1Excess of exports
In conclusion, it may be said that the prediction that as international financial relationships between banks are drawn closer, gold movements will tend to decrease, seem hardly to be borne out by the figures of the table given above. Banks here and banks abroad are working together in a way unknown ten or even five years ago, but as yet there are no signs of any lessening in the inward or outward movement of specie. More liberal granting of international credits, increased international loaning operations, far from putting an end to the physical movement of gold in large quantities,—these are influences tending to make gold move more freely than ever. The day of the treasure galleons is over, but in their place we have swift-moving steamers by which gold can be shifted from one point to another with safety and ease. Gold movements seem as though they were to play an important part in the markets for a good many years to come.
CHAPTER VIII
FOREIGN EXCHANGE IN ITS RELATION TO INTERNATIONAL SECURITY TRADING
Onaccount of the huge fixed investment of foreign money in the United States, on account of Europe's continuous speculative interest in our markets, and the activity of the "arbitrageurs" in both bonds and shares, dealings in securities between ourselves and the Old World are always on a very great scale. Not infrequently, indeed, Europe's position on American securities is an influence of dominating importance.
From the maturities, refunding operations, and interest remittances alone, growing out of the permanent investment of foreign money in our securities, there results a very great amount of international security and exchange business. Whether Europe's investment here amounts to three billions or four billions or five billions, it is impossible to say; the fact remains that it is so large that every year a very great amount of foreign-held bonds come due and have to be paid off or refunded, and, further, that the remitting abroad of coupon and dividend money each year calls for upward of $150,000,000.
This matter of maturing investments, alone, calls for continuous international security trading and on a large scale. Each year there comes due in this country an amount of railroad and other bonds running well up into the hundreds of millions, of which a large proportion are held on the other side. Some of these maturities are paid off in cash—more often, refunding bonds are offered in exchange; seldom, indeed, are the maturing investments allowed to remain unreplaced. European investors, especially, have consistently done well with money placed in this country, and the running off to maturity of a foreign-held American bond is nearly sure to be followed up by replacement with some other American security.
Bond houses doing an international business are therefore keenly watchful of the maturity of issues largely held abroad, and are ever ready with offers of new and attractive investments. Knowledge of the location of American investments in Europe is thus a business asset of the greatest importance, and records are carefully kept. The fact that a dealer here knows that some bank in London has a wealthy client who holds a big block of certain bonds about to mature, may very possibly mean that the house here may be able to make a very profitable trade. Information of this character is carefully gathered wherever possible and as carefully guarded. The longer a house has been in business, naturally, and the closer its financial relationship with investment interests abroad, the more of this sort of information it is bound to possess.
Foreign exchange growing out of these renewals and refundings is on a very large scale. Sometimes the placing of a new issue abroad means such immediate drawing of drafts on foreign buyers of the securities as to depress the exchange market sharply. Sometimes, as in the case of new issues of railroad stock, where payments are usually made in instalments covering a year or more, the drawing of exchange is distributed in such a way that its influence, if felt at all, is felt merely as an underlying element of weakness.
Of a somewhat different character are the foreign exchange transactions originating from what might be called Europe's "floating" investment in American securities and from the out-and-out speculations carried on in this market by the foreigners.
There is never a time, probably, when the floating foreign investment in American stocks and bonds does not run up with the hundreds of millions of dollars. "Speculation," such operations would probably be called by many people, but whether speculation or not, a form of activity which is continually giving rise to big dealings in foreign exchange. For this "floating" investment is very largely for account of bankers whose international connections and credit make it possible for them to carry stocks and bonds through the agency of the exchange market, and without having to put up any actual money. The ingenious method by which this is accomplished is about as follows:
A banker here, for instance, decides that a certain low-priced bond is cheap and that if purchased it will show a substantial profit within six months or a year. Not wanting to buy the bonds and borrow on them here, he invites his foreign correspondent into the deal on joint account, arranging to raise the money with which to buy the bonds by drawing a ninety-day sight draft on the foreign correspondent. This he does, drawing, say, a £50,000 draft at ninety days' sight, and selling it in the exchange market at, let us say, $4.83.
