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FEDERAL RESERVE BANK OF ST. LOUIS. 000 Omitted 8000 This Chart is compiled from reports to the Comptroller of the Currency. The heavy black line indicates amount of rediscounts with the Federal Reserve Bank of St. Louis; the dotted line indicates money obtained elsewhere. On December 31st, 1915, paper rediscounted with the Federal Reserve Bank of St. Louis for Stockholding Member Banks amounted to $1,200,000, while the total of obligations for money obtained elsewhere was over $4,200,000. The average rate paid the Federal Reserve Bank of St. Louis on rediscounts was 4.08%. The average rate paid on money obtained elsewhere was 4.91%. Discount Rates of the Federal Reserve Bank of St. Louis, in effect February 15th, 1916. Subject to change. Maturities of 10 days and less Maturities of over Agricultural and Trade acceptances to live stock paper over 10 to 90 days inclusive 90 days to 6 months 90 days inclusive Commodity paper 5% 3% 3% 4% REDISCOUNTING WITH THE FEDERAL RESERVE BANK OF ST. LOUIS Copyrighted by the Federal Reserve Bank of St. Lou's February, 1916 CONTENTS. Necessity of general knowledge of Rediscount regulations. Maturities. Certification that paper is eligible. Financial statements of borrowers* Merchants' notes. Manufacturers' notes. Agricultural Paper, Notes secured by chattel mortgages; Notes secured by warehouse receipts; Notes secured by other collateral. Renewals. Endorsing and forwarding notes for rediscount. Rediscounting, for a fixed periodPaying off rediscounted notes. Bankers' Acceptances; Trade Acceptances; Bills-of-Lading Drafts; Bills of Exchange. Rediscounting not an emergency. Warrants. Index. —3 — THE NECESSITY FOB A GENERAL KNOWLEDGE OF REDISCOUNT OPERATIONS. This Bank will prove successful to the extent that it and its Members develop into a harmonious working unit. The rediscount feature of the Federal Reserve Act is such an important one, that this development of the Bank must depend to a great measure upon the knowledge by its Members of the principles governing rediscount operations. Some twelve months ago, this Bank issued a letter setting out the qualifications of paper eligible for rediscount. This booklet is written to put into a more convenient form the principles set out in that letter and to add thereto the results of the year's experience. Paper rediscounted for Member Banks is the basis for Federal Reserve Notes. This being true, it is necessary to exercise -5- every care possible in the rediscount operations of a Federal Reserve Bank. Every note accepted here may possibly become collateral for the Federal Reserve Currency. This Bank is confident that every Member Bank in its District realizes that the Federal Reserve Bank is charged with the duty of safeguarding the collateral for currency. To do this, it is necessary to have certain regulations governing the rediscounting of notes so that the paper accepted shall be fit to serve as such collateral. This booklet sets out these regulations or standards and the reasons therefor. It is sent to Member Banks to familiarize them with the qualifications of eligible paper and in the hope that it will be retained for reference. —6— MATURITIES. The paper acceptable for rediscount is that made by borrowers engaged in farming, merchandising, manufacturing or mining. The paper must be both eligible for rediscount and safe as an investment for this Bank's funds. Eligibility is based upon the use made of the proceeds of the note by the borrower. It is fixed by the terms of the Federal Reserve Act under the regulations of the Federal Reserve Board. The safety of the paper as an investment for its funds is determined by the Federal Reserve Bank. It is important that officers of Member Banks become familiar with these factors: eligibility, and the methods used by this bank to determine safety. The general rule may be set out here that if the proceeds of the paper were —7 — used in the current transactions of the borrower's business, and the paper has the required maturities, it is eligible for rediscount. The requirements as to maturities are: All paper must be payable at a fixed date. Agricultural paper, or paper based on live stock, may have a maturity up to six (6) months from the date it is offered for rediscount. All other paper must mature within ninety (90) days from the date it is offered for rediscount. The time limits are calculated from the date the note is offered for rediscount. A note written for six (6) months, but having only ninety (90) days to run from date rediscounted, comes within the limit fixed for ninety (90) day paper. —8 — CERTIFYING TO ELIGIBILITY BY THE MEMBER BANKS. The Federal Reserve Act places upon Member Banks the duty of knowing whether or not the paper offered for rediscount is eligible under the law. To be eligible for rediscount, the proceeds of the note have been used or will be used in producing, purchasing, carrying or marketing