Whereas it appears that the only Federal Reserve Bank which has not purchased in the open market bonds in excess of the amount which might be allotted to it is under contract to purchase a sum very largely in excess of its allotment and has been prevented from consummating such purchase by reason of the fact that more than $9,000,000 in lawful money has been deposited with the Treasurer during the current month to retire circulation by national banks, and the banks under contract to sell are thereby prevented from making delivery: Now, therefore, be it Resolved, that it is the sense of the Board that no necessity exists for enforcing the requirement provided for under section 18 of the Federal Reserve Act at the end of this quarterly period ending March 31, 1916, and that it will not at this time require the Federal Reserve Banks to purchase any of those bonds which are offered for sale by member banks through the Treasurer of the United States under the provisions of section 18. Be it further resolved, that the Secretary be instructed to send a copy of this resolution to the various Federal Reserve Banks and to the member banks which have offered bonds for sale in order that they may be notified of the action of the Board in the premises. Subsequently Secretary McAdoo informed the Board that conversions would be made one-half into 3 per cent gold bonds and onehalf into 1-year gold notes. In the closing paragraph of his letter advising of this decision the Secretary said, "Upon further consideration I have concluded that the purposes of the Act and the public interest will be better served if banks are required to take the maximum amount, i. e., 50 per cent, of the new issues in 1-year gold notes and 50 per cent in 3 per cent 30-year bonds." On March 8 the Federal Reserve Board sent out the following letter to Federal Reserve Banks stating in each instance the amount of bonds which the bank would be entitled to convert: I am directed by the Federal Reserve Board to transmit to you the following information: The Secretary of the Treasury has notified the Federal Reserve Board that he will issue 3 per cent 30-year bonds and 1-year notes in exchange for 2 per cent bonds offered for conversion by Federal Reserve Banks to the extent of $30,000,000 during the present calendar year. On the basis of capitalization and surplus adjusted to April 1, your allotment for the Conversion of 2 year will amount to Secretary McAdoo, in a communication to per cent bonds may be made as follows: On the Federal Reserve Board on February 28, April 1, not to exceed one-half of your allotstated that he would, under section 18 of the ment; on July 1, not to exceed three-fourths Act, issue in exchange for United States 2 perverted on April 1; on October 1, balance of of your allotment, including the amount concent gold bonds, bearing the circulation privi- your allotment. If any bank fails to apply for lege, against which no circulation was out- its full allotment before October 1, bonds and standing, 1-year gold notes and 3 per cent notes remaining will be distributed on a pro 30-year gold bonds, both without the circula- rata basis among the banks applying therefor. tion privilege, upon assent by the Federal Re- The denominations of bonds are from $100 to serve Banks to the necessary obligation with $10,000 and of notes from $1,000 to $50,000. the Secretary of the Treasury binding them to ble on the basis of one-half 30-year bonds and All exchanges will be made as nearly as possipurchase for gold at maturity the 1-year notes. one-half 1-year notes. Please notify the Board, The limitation upon the issue was $30,000,000 to reach Washington not later than March 20, for the year 1916, and the conversion dates the amount of 2 per cent bonds you will offer the first days of January, April, July, and Octo- for exchange on April 1. ber. These dates correspond with the interest periods for the 2 per cent Consols of 1930. Under this arrangement $15,000,000 may be converted on April 1 and $7,500,000 each on the two following dates. The figures showing the allotment, which have been adjusted to cover the changes by reason of the transfer of banks in Fairfield County, Conn., from the Boston district to the New York district, and the changes from the Dallas district in the State of Louisiana to the Atlanta district, based upon capital of Federal Reserve Banks at the close of business on March 3, were as follows: Amount of conversions. $2,763,602 6, 121, 910 2,871, 275 1,822, 783 1,521,375 1,396, 033 1,641, 337 1,412, 836 be necessary for the applying bank to file a new application with the Treasurer of the United States that its wish to sell may be considered at the next quarterly period. Notes issued under the conversion privilege will be termed "One-year Treasury notes," and will be designated "Series of January 1, 1916-17." They are payable one year from the date of issue, with interest at 3 per cent, 3,247,658 which is payable on the 1st of January, April, 1,411,061 July, and October. These notes are issued in 3,634,284 