762 AGRICULTURAL ECONOMICS 



245. THE COMMODITY REGULATION OF THE FEDERAL 

 RESERVE BOARD 1 



BY W. P. G. HARDING 



Now, we all know that the farmer has temperamental peculiarities. 

 We know, as a matter of fact, that the farmer has been accustomed 

 in the fall of the year when his crop is made, either to dump it on the 

 market voluntarily, or to have someone say to him that he must 

 dump it to get the cash and pay his debts. We feel in Washington 

 that it would be a great thing if the farmer could feel that there were 

 special inducements offered him to do his part in this gradual market- 

 ing movement. We thought of that when the Federal Reserve Board 

 framed its commodity regulation. Now, we have talked with a num- 

 ber of bankers from the South and we realize that they cannot loan 

 money at 6 per cent as a general proposition. But we felt that an 

 unusual occasion was presented to us, that here was a crop that had 

 been produced and was ready for market and that the price was not 

 as high as we thought it should be on its merits. We desired to 

 put the southern bankers in a position where they could go to the 

 southern farmer and say, "If you have your crop properly ware- 

 housed, we want to loan you some money on this cotton so that you 

 can pay your pressing debts and enable you to hold it until you 

 can get such a price as we think is fair and equitable." Now the 

 southern farmer, as a rule, would be reluctant to hold his cotton if 

 he had to pay 10 or 12 or 15 per cent interest to carry his cotton. 

 Mark you, the crop has already been made; there is no risk attached 

 to it properly warehoused. The whole country is full of money: 

 the bank reserves are greater than at any time in the history of 

 the nation: no bank of any consequence, national or state, but is 

 anxious to make loans. The federal reserve banks' resources are 

 scarcely touched. So they issued the regulation to the effect that any 

 bank who loans on warehouse receipts on cotton properly insured, at 

 a rate of interest, including commission, not exceeding 6 per cent, 

 should have the privilege of rediscounting with the federal reserve 

 bank at a 3 per cent rate. There was no compulsion about that. 

 Any bank which did not care to make that loan could demand the 

 same loan under the commercial regulations at the rate of 4 per cent. 



1 From address at the Conference of Cotton States Bankers, New Orleans, 

 December 6-7, 1915. Stenographic report of proceedings loaned by the secretary, 

 Mr. Moorhead Wright. 



