The Washington herald., 1907-10-22

Wall streets house-cIeaning has now
reached the speculative banks. which have
been threatening trouble for some time.
The action taken by the clearing house
committee, though drastic will undoubt-
edly prove beneficial in the end, and il is
reassuring TO find that none Of the banks
whose condition has been inquired into is
insolvent. The incident is illustrative OF
the lengths TO which speculation has been
carried in the financial district. Banks
have been acquired by spectators for the
purpose of making use OF their resources
in risky enterprises These men have not
stopped with the control of a single in
stitutiOn, but have used the bank stock
owned by them as collateral for loans
wherewith TO acquire control Of other
banks, thus building up a pyramidal bank
ing structure of uncertain stability In
this way the evil methods Of corporate
promotion had invaded banking circles.
where the soundest principles of financing
should alone prevail BY insisting on the
elimination of the speculative element,
the clearing house committee has per-
formed d service Of the highest value to
the investing community
The continuous decline in security
values, a decline measuring much more
than the collapse Of speculative issues,
has had the effect OF adding TO the strIn-
gency Of the money market, and that
now appears as the most serious feature
Of the financial situation. The New York
Journal of Commerce estimates that the
total slump in the market values Of all
shares since the beginning OF the upward
movement in 1906 has been 5000 600 900.
The shares of seventy Industrial concerns
alone have dwindled 4Slz per cent. And
this tremendous shrinkage of security
values, exceeding even that of panic
years, has occurred in the midst of an
era OF unexampled prosperity and has
been accompanied. in the case of many OF
the enterprises whose stocks have been
adversely affected, by enormous expendi-
lures out Of earnings for additions and
extensions OF plants and physical better
ment Of the property. so that the actual,
tangible value represented by the securi-
ties is larger than ever before.
The street has, in effect, discounted
whatever trade reaction there may be
ahead, as we'll as any possible reduction
of dividends II securities have not
reached the ground floor. they are very
close to it. and the opportunity for legiti-
mate investmeR. would be unexampled
but for the cloud Of uncertainty that en-
velops the financial district. The specuIa-
tive mania has run its course. but it has
dragged in the mire the good name of
every security on the list It is an ex-
traordinary condition to cO-exist with a
prosperity so we'll founded that while it
may diminish, it cannot be extinguished.
Whatever the explanation, It cannot be
denied that speculative finance is the
worst enemy of the security market.
Whenever the people are convinced that
our corporate enterprises are essentially
sound-and most of them are-they will
invest their funds in corporate shares. but
not before then Though a severe process
Of renovation, the house-cIeaning now go
ing on was necessary, and il has been &C
complished so far without serious injury
10 the legitimate business interests of the
country.