ich is necessary in the purchase of bills of this kind.
And not only must the standing of the drawer be taken into
consideration, but the standing of the drawee is a matter of almost
equal importance--after the "acceptance" of the bill, the parties
accepting it being equally liable with its maker. The nature of the
merchandise, furthermore, and its marketability are further
considerations of great importance. Cotton, it will readily appear, is
an entirely different sort of collateral from clocks, or some specialty
in which the market may vary widely. The banker who holds a bill of
lading for cotton shipped to Liverpool can at any moment tell exactly
what he can realize on it. In the case of many kinds of articles,
however, the invoice value may differ widely from the realizable value,
and if the banker should ever be forced to sell the merchandise, he
might have to do so at a big loss.

Returning to the actual operation of selling bankers' demand against
remittances of long bills, it appears that the successive steps in an
actual transaction are about as follows:

The banker in New York having ascertained by cable the rate at which
bills "to arrive" in London by a certain steamer will be discounted,
buys the bills here and sends them over, with instructions that they be
immediately discounted and the proceeds placed to his credit. On this
resulting balance he will at once draw his demand draft and sell it in
the open market. If, from selling this demand draft, he can realize
more dollars than it cost him in dollars to put the balance over there,
he has made a gross profit of the difference.

To illustrate more specifically: A banker has bought, say, a L1,000
ninety days' sight prime draft, on London, documents deliverable on
acceptance. This he has remitted to his foreign correspondent, and his
foreign correspondent has had it stamped with the required "bill-stamp,"
has had it discounted, and after having taken his commission out of the
proceeds, has had them placed to the credit of the American bank. In
all this process the bill has lost weight. It arrived in London as
L1,000, but after commissions, bill-stamps and ninety-three days'
discount have been taken out of it, the amount is reduced well below
L1,000. The _net_ proceeds going to make up the balance on which the
American banker can draw his draft are, perhaps, not over L990. He paid
so-and-so many dollars for the L1,000 ninety-day bill, originally. If
he can