New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1883-09-07
LETTERS FROM THE PEOPLE.
ACCOMMODATION PAPER.
A SERIOUS SOURCE CT COMMERCIAL INSECURITY.
TO he Edttor OF The ribWne.

|
SERIOUS SOURCE OF COMMERCIAL INSECURITY
TO ne Edttor OF The r,bWne.
SIR Your leader of August 10, headed Fear
of Panic" without doubt correctly outlines the pres
cnt condition OF finance and trade In this country
The circumstances seem to you peculiar" Money Is
plenty very low rates call good collateral and
yet although there has been period Of reckless
trading. and the volume of commercial indebtedness
does not be large" you notice that commercial
oans are scrUtnzed with unusual dsrust and In many
cases refused where refusal would have been thought
impossible few weeks ago." and that the 6strust Of
lenders has caused great shrnkage in the credit OF
| many firms and corporations"
Liquidation has been going steadily for two years.
yet this dsrust attaches not only to credits known
10 be based on wild speculations, but TO commercial
loans generally state OF things which you do not at
| tempt TO account for.
1t is plain that promises Of merchants
sidered the safest security. Admitting certain we'll
known exceptions, this is the broad conclusion; and
there must be for it-something wrong at
the root OF the II that the point OF
the mystery overlooked and find It in the system,
since the war, OF floating sngle-name accommodation
paper Up this period certainly the bulk OF the
OF banks made up principally OF" douole-name bust
ness paper" This formed favorte form OF Investment
for financial institutions and private capitalists and was
proven by the experience Of many years be almost
the safest channel for the employment OF hostng funds
An investment In sIoh material was pretty sure to
turn at par money loaned panic panic while to
| realize In panlcky times Investment in stocks
might involve serious loss OF principal.
The old system sound business note signthed
purchase OF a commodity advance the pledge
OF commodity, and said its face for value
ceived coffee OF A, b Co. ;" etc. TWAS possible
those days keep accurate account OF the extent and
the nature OF the business Of any mercantile house that
used its credit There were certain few wel-known
houses OF wealth. privileged to issue their paper for any
Iard IA ken
moderate bounds; but tho general rule that
oommodation" paper sgnihed weakness and distrust
soon appeared.
The new system Is unsound n at the beginning
Of the war, through the necessities OF the case Gold
being subject constant fuctuation, the importer deal
ing on specie could sell his goods credit for
paper money The sale and the settlement needed to be
banker Hence no offered liberal discount for cash. and
the Transaction cold them in the discount market and
paid cash the importer This the beginning out
MaiT pe OF the Sna Of
money. 1t has been easy TO make notes. and easy 70 sell
the he" ap az G point reached sudden sense o.
!. ali h% hike s s
Is. q RS they button sna ii Ss
R,Hhssss Ell np aoaaS
S: may f's e .oS SG
speculation ip stocks or some wild venture Their
Slss %sy the nS1sno
helping . pay family s1psP:,. !, al snSeE.aiD g
Il they should be fortunate In securing the return OF
their principal they promise themselves they viii never
again ntrust any with club which may DO used In
the wrong direction
n ell men we're OF sound Judgment and could be
trusted dscreety the privilege might work vel
10 trust them with psn Ink and paper sign pleasure
their and to furnish them the cash therefor With
out asking questions But the average cannot be
trusted TO make wise OF funds thus easily secured
The present system, therefore, 10 unsound because II
TO promote excessive expansion Of unwhoesome
business and dangerous, because withdraw s cup
port In time Of necessity. II blows the bubble and
leaves 1, TO collapse Business sdeptitssf 10 and leans
upon IL only 10 find how unstable support II Ia time
OF peril.
II there Is be change for the better II must
through old methods. Merchants must close
open accounts and insist on their customers giving
notes 70 represent Indebtedness. that themselves
needing money they may have business paper TO offer In
bank OF elsewhere and will not have 20 depend on the
chauce OF coating their manufactured paper Thus
legitimate business would he kept within It's own proper
bounds and would be saYed ron ns and starts or sus
picion and dsoredt, ant .e-dying would be confined
10 rs special campus and all who entered this hed
10 invest their cash would do with eyes wide open.
Newport Aug. 80, 1888 ANrEDILuylAN