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 P ut
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 ION
the Street" A member of firm ham
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 period when 1t was least needed,
instead of bothering his own bank, which
might be none too glad to welcome him
just now as 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 rosier
hue and when at least the merchant VIII
have money coming in from his quick
assets"
But how does the transaction increase
the funds In Philadelphia banks?' he
was asked.
well, in the first place the merchant
was kept from being a borrower. In the
next place the money obtained by him
was used to create very welcome pal
ance instead of a loan at his own bank;
and the actual cash came into Philadei-
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
splendidly. Besides taking care OF their
own customers, In numerous cases tney
have even purchased paper made out
side of the city, when, OF course. the
money goes out of Philadelphia. But the
cause is common one; In fact, 1t 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 ~ per cent. and
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 we'll known require the higher rate,
and yet some of the best notes are those
of comparatively small concerns. which
have less liability and no contingent
liability. The individual investor some
times prefers this type of commercial
paper"
rs 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
It is so very seldom that note of such
reputation goes astray.
'It 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
.ity is not met promptly at maturity.
The experience of the banks in the 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
De based almost entirely upon commercial
paper"
What do you consider good type of
1ote?"
That Is too long a story. Suffice it
20 say that such a small matter as too
much Sunday golf may tempt a pur-
,haser to turn. instead to name of un-
oemished integrity"
AS the latch of the private office door
clicked behind the interviewer, he was
reminded of the old adage about
he banker of Philadelphia-he is so con-
'ervative in time of plenty that he can
Ifford to be liberal In time OF stress