-tor or warehouse company duly bonded and licensed and
regularly inspected by State. or Federal authorities with whom
all receipts for grain and all transfers thereof are registered. and without whose consent no grain can be withdrawn;
and provided further that the acceptor remains secUl~ed throughout the life of the acceptance. In the event that the gpods
must be withdrawn from storage prior to the maturity of the
acceptance or the retirement of the credit, a trust receipt
or other similar document covering the goods may be substituted in lieu of the original document, provided that
such substitution is conditioned upon a reasonably prompt
liquidation of the credit. In order to insure co~liance
with this condition it should be required, when the original document is released, either (a) that the proceeds
of the goods will be applied within a specified time
toward a liquidation of the ac~eptance credit or (b) that
a new document, similar to the original one, will be resubsti tuted within a specified time. 11
.
Augu.st 10,
1926.
( CO?l' )
X-4693-g
FBDERAL RESEltVE :SANK
OF~
:18{)
MINNE.APOLIS
July 26, 1926
V~. Walter L. Eddy, Secretary,
Federal Reserve Board,
i7ashin€;ton, D.C.
Dear Mr. Eddy:
This will acknowledge receipt of your letter of July 24, enclosing; copy of letter of Mr. E. R. Kenzel, Chairman of the General
Committee on Bankers Acceptances, dated July 9, to Mr. Walter Wyatt,
Mr. Xenzel is correct in his interpretation of rules nu;nbers
63, 64 and 65, adopted by the Railroad & Warehouse Commission of the
State of Minnesota. It is not compulsory for an elevator in this state
to issue receipts for all the grain stored.
Likewise, it is not compulsory for these receipts to be registered. Therefore, the receipts
of an elev2.tor co~pany in tho state of Minnesota may be good, or may
not be good.
However, an elevator company may issue receipts for all
grain stored and may have the receipts registered by a representative
of the State Department, as to quantity and grade.
The Twin City bankers long agp recognized that if receipts
were to be good se01.1.ri ty, receipts shoulcl be issued for all grain stored
and that such receipts should. be rogisterod by the Ste.te Department,.
and, in reality, be U..."lder state control.
In fact, a regular registered
terminal warehouse receipt is the only security that a northwestern
banker can accept on ·the domestic storage of grain and. feel absolutely
sure of what he is getting. The Twin City bankers would not care to
accept many receipts that arc issued by elevators in this state that
comply with the law. Th.e::..~efore, the amendment to Subdivision 3 of
Section 10 of Article B of Regulation A, was worded in such a way so
that the receipts of elevators that were not bonded, that did not issue
receipts for all of the grain stored in their elevators, or that did
not have the recei:pts registered, would be excluded.
I am still convinced that the suggested amendment will cover.
the situation and throw out the proper safeguar~s.
Nevertheless, I
cannot help but feel that the whole question could be handled much
better if Mr. Kenzel 1 s suggestion be adopted - that is, that the Board
interpret its own regulations to mean that regulex registered terminal
warehouse receints constitute documents for commodities so controlled
by a third party independent of the borrower, as to make them good and
eligible ,collateral.
Yaurs
re~pectfully,
(signed) R. A. Young
R. A. Young,
AI
July 24, 1926.
Dear Governor Young:
There is enclosed herewith copy of a
letter addressed to the Board under date of
July 9th by Mr. Xenzel, Deputy Governor of
the Federal Reserve :Bank of New York, which
is self-explanatory. It is requested that
you aovise the Board of your views on the matters discussed in Mr. Kenzelrs letter.
Very tru.l:r ::ours,
Walter L. Eddy,
Secretary.
Mr. R. A. Young, Governor,
Federal Reserve Bank,
Minneapolis, Minn.
(Enclosures)
~)tA1
_LC)I (
( C.OPY )
ttif-J
(COPY)
-,
X-4693-i
July 13, 1926.
•
To Federal Reserve Board
From Mr. Wyatt - General Counsel
Subject:_ Bankers• Acceptances
secured by terminal warehouse receipts issued by the bo~rower.
At the last Governors' Conference, the Conference voted to
request the Board to amend Section X(3) of Regulation A to read as follows, the words underlined being added to the prosent regulation:
·.
11 (3)
The storage of readily marketable staples, provided that the bill is secured at the time of acceptance
by a warehouse, terminal, or other similar receipt,conveying security title to such staples, issued by a party
independent of the customer· or issued by a terminal grain
elevator company duly bonded and licensed and regularly inspected by State or Federal authorities with whom all re£eipts for grain and all transfers thereof must be regis~d and without whose consent no grain can be withdrawn;
and provided further that the acceptor remains secured throughout the life of the acceptance. In the event that the goods
must be withdrawn from storage prior to the maturity of the
~acceptance or the retirement of the credit, a trust receipt or other similar document covering the goods may be
substituted in lieu of the original document, provided that
such substitution is conditioned upon a reasonably prompt
liquidation of the credit. In order to insure compliance
with this condition 1 t should be required., when the original document is releas~d, either (a) that the proceeds
of the goods will be applied within a specified time
toward ... a liquidation of the acce~9ta!1ce credit or (b) that.
a new document, similar to the orighal one, will be resubsti tuted within a s.pecified time. 11
The purpose of this proposed amendment ia to <Ik"'lke eligible for
rediscount or purchase by Federal reserve banks, bm1kers 1 acceptances
drawn by an elevator company a.nd secured by a terminal warehouse receipt of the elevator company that draws the draft.
OPINION
.rn ~rey opinion, the Board ruay legally adopt and promulgate this
amendment to its regulations. The question whether it should do so
ie a question of policy to be decided by the :Soard.
DISCUSSION
This proposed amendment to the :Soard's regulations was first
recommended by Governor Young in a letter address.ed to the :Soard und~r
date of Sept·ember 17, 1924-. The matter was referred to this office
~~d Mr. Freeman rendered an opinion in wh~ch he stated that there was
some doubt whether warehouse receipts of the kind described in Governor
:189
X-4693-l
- 2-
Young 1 s letter would comply with that provision of the Federal Reserve .Act wl1ich requires that tl;.ey co:r:.veJ· or secuxe title, es:_:Jecially
in view of tho fact that the grain is · stored in an elevator ~wnad by
the borrower and that the wore~ouse receipts arc issued by the borrower to himself. Mr. Freema..>J. sta.ted that there is a conflict in the decided cases as to whether such a receipt does secure title to the goods
or whether a bona fid.e puxchaser of goods from the ware21ousoman does
not take precedence over the h:>lder "Jf the receipt. In my opinion,
the question whether these particular receipts convey a good title or
give the holder a valid lie~ enforceable against a bona fide purchaser
of the whe.?.t, is a question which will depend upon the laws of tho
state in which the elevator is located a..1d upon tho construction of
those laws by the courts of that state. This is a question of local
law upon which this office Crolnot-undertake to pass.
