Full text of Federal Reserve Bank of New York Circulars : 25. Eligible Paper

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CIRCULAR N O . 25.

FEDERAL RESERVE BANK OF NEW YORK
62

CEDAR

STREET

J U N E 19,

1915.

T o THE C A S H I E R ,
SIR:

ELIGIBLE PAPER
T h e regulation of the Federal Reserve Board which defines the kind of paper eligible for
rediscount is attached to Circular No. 3 of the Series of 1915, and is now effective, except that
until July 15, 1915, member banks in applying for rediscounts are not required to specify whether
statements of the borrowers are on file. As this provision will become effective a month hence
it seems desirable to call it to the attention of member banks, to ask them to read over carefully
t h e regulation, and to explain to them briefly the meaning of the expression "paper eligible for
rediscount at a Federal Reserve B a n k " as used therein.
MEANING OF ELIGIBILITY
T h e regulation makes the following definition of eligible paper:
"A bill the proceeds of which have been used or are to be used in producing,
purchasing, carrying or marketing goods in one or more of the steps of the process
of production, manufacture and distribution."
T h e Act contemplates t h a t the resources of the Federal Reserve Banks, through the medium
of their member banks, shall be available, when needed, to the commerce, industry and agriculture of the country for the facilitation of production, manufacture and distribution. But it
provides t h a t these resources shall be available only through the discount of paper containing
t h e element of self-liquidation, and not through paper representing permanent loans or fixed or
speculative investments. I t establishes a new classification for commercial paper, and compliance
with the standard is determined primarily by means of a statement furnished by the borrower.
If this shows a liquid condition, according to good banking practice, or if the proceeds of the
note have been or are to be used in accordance with the definition above quoted, the paper is
eligible for rediscount with Federal Reserve Banks; otherwise it is not eligible.
T h e paper giving most satisfactory evidence of a self-liquidating nature is a note, bill or
accepted draft representing the obligation of the purchaser to the seller for goods purchased.
Such paper, with its two names, represents an actual commercial transaction. But the system
of open credits and cash discounts which has been developed has greatly decreased the volume
of such double-name paper and has led merchants and manufacturers to borrow, instead, on
their single-name paper, with or without indorsements, to obtain working capital to carry their
open credits and merchandise. Single-name paper of proper credit standing, as well as doublename paper, is eligible for rediscount.
T h e "eligibility" and the "goodness" of a note should not be confused. T h e notes discounted by member banks are presumably "good", b u t some are eligible and others not, according to the purposes for which their proceeds are used. Similarly, the signature of an "accommod a t i o n " maker or indorser upon a note does not affect its eligibility, which depends on the pur-

pose for which its proceeds are used; nor do "renewals" necessarily affect the eligibility of a
note, although evidence that a loan is of a permanent nature must, on grounds of sound practice,
if not technically, render it ineligible for rediscount with Federal Reserve Banks, the assets of
which must necessarily be of the most liquid nature.
DETERMINATION OF ELIGIBILITY
A note bearing the signatures of both the purchaser and the seller of goods, representing a
complete commercial transaction, is, from its nature, eligible for rediscount. The following
suggestions are offered as to methods of determining the eligibility of the ordinary promissory
note, with or without indorsements:
BY A STATEMENT O F CONDITION

In the case of a note made or discounted by a person, firm or corporation engaged in commerce, industry or agriculture, eligibility may be determined from the statement of condition furnished. If the statement shows a reasonable excess of quick assets over current liabilities, it is
sufficient evidence that its proceeds have been used in the manner described in the definition,
and not for land, buildings, or machinery, and the note is eligible. If the statement does not show
such reasonable excess the note is not eligible; such a borrower might not be entitled to bank
credit without adequate security or indorsements, but, while these might make the note "good,"
they would not make it "eligible."
The eligibility of "purchased" paper may be determined by the statement of the person,
firm or corporation on the strength of whose credit the paper is purchased.
BY T H E U S E O F T H E PROCEEDS

