ement entering into the value of time bills. For example, New York
regularly quotes on London _cables_, _demand_, and _sixty-day_ bills.
The rates on a certain date were: Cables, 4.8860; demand, 4.8790; and
sixty days, 4.8370. Inasmuch as these are all bankers' bills and
consequently of the same quality, the differences in their quotations
are due to the interest element and to the fact that in the case of
the cables the cost of the cablegram is included.

When a New York banker sells a cable on London, his balance with his
correspondent is reduced by the amount in a few hours, and the
interest he receives on such balances is proportionately diminished at
once, and he is also out the cost of the necessary cablegram. When he
sells a demand bill, his account with his London correspondent remains
undiminished during the time required for sending the bill by mail
across the Atlantic and for its presentation for payment. He draws
interest on his entire balance during this period. When he sells a
sixty-day bill, his balance does not suffer diminution on its account
for sixty days. In order to place these bills on a footing of equality
so far as he is concerned, therefore, he must quote demand and
sixty-day bills lower than cables; the former by the cost of the
cablegram plus interest on the amount of the bill, say for ten days,
at the rate he receives on his London balance, and the latter by the
amount of the cablegram plus interest on the amount for sixty days at
the same rate.

Trade, or mercantile, as well as bankers' bills are also frequently
and, in some markets, regularly quoted. Being of a quality ranked as
inferior to bankers' bills, they must be negotiated at a lower rate
and are quoted accordingly.

CHAPTER III

THE PROBLEMS OF COMMERCIAL BANKING

The conduct of commercial banking presents problems both to the
bankers and to the public, the methods of solution of which will be
given attention at this point. The problems concerning the bankers
primarily may be grouped under the heads, supply of cash, selection of
loans and discounts, and rates; and those which primarily concern the
public may be grouped under the heads, protection against unsound
practices, and adequacy and economy of service.

_1. The Supply of Cash_

The credit balances on checking accounts and the notes of commercial
banks are payable on demand in the legal-tender money of the nation to
which they belong, and such banks must at