Description of Securities Available for Discount or Collateral at the Federal Reserve Bank

Title

Description of Securities Available for Discount or Collateral at the Federal Reserve Bank

Creator

Strong, Benjamin, 1872-1928

Identifier

WWP18839

Date

No date

Description

A description of securities available for discount or collateral at the Federal Reserve Act.

Source

Benjamin Strong Jr. Papers, New York Federal Reserve Bank

Language

English

Text

DESCRIPTION OF SECURITIES, ETC., 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 warrants must consist of bills, notes, revenue bonds and warrants 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 warrants, see Regulation “B”, 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 drawn 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 which 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 machinery, nor for investments 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 banks shall be no time exceed 10% of the unimpaired capital and surplus of such bank; but this restriction does not apply to the rediscount of bills of exchange drawn 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 not 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
(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 must 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, see Regulation “E”, Series of 1917, of the Federal Reserve Board, Section 4.

Original Format

Letter

Files

http://resources.presidentwilson.org/wp-content/uploads/2017/03/D08032.pdf

Tags

Citation

Strong, Benjamin, 1872-1928, “Description of Securities Available for Discount or Collateral at the Federal Reserve Bank,” No date, WWP18839, Benjamin Strong Jr. Papers, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.