New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-12-05
MONEY JUMPS
TO l5PER CENT
Calling of Loans by Big
Banks Causes FURRY
Among Stock Brokers

A mild panic prevailed in the money
crowd at the New York Stock TX
change for brief period yesterday
afternoon when the interest on day
to day demand loans. by which Wall
Street brokers are accustomed to
finance their stock market operations,
rose in sensational monner to the high
est rate since 1919. When the furry was
at it's height about an hour before the
lose of the stock market approximate
ly s5o000 was loaned at Is per cent
This compared with q high Of 81 per
cent last Friday. A month ago call
money was in liberal supply around
2 per cent.
The rise TO Is per cent, the highest
rate touched since call money went to
20 per cent in December, 1912, follow
ing heavy outflow Of funds to
Canada, occurred after some important
lending institutions had called loans
earlier in the day. This necessitsted
a shifting Of the loan burden and re-
suited in spirited bidding on the part
of brokerage concerns which found
themselves in need of funds as a re-
cult OF the action of their banks.
When this demand was satisfied the
rate declined rapidly and closed at Z
per cent. Before the advance took
place the ruling rate was s per cent
Most Of the days loans were placed
on an s per cent basis. The total
business transacted was estimated at
somewhat above the daily average. at
between s25,OOOOOO and s3O,OOO,o0c.
The upturn checked an early advance
in stock prices and resulted in sub
stantial declines in some Of the more
highly speculative issues. United
States Steel. for example, declined
from 1864 TO 12414 and closed ~
points down at 1247s.
Explanation Of Bankers
Bankers who were asked to explain
the sudden rise in money rates pointed
to the sharp fall in the surplus cash
over legal reserve requirements at
New York. In the first week Of Novem-
Der the Clearing House banks Of New
York City had a surplus reserve Of
s124,000,000. Since then there has
been a steady decline, until last Satur-
day there was only s+l,000,000, the
smallest since the Federal Reserve
banking system went into operation
two years ago. The explanation for
the drop in reserves is flow Of funds f.
TO the interior OF. the country. Alb
normal expansion of business in all /
sections of the country has caused in
terror banking institutions TO take
funds away from New York on large
scale.
London May Be Affected
Bankers with international connec-
tons are interested to see what effect
the sharp advance in money rates will /
have in London. It is known that New /
York banks have been carrying heavy /
balances in the London market for the |
reason that they could employ it there |
more proftably than at home. In the /
event that the New York market /
should continue to hold strong it is I
believed that a withdrawal of these /
funds from London would follow. In |
September it is estimated that up
wards of SlOO,OOOOOO in American
banking balances we're transferred to
London.
1t is believed that the British /
financial authorities will make every |
effort possible to ease up the money |
situation here, as they realize that |
they must borrow in this market again /
In the near future, and the higher the /
interest rates the more they will be |
to pay For this reason the
of ]. p. Morgan & Co, |
that S50,000,0O0 in gold would be i'm /
ported from Canada this week, was /
received with interest. This and other /
shipments to be made later are ex-
pected to help ease the market. In .
the meantime the high rates here are
expected TO attract banking funds |
from interior institutions.