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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