goods. It is quite true that the officers of Member Banks may not knowthat theproceeds ofaparticular note have been used in the manner above defined. In the absence of this positive knowledge, this would cause hesitancy, and rightly so, upon the part of an officer in certifying to the use of the proceeds. This certification is to insure the rediscounting of only that paper prescribed by the Act. Since this is the purpose, it serves every theoretical and practical end if the Member Bank shows by a financial —9 — statement of the borrower that the borrowed money is employed in the current transaction of business. It can be assumed that the money is thus employed and certification rightfully made as to eligibility, if the borrower's financial statement shows that the current assets exceed the current debts. It is evident from this that Kediscounting goes hand in hand with Financial Statements of borrowers. It is in fact impossible to establish standards of rediscountable paper without the assistance of financial statements of borrowers. —10— FINANCIAL STATEMENTSThe advantages of having borrowers furnish financial statements are conceded by every one. The larger banks now maintain credit records which contain in one form or another information regarding their borrowing customers* No matter how small the bank, or how well its borrowers are personally known to the officers, the bank is benefited if it has, as a matter of record, information on which its investments and loans have been made. There is no argument which can be advanced to support the practice of a bank's officer carrying in his head information which belongs to the bank. Many things can happen that might suddenly deprive the bank of this knowledge. It is infinitely better to have this information in the form of signed statements furnished by the borrowers themselves; but, when -a- such cannot be obtained, without detriment to the bank, there is no good reason why the next best thing cannot be done and have the officer record his knowledge of every borrower's condition. Financial statements sent this Bank are received and held in the strictest confidence. Member Banks are authorized to give this assurance to their customers. Copies are made for this Bank's use, and the originals are returned to the Member Bank. An annual statement, or a statement made during the current year is sufficient. When a statement has been filed here, it is not necessary to send the same statement if a note of the same borrower is offered again during the year. Recognizing the difficulty, in some instances the impossibility, of obtaining signed financial statements of borrowers, this Bank accepts in its discretion statements of a borrower's -12- condition made by a Member Bank's officers. A supply of financial statements will be furnished Member Banks, without charge, on application, for the use of their customers. Forms of these statements appear on pages 35 to 40. -13*- QUICK ASSETS AND CURRENT LIABILITIES. The discussion of rediscounts cannot proceed further without a full understanding of the terms "QUICK ASSETS" and "CURRENT LIABILITIES", which will appear so often in this booklet. "QUICK ASSETS" are defined to be: Articles intended for sale in the customary transaction of the owner's business, and resulting assets created by their sale, namely: Cash, Accounts Receivable, and Notes Receivable. It is well to fix here the sharp distinction between "Quick Assets" and "Fixed Assets." "Fixed Assets" are Real Estate, Plants, Machinery, Equipment and other assets which the owner does not purchase to be sold in the ordinary conduct of his business. "CURRENT LIABILITIES" are debts represented by notes or accounts which —14— are payable within a period of say thirty days to six months. These should be separated from mortgage debts or bonded debts, which mature over a period of years. In the consideration of a loan, it should be noted whether the "QUICK ASSETS" exceed the "CURRENT LIABILITIES." When this is not true, the conclusion is evident that part of the borrowed money is being used for the purchase of fixed assets, or for the payment of debts which were contracted for fixed assets. The amount of the excess of Quick Assets above the "Current Liabilities" is commonly termed "THE MARGIN OF QUICK ASSETS." To what extent this margin should exist, to make the paper desirable for investment, is a matter for the judgment of the Banker making the loan. In considering the paper here, this Bank exercises the -15- same right of judgment in determining whether the paper shall be received, MERCHANTS' NOTES. Jobbers and Wholesale Merchants stand between the original producer and Retailers. Attention is called to the fact that the ACCOUNTS RECEIVABLE of a Jobber are largely due from retail merchants, and, are collectable as a rule, and that his merchandise is in unbroken packages and is readily salable in the event of liquidation. Retail Merchants stand between the Wholesale