The Washington herald., 1911-01-08
By FLANEUR.
(wntten S1 M Waahtngtm HanldJ

(Wntteu for Ihs Waahhgtm HaaldJ
Americans obviously arc content to do
their international banking through the
medium Of their foreign competitors. This
b inconsistent with American character
istics. and that they continue to do 30. de-
spite the fact that they have amassed an
enormous banking capital and q foreign
trade Of more than $500. 100000, calls for
some explanation. The necessity Of es-
tablishing American banks abroad to aid
commerce again and again has been
pointed out by American travellers and by
our consuls. yet apparently to no avail
1t cannot be doubted that American
banks abroad would be powerful aids to
upbuild our commerce. To me they seem
Indispensable, for these reasons:
They would furnish a direct finan-
cial exchange.
They would provide a safe and efh-
cient means Of obtaining credit infor-
nation.
They would furnish capital and cred
it at foreign markets for American en-
terprises.
They would bring American financial
interests in touch with foreign enter
prises. creating more business for the
American exporter.
The commercial benefit of direct finan-
cial exchanges does not seem to be fully
understood in this country. Perhaps our
legal restrictions as to domestic banks
have been the cause. One of the funda-
mental principles of European banking
practices is that a bank is permitted to
sell its good name in lieu Of money ad-
vanced or a credit placed at the disposal
of the borrower. For instance. an Eng
lish manufacturer. purchasing materials
abroad, does so through either personal
representatives or local firms acting as
his agents.
Makes Use of His Bankers.
When such a purchase is made. know
ing that the goods must be paid for be-
fore shipment. he receives from his bank
ers, commensurate with his financial
standing, a credit to the effect that the
bank will accept" Chat is. guarantee
payment of drafts drawn by the foreign
agent with shipping documents attached.
which give the shipper complete control
of the goods until they reach their desti-
nation. The agent. armed with this
draft and the shipping documents. is en-
abled at once to place himself in funds
by the negotiation of these instruments
ana Tie VI Tic at 10 pio
tccted until the bill of exchange is ac-
cepted by the English banker. to whom.
in consideration of his acceptance. the
document must be surrendered.
This practice enables the European
merchant to finance his purchases in for
eign countries at minimum cost, and 1t
must he admitted the practice has enor-
mousIy developed foreign trade there. II
American banks had branches abroad.
any merchants deposit in the parent in
stitution readily could he made available
at any of its foreign branches. or if an
American bank we'll known abroad.
could add its credit to that of the mer-
chant. by guaranteeing his transactions
in accordance with established business
usage. he could deal direct with all the
ports of the world.
American Banks Restricted.
But unfortunately American banks
have no branches abroad. Moreover.
they are restricted by law from making
time acceptances'' or otherwise guar
arteeinS commercial paper. In conse-
quence the American merchant is forced
tn employ the services of European
hanks to finance his American transac-
tionS. This facility must needs be well
paid for. as the good name of the Eu-
ropean banker is not sold cheaply. Con-
sequently the American importer must
establish his credit with strangers or suf-
fer the Inconvenience. delay, and expense
Of an indirect exchange. A like disad-
vantage confronts the exporter for the
identical conditions that made those same
European drafts the most available ex-
change for the purpose of collection
Thus the European banker takes toll
of American commerce. both ways. In
addition to the immediate handicap re-
sulting from indirect exchange, the
American merchant suffers collateral dis
advantages, as the quotations of the
world are expressed in the figures OF