48 TWENTY-FIRST REPORT. 



The acceptance has a separate and distinct use. A few of the most ardent 

 supporters of an American acceptance market have created the impression 

 that acceptances were to displace other systems of credit such as commercial 

 paper, and the cash discount for early settlements. This is not the case how- 

 ever, and acceptances should be used only when credit is required by the seller 

 and when the buyer is willing to grant it. So businesses, which are able to 

 carry on their trade transactions on a cash basis, or by borrowing on their 

 own paper or against collateral, may assume an air of indifference toward the 

 acceptance. The acceptance has not come as a revolution in our credit system 

 but rather as an evolution and a supplement. So much for the setting of an 

 acceptance market. 



SOME LEGAL ASPECTS OF THE ACCEPTANCE IN THE UNITED STATES. 



The Bank Acceptance. The Federal Reserve Act has defined what shall 

 be considered as eligible bank acceptances for member banks. It states that 

 a member bank may accept drafts or bills of exchange, having not more than 

 six months to run, exclusive of days of grace, drawn upon them for impor- 

 tation or exportation of goods, or domestic shipments accompanied by title 

 documents or warehouse receipts, as follows : 



(a). For any one person, firm or corporation up to an amount equal to 

 not more than ten per cent of the bank's capital and surplus, if unsecured 

 by either attached documents or other collateral. 



(b). Aggregate acceptances at any time shall not exceed 50 per cent of 

 the bank's capital and surplus, except that by ijermission of the Federal 

 Reserve Board such acceptances may equal 100 per cent. 



(c). The aggregate amount of domestic acceptances shall in no event 

 exceed 50 per cent of the capital and surplus of the bank. 



The Federal Reserve Board, in its regulations, has defined those accept- 

 ances which are eligible for purchase by a Federal Reserve Bank, and so these 

 acceptances constitute practically the only kind that will be presented in the 

 market. In this case, a banker's acceptance, within the meaning of the regu- 

 lations, is a bill of exchange of which the acceptor is a bank or a trust com- 

 pany, or a firm, person, company, or corporation, engaged in the business of 

 granting bankers' acceptance credits. 



To be eligible for purchase, the bill must have a maturity of not more than 

 three months, exclusive of grace, at the time of purchase and drawn under a 

 credit involving "(1) The shipment of goods between the United States and 

 any foreign country, or between the United States and any of its depen- 

 dencies or possessions, or between foreign countries, or (2) The shipment of 

 goods within the United States, provided that the bill at the time of its 

 acceptance is accompanied by shipping documents or (3) The storage within 

 the United States of readily marketable goods, provided the acceptor of the 