Mr. Free~~ also stated t~t, even if such warehouse receipts could be considered as complying with the letter of the law,
there would still remain an important question of policy whether the
Board should make &l exception to the fundamental principle heretofore established by it and uniformly adhered to, that such receipts
must be issued by a party independent of the borrower. In view of
the importance of this question V~. Freeman recommended that it be
considered by the .A.ccepta.."lce Committee of the Governors' Conference
aud that cor.1mittee be requested to r.uti~e a reco~Jendation to the
Federal Reserve Board.
The Board advised · Governor Yo"Jllg uno.er dc;.te of Oct:>ber
ii!ll~~ediate c:1a.'lge in the regulatLms was possible
in such an importw.1t matter and suggested that he subr.1it the ques ·
tion for conside=ation at the next GovernJrs' Conference. The question, however, was not subr:1.itted tJ, or co:;.sic:crcd by, t:~e Governors.t
Conference at that time.
15, 1924, that n·:>
Under date of Septoobor 9, 1925, GoverrDr You.a.J.g ag.~in
brought up this questbn and urged a.."l early r1.1.lb.g upon it. Mr.
Mitchell caoe to Washington to discuss the question with the Board
and, by directio:>n of the Board, t:':J.is office prepared a. propoued foro
of ar.1endnent designed to acco:>mplish whD.t the Fe<ieral Reserve Ba;.1k of
M~rutoapolis a.""lcl its r.1enber ba.."lks desired.
T11is ar:tendoent was prepared after a discussion with l/.r. Mitchell a..1d he was entirely satis...
fied with it. At the :Soard :oeeting 0:::1 SeptGJ-:l~er 29, 1925, the nat-.
tor was discussed inforr.1ally by the Board with Mr. Mitchell. No definite action was taken by the Board because tho oatter had never been
passed upon by tho GJven1ors' donferen~e. The discussion resulted
ip. an inforual understro1ding to the effect that the Board would not
consider t21e adoption of ~1Y such xJendnent to its regulations without the question having first been considered by the G~vernors'
Conference and that, if tho Federal Reserve B~1k of Minneapolis
desired to have the subject c:msidored by the Governors' Conference,
X-4693-i
- 3-
Governor Young should have it :put
next Governors' Conference.
O:!l
the progra;·n for disc-u.ssion at tho
This subject was finally put on the progrDJl1 for discussion
at the last Governors• Conference and the Conference reco~1ended the
adoption of the proposed an.end.~ent t.J Regulation A.
Under date of July 2nd, Mr. Konzel, Chairnro1 of the
General Co~nittee on Banking Acceptances, addressed a letter to the
Board in which he suggested that, in view of the close approach of
the grain marketing season, it would be . desirable for the Board to deal
with this question at its early convenience. I have had soce further
correspondence with Mr. Kenzel on this subject, which develops the
fact that Mr. Kenzel fears that the proposed anenr:.l.r.1ent is so strictly worded that it WO).ld 'be cUfficul t for tho torcinal elevator companies to cot:Iply with its requil'C!:J.ents. In this connection I desire
to call attention to the fact that the &~endcent recommended by the
Governors• Conference was drafted by this office at the Board's direction and after thorough consultation with Mr. Mitchell. Mr. Mitchell
and I discussed the subject personally at great length, and Mr.
Mitchell was thoroughly satisfied with the la,ngu.age of the anendcent and advised me that it would satisfactorily fit tho practical
situation in his district. In view of these facts, I am inclined to
think that Mr. Kenzel r s fears are unfounded, though I cannot undertake to interpret tho Minnesota law, which is not at all clear.
The law requires that a bankers' acceptance drawn
to finance the domestic storage of readily ~~ketable staples oust
be secured by a warehouse receipt 11 conveying or securing ti tle11 to
such staples; and the Board ca."lnot waive this roquirei:lent of the law.
In order to make sure that this requirement of the la~ is cor.Jplied
with, the Board has heretofOl e ruled unifori!lly, a.:nd ha .. i required by
the terms of its regulations, that such receipts must be issuGd by a
party independent of the borrower. If, u..11d.er the laws of the state in
which the warehouse or elevator is located, a receipt lil:e that
described in Governor Young's letter is hold by the couxts to convey
valid. title to the grain and to give the holder a valid lien on such
grain which is good against a bona fide purchaser of the &rain, the
Board l!lould waive the requirenent of its regulations that such x·eceipt be issued by a party independent of tho borrower. The question whether, even under these circuostances, the Board should waive
this fundru~ental requirement of ita regulations, however, is an extremely important question of policy.
4
The atto.nhed draft ;Jf a pr::>posod D.tnendr.1ent to ReE;Ulation
A would make an exception tJ the requireocmt that the warehouso
receipt be issued by a party independent of tthe borrower, but would
not waive the requirement ~f tho law that such receipt must convey
or secure title. T'.ne que:;;tion whether receipts securing bankers'
acceptances cJoply with tho law as conveying or securing title would
in each instnnce be a question for detorcination b~r the Federal re
1.9t
X-4693-i
- 4-
serve ba..."'lk upon the advice of local counsel; because the court
decisions in the VL>.rious states are in such conflict upon this subject
that the Board could not well atteopt to issue any general ruling on it.
