The Birmingham age-herald., 1913-07-25

per. There may have been some reason
which appeared good to those who drafted
this measure for fixing limit of IS days,
but If there be a reason it has not as yet
been explained to American bankers.
A somewhat hasty and yet accurate es-
innate was made on the life of CONNER
cial paper and the average daily payment
upon paper of that kind in the city of
New York. The average payment er liqui-
dation of commercial paper each day in
the larger banks in New York, especially
those which make the diseountlng of COM
mercial paper a large feature of their
business, is from 100000 to $780, 900. The
lpresident of one of the smaller banks in
New York, one that carries deposits OF
about $20,0O0,000, said that his bank re-
ceived on the average about $50,O00 a day
through the taking up of discounted COM
mercial paper OF course, many times
there is renewal of discounts.
Some time ago one of the officers OF the
clearing house association undertook TO
obtain a fairly good estimate of the rea-
sonable life of commercial paper. lie
wanted to learn how long 1t took TO Sc
cure a turn over-that is to say, payment
for commodities manufactured and mar
keted for goods sold by wholesale houses
| for which notes were discounted that rep
resented actual commodities.
| He was surprised to learn that five
months is a rather short allowance of
| time. His information showed him that
about six months were required in order
| to secure a completed transaction-thati is
to say final payment for manufactured
commodities or for those sold by the
great commission or jobbing houses.
1
Forty-Five Days Too Short
| 1t is in contemplation to submit to the
members of the lower house of Congress
a thoroughly prepared statement to show
that the limit of As days is an unreason-
ably short one for rediscounting CONNER
cial paper Apparently the trainers of
the bill were anxious to guard against too
| long committals, looking UP 40 days as
q reasonable time for the life of CONNER
cial paper offered to the regional reserve
bank for rediscount But the feeling in
this city is that unless this feature of the
bill be amended so that the time be ex-
tended to at least three months, the effect
of this provision will be greatly to curtail
the advantages which the regional re-
serve banks are expected to offer in the
way of rediscounting commercial paper.
The matter is quite as important to busi-
ness men as 1t is to bankers.
A Gigantic Estimate
/
| 1t has been estimated by some of those
who have examined the bill that II the
measure become flaw the life of any COM
mercial paper sold or rediscounted can
not be longer than 45 days. Presumably
the average life of commercial paper sold
| TO the federal reserve banks would be
about one month The result would be,
Undoubtedly, that almost all of the COM
mercial paper which is to mature in from
| 80 to 40 days will be turned over the fed
eral reserve banks. Charles Nj. Fowler
of New Jersey, who was for long time
chairman of the committee of banking
and currency of the House of Representa-
tives, has recently stated that IL the cur
rency bill now before Congress becomes
law and there are not large Withdrawals
of national banks from the control of the
government so that they may operate
under safe charters, II will be necessary
| to ship back and forward all over the
country and to sell from $l0,0O0,0 100000 to
S12 600 600 600 OF commercial paper in order
adequately to supply the country with
J, currency.
A True Asset
| The clearing house associations of the
United States demonstrated in 1907 what
the value of real commercial paper is as
an asset to teh banks. When the term
commercial paper is used ii is understood
| to mean notes or drafts given for COM
modties actually in the course of barter.
These notes and drafts represent the ac-
tual wealth which is in these commodi-
ties and these manufactured or agricu
tural products are the real security for
the payment of these notes. since it is
i presumed that when the goods have been
sold to the retailer consumer the
money which he pays for them will be
utilized in liquidating the notes and drafts.
| The statement is so simple that it seems
.I-r Ns.f
tains the reason why commercial paper
| is regarded as an asest unsurpassed by
| any. Hundreds and millions of these
notes and drafts were discounted by the
clearing houe associa tosnoihmhmhmmm
| clearing house associations of the United
States in 1907. the associations issuing
their certificates for them. And these cer-
| tiicates were currency available for pay
| ing clearing house balances.
There are a good many bankers who
wonder whether after all the proposed
currency bill is not going too far in its
proposed somewhat complicated system
| of regional reserve banking. They ask
why, If the experience of the clearing
house associations in 1907 was so highly
satisfactory in every way, If it were then
so abundantly demonstrated that there
! Is no better form of security for currency
than commercial paper, not one dollar of
which was defaulted, it would not be we'll
| to let the national banks do as the banks
OF Canada do-furnish the most perfect
bank currency in the world without re-
discounting any commercial paper or
charging themselves with any additional
| expense.
Canada's bank currency system was not
original with the Dominion. Massachu-
setts taught the lesson. Shortly before the
beginning of our civil war the Canadian
statesmen and bankers, having thoroughly
| informed themselves respecting the adj
mirable state banking law of Massachu-
setts, practically adopted that law, be-
| lieving then as they do now, that Massa-
chnsetts taught the world the best bank
ing system possible. The Massachusetts
law was followed throughout New Eng
land and also in several of the American
states, and it was demonstrated to be ah-
| solutely safe and sound and would prob
ably be in existence all over the United
! States at this time had II not been for
the establishment of the national banking