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94 Banking L.J. 293 (1977)
The Standby Letter of Credit Debate

handle is hein.journals/blj94 and id is 293 raw text is: THE STANDBY LETTER OF CREDIT DEBATE
Henry Harfield*
The following article, by Mr. Henry Harfield, is
adapted from an address to the Committee on Inter-
national Banking, and may suggest a response to an
earlier article by Mr. Melvin Katskee, The Standby
Letter of Credit Debate-The Case for Congres-
sional Resolution. t
Credits: Eligible and Ineligible Transactions
A conundrum to tax the wits of bankers and bank
lawyers is the incredibility of letters of credit. The issue is
framed by the supervisory benevolence toward letters of
credit and acceptances that grow out of mercantile trans-
actions, and by sporadic malevolence toward so-called
standby credits and ineligible acceptances. It is easy and
appealing to suggest that the crosses the banking profession
is obliged to bear are the stigmata of a Cinderella syn-
drome-due entirely to overregulation and undercompre-
hension of the business of banking. Unfortunately, the hot
air that has emanated from Congress and elsewhere reflects
frictions in the banking system as well as fire in the bowels
of politicians.
Unsound Banking Practices
Legislators have translated the fact that there are un-
sound banking practices into an hysteric demand for the
imposition of restraints on the use of standby credits and
ineligible acceptances. Such restrictions will not constrain
* Member of the New York Bar and of Shearman and Sterling; author of
Bank Credits and Acceptances (Ronald Press 1974).
t 92 Banking L.J. 697 (1975).

293

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