Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-07-07
Financial News Letter
BY W. q. NICHOLAS.

By W. q. NICHOLAS.
NEW YORK. N. Y. July 6. 1907.
The banks have no objection whatever to
seeing stock market prices higher. but they
make 1t plain that they have no money
with which to back a speculative bull cam
paign. Their position in this matter is log
ical and is we'll understood by everybody
with reasoning faculties. The banking in
situations and trust companies have an
enormous aggregate amount of money
loaned on stocks and bonds. Their en-
deavor Is to keep themselves perfectly safe
by compelling borrowers to keep well within
the limits: In other words. by maintaining
big. thick margin of good collateral be-
tween the amount borrowed and the mar
ket price. In a sense. therefore, the phrase
Is always correct that 1.-The banks are car
rying the stocks or the banks are under
the stock market" The banks are not ac-
tually carrying the stocks directly, but
they are nevertheless just back of the firing
line and are always keenly interested in
fluctuations and In the long swings.
u
When a situation gets shaky they compel
borrowers to either pay of. reduce their OBJ
legations or reinforce their securities.
Where the borrowing class Is found to be
over-extended. liquidation becomes compul-
sorry and prices break. After every severe
liquidation there are left with the banks
large numbers of favored accounts which
cannot well be closed out. yet which come
distinctly under the head Of undesirable"
me customers are in most cases solvent
and their collateral gilt-edged. although
oftentimes of kind that finds slow mar
ket in periods of distress. Since the March
panic the banks have been unusually full
NJ hos Il l.
Ing to them to see quotations advancing.
~
At the same time they are lending nothing
but their moral support to the situation
leaving the burden of manipulation to
Few leaders who have cash to risk and
whose special interests favor the bull side
In the present instance 1t has been to the
advantage OF several over-burdened clques
and pools to shove up prices in the hope of
Delng able to distribute, their surplus MR.
chandise. In some cases a demonstration
mas been considered essential to the later
Rotation Of new issues Of bonds and stock.
The market having been sold to a stand
Still, as the saying goes, 1t was found easy
to lift quotations and to give an appearance
or returning buoyancy and confidence. The
appearance was in large degree decep-
i've. for the public has not come into the
market and trading has been largely pro-
fessonal and saturated with manipulation.
-.
Capitalists back of and identified with the
management of leading railway and indus
trial corporations have control of most of
the banks and trust companies either d.
rectly or Indirectly, and have first show at
whatever surplus money may accumulate.
The demands from this source will absorb
every dollar that may come in sight for the
next year or two and there will be little
left for stock market speculation. For this
reason, opinion which is inspired by the
known banking position and the exigencies
of the money market inclines to the theory
that We are in for considerable period of
duilness. OF course there will spring up
seasons of enthusiasm and rising prices
but soundest judgment must continue to
antagonize speculative expansion in securi-
ties
There is and must continue to be a drug
Of bonds. The gold initiation Is an ever
present bearish influence on investments
having fixed returns. This condition is re-
fiected IN the increasing difficulty which
municipalities have in floating new issues
and in the entire willingness OF private cor
porations to pay a greater rate Of interest
for money. Railroads have within the last
year put out more than $1,000. 600 in
short-term notes extending over periods Of
lures it Is the hope and expectation of the
borrowers to be able to convert the obliga-
tions into funded form.
Among the many things which happened
in a money way in New York the first
week in July was the distribution OF the
big end of $780, coo, 600 In dividends and in
terest among more than 100000 bond and
stockholders. The clerical work incident to
this task has been almost beyond the COM
prehension Of the layman. The savings In
stitutions of the city have been entering to
the credit Of about one and a. half million
depositors little matter of $2OOOO,OOO.
representing semi-annual interest at the
rate of per cent per annum The
SubtreaSury in New York contributed ac-
lively to the redemption of the $36 OOO, 900
per cent bonds which matured the first
of the month. This labor will not be COM
pleted for month or more. 1t may never
be completed, for 1t Is a record that every
important bond redemption has tailings
which were never cleaned up. Bonds are
lost, mislaid or destroyed and never re-
appear. The government Is ahead a great
many millions Of dollars on this account.
In addition to the usual routine of corpora
ton transactions the Rock Island took UP
$7,5OO.0OO in short-term notes issues two or
three years ago for emergency financing.
This IS the last Of Rock Islands floating
Indebtedness.
The controller Of the city Of New York
has been taught his lesson and he realizes
the futility of attempting to sell bonds or
borrow money without the help of the
great banking and bond houses OF Well
street. These gentry have established toll
roads in the financial district and insist on
levying tribute ON every deal that is pulled
off within their sphere Of influence. Every
little while some official or group of cap.
ifo1fc fc tn got oil rurf&I Uy<,1
street. but invariably there is a return to
reason and the rash one are disciplined
Word passes along that IS man or that
group of men are trying to induce new
and unsafe methods in Wall street; this Is