New-York tribune., 1914-03-30
NOTE BROKERS and
COMMERCIAL PAPER
They Strongly Oppose Re-
turn to Old System of
ACCeptanceS.

The Clearing House Committee Of the
New York Clearing House Association
few weeks ago made public its opinion OF
the sort OF commercial paper it consid-
cred most suitable for rediscount purposes
under the new currency law. A return to
the old use OF two-name paper or accep-
tances was advised, but later reports
made by similar organizations in Phila-
delphia. Baltimore and Chicago urged
continuation OF the present single name
Endorsement
A resumption Of the method of settle-
ment existing years ago in the commerciai
paper market in this country, the Mer-
chants Association and prominent bank
ers have said. will mean a complete re-
adjustment Of the present commercial
business. Dealers in commercial paper
known in Wall Street as note brokers, are
also strongly against the exclusive use or
two-name paper for rediscount purposes,
but their opinions up to the present have
not appeared in the public prints. The
necessity Of continuing along under pres
ent conditions is summed up by one or
them as follows
Under present methods Of doing bust
ness the profits Of business concerns de-
pend to a considerable extent upon the
ability of the concern TO take advantage
Of cash discounts, and it is largely through
money obtained from the open market
that their profits can be so augmented.
ITO return 10 the former methods Of
settlement by acceptance or note woulo
practically do away with these cash dis
counts, for a seller could not afford To
allow a discount on the basis OF note
settlement and also accept further loss
necessitated by discounting the accep-
tance or note received in payment. and it
is a question whether the larger houses
can be induced 70 return to this method.
yet there can hardly he any half way
measure, for II is one OF the open market
principles that where concern Is bor-
rowing upon its corporation or firm paper
Il will neither give notes in payment FOR
merchandise nor dispose OF any notes
which may have been received in payment
for merchandise sold, for a concerns oilS
receivable are understood 70 be part OF the
ouick assets upon which their borrowings
are based.
"Tt is therefore probable that for some
while 10 come, at least, there Will be out
little change in the character OF the paper
offered for discount in the open market.
While there is, Of course, considerable
paper offered in the nature OF accept
snces and indorsed bills receivable, 1t IL
q question il enough OF this class Of
paper could be made to meet the require
nents for rediscount, even should the de-
cision OF the Federal Board restrict re-
discount privileges to strictly two-name
business paper. 1t does not seem likely,
therefore, that straight paper will be ex-
cIuded, for the bill itself provides for
paper of this character.
IF the decision OF the Federal Board
makes definite restrictions Il Will, OF
course, have the effect OF creating class
OF paper that will command lower ng-
ure Even so, rates for all paper, regard
less OF classification, will, in all likeli-
hood continue to be controlled by natural
law OF supply and demand, which will
also govern the market for paper which
may not meet the requirements for re-
discount, for in addition TO the market
created by national banks, state banks
and trust companies are heavy purchas-
ers.
THE new currency bill should have an
immediate effect in stabilizing rates'
which will be, indeed. boon to borrow
ers OF money. la years past, even under
normal conditions, with the coming or
fall. rates for money were apt TO al
vance TO a point where borrowing became
@ hardship. Then. too, the bill should 20
a long way toward preventing A return
~ such conditions as we're experienced in
1907 and 1913"