Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-12-22
BY ANDREW CARNEGIE.

We are spending $4OO, COCO to open a
great new trade route to the markets OF
the far east, and many good Americans
seem to feel that the moment the Pan
anna canal is opened to commerce we will
at once be in a position to command a
great share Of the trade of the Pacific
But unless we speedily reform our bank
ing system so that we may be in posi-
ton to finance the Panama canal trade a
good part Of this four hundred millions
will be wasted.
If we are to have the advantages in
finance enjoyed by our European COM
petitors sweeping revision of our pres
ent banking laws is absolutely impera-
tive Foreign banks, especially those of
London, now finance our foreign trade,
and we pay them rich tribute for the
service. To show how London finances
our foreign trade for us let me quote
from the foreign trade expert Of one of
the greatest banks:
IAN importer of coffee CAD in New
York purchases certain number of bags
of coffee from an exporter CD in Brazil.
A agrees to furnish Il with a commercial
letter of credit. b is not in position, We
will say, to await the arrival of the coHee
in New York and the return of :. remit
the other hand is unable to remit Tor
the coffee bef~~c it's receipt and sale to
his customers. A goes to his banker IN
New York and requests him to authorize
to draw upon the New Aorh banker ;
London correspondent at ninety days
sight with bills OF iading for coffee to the
amount of the purchase attached TO the
draft consular invoice and insurance
certificate if Il is to furnish the insur-
ance
Financed in London.
IF AS banker is willing to extend the
credit. he writes a letter Cor uses print
ed form, requesting his London banker
to accept BIS drafts upon presentation
under the conditions already mentioned
and others of minor Importance. This let
ter is issued in duplicate. one copy going
to the London banker. the other being de-
livered to A. A then mails the copy re-
ceived by him to B. B thereupon arranges
to ship the coffee. obtains the bill OF
lading invoice, etc, and takes them
with the copy of the credit to his banker
in Brazil. A draft is then drawn on the
London bank under the terms of the
credit at ninety days sight and is dis
counted by the Brazilian banker, the
proceeds being placed to the credit Of BIS
account or given to him In the form or
CHECK or cash.
documents as the instructions may re-
uuire to be forwarded direct to New
York, to his London banker. He may Sc
cure discount of the bill at once by
cable or await it's arrival In London be-
fore doing so. or he may request his Lon
don banker to have the bill accepted and
hold 1t for maturity II the bill is dis
counted. the Brazilian banker may draw
against it Immediately and thus put him
self In funds to purchase other coffee
bills. Upon receipt Of the bill by the
London correspondent. it is presented to
the London banker on whom 1t Is drawn
for acceptance. The acceptor bank ex-
amines the documents. and If they are
drawn according to the terms of the
credit, accepts the draft and returns 1T
to the correspondent Of the Brazilian
bank, retaining the documents. which it
then forwards to the New York bank
which opened the credit.
System of Extending Credit.
"The London bank has in effect agreed
to pay 1t at the end of ninety days. Upon
maturity payment is made and the
amount is charged to the account of the
issuing New York bank. Upon receipt of
the documents, the New York bank de-