The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1906-12-23
WALL STREET NOTES
Market Gets Severe Shock in
Arnold Leo Failure.
NO OTHER WEAKNESSES SEEN
Brokers Who Looked Forward to n
Quiet Session, Owing 10 NeRrReSs of
Public Carries 80 Much Money
About That Banks Suffer.

Arnold Leo & Co gave the market
severe shock and likewise such matters
started rumors Of more of the same kind
10 come There was. however. no reason
and no foundation for the talk of other
failures 20 come, for in the first place
what actually happened was bad enough
to furnish the bears with a fairly strong
argument against prices, while on the
other hand banking interests said there
was no other weak point that they could
discover.
The street. bankers said, was in Won
derfully strong condition. for commission
houses apprehensive Of a decline in the
country's commercial activities have in
sisted on their customers maintaining
very strong margins.
The fear that the present prosperity
cannot continue indefinitely has pro-
duced wholesome conservatism so that
in spite of the severe decline In some
stocks and embarrassments Of individual
customers the brokerage houses are now
/ in a position of almost unparalleled
strength.
Formerly when a member Of the stock
/ exchange failed his stocks were sold out
under the rule, but this is no longer the
case, and. therefore. it is not 50 easy as
/ il used 90 be O. determine what stocks
caused the trouble from observation OF
the trading In the case of the failure
announced to-day 1t was surmised that
the decline in Reading and the Hill stocks
was primarily responsible.
Brokers looked forward TO quiet ses-
sion when business opened for the day.
but the liquidation in Reading. which was
ia evidence almost from the start, soon
brought conviction that the trading was
not TO be OF purely holiday character.
Many of the traders remained away an
ticipating nothing unusual in view II
the approaching holiday and the fact that
London viii be closed on Wednesday as
well as on Tuesday Had the attendance
been larger the decline in the market
might have been more severe Those who
were away We're mostly out of stocks and
had they been present their operations
would probably have been largely on the
bear side.
Robert Goodbody, whose arguments on
the causes Of the present conditions IN
the money market have attracted wide at
tention on both sides Of the Atlantic.
writes as follows:
''The financial world apparently as
sumes that a principal cause of the
scarcity Of capital is Wall street specula-
ton and that it could De removed. or. at
all events. alleviated by some sort of cur
erroneous. We think that speculation in
Wall street has been smaller not larger,
than usual for a year. and that this can
be easily shown. As to remedial legisla-
ton. any that is suggested. or would De
likely 10 pass, appears TO US to be not
only not beneficial, but even fraught with
great danger. Every scheme involves the
creation of more paper currency when
the trouble is that We have too much
already
1t is a truth that financial politicians
never seem able 10 recognize. because it
is contrary TO the hazy ideas Of their con-
stituents, that in the money market as
elsewhere the cheapest way 10 get any
thing is TO buy it fairly and honestly,
and that therefore. all schemes whose
aim is TO get capital for less than its
value or for nothing by the issue Of
notes always prove far more costly to
the nation that adopts them than those
who are borrowing.
Therefore, I think that only legislation
that would really improve conditions
would be to have laws passed 10 call in
all the limited States currency afoat and
n rfsa-
the enormous unnecessary amount Of clfE-
rency now carried in the pockets Of the
people being replaced by gold. which
would be too heavy to carry in such
amounts, and. therefore would be de
posted in banks. and so set free for the
purposes Of business, national and inter
national. Altogether We hope that Mr..
Shaw may not attempt any scheme of
dickering with our currency
why is money deaT?' This question
Mr.. GOOdbOdy endeavOrs to answer with
his usual argument that while gold. the
money standard, is growing cheaper 10
produce, money ought TO be dear. adding,
however, that there are other factors,
which he proceeds to discuss as follows:
"One is that when trade is good-i e.
when the profits on a given amount of
work done are large-theTe is available
apparently for the purpose of employing
labor either in productive or nonpro-
ductive work more money than when
profits are small Being apparently avail
able it is naturally used. But its availa-
bility is largely apparent only because
capital is accumulated unused work,
and the large profits do not provide more,
except as they may stimulate people to
work and such Il form Of stimulus is
often accompanied by extravaganza.
which more than uses up the work done.
Hence capital is dear now from natural
causes, and so far as the writer can
see must remain so until circumstances
make people more economical"
The reference made above 10 the enor-
nous unnecessary amount of currency
now carried in the pockets of the people
draws attention 10 a condition which
some of the ablest dnanciers in Wall
street regard as one of the most i'm
pOTtant in the whole situation. The prac-
tice of carrying in prosperous times much
more money than ordinary is almost
universal and thus the greatest amount
is withdrawn at the time when the bust
ness of the country has the greatest need
Of il. The vice president of one of the
largest trust companies in this city ex-
presses the opinion that an excess of
IS per capita is now carried in the
pockets of citizens of the United States
over the average amount formerly car
ried, involving the withdrawal OF about
SiOO.000.OG5 from active circulation. How
to get this back is by no means an easy
problem.
Possibly a considerable fraction of the
money recently carried in the pockets
OF the people may be ayail9ble for bust
ness purposes after the holidays. The