The Washington herald., 1914-03-09
HISTORY BUILDERS.
A cunou. New England Financial
Transaction.
written Expressly for The Heraid)
ny Dn. v. ,. EDWARDS.

II
ny Dn. ". ,. EDWARDS.
tCopsight. Isia
A 7 the time Of the financial and bank.
"a ing panic In the fan Of 1fS5. wai
chatting one afternoon with e. 8
Scranton. q banker of New Haven. Conn.
and q member OF a family distinguished
as hnanciers, Industrial leaders and rail-
road authorities. One Of that family bull
and for years operated what In now 9
vital part of the New Haven railroad
system, stretching from New Haven te
New London. Conn.
| Another was for many years presi'
dent Of the New York. New Haven and
| Hartford Railroad. and IL was due tc
| the energy and business statesmanship oi
| another member of the family that the in.
dustrial community which received its
| name-Scranton-from the founder was
Instituted and developed.
Mr.. Scranton was speaking to me Of the
queer shifts men who wanted to borrow
money at a time of panic sometimes make
| In the way of offering collateral security
for loans. Were the securities to be &C.
cepted. he said, many Of the banks would
have the appearance OF pawnbrokers
shops.
I was told recently" Mn Scranton con-
tinued. of what think was the most
remarkable security ever offered for q
loan. 1t was absolutely perfect security.
Its value could not be Questioned. and
there was no need OF giving expert opln-
ion about the inherent value of the Sc
curity. II told the story of that value on
its face. and the man who offered the
security got the loan without question.
81 will repeat the story to you as near
ly as / recollect it, A manufacturer in a
st Ia anf fn 4
bank and asked for a discount of a note
| Of $4,000. The mans credit was excellent
and his business was OF good repute. The
bank officers said to him:
I'VE Will discount your note upon two
conditions-hrst. that you accept the
money in the form of the notes OF this
bank and withdraw It all Immediately.
and, second, that you do not use these
| notes until the life Of your own note has
expired
That seemed to be a queer sort oi
offer. for even though he toek the money
in cash from the bank instead OF allow
Ing II to remain on deposit to his credit.
30 that he could check against il, what
good would the loan do him IL he was un-
able to make use of these bank bills for
three months?
The bank officer told him Just what
could be done. He said: You take the
bills of this bank. amounting to $4,000. to
Boston and then go to a certain note
broker whose name I will give you. and
ask him IL he will discount your note for
$4,000. provided you offer him as security
the $4,000 In the bills of our bank
We'll. the merchant did this. He took
the $4,000 in bills Of that bank to Boston
and put up the money as security for a
loan OF $4,000 made by the note broker
'FuFthpFmnFR hraknr told o -,
he needn't bother about paying the note
when it became due. because the slo.OoI
which had been deposited with him as Sc
curity would be sufficient TO pay OF the
notes. or course, he would have to take
up the note which he gave TO his bank.
After the negotiation was finished and
he got his money from the broker he
asked for an explanation of that very
peculiar transaction. I want TO say to
YOU. Mr.. Scranton said. that this was
before the national banks were estab-
iished. The broker said il was all very
simple. The bank in Maine had issued
to him $1,000 of its own bills. II those bills
went Immediately into circulation they
would be presented for redemption with
IN a few days at the central redemption
oank at Boston, in which the New Eng
land state Bank notes were redeemed
But IL these bank bills could be kent out
OF circulation during the life of the note
drawn by the merchant for discount that
would be so much to the advantage of the
bank in Maine. For it would not need
to furnish the specie for the redemption
OF these bills. amounting to $4,000 until
three months had passed.
Il was told that after this transaction
other banks in Maine occasionally fol-
lowed the very shrewd method adopted
In the case I have just described to Won ;.