MICHIGAN ACADEMY OF SCIENCE. 51 



had long before been recognized in foreign countries. During the latter part 

 of the year, the higher discount rates caused many of the banks outside of the 

 larger cities to make investments in acceptances and so tended to increase the 

 scope of the discount market. During the year also, several trade banks of 

 foreign countries with branches in New York and many private banks filed 

 statements of their condition so that they might be in a position to trade in 

 acceptances in the American market. 



For the year 1917, the amount of acceptances bought in the open market 

 totaled $909,301,000, thus pointing out the fact that there was an enormous 

 increase in the volume of acceptances handled and also in the scope of the 

 market. This year marked the more general recourse to bankers' credits for 

 the financing of the large seasonal crop movements, thus indicating that the 

 borrower and the banker alike were beginning to recognize the advantages of 

 this new method of financing trade in the United States. Many smaller and 

 scattered banks came on the market as investors in acceptances, for the first 

 time. Two New York acceptance houses increased their bills sales to the 

 different banks to over $300,000,000 as compared with $60,000,000 the preced- 

 ing year. 



A brief survey of the development of the acceptance market during 1918 

 showed a more remarkable growth. Prior to the passage of the Federal 

 Reserve Act, very few states permitted banks and trust companies, incorpo- 

 rated under state laws, to accept bills of exchange drawn upon them. The 

 Federal Reserve Act now authorizes the member banks to accept bills, not 

 having more than six months to run, which grow out of foreign shipments, and 

 also those growing out of domestic shipments provided the proper receipts or 

 shipping documents are attached. 



The Board had, up to January 1st, 1919, authorized 161 member banks, 

 having $1,000,000 or more capital and surplus, to accept up to 100% of their 

 capital and surplus. The report showed that the purchases were mostly 

 bankers' acceptances, although trade acceptances were being acquired more 

 and more, — in some districts the amount equaled 5% of the total volume, 

 although the average was only 3% for the entire system. The statement of 

 the open market purchases showed a total of $1,818,354,000 for the year 1918. 



LONDON STILL THE LEADING MARKET FOK ACCEPTANCES. 



The American acceptance market has not as yet outdistanced the London 

 market. Up to this time, our market has developed with practically no com- 

 petition from other markets and so has been greatly favored and encouraged 

 by a growth which has been very largely due to the stimulus of the great 

 foreign trade during the war. Therefore some writers have felt that New 

 York had already or soon would surpass London as an acceptance market, 

 but the statistics of Mr. Leopold Fredrick of the American Smelting and 

 Refining Company furnish an interesting comparative study of this subject. 



