Q. 6. Banks and trust companies frequently state that they do not hold paper of a kind eligible for redis-count at the Federal Reserve bank. Is this true?

A. The experience of banks and trust companies, ranging from very small banks in the smallest communities up to the largest institutions of this kind in the country, which are members of the system, shows conclusively that practically all such institutions have substantial amounts of paper which is eligible for rediscount at the Federal Reserve bank, and the institutions which have thus far joined have experienced no difficulty in obtaining from the Federal Reserve bank all needed accommodation.

Q. 7. Is not the paper held by the smaller banks and trust companies, and especially those in small towns, too small to be used for rediscounting?

A. No. It is probable that the small institutions have an even larger proportion of eligible paper than the larger ones, and no item is too small in size to be used for this purpose. Notes for amounts as small as $5 have been rediscounted, and items of $100, $500, and $1,000 and similar amounts constitute the bulk, in number, of Federal Reserve bank rediscounts.

Q. 8. What paper is eligible for rediscount?

A. Generally speaking, the ordinary notes, single or double name, which a bank receives from its business and agricultural borrowers.

More specifically, eligible commercial paper includes notes, drafts, or bills of exchange having a maturity of not more than ninety days (or agricultural paper having maturity of not more than six months), the proceeds of which have been used or are to be used in actual commercial transactions - i.e., in purchasing, carrying, or marketing goods, or in one or more of the steps of the process of production, manufacture, or distribution.

Q. 9. What paper is not eligible?

A. Notes, drafts, or bills 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 similar instruments issued or drawn for the purpose of carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the United States, are not eligible for rediscount.

Q. 10. Is single-name paper eligible for rediscount?

A. Yes. The test of eligibility is not the number of names on the paper, but whether or not it was issued or its proceeds used for some in-36 dustrial, commercial, or agricultural purpose.

Q. 11. If a note has been made for a commercial purpose, does the fact that it is secured by pledge of collateral security make it ineligible ?

A. No, provided it is otherwise eligible.