In the case of a note made by a person, firm or corporation not engaged in commerce,
industry or agriculture, or which, being so engaged, does not make a statement, the eligibility
of the note may be determined by the purpose for which its proceeds are used. If they are
used for seasonal or temporary advances to carry the turnover of merchandise, or the open
credits, or the operating costs, of an agricultural, industrial or commercial enterprise in which
the discounter is interested, the note is eligible. If they are used for land, buildings or machinery,
or for permanent investment representing the proprietorship of the enterprise, or for purposes
not in conformity with the definition, the note is not eligible.
The notes of professional men or persons not engaged in business are not eligible unless
their proceeds are used for advances of the nature above described to commercial, industrial or
agricultural enterprises in which they are interested.
The notes of farmers are eligible if their proceeds are used for seed, fertilizer, live stock,
feed, tools, seasonal operating expenses, etc., but are not eligible if their proceeds are used for
land, buildings, or machinery.
AMOUNT OF ELIGIBLE PAPER HELD
Many of the member banks which have been accustomed to carry bonds, largely to use as
security for occasional loans, do not yet fully appreciate the complete availability of their commercial paper for rediscount under the Federal Reserve Act. Their commercial loans, taken in
the course of their daily business, are available at any time, with their indorsement, and within
reasonable limits, for conversion into bank credit or currency at the Federal Reserve Bank. Nor
do they understand that this conversion may be effected promptly and without red tape, for

only such information is called for on the application blank as prudent banking should require
and as should be available at all times in any well managed bank.
T h e volume of eligible paper reported by the national banks in the state of New York to
the Comptroller of the Currency on M a y i, 1915, was as follows:
32 banks in New York City
363 banks outside of New York City.

$270,078,651.82
$ 77,403,880.12

Eighty-three banks reported no eligible paper, but discussions with the officers of a number
of these banks have resulted, in almost every case, in establishing the eligibility for rediscounts of
a large proportion of their discounts.
MATURITIES
Industrial and commercial paper must have a maturity of not more than ninety days from
d a t e of rediscount. Agricultural paper must have a maturity of not more t h a n six months
from d a t e of rediscount.
M a n y member banks have been accustomed to borrow on demand. The Federal Reserve
Act makes no provision for demand loans, b u t banks desiring short accommodation may rediscount paper with short maturities.
S E C U R E D LOANS
Notes secured by United States bonds or notes, or by staple agricultural products or other
goods, wares or merchandise, are eligible. Notes secured by stocks, or other bonds or investm e n t securities are not eligible; nor m a y a member bank borrow from a Federal Reserve Bank
on its own note with or without collateral.
REDISCOUNTING
T h e Federal Reserve Ba^ik of New York has among its members several of the largest, as
well as of the smallest national banks in the country. Its facilities are open on equal terms to
all, afid it is prepared to rediscount small as well as large notes. I t has thus far made rediscounts for thirty-three banks aggregating $8,286,718.92. Of these banks four are located in
New York City and twenty-nine elsewhere. T h e largest a m o u n t rediscounted on a single application has been $2,182,500 and the smallest $1,700. T h e largest single note rediscounted has
been $300,000 and the smallest $25.40.
Applications for rediscount are acted upon on the day of receipt, and the proceeds credited
immediately upon approval. T h e practice is to return paper for collection, from five to ten days
before its m a t u r i t y , to the b a n k which rediscounted it, and charge the a m o u n t to the account of
such bank at maturity.
A new form of application blank has been prepared and three copies are enclosed herewith./
T h e form contains the usual certificate of the member bank t h a t the paper offered for rediscount
is eligible. On the back of the blank are instructions for filling it out and a specimen arrangem e n t of the information desired. Member banks applying for rediscounts are requested to use
only this form, a supply of which, on request, will be furnished without charge.
Member banks offering notes for rediscount are requested to examine them carefully to
see t h a t they are in good order. Notes cannot be accepted which contain any informalities or
discrepancies, such as pencil fillings, pencil or stamped signatures or indorsements, irregular
indorsements, discrepancies between figures and filling, incomplete dates or alterations of any
kind. Such conditions raise doubt as to the validity of t h e note and are possible causes of loss
through litigation.

