The Washington herald., 1914-12-27
Hon. Financial Crisis Brought
About BY the War Was Weathered
Tremendous Problems Confronting Banks and Securities
Markets Described by Governor Of the New
York Stock Exchange

/ II might be said that the exchange has
not actually closed Its doors at any time
At least II has provided q means for
necessitous selling to some extent, and
for investment purchases at . nxed level
Of prices.
Protection OF InvestOrn.
Because Of the progress that has been
made. natural demand has arisen that
the exchange reopened. Now, In 90 far
as the stock exchange and ia members
to facilitate the exchange Of securities
and thereby assist In the creation Of new
enterprises. At present there are no new
enterprises. and there can be none until
credit facilities are restored To reopen
the stock exchange until tolerabIy normal
conditions prevail In the credit market
would force necessitous selling upon in
vestors. This would result in abnormal
prices which are uneeonomic, unethicaI.
and unjust as a basis OF settlement II
was TO prevent the enforcement of con-
tracts upon such a basis that moratoria
were established throughout the world.
The New York Stock Exchange is a part,
but only a part. OF the financial machine.
One part Of q machine cannot maintain
It's functions when all other parts are
stilled- Any such attempt would mean
that large numbers Of innocent investors.
wholly unrelated to the war, would suf-
fer hardships. What has been Of vastly
greater importance in these opening
months Of the war has been the resump-
tion Of an international exchange not OF
securities, but Of commodities which are
needed TO maintain human life. This also
is a matter OF credit, and until such am
pie credit facilities are restored as will
insure a free market for focdstuffs and
supplies the stock exchange should not.
by a resumption OF its activities. hamper
or restrict that movement. These are
reasons why the stock exchange has not
reopened-
obIieatIona Abroad.
Another reason lies in the fact that
Europe Is a large holder Of American
securities, and to reopen our stock eX-
change prematurely. when all the others
are closed, would merely invite a resumP-
ton Of that concentrated pressure on
New York which We brought to an end
by closing our doors. Sir George Paish
has stated recently that he does not be-
lieve London will be a heavy seller OF
our securities. In making that statement
he wished, no doubt to reassure US, and
I hope he has stated the case correctly.
France will certainly sell heavily. In any
case Europe will not be paid for those
securities in gold. and measures looking
to other forms of payment are now un-
der way. II must be borne in mind that
where payments are due abroad we must
pay them promptly, but where payment
Is due on this side, as in the case Of Sc
curities sold here by foreigners, the cred
itor receives his money here, and the
question of when and how to convert 1t
into foreign funds becomes in a "rtSiS W"
this a matter Of arrangement between
the parties in interest
"Msan'ire Improvement con inues in
-fNusssu tr
ing exports Of foodstu1s and of various
supplies of manufactured articles; cotton
is slowly beginning to find market,
money is acc mrlating. and the resources
OF the banks will be greatly augmented
by the operation of the new bank act.
There is a marked reduction IN loans and
a reviving demand for old and seasoned
investments
The Railway Situation.
In the long run imports and exports
will bring about Offsets, and trade will
20 on as before. The British moratorium
has already ended: that Of France has
been modified, and the moratoria Of other
countries are expiring each week. AZ
fairs in this country are moving In an
orderly way toward recovery. The banks
. in the central cities have restored their
legal reserves and fears Of financial
crisis have disappeared. But one serious
dificulty remains. having a vital bearing
on the entire investment situation. re-
fer to the plight of the railways, which
Z to a large extent affects the banks. the
stock exchange, and the entire credit po-
! sition-
Briefly, the returns on railway capi-
tai employed in America today is 3ss per
cent. Yet renewals Of notes OF roads en-
joying the high credit Of the New York
Central and the Lake Shore today costs
per cent
met earnings Of all railroads in the
fiscal year 1914, after all deductions,
showed a total loss over 1918 OF more
than Sl240Oo,0Oc.
American railway bonds are now In
default In the volume OF $S7s.0OO,oOo, while
the funded debt. notes and bills payable
during the calendar year 1915 by all COM
panies amount 20 the staggering total OF
SSH. so.
Where is this money to come from
with railway credit at its present low
ebb? 1t will not suffice to say that the
situation is one of difficulty; it 10 one OF
the utmost gravity"