Evening star., 1932-08-20
TRADE ACCEPTANCE
USAGE IS GROWING
Banks Are Declared Ready
to Promote Business
Financing Plan.
BY FRANK III. MCCONNELL,
Associated Press Financial Writer

NEW YORK, August 20.-New York
bankers are watching closely the
growth and spread of the heretofore
rather neglected practice of financing
business transactions through use Of
trade bills, or acceptances.
Canvass of Wall Street institutions
reveals that today there is fair
plethora Of these new bills, which
in effect are two-name paper indorsed
both by the seller and purchaser in a
single transaction and, among other
things, enjoy the privilege of being
eligible for rediscount at the Federal
Reserve banks. The Reserve banks
also are privileged to buy these bills.
Credit Advanced.
As yet it is understood that the
central bank in the New York district
has made no purchases of the new
crop of trade bills. Presumably none
have been pressed on the bank for
that purpose. New York commercial
banks. however. have advanced credit
against trade bills in a number of
instances. Trade bills now in the
market here are said to include paper
bearing the Endorsement of some large
corporations including du Pont de
Nemours and General Motors.
A possible stimulus to the use OF
trade acceptances is forecast when the
proposed new Commodity Finance Cor
poration is finally called into being.
Inquiries reveal that Eugene Meyer,
governor of the Federal Reserve
Board, who sponsored the idea Of
forming such a corporation, has been
in frequent consultation with the New
York bankers, who, in varying degrees
of enthusiasm, have assured him that
they would cooperate.
Indications now point to the like
lihood of an announcement on TINS
subject within a week, possibly within
a day or two. Under the tentative
plans as now outlined, banks would
be willing to advance money to finance
the movement of commodities into the
hands of the fabricators or mill owners.
Trade bills. bearing the Endorsements
of corporations or individuals OF good
credit rating, would readily draw ad-
vances from the banks which, to use
the words of one banking leader, are
hungry for a chance to make loans
on strong security. Such advances
would, however, be for short periods
only. To take care Of longer term
and intermediate maturitieS efforts are
now being made to interest the Recon-
struction Finance Corporation in some
plan of supporting the movement:
A boon to the recent efforts to slim
ulate trade acceptance business is now
seen in the gradual growth of excess
reserve balances of the Federal Re
serve system. In New York last week
the excess reserves of member banks
made an unusual increase. The total
stepped up to S114,000,000 from S57,-
600 900 the previous week. For the
country as a whole excess reserves now
exceed S20O,000O00. This gradual
p1ling I'D of reserves, bankers state
has not impelled banks to rush head
long into the market to invest funds
| but, nevertheless, has stimulated thei1
interest in finding safe channels tc
take care of the desired outflow. Trade
| bills are expected to furnish an addi-
| tional outlet.
Banks Ready to Cooperate.
Some bankers state that the ma
! chinery is now ready, subject only U
a signal of business improvement, tc
| give full effect to the operation OF any
| pIan designed to send raw materials
| more RAPIDLY into the mills where they
| can be converted into hnlSheo goooS
! Manufacturers have in some cases eX'
pressed their readiness to borrow money
at reasonable rates to further the pro
gram, but still are cautiously feeling
around to make sure that the retail
markets are showing sufficient promise
to Justify them in going into debt FOL
While recent conversations abou'
! financing commodities have. centeree
mainly around cotton, it has beer
stated authoritatively that this is only
one of several commodities which vii
figure in the proposed plan. Presen
discussions have mentioned wool quite
prominently and there also has peer
some discussion about wheat. AS
matter of fact, some bankers state
the proposed corporation may not con
centrate on any one single commoditS
or group, but will be of sufficient broad,
ness to help facilitate the movement o.
any commodity for which a genuine
demand exists.