The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1906-12-24
MARKET NOT IN PANIC
st. Paul'S Issue a Blow, but
Street Soon Receivers.
VIOLENT DROP IN THE STOCK
western Roads Have Issued New Cap
itaI Amounting to Quarter billion
Billion I'm Several Weeks-Shavv's
Measures Fail to Relieve.

New York. Dec. 23.-Violent as was the
decline in prices in the stock market, or
at least in some of the principal stocks
in the market last week. the fan was not
surprising, when all the factors combining
TO produce it are duly considered, and the
reelection at once occurs indeed, that if
the bulk Of stocks held on margin in Wall
street had not been held by strong hands
much greater decentralization in the mar
ket would have been witnessed than
actually occurred.
The Ostensible occasion for the drop
was, Of course. the extraordinary details
of the Chicago, Milwaukee and St Paul
Railway Company's plan for an issue of
100000 new stock, and it is admitted
on all sides that even crediting the
originators of the scheme with innocent
designs, the best that can be said Of their
act was that it was one calculated TO
throw the stock market into confusion.
The payment of the first installment of
100000 on the new stock was set for the
last day Of the year. when the money
stringency attending the annual financial
settlement is sure to be greatest.
The transfer books of the company were
10 close for the new issue within forty
eight hours, and the original intention
was. it seems, to issue only a single Ger
tifcate in the case of each subscription
and not TO allow these certificates to be
split. Questions at once arose that no
one could answer regarding the avail
ability as collateral of these certificates
under such circumstances, and it was evil
dent that such shareholders as were not
living at or near the financial centers
might find themselves cheated out Of
prospective subscription rights through
physical inability TO comply with the
terms upon which the rights were Of
fered.
Violent Drop Results.
There was talk of lawsuits, injunctions.
and so forth. and the natural impulse OF
every one who was specializing in the
stock was 10 close his ventures as soon
as possible. All this brought about "a
drop on the day after the announcement
regarding the issue was made of 16 points
in the price of the St. Paul common
shares; and although the quotation for
the stock rallied somewhat afterward,
there was a manifest disposition on the
part OF traders in the market 20 let the
stock severely alone; nor were responsible
commission houses overanxious 10 have
dealings in the security on their books.
Back of the disturbance caused by the
manner of bringing out the St Paul issue
was. Of course. the fact that, including
the quantity of stock thus issued, there
had been in the seven days preceding
formal demands for new capital on the
part of three Northwestern railway COM
panies of over $50, 000.oyO, while if account
was taken Of the authority granted by
the AtchisOn stockholders TO the directors
of their company TO increase the Atchison
capitalization. the sum thus stated would
have been increased by S1O0.CO0.OO0 more.
over S5OoO000OO Of new capital issues have
indeed been brought out or authorized
within the last few weeks.
There is no denying the fact that the
business of the Western railway lines is
such as 10 warrant all the expenditures
contemplated in these new creations of
stock Nothing has been more emphati-
cally demonstrated in the course Of the
last six months than the needs of the
railroads, not only in the West but the
country over, for new mileage new ter
minals, and enlarged facilities of every
description. Coming however, upon a
torpid investment market. such huge in
creases Of capital were by no means a
bull argument in the views of Wall
street spectators. The terms which pro-
vided for the spreading over a long pc
Rod Of payment upon the new stock and
for the allowance Of interest upon these
payments meanwhile were such as to
amount, in substance TO the negotiation
of shOrt-time notes by the railroad COM
panies at rates varying from TO per
cent; and thus the action was Itself a
rather pointed indication of the probable
market valuation under existing cir
cumstances of the outstanding per
cent dividend-paying stocks in question.
Measures Fail to Relieve.
Looming up in the further background
still of all these matters was the rather
grim presence Of the money situation.
Secretary Shaw's relief measures had. il
was realized. come TO naught. or were at
least working their relief so slowly as to
exhaust the patience Of spectators. It
was discovered that offerings Of the gov
eminent ( per cent bonds Of 1907 to the
Secretary under his offer 10 buy S10.0O0C0O
of these securities were an almost neg
ligibie quantity; and that whatever other
release Of Treasury money had been ac-
complished was for the time being offset
by an intake OF funds by the government
from other sources.
Bank renewals rose steadily each day
during the earlier part Of the week to
higher figures. while time money was
quoted at prices that represented an abso-
lUtely unprecedented scarcity OF funds OF
this class. In this respect the existing
situation was notably different from that
Of last year. On the former occasion, al
though call money was quoted at much
higher figures than it now is. time money
could still be had at rates that, if oner-
Gus. We're yet endurable. Such terms,
however. as from S TO 9 per cent for
money for use for from sixty 10 ninety
days, S per cent for four-mOnths money,
with borrowings negotiated for six
months at between and TX per cent.
and bids for money for thirteen and four
teen months at s per cent, possessed this
significance: that they bore witness to a
seeming permanenCe of the stringent
monetary conditions that have been
brought about.
And II was not unnatural in view Of
such facts. that speculative sentiment in
Wall street should have veered to the
conclusion that either one of three
things must happen I'm the future
either some fresh addition to the circulat-
Ing medium i'm the country or other
similar development that would serve to