I wish to make 1 t clear tf....c'lt this office does not
the adoption of this amenfujent. If, however, the Board
decides to adopt this anendment, I respectfully suggest t ~"l.t the l:J.atter
is not of sufficient general i~ortance to warrant the publication
of a new edition of the regulations at this ti~e, and that the matter
could be sufficiently covered by the publication of the a.mend.r..1ent in
the Federal Reserve Bulletin. Such a stateoent in the Federal Reserve
:Bulletin should call particular attention to the fact that this amendment to the Regulations does not waive the requireoent of t~e law
that such warehouse or t erninal recei;tts oust convey good security
title and that undel.. the regulation as a.::.1ended it is essential that,
such terminal or warehouse receirts nust actually convey to the holder
a valid lien which is enforceable as a~ainst general creditors of
the warehouse COI:lpany or bona fide purchasers fran the warehouse coiJpany.
recon~end
For the futher. inforr.1ation of the :Soard, there is attached
hereto the Board 1 s previous file on this subject and the recent
correspondence with Mr. Kenzel.
Respectfully,
(Signed)
Walter Wyatt,
C':reneral Cou.."lsel.
File attached.
( COPY )
X-4693-j
~'EDER.AL
:192
RESERVE :B.A.lTK
OF J:JE\V
YORK
July 9, 1926.
Federal Reserve :Board,
Washington, D.C.
Attention: Mr. Walter Wyatt
Dear Mr. Wyatt:·
Refe~ring to our conversation this morning over the telephone as
to the adequacy of the terms of Regulation A if modified aa suggested by
Governor Yo~~g (see page 383 of Stenographer's Minutes of the Governors Conference of March 1926), to admit as eligible security for warehouse secured
bankers acceptance credits the receipts issued by the Minneapolis terminal
elevators, I shall endeavor to state the doubts that arose in my mind in that
regard.
The pertinent language in the proposed amendment is nor issued by a
terminal grain elevator company duly bonded and licensed and regularly inspected by State or Federal authorities with whom all receipts for grain and
all transfers thereof must be registered and without whose consent no grain
can be wi thdrawn. 11 Nothing that I have seen, either in the law of the State
of Minnesota, the rules or by-laws of t:he Railroad and Warehouse Commission
of the State of Minnesota or in any communicatio:1s from bankers, indicates
that the Minneapolis terminal elevator grain con('JFtnies are duly bonded and
licensed or that all of their receipts for grain ~d all transfers thereof
must be registered. ·
"
I think it is quite clear from the documer,;,ts waich I sent to Mr.Ve::~t
on July 2 that the Bartlett Frazier Company of Mi:o.ne13polis c~-uducts its Soo
Line terminal elevator a.s a public termina.l warehouse a...1d tha.t it is as a
public terminal warehouse rather than as a, terminal gra,in elevator that they
come within the warehouse provisio.1s of the law.
Rule /f64 ador.Jted by the Railroad a.;.1d Warehouse Col.T.Plission states
that holders of warehouse re~eipts should promptly present them, etc., for
registration. You will note that it is pernissive, not conpulsory.
Hule :IF63 covering the dslivery of gra.in on storage receipts provide<>
for delivery of the grain upon surrender of thd raceipt properly indorsed. I
do not sea tha.t the rule requir1:3s that the receipt shall have been registered
by the Commission. Another pa,rt of the sa.me rule authorizes the State Registration Department to accept terminal public warehouse receipts.for cancellation,
etc. No mention i$ !I18,de of registered receipt&, from which I infer that some
receipts may not be registered.
Rule #65 refers in its latter part to grain delivered for which no
receipts hava been issued, which to my mind presents the probability of· the fact
- 2-
(COPY)
Mr. Walter Wyatt
. 7/9/26
.·.
.-'i ._}'
X"'" 46 93- j.&- 0 3
that it is conterrplated that grain shall be recdi vad for which no receipts are
issued and which, therefore, wnen delivered must bo delivered without the
surren~er of receipts.
It W011ld seem to me, therefore, at least from these rules a..'1d la.cking
further definite information, that serious doubt is created in respect of the
complia..'1Ce of these t ermina.l eleva.tor receipts with the terms of the amendment
suggested by Governor Young, and in every case it would be a. question in which
Federal reserve banks would have to ascertain the facts as to exact compliance
with the proposed regulation w ich, in rey opinion, would be a serious detriment
to the rearly negotiability of the bills.
If it is desired to admit this class of receipt as eligible by a
change in the Regule.tions, in rey opinion, for practical purposes the change woulJ
have to be so dra.fted as to relieve all apprehension or doubt as to the co!IlPli- ance of the collateral with the terms of the regulation. This, I consider, might
well require such a general description of the collateral as would be difficult
to draft in such a way as would exclude other receipts not safeguarded a.s the
Minneapolis grain receipts are by the Railroad and Warehouse Commission, provided
the holder of the receipts chooses to avail of the protection provided by
the Commission.
On the other hand, carrying a little fur t•1er tl1e thought that I intended
to convey in my letter of July 2, it ha.s alwB.ys been my understanding that the
purpose of all of the Boa,rd 1 s special rulings in respect of wa.rehousing facilities controlled by trustees or agents of creditors was to assure tha.t the security title would be conveyed by the wa.rehou.semf-!11' s receipt a.ad tha.t the physical
property would u e SAfeguarded to the creditors by R. physical control as well, exercisad by the trustees or a.t;ent,s, ra.ther thE;.n that the signa.ture of the actual
receipt issued should be by someone .othar thF,:Cl til:; oorrO\Ner. In fa.ct, I am quite
sure thAt :i.n rr~:my credits that ha.ve been grm;t,;,d -x,:der tJ.1aso sr;ecial rulings the
actual r2:ceipts ware execute::i Oj' the borrow;1r. S::·e.L·sfora, I hA.ve felt and I believe that the acc:epting bankers g•:marall;y fsal t~1n.t rhe spirit And intent of the
Regulations as interpreted by these spacj.al ruling<> is corLplied with if the physical custody of the goods plGdgcd is n<lda pr.•ctic:;.lly Lda;:;Gnjcr:t of the borrower
by the supervision end acts of tha trust,3eS or Bt;:3Llts.
