Discount Of Renewal Notes

Banks should not enter into an agreement for renewal. Banking judgment is necessary in determining the merits of each renewal. Those providing working capital or to finance fixed investments are not eligible for rediscount.

Extension Of Time

A note or draft containing a provision for an extension of time should not be approved for general use by the Federal Reserve Board.

Financial paper; notes to replace funds withdrawn ineligible. - A note executed by one bank and discounted by another, the proceeds of which were used to replace funds withdrawn by customers to purchase liberty bonds is not eligible for rediscount by a Federal Reserve bank, since the proceeds were not used for an agricultural, industrial or commercial purpose or for the purchase of notes or bonds of the United States.

Paper Secured By War Savings Stamps

Notes, drafts and bills of exchange which are secured by War Savings Stamps are ineligible for rediscount with a Federal Reserve bank. It is suggested by counsel that War Savings Stamps are not bonds or notes of the Unites States, but in effect only receipts for payment on account of non-negotiable evidences of indebtedness.

Notes Of Finance Companies

The note of a finance or credit company which is either drawn directly or indirectly to finance some industrial or commercial concern in the transaction of its business is not eligible for rediscount, even though it may be secured by paper which is itself eligible for rediscount.

Notes Of Acceptance Houses Or Brokers

The note of an acceptance house or broker, secured by acceptances eligible for rediscount at a Federal Reserve bank, is not eligible for rediscount. Such note of the acceptance house or broker cannot be said to have been used for an industrial, agricultural or commercial purpose, since the business of such acceptance house or broker is not such as to come within any of these classifications. The fact that the note is secured by eligible paper is immaterial if the proceeds are not used for one of the purposes named.

Collateral Trust Notes Undesirable

Collateral trust notes are considered by the Board as not arising out of commercial transactions, and Federal Reserve banks are, therefore, directed not to accept such for rediscount.

Collateral Of Bills Receivable

The note of a manufacturer, secured by his bills receivable, is desirable paper, and should not be debarred as a collateral trust note. However, if such collateral of bills receivable is issued for the purpose of carrying collateral for a speculative purpose or collateral in the nature of stocks and bonds other than the securities of the United States, the note would be ineligible for rediscount.