tself a wrong idea, but with business carried on along the
lines on which it is actually done nowadays, bank credits play so
important a part that conservatism of this order has little place.
Theory and practice prove that there is no reason why a silk importer,
for instance, with a capital of $100,000 should not be able to use
safely a credit of as much more than that, the standing and credit of
the firm being always the prime consideration. Granted that a
manufacturer stands well and is doing a safe, non-speculative business
on the basis of $100,000 capital, there is no reason why he should not
be able to secure an import credit for an additional L20,000. Not only
is there no reason why he should not get it, but there are any number
of good banking concerns only too glad to furnish it to him.

So much for the transaction from the importer's standpoint--what does
the seller of the goods get out of it? Payment for his goods as soon as
he is ready to ship them. No waiting for a remittance, no drawing of a
dollar-draft on an obscure firm in Paterson, N.J., which no Canton
bank will be willing to buy at any price. The credit constitutes
authority for the shipper to draw in pounds sterling on London--the one
kind of draft which he can always be sure of turning at once into local
currency and at the most favorable rate of exchange. He ships the
goods, he draws the draft, he sells the draft, he has his money, and he
is out of it. From the shipper's standpoint, surely a most satisfactory
arrangement and one which will induce him to quote the very best price
for merchandise.

As to the banker's part in the transaction, the whole question is one
of commission. The London banker on whom the credit is issued gets a
commission from the American banker for "accepting" the drafts, and the
American banker, of course, gets a substantial commission from the
party to whom the credit is issued. Sometimes the banker in New York
and the banker in London work on joint-account, in which case both risk
and commissions are equally divided. But more often, perhaps, the
London bank gets such-and-such a fixed commission for accepting drafts
drawn under credits, and the New York banker keeps the rest of what he
makes out of the importer.

Before proceeding with discussion of what commissions amount to, it is
well to note the fact that in those commercial credit transactions
neither banker is ever under the necessity of putting up a cent of
actua