Dealers and the general public in the distribution of merchandise. Since the ACCOUNTS RECEIVABLE are largely due from individuals, and the merchandise consists of a widely distributed variety of articles, more difficulty will be met in realizing upon these assets, should it become necessary. The MARGIN OF QUICK ASSETS should neces- -16- sarily be large, in considering paper of Retail Merchants as contrasted with that of Wholesalers, for the reasons given above. This is no reflection upon the Retail Merchant's paper, but is simply setting out well established principles of credit. This Bank has taken notes of Retail Merchants freely in the past, and there is no reason for hesitancy on the part of Member Banks in offering us such notes. -17- MANUFACTURERS' NOTES. Manufacturers of staple merchandise, sold through the regular channels of trade, stand close to the source of production. Their Accounts Receivable are due from merchants rand other distributers. Their raw material and finished product would generally command a ready sale in the event of liquidation. It is a well recognized principle that a manufacturer should have capital sufficient to cover his investment in plant, machinery and equipment less the bonded or mortgage debt on same. His borrowed money will be represented by raw material, finished and unfinished product, and current manufacturing expenses. The fixed investment of a manufacturer is often so large that there exists a small margin, if any, between "Quick Assets" and "Current Liabilities." The earning power of the —18- business is such an important feature that proper consideration of a manufacturer's statement cannot be made without the collateral information furnished by the profit and loss statement reflecting the earning power and the turn over shown by the sales of product This Bank gives special attention to that feature of a manufacturer's statement, in those instances where a MARGIN OF QUICK ASSETS does not exist. During the past year, several Member Banks have related examples of loans to manufacturers made expressly for carrying accounts and purchasing raw material, which would be repaid from the collection of said accounts and sale of the raw material when manufactured, yet which would be ineligible for rediscount under any fixed rule requiring a margin of quick assets in the borrower's financial statement. -19- In such instances, when the proceeds of the notes were used as indicated, and this fact is within the knowledge of the Member Bank, this Bank will entertain the offering of the paper. Every consideration will be given to the circumstances surrounding the loan in passing upon the paper. The principles set out above will also apply to notes given by Companies engaged in the mining of coal, ore, or quarrying stone, etc. —20— AGRICULTURAL PAPER. Notes made for the raising of crops, purchasing and preparing live stock for market, and carrying on the ordinary operations of agriculture, are eligible for rediscount. The principal distinction to be kept in mind is whether or not the money will be used by the farmer in such a way as to enable him to repay the loan from the products obtainable by its use. This liberal construction does not embrace loans made for the purpose of acquiring land, or making permanent improvements. —21— NOTES SECURED BY CHATTEL MORTGAGE ON LIVE STOCK; or WAREHOUSE RECEIPTS FOR STAPLE COMMODITIES. Notes accompanied by chattel mortgage on live stock, which in itself is sufficient to insure the payment of the loan, are eligible without financial statement of the borrower. Any information accompanying the note assists this Bank in determining the desirability of the paper. This information need not be in the form of a financial statement. Notes secured by warehouse receipts for staple commodities, such as cotton, grain, tobacco, etc., need not be accompanied by financial statement of the borrower. If the warehouse receipts are issued by a public warehouseman, chartered by the State, the collateral will be sufficient. If issued by other classes of warehousemen, some information -22- should accompany the note, reciting the financial strength of the warehouseman. NOTES SECURED BY OTHER COLLATERAL. Notes secured by other collateral are not ineligible if the notes are given for Commercial, Industrial or Agricultural purposes, and not for the purpose of carrying the collateral attached. Such notes should be accompanied by a specific statement from the Member Bank that the collateral was taken as additional security and the proceeds of the note are not invested in the said collateral. —23— RENEWALS. The subject of renewal has given rise to more erroneous opinions regarding rediscount operations than any other single subject. It is a well established custom of merchants and others to borrow money from a bank and to employ it in the current transactions of business. When the note matures, a new note is taken in its place, and this is commonly termed A