Kiting. Consists of incurring a fresh obligation to
discharge an old one.

The commonest form of kiting is by means of checks.
Example : A depositor in a bank has issued a check
which overdraws his account. He makes out another
check, obtains cash for it elsewhere than at the bank,
and deposits the cash in the bank in time to meet the
first check. Two or three days elapse before the
second check reaches the bank and before its arrival
another check has been made out and the cash
obtained for it and deposited. So the process
continues.

A person engaged in kiting may arrange to exchange
checks with another person. Thus, if he has issued a
check which overdraws his account he makes out a
new check and exchanges it for a check drawn by the
other person on another bank, which latter check he
(the first person) deposits in his own bank to meet his
own first check. He may draw and exchange a third
check to meet his second check; and so on.

The person engaged in kiting may gain time by
sending his checks to other places—places as
remote from the one in which is situated his bank as
possible. The more remote the places the longer the
checks are in reaching the bank upon which they are
drawn for payment.

Another example of kiting: A person in New York has
issued a check which overdraws his account. He
draws (draws a draft) on another person in Chicago
(in accordance with a previous arrangement made
with this second person) and deposits the draft m his
own bank to meet the check which overdraws his
account. Then, he sends another check of his own to
the person in Chicago upon whom he has drawn. This
check is used in Chicago in meeting (paying) the draft
on its arrival there. This check on arrival in New York
is met with another draft; and so on.

Again, three or more persons and three or more
places, may be involved in a kiting operation. A in
New York may draw on B in San Francisco, B in San
Francisco may draw on C in St. Louis and finally C in
St. Louis may draw on A in New York. Ten days or
more will elapse between the. time when A draws on B
and the time when C's draft on A reaches New York.
In the meantime A will have the use of the money
obtained on his draft on B and just before the arrival
in New York of C's draft on A A will have drawn a new
draft; and so the process may continue.
Another form of kiting is for a person to obtain an
accommodation note from another person for, say, 60
days and have it discounted at his bank. The amount
is credited to the account of the person who procures
the discounting of the note and he may draw checks
against it. When the note reaches maturity (becomes
due) a second note may be used to take up the first.