New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1884-05-08
PRICE THREE CENTS.
SECURITIES TWICE USED.
A SEQUEL OF THE RECENT FAILURES.


Disclosures were made yesterday tending TO show
that the failure Of the Stock Exchange firm Of
Grant g. Ward Of which ex-President Grant is
member is even more complete than was at first
supposed 1t was learned that the house had re-
hypothecated securities pledged with ition loans
by various railroad companies. The total amount
of the rehypothecatons could not be learned.
but it is believed TO be large, and in one case at
least suit will be brought to recover the securi-
ties that have passed out of the firms control
Little that was new was learned regarding the
condition of the Marine National Bank. Tho di-
rectors in session large part OF the day, out
those who prOfessed themselves unable
to give any statement yet to the banks financial
affairs. United States Bank Examiner Schriba Is
still at work, with expert accountants,
trying to produce order ont of chaos,
and he said that by tomorrow he
might be able to make statement 1t is under
stood ho owever. that Mr. Schriba sent word to the
Washington authorities that the failure was bad
MISUSE OF SECURITIES
The facts developed regarding the rehypotheca-
tons of Grant & Ward are shedding more light on
the immediate cause of their suspension. The nse
made by them recently of the securities pledged
with them has excited the suspicion of bankers and
banks as to the source from which they were OBJ
tained by the firm The consequence was that many
of their loans called, and when they attempted
to obtain fresh loans the collaterals they offered
were in several cases declined. Among the COM
panies whose securities, placed with the frm were
rehypothecated the Street, are the New-lork,
Chicago and st. Louis {" Nickel Plate'), the New
York Lake Erie and Western, the ST. Louis and
San Francisco, and the Buffalo, NewYork and Phila-
delphia Notices of reclamation were sent by all
these companies to the banks and firms that held
the rehypothecated securities, so far as they were
known. The Nickel Plate Company secured loan
of 800 90 from the house, time ago, deposit
ing 81 400 600 second mortgage bonds as coll
lateral The loan was obtained on stock coli
lateral note payable on January l. 1855, aud bear
ing interest at three per cent per annum. These
facts are recited in the notices of reclamation sent
out yesterday by Bangs e. StetsOn, as counsel for
the railroad company. The notices request any
persons who may have the bonds included with
other collaterals for their loans, to detach them
from the loan and hold them until settlement OK
the loan can be made by the railroad company The
numbers of the Nickel Plate bonds rehypothecated
by the suspended firm as follows l0l, ,2Oi;
331, ,24O 3Ol to 400; sol to 525; 2l31 to 2l49:
21sO TO 2,2OO; 2,6O1 to 3,2OO 1901 to $3.50, and
1876 to 1850.
A member of the firm of Bangs & Stetson said
yesterday that the transaction between the railroad
company and Grant & Ward was simple loan.
The firm not given an option as to the disposl-
tion of the securities no agreement OF any KIND
having been made for their negotiation use except
as security for the loan 1t is understood that the
papers are being drawn IN suit TO be brought TO
recover the company's property.
The amount of the securities placed in the Gus
tody of Grant g. Ward by the Erie Company could
not be learned 1t SAID that they include stock OF the
Cleveland Columbus, Cincinnati & indianapolis Rail
road nj ahout 20 00O O00 second mort cage bonds
of the Chicago and Atlantic Railroad. The bonds
were placed with the firm to be sold Part of them
disposed of and advances made to the company
upon part of the remainder. c. l.. Atterbury, as
sistant to the president of the Erie said yesterday
that most of the securities held by the firm which
had been pledged, were used for loans much smaller
than the amounts originally advanced 10 the COM
pany Several persons who held the securities had
been to the cOmpany's Office and had offered to
advance than the amount of the loans If the
company chose 10 take them up. Mr. Atterbury
said that he was confident that there would be no
trouble respecting the securities which Grant *
Ward had used as collateral.
An officer of the st. Louis and San Francisco
Company said that the company had only 1000
shares of stock pledged with the firm. which had
been re-hypothecated. About 800 shares had been
sold by the persons from whom Grant * Ward had
btained loans. The Buffalo, NewiOrk and Phila-
delphia Railroad. it is understood, procured a loan
from the suspended firm some time
ago on the pledge of a certain amount of its
general mortgage bonds. These had been re-hy-
pOthecated. The officers declined to say what the
total amount of the securities was. II is known,
however, that $24 900 of the bonds are held rs col
lateral by one concern and prominent National
bank holds another lot.
PENALTY OF RE-HYPoTHECATIoN.
II ,vas tnnio of some Al diSpusSiOn in Wall Street
when the first news of tine re.hypothecaton by
Grant & Ward was heard to how far their
course would be amenabe to the law. prominent
railroad lawyer said Z" In itself, re-
hypothecation is not held TO be
criminal by the law. Where securities
are re-pledged for loan larger than the sum adj
vanced on them when originally received the case
is different, and such use of the securities would
make the person responsible for il liable to punish
ment. This was the situation in the well remen-
bered Bonner case he obtained money the col
aterals pledged with him far in excess of the
original loans made by him upon them" promi-
nent member of the Stock Exchange Governing
Committee said: There is law that 1
know of prohibiting re-hypothccatlon. but it
is considered improper, and Is IN dI-
rect violation of all business customs
and principles. With stocks bought by brokers on
margin it is clearly understood that the broker is
at liberty 10 the stocks for loans in order
coup himself for carrying them But when an III
dividual a corporation obtains loan >ecur-
ties, ii is supposed that the money is advanced by
a capitalist, who only takes the collateral 10 pro-
tect himself against possible loss. An excellent
practical reason for the universal understanding
even if no specific agreement has been made that
the securities which corporation pledges To raise
money on are TO be kept intact by the lender, is
that the knowledge that the corporation Is
borrowing money, if generally known. might injure
its credit. When collaterals such loans are
broken up and used TO borrow money on, it is q
comparatively easy matter to trace out the original