76o AGRICULTURAL ECONOMICS 



warehouse facilities in the cotton belt and by making a careful 

 study of the laws governing warehousing in the southern states. It 

 was not long in reaching the conclusion that the yield of cotton would 

 be much less than was the case in 1914. Finding the storage facilities 

 for such portion of the crop as might have to be carried over generally 

 adequate, it recommended the creation of a special kind of accommo- 

 dation to assist those producers who, having made their crop, might 

 desire temporarily to withhold a portion of it from market. The 

 committee entertained the view that warehouse receipts for cotton, 

 grain, and other staple, non-perishable agricultural products of a 

 readily marketable character, form an excellent basis for bank loans, 

 particularly as under the terms of the Federal Reserve Act and the 

 regulations of the Board, notes thus secured are eligible for rediscount 

 by Federal Reserve Banks. 



During the summer, the committee developed a method by which 

 producers could secure low rates upon loans secured in this manner, 

 and in order to encourage co-operation between member banks and 

 producers, the Board issued on September 3, 1915, its commodity 

 paper regulation which provided that notes secured by non-perishable 

 staple commodities, having a specified date of maturity, and upon 

 which member banks had not charged a rate of interest, or discount, 

 including all commissions, of more than 6 per cent per annum, should 

 be eligible for rediscount in Federal Reserve Banks at a preferential 

 rate. It should be especially noticed that this commodity rate, so 

 called, was not confined to any section of the country or to loans 

 secured by any one commodity, but was general in its nature. It 

 applied not to cotton alone, but to other staple products, such as 

 grain, sugar, and wool. It was, in fact, adopted by several of the 

 reserve banks, some of them, however, receiving but little business 

 under it owing to the abundance of funds in member banks. 



The Board, moreover, in the exercise of the powers conferred upon 

 it by the Federal Reserve Act, was fully prepared to set in operation, 

 if it should become necessary, at rates to be fixed by it, the machinery 

 of interbank rediscounting, in order to make available for Federal 

 Reserve Banks requiring larger resources the available funds of other 

 reserve banks, the collective strength of the reserve system as a whole 

 being far in excess of any demands that might reasonably be expected 

 to be brought to bear upon it at that time. 



The Board's commodity paper regulation was issued September 3, 

 1915, well before the time when the movement of the cotton crop 