The $241,500 received from the sale of the draft, the American banker uses to buy the bonds. Ninety days later the draft will come due in London, and have to be covered (or renewed) from this side, but in the meantime, a profitable chance to sell the bonds may present itself. If not, the draft can be "renewed" at the end of the ninety days, and again and again if necessary, until the bankers are willing to close out the bonds.
This operation of "renewing" long drafts drawn for the purpose of carrying securities is one of the most interesting phases of foreign exchange business in connection with international security dealings. The draft has been drawn, say, for £50,000. The end of the ninety-day period comes, the draft is due, is presented, and has to be paid. But the bankers do not choose to sell out the bonds and close the deal. They arrange instead to renew the maturing draft. This they do by paying the original ninety-day draft out of the proceeds of a new ninety-day draft.
The original draft for £50,000 comes due let us say on October 19, so that about October 10th the New York banker will be under the necessity of sending over to London a demand draft for £50,000. The rate realizable for ninety-day drafts being always considerably lower than the price of demand drafts, it follows that if the banker proposes to buy £50,000 of demand out of the proceeds of a fresh ninety-day bill he will have to draw his fresh bill for more than £50,000. If the demand rate happened to be 4.86, the £50,000 he needs would cost him $243,000. In order to raise $243,000 by selling a ninety-days' sight draft (say at 4.83) he would have to make the new draft for £50,310. The extra £310 would constitute the interest. Each time he renewed the draft he would have to draw for more and more.
Requiring the tying up of no actual capital, this form of financing "floating investments" has become exceedingly popular and is carried on on a large scale. Where the relationships between the foreign and the American houses are close, there is almost no limit to the number of times an original bill may be renewed. As for the constantly increasing amount of the drafts which have to be drawn, that is taken care of by the interest on the investment carried.
Not all the floating investment in American securities is carried in this way, but in whatever form the financing is done it is bound to involve foreign exchange operations and to necessitate the drawing of drafts by banking houses in this country on their correspondents abroad. Quiet conditions may result in long periods when investments of this kind are left undisturbed, but even then, the constant remitting and renewing of drafts originates a good deal of exchange market activity. And with considerable frequency occur periods when the floating investment is strongly affected by immediate conditions, and when purchases, sales, and transfers of securities stir the exchange market to a high pitch of excitement.
Speculative operations in this market for foreign account, are, however, the cause of the greatest amount of exchange market activity caused by international security transactions. There are times, as has been said, when individuals and banking houses abroad speculate heavily and continuously in this market, at which times the exchange market is strongly affected by the buying and selling of exchange which necessarily takes place. Such periods may last for weeks or even months, and during all of the time, London's immediate attitude toward the market is apt to be the controlling influence on the movement of exchange rates.
Concerning arbitraging in stocks, operations of this kind will be found to divide themselves readily into two classes—trades which are closed off at both ends at once, and trades which are allowed to run over night or even for a day or two. The former is a class of business out of which a dozen or twenty well-equipped houses in New York are making a great deal of money. With an expert "at the rail" on the floor of the New York Stock Exchange, and continuous quotations as to prices on the various stock exchanges in Europe coming in, these houses are in a position to take advantage of the slightest disparity in prices. The chance to buy a hundred shares of some stock, in London, for instance, and to sell it out at the same time in New York, at one-eighth or one-quarter more, is what the arbitrageurs are constantly on the lookout for. With the proper facilities, an expert, in the course of the hour during which the London and New York Stock Exchanges are simultaneously in session, is often able to put through a number of profitable trades.
Such operations are possible, primarily, because of the fact that the same influences affect different markets in different ways. A piece of news which might cause a little selling of some stock in London, for instance, might have exactly the opposite effect in New York. With the wires continually hot between the two markets and a number of experts on the watch for the chance to make a fraction, quotations here and abroad can hardly get very far apart, at least in the active issues, but occasionally, it does happen that the arbitrageur is able to take advantage of a substantial difference. Always without risk, the bid in one market being in hand before the stock is bought in the other market.
