Pine Bluff daily graphic., 1912-10-20
COTTON

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 Written for the Graphic by Silas Bent.)
 ing system falls upon no section of the country more heavily than upon the South, because the South is pinch ed and bled annually in the move- ment of the cotton crop.
 In the thirteen cotton growing states, including Kentucky and ex- cluding Missouri, there are 1461 na- tional banks with combined capital stock of $159,927,4 ,43O.
 The total value of cotton raised annually in the Southern States is about seven and a half million dol lars.
 When the capitalization of the Sou- thern banks is considerei .,n connec- ton with the value of the cotton crop, it is at once obvious why they must call on New York and on Eu- rope for help when that crop is to be moved from the producer to the manufacturer
 It should be mentioned in the be- ginning that the local cotton busi- ness is done in cash. Hence a buyer, or cotton factor, will arrange with his local bank to obtain funds if he wishes to purchase cotton. He gives as security his note, with warehouse, or compress, receipts, or the railroad bills of lading covering certain num- Der of bales of cotton. Conservative banks do not advance in this form of security more than the capital stock and surplus, and so the move- ment of cotton is costly and difficult When the cotton factor buys 1000 bales and get loan, for, say $60,OOO, the local bank knows that within three or four days it will be called upon for $60,OO0 in currency, which must come out of it's reserves or be sent to it from reserve city banks Approximately .$2OO.0O0,OOO of teur- rency is sent annually into the South to help finance this crop.
 Who gets the profit? New York bankers and brokers They reap in this way several million dollars a year. The South pays the bill..
 And, in addition, the mere cost of shipping the currency costs country banks in the South, It is estimated, $40.OOO a year, aside from the inter- est which must be paid for it.
 The first reason for this expense is the lack. of actual currency. An other is the use of actual cash where credit exchanges might be more gen. erally used. Still another is the in- elasticity of our. currency system.
 A discount system would make it possible to coin the cotton crop at once into currency The local South ern bank which took the cotton fac- tors paper for $60,O0O could turn that over to the reserve agency and get currency with which to finance an other cotton factor. Thus the enor- nous wealth brought out of the soil would make for instant prosperity instead of creating a financial strin- gency. It would enlarge credit, in stead of crippling or hampering it. Reform of our banking laws might well include system of acceptances such as are in use in Europe. An ac- ceptance is, in effect, draft bearing a banks endorsement. For instance the buyer of cotton has an arrange. l ment with his bank whereby it agrees I to stand back of the purchaser | promise to pay a draft against him ! When the draft for the cost of the l cotto his received at this bank, 1t "ac,
 cepts' it, writing that fact acros.
 the face of the draft, with the date
 So far as the holder of the paper i: concerned, it is the hanks obligation | Such paper is rated higher thar l government bonds abroad. It has ar
 international market.
 A uniform discount rate, effectiv | only in rediscounts for banks, woul AA>AAAAAAAAAAA/s q