Page:Harvard Law Review Volume 32.djvu/783

HARVARD LAW REVIEW VOL. XXXII MAY, 1919 NO. 7 ACCELERATION PROVISIONS IN TIME PAPER DESPITE the testimony of the late J. P. Morgan ^ that the basis of commercial credit is character, his fellow bankers still attach considerable importance to collateral. Negotiable instru- ments given for a loan frequently state that they are secured by specified stock or bonds or produce documents, and authorize the summary sale of this collateral in the event of nonpajrment at maturity. Even this protection does not render the bank entirely safe. The security may begin to depreciate, so that it will be worth much less than the loan before the instrument falls due, and if the bank cannot sell until the date fixed for maturity, a large portion of the loan may be lost. Consequently, it is becoming usual for time paper secured by collateral to contain numerous provisions for the acceleration of payment, if the bank or other holder feels insecure. The note states the present value of the collateral, and agrees that if it depreciates the maker will furnish additional se- curity on request so as to maintain a satisfactory margin above the loan. If he fails to do this, the note immediately falls due, and the bank or other holder is empowered to sell the collateral at once.^ ^ Report of the Committee appointed pursuant to House Resolutions 429 and 504 to investigate the Concentration of Money and Credit, February 28, 1913, page 136. Washington, 1913. * ' 2 The following form is much used in Boston and the vicinity: $ , Mass., 19. , months after date, for value received, promise to pay to the Trust Company, of , or order, at the said Trust Company Dollars, having deposited with the said Trust Company as collateral security for the payment of this