Other Factors In The Acceptance Investment Business

The progress in the development of the acceptance business as an item of investment has brought into existence numerous commercial paper dealers and brokers, who make a specialty of dealing in bank and trade acceptances. These dealers, many of whom are private bankers and well known stockbrokers, generally issue periodical bulletins called "acceptance offerings." The houses having commercial paper to offer naturally acquire them through purchase from commercial firms and general holders of bank and trade acceptances. An investor, firm, corporation, or bank, having surplus funds, chooses from the offering list the same as from a list of bonds and other securities, and selects according to the faith based upon the acceptors of the draft.

The Acceptance As An Investment Analyzed

Availibility Of Trade And Bank Acceptances

Trade acceptances and bank acceptances at the present time are available for investment purposes in nearly any amount and for any desired maturity. Of the two, bankers' acceptances are the usual form available for investment. The bank acceptances comprise two classes, eligible and ineligible. Both forms of bankers' acceptances are dependent upon the rating and credit standing of the accepting banking institution, which places the bills accepted among the highest grade of securities. The chief responsibility rests with the accepting banks, which because of their greater credit ability and more conservative operation, obviates the necessity for close scrutiny of the drawer of the bill or its indorsers.

The Acceptance As An Equalizer Of The Bank's Cash And Investment Position

Liquidity Of Investments

As a secondary reserve for banks, there is no other investment so liquid as the acceptance. Such a bill is a short term investment offering assurance of payment at maturity.

The open market feature of such an acceptance and the purchasing power of the Federal Reserve Banks contribute to the position of the acceptance as a premiere investment for banks wishing to establish a secondary reserve.

As a liquid investment, the acceptance is the highest form of commercial paper. Banking experience for many years has demonstrated that purely commercial loans are the safest of all temporary investments.

Acceptances As Short Time Investments

The acceptance to-day is available in almost any amount and for almost any maturity. The various banks and discount corporations making a specialty of acceptances have at all times a large supply of this class of commercial paper available for investment purposes.

One great advantage in the acceptance as an investment lies in the fact that its security is of a very high character and it is self-liquidating. As a short term investment, it is much more desirable and convenient than other means of investments. The Federal Reserve Banks employ a considerable amount of their funds in investments in acceptances, and distribute them so that their maturities are continuous. At the present time more favorable legislation is being adopted in many States of the Union favoring the acceptance as a means of investment for savings banks and trust companies. Moreover, a large number of corporations and business houses throughout the country, particularly those which favor the acceptance method, purchase quantities of this class of commercial paper according to their surplus funds.

Trade Acceptances

The second class of acceptances, namely trade acceptances, are largely bought by Federal Reserve Banks and are dealt in extensively by the banks and discount houses of the country.

The same discussions heretofore stated in connection with bank acceptances would apply equally to trade acceptances. They, too, will undoubtedly prove to be a desirable form of investment, their qualities as standardized commercial paper of a high class being generally recognized by the banks and investing houses.