Eugen von Philippovich: Review of Leonhardt’s Der Warrant als Bankpapier (1887)

Philippovich’s review examines Leonhardt’s proposal to admit warrants—documents representing claims secured by warehoused goods—to note-bank lending and note cover, particularly in Austria-Hungary. It proceeds from the economic importance of commodity credit to the legal transformation of warrants, then considers Austrian reform and the comparative evidence assembled in Leonhardt’s book. Its central judgment is qualified approval: endorsers’ liability can make warrants acceptable bank assets, but security of repayment does not guarantee sufficiently rapid realization.

The opening connects commodity credit with stable supplies and prices and the continuity of business, especially during crises. The question is therefore not whether such credit is useful, but whether it meets the distinctive requirements of a note-issuing bank. Michaelis opposed lending against goods or warrants; Wagner rejected counting the resulting claims as note cover. Philippovich acknowledges their concern:

Die Zeit, welche der Verkauf der Waare in Anspruch nimmt, scheint zu lang, die Höhe des Erlöses zu unsicher zu sein, um eine Deckung der Noten durch Waaren oder Warrants gestatten zu können.

English translation: The time which the sale of the goods requires seems too long, and the amount of the proceeds too uncertain, to permit a covering of the notes by goods or warrants.

Leonhardt’s answer rests on legal change. In France, Belgium, Italy, and Hungary, legislation had established both endorsement and the joint liability of endorsers. The warrant consequently acquired a bill-like character: the bank could look beyond the pledged goods to the personal credit of those liable on the instrument. Requiring two signatures or endorsements would, on this argument, provide security comparable to bill discounting. Philippovich distinguishes the merits of introducing such liability from its consequences once legally established:

Man kann die Zweckmässigkeit einer derartigen Haftung aller Indossanten bestreiten (wie Bayerdörffer, Jahrb. für Nationalökonomie und Statistik, 1878, S. 33, es gethan), wenn sie aber besteht, dann liegt für eine Notenbank keine Veranlassung mehr vor, den Warrant nicht als ein unter bestimmten Bedingungen belehnbares Papier anzusehen.

English translation: One may dispute the expediency of such a liability of all endorsers (as Bayerdörffer, Jahrbücher für Nationalökonomie und Statistik, 1878, p. 33, has done), but if it exists, then there is no longer any reason for a bank of issue not to regard the warrant as a paper that may be lent upon under specified conditions.

This acceptance is limited by a distinction between eventual recovery and liquidity. Even where liability secures repayment, payment dependent on selling the goods may be slower than enforcement of a bill:

Allein keineswegs wird eine etwaige, an den vorgehenden Verkauf der haftenden Waare gebundene Zahlung der Indossanten so rasch vor sich gehen, wie eine Wechselsexecution.

English translation: But a payment by the endorsers that is tied to the prior sale of the goods serving as security will by no means proceed as rapidly as execution upon a bill of exchange.

Philippovich identifies this as a point Leonhardt scarcely considers. His resulting policy recommendation is a statutory ceiling on the proportion of note cover supplied by warrants. The review thus modifies the proposed analogy with bills rather than rejecting it: comparable credit security need not imply comparable speed of collection.

For the Austro-Hungarian Bank, expanded warrant lending would require revision of Austrian warehouse-receipt law. Philippovich identifies not only the absence of joint liability but also unresolved questions concerning separate goods and pledge certificates, warehouse operators’ liability, and the warrant holder’s rights over the goods. He praises Leonhardt, the bank’s general secretary, for recommending action despite the small number of warrants then circulating. The proposal reflects a responsibility attached to the bank’s privileged position: its participation might itself stimulate warrant business.

The closing assessment places this reform agenda within Austria’s and Germany’s lag behind other countries. Philippovich commends the book’s first section on principles, its second section comparing warehouse and warrant legislation, and its fourth on note-bank practice. He treats their practical orientation as a strength: prepared for the bank’s General Council, the study assembles foreign legal provisions and institutions into a usable basis for decision. The review’s broader relevance lies in showing how legislation can transform commercial collateral into bankable paper while leaving liquidity constraints that must still govern note issuance.