INDORSEMENTS
Member banks are requested to use only the following form of indorsement:
BANK OF
This indorsement includes a waiver
of demand, notice and protest.
(Signature of authorized officer.)
(Title.)
CREDIT FILES A N D STATEMENTS
T h e Federal Reserve Board, in its regulation, recommends t h a t every member bank maintain credit files containing all information essential to a clear and correct knowledge of the credit
to which borrowers are entitled. T h e maintenance of such files is in accordance with sound
banking practice. This bank is in thorough accord with the recommendation and urges the
member banks to co-operate in carrying it out.
A standard form of statement is under preparation upon which member banks may, if they
so desire, require borrowers to furnish their statements. A copy of this form will soon be sent
to each member bank in District No. 2 and until further notice, a supply of such forms, will,
when requested, be furnished without charge. T h e Federal Reserve Bank of New York deems
the maintenance of adequate credit files by its member banks a m a t t e r of prime importance and
is ready, if desired, to advise with or assist them in assembling and arranging their credit information so t h a t it m a y be effectively utilized.
On and after July 15th, the regulation requires member banks in applying for rediscounts,
to certify whether statements of borrowers are on file. Statements must be on file with respect
to all purchased paper. Recognizing, however, t h a t especially in the smaller banks majny of the
notes are discounted by persons, firms or corporations not accustomed to making statements, the
regulation provides that, a t the option of the member bank, a statement need not be required
from its depositors the aggregate of whose paper actually rediscounted and offered for rediscount
by it does not exceed $5,000, or 1 0 % of its paid-in capital. But the advisability of maintaining a file of credit information concerning every borrower, whether or not it contains an actual
statement of condition, is appreciated by every careful banker.
T h e regulation also provides t h a t statements need not be required in the case of depositors
whose notes discounted (a) either have the signature of both the purchaser and the seller of
the goods, or (b) are secured by warehouse receipts covering readily marketable staples.
T h e Federal Reserve Bank, whenever the circumstances seem to require it, will ask for
copies of the filed statements of borrowers whose paper is offered for rediscount.
T h e information and suggestions contained in this circular relate to matters about which
inquiries have been made. T h e officers of the Federal Reserve Bank are glad, a t all times, to
answer inquiries made by officers of member banks either in person or by letter concerning its
functions and operation.
Respectfully,
B E N J . STRONG, J R . ,

Governor.

[E1649R]

191

F E D E R A L R E S E R V E BANK
NEW YORK
DEAR SIR :

Please charge our account and make the following transfers by

t e i e p. r a o u

Credit account of Federal Reserve Bank of
for use of

of_

Credit account of Federal Reserve Bank of
for use of

of_

Credit account of Federal Reserve Bank of
for use of

of
Yours truly,
.^

Cashier.

Bank of
(

(

See instructions and
imen form on bark.

SHI:LT N O .

APPLICATION FOR REDISCOUNT
M i»t be made in duolical

*o TAB FEDERAL R

I R.W

191

York City.
The
rediscount of notes, drafts and (or) bills of exch;

, IN.

application for the
., which are listed in detail in the

\ f I

aing $

following BChedu
-

MBFR

• _ -

X Z T

±c
EIT'ONIT

MAKER

tOM
UP

ADDRESS
•NDORSERS

BUSINESS

(

WORTH

L!
0

R A T I N G

)

AMOUNT

TOTAL

I,
, Cashier of the
Bank of
, hereby certify that to the best of my knowledge and belief, the original loans which are
evidenced by the notes, drafts and (or) bills of exchange listed in the foregoing schedule, were made for agricultural, industrial or commercial purposes, and I further certify that, to the best of my knowledge and belief, the notes, drafts and (or) bills
of exchange listed in this schedule are eligible for rediscount with Federal Reserve Banks under the regulations of the Federal
Reserve Board.
The aggregate of the bills payable and rediscounts of this bank, on this date is $

.-10.

Cashier.

PLEASE NOTE CAREFULLY
Please give your estimate of the present net worth of each name or a
commercial agency rating. Indicate your estimate of the net worth by placing
the letters " N. W. " before your figures. Insert the name of the agency at the
top of the column if ratings are given.
Insert either a " D " or a " P " in the column headed "Depositors or
Purchased" to indicate whether the paper was discounted for a depositor or
purchased.
The " D " should appear on the line with the name of the
discounter.
Insert an " S " in the column headed "Statement," on the line with
each party whose statement is on file.
Notes submitted for rediscount should be indorsed in blank in the following form:
First National Bank, Blankville N. Y.
This indorsement includes a waiver
of demand, notice and protest.
Cashier
Each indorsement of a member bank should be signed by an officer whose
signature and authority to indorse for rediscount have been filed with this bank.
Industrial and commercial paper must have a maturity not exceeding
ninety days from date of rediscount.

