For And Against. Expressions And Opinions

From the Leading Commercial and Financial Organizations, the Government, the Bankers and Specialists on the Acceptance Method Herewith are reviewed the opinions and expressions of some of the leading commercial and financial organizations, the Government, bankers and specialists on the acceptance method, qualified to speak upon the subject.

Also, there are given extracts from some of the leading articles on acceptances, as well as extracts from the speeches of the leading proponents of the acceptance method.

These may be taken as conclusive evidence of the practicability of the acceptance from those who have studied it from every angle and who have proved to themselves that it is far better than any credit system that has ever been devised.

It has been estimated by the leading credit associations of the country that at the present time more than ten thousand firms and business establishments are users of the acceptance in one form or another.

The American Acceptance Council, an organization especially existing for the furtherance of the acceptance method, estimates that there are more than that number of users.

Nationwide investigations conducted in the interests of better business for the country show that in those cases where the acceptance has been put to the test, rarely has it failed to supply the desired results.

Not only is the acceptance of benefit to its present users, but it holds out equal advantages for the country's business in general. True it is that the acceptance method is not intended to eliminate all other forms of banking credit, for, in some lines of business, its use would be to confuse existing methods rather than to aid them. The acceptance is not intended as a substitution for all prior methods. It is, on the other hand, an improvement in credit methods.

If the acceptance could save for the merchant but a small fraction of a per cent, of the annual turnovers in business, in costly account carrying, in frozen liquid accounts, tied up and awaiting settlement, in tied up capital, in lost motion, in extra expense of conducting business, in bad debts, in slow collections and other evils; if it could be the means of an open discount market capable of absorbing the commercial paper produced by the country's business, thereby creating liquidity in the nation's resources, and be a means of extending financial equilibrium at all times, with the cheapening of money and its advantages to business, - can we not say that the acceptance is a national asset-a means of conserving the national resources?

Let us see what the following say:

From the Government The following interesting letter was received from Governor W. P. G. Harding of the Federal Reserve Board by the American Acceptance Council, and expresses clearly the attitude of that highest of financial tribunals in the country towards the trade acceptance method:

"To the American Acceptance Council, New York:

"The Board is advised by letter from your Executive Secretary, dated October 22nd, that the American Acceptance Council, organized to encourage the use of bankers' and trade acceptances, is at this time conducting a campaign in the interests of trade acceptances.

"Your activities in this connection are observed by the Board with satisfaction. It is a matter of public knowledge, justified by frequent and emphatic expressions from the Board, that the purposes of the Federal Reserve Act would in many cases be better served by the general adoption of trade acceptances in lieu of book accounts and 'one name' paper. The acceptance has the added security of a second name, it usually evidences upon its face that it represents a commercial, industrial or agricultural transaction, and gives reasonable assurance that it will be liquidated at maturity by proceeds from the sale of the identical goods involved. For these reasons, the Board believes that this class of credit instrument is often more desirable than single name paper as an investment for the funds of the Federal Reserve banks, and has backed this belief by authorizing a preferential rate for trade acceptances.

"There are, of course, some branches and kinds of business which are not adaptable to the use of trade acceptances, and the question of such adaptability must be left to the judgment of those interested. The Board does not undertake to urge the use of the trade acceptance against the wishes of interested parties, but merely takes the view that the trade acceptance represents generally a convenient and scientific kind of credit instrument and has no hesitancy in recommending that it be utilized wherever practicable.

"Very truly yours,

"(Signed) W. P. G. Harding,

"Governor."

From the Commercial, Financial and Credit Organizations

At the 24th annual convention of The National Association of Credit Men, held in Detroit, on June 10th to 13th, 1919, the following resolutions were recommended in a report presented by its Committee on Banking and Currency:

"Resolved, That the National Association of Credit Men hereby reaffirms the action of former conventions in approving the principles of the trade acceptances as a desirable credit instrument for the ordinary commercial transactions of the nation, believing that the trade acceptance is superior to the open book account, that it is a logical development of the Federal Reserve Act in the emphasis and dignity it gives to commercial paper as a national asset, and that it will tend to decrease trade abuses, give greater liquidity to capital, and therefore should be known and used generally in mercantile credits.

"Resolved, That in the approval given by this convention to the trade acceptance, it is earnestly recommended that in the literature of the National Association and local associations, and in the activities of succeeding committees, this be the attitude taken - that wherever the trade acceptance is found adaptable and can be used to advantage by the credit grantor, he be encouraged to use it without restraint or criticism; that those who do not find it adaptable or of economic advantage at this time in their credit transactions be not required to use it; the convention believing that such attitude will permit the subject to receive study and consideration without any rancor and those insinuations that would impeach the intelligence of one either favorably or unfavorably inclined toward the instrument."

From the American Bankers Committee on Acceptances

The list of known users of the Trade Acceptance has grown rapidly, having increased over four thousand in the period of one year. It ineludes practically every line of industry and all sections of the United States. Out of the reports received not one single valid objection has been presented where proper use of the Trade Acceptance has been undertaken. In every legitimate case the instrument is praised most highly. Experience has actually demonstrated that the use of the Trade Acceptance enables an equal amount of capital to do a greater amount of service. It has also enabled its users to reduce their bills payable account, to buy a greater amount of Treasury Bills and to handle without difficulty the increasing volume of their business with the attending high prices, to shorten the credit period, to reduce the number of claims and disputes, to afford a definite check-up on all transactions, and to generally stabilize their business-producing at the same time a great volume of liquid paper, eligible for rediscount at the Federal Reserve banks and for service as the basis of currency issue.

The following paragraphs are taken from the recommendation of the Chamber of Commerce of the State of New York, one of the oldest organizations of the kind in existence and noted for the sound and conservative quality of its judgment, on the Trade Acceptance:

"A new step of importance to the development of the Federal Reserve System will be the adoption by merchants of the method of settling accounts by Trade Acceptances. Your Committee desires to give its approval to the principle involved in this method of settling accounts between sellers and buyers. It believes that merchants throughout the country should be encouraged in every way to study the question of Trade Acceptances and to bring the matter to the attention of their customers. The introduction of new methods of business of this description requires time and patience, in order that those adopting them may become thoroughly familiar with their methods and with the benefits to be derived therefrom."