The Madison daily leader. [volume] (Madison, S.D.) 1890-current, 1917-03-08
BIG AID TO TRADE.
"AcceptanCes" Are Attracting
Merchants and Investors.
BROADER FIELD FOR BUYING.

Enable Seller TO Handle His Business
at Smaller Operating Cost-one Form
Of Acceptance Consists Of Extension
Of Banks Credit TO Customer Upon
Agreed Basis
New York-Rapid increase in the use
~ bank ultd trade acceptances marks
the Development of upNy form of
financing ia this country. which Is at
tracting the attention OF bankers. busi
ness men and investors Opportunities
for trade expansion. increased credit
aud desirable investment all accom-
pany it ami in, itc study
Prior 10 the passage of the Federal
Reserve Act, one Of the particular OBJ
jections to Our existing huuEing Sys-
tenn was the absence OF a discount
market like those of London. Paris.
Berlin AMI other Continental centerS
where bankers acceptuuCeS could br
readily sold owing to construction
IT the National Banking AOt bv the
supreme Court. our national banks
anccs. he auSc an acceptance is tn cf-
feet the lending of a banks credit.
To-day THAI situation is radically
altered There is in this country
healthy und constantly expanding mar
ket for 8cscptanee~. According - tho
combined statements of the report Of
December -. 1916. national banks in
New York City showed customers liza
bility oa accut15t o. aeceptnnces at 500.
21s.SOO. The combined reports of New
York CITY tra~t companies. ii. of No
teHihcr ~ 1916. showed total of
81 .54o POO for rustomeT, liabilities ON
aceeptaucc@. And according to the
November STATEMENTS last year. ma
tional banks aud trust companies of
New York City reported an aggregate
acceptance volume Of $l26S50 500.
In nm interesting booklet issued
bY the Guaranty Trust Company OF
New York. that institution explains the
details of this method of finance and
the growth OF the acceptance market
In the fall o. 1911 the Guaranty Trust
Company If New York was tho only
institution I'm NeH York city accepting
sterling drafts payable at Il future datc
When the London market had to re
strict its aceeptanees owing TO eondi
1ions arising from he war. the Guar
anty Trust Company Immediately he
gan using dollar letters OF credit
When bills were offered from abroad.
drawn undc, these letters of credit. the
Guaranty Trust Company bid for them
SO did other banks As result dis
count rates We're lowered With Il
clearing of the situation in the Amer
lean money market IN the beginning
If 1918. bankers and brokers began Ia
lid freely for acceptances, which ere
ated the first basis of future discount
market Sufficient acceptauces. how
ever. We're lacking, and the Guaranty
Trust Company supplied this deficiency
with It's own aeeeptances. 80 rapidly
We're these absorbed that the discount
rate fell to about 2i4 per cent. soon
the possibilities In this new line of
financing We're seen throughout the
country ANA thus a discount market
was quickly developed
The superiority Of the trade accept
ance over the open account for the
purchase or sale Of goods l. now per
teiNed, in fact lis power 10 broaden
the buying field uf the merchant. and
70 enable the seller To handle lis bus-
hess at smaller operating cost. is being
fully recognized Throughout The eoun
Try. Briefly. he trade acceptance Is
yerything thai tie open account Is
Hot. Ii gives the buyer credit for a
definite instead of an indefinite time.
1t Is OF ScrK ice 10 the seller for he
can take the acceptance to his bank
and discount il at lower rate than Is
accorded to any other commercial pa
per. The bank not the seller carries
the credit, and all parties 10 the trans
action are placed on an equitable basis
Another form Of acceptance is the
bank acceptance. which consists of the
extension Of banks credit 10 "A Gus
toner upon an agreed basis When
Brown, IN New York. buys Of Doe III
Galveston. and arranges with bank
/ in New York to accept on presentation
! the drafts Of Doe. with documents at
/ tached, Does draft on the bank be
comes a bank acceptance. Again. the
/ customer can draw his own draft di-
4 rectly on the bank, the latter accept
/ ing Ii for payment AT Il future date
+ In this form the acceptance is com
mercial credit bill The accommoda
ton given the customer under an ac.
teptance is merely IA loan Of the bank 1
redit responsibility until he can pro
.nre the funds elsewhere.
Issued for commercial purposes OF
gainst actual business transactions
banks and trust companies can finance
through acceptances legitimate busi
ness transactions of their customers
properly and conveniently; while they
can also invest their surplus money
therein. at profitable rates, and with
the certainty Of being able to convert
them at any time in the open market
| For short-term investments accept