a "Against domestic shipment of goods, providing shipping documents conveying or securing title are attached at the time of acceptance." b "Secured at the time of acceptance by warehouse receipt or other such document conveying or securing title covering readily marketable staples."

In order to finance his purchases and take advantage of the cash discount, the merchant formerly went to his bank and borrowed on his own promissory note such funds as he required. The rate of interest which he had to pay varied according to the state of the money market, while the money market in turn always showed the effect of our old banking system, with its lack of rediscount facilities and its consequent tendency to sudden and abnormal fluctuations.

Today, the merchant who wants to borrow is privileged to pursue a different course. Let us take the case of a buyer who has to meet a draft for $50,000, covered by domestic shipping documents.

The buyer, having made the proper arrangements with his bank, authorizes the latter to "accept" the seller's draft for $50,000 drawn upon the bank-(not upon the buyer), provided the draft is accompanied by certain specified documents, such as invoices, railroad bills of lading, etc. There are instances when it is more practicable that the customer himself draw upon the bank instead of the seller. However, the other method is the more usual one. The draft is presented by the seller, accepted by the bank and returned to the seller. The documents are withheld by the bank and turned over to the customer against the familiar trust receipt.

The seller now has the "Bank Acceptance" for $50,000 which he can readily discount in the open market. Thus, actual funds are provided under competition by the banking and investing community at large.

The procedure of creating Dollar Acceptances secured by warehouse receipts or other documents covering readily marketable staples does not vary materially from that outlined above, except that the customer of the bank usually does not designate any third party to draw the draft on the bank, but draws it himself.

The advantages of these acceptances are four-fold:

First : The seller receives his money promptly.

Second: The bank's customer has obtained his loan (or rather credit) at a lower cost than by the use of his promissory note, the rate for a three months' promissory note, all other things being equal, being higher than the discount rate for a three months' Bank Acceptance plus acceptance commission. This difference is eloquently illustrated by the different valuation applied by European bankers to an investment of ready negotiability-as compared with one that locks up the funds of the bank.

Third: The bank is able to accommodate its customer more readily, since it advances only its credit, the ultimate buyer of the Acceptance advancing the actual money.

Fourth : It has a balancing effect on the money market.

Thus, through the use of the Bank Acceptance the bank can take care of the needs of its customers without carrying their paper in its portfolio. In other words, the bank, in granting accommodations, is not dependent upon the amount of loanable funds it has available.