Foreword to Teachers

The author believes that mastery can be gained most advantageously through the solution of questions and problems directly related to the text studied and accordingly presents extensive "Questions, Exercises, and Problems" in Appendix A. Many of the questions, exercises, and problems are integrated with the text and the numerous teachers who rely chiefly on the Socratic method may profitably direct considerable attention to their solution, notably, in connection with chapters II, III, VI, VIII-X. It would be conducive to thoroughness if chapters II and III and the corresponding portions of Appendix A were broken into not fewer than five assignments, e. g., as follows: 1. Pages 13-29 and relative questions and problems 1-16. 2, Pages 29-31 and relative questions and problems 17-26. xni XÎV FOREWORD TO TEACHERS 3. Pages 32-51 and relative questions and problems 1-10. 4. Pages 52-63 and relative questions and problems 11-25.

5. Pages 63-74 and relative questions and problems 26-37. The method of handling other works used jointly with Bank Credit may be passed over without comment except that a preliminary study of the bank balance sheet and of clearing and collection facilities and methods would be desirable, although not essential. The familiar texts of Dunbar, White, Holdsworth, Scott, and Moulton contain suitable introductory or collateral material. It is in place to say that the purpose of the sharp conflict of theory with theory in chapters III and V is primarily not to expose the fallacy of the false, but to demonstrate, clarify, and enforce the truth of the true.

BANK CREDIT BANK CREDIT CHAPTER I INTRODUCTION The Nature of Bank Credit Bank credit, as the term is used in this volume, stands for credit extended by banks to borrowers. Bankers frequently use the term in the plural, meaning advances made to their borrowing customers. Whether the borrower withdraws the amount of the proceeds of his loan in cash at once or leaves it on deposit with the lending bank, the loan in either case constitutes credit extended. Just as a merchant extends credit to the customer who pays for his purchase at a later time, so the banker extends credit to the business man who borrows money. Whether the money is taken from the bank at the time the loan is made, the next day, or ten days later, makes no essential difference; bank credit may take even the form of an overdraft. The Bank Acceptance as Bank Credit The bank acceptance, which is a draft or bill drawn upon and accepted by a bank, differs from a loan in the fact that the accepting bank makes no actual advance of funds; it meets its obligation at the maturity l 2 BANK CREDIT of the draft out of funds provided by the drawer. The accepting bank has faith in the willingness and ability of the drawer to provide the funds required to meet the draft when it matures, but the üability assumed is essentially contingent, the advance being made by the bank or discount house that buys the bill.