It seerus to me that, for prActica.l purpo::>es,
tL~at
is e. raasonc:tbl0 view
And it w,:,.s with such thoughts il: mind tilat I a.ttempteci to stA.te my belief that
these Minn.sa.pclis t.srarl.rilii.l wsre.c.ouse r.;:;ceiptt; for grain in terminal elevators,
whan registered by the Corm,ission, knowing ,<1.11 th<:J.t we now do about the physical
control of the grain by the reprE,sent;tive of t.le Ccmmissiont the inspection o~
it on raceipt, tl:.e waigl1i1::.g it in ,,nd tha woig.."ling it cut, the registratlon r~:.:vt
tha saA.ling up of tha spo·J.ts a.t night whJn the ;o,gent of the Cora:dssion is absell t
from the eleva. tor, Gonsti tuto documan ts for co1modit ies so con trolled by tl1e CcJ;.
mission indapcnd;:;r..tly of tha borrower 8.S to Ill8.k:e them good And eligible coll·.tc.;>
al under t.~e pr8sen t rag;.lP.tions as n.odifi,;:;d and in terpr-3ted by the speciA.l n:u
ings · the Bc::1rd ha.s nr-;.cie frcm time tc time heretofore in connection with com··
modi ties stored in t~1e bcrrO'Ner 1 s we.rehcuties or on the borrower's premisas but
physically controll8d by trustaes or a.gents of the cr.~di tors.
I should be glP.d to discuss any cthar points in t,Jis rr;A~.tt.:;r with ycu
fJ.t your convenience.
Very truly yuurs,
(signed) E. :H. Ken zel
E. J;. Kenzel,
C:1a.irlil8.n, General Committee on
( COPY )
x-4693-k
194
FEDERAL
OF
RESERVE BANK
NEW
ATTENTION OF:
YORK
July 2, 1926
.MR. G. B. VEST, ASSISTANT COUNSEL
Federal Reserve Boaxd,
Washington, D.C.
Dea.r Sirs:
Referring to our conversation over the telepaane this afternoon
with respect to the eligibility fer a.cceptance by member banks of bankers
acceptances s.ecured by terminal elevator receipts for grain issued by
Minneapolis terminal elevators or warehouses w_;ich are owned by the taker
of crodit and drawer of the bill but which a,rc operated under the supervision.of the Railroa~ and Warehouse Conndssicn of the State of Minnesota,
I am enclosing as arranged a copy of a. lettar rece.l1tly received by Mr.
Fred I. Kent, Vice President of the Bankers Trust Company and former President of the American Acceptance Council, from the First National Bank of
Minneapolis, dated June 24, 1926; also copies of excerpts from the law of
Minnesota pertaining to wa.rehouse receipts and a copy of some of the rules
and regulations adopted by tha Railroa.d and Warehouse Commission of the
State of Minnesota, ~1d a photostatic copy of a wnxehouse receipt registered
by the Railroad and Warehouse Commission, all being copies of the enclosures
mentioned in the aforesaid letter of the First Nationa.l Baak of Minneapolis
received by ~~. Kent and loaned to me by nim.
In our conversation over the telephone I referred to the fa.ct that
the real question at issue, w.1ich is whether or not warehouse receipts issued
under such circumstances are issued by a warehousing concern independent of
the borrower, wa.s pre sen ted by Governor Young at the corlference of governors
in March, 1926, when the question was discussed and the conference acted f~v
orably upon Governor Young's suggestion that the Board's regulations governing warehouse secured credits should be amended in S"'J.Ch a way as wa.s intended
to includd such ware house rt;)ceipts as security for an 0ligible bill.. (See
Stenographic Minut.3S of Confer,zmce, :pages 378-389) ..
As stated to you over the telephone, it would hardly seem to me ne::c;,·.
sary to amend the r<:1gulation as suggested to the confar:mce if tha control b~,:
the Ra.ilroaj and Warehouse Commission of the grain stored in such terminal
elevators is such as to make a receipt issued by the eleva.tor company and
registered by the Commission such an "other similar document" as conforms t~
the spirit and intent of the present regulations.
I ma.y say that I have discussed the degrl)e of actual security as
represented by such receipts with the leg.ding bankers in Minneapolis, with
Governor ~Dougal and Deputy Governor McKB¥ of the Chicago Federal Reserve
Bank and with lea.ding bankers in Chicago, B.l1.d have been assured by ea.ch of
them that such receipts are taken freely a.s colla.tera.l for loans in inportant
- 2-
(COPY)
Federal Reservs BGard
7/2/26
X-4693-k
a.moun ts ·by the Minneapolis a.nd C3:lica.gc ba::1ks and are by them rega.rded as being
absolutely sa.fe and about tha best collat.ara.l that they handle in their institutions. Each of th~m ha.s referred tc the pra.c tical con trcl of the warehouses
by the Commission through its representB.tive sta.tioned at each we.rehouse and
t.ad told me in effac t that it would be practically i!ll)ossible for the gra.in to
bd removed from the warehouse without the surrender of the receipts.
Personally 1 I am assured in my own mind that t~ese terminal receipts
register8d by the Commission exe the full equivalent of the kind of receipts
intended to be required by the Board in its Regulations.
Mr. Kent had stated to me tha.t the First National Bank of MinneF.lpolis
would ha.ve occasion during the coming ·grein sea.son to extend a large amount of
credit on gra.in in terminal elevators in Minneapolis, possibly as much as
$5 1 000 1 000 and that the other banks in Minneapolis would have relative opportuniii~s and that he himself would consider receipts issued 8nd registered under
these conditions as collatera.l abundantly good end entirely satisfActory to secure acceptance credits; also that it had been his intention to take the ma.tter
up with the Board through the American Acceptance Council. He, however 1 d~d
not know tha.t the matter W9.S a.lree.dy before the Boa.rd and hae. been under discussion for some cons:i.der.sble period of time a..'1d he, therefore, gladly a.cquiescad
in my suggestion that I forwF•xd you this new information wJ:1ich had come to him.
In view of t.he c1ose approach of the grain shipping season I would
respectfully suggest that it would seem desirable that the Board might dea.l wit
this question e.t its early convonienco.
Hespectfully,
(signed) .E. R. Kenzel,
E. H. :cenzel,
Cha.irm.<:l..n, Ge:1eral Ccnmi ttee on
BAnkers Acceptances.
FJ.tK/VRM
Encs.
X-4693-1
(COPY)
FIRST
NATION.~
BAEIA
EI~JE.APOLIS,
MINN.
June 24th, 1926.
