"We see, then, that the real danger to a bank in being led into discounting accommodation paper is that the position of principal and surety is reversed. They are deceived as to who the real debtor is, and who the real surety is, being precisely the reverse to what they appear to be, which makes a great difference in the security to the holder of the bills...." In carrying on a legitimate extension of credit, the bank never permits the advance to exceed a certain definite limit; but it never can tell to what length it may be inveigled to discounting accommodation paper until some commercial reverse happens, when it may discover its customer has been carrying on some great speculative operation with capital borrowed from it alone.... "This is the rationale of accommodation paper; and here we see how entirely it differs from real commercial paper. Because with real commercial paper, and bona fide customers, though losses may come, still directly the loss occurs, there is an end of it. But with accommodation paper the prospect of a loss is the very cause of a greater one being made, and so perpetually in an ever-widening circle till at last the canker may eat into a banker's assets to any amount almost." "The insurmountable objection, therefore, to this species of paper, is the dangerous and boundless facility it affords for raising money for speculative purposes." MR. MERCHANT: That is absolutely true. Accommodation paper and speculation go hand in hand. They are twin sisters. Siamese twin sisters. Pardon me, if I take a moment to demonstrate its terrors by relating the experience of a friend of mine who was led into an irrigation scheme: "My friend was in the grocery business in a western town and had a stock of groceries worth $75,000, and he had $25,000 cash in the bank. The dam and water ditch was to cost $100,000. My friend sold off a part of his goods, realizing $25,000 of additional cash. He moved the balance of his goods out to the point where the dam was to be located, forty miles away, and began operations. He succeeded in finishing the dam after paying out for work all that he had, and in securing indorsers up to $100,000 upon accommodation paper in the city where he had carried on the grocery business. Two hundred thousand dollars had been paid for groceries and clothing. The laborers had gone to his store and obtained food and clothing during the two years he was engaged in constructing the work, and they had consumed all their wages in living, and more, too. He put an issue of bonds on the dam but could not sell them; therefore he could not pay the banks. His indorsers could not pay the banks, and most of them were ruined because of their indorsements for accommodation purposes. He was wiped out. He turned over everything to the bank, bonds and all. The banks had to carry those bonds ten years before they could sell them."