As a further example of this class of acceptance, let us take the case of a clothing manufacturer who desires to carry a stock of silks by means of the banker's acceptance. He places the merchandise in a warehouse, draws a draft on his bank for the value of the silk, attaching the warehouse receipts as collateral. The draft, after acceptance, is returned to him to be sold, the warehouse receipts being retained by the bank. The requirements as to warehouses in connection with bankers' acceptances will be better explained by a reference to the general statutory provisions, regulations and rulings of the Federal Reserve Board and opinions of counsel reviewed in the following pages; also the United States Warehouse Laws in Part V of this work.

It may be said, in summary, that the silk must be stored in a warehouse which is independent of the manufacturer; that is, the manufacturer must not have any control of the silk as long as the warehouse receipts are outstanding. It is, of course, possible to secure-possession of the original warehouse receipts by substituting other warehouse receipts for the silk, but if the manufacturer desires to take down the silk without substitution, he should give the bank the cash value of the silk taken, for the bank should be secured either by-warehouse receipts or cash all the time its acceptance is out.

Drafts Drawn For The Purpose Of Furnishing Dollar Exchange

It sometimes happens that persons in foreign countries, having obligations to meet in this country, find it necessary to do so by means of dollar exchange; that is, to remit in dollars in settlement of the outstanding obligations.

The Federal Reserve Board has provided for such contingency and permission is given to banks thereby to accept drafts drawn on them by banks in certain foreign countries for the purpose of furnishing such dollar exchange. It is necessary, however, for a bank desiring to accept bills drawn for this purpose, to make application to the Federal Reserve Board for permission to do so. The restrictions surrounding acceptances for this purpose are fully set forth in the present part of the work which discusses such classes of bank acceptances.

Trade Acceptances

A trade acceptance is a draft drawn by the seller of goods on the purchaser and accepted by him. It must bear a statement on its face to the effect that it represents a purchase of goods by the acceptor from the drawer of the draft.

Being drawn against actual current transactions and being paper bearing at least two names, preferential rates are made by Federal Reserve banks for the rediscount of trade acceptances as compared with single name paper. Such acceptances may also be purchased in the open market. If the acceptance is not paid at maturity and is properly protested, recourse may be had by the holder to any indorser and to the drawer. (For the discussion of the trade acceptance, its advantages, uses, applications, etc., see Part II of this work).