Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1914-09-23
COMMERCIAL PAPER
SITUATION AS 1T 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 Phila delphia
banks, since the European war began,
from the sales Of commercial paper "on
the street" A member of firm ham
ding this form of security was asked to-
day to explain the situation.
I'm n 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 him
Just now as borrower, will go as usual
to his commercial paper broker. The
notes are made to fall due few months
hence when things may have roster
hue and when at least the merchant will
have money coming in from his quick
assets"
But how does the transa ction 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 a very welcome ball
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
1.-THE Philadelphia banks have acted
splenddly. Besides taking care Of their
own customers, in numerous cases they
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, it 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 I and ~ per cent. and s
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
have less liability and 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 he cut"
And you think the notes will be paid
lt Daturity?"
can aeroplane causes more commotion
than Ford car because of its rarity
The Clafn failure caused a stir because
t is so very seldom that note of such
equation goes astray.
1T Is estimated that of the billion or
80 dollars worth of bought commercial
PAPER that falls due each year in the |
'nited States an almost negligible Quan- |
ity is not met promptly at maturity.
rhe experience of the banks in the 1907 |
Panic in this regard was so gratifying |
hat as a direct result the Federal re- |
erye bank act was framed 50 that the |
urrency of the country will in the future |
e based almost entirely upon commercial |
aper'
What do you consider good type of
ote?"
That is too long a story. Suffice it
o say that such a small matter as too
luch Sunday golf may tempt Il pur-
haser to turn instead to a name of IN
lemished integrity"
As the latch of the private office door
licked behind the interviewer he was
uddcnly reminded of the old adage about
ne banker Of Philadelphia-hc is So con-
erVative In tim" of plenty that he can
Hord To be liberal in time of stress.