This historic book may have numerous typos and missing text. Purchasers can usually download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1922 edition. Excerpt: ...the acceptance, and when he does, the member bank in turn often does not rediscount it. The Central Federal Reserve Banks in the past have given the member banks a preferential rate in rediscounting the trade acceptance, with the expectation that they would pass this on to their customers, thus serving ...
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This historic book may have numerous typos and missing text. Purchasers can usually download a free scanned copy of the original book (without typos) from the publisher. Not indexed. Not illustrated. 1922 edition. Excerpt: ...the acceptance, and when he does, the member bank in turn often does not rediscount it. The Central Federal Reserve Banks in the past have given the member banks a preferential rate in rediscounting the trade acceptance, with the expectation that they would pass this on to their customers, thus serving as an incentive for them to adopt the "acceptance idea." Unfortunately the member banks have not always passed this preferential rate on to the business man. The Assigned Account and the Trade Acceptance. What is the difference between selling an open account to a credit company and selling a trade acceptance to a bank? 1. That is, the theory of the acceptance as regards discounting and rediscounting; as with other eligible paper. 2. Resorted to more in times of money stringency. 3. Actual currency rarely employed; performed by means of credit. COMPARISON OP THE TWO METHODS 41 Discounting an acceptance is a much cheaper method than selling an account. The former can be done for about six per cent and the latter costs about eighteen per cent per annum. The banker might take this into consideration in his single-name line of credit, and curtail to a greater degree the loans of the firm which sells its accounts, as this is the more expensive and less desirable method. Let us examine the effect of the two on the credit structure of the country. A., a merchant, has a customer, B. He obtains a trade acceptance for goods shipped to B. to the extent of, say $1,000.00. A. discounts the acceptance with his banker, who in turn can rediscount it with the Central Federal Reserve Bank of his district and receive credit to the extent of $1,000.00 less the discount rate, which may be anywhere from four per cent to seven per cent. The banker now...
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