Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1914-09-23
COMMERCIAL PAPER
SITUATION AS IT is
SEEN HERE TODAY
Broker Takes Up Problem at
Close Range and Tells
How and Why Such
Transactions Are Put
Through.

Few persons realize how many millions
| OF dollars have come into Philadelphia
banks, since the European war began
from the sales Of commercial paper "on
the Street" member Of a firm han
ding this form of security was asked to-
day to explain the situation.
I'm time like this" he said, "the wise
merchant, who has built up his credit
over a period when 1t was least needed
instead of bothering his own bank, which
might be none too glad to welcome MIN
Just now as a borrower, will go as usual
to his commercial paper broker. The
notes are made to fall due a few months
hence when things may have a roster
hue and when at least the merchant Will
have money coming in from his quick
assets"
But how does the transaction increase
the funds in Philadelphia banks2' he
was asked.
well. in the first place the merchant
was kept from being borrower In the
next place the money obtained by him
was used to create a very welcome bal
ance instead of loan at his own bank;
and the actual cash came into Philadel-
phia from the sale OF the paper by the
broker for the most part to country
banks which are relatively very strong
at the present time.
THE Philadelphia banks have acted
splenddly. Besides taking care of their
own customers. in numerous cases they
have even purchased paper made out
af hn Ctt tThn Of
money goes out of Philadelphia. But the
cause is common one; in fact II is
international in scope, and anything that
the banks do here to help elsewhere is
certainly to the credit of Philadelphia"
do brokers like the high rates?'
"On the contrary, we are doing every
thing consistent with good banking to
get money in and thereby force down
the rates. Today the best names are
selling at and IA per cent. and 5
is not at all unheard OF. Were the
rates TO go much higher they would be
almost prohibitive and general business
would suffer. OF course, the names not
so well known require the higher rate,
and yet some of the best notes are those
of comparatively small concerns, which
nave less IlaDlllty ana no CONTINGENT
liability The individual investor some
times prefers this type of commercial
paper
"Is this a good time for the individual
to buy paper?"
"If he goes to an established broker
whom he can trust he will get his cap
ital back at par when the notes fall due
a few months from today and the dividend
can't possibly be cut"
And YOU think the notes will be paid
at maturity"
IAN aeroplane causes more commotion
than a Ford car because of it's rarity.
The Claflin failure caused a stir because
1t is so very seldom that note of such
reputation goes astray.
1T is estimated that of the billion or
so dollars worth of bought commercial
paper that falls due each year in the
United States an almost negligible guam
tity Is not met promptly at maturity.
The experience of the banks in tho 1907
Panic in this regard was so gratifying
that as a direct result the Federal re-
serve bank act was framed so that the
currency of the country will in the future
be based almost entirely upon commercial
paper"
What do you consider good type of
note?"
That is too long a story. Suffice 1t
to say that such a small matter as too
much Sunday golf may tempt pur-
chaser to turn instead to a name of UNI
blemished integrity"
AS the latch of the private office door |
clicked behind the interviewer. he was
suddenly reminded Of the old adage about /
the banker of Philadelpha-he is so con- |
serVative in time Of plenty that he can |
anord to be liberal in time of stress