To obviate these legal limitations the Federal Reserve Board has suggested that : (r) instead of guaranteeing acceptances, the bank purchase them outright and immediately resell them with its indorsement, since the power to indorse is incidental to the power to negotiate; and (2) instead of guaranteeing letters of credit issued by metropolitan correspondents, the metropolitan bank as agent of the interior bank issue a letter of credit for the account of the interior bank's customer, the letter to be issued in the name of the New York correspondent, but in issuing the letter the New York correspondent is to act as agent for an undisclosed principal, namely, the interior bank.
The Drawer When bank commercial acceptance credits are issued they are made available either by the drafts which the taker himself in tends to draw or by the drafts of a third party. For instance, a buyer of merchandise may take out a banker's credit and draw drafts on the issuing bank and remit to the foreign seller, who will hold the drafts till maturity or discount them in the market. Or an importer may take out a credit available for drafts of the foreign seller. If the foreign seller is satisfied with the credit title of the drawee bank, he may consider his own contingent lia bility as drawer negligible, and the first discounter may also regard his contingent liability as indorser as negligible. But ff the credit title of the drawee is clouded, even in a small degree, or if he is not well known, the first discounter will consider the credit rating of the drawer and will protect himself by offering a lower price for the draft or by making other provisions.
There is a proper field for the use of banker's acceptances by the drawer under credit taken by himself in cases such as the following: When an importer has arranged to bring in goods under condi tions that require longer credit than the usual terrns or than the seller would wish to extend or to draw for. Frequently in such cases the terms stipulate payment on presentation or "sight against documents," whereas some further time is required for the sale of the goods that will furnish the funds to pay for them. A
bankers' acceptance credit may be used to finance the carrying of these imported goods during such an interval provided it was arranged for with the banker as a condition to engaging in tbe importation or the transaction which involved the importation.
Or, where goods have been sold and exported and, instead of discounting the bills on foreign buyers, these bills are lodged with a banker for collection and application of proceeds to liquidate an acceptance credit granted against the exports represented by the pledged bills and documents covering the exportation.
Or, where bills are drawn by a shipper against documents in either export or domestic shipments, delivered to the banker for forwarding and delivery against cash, the latter, when received, to be applied by the banker in payment of the acceptance credit.
Or, where there is a contract to export, to perform which goods must be manufactured or assembled, requiring use of credit before actual export can begin, or ocean or through bills of lading can be procured, but which the exporter has agreed to procure and de liver to the accepting banker.
Or, where goods have been sold or contracted for export but are delayed in transit to port or are at port awaiting bottoms.
Or, where staple commodities properly stored and insured are awaiting shipment or market or manufacture and are pledged to secure credit taken.
Or, if from some unforeseen cause or delay interfering with the prompt liquidation of the transaction a continuation of credit is required and an importer or exporter might properly wish to draw a new bill to retire one maturing.
All of these cases, and possibly others, would fall well within the spirit of the law and principles. All are confined to certain transactions involving importations, exportations, or domestic shipments, the proceeds of which will come into the banker's hands in due course to be applied in liquidation of credit, or are properly secured by pledge of staples.'