Paper REDISCOUNTED AND BougHT BY FEDERAL RESERVE BANKS

bankers’ acceptances which are eligible for rediscount or for purchase
by Federal Reserve Banks, or by the deposit or pledge of bonds or
notes of the United States, or bonds of the War Finance Corporation.
The Federal Reserve Board, exercising its statutory right to define
the character of a note, draft, or bill of exchange eligible for rediscount
 at a Federal Reserve Bank, has determined that

(a) It must be a note, draft, or bill of exchange which has been issued or drawn,
or the proceeds of which have been used or are to be used in the first instance
in producing, purchasing, carrying, or marketing goods in one or more of
the steps of the process of production, manufacture, or distribution, or for
the purpose of carrying or trading in bonds or notes of the United States.
It must not be a note, draft, or bill of exchange the proceeds of which have
been used or are to be used for permanent or fixed investments of any kind,
such as land, buildings, or machinery, or for any other capital purpose.
It must not be a note, draft, or bill of exchange the proceeds of which have
been used or are to be used for investment of a purely speculative character
or for the purpose of lending to some other borrower. An exception to the
last named prohibition was incorporated in the Agricultural Credits Act of
March 4, 1928, which provides that notes, drafts, and bills of exchange of
factors issued as such making advances exclusively to producers of staple
agricultural products in their raw state shall be eligible for discount.

d)

It may be secured by the pledge of goods or callateral of any nature, including
 paper, which is ineligible for rediscount, provided it (the note, draft, or
bill of exchange) is otherwise eligible.

Special conditions of eligibility for discount at the Federal Reserve
Bank are applied in the case of each class of paper.

Bankers’ acceptances eligible for rediscount
by the Federal Reserve Banks

IT

Definition: A banker's acceptance within the meanings of the Federal Reserve
Board Regulations, is defined as a draft or bill of exchange, whether payable in the
United States or abroad, and whether payable in dollars or some other money, of which
the acceptor is a bank or trust company, or a firm, person, company, or corporation
®ngaged generally in the business of granting bankers’ acceptance credits.

A Federal Reserve Bank may rediscount any such bill having a
Maturity at the time of discount of not more than 90 days (in case of
AN acceptance drawn for an agricultural purpose, six months), exclu-Sive
 of days of grace, which has been drawn under a credit opened

[71]