Mr. F. I. Kent, Vice President,
Bankers Trust Co.,
16 Wall Street, New York City.
Dear Mr. Kent:
Referring to our conversation of a few days ago regardine; the
eligibility of bills secured by warehouse receipts issued by the sarne
coqpany us the drawer of the bill. I enclose herewith photostatic copy
of a terminal elevator receipt issued in accord$nce withthe rules and
regulations :)f the R. R. & Warehouse Comr:1ission of Minnesota. You will
note t~e receipt reads for a specified amount of a certain grade of grain
and bears a stamp showing date of registration by the R. R. & Warehouse
Conmission. As stated in oy conversation, it is our practice to check the
reeistration and genuineness of the receipts by presenting them at the
office of the R. R. & Warehouse Commission in Minneapolis, so that we are
assured of the genuineness of tho collateral in our hD!lds. The Statute
distinctly states that grain can only be delivered upon
.delivery of the
warehouse receipt.
I tl1inJ: I mentioned to you that trJroinal elevators are inspected
by the B.. R. & Warel1ouse Col!llJissio:..1 at rer:ulnr intoJ:•vals, and that also in
each elevator is a representative of the Cc::Jr:iSl:>ion who actually checks
the inc::>oine; and outgoing grain, and who:1. this :.:·e;;n·os,..;ntative leaves at
night, the spouts are sealed by him.
As requested by you, I enclose c·Jpics o:t exceJ.?ts froo the
L-:1w of Minnesota pertaining to warehouse recei:lts, a11rl also a. copy of
s.n:~e of the rules and regulations adopted by the R. R. & Warehouse Comnission. We feel that bills secured by these wo.rehJuso receipts conform
wi tl1 the requirements fvr eliGible bills and will appreciate your assist~1ce in havinc them declared eligiole.
Governor Yv~~g has already had
the ~attar up bef::>re the Governvrs ofthe Federal Reserve Bank, ~id it
is my understanding the chenge was ap11roved by th0r:1 and. their action
has been suboit.ted to the Federal Reserve Board w~:.) now have the oattor
under adviseoent. With kindest regards, I aD,
Yours very truly,
(Si€J1ed)
J. G. 3YAM
Vice Presid.en t.
JGB 1Il
1_97
(COPt)
X-4693-o
~aptor 28, of tho General Statutes of Minnesota for 1923 covers
railroads, warehouses and grain, including the power and duties offue Railroad ~~d Warehouse Conoission under Sections 5020 and 5021, as follows:
5020. - GRAIN TO
~E ~DELIVERED
ON &ntlENDER OF WAREHOUSE
RECEIPT.~
Ul">On return of the receipt of grain not stored in separate bins to the proper
warehouser.:J.al1, properly indorsed, and upon ]_)aynen t or tender of all a.d:vances
and legal cha.rt;es, grain of the saoe grade aJl.d qua.'1tity na.r.1ed therein shall
:,e delivered to t:he !lolder of such receipt within twenty-four hours after
facilities for receiving the same have been provided. The identical grain,
if stored in separate bins, shall be so delivered. If such warehouseman
shall fail so to deliver· it, he shall be lia~le to the owner i~ daoages at
the rate of one cent a bushel for each day's delay, unless he shall deliver
the p·operty to the several owners in the order of deoanli, as rapidly as it
can be done by ordinary diligence. If the warehouser.1an shall fail so to
deliver such grain, the person entitled thereto may recover the sane, if
kept in separate bins, or the sace amount of grain of like grade, if stored
with other grain, or the value thereof, in a civil action; ~~d such warehouser.1all shall also be gu.il ty of la.rce:J.y.
5021. -
WAB.EHOUSEM~~
NOT TO SELL WITHOUT AUTHORITY FROU OWNER. -
No such warehousenan shall sell or otherwise dispose of or deliver out of
store any grain stored in his warehouse without the express authority of
its owner and the l'eturn of the storage receipt, except as herein provided,
nor mix together grain of different grades in store, nor select grain of
different qualities, but of t~e same grade, for storage or delivery, nor
shall he in any way tacyer with grain of others while in his possession or
custody, with the purpose of securing a~y profit to himself or ~~y other
person, or atteJ:lpt to deliver~ grain of one grade for tb.a,t of another •
.Any pers:>n violating any provision of this secti.:m shall be punished by
fine of not more than one thousand dollars or imprisonment in the state
prison for not more tha1 five years, or both.
X-4693-:c.
..urn :3.EGUUTIONS
.ADOPTED 31 THE .:U.IL:.:W..\.D .AJ."iTD WA.lEHO"JSE COMMISSION
.lULES 61, 62, 63, 64, 65 tu1d. 66 of :U.ULES
:a.ule 61
INSPECTIOU AT TERMINAL W.AREHOUSES
.All grain rocei ved into or sh;Lpped fro:o public terminal warehouses
r.mst be inspected by a duly authorized State Inspector and weighed by a duly
authorized State Weigher.
:aula 62
Warehouse receil;ts in the foro proscribed by law r.:ru.st be issued upon
the application of the owner or consignee for all grain received, but only upon
actual delivery of grain into store. No receipts shall be issued for a Greater qua:;.'lti ty of grain tha.."l is actually r ecoi ved.
Rule 63
DELIV3:RY OF G:W:N ON STORAGE :aECEIPTS
Upon return of the receipt to the proper 'Warehousooan properly
indorsed, ru1d upon puyr::~en t or tender of all advances and legal charges, grain
of the grade e~d quantity naoed therein shall be delivered to the holder of
such receipt within twenty-four hou.rs after facilities for -receiving the
samo have been provided.
The g:rain represented by said roce:i.l)t is ir:Jnedia,toly deliverable and
not subject to further charge for storage, e.:nd the '\7archouser:Jan s~1all be held
in default if doli very is not made in the order dor.cru1ded and as rapidly as
due diligence,ca.riJ· and pru.dence will justify.
The State Registration Departr.,ent is hereby autl:Jrizod to accept
ter::1inal :;:mblic warehouse receipts for cancellation, also lJading out inutructions, from parties surrendering the sar.1e, wh:> r.--.1.Y l.u.Jvo taken delivery of
wheat on May, July and other future contracts. The Registration Department
shall furnish to such receipt h::>lders, blank f·:Jrr.1s in triplicate ofthe surrender notice and loading out i~structions, and upon surrender of the receipts
to the Departuent by the holder thereof, accorrrpanied by surrender notice and
loading instructions, said receirts shall 'be cancelled by the Department and
returned to t.."lo ternina.l COl:t1?aD.Y issui!-:.g the saDe, taking duplicate receipts
therefor, one to be retained by the Department and the other returned to the
party surrenderinc said receipts.
