The Birmingham age-herald., 1917-12-08
Trade Acceptances
 As an Aid in War
By HOLLAND

mere are thousands of millions of frozen book accounts in the United States at the present time That is the estimate reported to have been made by Lewis F. Pierson, chairman of the board Of the Irving National bank and one of the foremost merchants in New York. and he alluded indirectly to it when in ms recent address before a war confer cnce Of Michigans business men at De- troit he spoke of the waste which is
 round among other things in money which is boarded instead of being put into channels Of commerce for which 1t was intended and In commercial credit
 which is tied up in frozen book ac- counts.
 some have spoken of these book ac- counts as dead accounts" not to be qulckened until payment and liquidation or them are made. Could some means De found whereby all these frozen book accounts could be made available for instant credit, then the effect upon com merce, industry and financial conditions tn the United States would be almost in- calculably beneficial especially in this time of very great financing The meth ods has been found in the view of MT. Plerson and also in that of the American
 Bankers association. It is exemplified by the method which is called trade ac- ceptances. There still remains, however, long time, possibly several years, be- tore the people can be well taught les son which utilization of trade accep- tances teaches.
 Some of the merchants of New York who do extensive business began year ago to urge this method upon their cus-
 toners. mercantile house in New
 York whose capital Is large and whose
 business Is extensive began year ago 10 urge their customers to accept orders
 drawn upon them or what are now known as trade acceptances." At first
 these merchants discovered that many of tnelr customers looked upon this request
 as an imputation upon their credit tuners professed not to understand what the meaning of the trade acceptance is
 According to MT. Pierson it means. if
 generally adopted, the ending of the enormous waste represented by commer- cial credit which is tied up in frozen DOCK accounts. Gradually the customers or these merchants began to get better
 understanding of what trade acceptances
 meant both for them and for the mer- chants until now many of the customers
 Willingly comply with the formula neces- sary 10 perfect the trade acceptance But IL mas taken nearly a year to secure the adoption of this plan by them.
 WHEN PEOPLE UNDERSTAND Of course, bankers have always under stood what is meant by the plan, but not until recently and especially since Mr. Pierson and active members of the
 American Bankers associat ton have un-
 dertaken thoroughly we'll to inform the people how they will be able, by sim
 pie act, in the aggregate to provide the country with stupendous stores of credit
 that are immediately available has there
 begun to be established with the people good understanding of the plan.
 The public begins to understand that
 trade acceptance Is an order to pay
 which is drawn by the seller of a com
 modity and Is accepted by the buyer. It
 represents transactions in merchandise
 only. A trade acceptance is time bill of exchange and serves the same pur-
 pose as transfer of gold itself in the
 cancellation of debts
 ITS USE IN EUROPE
 Perhaps by one or two concrete exam pies a better understanding can be gained of the meaning of trade accep- tance than by general or formal state- ment. The great Bank of France at the tune the war with Germany broke out held acceptances of this kind, the aggre- gate Of which was 5000, ,000000 francs. ~-~~-NSf VI ~AASAh WCA Q TUT dS Siilau sums as 70, Tn American money. The market man after having sold food to a custo- mer say of $5 value, offers to that cus- toner an order for s, payable 30 or so or even 90 days after date. The customer writes his or her name upon the order and in that way becomes an acceptor. Instantly this piece of paper becomes as good as currency. The banks gladly buy these documents. Many of them find their way to the general money market Ine customer knows that upon certain date the order must be paid at the bank Indicated on the paper. The market man received what is equivalent to cash inn mediately after the sale was com pjeted.
 In Italy the larger amount of small transactions are liquidated in this way. Ihere are few if any frozen or so-called dead accounts Congress has so legislated that the federal reserve banks are per- mitted to rediscount these trade accep- tances. Credit has always been called the life blood of business. The trade ac- ceptance makes it possible immediately 70 utiiize vast amounts of open book ac- counts which in the past have been car rled as frozen or, for the time being, as oead accounts. Heretofore merchants and manufacturers were obliged to carry open accounts in large volumes. This entailed great expense. It required a use 0f capital that Is neither prudent or profitable. Therefore if the trade ac- ceptance were generally adopted this condition would be relieved for there would be substituted negotiable assets | for these open accounts. MT. Pierson fully agrees with H. A. Black of Alex
 anders Brothers of Philadelphia who re- ceRtly said that Trade acceptances are l destined and we'll fitted to play an in- l creasingly large part in our credit and
 financial systems. When their advan- 1 tages and methods of handling have be- come familiar we shall probably wonder Why we did so long without them.
 l Every honorable customer knows ap. proximately when he can pay his debt small or large to the merchant Or manu. l facturer from whom he has bought com.
 modities He therefore may set time upon the trade acceptance when it will
 be paid. And he will be to a great ex. 1 tent relieved from the temptation o1 over restraining his credit or delaying his payments.
 The federal reserve board at Washing.
 ton, almost all of the leading bankers and gradually bankers in smaller and remote communities. the American Bank. CTS association and the National Asso- citation of Credit men are now earnestly advocating the general use of trade ac- cenfarcea q -E