The Birmingham age-herald., 1913-07-26
Another Example of the
Ways in Which Credit
Can Be Utilized
LONDON KNOWS SHE
MUST PAY UP LATER
United States This Fall Will Export
Hundreds of Millions of Dol
lars Worth of Farm
Products
BY HOLLAND

-NtN loihi july z0.-tSpeclal. )-MenDefS
Of Congress viii nave fine object lesson
before them during all the time that the
pending currency bill is under discussion,
since it is presumed that in any event the
measure cannot be formulated into law
before mid-october This object lesson
will show how many of the great instru-
mentalities by which credit is utilized for
the facilitating of American barter and
exchange of commodities have been devel-
oped without even the remotest assistance
or regulation or supervision from the ma
tional government through law.
About a week ago there came the first
intimation that London was lending money
in New York. although, curiously enough.
these transactions We're coincident in point
of time with the expectation of gold from
New York to Paris, The great bankers of
the United States in cooperation have
made advances to the London money lend
ers, with the result that it was possible
to negotiate for discount notes running
from 60 days to three months behind which
stood for the most part securities which
are listed in the New York stock ex-
change.
Presumably London was informed that
the promise for the American harvest in
1913 is as good as was the forecast a wear
ago at this time. 1t is inconceivable that
the harvests should not be abundant and
they are more likely to yield record MAX
ing crops on the whole than they are to be-
below the average.
London knows that as soon as many OF
the crops are harvested and in condition
for the markets they will be exported in
large amounts. We shall probably sell to
Great Britain and the continent of icurope
late in the fall and early in the winter
FOOD products of approximately $40O, 600 900
In value. We shall probably sell TO Great
Britain and in less measure to France
raw cotton perhaps to the money value
Of $500 600, 900. Great Britain and the con-
tlhent OF Europe must pay for these com
modiues IN one way or another as soon
as the commodities are marketed.
Undoubtedly ii was reliance upon a
great harvest in the United States that
from the more narrow or technical bank
ers point of view the London money
lenders We're willing to negotiate the dis
count of notes, commonly called finance
piiis' ottered by American bankers The
transaction is one in which the govern
ment has and can have no part No leg
1slation affects 1t. 1t would not be affect
ed, directly at least, had Congress in June
OF this year passed the banking and cur
rency bill now under consideration bv the
lower house. 1t is a financial function
which has been developed in the normal
course of international trade represent
ing the barter of the commodities of the
United States for the commodities or cash
of Great Britain and other European
countries.
Great Discount
One of the estimates in the Wall street
district is that the aggregate amount of
these borrowings in London by American
bankers would be not far from 500 600 600
That amount, great as it is, represents
the confidence of Great Britain in the abil-
ity of the United States to get from the
soil products which will be exported later
IN the year, and for which Great Britain
and the rest of Europe must pay in one
way or another. Another way of putting
the fact, if the object lesson is to be
made all the more impressive, would be by
saying that the farmers of the United
States have again financed the needs of
the American people, as they have done
SO conspicuously for long series of years,
and as they did so brilliantly and swiftly
in the panic days of 1907.
When these commodities are sold in
Great Britain and on the continent of
Europe the money thus received will be
available for paying off the American
notes or finance bills upon which London
has lent money to the United States.
The Great Free Market
In the past some American bankers OF
very high credit are believed to have Of
fered and discounted in London their own
finance bills behind which was no other
1a - a..
At one time there were understood to be
whisperings in London asking whether
certain American banker had not been
seeking rather heavy line of dscounting
in the London market. With characteris-
tic promptness and energy this American
banker answered these whisperings by de-
clining to offer any more bills and by Of
fering to take up instantly those which
his house had issued.
No doubt all of the bills which have re-
Gently been discounted, as we'll as those
which are to be discounted in the London
market for the next go days, will be Sc
cured by stocks and bonds which are list
ed upon the New York stock exchange.
These are transactions in which the ma
tional government has and can have no
part, nor is there any law in contempla-
tion. except one which would devitalize
the New York Stock exchange, which
could reach transactions of this kind On
the whole they represent perfectly free
normal and healthful operations of bank
ing untrammeled or unaffected by legisla-
tive interference. Were 1t not for the very
features of the New York Stock exchange
business of which considerable complaint
has been made lately, it would have been
impracticable, utterly impossible, to OBJ
tain the collateral security which lies and
is to lie behind finance bills America is
now discounting in the American market
The New York Stock exchange is
great open market wherein is tested the
value of securities. This value could not
be established were it not for the buying
and selling or the offerings which are
recorded in the daily list of transactions
in the New York Stock exchange. The
money lenders of London are able by rea-
son of this free and open market for
securities in the United States to obtain
a good idea of what their quotable values
are 1t was this free and open market
which in the silver panic days of 1893 made
1T possible for the late Frederick d. Tap
pen. then chairman of the clearing house
committee to know every day what the
market value of securities was and to fix
upon the margin which he should demand
when these securities were offered by
banks to the Clearing House association
in exchange for clearing house certificates
with which the banks could pay their
balances.
The stock exchange of New York makes
available as security for English loans to
the United States. which may amount to
as much as 100000, and which will
serve to ease our money market, the
wealth of the country so far as that
wealth is reflected in the negotiable in
ct like stocks and bonds which