HOLD:EBS OF :L'\ECEIPTS TO fitESENT SAME FOR REGISTRATION
Holders of warehouse receipts should promptly present them at the
office of the Warehouse Registrar for registration, and upon the delivery of
grain represented by any of the said receipts such receipts shall be im~ediately cancelled and s~~ll thereafter be void and not again placed in
circula
http://fraser.stlouisfed.org/ ti .Jn.
Federal Reserve Bank of St. Louis
X -4693-n
- -
.
'
' "'
.:;
:iulo 65
WA:t.EHOUSEM.tu~' S
DAILY
1l.EP0~1T
TO ::1EGISTI'JQ.
i7nrch.)USCl~1en oust state in thoir daily reports tJ the :U.e~:;istrar
the ru:1::nmt of each kind nnd ,;rade of special bin erain received or delivered;
also what warehouoc receipts representinG such t;rain have been cancelled,
civin5 nunter of each receil1t and tho nno1.mt, }dnd a.'1d grade received and
delivered upon each; they oust also state the onount, kind and 5Tadc of all
other bTain &elivcrod, for which no receipts have been issued; also show
when ru1C. l1ow such unreceipt0d grain was rccei ved.
Rule 66
WAREHOUSWA"TIT' s STATEMENT
It shall be the duty of Public Warehousonen on or before Tuesday
noruing of each week to nclce a stateoent, under oath, of the aoo~'1t of each
grade of grain in store in his warehouse at the close of business on the
previous Saturd~r, and shall furnish to the ~arehouse negistrar and Railroad
and Warehouse ColJ.r.1ission such daily and weekly stater.1ents as they nay require.
( COPY )
X-4693-o .
September
29,1925·
PROPOSED ~~Mru{T TO REGULATION A, ARTICLE B, SECTION X, SG~DIVISION (3).
In order to effect the amendment suggested by Governor Young
of the Federa.l Reserve Bank of Minneapolis in his letter of Septerrber
9, 1925, W~. John R. Mitchell, at a meeting of the Federal Reserve
Board today, suggested that Subdivision (3) of Section X, of Article
B, of Regulation A, be amended to read as follows, the words in capital
letters being inserted:
"(3) The storage of readily marketable staples,
provided that the bill is secured at the time of acceptance by
a warehouse, terminal, or other similar receipt, conveying security title to such staples, issued by a party independent of
the customer OR ISSUED BY A TE...11MINAL GRAIN ELEVATOR COMPANY DULY
BONDED .AND LICENSED .AND REGULARLY INSPECTED BY STATE OR FEDERAL
AUTHORITIES WITH WHOM ALL RECEIPTS FOR GRAIN AND ALL TRANSFERS
THEREOF MUST BE REGISTERED AND WITHOUT WHOSE CONSENT NO GRAIN
CAN BE WITHDRAWNj and provided further that the accap tor rerr.aina
secured throughout the life of the a.cceptance. In the event
that the goods must ba withdra\'V'n from stora.ge prior to the
maturity of the acceptance or the retirement of the credit, a.
trust receipt or other similar doc1.1me;1t covering the goods ID8Y
be ;;Jubstituted in lieu of the origina.l document, provided tha.t
such substitution is conditioned upcn a rea.aonably prompt
liquidation of the credit. In order to insure corrpliancc3 with
this condition it should be required, when the original document
is relea.sad, ai ther (a) that the proceeds of the goods will be
applied within a. sp.vcified time towa.rd a liquida.tion of the acceptance credit or (b) that a new document, similar to the
original one, will be resubstituted within a. specified time. 11
( COPY )
20:t
FEDERAL
RESERVE
BANK
X-4693-P
OF !v.INNE.APOLIS
September 9, 1925.
Hon. D. R. Crissinger,' Governor,
Federal Reserve Board,
Washington, D.C.
Dear Governor Crissinger:
Under date of ·September 17, 1924, I wrote you in reference
to acceptances in this district, which our lA.rger banks were executing
on domestic storage of grain. Copy of my letter is enclosed herewith,
which will be self-explanatory. Under data of October 15, 1924,
Mr. Platt replied to my communication upon behalf of the Board, and
suggested tha.t the matter be discussed before the Governors 1 Co·,1ference.
I also received a letter from Mr. Cunningham in reference to the
matter, dated October 16, 1924. Inasnuch as I was going to Wa.shington,
I did not reply to their commu.nica.tions by letter, but discussed
the matter with them in detail when I was in Wa.shi:;.1gton.
It appea.rs to our people that these a.ccept:3.nces are entirely
legitimate and secured by a. receipt that is .iust as good a.s that of
an independent elevator. Some of our banks are again accepting in
this manner, and while there is nothing to prohibit them from doing
it, that I know of, still ·r have to inform them th::>.t there is a question
about their eligibility for purchase or disco-c.-::1t by a Federal Reserve
Bank.
I do not know tilB.t it is absolutely necessary to finance
by this method at the moment, but at the same time I am satisfied that
the time will come whan our banks wlll ha.ve to resort to the acceptance
form of credit to enable them to handle the marketing of grain in an
orderly and syst;amatic way. I therefore would appreciate it very
mu.ch if the Board would again consider the request of our people 1 and
see if it is not possible·to amend the regulations in such a way as to
permit a.cceptances of terminal elevator COIIlPanies, which are under State
supervision, to be eligible for discount or purcha.se at a. Federal Reserve
Bank, even if such acceptances are secured by regula.r, registered, terminal
warehouse receipts of the eleva.tor that dra.ws the drA.ft.
I do not see
how it is possible for me to give any more infor!II8.tion in reference to
the transaction other than was contained in my latter of September 17,
;md the verbal talks I have he.d with Messrs.Cunningha.'ll and Platt. Nevertheless, Mr. Mitchell contelllPlates being in Washington in the very near future,
and if there are additional inquiries which you care to make of him, he is
thoroughly familia.r with the transa.ction end can explain the deta.ils.
I would appreciate a ruling on this q11estion as soon as possible
after your interview with Mr.• Wdtchell,because soma of our ·banks a.ra
anxious to get a reply.
Yours respactfully,
http://fraser.stlouisfed.org/
(signed) R. A. Young
Federal Reserve Bank of St. Louis
.20~<!
X-4690-q
(COPY)
Octooer 15, 1924.