denominations of $1,000, $10,000, and $50,000. The 3 per cent bonds are called "Three per 2,155,846 cent conversion bonds," and will be desig30,000,000 nated as the series of the years of issue and of maturity, the first being "Series of 1916-46." They are payable 30 years from January 1 of the year of issue, bearing interest at 3 per cent, payable at the same quarterly periods as the notes. The bonds are issued in denominations of $100, $1,000, $5,000, and $10,000, both registered and coupon form. Several Federal Reserve Banks raised the question whether the Treasury Department would at this time consider applications for the conversion of the 1-year gold notes into 30-year 3 per cent bonds, and in answer to one of these inquiries the Federal Reserve Board sent, on March 13, the following reply: Your letter of March 8, relative to the exchange of 2 per cent bonds for 3 per cent bonds and 1-year gold notes, was referred to the Treasury Department and is to-day returned with the following advice: "I have received your memorandum of March 10 inclosing a letter addressed to the Federal Reserve Board by the governor of the Federal Reserve Bank of Cleveland, in which he asks whether the Secretary of the Treasury has determined that he will not consider applications for the conversion of 1-year gold notes into the 30-year 3 per cent bonds as provided in section 18 of the Federal Reserve Act. In reply I beg to advise you that the Secretary has taken no action in this matter and during his absence nothing will be done in relation thereto." It has been held that the limit of $9,000,000 of deposits to be made by national banks for the retirement of bonds securing circulation in any one month stands irrespective of the allotment made under the requirement of the law for the purchase of $25,000,000 in bonds yearly by Federal Reserve Banks. If an application to sell bonds under section 18 is not granted by the Federal Reserve Board it will a The Secretary of the Treasury, upon the request of a Federal Reserve Bank, will open & suspense account with such bank for each loan, in which account will be credited all bonds acquired by the bank and charged all bonds reissued or converted as directed by the Federal Reserve Bank having title thereto. After suspense accounts have been established the Secretary of the Treasury will advise the Federal Reserve Bank of all bonds received for the bank's account and of the disposition of such bonds or any part thereof in accordance with instructions given by the Federal Reserve Bank. A statement of all transactions will be furnished the bank at each dividend period for each loan, and interest on the bank's holdings will be declared on account of the bonds held in suspense. In order to have such suspense account established a Federal Reserve Bank should make application therefor to the Secretary of the Treasury, such application to be in the form of a certified copy of a resolution of the board of directors authorizing the action. There were on March 1 national bank notes outstanding, secured by United States bonds, amounting to $711,129,418. This was a de- notes on March 1 are shown in the following crease of $7,794,072 since February 1. table: Kinds of bonds on deposit. In addition to the national bank notes outstanding, secured by United States bonds, there were on March 1 $51,866,895, secured by lawful money, an increase over February 1 of $4,398,317. The amount of Federal Reserve bank notes outstanding, secured by United United States loan of 1908-1918.. States bonds, on March 1 was $2,999,970. The kinds of bonds on deposit to secure Federal Reserve bank notes and national bank United States consols of 1930.. United States loan of 1925.. Statement of the public debt on February 29, 1916. DEBT ON WHICH INTEREST HAS CEASED SINCE Funded loan of 1907, matured July 2, 1907. Old debt matured at various dates prior to Jan. 1, 1861, and Total........ INTEREST-BEARING DEBT (PAYABLE ON OR AFTER SPECIFIED FUTURE DATES.) $4,000.00 22,950.00 13,050.00 535,000.00 12, 190.00 901, 460. 26 1,488, 650.26 Of this original amount issued, $132,449,900 have been refunded into the 2 per cent consols of 1930, and $2,396,800 have been purchased for the sinking fund and canceled, and $500 have otherwise been purchased and canceled. Of this original amount issued, $43,825,500 have been purchased for the sinking fund and canceled. THE PRESENT COTTON SITUATION. Speaking before the Birmingham Chamber of Commerce in Alabama Friday evening, March 10, Hon. W. P. G. Harding, member of the Federal Reserve Board, discussed the present cotton situation in part as follows: During the next six weeks, assuming normal weather conditions, the cotton crop of 1916 will be planted. While the acreage put in cotton will bear a direct relation to the size of the new crop, other factors must be considered in reaching conclusions as to the final outcome. The quality and amount of fertilizer used, the character of the season, methods of cultivation, the ravages of the boll weevil and other insect damage, will all have