MICHIGAN ACADEMY OF SCIENCE. 53 



York market has not been put to the real test of meeting the competition 

 of the foreign markets, but it will be obliged to consider the English rate 

 after a normal condition is resumed, and money flows more easily from place 

 to place. 



A PROPOSED CHANGE IN THE LEGAL LIMIT OF ACCEPTANCES. 



The Annual Report of the Federal Reserve Board for 1918 points out the 

 fact that, "in a development of the American acceptance market, it is neces- 

 sary to provide not only an outlet for acceptances, but means of securing 

 acceptances of bills in adequate volume, and in order to enable American 

 banks and bankers to compete with British banking houses in financing the 

 world's trade, the combined power of American institutions, (whose accept- 

 ances can be made available in foreign markets), to accept time bills must be 

 large enough to meet all requirements, for otherwise, should importers find 

 that it is only occasionally that they can obtain dollar acceptance credits from 

 American banks, due to the fact that these banks have reached the limit of 

 acceptance liabilities provided by law, the importers will naturally return to 

 the sterling acceptances which are available at all times in sufficient amounts 

 to meet the demand." 



The Board, a few months ago, made inquiry concerning the amount of 

 acceptances outstanding in this country and found that the amount was 

 $477,500,000. On this basis, excluding the inland cities which do not accept 

 to any large extent on foreign transactions, it was found that the Atlantic 

 slope cities can accept for only $290,000,000 more, while the foreign trade of 

 these cities, if a large part were financed by dollar acceptances, would require 

 a much larger amount. As a result of this inquiry, the Board suggested that 

 the Act be amended so as to permit any member bank with a capital and sur- 

 plus of not less tha}i $1,000,000 to accept drafts or bills of exchange, growing 

 out of foreign trade, to an amount not exceeding 200% of its capital and sur- 

 plus, instead of 100% as at present. This suggestion, if enacted into law, 

 should provide a limit which would be sufficient for the growth of an accept- 

 ance market in the United States for many years to come. 



AMERICAN FOREIGN BANKING MACHINERY. 



It goes almost without saying that the financing of our foreign trade will 

 be greatly facilitated by the organization of international and foreign banking 

 corporations, so it will be worth while to note the development in that line 

 since the enactment of the Federal Reserve Act. At the present time, we find 

 five foreign banking corporations organized under Section 25 of the Act, viz. : 

 (1) The American Foreign Banking Corporation, New York, with four 

 branches. (2) The Mercantile Bank of Americas, New York, with six afliliii- 

 ated institutions, more than twenty offices, two branches and five agencies.. 