Agricultural or live stock paper must have a maturity not exceeding six
months from date of rediscount.
For further information regarding paper eligible for rediscount, see Federal
Reserve Board Circular No. 3, Series of 1915 and Circular No. 25 of this bank.
FEDERAL RESERVE BANK OF NEW YORK.
SPECIMEN FORM OF APPLICATION SHOWING DESIRED
ARRANGEMENT OF DETAILS
NUMBER
FROM
1 UP

E S T D N E T WORTH

MAKER
ADDRESS

BUSINESS

INDORSERS

N.W. 10,000 8/3
50/75-lJ/£

F. J . Crockett

West Blankville Farmer
For purchase of horse.

N.W. 3,500

Western Packing- Hvr.
tjed WOOIBTT Co.
A. B. J o n e s
Jam6s & Co.

8 Momfis Harvey

R A T I N G

X Ae-encyJ

Farmer
Feed & Grain
For purchase of feed.

Gem ral Building Co.
Jones Brick Co.

C. If. Scudder
A. P . Crawford

W. 3 . R i c h t e r
Annie Richter

(

A. f.

Schmidt Co.

ie Furniture Co
A. S. Cox
J. B. Cox
Samuel Hood

Blankville
4 <

Blankville

Mfr. Baskets
Wife
For purchase of materials.
Brooklyn
Builders
Blankville
Brick Mfrs.
Foi? purchase of brick.

9/15

7/3
20/35-2
N.W. 1,000
75/125-lJ^
35/50-2
Over
1,000,000

Chicago

Packers

Boston

Mfrs.Woolens 500/750-1
President

Blankville
10/20-23^
Hardware
Fot purchase of hardware for seasonal
requiremen DS
CattleDealef 2/3-3
Blankville
Fo^» purchase cattle. Collater41 c/m on
ten head cattle.

AMOUNT

200

1,050

7/18

4,500

8/30 P

5,000

7/15

2,500

I 8/10 D

500

9/3

8/27
Butter &Eggi 35/50-1
Blankville
Collateral W.R's for 10,000 lbs butter.
75/125-1
Inc. Blankville
Mfrs.
8 15
N.W. 25,000
President
N.W. 10,000
Secretary
N.W. 40,000
Physician
For purchase of lumber and other materials.

850

1,500
7,500

$23,650

FEDERAL RESERVE BANK
OF NEW YORK

June 2$, 1915-

To the Cashier,
Sir:
In accordance with the notice sent you June 2, 1915( we are forwarding under separate cover a binder for holding all circulars issued by both the
Federal Reserve Board and this bank.

In order that the files of each member

bank may be complete, this binder contains a copy of each of the following:
FEDERAL RESERVE BOARD CIRCULARS
No.
No.
No.
No.
No.
No.
No.
No.

1
2
3
6
10
11
12
13

- Series of
» •»
"
•
"
*
n
" •
" •
"
"

FEDERAL RESERVE BANK CIRCULARS

1915

No.
No.
No.
No.
No.
No.
No.
No.

"
*
•
"

2
7
10
15a
17
18
20
25

These circulars, together v/ith Nos. 22 and 24 of this bank, which
wfcre mailed you on June 2d, are all the circulars of general interest nov/ effective.

In order that member banks may keep their files complete, all

Circulars issued are punched for insertion in the binder.

Additional copies

of circulars v/ill be sent on application*
We are also sending you under separate cover check book for your use.

Respectfully,
Benj. Strong, Jr.,
Governor.

DESCRIPTION OF SECURITIES, E T C , ELIGIBLE FOR DISCOUNT OR
AS COLLATERAL AT FEDERAL RESERVE BANK, MENTIONED IN
PARAGRAPH FOURTH,

(A) UNITED STATES GOVERNMENT BONDS AND NOTES.
These may include any bonds^ notes or certificates of indebtedness
issued by the Government of the United States.
(B) MUNICIPAL WARRANTS.
Municipal v/arrants must consist of bills, notes, revenue bonds and
v/arrants with a maturity from date of purchase by the Federal reserve bank of
not exceeding six months, issued in anticipation of the collection of taxes or
of the receipt of assured revenues by any State, County, district, political
subdivision or municipality in the continental United States, including irrigation, drainage and reclamation districts.
For further details as to eligibility of municipal v/arrants, see Regulation "E", Series of 1917, of the Federal Reserve Board.
(C)

COMMERCIAL PAPER.

