The diamond drill. (Crystal Falls, Iron County, Mich.) 1887-1996, 1913-02-01

II
banking system that under il idle
banks funds aow TO New York. 60 DO
loaned there on call. with Stock Ex-
change security. And 1t ia one Of the
system crying ininstices TO the Amer
lean business uian that loans secured
by stocks and bonds are cheaper I'm this
country than loans which go 10 further
the operations Of legitimate commerce
and industry. The reverse holds true
in Europe There commercial paper
commands the lowest rate of interest.
as il should The merchant receives
accommodation more cheapIy than the
specnlator
This gross disadvantage to American
business arises from the fact that we
have no broad rediscount market for
commercial paper. such as is the foun.
dation of European credit machines.
Abroad. this market forms the basis of
note issues. Our note issues ara poud
secured. and the daily adjustments of
the demand and supply Of money pri-
mariIy results ia an increase OF call
loans on Stock Exchange collateral.
II there is pronounced contraction
and liquidation. then stocks and bonds
are dumped onto the market. which
sags under their weight Disturbances
are inevitable How much more logi-
cal would be note issues based on com.
mercial paper. which depends Tor
liquidation, not upon the narrow con
fines of the stock market but upon
the entire nation For only specu
lators will deal in the stocks and bonds
but the whole nation will consume
the goods which commercial paper re.
presents.
The commercial paper arising or e
industries runs from thirty 10 ninet
days 1t may be based upon the actual
shipments Of goods, or il may be based
solely upon the commercial standing
of the man who makes it.
In the first instance. IL ia likely to
be two.nam paper. The manufacturer
or merchant who ships the goods may
demand the promissory note of the
merchant to whom he sends it and 10
whom he gives credit. say. OF sixty
days. When he receives this note. he
may endorse it. aud then discount il
at his bank. Or, he may draw on the
second merchant at sixty days sight.
in which case the second merchant ac-
cepts it, by writing across its face the
word accepted, with his name and
thedate; and then it becomes an in
strument convertible into cash by dis.
count.
In either OF these cases. we have two
name paper. based on actual goods in
transit from the producer to the con
sumner. and dependent tor payment, in
the last analysis. not merely upon the
commercial INTEGRITY of tho man who
made il. but upon the ability Of the
public TO consume the goods il repre-
sents
The second kind o. paper bears
merely the name of the maker, and IS
FAR more extensively dealt IN by the
National banks Of this country than
hat just described The report Of the
Comptroller of the Currency for 1911
ihows-that.L 30l National banks then
n existence held, during the three
iears preceding. g53 million dollars in
line paper with two or more individu
Il or firm names and /. SS5 million
dollars OF one-name time paper There
vas about twice as much one name
,aper rs paper bearing two or more
iames and the aggregate OF the two
vas more than half OF all the paper
leld by these banks
In the case of one.name paper. the
wisdom Of bank In granting loan
depends upon what ID knows OF its
lient. II the total amount desired is
Moderate in comparison with his cur
ept receipts. il is a-good loan. There
s none safer. II must be understood
be selection by banks Of such paper
hould be carefully made They must
ave the facts about the business OF the
oncern asking the loan. Usually
'anks have a bureau Of information
evoted TO this purpose, called Credit
department.. thoroughly posted rs re
ards the commercial paper offered 10
{.
This department may. in some in