n, some bills
regularly selling a cent or a cent and a half per pound sterling below
the best bills of their class.

Without the introduction, therefore, of the element of speculation,
except as to the soundness of the bills' makers, it is possible for
bankers to make widely varying profits out of the same kind of
business. Everything depends upon the amount of risk the banker is
willing to take. The exchange market is a merciless critic of credit,
and if a commercial firm's bills always sell at low rates, the
presumption is strongly against its financial strength. Cases very
frequently occur, however, where the exchange market misjudges the
goodness of a bill, placing too low a valuation upon it. In that case
the banker who, individually, knows that the house in question is all
right, can make considerable sums of money buying its bills at the
low-going rates and selling his own exchange against them. This,
evidently, is purely a matter of the exchange manager's judgment. With
comparatively little risk there are banking houses which are making a
full cent a pound out of a good part of the commercial exchange they
handle.

2. _Selling Cables Against Demand Exchange_

No description of a cable transfer having been given in the preceding
description of different kinds of exchange, it may be explained briefly
that a "cable," so-called, differs from a sight draft only in that the
banker abroad who is to pay out the money is advised to do so by means
of a telegraphic message instead of by a bit of paper instructing him
to "pay to the order of so and so." A, in New York, wants to transfer
money to B, in London. He goes to his banker in New York and deposits
the amount, in dollars, with him, requesting that he (the New York
banker) instruct his correspondent in London, by cable, to pay to B the
equivalent in pounds. The transfer is immediate, the cable being sent
as soon as the American banker receives the money on this end.

To be able to instruct its correspondent in London by cable to pay out
large sums at any given time, a bank here must necessarily carry a
substantial credit balance abroad. It would be possible, of course, for
a banker to instruct his London agent by cable to pay out a sum of
money, at the same time cabling him the money to pay out, but this
operation of selling cables against cables is not much indulged
in--there is too little chance of profit in it. Under special
circumstances, however, it can be