The daily Cairo bulletin. (Cairo, Ill.) 1878-1???, 1883-06-26
Business and Banking.

DuSlnbbS anu Dunhlubs
There are nearly one hundred banks
in New York, everyone Of which holds
some proportion of what Is known in
discount circles as swamp paper.
The recent failures in the leather and
other trades have, consequently excited
no little discussion among bank officials,
and the question Is eagerly canvassed,
What is the soft place in the present
system which enables a firm to carry on
its transactions upon borrowed capital
until nearly all its assets have disap.
pearedp
Under the system which prevailed be-
fore the war, the bills in the market rep.
resented bona-fde mercantile transac.
tons. If merchant bought so many
hides, he gave bill for the amount.
When he sold, he drew on his customer,
and in each case the document bore on
the face of il the consideration for which
it was drawn, In those days credit was
much longer than il is now. Three and
six months were common usances, and
even ten months was not unknown. Al
though there was no absolute hypotheca-
ton of the goods to meet the bill, yet
the buyer had, or supposed he had, the
security OF a legitimate trade transac-
ton at the back. of it, and that the goods,
when sold, would discharge the liability.
The war, and the disorganzation of
currency caused by it, abolished all this.
Credits were shortened. Currency was
plentiful and deprecated in value.
Every existing debtor made haste TO
discharge his liabilities in a medium so
reduced from its face value that the
creditors received only percentage of
his debt in discharge for the whole.
This changed the entire system of mer-
camille transactions. National took the
place of individual credit. The system
of long usances disappeared, and trade
transactions were reduced practically
to cash basis The great majority of
the business of this city is now trans
acted at from thirty to sixty days credit,
and bills are rarely drawn except when
che customer requires further indul-
gence The amount of mercantile pa
per afloat representing specific mercan-
tile transactions is probably not tenth
part of the turnover. A new system has
consequently taken the place Of the old.
The merchant, instead of selling his
customers paper, furnishes broker
with his own notes. and these are sold
to the banker generally upon the repute
and credit of the firm alone, or with the
support of an indorser. Under this sys-
TEN, the paper out bears no necessary
proportion to the business done. In
deed, il seems as il some of the firms
who have recently failed have added
paper factory to their leather business.
The notes issued, which in q sound con-
Germ should GO 10 purchase fresh stock,
have simply represented nan increasing
deficiency, and the traders have gone
on until the bulk of the assets have van:
ished.
Several remedies are proposed. II
has been suggested that by some sort OF
freemaSonry between the banks ii might
be possible to tell how much paper each
firm has afoat. But this suggestion is
scarcely feasible Much Of the paper is
sold to private buyers in country towns,
who could not be approached The
remedy really rests with the banks them
selves Instead Of following each other
like flock Of sheep and buying paper
because the house is in good credit,
they should insist on the merchant
furnishing bis broker with a cerIifet
balance sheet 70 be shown 10 person,
buying the paper Such system woult
enable bankers TO CLEAN some idea o.
the risk they run, and firms who con
slider the suggestion derogstory to Their
dignity might better keep out Of tn:
market There is another objection Il
the existing system in that it offers grea
opportunities for fraud, such paper be
ing easily fabricated by dishones
partner for his own purposes. - Nsu
York Tribune.