an important bearing, so that under some conditions it is conceivable that 30,000,000 acres planted in cotton will produce a larger yield than 35,000,000 acres under other conditions. The new crop acreage, however, which will probably be known definitely within the next 60 days, will play an important part in fixing the market value of that portion of the crop of 1915 which remains unsold, for it is likely that not until July will reports of condition of the growing crop become a factor in price control. It will be remembered that during last July there was a decided slump in the cotton market, which brought about an extremely nervous feeling throughout the South. Despite the very vigorous and diligent campaign that had been made in the spring of 1915 for a sharp reduction in cotton acreage, reinforced as it was by the severe object lesson of the dangers of overproduction that had been impressed upon cotton growers during the preceding fall and winter, it was found that the area planted in cotton had been reduced by only about 15 per cent. The season up to July had been propitious and there was much talk of a new crop of at least 14,000,000 bales. It was known also that Great Britain intended to declare cotton an absolute contraband, which was regarded as meaning the loss of a market for about two and one-half million bales which had usually gone to Germany and Austria, and which had to a considerable extent during the season of 1914-15 reached those countries through neutral ports. Farmers and business men throughout the South were aroused, and, without any definite organization, but through the force of public sentiment, a policy of gradual marketing was decided upon. Warehouse facilities had been found to be adequate, and the banking situation was such as to render ample funds available to carry out such a policy. At the same time it became evident that the yield would not be as large as had been anticipated, so that consumers, finding that there was no rush of cotton to the market for sale at forced prices, began to contract for their wants, and prices advanced rapidly. The new crop, instead of bringing 7 to 8 cents per pound, as had been predicted by many pessimistic persons, found a ready market up to 12 cents per pound, and cottonseed advanced in a corresponding degree so as to give producers the equivalent of $20 to $22.50 per bale from sales of seed. The advance attracted speculative interest, and by December some enthusiasts had visions of 15 to 18 cents per before, would have sold most gladly at 12 cents, caught pound. Many farmers and merchants who, a few weeks the infection and decided to hold for the much higher prices which they felt were coming. About this time, however, the export movement began to compare unfavorably with the previous season. Except as to coastwise trade, our ocean freights are carried almost entirely in foreign bottoms. Of these, German vessels are idle, being interned in neutral ports throughout the world, or else blockaded in the waters of the North Sea. This scarcity of shipping has caused a great advance in ocean freight rates, which are from six to ten times the normal, so that rates on cotton from American ports to Liverpool have been ruling as high as $3 per hundred pounds, or $15 per bale, being 3 cents per pound. Even at these abnormal rates, exports of cotton have been restricted, as shipowners, acting probably under instructions from their Governments, have given preference to cargoes of grain and munitions. Under these conditions stocks abroad have been greatly reduced, and during the month of January there was a time when the stock at Liverpool was sufficient to supply British spindles for less than six weeks, with prices ruling at 18 cents, against 12 cents in New York. There is reason to believe however, that during the past month arrangements have been made to increase the ship room available for cotton, and there has been some increase in the supply at Liverpool, London, and Manchester. The total stocks in Great Britain on March 3 have been esti mated to be 1,000,000 bales, against 1,452,000, 1,289,000, and 1,498,000 bales for the same date in 1915, 1914, and 1913, respectively. The depletion of stocks on the Conti nent is still more marked. The Financial Chronicle estimates the supply of stock at Hamburg, Bremen, and Trieste to be about 1,000 bales at each point, against a total of 384,000 bales on March 1, 1915, 570,000 bales in 1914, and 578,000 bales in 1913; and, including stocks at Havre, Marseilles, Barcelona, and Genoa, it estimates continental stocks on March 3 at 479,000 bales, against 1,083,000 bales in March, 1915, 1,065,000 in 1914, and 1,089,000 in 1913. Authorities place the total visible supply for the world on March 3 at 5,777,448 bales, against 7,607,227, 6,107,140, and 5,491,952 bales in 1915, 1914, and 1913, respectively. In Egypt figures relating to cotton receipts are expressed in cantars, approximating 100 pounds, and exports in bales which weigh about 750 pounds. Reducing the figures to the equivalent of 500 