Eligible commercial paper must consist of a note, draft or bill of
exchange having a maturity of not more than ninety days, exclusive of days of
grace, except paper drav/n or issued for agricultural purposes or based on live
stock, which may have a maturity of not more than six months, exclusive of days
of grace.
The paper must be a note, draft or bill of exchange, the proceeds of
v/hich have been used or are to be used in an actual commercial transaction,

—

that is, in purchasing, carrying or marketing goods, in one or more of the steps
of the process of production, manufacture, or distribution, and must not be used
for permanent or fixed investments of any kind, such as land, buildings or mach*

-2inery, nor for investrnentc of a purely speculative character.
The eligibility of the paper is not affected by its being secured by
the pledge of goods or other collateral. The aggregate of notes, drafts and
bills bearing the signature or indorsement of any one borrower rediscounted for
any one member bank shall at no time exceed 10/^ of the unimpaired capital and
surplus of such bank;

but this restriction does not apply to the rediscount of

bill3 of exchange dravm in good faith against actually existing values.
For a further detailed description of eligible commercial paper, see
Regulation "A", Series of 1917, of the Federal Reserve Board, Sections 1 and 2
for notes, drafts and bills of exchange;

Section 5 for trade acceptances, and

Section 6 for agricultural paper*
(D) ACCEPTANCES.
An acceptance (other than a trade acceptance) must be a draft or bill
of exchange of which the acceptor is a bank or trust company, or a firm, person,
company or corporation engaged in the business of granting bankers acceptance
credits.

The bill must have a maturity at time of purchase or rediscount by

the Federal reserve bank of r-*. more than three months, exclusive of days of
grace, and must have been drawn under a credit opened for the purpose of conducting or settling accounts resulting from a transaction or transactions involving (1) The shipment of goods between the United States and any
foreign country, or between the United States and any
of its dependencies or insular possessions, or between
foreign countries, or
(2) The shipment of goods within the United States, provided
the bill at the time of its acceptance is accompanied
by shipping documents, or
(3) The storage within the United States of readily marketable goods, provided the acceptor of the bill is secured by warehouse, terminal or other similar receipt,
or

-3(4) The storage within the United States of goods which have
been actually sold, provided the acceptor of the bill
is secured by the pledge of such goods
or it must be a bill drawn by a bank or banker in a foreign country or dependency
or insular possession of the United States for the purpose of furnishing dollar
exchange.

In this latter case the bank or banker drawing the bill mu3t be in a

country, dependency, or possession whose usages of trade have been determined by
the Federal Reserve Board to require the drawing of bills of this character.
For further detailed description of eligible acceptances, 3ee Regulation
"E", Series of 1$17, of the Federal Reserve Board, Section 4.

DESCRIPTION OF SECURITIES ACCEPTABLE AS COLLATERAL
FOR GOVERNL-SHT DEPOSITS MEIJTIONED IN PARAGRAPH FIFTH

(A) Bonds and Certificates of Indebtedness of the United States Government of any
issue, including bonds of the Liberty Loan and interim certificates for payments therefor; all at par,
(B)

Bonds issued under the United States Farm Loan Act and bonds of the Philippine
Islands, Porto Rico and the District of Columbia: all at par.

at market value not exceeding par»

(D) Territory of Hawaii, 2if» bonds at 90^ of par. Cxher bonds of said territory
at market value not exceeding par.-.
Bonds of the I£inila Railroad Company: at 9C/£ of market value not exceeding
90% of par(E)

Dollar bonds and obligations of foreign Governments (and of the dependencies
thereof) engaged in war against Germany and issued since July 30, 1914- a"t
90% of the market value thereof not exceeding 90> of par

(F) County or City bonds of any County or City in the United States v/hich are direct obligations of the County or City as a whole; at 75/? of the market
value thereof not exceeding 75> of par.
(-G)

Railroad mortgage bonds secured by direct mortgage upon lines of railroad
within the United States, but not including any such bonds which on K'ay 23,
1917, were at a market price to yield more than $W» if held to maturit}' according to standard tables of bond values: at 75/* of the market value
thereof, not exceeding par.

