The Birmingham age-herald., 1914-07-09
John Claflin's Good Name Brings Offers of Aid from
 Whole Country
OTHER EXAMPLES OF
 KEENEST INTEGRITY
Method of Handling Firms Conner cial Paper May Bring About Change in Policy of the
 Banking Interests
BY HOLLAND

New fork, July S.-tSpeclal.)-f1oW great an asset character is, especially for a man engaged in business on a large scale, is proved by the attitude of the great majority of the creditors of the house of H. B. Claflin company toward John Claflin. Yet it is spoken of here as not an exceptional instance. An asset of that kind served greatly to assist Hor- ace B. Claflin, who founded the house, to relieve him of serious embarrassment at the time of the civil war and little later. Offers of assistance in 1873 came from all parts Of the country to Horace Claflir, and it used to be the understand ing in business circles that many of the merchants of the south, who just before the civil war had large business relations with H. B. Claflin and who were unable to pay or prohibited by law from so doing, took the first opportunity after they got upon their feet in the early years fol- lowing the close of the civil war volun- tarily to pay as much as they could of their indebtedness to the house. Recent ly long, established brokers house whose principal partners had gained high esteem for their integrity and honorable business life, was obliged to make an assignment. The one great asset which these part ners possessed, which was character, served greatly to aid in satisfactorily winding up the bankruptcy proceedings.
 Communications of @ most friendly na- ture continue to come to MT. Claflin from all parts of the country. They tend to confirm the reports which prevailed long before the Claflin failure that no in- stance has ever been reported of an accu- sation that John Claflin had not dealt fairly and honorably with every one of these with whom he had business deal- ings
 it all the more easy to compass a read justment of the affairs of the house and to enable 1t to reorganize The convic- tion is general that ultimately all of the creditors will be paid 100 cents upon the dollar whether there be a legal obliga- tion to do this or not.
 Another Point of View There is, however, another point of view which in no way effects MT. Claflins s character, but does seem to imply some criticism respecting the modern way of securing discounts or sale of commercial paper.
 At the time of the preliminary organ fzstion of the. new national banking sys- tenn the question was raised-first by one of the great bankers of Chicago-"What will be the standard of commercial paper
 
 upon in case paper of that kind be of fered for rediscount?" The question seemed to involve try and abstract dis cGssion, yet the answer to it made it nec- essary to obtain complete understanding of modern commercial paper methods.
 The Chicago banker and several in this city were inclined to think that if the new banking system did not recognize as standard commercial paper any which did not represent actual commodity value then a considerable part of our business sys- tenn would ba thrown for time Into choos.
 Not much more than 15 years ago departure was noticed from the long es- tai,lished character of commercial paper. Up to about 1895 notes offered for discount were presumed to represent actual com modties, exactly as cotton bills, or wheat bills represent, and are secured by cotton or wheat, the actual commodity. But SC me of the larger mercantile houses thought it expedient to adopt another method. They Issued their paper and turned it over to the note brokers, who instead of offering it for discount, sold 1t to the banks To the laymen there does not appear to be much difference between discounting a note and buying it. But there is gerat difference in view of the law that banks which by law are prohibited from discountjng certain kinds of paper are permitted to buy paper of that kind outright
 This new method was very rapidly de- veloped. It had some advantages. Credit men were not able to keep a line upon the paper drawn by the mercantile house and sold to the various banks Moreover 1t made a wise distribution of this paper possible, and that is precisely what char acterizes the methods of the H. B. Claf- |, lin company. There appears to have been sold to some 3000 banks in the United States paper drawn by the subsidiaries, so tu call them, of the companies identified by MT. Claflin's name and indorsed by the H. B. Claflin company-an aggregate of GOO of paper. Much the greater part of this is understood to be amounts not much greater than $50OO. The note brokers took the paper and negotiated the sale of it with banks all over the coun- try.
 From one point of view this paper is nothing more than accommodation paper Behind it stands nothing but the credit of the mercantile houses which drew the paper and the credit of the H. B. Claflin company It does not legally or tech nically represent commodities. The ques- tion is now asked: Would it have been possible for ss much paper as .his to have been discounted if it represented actual commodities? That is to say, could as large an amount of commercial paper as s30,000G00, which feprese nted actual commodities, have been offered even by this great corporation?
 This experience may lead to a change in the methods by which funds have been