But not so in the case of the other kind of arbitrage, where stocks bought in one market are carried over night for the sake of selling them out in some other market the next morning. There a decided risk is taken, the success of the operation depending absolutely upon the judgment of the operator. Under the stimulus of some favorable development, for instance, which becomes known here only after the Stock Exchanges abroad are closed for the day, the New York market closes buoyant. The chances are that the receipt of the news abroad over night will make the London market open up strong in the morning. To buy stock right at the closing of the market here for the purpose of selling it out next morning in London at the opening is an operation not without risk, but one which is likely to make money. A lower opening abroad would, of course, spoil the whole plan, and force a loss, but just there comes in the ability and judgment of the man who is handling the business. His judgment need by no means be infallible for the house to make a great deal of money.
Concerning arbitraging in bonds, practically everything depends not only on the judgment and skill, but on the facilities and connections of the man in charge. In the great "open" market in New York and in the great "open" market in London, American bonds are being continually bid for and offered in a way which gives an expert in touch with both markets a chance to buy here and sell there, or vice versa, at a profit. Such men are employed by bond houses with international connections, and spend their time doing practically nothing else but keeping in close touch with open market bids and offers for stocks and bonds and trying to buy in one market and sell in another. Such trades are frequently put through on a very profitable basis, profits of a clear point or more being not at all uncommon.
As for the degree of risk to be taken in business of this kind, that is entirely at the discretion of the arbitrageur. Where a firm bid of ninety-nine, good for the day, for instance, is given, there is no risk in cabling a bid of ninety-eight to London, but where the bid is not firm at all, or where it is only firm for five minutes, or in many other cases, the man who cables his own bid of ninety-eight is taking a certain amount of risk. Often enough he gets the bonds in London at ninety-eight, only to find that the ninety-nine bid in New York has been withdrawn.
Knowledge of what risks to take and of what risks to leave alone constitutes expertness in this line of business. Seldom can the transaction be absolutely closed at both ends and any substantial profit be made. Most of the time the correctness of the bond expert's judgment as to how he can sell somewhere else what he has bought, is what determines the amount of money he will make or lose.
CHAPTER IX
THE FINANCING OF EXPORTS AND IMPORTS
Interestingas the movement of gold and the international money markets may be, it is in its application to the every-day importing and exporting of merchandise that foreign exchange has its greatest interest for the greatest number of people. Every bale of cotton exported from the country, every pound of coffee brought in, is the basis of an operation in foreign exchange, such operations involving usually the issue of what is known as "commercial credits."
Broadly speaking, commercial credits are of two classes, those issued to facilitate the import of merchandise and those issued to facilitate its export. Considering the question from the standpoint of New York, import credits are so much more important than export credits and issued in so much larger volume, they will be taken up first.
Not all the merchandise imported into the United States is brought in under commercial letters of credit, but that is coming to be more and more the way in which payment for imports is being arranged. Formerly an importer who had bought silk or white-goods in France went around to his banker, bought a draft on Paris for the required amount of francs and sent that over in payment. In some cases that is still the method by which payment is made, but in the very great majority of cases where the business is being run on an up-to-date basis, a commercial letter of credit is arranged for before the importation is made. Of how great advantage such an arrangement is to the merchant importing goods the following practical illustration of how a "credit" works will show.
Form of Commercial Letter of CreditForm of Commercial Letter of Credit
To exemplify the greatest number of points of importance possible in connection with the commercial credit business, the case of a shipment of raw silk from China will, perhaps, serve best. A silk manufacturer in Paterson, New Jersey, we will assume, has purchased by cable ten bales of raw silk in Canton, China. Understanding of the successive steps in the financing of such a transaction will mean a pretty satisfactory understanding of the general principles under which the financing of most of our imports is arranged.