RENEWAL. If the merchandise bought from the proceeds of the first note has been absorbed in the trade of the merchant, and the new note is to make fresh purchases, the new note is not a renewal, but is in reality a new loan. So long as the Bank is not furnishing capital to the borrower, there is no reason why it should not continue making these new loans, on the retirement of the old ones. How, then, may a Bank determine when —24- this is good practice? Simply by the condition reflected in the borrower's financial statement, showing the MARGIN OF QUICK ASSETS, the sales and purchases of merchandise. Here, again, is emphasized the importance of a bank requiring financial statements from its borrowing customers. The current purchases and sales of merchandise have a relation to the needs for borrowed money, and will reveal if the new note is given merely to carry old merchandise, or, if it is, in reality, given for new transactions. The Banker exercises his discretion as to the desirability of discounting new notes at the maturity of the old ones. This Bank exercises the same discretion. This statement should dispel any idea that because a note is a so-called renewal, it will not be accepted here. The quality of the note is the real test. —25- ENDORSING AND FORWARDING THE NOTES. Notes sent for rediscount to the Federal Reserve Bank should be endorsed by the Member Bank. The following form of endorsement is suggested, but an endorsement in blank is permitted if the Member Bank prefers it. PAY TO THE ORDER OF THE FEDERAL RESERVE BANK OF ST. LOUIS. DEMAND, NOTICE AND PROTEST WAIVED. (Name of Bank) By President or Cashier. The notes should be listed on Form D. G. 4. This form appears on page 34. Member Banks will be furnished these forms, on application without cost. -26- REDISCOUNTING FOR A FIXED PERIOD. It often happens that a Member Bank needs money for, say, thirty or sixty days, and does not desire to be under discount for a longer period. At the same time, it may not have sufficient eligible paper with exactly that maturity. Under these circumstances, it may offer its paper, and if it desires to retire the rediscount before maturity, this Bank will, on request, charge such notes to its account and return them. If this Bank has had the paper for as long as fifteen (15) days, the full unearned discount will be refunded the Member Bank. -27— PAYING OFF REDISCOUNTED NOTES. At their maturity, rediscounted notes are charged to the account of the Member Bank discounting same. Ten days prior to the maturity of each note, it is sent to the Member Bank, so that it may be in the hands of the Bank in ample time for presentation and collection. It is not necessary for the Member Bank to remit separately for each note, provided it has sufficient funds in this Bank to its credit to cover the note at its maturity. This applies to notes which are not secured by collateral. Notes secured by warehouse receipts, chattel mortgages or like pledges, are held here until maturity, but ten days before maturity the Member Bank is notified, so that it may provide funds to cover; or, if desired, the note will be -28- mailed to the Member Bank before maturity, by arrangement. BANKERS' ACCEPTANCES. This Bank is constantly in the market for Bankers' Acceptances. In some States, the banking laws permit State Banks to accept drafts drawn on them payable at a distant maturity for domestic transactions. The St. Louis Federal Reserve Bank is constantly in the market for prime acceptances of this character, with or without the endorsement of Member Banks. Acceptances of National Banks are by law limited to transactions relating to the importation and exportation of goods. BILL OP LADING DRAFTS. A large volume of merchandise is sold in this District for payment by drafts with Bills of Lading attached. Drafts drawn on demand, or at sight, or for a period not exceeding fifteen (15) days, will be accepted for credit, on receipt, when endorsed by a Member Bank with Waiver of Protest; provided, the drafts are accompanied by Bills of Lading made to shippers' order without other conditions, and covering staple marketable commodities. On receipt of these drafts, credit will be given to Member Banks, and the drafts sent for collection to the place of payment. When this Bank is in receipt of proceeds, an interest charge will be made for the actual time elapsing between the date of the receipt of the draft and the date of payment to us. Interest will be calculated at the same rate per annum as this Bank's -30- current rate of discount, on thirty day notes. Exchange charges, if any, will be added to the interest. Drafts drawn on demand, but which are to be held for payment until the arrival of cars covered by attached Bills of Lading, can be received for immediate credit under arrangement with the Member Bank which will provide that if any draft remains unpaid for fifteen (15) days after its receipt by us, it will be charged back to the Member