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At a regular meeting of the Federal Reserve Board held in the office of the Board at 3:00 p. m. Saturday, October 24, PRESENT: Ex. McAdoo Er. Williams Er. Hamlin Er. Warburg Mr. Delano Mr. Harding Mr. Miller. The Secretary of the Treasury presided and Lir. H. P. Willis acted as secretary to the meeting. The Secretary of the Treasury stated to the Board that the Federal Reserve Act imposes upon him the duty and responsibility of determining and announcing in such manner as he may elect the date of the establishment of any Federal Reserve Bank; that he had given thorough and careful consideration to the views which had been submitted to him about this matter and had concluded to notifY the several Federal Reserve banks that he would announce the establishment on the 16th day of November, 1914, of the Federal reserve bank in each of the twelve Federal reserve districts. Er. Delano, Mr. Warburg, Er. Harding and Mr. not expressed regret that the Secretary of the Treasury was 260 1 able to concur in the recomendation of the Reserve Bank Conference that November 30th be fixed as the date for announcing the establishment of the Reserve banks, but all expressed the opinion that whatever date was fixed by the Secretary the Board would individually and collectively heartily cooperate in making the opening a complete success. Discussion of the date of the opening of reserve banks was discontinued at 4:00 o'clock and conference with the bankers committee regarding the cotton loan plan was resumed. On motion, it was voted that in view of the emergency confronting the country, the plan for raising a cotton loan fund of .A35,00.0,000 be approved by the Federal Reserve Board leaving it however to the individual members to decide as to their individual actions with reference to the administration of the fund. It was further voted that a letter be sent to the respective cities in which banks were to be asked to subscribe to the proposed fund, with a request that they should so subscribe, in an amount as agreed by the committee having charge of the fund in question. The plan as finally adopted after revision by counsel and ordered sent out as above voted was as follows: Memorandum of plan for the creation of a fund of approximately 4135,000,000 to be used for the purpose of making loans on cotton in the cotton-producing states. Submitted to the Federal Reserve Board at a meeting of bankers representing banks in New York and St. Louis, and approved by the Board on October 24, 1914. Members of the committee present in person, Messrs. A. H. Wiggin, William Woodward, A. J. Hemphill and J. S. Alexander representing the New York bankers, and Mr. Festus J. Wade of St. Louis, and 1:r. Daniel G. Wing of Boston. OUTLINE OF PUN. after proIt is proposed to create in the manner herein as known vided a fund of approximately 4135,000,000. to be herees purpos the "Cotton Loan Fund" and to be used for the into in stated. Subscribers to this fund shall be divided and "A" two classes to be designated respectively as Class t consis Class "B" subscribers. Class "A" subscribers shall located duals of banks or other corporations, firms or indivi of Ala° or residing in other than the cotton-producing states sippi, Missis ana, Louisi bama, Arkansas, Florida, Georgia, ' Tennessee North Carolina, Oklahoma, South jarolina, Texas and o, , upon tile All Class "A" subscriptions shall be contingent 0,0;0 1 I.0Q,00 ating aggreg class receipt of subscriptions of that e id bankers lo, Class "B" subscriptions shall be made by banks or r , ned mentio above states cing or residing in the cotton-produ . as hereinafter more particularly explained; no Class "B" sub' loan a of ion condit a as script ions shall be required except and in s,Ir or loans to be made out of the fund to be created, 25, exceed to ed requir be not event such subscriptions shall d for. of the amount of the loan applie in Each subscriber shall, upon the payment in whole or n ipatio partic a e receiv for, ibed part of the amount subscr 268 certificate transferable on the books of the Committee, showing on its face the class of subscription represented thereby and specifying the terms under which the owner will be entitled to share in the distribution of the monies realized from the loans made from the fund created. . All Class "A" and Class "3" certificates shall bear interest at the rate of six per cent per annum payable quarterly. The Cotton Loan Fund will. be administered under the direction of a Committee to be known as the Central Committee and to be composed of the individual members of the Federal Reserve Board. The Central Committee shall appoint a committee for the general administration of the fund to be known as the Cotton Loan Committee and shall delegate to such Committee such powers as may be necessary to properly carry out the purposes of this plan. The Cotton Loan Committee to be named by the Central Committee shall consist of the following: W. P. G. Harding, Chairman, ,rashington, D. C. Paul L. Warburg; Washington, D. C. Col. E. L. House, Austin, Texas. Albert H. Wimsin, ::ew York James S. Alexander, :4a York. James B. Forgan, Chicago, Ill. Festus J. Wade, St. Louis, Lc). Levi L. Rue, Philadelphia, Pa. William A. Gaston, Boston, Lass. The Cotton Loan Committee shall in turn appoint committees in each of the cotton producing states hereinbefore named, the title of such committee to include the name of the state in which such committee shall be required to act for the Cotton Loan Committee, and each itate Committee so appointed shall in turn appoint local committees in sufficient number to safeguard the practical workings of the plan. All Committees appointed to be subject to the approval of the Central Committee and all committees to serve without compensation of any kind. The banks of the City of 'Iew York have pledged themselves to subscribe to fifty million dollars of the one hundred million 26 dollars of Class "A" certificates, provided the remaining fifty million dollars shall be raised within a reasonable time under the supervision of the Central Committee by banks in non-cotton producing states. All loans made from the fund created shall bear interest at the rate of six per cent per annum and all applications for loans must be made through banks or bankers who shall in each instance accompany the application for such loans with