Evening star., 1923-07-23
CLEARING HOUSE
PROBES METHODS
Local Bankers Asked to Give
Information on Use of Sne-
ciaI Regulations.

! Members and associate members OF
the District of Columbia Clearing
house Association have been request
| ed to advise that body if certain rec
concentrations, outlined many years
| ago, are still being carried out BY
| local institutions. These recon
mendations for the carrying on of
banking in Washington were drawn
up in 1914 by George w. White, Cuno
Fl. Rudolph and Henry H Mckee.
after lengthy deliberation of major
bank problems and an exhaustive re
search of methods pursued in other
cities, and are as follows:
L. uniform practice of discount
ing commercial paper
z. That commercial paper bearin.
! interest be discounted by adding the
amount of the interest at the rate
! specifed to the principal, thus max
ing new principal which shall b.
discounted at the rate agreed upon
J toner
| B. That loans. to individuals So
cured by collateral be made time
T. That interest on such demand
| loans as it may be necessary for
! the banks to make be collected
! monthly.
Notwithstanding the fact that the
above recommendations were made
! Aiiiic years dB IiltlT import Is rather
accentuated than dulled by the lene
lapse Of time, present association
| officials hold.
| Methods in Other Cities.
Reference to the methods pursued
! in oeher cities which discount com
mercial paper. bearing interest indi-
, Gates that such notes are treated
| in three ways.
! First the interest is added to tl.,.
principal. thus making new prIt.-
| cipal, which is discounted at the prs
| vafling rate for the elapsed time
| between the day of discount and th<
/ date of maturity. The bank retains
| the discount as payment for its sel.N
/; ice and the remainder is paid 10
| the customer who presented the not
( for discount.
| Second, the principal is diseountel
and the accrued interest is paid tu
the customer when the note plus IN
| terest is collected.
| Third, the bank retains and pGis
aside Tor its own use all amount equal
10 the interest, at the rate mentioned
! IN the note. based on the principal ~
the time the transaction is made. aud
pays the remainder (Which is usually
the principaD to the customers
First Method Favored.
The first method, which officials Of
the association believed then, as they
DO noWa is correct, is the one geueral15-
accepted in cities covered by the re-
Ill anu SlSIuS Il greater revenue
than the third method, which is sirnnIy
division of the amount of the note
ana interest, because the banker saws
10 MS customer. Yes. / will buy th.
| the interest"
The advantages in favor of the pra,.
tlce OF making collateral loans on time.
follows: .
The officers of the bank and the bor
rover are brought more frequently ana
more closely in contact
Inc collateral is brought forward
OF the officers of the bank
/ Inc contract is one of definite ma
| Iurlty. which is always preferable To
one or uncertain maturity.
Demand Notes Only in Name.
IN most. if not all, cases demand
! notes held by banks are demand notes
oniy IN name. The maker exercises
with perfect freedom his right to nav
any amount on the principal at any
| e. o,Iie. thus saving the interest on the
amount paid. But IL demand by the
pank for payment of the entire
amount OFTEN makes an enemy and
frequently causes embarrassment tn
both parties. as the maker i'm naarlr.
every case seems to regard the con-
| tract as an indefinite, continuing one
10 De terminated only at his pleasure
although he should not be blamed for
an attitude which MANY banks sa.n
TO nave encouraged
If demand loans on collateral h.
confined to brokers and stock and
pond dealers, the committee saw no
good reason why interest on such
! loans should not ba collected monthly /
| Inc amounts borrowed by such Gus
| toners are large and interest collect
ed monthly would be a distinct beuetit
to the banks and should not be Oh
Jected to by the borrowers in view of
the frequent substitution of collateral
| Early replies to the Clearing Holls..
Associations query have been r.
quested.
Riggs Bank Rights ON Exchange.
Riggs Bank rights when issued
| We're admitted to the list on the local
exchange today, 100 being bid. with
none offered Aside from this, the
session was featureleSs
| Railway As sold to the extent or
$4,000, face value, at 70&, and pepco
jrefunding 6s Were unchanged at lpi i.
'Georgetown Gas 5s brought S612
The stock list was quiet, with Rail-
way preferred selling at - and Mer-
genthaler at 149.