New-York tribune., 1910-11-04
LOANED S5OO,OO0 ON
CENTLEMEN'S AGREEMENT
Frank 0. Roe Tells How Brokers
Got That Sum Without Put
ting Up Collateral.
GENERAL CUSTOM, He SAYS
Official of Mechanics and Metals
Bank Testifes in Action of
Bankrupt's Trustees on
Stock Sale.

! What is said 20 be general custom in
| wall Street. which enables brokers to
secure accommodations in the form Of
certi4cation for their checks from their
banks without actually putting I'D col
lateral at the time the loan is made. was
explained by Frank .. Roe, one Of the
vice-presidents of the Mechanics and
Metals National Bank. when called yes
terday before ex-Judge Charles Brown,
sitting as referee, in the joint action
brought against the National City Bank
and the Mechanics and Metals National
Bank by the bankruptcy trustees of the
failed firms of J. NJ Fiske & Co. and
Lathrop. Haskins & Co.
In the course Of the testimony by MI.
Roe he brought out, in reply to ques-
tions put TO him by Daniel P. Hays,
counsel for the receiver of J. NJ Fiske &
/ Co, the details of what he considered
the daily custom in the financial dis
/ trict of extending loans to brokers with
| out compelling them to put up security
! at the time the loan is made.
! According TO Mr.. Roe the loans to
| J NJ. Fiske & Co were made under Il
written agreement in use generally
! throughout the district Under this writ
! ten agreement broker is able to call
up the bank in the morning or send in
| by messenger a notification TO place to
/ the brokers' credit any reasonable
amount of money he may desire, and in
the case of ]. NJ Ffske & Co. it ran up
to about haf million dollars.
The "Gertlenen's Agreement"
These accommodating are made,
according to Mr.. Roe. Under the terms
Of the written agreement. irrespective
Of the balance the broker may have
on deposit in the bank. T. copy of the
so-caIled "gentlemen's ag1eement" en-
tered into between the Mechanics and
Metals National Bank and J. NJ. Fiske
E Co. was offered in evidence.
It provided that should the broker
fail 10 deliver collateral 10 the bank TO
cover the loans made. the bank had the
right 10 enter the brokerage house and
demand such securities. as the bank
desired
centred about the .qAntleren's agree
mont" entered into between the bank
ana brokerage firm. The legality OF
such a practice is questioned by the
plaintiffs in the action against the two
banks. In 1901 the agreement in ques-
ton was entered into. Mr. Roe testified
that for years it had been the general
custom Of banks 10 loan money TO
brokers on these terms.
The accommodation" is extended by
means of certifying the FIRMS checks.
These loans are made to brokers, ac-
cording to Nj Roe, with the distinct
understanding that TIE broker will de
posit funds or securities during the day
to make up the loan.
Mr.. Roe related his hurried visit to the
office Of J. NJ Fiske & Co. about u
o'clock on January 10 just before the
firm failed He SAID he was prompted
TO 90 70 the firm 'or the purpose OF
securing collateral u insure the firms
loans. after rumors had eached him
that the firm was in trouble.
He admitted that the bank derived
S1T5.647 ~ from the sale Of the securi-
ties he obtained from the firm on that
dav. but he asserted that after balanc-
ing I'D the books II was found that the
brokerage firm owed the bank S242.-
POI -.