a subscription to Class "B" certificates _in an athount equal to 25:, of the amount of the low} applied for. The subscriber to Class "B" certificates applying for a loan for a customer will not be required to endorse the note of such customer and shall not be entitled or permit'6ed to receive from such customer the payment of any commission on account of obtaining such loan. All loans made shall be first approved by the proper local committee, by the appropriate State Committee and by two members of the Cotton Loan Committee. When applications for such loans have been approved as above provided the notes evidencing same, together with the collateral required under the terms of this plan, must be forwarded to the office of the Cotton Loan Committee with instructions as to the aisposition of tile proceeds and must, as stated, be accompanied with the subscription of the bank or banker forwarding the application to an amount of Class "B" certificates equal to 25-, of the amount applied for. In order to make the subscriptions to Class "B" certifi_cates immediately available, each subscription accompanied by an application for a loan, must be accompanied by a Ilew York draft of the bank or banker through which the application is made, drawn to the order of the Cotton Loan Fund, or in such manner as the Cotton Loan Committee shall designate, said draft to be for an amount equal to 25:; of the loan applied for, and upon the granting of such loan a Class "3" manner certificate for tilis amount shall be issued. In this from obtained 75; of each loan will be provided by t.le fund subscribere• Class "A" subscribers and 257; from the Class "B" All loans shall be evidenced by notes in form approved cotton by the Cotton Loan Committee and shall be secured by addition on the basis of six cents per pound for middling in 270 to the Guarantee Fund hereinafter described. As evidence of the security offered, each note tendered with an application for a loan must be accompanied by receipts of approved warehouses and by evidence of proper insurance. All cotton accepted as security must be located in warehouses or other buildinc3s under the ownership and control of some person, firm or corporation other than the borrower, and in approving such loans the Local and State Committees shall respectively pass upon the puffipiency of such warehouse receipts and insurance and shall be satisfied that such cotton is free from all liens except that created by the loan or loans from the fund to the borrower for which such cotton is Pledged as part security for such loan, and the Committees approving such loans shall likewise be satisfied that the cotton offered as security is of the grade or quality specified in the application. All expenses such as warehouse charges and insurance preraums shall be borne by the borrower. In addition to the security hereinbefore specified, every applicant granted a loan from the fund shall pay to the Cotton Loan Committee a sum equal to three per cent of the face amount of the loan granted and the applicant shall authorize the Cotton Loan Committee to deduct or withhold this amount from the proceeds of such loan. All sums so paid, together with all interests earned from the investment thereof shall constitute a mutual borrower's Guarantee Fund to be used (1) for the payment of expenses of administration, which it is estimated, will in no event exceed 1/8 of one per cent of the loan fund created; (2) to make up any deficiency in the amount available for payment of the Class "A" and Class "B" certificates with interest resulting from losses sustained by reason of any loans made from the said loan fund or otherwise; the balance, including all interest earned thereon, shall be returned pro rata to the borrowers. The Cotton Loan Committee shall control t'he Guarantee Fund so created and may, in its discretion, invest all or any portion thereof in Class "A" certificates herein provided for. 271 All applications for loans shall be made not later than February 1, 1915, and all loans made shall mature on or before February 1, 1916; provided, however, that the Central Committee, in its discretion, may authorize the Cotton Loan COmmittee to extend any or all loans for a period not to exceed six months aft February 1, 1916, if in the judgment of said Central,Committee conditions at that time justify such extent ion. Calls for Payment of subscriptions to Class "A" certificates shall be made as nearly pro rata as possible. In the event that on February 1, 1915, applications for loans shall not have been received to the extent of the full amount subscribed, the fund shall nevertheless be closed at the amount then applied for and loaned, and Class "A" subscribers shall thereupon be released from the payment of the balance of their subscriptions which have not up to that time been called for. Provided, always, that the fund shall not be construed to have been established for any purpose until Class "A" subscriptions shall have been received to the extent of :,;100,000,000. As monies become available for repayment to the subscriber, they will be applied against both Class "A" and Class "3" certificates, but the percentage of reduction in the ease of Class "B" certificates shall be one-half of that in the case of Class "A" certificates until the amount of the latter outstanding shall be reduced to the amount of Class "B" certificates then outstanding, after which the percentage of reduction shall be the same. For example, if a payment is made on the Class "A" certificates to the extent of ten per cent of the face amount of such certificates then outstanding, a payment shall at the same time be made upon the Class "B" certificates to the extent of five per cent of the amount then outstanding. Again, if a payment on the Class "A" certificates is made of an amount equivalent to 31% of the amount then outstanding, at the same time a payment on account of Class "3" certificates will be made of an amount representing li:;;; of the aggregate of Class "B" certificates then outstanding, which method of payment shall be continued until the amount of the two classes of certificates outstanding shall be the same, after which all sums distributed shall be divided pro rata among all certificate holders, regardless of the two classes. On motion the Board adjourned at 5:30 p. m. APPROVED: Chairman.
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