The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1915-07-11
Day When Stock Exchange
Gong Failed to Ring
Dramatic Story, Told by President Noble of How Panic
Was Averted When War Broke Out.

and made the formal announcement,
which was greeted with cheers of ap-
probation. The president promptly ap-
pointed Messrs. H. K Pomroy. Ernest
Groesbeck. Donald G.. Geddes. and
Samuel F. STREET. to constitute, with
himself, the committee of five, and
the long suspense and anxiety of four
months and half began.
These events, which were crowded
into few feverish hours, and which
seemed to those who participated in
them more like a nightmare than like
reality, present some aspects that
are especially worthy OF detailed de-
scription. 1t is noticeable that the
vote to close the exchange was not
unanimous. This shows the immense
complexity of q situation. which, even
at the last moment, left some two
or three conscientious men undecided.
1t is fact OF profound Importance,
and one that never should be forgot
ten by stock brokers or by the public,
that the exchange closed itself on its
own responsibility and without either
assistance or compulsion from any
outside influence. Many false asser-
lions by professional enemies of the
institution have been made to the
effect that the banks forced the clos
ing. or that it's members were I'M
willingly coerced by outside pressure.
The facts are that the influential part
Of the membership, the heads of the
big commission houses, made up their
minds on the evening of July 20 that
closing was imperative. and that on
the morning Of July 81 their repre-
sentatives in the governing commit
tee took the responsibility into their
own hands, the bankers having been
h1a 70
Bank President Displeased.
Immediately after the closing the
president of the exchange visited the
prominent bank president who had
served notice at the last moment of
his disapproval of this procedure He
was found in his office in consulta-
ton with a member Of one of the
great private banking houses. Both
the bank president and the private
banker agreed that, in their opinion,
the closing had been a most unfor-
tunate mistake. 1t was an opportunity
thrown away to make New York the
financial center of the world. The
damage was done and would have to
be made the best of, but had the mar
ket been allowed to open the banks
would have come to the rescue and all
would have gone well. These gentle
men admitted tHal the exchange was
to some extent excusable owing to
the negligence of the bankers in not
notifying them that they were ready
to protect the money market.
1t may safely be stated that within
twenty-four hours after this inter
view neither the two bankers in ques-
ton nor any one else in Wall Street
entertained these opinions. The rise
of exchange on London to s7-a rate
never before witnessed: the marking
of the Bank of England's official dis
count rate TO 10 per cent, accompanied
by a run on that institution which re-
suited in loss of gold in one week
of 52,500.000; the decline of the
ratio of reserve from the low figure
of 40 per cent to the paralyzing fig
ure of 14S per cent: together with
the fact that the surplus reserve OF
our New York clearing house banks
fell S50.00o.000 below their legal re-
quirements, were reasons enough in
themselves to convince the most skep-
teal of the necessity of what had
been done.
Flood of Orders to Sell.
The frightful gravity of the situa-
ton which had arisen became clearer
and more defined in peoples minds a
few days after the first of August
than it was on the morning of July
81. European selling had been pro-
ceeding for some time before the out
break of war and in the last few
days before closing had been tenn
porarily arrested by the prohibitive
level of exchange and the risk Of,
shipment at sea. The American pub
lie itself, however, was seized with
panic on the evening of July 80, and
on the morning of July 81 brokers'
offices were flooded with orders to
sell securities for what they would
bring and without reference to val
ues. Had the market been permitted
to open on that Friday morning the
familiar Wall Street tradition of
BLACK Friday would have had a
meaning more sinister than ever had
been dreamed of before.
In all previous American panics the
foreign world markets were counted
upon to come to the rescue and break
the fall. Imports of gold, foreign
loans. and foreign buying were safe
guards which in past crises had been
counted upon to prevent utter dis
aster. On this occasion our market
stood by itself unaided; an unthink- \
a bile CONFUSION had seized the world;
panic had spread; even the bargain
hunter was chilled by the unprec-
tically no buyers. A half hours ses-
sion of the exchange that morning
would have brought on a complete
collapse in prices; general insol-
vency of brokerage houses would have
forced the suspension of all business;
the banks. holding millions Of IN
saleable collateral, would have become
involved; many big institutions would
have failed and a run on savings
banks would have begun. 1t is idle
to speculate upon what the final out
come might have been. Suffice IL to
say that these grave consequences
were prevented in the nick of time
by the prompt and determined action
Of the stock exchange. and by that
alone.
Morning Smiles.