The Harvester World: Volume 8, number 1, January 1917

              the Federal Reserve Act, twelve Federal Reserve Banks were established. The country was divided into regions and a Federal Reserve Bank established in each. N ation- al and other banks called by the law " Member Banks " may, among other things, rediscount their customers' notes with their Federal Reserve Bank. The law pro¬ vides that the Member Banks may rediscount paper taken for agricultural purposes, provided such notes have not more than six months to run before their ma¬ turity. Therefore, if the bank I spoke of, which had loaned its available funds, had additional demands for money from its customers, it would not be necessary to refuse Mr. Jones, or anybody else, provided he came in with proper security. All the bank would have to do would be to take some of its agricultural paper that matured within six months, endorse it and send it on to the Federal Reserve Bank in its district for rediscount¬ ing. The banker would then have more money to take care of the needs of his customers and the natural course of trade would not be stopped.
It  will interest you to know about what is termed "agricultural paper."    It means notes or acceptances that are issued for agricul¬ tural purposes, or based on    ' livestock.   The Federal Reserve Board  at  Wash¬ ington says that a Member Bank  buying such  paper will have to satisfy itself in some adequate way that the note is substantially of an  agricultural character. Therefore a simple memo¬ randum   attached   to   the note,  stating   that  it  was    ' drawn in payment of goods    I used for agricultural  pur-    j poses, would be considered    j sufficient evidence by the banks.   The law provides for  the  rediscounting   of
both notes and acceptances, but I am limiting my talk to
notes, for the note form is more universally known than is the newer instrument called an acceptance. I have prepared a note form that will be recognized as agricul¬ tural paper. This note was taken by William Parker & Co., implement dealers at Newberry, Iowa; Parker & Co. sold Roger S. Brown, a farmer, $42.50 worth of imple¬ ments on March 2nd. Brown promised to pay this sum to Parker on September first, and signed a note payable at the First National Bank of Newberry. It says on its face that "This note arises out of the purchase from the payee of goods to be used for agricultural pur¬ poses. '' 1 suggest the use of a form of note similar to this.
In connection with the extension of credit and the signing of notes, I wish to say right here that I do not recommend extending credit to a customer in any form unless you know and are satisfied that he will eventually pay the obligation. Credit is badly abused, and much discretion and judgment should be exercised in extend¬ ing it.
Parker and Company, whose name appears on the note in question, are now in a position to take it to their

WELL, Good-Bye John. GOOD PUT IT ON THE BOOKS

local bank and get the money for it and use the proceeds in their business. They do not have to wait for six months, until Brown gets the real cash. Brown is now under obligation to pay this note, not to Parker & Com¬ pany, but to the First National Bank of Newberry, Iowa, and the bank expects him to pay the note on Sep¬ tember first, and not on September ISth, or 20th, or 2Sth, according to Brown's personal whims.
It may be said that some of the banks in your towns are not National Banks, and therefore not in a position to rediscount notes with Federal Reserve Banks. I would not accept that reason as an excuse for not dis¬ counting your farmers' notes, provided the notes are good. It is a bank's province to discount good paper, especially when it is signed by a prosperous farmer and endorsed by a responsible dealer, for there is a double responsibility for its payment—the maker's and the endorser's. Your bank should be perfectly willing to accept a reasonable amount of good paper. If your banker is not a member of the Federal Reserve System, he has a way, through his correspondents in larger cities,   of   obtaining   additional   funds   for   handling
the local business in  his town.
Gentlemen, you have the means at hand to put your business practically on a cash basis. Let me urge on you to discontinue the use of open book accounts. Close all your sales the day you make them by taking a note. Do not take a note, or extend credit in any form, if the customer is not a good credit risk. If he can't pay, you do not want his business, and you are much better off to have the goods in your warehouse than in his pos¬ session. Take your notes to your bank, endorse them, and discount them, get the cash and use it by taking advantage of the discounts offered to you by the various implement manufacturers from whom you purchase goods. Impress on your farmer customers that a due date means a due date, and not two or three weeks or a month later.
Talk this matter over with your banker. He should be only too glad to co-operate with you and help to make your business successful, for while doing so he is also making money. The average farmer throughout the United States is prosperous. Most of them have substantial bank accounts. You are not imposing on the farmer when you ask him to do business in an up- to-date and businesslike manner. It is all a matter of education, and it isuptoyou—the implement dealers — to administer this education. You are the people with whom the farmer deals.
The best proof that a thing can be done is the fact that it has been done. The change in business method which I am urging upon you here has already been accomplished by at least one dealer whom you all know