The daily Alaskan., 1917-03-16
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 Bank's Credit to Customer Upon
 Agreed easlS.
 New York.-Rapid increase in the use of bank and trade acceptances marks the development of a new form of financing in this country, which Is at- tracting the attention of bankers, busi- ness men and investors. Opportunities for trade expansion, increased credit and desirable investment all accom- pany 1t and invite study.
 Prior to the passage of the Federal Reserve Act, one of the particular ob- jections to our existing banking sys- tenn was the absence of a discount market like those of London, Paris, Berlin and other Continental centers where bankers acceptances could be readily sold. Owing to a construction of the National Banking Act by the Supreme Court, our national banks were not permitted to make accept ances, because an acceptance is in ef- feet the lending of a banks credit.
 Today that situation is radically altered. There is in this country a healthy and constantly expanding mar ket for acceptances. According to the combined statements of the report of December 27, 1916, national banks in New York City showed customers na- bility on account of acceptances at S6O,- 21S,SO0 The combined reports of New York City trust companies, as of No- vember 29, 1916, showed a total of ST, 7,540200 for customers liabilities on aCceptances. And according to the November statements last year, na- tional banks and trust companies of New York City reported an aggregate acceptance volume of $126,S50,SO0.
 In an 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 of 1914 the Guaranty Trust Company of New York was the only institution in New York City accepting sterling drafts payable at future date. When the London market had to re- strict It's acceptances owing to condi- tions arising from the war, the Guar anty Trust Company immediately be- gan using dollar letters of credit.
 When bills were offered from abroad, drawn under these letters of credit, the Guaranty Trust Company bid for them. So did other banks AS q result, dis count rates were lowered With a clearing of the situation in the Amer lean money market in the beginning of 1915, bankers and brokers began to bid freely for aeceptances, which ere ated the first basis Of q future discount market. Sufficient acceptances, how ever, were lacking, and the Guaranty Trust Company supplied this deficiency with It's own acceptances. So rapidly were these absorbed that the discount rate fell to about 2l2 per cent, Soon the possibilities in this new line of financing were seen throughout the country and thus discount market was quickly developed.
 The superiority of the trade accept ance over the open account for the purchase or sale of goods is now per Ceiyed; in fact, its power to broaden the buying field of the merchant, and to enable the seller to handle his busi- ness at smaller operating cost, is being fully recognized throughout the coun- try. Briefly, the trade acceptance is everything that the open account Is not. It gives the buyer credit for a definite instead of an indefinite time. It is of service to the seller, for he can take the acceptance to his bank and discount 1t at lower rate than is accorded to any other commercial pa- per. The bank-not the seller-carries the credit, and all parties to the trans- action are placed on an equitable basis.
 Another form of acceptance Is the bank acceptance, which consists of the extension of a banks credit to a GUS toner upon an agreed basis. When Brown, in New York, buys of Doe, in Galveston, and arranges with a 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 d. rectly on the bank, the latter accept ing 1t for payment at a future date. In this form the acceptance is a con- mercial credit bill The accommoda- ton given the customer under an ac- ceptance is merely loan of the banks credit responsibility until he can pro cure the funds elsewhere.
 Issued for commercial purposes or against 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 ances of well-known banking insitu-