New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1918-09-02

the call loan secured by Stock Ex-
change collateral; nor can the interest
rates on the former be considered as
attractive as the latter, for interest
rates on call loans on securities are
likely to remain higher until business
conditions change materially. The
rates on both kinds Of loans may then
come together, but that is only likely to
happen when they both go so low that
the question of competition would be
quite negligible.
The question of desirabilty raises
much broader issue, and it evidently is
from this point of view that J. P. Nor
gan & Co. have seen the need of an
open market for acceptances. 1t does
not follow that other banking houses
will take similar stand in the matter;
and If they do, to what extent still re-
mains an open question. Banking in
stitutions have not yet reached the
utopian stage Of finance where money
flows to the borrower who offers the
lower rate of interest on security
equally safe.
Banks and bankers, however, NAV not
only consider the stimulation of accept
ance dealings desirable from the stand
point of trade supremacy both here
and abroad, but also from the point of
view that an open and ready market for
acceptances tends to diminish the
amount Of credit that is procured from
the banks in the form of single name
paper. They will figure that the bust
ness man can then finance himself on
single, double name pa per, trade or
bank acceptances with sufficient facil-
ity to permit him to diminish the de-
mands he is likely to make on his bank
for individual borrowing.
VIII Aid Federal Reserve System
An open market for call acceptances
will add to the efficiency of the Federal
Reserve system and intensity the use
of credit in banking facilities.
These influences tend to releas.
funds which likely will augment the
funds for the call market all over the
country.
1t may be interesting to COMPARE tho
question of refinancing of these two
classes of loans.
Under the ruling of the Federal Re-
serve Board call loans on securities
cannot be refinanced; the lender can
not secure any advances from the Fed
eral Reserve Board on these securities
by repledge or otherwise. Members of
the Federal Reserve Bank, as has been
stated can secure loans for fifteen days
WIN acceptances as security, and to
this extent call loans on acceptances
may be refnanced; whether the actual
loan can be repledged for such period
mas not yet been decided. Since ac-
cep1ances are purchased by the Fed
eral Reserve Bank and rediscounted
tor Its members, collateral under call
loans on acceptances stands on a DIFF
terent footing than collateral under
call loans on securities. Bonds, stocks
can be liquidated only by a sale and
perhaps at declining prices. Eligible
scceptances due in ninety days or less
nave thus much better market and
are hardly ever likely to require their
''"1S ". ASulSCouHC at any sacrifice,
II the Federal Reserve banks would
give advances to their member banks
tor longer periods than fifteen DAYS on
acceptances, in the opinion of the writ
er it would give far greater mobility
and force to the call loans on accept,
ances and in turn probably increase
the funds available for cali loans on
securities
In conclusion, there does not seem to
be any intimate connection between
call loans on acceptances and call loans
on securities that would justify the
opinion that there will be any less cali
money available to Wall Street on
Stock Exchange collateral. In a some
what remote manner an open market
TOR acceptances stimulated by these
proposed call loans might give the
banks of the country larger SURPRISES
available for the general call market.
10 this limited extent call loans on
Stock Exchange collateral NAV benefit.
However, if the discount rate Of the
Bank OF England can raise gold from
the moon there is no reason whv the
eau market on Stock Exchange col
lateral cannot hold its own.