The Lancaster news. [volume] (Lancaster, S.C.) 1905-current, 1915-09-28
COTTON:
The Banks and the Warehouses.
The Columbia State.

Southern bank.
Cotton as a security for loans has
exceedingly attractive qualities-just
what the banks are seeking 1t is
non-perishable when protected and
instantly convertible into cash at all
times.
On standard railroad bond one
may borrow money in the New York
market at four per cent, but in the
Columbia market the rate is seven.
The rate is higher in Columbia be-
cause money fetches what it is every
where worth and the borrowing de-
mand is greater than the lending
supply in Columbia.
The owner of railroad bonds does
not borrow in Columbia. He deals
with the New York or Boston bank
where the lending supply is so great
in relation to the borrowing demand
that the interest rate is low.
Comparatively, cotton is a security
but slightly less attractive than
standard railroad bonds, but in New
York or Boston it requires an intro
duction.
John r. Reader goes to a New
York bank and requests a loan on
100 bales. Certainly, Mr.. Reader"
the banker tells him-''but let me
see your warehouse receipts" Reader
hands them to him and the banker
knits his brow. I'm sorry, Mr..
Ppodar ha 1>onlar ta1I, ,,;,,, - III.
firm and gentle way, "but we never
heard of the warehouse at Swellton,
S. c., Doubtless the cotton is there
no reflection whatever is meant on
the management and doubtless it is
properly insured and the warehouse
bond is sound and good-but we
never heard of it ana have no time
to investigate. Good morning. Mr..
Reader +"
Or the banker tells Mr. Reader:
1--WE know of that warehouse; it is
all right 1 suppose but-er-er GER
tain of it's methods are not like ours:
We can't approve them; better try
some other bank"
hand the banker another warehouse
receipt, with entirely different re-
suits and the banker explains: eve
are glad to make the loan. This ware
house is we'll known on this market.
It is strong concern-as sound as
our bank is 1t can't afford to allow
any question to be raised If the loan
Is not paid at maturity. The credit of
this warehouse company is such that
its receipt Is as good a security as
Coast Line bond
In short. when the cotton ware
house has a good credit established
on the New York market, it's receipt
is accepted as collateral Just as the
railroad bond is and the interest rate
is the New York rate. A little ware
house, no matter how we'll conducted
is not likely TO be known in new York
at all; hence its receipt is available
as security only in it's own village
bank and, in the long run, loans will
be made on it at the rate that any
other security of the highest class
Will command III the village bank.
Some of the warehouse companies
are, in effect, introducing the South
ern farmer at the New York bank
that is TO say, they are borrowing
money at five per cent. and lending
1t to farmers at six, the one per cent.
difference barely paying the cost of
the transaction. The warehouseman
is making no money out of the loan
and he would not bother to make
loans If he could fill his warehouse
without making them. His profits are
earned from the warehousing. and not
the banking end of the business
We have State warehouse system
now i'm its muling infancy. If its re-
reipt shall be acceptable only when
mderwritten by a local Southern
bank, it will be Of small service to the
cotton growers. IF it should gain 9
standing Of the highest character in
the grea. money markets il will
make South Carolina cotton secur
ity of like rank, upon which the low
/ ess of the interest rate VIII be pro-
nc rtionel
1t Will take cotton into the lending
c+rtres as security and Gotten
through its introduction, it's euarar
tee, will obtain treatment that the
railroad bond receives Southern