New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-06-29
REVIEW OF THE
WEEK in FINANCE
Market Stands Up Under
Shock of Suspension
of III. B. Claflin Co.
SPECIAL CAUSES
FOR THE FAILURE
Business Depression Alone Not
Sufficient-Money Rates
Continue Low.

Suspension of the H. B. Clahin Com
pany, the greatest wholesale drygoods
house in the country, started liquida-
tion and short selling that aroused Sc
curity trading into such activity as it
had not seen for months. Considering
the long established reputation of the
concern that was obliged to seek the
bankruptcy courts. the market respond
ed well to the strain put upon it and
| justified in great measure those who
had been insisting that securities had
discounted much of what general bust
ness was struggling under. Banking
support, which had interviewed to sus-
tain the holding companies of the Olaf
lin group, played large part in check
ing the decline. At the end of the week
net losses were not large and the gen.
eral price levels were little changed
The brief upturn, however, that had
followed Southern Pacific's victory in
the Supreme Court over title to its oil
lands was forgotten.
When first rumors began to be heard
Of the impending difficulties in the dry
goods district they were not credited by
many, so long had the reputation of the
II. B. Clafin Company persisted from
the days when it was the great COM
mercial house of the world Others, re-
membering former occasions of slack
ened trade, repeated that Claflin obli-
cations were so widely held by the
banks that they would carry the con-
Germ through. On Tuesday and Wednes-
day, however, selling appeared that
could not be credited to the usual oper-
ations of professional traders and did
not seem accounted for by the Supreme
Court decision against the railroads in
the intermountain case. A sharp break
in the price of one of the affiliated cor
porations late on Wednesday centred
attention on the II. +. Cl&fin Company.
So announcement Oh Tn Irsday of ap-
pointment of receivers came as a shock
rather thar surprise.
Evidence of Slack Business.
To the casuists in Washington, who,
serene in the illusions of persecution
by big business, have calmly put aside
with easy phrases repeated evidence of
depression prevailing throughout the
country the news must have impinged
like jet Of cold water on a man in a
dream. No matter what special inAu-
ences may have operated in the case of
this particular concern, it was lack of
profitable business that pushed it into
the courts.
By the nature of its financing the
II. B. Claflin Company was, however,
particularly liable to feel the force of
u1favorable credit conditions arising
through the slowing up of industry. In
stead of borrowing funds in one centre
1t kept to its old method of taking its
customers notes for purchases, indors-
ing them and disposing of them coun-
trywlde. Of late the interior bankers
have been taking less and less of these
bills receivable, until the burden upon
the central house became too great to
be carried. When it became necessary
to call for assistance here it was found
that its business was so extended that
the sum necessary, if New York was to
assume the Indebtedness now widely
scattered, was greater than could be
granted.
Change in Nature of Notes.
Conditions have changed for the old
commercial house, and this city is no
longer the great jobbing centre of the
country for staple drygoods that it was
years ago. To keep up its immense
business the interests behind the COM
pany had created customers through
buying into retail stores all over the
country and association with great re-
tail concerns here. This changed the
nature of the notes issued for each sale
of goods. Formerly the maker was an
independent buyer. On his rested the
necessity of payment at maturity if he
wished to continue to do business with
his wholesale house. This obligation on
the maker became less where he was
practically an agency. Banks discrimi-
nate between the old-fashioned two
name paper made by buyer and seller
in bona fide commercial transaction
and such as this, but in the case of the
Clafiin receivables its long pre-emi-
nence assisted to keep it in the favored
class.
Investigation will show whether OF
not this relation between maker and
indorser of notes has resulted in what
practically amounted to extension
through issuing new paper to pay for
the old after the transaction out of
which it arose should have been ended
and to what extent, if any, the notes
are accommodation paper.
Federal Reserve Currency.
Considerable discussion of the Fed
eral reserve currency to be issued
against rediscounted paper, with ad-
ditional security of 40 per cent. in
gold, has naturally arisen. One of
| the effects Of the new law shpuld be
| to cause bankers to scrutinize care
fully the notes they buy so they may
be certain whether or not they com