Bank's account, and entered for collection. These drafts are not to be listed in the regular cash letter, but should be sent in a separate letter. Member Banks desiring to use this service, with this Bank, may make arrangements for us to handle such drafts regularly. —31— TRADE ACCEPTANCES. When a draft has been accepted by the drawee, it can be defined as an accepted Bill of Exchange, or a "Trade Acceptance." This Bank is permitted to buy Bills of Exchange, provided the said Bills conform to the regulations issued by the Federal Reserve Board. At any time that a Member Bank deems it advisable to sell such Bills, this Bank will entertain the offering. -32— REDISCOUNTING NOT NECESSARILY LIMITED TO AN EMERGENCY. So much publicity has been given to the Federal Reserve Act, and especially the important provisions for rediscounting, that the item "REDISCOUNTS WITH THE FEDERAL RESERVE BANK," in the bank's published statement, does not reflect anything except that the bank is turning over customers' paper to give to other customers the benefit of the funds thus released* It signifies more than anything else that the bank has in its assets paper which will pass the scrutiny of the Federal Reserve Banks. Rediscounting with the Federal Reserve Bank is a current, not necessarily an emergency operation* -33- FEDERAL RESERVE BANK. St. LOUIS. MO. Ity vwfW inm OM m raw • ln, iiecpthif ifricullor.I p DEAD SiftS: bees to submit herewith (or rediscount the (allowing notes or Kcepttnce* eligible under section U of the Federal Reserve Act. duly endorsed by it ind iwhrfag deiMnd notice tnd protest- The itxrve described note* iff endowd htrewHh and «r» iubmhtcd for nj3»c«tnt tt the |oin« B u * T * the bett «l ow koowMct tad htllef toe Iwm remsentrd by tb> ibeve ortn »er« nude lot urturil. UdustHtl. «r camaicrd*r purposes and the prwrition* «l the Fedetil kntn* Act •Od tin lttloMfacwdby the Federal K n e w 8 M M h*v» been OMiplied with. Ovr (»n» PiymUe M thUdite ire I , . ; wit iwtisawnted irtpw nettaKlvtingthi* -34- CREDIT STATEMENT—ACRI CULTURAL. Fortbtpurpou ol procuring ctmiii fnvn lime u line with you Ua • ) / nefottlbU pnpw at otherwlte, Ikmlihtl oi my Eauiciil condition on which naj htruflttt* CMtidcrol u ivprn«ituX »In* tUMWOt ef a itolcu Aetic* of t^iirfir ii (irro you. PROPERTY OWNED BY UNDERSIGNED CASH illfainkn i l on k u d , .. r x DEBTS DUE BY DNDEKSIGN£D ArmiTMTit P AVAttT.h h, « . ._ GOOD ACCOUNTS due BW w r r a s PAVAfti.it h j h . COOn NOTES Anfc.nJ Mnair.»fiE MOTR* <»« t>7 — . LIVE STOCK on h*nd, i h w kind and n l u * ALL OTHER DEPT?., FARM PRODUCTS on Itnd: tr»lo (ottoa, tiiy, Ind at PtTri HTNOt "- 'TTH *•* wnttN. c r r y BEJIT. FSTAT* i'«"r • j hay* endowed otaMrtmmfl. notgB for other TJeople f o r | TOTAL DEBTS TOTAL PROPERTY QUECTIONS TO B£ ANSWERED REGARDtNC FARM LAND. M fotlowi: R w p , S«tJ«, Towa.bip. £ t c _ Any HMMibW 7 « t , ttui (awl witl piwtjc* per a m : . —35- ~- loig h m you own«d tUit I»Bdf_ MJ pan i**t*4; t w muei, todfa*wlut « auto fitmi_ iwhu price p*r mw, kan impwwd tow it your «irhtwkwd »W duting pMt y«trf ! fcml* wUmoty deeUn ud e«ti(y thi. A* ttwt* u t trut u w w u <J mj I w c U cowliliM -36- &S5SS d of butiaett fully and state whether wholesale or retail.) For th« pttrpose of procuring credit from time to time, the udertiztted hereby make* to yo« tit* following statement of th* condition of the undersigned on the— d a y _ • »?—-I » hereby miirttAini and guarantees that said statement U id aU respects true and correct; and yoa m*y consider • the peewiiary respootibility of the undersigned u coBtiwting to be tnc and correct until written notice of • chai by the undersigned. LIABILITIES ASSETS BILLS PAYABLE U"« tm • ^ i - d u . BILLS PAYABLE « t « i - ^ w • » Wto BILLS PAYABLE « t « i « iU^mU «f BILLS PAYABLE *>iln*>n*m*oUUm ACCOUNTS PAYABLE DEPOSITS OP MONEY WITH OS MORTGAGE ON REAL ESTATE CHATTEL MORTGAGE DEBT OTHER LIABILITIES CASH OB hand CASH la JanV NOTESJRECEIVABLE of ctutomert ACC^UNTSRECEIVABLE of cwtomers NpTESjBd^A^r^NT^RECnVABLE REAL ESTATE used to ladota FIXTURES «sed hi bubes* OTHER ASSETS! TOTAL LIABILITIES NET WORTH •rAPITM STTX-r t ST7FPT.RS * PROFITS t -. , TOTAL TOTAL PSOFIT AND LO*3 ACCOOMT. T15CAL TXAR KWDIKQ-, CROSS PROFITS From If tftfcurffae From InrettiBeaU Ba4 Debt, charged oft Withdrawal* or DMdetttt Paid Ktt Profit* Soldi Net Worth t h o n by t*M rt»t* «• fcu4 o . thtt d»tt. Total wlei of awftbtadtw faith* » O« wl*t uwtt an •ortgafts % It What What., it of w o n t s u d bllla nccittMe m put 4«* «ad «tefcW? 