Neil H. Jacoby

Raymond J. Saulnier

English

Research Papers in Economics

This PDF is a selection from an out-of-print volume from the National
Bureau of Economic Research
Volume Title: Financing Inventory on Field Warehouse Receipts
Volume Author/Editor: Jacoby, Neil H. and
Volume Publisher: UMI
Volume ISBN: 0-870-14134-1
Volume URL: http://www.nber.org/books/jaco44-1
Publication Date: 1944
Chapter Title: Appendix to "Financing Inventory on Field Warehouse Receipts"
Chapter Author: Neil H. Jacoby, Raymond J. Saulnier
Chapter URL: http://www.nber.org/chapters/c4022
Chapter pages in book: (p. 83 - 87)A.
Surveyof Field Warehouse
Receipt Financing
BASIC DATA WERE COLLECTED about mid-1941 regarding the role played
by commercial banks infield warehouse receipt financing through the
medium of a schedule submitted to a sample of banks. Specifically, it was
sought to measure the frequency with which banks of different sizes, in
different geographical regions and in centers of population of differing
importance engaged in field warehouse receipt financing; the importance
of field warehouse receipt loans in their portfolios; and the number of
business concerns to whom they extended credit by this method. Because
of the limitations imposed by available time and resources, a random sample
of commercial banks in the United States was selected by the following
method:
1. Through the courtesy of the Federal Deposit Insurance Corporation
a list was made available of the names and addresses of all of the 13,500
operating insured commercial banks in the United States. This list was
arranged alphabetically by states; size of center of population in which
each bank was located was indicated in code.
2. From the "population" of banks provided by the Federal Deposit
Insurance Corporation mailing list, there was selected the following sample:
(a) Every 36th bank located in a center of population of less than
10,000. (A total of 10,991 banks were in this class.)
(b) Every 9th bank located in a center of population of 10,000
and up to 50,000. (A total of 1,520 banks were in this class.)
(c) Every 3rd bank located in a center of population of more
than 50,000. (A total of 981 banks were in this class.)
The hypothesis underlying this sampling procedure was that the relative
frequency with which commercial banks engaged in field warehouse receipt
financing steadily increased with the size of the city in which the bank
was located, and that sampling errors would be reduced by making the
sample consist of a larger fraction of the large-center than of the small-
center institutions. This hypothesis, confirmed by the results of the survey,
was based on independent evidence that the market for field warehous&
receipt financing was greater for banks in large than in small cities, and that
8384 FieldW"arekouse Financing
the specialized knowledge necessary to apply this technique of financing was
more likely to be present in banks located in larger centers.
3. A serially numbered schedule was sent to each of the 800 banks
selected, requesting answers to the following three questions:
(a) Do you at the present time make loans to business concerns secured
by warehouse receipts issued by field warehousing companies? "Yes" or
(b) If your answer to question (a)is "Yes," state the number of
business concerns that you are now financing in this way
(c)If your answer to question(a)is "Yes," state the approximate
total amount of your outstanding advances against field warehouse receipts.
as of (a recent date)
4. Some 385banks,or nearly 50 percent of these circularized, returned
complete and usable schedules. This group was regarded as a satisfactory
sample, although it was smaller than was desired. As the schedules were
returned, deposit class, loan-and-discount class, city-size class and region
class were noted on each schedule, since the schedule number enabled the
name and address of the bank to be identified. Data contained in the
schedules were then hand tabulated, and summarized in the tables pre-
sented in Chapter 4.
A question may be raised as to the validity of using only those schedules
that were completed and returned as representative of the field warehouse
receipt financing experience of all commercial banks. It might be argued
that those banks engaging in this phase of commercial banking would tend
to complete and return schedules, while those that did not engage in such
financing would fail to return them. This argument is believed not to be
valid. In the first place, a large majority of the returns emanated from
banks that did not engage infield warehouse receipt financing. More
important, experience in sampling commercial banks in other connections
clearly indicates that the fact of engaging or not engaging in particular
types of operations does not significantly influence responses to question-
naires. Commercial bankers are called upon to make many reports to public
agencies on a variety of subjects. Bankers understand the necessity for
