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WALTER KUTZLBB NBW YORK 19, Bector Street (Room 807) June 17, 193S. Bon* Warriner S. Eccles, Chairman, Federal Reserve Board, Washington, D. C. My dear Mr. Eccles I have read with deep interest your views on banking policies as disclosed in your correspondence with Senator Vandenberg. I wonder whether it mi^it be advisable to consider at this time the development of commercial acceptances in our country. In any event, such development would supply two-name paper, aside from endorsements, and would liberate hundreds of millions of dollars now frozen in so-called open accounts. Eased on the Crust-Receipt principle, a commercial acceptance should constitute one of the best and safest instruments of commerce, and should assist many small industrial and commercial concerns in financing their current needs. European Central Banks "have welcomed such paper in their own countries as basis for currency, and there has usually attached a certain sanctity to acceptances which has added to their attractiveness as short-time investments. Currency, as you state, is not necessarily wealth but I am inclined to believe acceptances would really make a contribution to a more active turzfc-over, and once properly introduced, mi^it be entitled to better recognition in all directions of trade and banking. And it is turn-over that leads to more employment, and consequently greater prosperity. I am aware .of antipathy in certain quarters to the development of the use of acceptances but I truly believe the matter is worthy of more study. With assurances of my esteem, believe me, June 2k, 1938 Mr. falter Kutzleb 19 Hector btreet (Room 807) New York City, N. Y. Dear Mr. Kutleb: I wish to acknowledge your letter of'June 17 with reference to the development of trade acceptances in this country. As you Know, the "numerous 'att&npts^ in the past to promote a wider>:£Tse- o£~the trade acceptance Have be6n,.unsuccessful. The Federal.Keserve banks are authorized to rediscount "or purchase short-term trade acceptances drawn for" commercial and agricultural purposes. These acceptances are also-eligible as cbllatereCL fot the .issuance of Federal Keserve notes; The'chief reason why the trade acceptance h^s not been popular ±a this country, in'spite of the Increased liquidity introduced by the Federal Keserve net, is-because American business has preferred to use the traditional methods of financing, namely, the open-book account and the- cash discount systetm. Moreover, th^re has been a steady decline' in the volume of short-term commercial loans, since the war. At the present time I "believe an attempt to increase the use of trade acceptances would meet with the same difficulties encountered in the past. Commercial borrowers who might Hise this type of'paper can rea,dily obtain accommodations at extremely low rates ^either'from commercial banks upon their own promissory notes or through access to the commercial paper or bankers1 acceptance markets. In closing, I wish to thank you for your interest in my views on monetary "and banking policies and for ® ^ L n f i . trouble to send me your suggestions. Very truly yours, Jf/fy * Of M. 5. E c c l e s , ^ ^ ^ r.hairmsn. Chairman. HE/fsc
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