1 Vswl tenu on wVkh jo« • T«*>1fi«l«*lor pMt tw«lr« -37- Arc any Bills payable fWea by jwu to Banks or others, ttcortd by pledge of eclUtwaL endorsement, parantet or bond? If BO, ghre unouni of sties Bills Payable and how secured-^ b aitj part of items. -Notes RteaT^J* of Customers" or "Accounts Receivable of Customers." doe trom allied companies or final b Accounts ReceWablt. Notts Receivable. Timefcavcbees in bewne IVhat Utharacter of r»w material? (Pleue iniww t h raw material prepared tpedally for your <uc or cao it be tued by other maaafacturers ia *ame Hoe? ( P I U M ktuwer f Itavt all bad and doubtful assets been eliminated from foregoing statement? Bank Acconmj, where kept? It a Corporation, G out following schedule; U OFFICERS AND DIRECTORS. NAME IN KULL TXTLE No.ofShares4Jeld ADDRESS If * rVtaenhip. fiH oot folk>*tiia schedule. PARTNERS. NAME IN FULL Iiutnul W tUi i bptrnJui H Lta-ted U ADDRESS . 1 hereby certify that to the best of my knowledge and belief, the figure* and Information given arc, ta every respect, true and ia t c c o r d u u wfth the fact*. (»•* Ornnttai w Firm MM* Dm) - 3 S - LocationB«*neu_ For die pttrpose of procuring crtdit from time to time, the undersigned hereby nukes to yon the following statement of tot con* dition ol the undersigned on tb< day 19 :; and the andersijueil bereby maintains and guarantees that iaid statement b in all respects true and correct; and you njay.eoitsidcr said statement as to Ilir pecuniary responsibility of the undersigned.as contiuulng't&be true and correct nnttl written notice of a change it given to yoa t>j i!ie tm erngne ^ ^ blank*, witting •no* ot "none" where necessary to complete Information. LIABILITIES ASSETS Cast on hand «"««•» in ,.., ,., , . .. Bills Reeeirahle, from Customers, good n — "lV >— — — Bills Payable, to Bank or Banks—________ Sills Payibfe. otbcr*i_e disposed of. Bill* Payable, to Partners, Directors or Stock- Accounts Receivable, from Customers, good (Not mattered or ptcdtcd) SiHs and Accounts Receivable, dor Inm Pinner* Ofetn q* SuKkheldct* (not tru-fernd or »i«)«*d>— Merchandise, fm.shed — _ Accounts Payable, to Partners, Directors or Stircknfrfdrr* Mortgage on Real F«*»>- ___ Chanel Mortgage Deb, li Real Eatate (market value/tue'd in tins business^ ttD;i4iA£« n^d ; n tfatt hit'ntit.,, .,,., Machinery aod Fixtures nsed in this business^— Other Asset* tte. TOTAI i TABi_rnFs____ •CAPTTAt STru-K — « (*Fm eat •»•*€ s EH* if « > » « < » ; TOTAL Dr. — — TOTAL PROFIT AND LOSS ACCOUNT, FISCAL YEAR ENDING DISBURSEMENTS For ail expenses, inchxiing material bocicnt, •factoring aod general expense. For deprecUtion, IAJ debts, etc Withdrawals or Dividends pai Met Profib added to MU From Sales of Prod. Fran tdTeitnxats_ From all other s Total— Date ol hst annual statenunt preceding abort Total of Inrentories of Raw Material. Finidted and Us&ilahcd Mertbudue, shown In that stata* Amount of tales doc* thai data to 4at* of a b m On what auets a n mortgage* a tien? t *a, fiT* datt of im Is Statemeat based oa actnal in, How is vantation vrtftd at? Oa Raw Mat How It Tana&w armed at? Oa TJ&fiusbe Hew it vahutkm arrived atr Oa Ftoished Mcr Total Sties for past tw«he awaths $ -39- Art U 7 Bin* pcysbt* ^ m by fv* to Biak* « ottun, want by pltdc* ol ceJUttnl, wofei d bow Mcured . ——• It »ny put of Itcsu. "Nottt ReetlTible of Cuitoaert" or "AceoonU R««tv*bU ol Cutomcrt," ivt from *Uie<l comp*n»tt a t« **ifch ywi-mrt ihteretttd? If w, tin •mornitj, | . Note* Reetlnblc. t — • — .—> AceounU Re«bf»btfc Time IUTC been in t > Ami wtwBi tueceeaed Sutc U.t 4at« of Utrfnt trial b t l u u <jf y o u book* Bcgtlu time of btlucSar roar bootn Bank Aeeounu, when ktpt? Vrhen U UcnJusdlM totmud? ^ _ _ _ _ _ ^ _ _ tt * CorponHon,fiUout following tdtedtd*: OFFICBSS AND DUtSCTOftS. NAME Itt PtJU, TtTLB No. of Share* Held ADDRESS tf • PutncnUp, M oat fonowinc KheJak; PAKTNBSa NAME IW FOU. K ADDKSSS I hereby emlfr iku. M tb* V c with the £**•. B we* hi **ttf tttv***. ti (Slr> Cotpontio. w rmi N I M Here) By -40— MUNICIPAL WARRANTS. (The word "Municipal" as used herein means any Town, City, County or State. The word "Warrant" means any bill, note, revenue bond or warrant, — payable within six (6) months from date of purchase, issued in anticipation of the collection of taxes already assessed, or the receipt of assured revenues.) It is the purpose of this part of the pamphlet to call the attention of Member Banks to the new market for Municipal Warrants, in order that the Member Bank may be of assistance to the Municipality in which it is located, as well as to the Agricultural and Commercial borrower, and at the same time, afford the Member Bank an additional field for operation. The Federal Reserve Act authorizes Federal Reserve Banks to invest a portion of their funds in warrants, issued by Towns, Cities, Counties and States, either with or without the endorsement of a Member Bank; provided, - 4 1 - (1) That under the laws of the State, the warrant is a legal obligation against the Town, City, County or State issuing it* (2) That the warrant must have a fixed maturity from the date of purchase of not exceeding six (6) months and must be issued in anticipation of the collection of taxes, already assessed, or the receipt of assured revenues. (3) That the net funded indebted* ness of the Town, City, County or State must be within the amount authorized tyy the laws of the State and in no instance