(H) Commercial paper which is eligible for rediscount or purchase by Federal Reserve Banks, and which has been approved by the Federal Reserve Bank of the
district in which the depositary bank is located.
All such paper must
bear the indorsement of the depositary bank.
(i) Notes, certificates of indebtedness and warrants issued by any State of the
United States at $0f, of their market value, not exceeding par.
(j) Railroad equipment and trust obligations at 75% of their market value, not
exceeding par, but not including any such obligations which on Kay 29, 1917
were at a market price to yield more than 5s$ P®r annum if held to maturity
according to standard tables of bond values.
(K) Bonds of electric railroad and traction companies, telephone and telegraph
companies and electric light, power and gas companies, secured by direct
mortgages upon their physical properties in the United States and listed
on some recognized stoc!: exchange, taken at 75$ of the market value thereof, not exceeding par, but no including any such bonds which on May 29,
1917, were at a market price to yield more than 5*2$ per annum if held to
maturity according to standard tables of bond values.

S U M M A R Y OF THE REGULATIONS OF THE FEDERAL RESERVE BOARD
RELATING TO PAPER ELIGIBLE FOR REDISCOUNT WITH, OR PURCHASE B Y FEDERAL RESERVE BANKS

T h e regulations of t h e Federal Reserve Board m a k e t h e following definition of
paper eligible for rediscount w i t h Federal reserve b a n k s :
"A bill the proceeds of which have been used or are to be used in producing, purchasing,
carrying or marketing goods in one or more of the steps of the process of production, manufacturing and distribution."
Any note, draft or bill of exchange is eligible if:
(a) It has a maturity at the time it is offered as security for deposits of
not more than 90 days, exclusive of days of grace; but if drawn or issued
for agricultural purposes, or based on live stock, it may have a maturity
at the time it is offered as security for deposits of not more than six
months, exclusive of days of grace.
(b) I t arose out of actual commercial transactions; that is, it must be a
note, draft or bill of exchange which has been issued or drawn for agricultural, industrial or commercial purposes, or the proceeds of which have
been, or are to be, used for such purposes; but it must not be a note, draft
or bill of exchange, the proceeds of which have been used for permanent
or fixed investments of any kind such as land, buildings or machinery.
It may, however, be secured by a pledge of goods or collateral, provided it
is otherwise eligible.
(c) It was not issued for carrying or trading in stocks, bonds or other
investment securities, except bonds and notes of the Government of the
United States.
(d) T h e aggregate of notes, drafts and bills bearing the signature or indorsement of any one borrower, whether a person, company, firm or corporation offered by anyone bank does not exceed 10 per cent of the unimpaired capital and surplus of such bank; but this restriction shall not apply
to bills of exchange drawn in good faith against actually existing values.
In the case of a note made by a person, company, firm or corporation engaged in commercial, industrial or agricultural pursuits, the eligibility may be determined from the financial statement of condition furnished.

If the statement shows a reasonable excess of quick assets over

current liabilities, it is sufficient evidence t h a t its proceeds have been used in the manner described and not for land, buildings or machinery, and the note is eligible.

If the statement of

condition does not show such reasonable excess of quick assets over current liabilities the note
is not eligible although it may be entirely good.
T h e eligibility of paper may also similarly be determined by the statement of the person,
firm or corporation on the strength of whose credit the paper is purchased or discounted.

If they are used for seasonal

or temporary advances to carry the turnover of merchandise, the open credits, or the operating
costs, of an agricultural, industrial or commercial enterprise in which the discounter is interested,
the note is eligible where the amount does not exceed $>5,ooo or is less than 10% of the paid in
capital of the member bank.
T h e notes of professional men or persons not engaged in business are not eligible unless their
proceeds are used for advances of the above character to commercial, industrial or agricultural
enterprises in which they are interested.
T h e notes of farmers are eligible if the proceeds are used for seed, fertilizer, live stock, feed,
tools, seasonal operating expenses, etc., but are not eligible if their proceeds are used for land,
buildings or machinery.
T h e r e g u l a t i o n s of t h e Federal Reserve Board m a k e t h e following definition of
bankers' a c c e p t a n c e s w h i c h are t h e principal f o r m of paper eligible for purchase by
Federal reserve b a n k s .
A bankers' acceptance is an accepted bill of exchange of which the acceptor is a bank or trust
company, or a firm, person, company or corporation engaged in the business of granting bankers'
acceptance credits, and to be eligible must have a maturity at the time it is offered as security for
deposits of not more than three months, exclusive of days of grace.

