52 TWENTY-FIRST REPORT. 



These statistics show that, at a date approximately the end of November, 

 1918, the total amount of acceptances of all the London banks and agencies 

 was approximately $500,000,000, while the total acceptances, in New York, 

 representing the financing of foreign trade, showed an amount of $210,000,000. 

 Mr. Fredrick comments upon these figures by saying that "the foregoing figures 

 show that London is far ahead, and I believe that even with the much-needed 

 improvement of the machinery for financing international trade London will 

 still, for many years to come, outdistance New York. We are lacking here 

 the large number of merchant bankers, and old-established accepting houses 

 with business ramifications all over the globe. We here will be satisfied if we 

 can hold the Central and South American, and Far East business. Although 

 dollar exchange has made great strides since the war, the New York discount 

 market is still in its infancy. For the present there is little likelihood that 

 we will get. except occasionally, the financing of the continental trade of 

 Europe. It is hardly likely that, say an Amsterdam merchant importing 

 goods from France will seek accommodations in New York ; he will go as 

 heretofore to London." 



In considering the development of an acceptance market in this country, 

 we must always keep in mind the difference in the rates of discount for this 

 kind of paper in London and New York. In London, the Bank of England 

 fixes an official rate, and then there is also an open market rate. The London 

 acceptance bankers ordinarily buy and sell the majority of the bills in the open 

 market, but always have access to the Bank of England for rediscounting, if 

 desirable. So the bank rate is usually fixed for a considerable period of time, 

 while the market rate fluctuates according to the demand for and the supply 

 of bills. The Bank of England, if it seems advisable, may also enter the active 

 acceptance market as a buyer or a seller and so affect the prevailing rate. 

 As to the rate of discount in London, it is the lowest in the world because of 

 the accumulation of funds there from all parts of the globe, which may best 

 be invested in bills of exchange. 



In contrast with the English situation, we find that New York is the only 

 broad acceptance market in the United States, and that the rate established 

 by the Federal Reserve Banks is followed closely by the exchange bankers, 

 because there have not been sufficient funds in the New York open market to 

 take up the acceptances offered, and so many of the bills have been trans- 

 ferred to the Federal Reserve Banks for rediscounting, and there has been 

 no tendency for the market rate to fall below the bank rate. When money is 

 easier in New York and the bankers are willing to keep the purchased bills 

 until they mature, then the market rate will tend to be below the bank rate, 

 but not until then. 



During the war, the ordinary free movement of acceptances to the market 

 which has the lowest rate of discount has been restricted, and so the New 



