New-York tribune., 1918-08-22
Banks Ask Reserve
Board to Classify
All Stock Loans
Situation Requires Ruling
as to Whether Market
Advances Are Essential

New York bankers have asked the
Federal Reserve Board to state definite
ly whether they are to consider loans
for Stock Exchange purposes as es-
sential. The board has urged all
banks to reduce or eliminate non-es-
sential credits, and if it should definite
ly decide that Stock Exchange loans
are in this class, there will be little
chance for big stock market specula-
ton as long as the war lasts, inasmuch
as the funds wherewith to finance it
would not be available On the other
hand, if the decision should be favor
able, the market might be freed In
some degree of the restraints imposed
omit of late by the reluctance Of bank
ers to advance funds for speculate pur-
poses. Bankers feel that a specific
classification must be made in their
own interests~ks we'll as the interests
of their Stock Exchange customers and
the country In general.
Bankers Are in Doubt
In discussing yesterday the recon-
mendations Of the board, that all bank
ing credits be restricted, so far as
possible, to those industries that are
necessary to the winning of the war.
the head of one of the most important
Wall Street banks declared that the
great lending institutions are at sea
as to what should constitute a uniform
policy with respect to call and time
loans.
"We have been endeavoring for
some time,' said this banker. "to get
definite Interpretation concerning
whether the Reserve Board wishes us
to further restrict our call and time
loans 1T so, we are willing to do it.
but we want to know exactly where we
stand, as the matter is an extremely
important one"
In its April bulletin, the Federal
Reserve Board stated that it was not
lts purpose to suggest specific ways in
which credit should be conserved. or
unnecessary expenditures curtailed.
Each banker, it was said, must deter
mine this for himself. The bulletin
added: VA
nc oo"lu can only dlScuSS the SUBJ
!!ect IN general terms, with emphasis on
the necessity that while credit conser.
Vatlon should be undertaken promptly
1T should be carried ont gradually. with
reasonable discretion and with the
least possible avoidable embarrassment
TO the business of individuals and in
oustrles. I'm the absence Of anv Of
hclal classification of the more essen
tlal and the less essential things and
enterprises it will be necessary for
each banker in determining how he
maM.do his share in the conservation
or credit to use his own Judgment"
Two Groups of Loans
There seems, however, the bulletin
added, to be two clearly defined groups
or loans: "a? Loans to facilitate pro-
ductlon or distribution, OBJ loans for
productive or non -distributive pur-
poses.
IN the productive or .non-dis-
trlbutlve class were placed loans for
purchasing or carrying property,
whether real estate or personal Sc
curltles. In some quarters of the finan-
clal district it has been suggested that
TINS classification answered the query
Ct bankers concerning Stock Exchange
loans. The latter feel, however, that
Ine reserve BOARD should make spe-
cial ruling.
Call loans in, normal periods have
formed the so-called Second line of
reserves of the banks. In other words.
the quickness with which they could
be converted into cash has always
placed them in position of high i'm
portance. If these funds are diverted
to other fields to a greater extent than
at present bankers believe that any
Increased activity in the security mar
kets is not to be expected until definite
steps toward a satisfactory peace have
been taken.
The great demands on the banks re-
sources by the government and by in
dustries identified with the prosecution
of the war have already caused a heavy
reduction in the funds available for
speculation in the security markets. A
prominent broker estimated Yesterday
that loans on Stock Exchange securi-
ties are now less than rs per cent of
what they were year ago.
The Stock Exchange money market
to-day is confined principally to call
loans. Little time money is being put
out because Of the heavy government
withdrawals that may be expected at
any time. On these occasions the So
called money committee has had to
step in and lend large sums to keen
the rate from going above the "pegged"
rate of per cent.