Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1913-01-18
NEED Of Immediate reform
IN AMERICAN BANKING SYSTEM
BY ANDREW CARNEGIE.

We are spending $500. 900 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 Panama 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 banking sys-
TEN SO that we may be in a position
to finance the Panama canal trade a
good part Of this four hundred mil
lions will be wasted.
If we are to have the advantages in
finance enjoyed by our European com
petitors a sweeping revision of our
present banking laws is absolutely nee
essary. Foreign banks, especially
those of London, now finance our for,
elgn trade, and We pay them rich trib,
ute for the service. To show how Lon
don finances our foreign trade for US
let. me quote from the foreign trade
expert of one of the greatest banks .:
An importer of coffee tA) in New
York purchases a certain, number OF
bags OF coffee from an exporter CD in
Brazil. A agrees to furnish B with a
commercial letter of credit. B is not
in position, we will say, to await the
arrival of the coffee in New York
and the return of a remittance before
receiving his pay. A on the other hand
is unable to remit B for the coffee be.
fore its receipt and sale to his custom,
ers. A goes to his banker in New York
and requests him to authorize B to
draw upon the New York 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 in.
surance certificate; If 8 is to furnish
the Insurance. ,
Financed In London. 81 -. -
IF AS banker is willing to extend
the credit, he writes a letter Tor uses
q printed forml, requesting his Lon,
don banker to accept BIS drafts upon
presentation under the conditions al.
ready mentioned and otAers of minor
Importance. This letter Is issued IN
duplicate, one copy going to the Lon.
don banker, the other being delivered
to a A then mails the copy received
BY him to 3. p thereupon arranges to
shin the coffee, obtains the bin of lad,
ing, 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 of "a check of cash. -. :. .-@
The Brazilian banker then forwards
the draft and documents, except such
documents, as the Instructions may re,
Quire to be Forwarded direct to New
York, to his London. banker. He may
secure discount of the bill at once by
cable or await its arrival in London
before doing so, or he may request his
London banker to have the bill accept.
ed and hold It for maturity. If the
bill is discounted, the Brazilian banker
may draw against it Immediately and
thus put himself 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 aeceptor bank examines the doc
uments, and if they are drawn accord
ing to the terms of the credit, accepts
the draft and returns 1t to the cor
respondent of the Brazilian bank, re
tanning 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 it at the end of ninety
days! Upon maturity payment is made
and the amount is charged to. the &C
count of the issuing New York bank
Upon receipt of the documents, the
New York bank delivers them to it's
customer under trust receipt or
against collateral and the latter is then
in position to. obtain the goods. Ten
days before the bill Of exchange is due
ia LONDON the, New York bank col