It must have been drawn

under a credit opened for the purpose of conducting or settling accounts resulting from a transaction, or transactions, involving:
(i) The shipment of goods between the U. S. and any foreign
country, or between the U. S. and any of its dependencies or insular possessions, or between foreign countries.
(2) T h e shipment of goods within the U. S. provided the bill at
the time of its acceptance is accompanied by shipping documents.
(3) The storage within the U. S. of readily marketable goods, provided the acceptor of the bill is secured by warehouse, terminal, or other
similar receipt.
(4) The storage within the U. S. of goods which have been actually
sold, provided the acceptor of the bill is secured by the pledge of such goods.
Satisfactory evidence of eligibility may consist of a stamp or certificate affixed by the acceptor,
in form satisfactory to the Federal Reserve Bank, but no evidence of eligibility is required with
respect to a bill accepted by a national bank.

"WHEREAS,

It is desirable that the officers of this bank should from time to time be

able to secure advances from the Federal Reserve Bank of New York on promissory notes of this
bank secured by collateral, and to rediscount its bills receivable:
" N O W , T H E R E F O R E , RESOLVED,

"I.

That the president, any vice president, and cashier of this bank are, and each or either

of them is, hereby authorized to make, execute and deliver from time to time to the Federal
Reserve Bank of New York promissory notes of this bank not exceeding 15 days' maturity, and to
transfer, deposit or pledge as collateral security therefor notes, drafts, bills of exchange or bankers
acceptances eligible for rediscount or purchase by Federal reserve banks under the provisions
of the Federal Reserve Act, or bonds or notes of the United States, in such sums and upon such
terms as may to them or either of them seem advisable.
"II.

That each or either of the said officers is hereby authorized to rediscount from time

to time with the Federal Reserve Bank of New York notes, drafts, bills of exchange, acceptances
and other bills receivable of the kinds and maturities by the Federal Reserve Act made eligible
for rediscount, in such sums and upon such terms as may to them or either of them seem advisable.
"III.

That each or either of the said officers is hereby authorized to indorse in behalf of

this bank any notes, drafts, bills of exchange, acceptances or other bills receivable, or registered
bonds or notes of the United States now or hereafter owned by this bank for the purpose of
rediscounting such notes, drafts, bills of exchange, acceptances or other bills receivables with, of
transferring or pledging such notes, drafts, bills of exchange, acceptances or other bills receivables
or registered bonds or notes of the United States to, the Federal Reserve Bank of New York,
and to do any and all other acts necessary in the premises.
"IV.

That the foregoing powers shall continue until express notice of their revocation has

been duly given in writing to the said Federal Reserve Bank of New York."
I, the undersigned, do hereby certify that the foregoing is a true and correct copy
of a resolution of the Board of Directors of the
duly adopted at a regular meeting of the said board, held on
a quorum being present, and of the whole of the said resolution, as set forth in the
minutes of the said meeting, and that the said resolution has not been rescinded or
modified.
IN WITNESS WHEREOF,

I have hereunto subscribed my name and affixed the

corporate seal of the said bank this

day of

[SEAL]

Cashier
(or)

Secretary of the Board of Directors.

"WHEREAS,

It is desirable that the officers of this bank should from time to time be

"I. That the president, any vice president, and cashier of this bank are, and each or either
of them is, hereby authorized to make, execute and deliver from time to time to the Federal
Reserve Bank of New York promissory notes of this bank not exceeding 15 days' maturity, and to
transfer, deposit or pledge as collateral security therefor notes, drafts, bills of exchange or bankers
acceptances eligible for rediscount or purchase by Federal reserve banks under the provisions
of the Federal Reserve Act, or bonds or notes of the United States, in such sums and upon such
terms as may to them or either of them seem advisable.
"II.

That each or either of the said officers is hereby authorized to rediscount from time

That each or either of the said officers is hereby authorized to indorse in behalf of

this bank any notes, drafts, bills of exchange, acceptances or other bills receivable, or registered
bonds or notes of the United States now or hereafter owned by this bank for the purpose of
rediscounting such notes, drafts, bills of exchange, acceptances orother bills receivables with, of
transferring or pledging such notes, drafts, bills of exchange, acceptances orother bills receivables
or registered bonds or notes of the United States to, the Federal Reserve Bank of New York,
and to do any and all other acts necessary in the premises.
"IV.

That the foregoing powers shall continue until express notice of their revocation has

I have hereunto subscribed my name and affixed the cor-

porate seal of the said bank this

day of

[SEAL]

Cashier
(or)

Secretary of the Board of Director*.

Full text of Federal Reserve Bank of New York Circulars : 25. Eligible Paper

FRASER