The Sun. [volume] (Price, Utah) 1915-1932, 1920-07-23
ACCEPTANCES GROWING
MORE POPULAR IN
WEST
wooLMEN TO PROFIT BY USE
OF THIS CREDIT.
Principles Of Negotiation Gone Into
and Explained In Detail By Am
erican Council-Plan Growing Very
Much In Favor, As Well. Through
out the East and Also In Europe.

In view of the current discussion OF |
aeeeptances and the possibilities Of |
their use as n means of granting cred
It's 10 woolgrowers of the West Il is
noted that the use Of these credit
Instruments is being widely extended
in American business, particularly in
the East. European countries, France
especially, have long used accept. !
ances and these instruments provide !,
one Of the principal methods Of credit |
extension in their business relations. |
A bank acceptance has been defined |
by the federal reserve board as "a
draft or bill Of exchange of which the |
acceptor is a bank or trust company or
a firm, person, company or corpora
ton engaged in the business of grant |
ing bankers acceptance Credits ar
rangement having been made with
the bank or other party 10 "accept,"
thus lending its credit. for which sat |
isfactory credit Is given and a com
mission is paid. The bankers assept- |
ancc, according 10 reserve bank |
pamphlet, will be used in the handling |
Of commodities, such a. grain, cotton,
copper, wool and soforth, and in 9TH
or large transactions.
High.Class Credit.
Trade acceptanees and bankers
acccptances both constitute what isl
regarded ne a high-class commercial
credit, but the latter are the only ac-
ccptanccs which can have application
10 the present wool situation, ~ the
trade accepiances constitute fin
ancial relationship between buyer
and seller. Some of the general prin-
ciplcs Of bankers acccptanees haEe
been stated by The American Accept
ance council 10 be:
That credit, not money, Is loaned
by the acccptor.
That, in general commercial use,
the bankers acceptance credit is dos-
igned 10 provide for short term trans
atoms in goods by supplying as
surcd credit 10 carry goods in pro-
ccst Of production, transit and mar
keting
That the completion Of the under
lying transaction should liquidnts the
bankers acceptance.
That the banker, ordinarily and ~
far ~ practicable, should retain con
troll Of the goods, receive and apply
the proceeds 10 the retirement Of the
credit when due. Accordingly bills
should be drawn 10 mature 40 as toI
synchronize with the prospective Ill
quotation of the transactions.
Act Not Inclusive.
Ia this connection il should be noted
that the federal reserve act does not
authorize the granting of credits toI
finance goods In the process of pro-
duction. In domestic credits secured
by "readily marketable staples in
warehouses, the bankers accept
ance Is designed 10 provide means for
the carrying of staples from the point
Of completed production 10 the time
when they are distributed. IL is never
TO be used for speculation. Considera-
ton of the application of the general
principles of acceptance 10 the bank
ers credit is given by the acceptance
council as follows;
"The banker will require that UNI
der the federal reserve act Il Is an
eligible transaction;
"That il will be completed within
the period Of contemplated credit and
is reasonably certain of itself at ma
turity 20 produce the funds with
which 10 pay the obligation assumed
by the borrower;
"What further guarantee, II any,
he should require beyond his custom
er's obligation TO provide the funds
in ease of delay on failure in liquidat-
ing the transaction.
Assumes Liability.
The accepting banker expects mere
liz 10 lend his credit 10 his customer
for a specified time and purpose. We
has, however, entered upon an un-
qualified liability to the holder of his
acceptance 10 pay il at maturity The
guarantOr of an aeeeptanes credit
may, or may not, be a banker III he
is a domestic banker, not himself able
20 accept in sufficient amounts To
supply the entire needs of his custom
ers, he will probably act as agent in
procuring other acceptors and is like
liz TO act for them in attending TO the
local details of the business involved,
such as holding collateral and s0torth.
He may also negotiate the paper for
HE cugtomars hut his ALLEGATION ag