pounds to the bale, receipts of cotton at Alexandria from August 1 to February 9 have been, according to the same authority, 790,300 bales, against 942,500 bales last year and 1,350,000 bales for the same date in 1914. A report dated Friday night, March 3, gives the following statement as to the movement of the crop for the week: Total receipts, 107,849 bales, against 156,956 and 142,403 bales for the two weeks immediately preceding. Total receipts since August 1, 1915, 5,402,039, against 8,093,162 for the same period of 1914-15. Decrease since August 1, 1915, 2,691,123 bales. Exports for the week, 142,143 bales, of which 73,972 were to Great Britain, 24,125 to France, and 44,046 to the rest of the Continent. Total exports August 1, 1915, to March 3, 1916, to Great Britain, 1,755,493 bales, against 2,487,993 bales for the same period last year; to France, 510,883, against 376,892; to Continent, 1,295,565, against 2,672,188, making a grand total of 3,561,941, against 5,537,073 last year, and 7,296,085 for 1913-14. The export movement therefore is approxi. mately 2,000,000 bales behind last year and nearly 3,750,000 bales under 1914. There seems to be no material difference of opinion on the part of various authorities as to stocks of cotton held abroad or as to the exports, but there is some divergence in the views as to the domestic situation. A well-known cotton authority, who prefers not to be quoted, gives me the following estimate of the supply of cotton in America on July 31, 1916, at the close of the current cotton year: Visible supply in United States July 31, 1915. 1,300,000 1,800,000 12, 250,000 15, 350, 000 13,500,000 1, 800, 000 14, 050, 000 4,495, 205 1, 102, 047 I quote as follows from a letter received from him: "It is reasonably plain that if we export 6,500,000 bales of cotton this year, we shall not have more than about 1,800,000 bales left over in the United States. This includes the cotton at the ports and interior towns as well as the unmarketed supply on the plantations. I do not think it can be considered burdensome with the financial facilities that the Federal Reserve Banks provide, and if the war ends during the present summer, I believe that all the cotton that is left over and all that America can possibly produce next year will be required to fill up the vacuum created by the blockades and the war." Another view is given in the weekly cotton letter dated March 4 of a well-known brokerage house. From this statement I quote: "The world's visible supply of American cotton is now 1,604,000 bales less than at this date last year and 64,000 less than in 1914. The stocks of American cotton in Liverpool with one exception are the smallest in the past 10 years, and practically the same is true of continental stocks of American cotton. Our cotton markets are absolutely closed to Germany and Austria, which was not the case at this date last year and yet in spite of the extraordinary advance in ocean freight and insurance (the rate to Liverpool is now $15 a bale as compared with about $1 August 1, 1914) we exported the first six months of the season 2,961,000 bales and to date 3,680,000, clearly indicating an export movement for the season of fully 6,000,000 bales. The domestic consumption for the first six months of the season amounted to 3,528,000 bales and it is increasing as the season advances, foreshadowing a total of fully 7,250,000 bales for the year. With a supply of about 14,675,000 bales (made up from the carry over from last year of 2,765,000 bales, the crop estimated by the Government at 11,161,000 and an estimated linter crop of 750,000) and allowing 6,000,000 bales for export and 7,250,000 for domestic consumption, we would close the season with an apparent surplus of 1,425,000 bales." There is a difference in the estimates of these two authorities of 425,000 bales. The first-mentioned estimate places the carry-over from last year at 3,100,000 bales, while the second puts the amount carried over at 2,765,000 bales. The first places the present crop, including linters, at 12,250,000 bales, while the second, accepting the Government estimate, figures the crop, including linters, at 11,911,000 bales. The first estimate puts American consumption at 7,000,000 bales and exports at 6,500,000 bales, or a total of 13,500,000 bales, while the figures given by the 7,007, 537 second are 6,000,000 bales for export and 7,250,000 bales American consumption, or a total of 13,250,000 bales. The first authority says further that from the apparent surplus of 1,425,000 which is shown according to his figures "there must be deducted 1,179,000 bales of linters, 429,000 carried over from last year and the linter crop of this year, 750,000, every bale of which will go into the manufacture of explosives. This cuts the spinner's supply down to about 13,500,000 bales, leaving an apparent surplus at the close of the season of about 250,000 bales." I am informed that the Census Bureau in its statistics relating to the uses to which cotton is put is confined to the 5, 254, 078 1,753, 459 |