The purchase of the silk having been consummated by cable, the first thing the purchaser would do would be to go to his banker in New York, lay before him an exact statement of the conditions under which the purchase was made, and get him (the banker) to open a commercial letter of credit covering those terms. Such a credit, of which a reprint is given herewith, would be in the form of a letter to the issuing banker's London correspondent, requesting him to "accept" the drafts of the sellers of the silk in Canton up to a certain amount and under certain conditions. These conditions, having to do with the "usance" of the drafts (whether they were to be drawn at three, four, or six months' sight) and with the shipping documents to accompany the drafts, are all very fully set forth in the letter of credit itself. If the silk has been bought on the basis of four months, for instance, the credit would read that drafts are to be drawn at four months' sight. Mention is also made as to whose order the bills of lading are to be made, as to where the insurance is to be effected, etc., etc.
The silk importer having received this letter of credit from the banker in New York, sends it by first mail (or, if the case be urgent, cables its contents) to the seller of the silk out in Canton. The latter, having received it, is then in a position to go ahead with his shipment. The first thing he does is to put the silk aboard ship, receiving from the steamship company a receipt (bill of lading) stating that the ten bales have been put aboard, and making them deliverableto the order of the banker in New York, who issues the credit. The bill of lading being made out to his order is useless to anybody else. He and he only can get the silk out of the ship when it arrives in New York.
The shipper in Canton having received this bill of lading from the steamship company and having properly insured the goods and received a certificate stating that he has done so, is then in a position to go ahead and draw his draft for the cost of the silk. The London correspondent of the New York banker, to whom the letter of credit is addressed, is, say, the Guaranty Trust Company of London. Upon that institution the Canton silk firm, therefore, draws his draft in pounds sterling for the cost of the silk, attaching to the draft the bill of lading, an invoice, and the insurance certificate.
A pertinent inquiry at this point is as to why the letter of credit for silk shipped from a city in China directs that drafts be drawn on London—as to why London figures in the transaction at all? The answer is that drafts on London are always readily negotiable, and that London is the only city in the whole world drafts on whicharereadily negotiable in all places and at all times. A draft on New York or on Berlinmightbe negotiated at a point like Canton, but to be sure that the exporter of the silk will get the best rate of exchange for his drafts, the drafts must be drawn on London, the financial center of the world. One of the chief points to the whole business of taking out a credit, in fact, is to provide a point on which the shipper can draw satisfactorily.
Assume now that the silk has been put aboard ship bound for the United States, that the shipper has drawn, say, a draft for £1,000 at four months' sight on the Guaranty Trust Co., London, and has attached thereto the bill of lading and the insurance certificate. Taking this draft around to his bank the shipper sells it for local currency at the then prevailing rate for four months' sight drafts drawn on London. The fact that it is drawn at four months' sight means that he will get a lower rate of exchange for it than if it were drawn payable on demand, but that was the arrangement with the buyer in New York—that the drafts against the silk were to have four months to run.
Having sold this draft to his bank in Canton and received local currency therefor, the shipper of the silk is out of the transaction. He has shipped the goods and he has his money. What becomes of the draft he drew is the next important point to consider. But so far as the exporter is concerned, the transaction is closed, and he is ready for the next operation.
The silk has now been set afloat for New York, and the draft purchased by the Canton banker is on its way to London for acceptance. Long before the silk gets to New York the draft will have reached London and will have been presented to the cashier of the Guaranty Trust Co., there, who, of course, was apprised of the credit opened on his bank at the time such credit was originally issued in New York. Examining the draft and the documents carefully to see that they conform with the terms of the credit, the cashier of the Guaranty Trust Co., London, formally "accepts" the draft, marking it payable four months from the date it was presented to him. The accepted draft he hands back to the messenger of the bank who brought it in; the bill of lading, insurance certificate, and invoice he keeps. By the next mail steamer he dispatches these papers to the banker in New York who issued the credit.
For the time being, at least, that is to say, till the accepted draft comes due, the London banker is out of the transaction, which is now narrowed down to the importer of the silk in Paterson and the banker in New York who issued him the credit.
