New-York tribune., 1918-05-19
By Morton III. Fry
of Bernhard, Scholle e Co.


been any development in the finan-
cial mechanism of the country in
recent years which has attracted so
little attention generally as the growth
: OF the use of the bank acceptance
Even among bankers and ,nerchants
> is lack Of knowledge except in cer-
tain quarters of just what has been
accomplished. Among people not di-
: rectly connected with the handling of
I aoceptances there is very little COM
4 prehension of the size of the market
! which has grown up in this most liquid
( instrument of trade.
5 1t is not infrequent even under pres
ent conditions to have an acceptance
I dealer buy and sell as many as $10,-
1 10000 worth of prime acceptances in
1 single day, and when it is considered
Z that there are a number of these deal!
3 crs some idea can be obtained of the
/ present volume of business. This vol
z ume is particularly significant when it
& is borne in mind that the bank accept
] ance is an innovation in this country
i and has existed as an instrument for
i the fiancing of trade only since the
!, passage of the Federal Reserve act in
The fall of 1914.
- AS indicative of the growth which
has taken place thus far, it is inter-
estng to note that some little while
ago list of accepting banks and bank
ing institutions in the United States
was compiled by one of the discount
houses. In this list there was o total
of about 800 names, comprising the
best known national banks, trust COM
panies, state banks, private bankers
and foreign agency banks in this
country.
Use Of Trade
Acceptances Grows
In the commercial field the growth
has been almost as marked. For long
-time after the establishment of the
acceptance in this country the bulk of
bills arose out of export transactions
and was drawn by exporters and i'm
porters, who were familiar with the
customs existing abroad. Recently,
however, there has been tremendous
growth in the volume of the domestic
transactions, which are being financed
through this means. Hardly day
passes but that some new commercial
or industrial concern falls in line as
user of this most advantageous
means of financing. Among the cor
porations which are now using accept
ances are many of our most represen-
tative industrial enterprises.
Only recently arrangements were
made by syndicate of American bank
'ers to finance the export of the Cuban
sugar crop through this means. AS a
matter of fact, number of the bills
arising under this credit have already
-~been placed in the open market. Other
notable examples of large transactions
of this kind may be found in the
various French credits which were ar
ranged by certain banking houses in
, this country to finance purchases Of
r war supplies at the outbreak Of the
war. The American Tobacco Company
& has also beeA a user of bank accept
"a ances to finance its commercial trans
actions, a credit of $25,000,O00 to be
utilized through bank acceptances
having been arranged some time ago.
- - In spite of the fact that the number
-aof accepting institutions and the num-
ber of commercial concerns using ac-
sceptances has increased steadily, the
acceptance cannot obtain the position
which it should occupy in our financial
~ structure unless an active and ready
market is developed in which accept
.ances can be moved at reasonably sta
BILE and attractive rates. Much has al
ready been accomplished in the devel-
. opment Of such market. Discount
ii dealers and discount houses have
sprung up whose function it is to buy
! acceptances from banks and merchants
& and place them with investors all over
the country. Even at the present time
20 20 and under the unusual money condi-
tions created by the war a ready mar
ket exists for practically unlimited
amounts of prime acceptance. 1t has
very frequently happened that $10,000,-
600 is turned over in single day by
one house, and such turnover involves
not even Lie of i per cent per annum
fuctuation in the rate. Banks and
banking institutions and to certain
sdextent private investors with surplus
funds to invest, have come to realize
that prime acceptances offer an un-
~'paralleled medium for investment
aNShen safety and liquidity are taken
ns}nto consideration.
Range in Market
Prices Slight
A remarkable stability of rates has
sraiso been achieved in spite of the vio
ient and erratic fluctuations in call
esmoney which have taken place. The
total range Of open market prices in
prime national bank acceptances, due
ssan ninety days or less, since the fall
szcf 1914 has been from per cent to
.4@s per cent, although in this period
sscall money has fiuctuated anywhere
sss4rom Ia to IL per cent or even higher.
~ Cn~k 1Ava1oux,.~