Denr Governor Youn5: .
~•e TioOl~d, at it3 ~0eting on Tu0sday, considered tho
l)Oints raisod in yot1.r letter of Sc:)ter.Jber 17th, ·sugeel:ltine
a chal1ge in Section X, .Article ::S, of :legulation: .i'l.., so that
acceptances basod u:_1on terr.:linal elevator v.-n.rehouse receipts
covering the stora~e of their o~n grain night be rJade
eligible for discount by Federal reserve ~auks, and directed
ne to reply that no i~~ediato chanee in the Regulations is
possible in such ro1 ir~ortant r~1tter. This question is not
a new one ~~d there is at least sone dou~t as to the power
of the Joard to aoend tha Regulations in the desired rJanner
under the law. The qu.estion of :policy involved is so
ir.~ortant that the noard su5eests that you suboit this for
consideration at the forthcooing confl~rence of Governors.
I have heard the suggestion oade that the control of
grain in theBe elevators by .the State Railroad and Warehouse
Co~~ission is eo complete their operation is practically
that of independent warel1ouses. A full statc::J.ent of tho
facts involved in the operation of checking in and checking
out t,Tain should be made.
Ver;r ,·;:truly yours,.
(Signed)
Edr.mnd Platt
Vice Governor •.
Mr.
:a. A •. Young, Governor,
Federal ~oserve J~1k,
l.iinncn.?olis, :t.t:inn.
(COPY)
FEDE~AL
~ESEJ.VE
X-4693-r
TIANK
OF HINNE ..l.POLIS
Septcr.1ber 17, 1924.
Hon. D. J. CrissinGer, Governor,
Federal ~eserve ~oard,
~ashington,
Dear
D.
c.
Gover~or Crissin~er:
It has been the practice of teminal elevator
conpanies in this district to establish an acce~tance credit with local
bonks on the domestic storage of grain. The elevator coopany draws on the
bank, which accc:;?ts, and such acceptance is secured by regulor registered
terminal warehouse receipts of the elevator company that draws the draft.
This form of accept~~ce was recently referred to our Counsel, and I am
sending herewith a copy of his opinion. You.will observe that in Judge
Ueland 1 s opinion such acceptances are not eligible for discount or
purchase by a Federal Reserve :Dank. 1Tevertheless, the a cccptancos nre
so well secured. that I ao writing to you to see if it would not be
possible tc have the Board amend its regulation in such a way that
acceptances of this class would be eligible for discount or purchase by
a Federal Reserve ~ank, and in making such suggestion I offer the following:
A terminal elevator in Minnesota is under
strict superv1s1on and control of our State Railroad & Warehouse Co~1ission.
All grain that is stored in the elevator is checked in by a representative
of the State :U.ailroad & Warehouse CorDiasion as to GJ,~ades and weights. .All
grain is checked in like I:lanner that is removed fro:.1 the elevator. Therefore, if an elevator company issues a neeotia"!Jle terr.1inal warehouse receipt
against grain stored in its own elevator, the t;rain Co.tL."'lot be rei':toved froo
the elevator except with the knowledge and perr:1isoion of a representative
of the State Railroad & Warehouse Co~~ission. There is one exception to
this statement. It would be possible for the elevator conpany to oove
the grain between 6 o'clock in the evening and 7 o'clock the following
morning. However, the possibility of an elevator coopany reooving grain
from its own elevator during these hours is aloost negligible and need not
be considered, because the only way it could remove any ereat amount would
be by box cars, and the railroads would not handle the grain between those
hours. Even if it is adoitted that it is possible to re~ve a. portion of
the grain between these hours·, the State has thrown out an additional safeguard by requiring the elevator conpany to furnish a bond of 15¢ a bushel
on the elevator'·s capacity. In the case of the Electric Steel Elevator
Company the bond is for $600,000. In addition to this, every terminal
elevator in the Twin Cities is under the direct surveillance of our local
Chamber of Con~erce, i. e •.a representative of the Chaober of Co~erce
can check any teroinal elevator as to 'bushels and grades at any time. I an
informed that this is done regularly by the Ch~ber of Commerce about every
three weeks. I point out these facts to show that every possible safe-guard
-a'
'
ba.$ been ~ b ~i"!)t_oet \l:lo .. deii.vei':r of the g:ro.in uhen t!le _holder o~
a._rec&ift d8Qtmda de11vvr~ .. !n oi4\c )YOJ'fla,. •:~egUlar .-eGtatei'Gd teitdnal
~lile r~eeip~ ia~ 'b7 t!w eleva·tor<~ :that 4J'a.wia the cfr'att t.a
ju.st Ill. good collateral. ea ·a- receJ.pt- iaaued )j . a party. b4ependent of the
drawer..
It will be !Jl1CieatEX1 tb:l.t an 1n40J;>end.ent co~ be carcanuea. to
or· tho grain, .})ut o-r~ if auch e. «»~·- 4,rpl\1a- a:A4 ·It.
s.s.- a. re~ . regiet_.4Jd ·W&l"o!'l.ouu receipt 'll.'lidel!".•*-'- ......,lttoa.~ .. •• . ·
would no.t be 1J1>.7 better collateral, a.n4 it it 1&JUe4 lta
l'eotipt
.•.. witllrQ.' atil.te au;>t)l"-.t.toa, ·~two~" i)ot<bo aa poa..t:.
....-•~
C\ll&~ :the elevator coapcr •to~o •the gain in • ·1Jld~1 el.,.to,-._ lt t:lt.eJ
· ··contfll9late.£inan<:in& 'b;; $CCGptancoa. KowOl'er. an el..,.\c)l"ta·prottt OOII8t . ·
.. ·1•~1 tr:>:;~lta a\!)~ cbR,-.a. emd'tt'lt
prq .... _ .Wpe, t.t
· .WOW4 have to get the a44iti.cmal protit elthel" floc
or \lle aell••
Of CQU1"80 it 'WOuld. bo kJ.poaa1ble 1io $Ot it frC ~ ..,..., azul it ~ 'be
~ ..-:t• old atoey tb.&t; ••• cr~-- ot
~
...Ulu&•• -~.
ttarul. the e:J.l*lae• ......... l'J.cb,t in the Jttc14.11 ot a. . -~ pt'rlod, and
it .~· ov~hing to Ol# a&l'icultunl =~--• to. ~a..-. ..~ •~ with ·
aa l1 ttle _,.... a:a po•a1ble. . It 1 t -a'tioul& ,... ~eclat ihl• tiM that .·
. · : thee• · bill• are ineliei"ble, ·~ would Dli\Vd-17 A11 at a hS.por .l'ate ln
.