accuracy in reporting. It is believed that the results of the survey can be
accepted as typical of the experience of American commercial banks with
field warehouse receipt loans at the middle of 1941.
Of the 385 banks that responded with a usable schedule, 291 or 76
percent reported that they had no loans against field warehouse receipts,
and 94 banks or 24 percent did have such loans. The banks doing the
business were extending credit to 522 business concerns, or between five
and six concerns per bank on the average. Collectively, these banks had
$20.9 million of such loans outstanding, with an average loan balance
per customer of $39,809. They accounted for between 7 and 8 percent
of the total number and amount of field warehousing loans estimated, by
independent means, to be held by American commercial banks. While theSurvey of Field Warehouse Receipt Financing 85
385banks in the sample comprised only 2.9 percent of the 13,500 insured
commercial banks in the United States, they held $1.6 billion or nearly
10 percent of the $17 billion of "total loans and discounts" held by all
American insured commercial banks. Consequently, the sample is believed
to be fairly representative of commercial banks as a whole.ACCOUNTS RECEIVABLE FINANCING—9, 45,
59, 61-62.
AGREEMENT OF BAILMENT—24-25.
BANKS, WILLIAM H., WAREHOUSES, INC.
—13.
BORROwERS—Characteristicsof,58-60;
Credit Standards Pertaining to, 70-72.
See DEPOSITOR.
CHATFEL M0RTcAGE—11-12.
COMMERCIAL FINANCE COMPANIES—40.
COMMODITY LENDING—Organization for,
63-65. See INVENTORY FINANCING and
FIELD WAREHOUSE RECEIPT LENDING.
CoMMODITY WAREHOUSED—Credit Ap-
praisal of, 72-77; Determining Value
of, 76-77.
COSTS OFCREDIT—Warehouseman's
Chargesand, 78-80;Interest Rates
and, 80-82.
CREDIT STANDARDS—60, 67-77.
Cus'rODIAN—21-22;Qualificationsof,
26-3 0.
DEPOSITOR—Definition, iOn. See BORROW-
ERS.
DOUGLAS-GUARDIAN WAREHOUSE CORPO-
RATION—i 3.
FACTOR'S LIEN
FACTORING—40.
FEDERAL RESERVE AcT—63.
FEDERAL RESERVE BANKS—9.
FEDERAL RESERVE SYSTEM, BOARD OF Gov-
ERNORS OF—28, 63.
FIELD WAREHOUSE COMPANIES—Promo-
tional Activities of, 65-67; As Element
in Credit Appraisal, 67-70. See FIELD
WAREHOUSEM AN.
FIELD WAREHOUSE RECEIPT LENDING—
Bank Examination Policy and,17;
Geographical Differencesin,47-49;
By Banks of DifferentSize, 49-54;
86
Credit Standards in,60,66-67. See
COMMODITYLENDING,FIELD WARE-
HOUSE RECEIPT LOANS, FIELD WARES
HOUSERECEIPTSand INVENTORY
FINANCING.
FIELD WAREHOUSE RECEIPT LOANS—As
Adaptations to Changes in the Market
for Business Credit,9,17; Use by
BusinessesofLimitedFinancial
Strength, 9, 58; Use by Concerns with
Seasonal Operations, 9,59;Sizeof,
32,38-40, 54-58; Amount of, 32-33;
Relative Importance of, 43-47; Aver-
age Bank Holdings of, 54-58; Mini-
mum Limitations on, 79-80; Term of,
81; Losses on, 82. See FIELD WARE-
HOUSE RECEIPT LENDING.
FIELDWAREHOUSE RECEIPTS—IsSUance
of, 21; Forms of, 22-25; On Fungible
Goods,23-24;Lenderson,40-41;
Frequency of Bank Lending on, 42-43;
As CollateralSecurity,61-63 ;And
Credit Appraisal, 77. See FIELD WARE-
HOUSE RECEIPT LENDING.
FIELD WAREHOTJSEMAN—AS Bailee, 19-
20; Legal Position of, 19-20; License
to Operate as, 20; Bond of, 25-26. See
FIELD WAREHOUSE COMPANIES.
FIELD WAREHOUSES—Definition of,10;
Purposes of, 10; Cost of, 12; Methods
ofEstablishing,20-25;Typesof,
20-21; Number of, 31-32; Geograph-
ical Distribution of, 33-35; Commodi-
ties Depositedin,35-37;Businesses
Using Facilities of, 37-38; Value of
Goods Deposited in, 38-40; Physical
Conditions of as Element inCredit
Appraisal, 69-70.
FIELDWAREHOUSING—EconomicFunc-
tion of, 10-12; Development of, 12-15;
FactorsAffectingGrowth,15-18;
Duration of Arrangement, 29-30; Use
by Trade Suppliers, 40, 66; Ancillary
Services of, 59.
IndexIndex
FINANCIAL STATEMENTS—Analysis of in
Commodity Lending, 74-75.
FREDERICK, JOHN H.—15n.
FREDERICK, KARL T.—lln.
HASLETF WAREHOUSE C0MPANY—13-14.
"HEDGING"—73 -74.
INSTALMENT EQUIPMENT FINANCING—9,
45, 59, 62.
INVENTORY FINANCING—Working Capital
and, 15, 59; Corporate Taxation and,
15; War Production and, 16; Cash
Discounts and, 16; Labor Costs and,
16. See COMMODITY LENDINC and FIELD
WAREHOUSE RECEIPT LENDING.
JACOBY, N. H.—33n, 39n, 42n, 45n, 61n.
KANE, ANTHoNY—un.
LAWRENCE WAREHOUSE COMPANY—14.
LEASE AGREEMENT—20.
MERWIN, CHARLES L.—lSn.
NATIONAL BANK AcT—il-iS, 63.
NEWYORK TERMINAL WAREHOUSE COW.
PA N y—14.
87
PERCENTAGEADYANCE—72-73,75-76,
77-78.
PUBLIC WAREHOUSES-Definition of, 10.
RECONSTRUCTIONFINANCE CORPORATION
—9.
ST.PAUL TERMINAL WAREHOUSE COW.
PANY—14.
SAULNIER, R. J.—33n, 39n, 42n, 45n, 61n.
TERM LENDINC—9, 45, 61.
TERMINAL WAREHOUSE COMPANY OF BAL-
TIMORE—14-i 5.
TERMINAL WAREHOUSES-Definitionof,
10.
TRUST REcEIPT—11-12.
UNIFORM WAREHOUSE RECEIPTS ACT—i 7,
19, 22-23, 29.
UNITED STATES WAREHOUSE ACT—27-29.
VAN VLISSINGEN, ARTHUR, JR.—lSn, 31.
"WORKOUT" LOANS—5 S.
YOHE, H. S.—28n.

Financing Inventory on Field Warehouse Receipts

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Research Papers in Economics