Assume now that a week has passed and that the New York banker finds himself in possession of a bill of lading for ten bales of silk, merchandise deliverable to his order. A few days later, perhaps, the goods arrive overland by fast freight from Seattle. The Paterson silk manufacturer, who is eagerly awaiting their arrival, comes around to the banker: "Endorse over the bill of lading to me," he says, "so that I can get the silk and start manufacturing it."
If the banker does it, he will be giving over the only security he has for the payment at maturity of the draft his London correspondent accepted, and for which he himself is responsible. Still, the manufacturer has to have his silk.
A number of different agreements exist between bankers and importers to whom the bankers issue credits, as to the terms on which the importers are to be allowed to take possession of the merchandise when it arrives here. Sometimes the goods are put into store and handed over to the merchant only when he shows that he has sold them and needs them to make delivery. Sometimes they are warehoused at once, and parcelled out to the importer only in small lots, as he needs them. But more often the goods are delivered over to the importer on his signing one form or other of what is known as a "trust receipt."
Form of Trust ReceiptForm of Trust Receipt
Form of Bailee ReceiptForm of Bailee Receipt
Such difference of opinion exists among foreign exchange men as to the goodness of the trust receipt system that the author refrains from making comment on it, confining himself strictly to description of what the system is. As will be seen from the accompanying reprint of the trust receipt used by one of the largest issuers of commercial credits in the country, the document is simply a pledge on the part of the importer to hold the merchandise in trust for the banker, and, as the merchandise is sold, to hand over the proceeds to apply against the draft drawn by the shipper of the goods. The theory of the thing is that by the time all the merchandise has been sold more than enough money will have been handed over to the New York banker to take care of the draft accepted by his London correspondent, the excess constituting the importer's profit.
The kind of trust receipt under which bankers are willing to give over the merchandise (the only collateral they have) naturally varies according to the standing of the house in question. In the case of some importers the bankers would be willing to let the bill of lading pass out of their hands on almost any kind of a receipt; in the case of others a very strict and binding contract is invariably signed. But whatever the form of the contract, it is to be borne in mind that when the banker issuing the credit hands over the bill of lading to the importer on trust receipt, he is allowing the only security he has to pass out of his hands, and is putting himself in the position of having made an unsecured loan to the importer.
Returning now to the particular transaction in question, the point has been reached where the silk is in the importer's hands, that result having been accomplished without the importer having put up a cent of money. Moreover, for nearly four months to come there will be no necessity of the importer's putting up any money (unless he should sell some of the silk, in which case he is bound to turn over the money to the New York banker as a "prepayment"). But in the ordinary course of events the importer of the silk has nearly the four full months in which to fabricate the goods and sell them. At the end of that time the draft drawn by the firm in Canton and accepted by the Guaranty Trust Co., London, will be coming due, and the silk importer will be under the necessity of remitting funds to meet it. Twelve days before the actual maturity of the £1,000 draft in London, the New York banker will send to the manufacturer in Paterson a memorandum for £1,000 at, say, 4.86 (whatever is the current rate) plus commission. The silk firm pays in dollars; the New York banker uses the dollars to buy a demand draft for £1,000; a day or two before the four months' sight draft comes due in London this demand draft ("cover") is received in London from New York, and the whole operation is closed.
It has been deemed advisable to set forth the whole course of one of these import-financing transactions, in order that each successive step may be clearly understood. The question of justwhythis credit business is worked as it is will now be taken up.
The whole purpose of the business, it is plain enough, is to give the importer here a chance to bring in goods without putting up any actual money—in other words, of letting him use a larger capital than he is actually possessed of. There are persons so conservative as to consider this in itself 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 £20,000. 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 actual money. As in the case of foreign loans previously described, the banker's credit and the banker's credit only is the basis of the whole operation. The London bank never pays out any actual cash—it merely "accepts" a four months' sight draft, knowing that before the draft comes due and is presented at its wicket for payment, "cover" will have been provided from New York. The New York banker, on the other hand, merely sends over on account of the maturing draft in London the money he receives from the importer. He is under an obligation to the London banker to see that the whole £1,000 is paid off before the four months are over, but he knows the party to whom he issued the credit, and knows that before that time all the silk will have been manufactured and sold and the proceeds turned over to him. At no time is he out of any actual cash.