can it be more than 10% of the assessed valuation of its taxable property. The taxes necessary to pay the current expenses of a large per cent of the Towns, Cities, Counties, and some States, in the —42- Eighth Federal Reserve District, are assessed at the beginning of the year, but are not collectable and available for use until the middle or last of the year. In the meantime, the Town, City, County or State has to borrow money in sufficient amounts to pay its current expenses. This is usually done by selling its warrants issued in anticipation of the collection of the assessed taxes or receipt of assured revenues. In the past, these warrants have not found a ready market with Commercial Banks. The Federal Reserve Act makes such warrants eligible for purchase by Federal Reserve Banks, thereby providing a ready market for them when a Member Bank finds it necessary to obtain additional money. In addition to the right of a Federal Reserve Bank to purchase such paper from Member Banks, it is authorized to -43— purchase it on the open market, that is, without the endorsement of a Member Bank. The demand on a Member Bank for money for regular commercial purposes may be such that it does not care to invest its funds in this class of paper, even though, being acquainted with local conditions, it considers the investment a good one. If this is the case, when it is ascertained that a loan is to be negotiated, if the Member Bank will take the matter up by correspondence with this Bank, and act as its agent in the purchase of such paper, it will thereby afford the Federal Reserve Bank an outlet in which to invest the surplus portion of its funds not required in its regular discount operations, and at the same time, be of assistance to the Town, City, County or State in which the Member Bank is located. -44— The following are copies of (a) The form of warrant which could be used. (b) The form of Certificate of authority to issue warrant. (c) The form of Certificate required to be furnished by the fiscal officer of the Town, City, County or State. (d) The form of Certificate to be furnished by the City Attorney or some recognized authority on Municipal issues. (e) A list of questions to be answered by the fiscal officer of the Town, City, County or State, in order that Counsel for the Federal Reserve Bank may determine whether the warrants have been issued in accordance with the Regulations of the Federal Reserve Board, and the laws of the State. (a) CERTIFICATE OF INDEBTEDNESS OR WARRANT. $ 191. This is to Certify That the City of is indebted to L T in the sum of Dollars, which, for value received, it promises to pay to her order at the office of on the day of 1 9 1 . . . , with interest at the rate of per cent per annum. Issued under and pursuant to an ordinance adopted by the City Council or [Board of Commissioners] of the City of on the day of 1 9 1 . . . , and duly approved by the Mayor. Mayor. City Treasurer. City Secretary, No Countersigned. (SEAL) (b) CERTIFICATE OF AUTHORITY. This is to Certify That the Certificate of Indebtedness of the City of , for Dollars, dated , 1 9 1 . . . , and numbered No was made in behalf of said City under and in pursuance of an ordinance of its City Council [or Board of Commissioners,] passed 4 , 191... t and duly approved by the 1 Mayor, being Ordinance No , and that such certificate with other certificates issued under the said Ordinance does not in the aggregate exceed the sum of Dollars named in said ordinance. City Secretary. Mayor. (c) CERTIFICATE OF FACTS, I Hereby Certify That the Certificate of Indebtedness of the City of , signed by its Mayor and Treasurer and countersigned by its Secretary, for the sum of Dollars, bearing date of 191...,payable 191.., numbered No , was issued in payment of a current liability of the City of , for the current year, and that the revenues of said City which are derived from taxes and other purposes which can be applied to the payment of this and similar claims will be sufficient to pay off and discharge all Certificates of Indebtedness authorized by the City Council or Board of Commissioners of the City of , by Ordinance No , passed the day of 191.., and approved by the Mayor. I Further Certify That the has existed for a period of more than ten years, and for such a period immediately preceding the date of this Certificate it has not defaulted for a period exceeding fifteen days in the payment of any principal or interest of its funded debt, and that the funded indebtedness is , and does not exceed per centum of the valuation of its taxable property, which amounts to $ , as ascertained by the last J preceding valuation; that the aggregate amount of all similar revenue * 1 warrants for the current and prior years, including these warrants, issued and outstanding is $ ; that the population of the municipality as determined by the last Federal or State census is , and that a penalty for the non-payment of taxes in anticipation