Evening star. [volume] (Washington, D.C.) 1854-1972, 1906-01-04


The greatest difficulty in keeping Interest
down was experienced by the houses with
large and active trading clienteles, and as
nearly as can be ascertained the ruling
range of interest rates throughout Wall
street on December accounts was II to 10
per cent, despite the number Of houses that
were able to keep interest down to one fig
ure. OF itself this range of interest would
not have caused much complaint. 1t rep
resents net charge of from l to IA per
cent for the month, and, as the average
price Of stocks advanced about 5 per cent
during the month, the interest cost was
dividend and interest disbursements that
have just been made and 1t is hard to see
why commission house customers were gen.
orally willing to stay long through Deem
ber's tight-money market and to trade on
the bull side
All through the month, when brokers
warned their customers that interest
charges would probably be stiff the re-
spouse was something like this: Il don't
care so long as the stocks more than carry
themselves, as they seem by their advances
to be doing SO" The rub came when the GUS
toners of one house found that the CUSTOM
ers OF another had Jared better in respect
to interest regardless as to whether or not
the one house did little business and the
other much, or how the houses compared in
| respect to facilities offered information fur
nished and other matters
1t is not often that brokerage houses
have such problem to deal with as here
presented. There Is always discrepancy
IN interest charges as between vartou,
firms. When money Is easy 1t Will be
found that the rates will run from 5 to =
per cent. and there are many factors that
go to make for these diversities Individual
credit banking house affiliations the char
acter OF the stocks dealt in from time to
tlme-al these tend to figure. If house
has been carrying large line OF industrial
securities for its customers 1t will probably
have to charge higher interest than a house
whose customers have been trading chiefly
IN railroad shares.
"Ali-industrial' collateral does not obtain
as low interest rates as do all-railroad Sc
curities or ordinary street loans" consist
Ing of from 60 to 10 per cent railroad coll
lateral and 80 to 40 per cent industriaIs.
At the same time the customers of the
house that has been running to industria,s
may nave made a great deal more money
than the traders in railroad stocks Until
banks and bankers generally agree or are
forced TO maintain larger cash reserves and
until brokers' generally learn or are forced
10 place less reliance on call money ac-
Communications Wall street will have now
and then wild call-money markets and such
troubles in respect to interest charges as
now
The maintenance of larger cash reserves
ana hablt OF borrowing most money on
time would not make big speculative stocg
markets and would tend to prevent the
wide swings in prices, which enable traders
to gather in huge profits but more stable
markets would result
Il
There seems to be very little reason IN
the complaint OF usury on the part of COM
mission house customers II there Is usury
the fault lies with the original lenders
and, as matter of fact, the laws in re-
spect to interest rates are violated fire.
quently in spirit.
Wall street brokers are this week paying
per cent, plus commissions of to per cent
or from to per cent interest for thirty
to sIxty-day time loans. The broker owes
no excuses to his customers. Very few
traders lodge balance with a broker, saw
ing: Agree to keep this balance here for
SIX months, year or two years, as the
case may be-"
The customer may withdraw his account
when he pleases. Consequently the broker
may say to him: Under the circumstances,
you cannot expect me to load myself up
with short or long time money that may
not need. You have practically day-to-
day account with me, and you cannot
ufaifio INC IL carry ~ Ou ddy-tO-Oay or call
money
AS a matter Of fact and practice, brokers
borrow large sums on time against the
probable permanent percentage OF accounts
which they must carry, and look to the
call money market to take care of the
shifting balance which now expands. now
contracts and now disappears altogether.
The tendency, however. Is to rely too heav-
lily on call money because 1t rules cheaper
than time funds.
The constitution of the stock exchange
does not have much to say on interest
charges. About the only provision is con-
tanned in the governing committees reso-
luton OF March 49, 1902, which says: RE
solved. that any agreement or arrangement
entered into between a member or his firm
and his or their customers whereby special
and unusual rate of interest Is stipulated for
$3.50 In connection with the conducting
of an account, with interest thereby to
give special or unusual advantages to such
customers for the purpose of receiving his
business shall be deemed violation Of the
commission law" (Which says that
Commissions 49, shall be absolutely
free from all replacement return dis
count or allowance in any shape or man.
ner.'o
FOREIGN BANK BUSINESS.