· take Q\18tocly
-.r.,_.
tt·w. tlltt.••.-
'**··• the....,_..
·
tu ....... ...... , .....
· ... ~o 4pen tlaJ'ke.t. ~·. ~.· .......to. ·.•· , '........ ••.t. I.Jle.:_ .aa.t.-..·......·· tba..·
..
. . ·.·
. -.·
...
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-'.h&•• 'b~en ,UCed . ~. . ' .ihel'et.•~"!.•~. natp;a,... -.~ it 110uJ4, 'be •UI'•lT '.·.: .
. prow aad ad•iea:ble tO!' the ~ lftene »•4 to . -.. t*t. ~tf.Qa .A..
$erlea 19241, .Articl-e XJ, .. -'4l.S•toil (3) u. llUOli a .., • to ,...._, -.M.tlcea · ·
(It OUI'. teft.'d.nal el.e't'ator co...,.ioa \h&t • • _.... a-.te ~t!oa '•·-. ·
el~le to~
diacount 01' pu7~e b7 a :reclel'alle..- l\~ •t•l:f' ·~ . .
accogtaucea ue a~edlq r.cte"l• rctb~IWe4
the. •1.-.ator tha.t. dt'&WJ the 41rf&ft. . · · · ·
*~
·
•.:b9ua• J>eoetpte Of
I feel tllat ~•: _.__. 1• urpnt ·aile\ •ul4 appreciate it
very much if tb.e Doard wou14 ..c:t tavorabq ,.on r31 •wotion.
' . Goveftl.Ort
P~
8.
t have f'afttr.r• ;ht,a. letter
or .._..,toa....~.·
w ur.
lli,tcboll ud he appS"OTM
·
..
ot
( COP'?" )
X-4693-s
Septerrib er 15, 1924.
Mr. John R. Mitchell, Chai:rman,
Board of Diract.or:..>,
Federal Reserve Bank
of Minneapolis.
Dear Sir:In conn-acticn with the
l~tter
from lvJr. Curtiss of the
Fadera.l Reserve Bank of Bcston of Ausust 9th ir;quiring c::mcerning
the eligibility of a. banker's acceptance dra.wn by thel.Electric
Steel Elevator Conpany or the Russell-Miller Milling ·Con:rpany of
this city and secured by the gra.i.l1. warehouse receipts of the Elevator Con;p::my, I submit the· following for your informa.tion:
Reet,ula.tion A, Series 1924, Article B, subd. (3) provides
tha.t such an acceptance is to be secured
11
f.l.t the tinK;. of acceptance
by a warehouse, terminal, or other sirrilar raceipt, conveyirlg securi ty title to such staples 1 issued by a. pa.rty inci.apend..:mt of the cus..s..
torner 11 •
The Elevator Corrpany is a public terminal w<::rehouse 1 independent in point of law of the Russell-Miller Milling Company, and.
a banker 1 s acceptance of the Milling Company 1 secured by the wa.rehouse
receipts of the Elevator Compa.."w, is clearly eligible.
As
B
public tcn·rdna.l
wc..r3h01.~
se the Elevatol"' Company is
under very strict S1.::pGrvbion and ccntrol by our State Ra.ilrcad and
Warehouse Commiasicn.
Laws 1923.
The law on tr...at subject in fou."ld in Chap.201,
It requires license from
tl.~.e
State, and bond to the State
( COPY )
20'5
Jvhn E. WutchGll-#2
X-4693-S
.,
to secure the vvarehouse receipts.
The bond in this instance is for
$600,000 .. The grain tak6n L.1 to th8 warehouse is weighod ~nd
graded by St1-1t0 e:rrployeJs.
make daily reports to th.:;
Tn0 Ebvator Cornpany is required to
Ccn~r:;issi.on
of grain te.\i:on out a.nd of
cancellation of the r<:·,coi.pts for th3 sB.:Do, <m J of tha grain remaining from tima to tim-:o w.J.d.::r ou tstending r.:lceipts.
Tho la:vv, in
short, pla.ces t:':lG warcllo11se under :.mcl1 rigid Sta,t<a control so as
to ma.k:e the r.scaipts most excellent sacurity.
Tha Corr:rr:ission having
constant information a.oout the gra.in in the wa:rt;b.OUSG and ti.1e outstBl:lding receipts, it is the practice here to b.ave its registra.r certify on the rc:ceipts tha.t t"ie gra.in called for is a.ctually in the
warehouse.
But ;,vlJ.ile this is the practice such a certification is
not tna..."ldatory under the law, and a receipt issued wit,."l.out that certification is valid, and en ti tlei:l the holder to thd graL1 CFa.lled for.
It has been sug6ested that in effect the grain is in tha custody of
the Commission 8.nd that the receipts s.re therefore wi t.dn th0 ruling
of the Boe.rd
r~ported
in Vol.
9 1 page 1194, Federa.l B..;: serve Bulletin,
1923, concorning coal on the Duluth docks.
be successfully clA.imed.
I do not t:::ink tnis can
The storage rt3ceipts for coal in the.t
ca.se were issuQd by a. storage company which held the title to the
coal as truste.a and had possession and custody of the coal, independent of any contro·l on th,; part of the drA.wer of tha acceptR:nce.
In the pr;;;;sent i.nstm1cer notwithstanding the supervision and control
of the Railroad and Wfl.rehouse Corrrnission, and tho excellence of the
storage recaiptsr:J.S security, the Elevator
Comp~:my
roo.st be conceded
207
X-4693-s
...
t:lC
•
to be ;custodia:.'1 of tho ero.in ·repr.~s.emted by the receipts •
The receipts are hence not flissued by a pa.rty independent of the
cus toner 11
•
What is said abov.e applies exclusively to
t~1~
.
of eligibility for discount in a Federal reserve bank•·~i
(Signed)
.A.U*MS •
...
<W-'ost·ion_
'J~-~i
.'(.::,;r·
.A. UELAND
Counsel •
.
@FedFRASER