That being the case, the amount of commission he charges is really very moderate—one-quarter of one per cent. for each thirty days of the life of drafts drawn under credits being the "full rate." Under such an arrangement an importer taking a credit stipulating that the drafts are to be drawn at thirty days' sight would have to pay one-quarter of one per cent.; at sixty days' sight, one-half of one per cent.; at ninety days' sight, three-quarters of one per cent., etc. Such commission to be collected at the time the drafts drawn under the credits fall due.
These are the "full rates"—naturally, few importers are required to pay them,actualrates being largely a matter of individual negotiation and standing. Where the drafts under the credits run for ninety days, for instance, as in the case of coffee imported from Brazil, the full rate would be three-quarters of one per cent., but very few firms actually pay over three-eighths of one per cent. Similarly with credits issued for the importation of merchandise of almost every other kind. Silk credits, with drafts running four months, ought at the regular rate to cost one per cent.; but as a matter of fact there are any number of good houses willing to do the business for five-eighths of one per cent. One large international bank in New York, indeed, is going so far as to offer to issue credits under which drafts runsixmonths for a commission of five-eighths of one per cent. Such a commission is entirely inadequate and no fair compensation for the trouble and risk the banker takes. It means little more than that the bank is willing to take business at any price for advertising or other purposes.
Assume that an importer has taken out a ninety-day credit and is to pay three-eighths of one per cent. on all drafts drawn thereunder, what rate of interest is he actually paying, figured on an annual basis? The life of the draft is ninety days, and he pays three-eighths of one per cent.; in each year there are four ninety-day periods; figured on an annual basis, therefore, the importer is paying four multiplied by three-eighths of one per cent., equalling one and one-half per cent. interest. Not a very high charge, and made possible only because the banker lends his credit and not his cash.
For purposes of illustration, the financing of the import of silk from China was chosen because the operation embodied perhaps more points of interest in connection with commercial credit business than any other one operation. Commercial credit operations, however, are of great variety and scope. They may involve, for instance, the import of matting shipped from Japan on slow sailing ships and where the drafts drawn run for six months or more, or they may involve the import of dress goods from France, in which case the drafts are often at sight. Furthermore, all credits are by no means issued on London. In the Far East, where tea or shellac or silk is being exported to the United States, London is known as the one great commercial and financial center, but in the case of dress goods shipped from Marseilles or Lyons, for instance, the credits would invariably stipulate that the drafts be drawn in francs on Paris.
But whether the material imported be dress goods from France or tea from China, the principle of the commercial credits under which the goods are brought in remains identically the same. In every case there is a buyer on this end who wants to get possession of the goods without having to put up any money, and in every case there is a seller on the other end who wants to receive payment as soon as he lets the merchandise get out of his hands. The banker issuing the credit is merely the intermediary, and the naming of some foreign point on which the drafts are to be drawn is merely incidental to the conduct of the operation.
One last point remains to be cleared up. The seller of the goods in the silk-importing operation described gets actual money for the goods as soon as he ships them—where does this actual money come from? In the last analysis, from the discount market in London, from the man in London who discounts the draft after it has been "accepted". The exporter in Canton gets the money direct from his banker in Canton, but the latter is willing to let him have the money in exchange for the draft only because he (the banker) knows that he can send the draft to London and that some one there will eagerly discount it. In that way the Canton banker gets his money back. The only party who is out of any money during the time the silk is being manufactured and sold in Paterson, N.J., is the party in London who has discounted the shipper's draft.
The real function of the banker, then, in these Commercial Credit transactions is to open up the international loaning market to the importer. Through the system now in force this is accomplished by a banker in New York issuing a credit and by a banker in London putting his "acceptance" on drafts drawn under that credit. The combination makes the draftsgood; makes the great discount market in London willing to take them, and absorb them, and advance real money on them. And for the opening up of this great reservoir of capital the importer here has to pay an interest rate of but from one to two per cent. per annum. Naturally the business has grown to tremendous proportions.