The evening times. [volume] (Grand Forks, N.D.) 1906-1914, 1910-09-13

call-loan rate Is attributed to the sud
den changes in the demand for specu-
lative loans. Speculative movements
do not halt because Of q small rise In
the call-loan rate. Moreover, foreign
funds are not attracted because OF
tits very uncertainty Of the call rate
and the absence Of bankers bills AZ
q form of investment. "New York is
in class by itself. Without bank
accepted bills It can have no discount
market. Without . discount market
funds can not move to It as they do
between the financial centers Of Eu-
rope. because there are no bank-ac-
cepted bills in which foreign banks
can invest
This weakness Of our banking sys-
tenn results in q serious economic loss
to the country. Only the strongest
and largest American concerns can
take advantage of low foreign dis
count rates. without bank accept
ances we are also at distinct disad-
vantage in our foreign trade. The
'Englj' importer can instruct his
credit s. draw, upon his London
bank. 80 bank-accepted bill is
of first qh> &. T. can be sold at a
high rate, thu, >g the English i'm
porter the best q. MS in competi-
tion with the AmeSex,. who can Of
fer no such securityS American
exporter, as we'll. sat 10 vantage.
Since our system does mo- allow the
creation Of supply Of exchange on
New York, foreign debtors must pay
with bills on Paris, Berlin, or London.
the exporter being forced to value his
goods in francs or marks or sterling.
He is thus Obliged to assume the risk
of exchange, serious handicap when
competing, for instance, with British
exporters.
The prohibition Of bank acceptances
is detrimental to our banks, parttcu-
larly the small country bank. The
country bank finds the employment of
its surplus funds serious problem.
Deposits with reserve agent yield
but a low interest in return; invest
'ment in bonds partakes of the nature
of speculation, and the purchase OF
commercial paper involves risk and
the tying up OF the banks funds for a
fixed period. "If national banks were
permitted to accept time bills the
country bank could then invest Its
funds in paper bearing the guaranty
of some great bank with whose stand
ing 1t Is; perfectly familiar. Risk
such as now has to be taken would
be eliminated. What is vital, how
ever. is that with national discount
market an investment in a bank-ac-
cepted bill is one which could be re-
allied upon Immediately"
The New York banks. are also in
jured because of the prohibition Of
bank acceptAhces. They are forced
to put their surplus funds into day.
to-day loans on the stock exchange.
In this field there is often the keen
est competition, q competition which
"is not only of little benefit to trade,
but which, through the lowering of
the money rate. actually stimulates
speculation" Moreover, the absence
Of a steady money rate, such as exists
abroad, deprives New York banks OF
a reasonable and satisfactory basis
upon which to fix rate Of interest
on the deposits of country banks. In
London the interest paid on deposits
is fixed at a certain percentage below
the discount rate Of the Bank Of Eng
land, changing as the discount rate
changes. In the United States, how
ever, country banks receive a fixed
rate Of interest on their deposits,
usually two per cent, the year round,
regardless of fluctuations in the value
of money. Consequently. when the
call-loan rate is high country banks
do not get the interest their deposits
earn; when the call rate Is low the
injurious competition already men
toned results.
The remedy for these evils will be
found, in the opinion Of the author,
in the insertion of>a paragraph or two
in the national bank act, giving the
national banks power to make accept
ances. ITO permit bank acceptances
would not require the revision of the
entire bank act. To remove the bar
rier to scientific banking, as it is
known abroad, no complicated piece
of legislation would be snecesnary.
Time only would be required for the
development of great national dis
count market"