The news scimitar. (Memphis, Tenn.) 1907-1926, 1919-01-16

HAS BIC BUSINESS
INACCEPTANCES
CenterS Find Form
Practical and Cheap Credit
Instrument for Clearing
Accounts on Transactions.
RY E. p. MAcNIcoL.

Thousands Of people every day pass
the white marble front OF a tederal
institution on Madison avenue and
never realize that behind its heavy
bronze front doors Is a bank h has
no teller, no cashier, no depositor, but
still has more currency on hand than
any other banking institution in the
city of Memphis. The institution is
the Memphis branch, Federal Reserve
hank Of st. Louis, and 1t Is setting
a financial record, not for the vast
amount of one its roof covers, but
for business transacted through the
medium of trade acceptances.
II Is a new thing in the commercial
world, this trade acceptance, a form OF
negotiable paper that was not known
until the federal reserve bank system
was established; a method that Mem
phis banks and their patrons are real
i2ing more and more is an easy, ex-
pedient, practical credit instrument; a
self liquidating obligation.
As the federal reserve board puts IL:
THE system of credit based on ac-
ceptances has been very widely devel-
oped through long usage In the leading
European countries. 1t is so compare
lively new In the United States that
II Is not yet generally understood. Its
fields of employment here, however,
are broadening ri pldly, and 1t seems
likely to become before very long one
Of our chief credit instruments"
Cuts Book Credits
Th big outstanding feature Of the
trade acceptance is that not only does
1t tend to do away with so-called book
credits, that Is, the carrying of open
accounts, but it may involve two or
more persons n a bank that Is a
member Of the federal reserve system
In a single transaction in which not
| ma Ipnt nf nrtnnl RDrrAnnV changes
hands, and at the same time each step
In the transaction Is full and complete.
For instance: John Jones, for value
received, commands Bill Smith, by
draft, say to pay to a designated bank
or its order or to bearer q" stated sum
Of money at a stated future time, Jones
Is the drawer, Smith the drawee and
the bank the payee. Smith accepts the
order upon him and writes the word
accepted" across the face of the or
der and signs his name below the word,
with the date Of acceptance, the date
it is payable and the place. Smith is
thereafter known as the acceptor and
the document as an acceptance. II
the bank chooses to transfer the paper
to some other person 1t indorses the
paper, but more frequently the paper
turns up at the reserve bank, where
i is placed to the credit Of the payee,
The documents indorsers, three OF
is amply secured. Not a cent Of actual
currency figured in the three-way
transaction, but II the payee at some
future time wants he money he may
draw against his credit at the reserve
bank by wire at the reserve banks
expense when the currency will be for
warded bv express, or he may check
against 1t,
AS defined by the bank officials "ac-
%ceptance of the order is equivalent tc
the promise to pay that is contained In
a promlssory note, although the latter is
not Intended to transfer funds, but tc
settle debts and borrow money. A note
Is drawn by persons; an acceptance is
drawn on persons. Each has Its dis
tinct field"