se foreign loans, it is evident that there
is as much chance for different ways of looking at different stocks as
there is in regular domestic loaning operations. Not only does the
standing of the borrower here make a difference, but there are certain
securities which certain banks abroad favor, and others, perhaps just
as good, with which they will have nothing to do.

Excepting the case of special negotiation, however, it may be said that
the collateral put up the case of foreign loans in this market is of a
very high order. Three years ago this could hardly have been said, but
one of the many beneficial effects of the panic was to greatly raise
the standard of the collateral required by foreign lenders in this
market. It used formerly to be more a case of the standing of the
borrower. Nowadays the collateral is usually deposited here in care of
a banker or trust company.

From what has been said about the mechanism of making these foreign
loans, it is evident that no transfer of cash actually takes place, and
that what really happens is that the foreign banking institution lends
out its credit instead of its cash. For in no case is the lender
required to put up any money. The drafts drawn upon him are at ninety
days' sight, and all he has to do is to write the word "accepted," with
his signature, across their face. Later they will be presented for
actual payment, but by that time the "cover" will have reached London
from the banker in America who drew the "nineties," and the maturing
bills will be paid out of that. The foreign lender, in other words, is
at no stage out of any actual capital, although it is true, of course,
that he has obligated himself to pay the drafts on maturity, by
"accepting" them.

Where, then, is the limit of what the foreign bankers can lend in the
New York market? On one consideration only does that depend--the amount
of accepted long bills which the London discount market will stand. For
all the ninety days' sight bills drawn in the course of these transfers
of credit must eventually be discounted in the London discount market,
and when the London discount market refuses to absorb bills of this
kind a material check is naturally administered to their creation.

Too great drawings of loan-bills, as the long bills drawn to make
foreign loans are called, are quickly reflected in a squeamish London
discount market. It needs only the refusal of the Bank of England to
re-discount the paper of