The Portland daily press., 1883-05-18
Curiosities of Credit.
Examples of the Trust Underlying Bust
ness The Promises to Pay OF Merchants
and How They are Regulated in the U.s.
ual Channels of Trade.

How much personal confidence has to do
with enabling the social and business life of
the day TO be carried on is nowhere better
shown than ia a consideration Of the system
of credit which underlies all manner of tram
saclions. Nothing, indeed, is more apt to
bewilder than casual survey which serves
only to illustrate to how great an extent the
principle of trusting is resorted to. There Is
quite large business done in the sale If
striking cards, illus rated with more or less
taste, whish convey to the reader the infor-
mation that Poor Trust is Dead Bad Pay
Killed Him. And when this motto appears,
accompanied by a striking cut in colors,
showing dead dog lying on the ground with
legs apifted and aith piteoas expression
OF conntenance. fixed apparently by The ''in-
stantaneoIs process while the animal was
ia the last throes Of dissolution, ii is very
difficult for the impractical observer to re-
sist the conclusion that the motto is rigidly
adhered to by the person 10 whose premises
the sign is displayed. A little experience
however, shows how much Of a hollow
mockery the thing is. What is known to the
vulgar as ''the slate' appears everywhere il
one form or another. The record Of trust
changes in charae.ss-E varies from the
chalked markings on the cellar door through
various grades of accounts until IL reaches
it's acme in big sheep bound and heavily
ribbed volumes filed with specimens Of the
penman's art, and the book-keeper's best
skill. But the thing chronicled is the same.
IL is record of trust, confidence, ere lii,
and 1t marks the bridges which cross the
points of more or less prolonged impecunios
ity. Its vaIiances are almost innum@rab.e
and some are rather extraordinary. Every
grocer. haberdasher or other small trades
man in poor nelghborhood, has constant
experiences in the credit line with his neigh
bors, and even pailfuls of coal and punches
Of greens" are not paid for until The BUYERS
themselves obtain their weekly wages. And
some what similar state of affairs prevails
in what are called higher circles, although
the matter OF convenience of payment rather
han the ability to pay is what governs
there.
II is, however, in the mercantile world
proper-the world whose ho- lion is bounded
by boxes and bales of goods sent to and from
every habitabe elme-tbat the system
reaches its highest and most notable devel-
opment. Here it is that complicated mecb-
ansm is brought into play TO give to credit
its widest range and most fiexib appliances.
Rating agencies are employed to keep rec
ord of the transactions of tradesmen, their
liabilities and resources. 1t &c after while
to be matter of calculation as to the
amount for which a purchaser shall be trust
ed in view of all his circumstances. Some
Of he methods by which results are arrived
at as well as sketch of the machinery in
use for the purpose, form interesting fea-
lures of the subject.
Promises to pay abound. The richest
house issues Its paper as well as the smallest
Brokerage establishments have been found
ed, some of them with Sl,0O0,000 at their
Command, to handle the paper of the mer-
chants, and there are banks which make a
feature of discounting the paper. One bank
is known to have had as much as $4,000, 900
If the paper on hand at one ime, and there
are three OF four which carry in the neigh
borhoodiof so. 000, goo worth the year round.
The rate of discount BY the banks is all the
way from 81 t. 70 per cent, according to the
standing of the signer, and the broker re-
ceives one-fourth of per cent. for negoliat-
ing the paper. A merchant may draw his
note for $50, 900. He wants $4,000 at once
and the remainder as soon as IL is possible to
obtain it, The broker advances the $4,000
out of his own capital, and he goes to the
bank to negotiate the note. II il is after
banking hours when the merchant draws his
note, the $4,000 will enable him to prompt
" meet an obligation, and the need is not so
urgent bu. thai the balance can go over till
the next day. The broker, of course, deducts
his $4,000 as soon as he gets the $4,000,
less tile discount, and the bank carries the
full amount when the paper goes into its
keeping.
By the recognized rules of trade the nor
NAL credit is limited 10 80 per cent. more
than the capital Of the house. To take it
beyond that limit reduces the rating OF the
house, and makes the paper what in COM
mon oarlance would be called risky In
granting credit the plan is TO allow 10 per
cent. for an individual account. In other
words, If the capital Of house is 500. 900,
he seller will grant credit to the extent OF
$4,000. Thus IL would lake 10 transactions
10 use up the entire capital, and in this way
the individual risk would be reduced to what
would be called minimum. This is not al
ways the case. for very often In special lin %
OF goods the limit is exceeded but IL is the
Fundamental rule. A jpbDihg house will do
a business Of s., 0O0, 900 a year on a capital
Of s., 100000 year, an investigator Of cred
its explained. 1t is very seldom that the vol
ume Of business a year amounts 10 over
ctkut bfIbto buC topibdi iHsCotru. ne mouse
will sell the goods on 80 DAYS time. 1t will
pay for the goods OH 30 days, but to do this
it must have its bills dated ahead. The
house will buy In January and February for
he Spring trade, hut the bills will date from
April and May l. The credit OF a whole
safe house depends, naturally, very much on
the rate at which its paper sells. Then,
again, the money market has a certain infiu-
eBce which has to be considered: Since the
commercial agencies have attained such
magnitude the credits are based largely on
their information. Owing to the extent Of
The country the individual merchant cannot
keep track of the responsibility of the trad
ers in the different States who may desire to
purchase Of him. To maintain their own
reputation the agencies must strive for accu-
racy and trustwortbiness, and, therefore,
their reports have come into widespread
use. The establishment of commercial rat
ings brings money that has been retired into