of which the Certificates of Indebtedness or warrants above authorized are issued will attach on the day of 191.... City Treasurer, (or other proper officer.) (d) CERTIFICATE OF CITY ATTORNEY. I Hereby Certify That the Certificate of Indebtedness of the City of , signed by its Mayor and i Treasurer and Countersigned by its Secretary, for the sum of Dollars, bearing date of payable . . . .191.., , 191.., and numbered No was issued pursuant to the ordinance of the City Council or Board of Commissioners of the said City dated 191.., and duly approved by the Mayor, authorizing a temporary loan of Dollars, for the payment of current liabilities of said City, in anticipation of the City taxes for the year 1 9 1 . . . , the same being included in and made a part of the tax budget for 1 9 1 . . . , and that the said loan is authorized by law and that the City Officers who have executed the same on behalf of the City had the authority and the power so to do, and that said certificate is in proper form and properly executed and when issued will become and be a valid and legal general obligation on the part of the City, City Attorney. (e) 1. 2. 3. 4. DATA TO BE FURNISHED RELATING TO MUNICIPAL WARRANTS OR OBUGATIONS OFFERED TO FEDERAL RESERVE BANKS. Name of municipality or (political division) Population (last Federal census) Total valuation of taxable property (as of 1915) $ Total gross indebtedness $ .... (Note: Tills Item should include all debts evidenced by bonds, notes* warrants, and certificates of Indebtedness of every description as of the date of this statement.) Less deductions allowed: (a) Obligations payable from current revenues (b) Outstanding bonds issued for public utilities $ $ (Note: This deduction can only be made provided the Income from the utilities is sufficient to pay for maintenance, Interest and sinking fund.) (c) Outstanding improvement bonds to be paid by special assessment against abutters $ (d) Sinking funds for issues not included in (b) $ Total deductions „ $..... 5. Net funded indebtedness (Item 4, less total of (a, b, c, d) $..... 6. Percentage of net funded indebtedness to total valuation.. 7. Description of present issue of revenue warrants (or notes) 8. 9. 10. 11. 12. 13. 14. 15. (a) Purpose (b) Date. (c) Maturity. (d) Amount $. Total amount of warrants or notes issued and outstanding, including this issue, payable from tl same tax levy or revenues $. ., Description of the taxes or assured revenues in anticipation of which the warrants are issue (a) Nature of tax „ (b) Date of levy. (c) Rate levy $. per thousand (d) Amount of levy $ What is the last day on which such taxes can be paid without penalty? ..„ „ Are the warrants the general obligations of the entire municipality? Has the municipality been in existence for 10 years ? „ . .. ............... ... Has the municipality during the 10 years immediately preceding the date of the issue of the warrants defaulted for a period exceeding 15 days in the payment of any principal or interest its funded debt? . Are the warrants registered by a registrar? . If so, where? Has legal opinion of their validity been given?. If so, by whom?.... I hereby certify that the statements made above are true, as of this.. dayoL „ .._ ...191 (SEAL) INDEX Acceptances Agricultural Paper Definition : Maturities Assets Fixed Quick Margin of Bankers' Acceptances, Bill of Lading Drafts Bonded Debt Cattle Paper Certifying Eligibility Chattel Mortgages Coal Companies Collateral Notes Collection of Notes Rediscounted Commodities as Collateral Cotton as Collateral Cotton Exchange, (See Drafts,) Credit Records Crops, growing of Current Assets (See Quick Assets.) Current Liabilities Demand Drafts Discount, Unearned Drafts, Bill of Lading -se- , 29-32 21 21 8 14 14 14 15 29 30 18 21 9 22 20 22-23 28 22 .22 30 11 21 14 14 30 27 30 Eligible Paper, Qualifications Eligibility, Certifying Endorsing Notes Farmers' Notes. Financial Statements * (See Statements in Index) Forwarding Notes Grain as collateral Interest, Refund of Live Stock Paper . Lumber Companies (See Manufacturers.) Manufacturers. Margin of Quick Assets Maturities Merchants Miners of Coal, Ore, etc Mortgages, Chattel Mortgage Debt in Statement Notes, Collateral Farmers Manufacturers Merchants Miners Warehouse receipts attached Ore, Mining Companies Other Collateral Paying Rediscounts Notes. Payment of Notes before Maturity Quarriers Quick Assets -57- 7 9 26 21 II 26 22 27 22 18 18 15 7 16 20 22 18 22-23 21 18 16 20 22 20 23 28 .27 20 14 Rediscounting, not an Emergency Bediscounting for a stated time , Refunding unearned discount Renewals Returning discounted paper Sight Drafts Statements of Borrowers Furnished Member Banks free Held in Confidence How often required Use in showing eligibility When made by Bank Stone, Quarriers of Tobacco as Collateral ^ Unearned Discount Use of Statement to certify eligibility Warehouse Receipts Warrants —58- .33 27 27 24 2S 30 11 13 .12 12 9 12 20 22 27 9 22 41