The sun., 1918-10-28
LOAN RESTRICTIONS CURB
SPECTATORS EN77USLAS SIN
Bearing of Proposals of Money Pool Committee on
Advance in Security Prices-Other Develop
ments of an Unusual Wall Street Week.
ny WILLIAM JUsTUs BoIEs.

NA'S ShSNN ASAehahbo tVo1ASo btabo
last week where the Money Pool Com
mittee, in its effort to check undue
speculation at this centre, asked that
tho banks. beginning next Monday.
should require a 80 per cent margin on
loans based upon Stock Exchange COL
lateral. This was an ingenious way Of
curbing speculation without advancing
money rates in a manner that would
increase the cost OF accommodation to
all classes OF borrowers The cxpedient
was unique, however, and recalls the
effort made several years ago by a
powerful group OF Wall street banks
to prevent the heavy lehding Of call
money at 2 per cent. when the best
Judgment was that a per cent. rate
was justified. conference OF bankers
resulted In gentlemen's agreement be
ing reached not TO lend call money at
less than 3 per cent Every one was
happy for twenty-four hours. until the
late Howard rockingham. the money
broker, admitted that one Of the banks
had gone back to the old rate. The
market broke Immediately and within
"A few minutes the Stock Exchange was
getting all the money II wanted at 2
per cent
The present Money Pool Committee
enjoys the distinction ofsbeing the only
group Of bankers which has ever been
successful in regulating the lending
operations of this market. The COM
m!ttee would not have attempted the
task in this instance except to meet
the extraordinary CONDITIONS Of war
emergency In which X was necessary to
cCrtail loans upon speculative collstei al
SO as to make sure that the Government
received from the banks whatever as
sistance 1t needed in financing an I'M
precedented military campaign The
episode therefore is one OF TIE most
Interesting in the history OF war finance.
and IL the committee succeeds In get
ting all the banks to Increase the mar
gin requirements OF StocE Exchange
loans the movement may lead TO far
reaching changes In the methods OF
making collateral loans in Wall Street
Tho situation Is the more interesting
because OF the committees suggestion
that it may later find II desirable to
recommend a further increase hi mar
gins
solve PerplextnE Problem.
There are more than nifty banks and
trust companies in the so-called money
pool. and II IL safe to say that those in
control of these institutions never had a
more perplexing problem to solve than
that of safeguarding this markets credit
facilities so as to provide the Govern
ment with funds and at the same time
finance the legitimate operations OF the
stock exchange which offers the only
free securities market in the world to-
day. Tho bankers could not have gone
as far as they have In controlling the
loan account had Il not been for the
stand taken by the Federal Reserve
Board with reference TO limiting nom
essential loans. The resumption of
million share day trading on the Stock
Exchange following the withdrawal OF
Bulgaria from the war and the peace
moves by Germany led to a much
broader demand for loans upon specula-
tive collateral. The committee was con-
fronted therefore with the necessity of
doing something to check advances upon
speculative collateral II the banks were
to be in a position where II would be
possible for them to finance the record
breaking payments on the Fourth Lib
erty Loan.
Just how effective this measure will
be in restricting speculation depends on
the willingness of out OF town banks 10
make Wall Street loans on their own ac-
count. The banks OF Philadelphia, Chi
Cago. Boston and other large cities have
for years made loans TO Stock Exchange
borrowers. Most OF these advances have
been made through some New York bank
which has carried the collateral and at
tended TO the details of the lending. The
probability is therefore that most in
terror hanks would not work at cross
purposes with the Money Pool Commit
tee. which acts virtually under Govern
ment auspices and in harmony with the
Federal Reserve Bank. Some OF the
large Chicago banks are accustomed tc
lend heavily in this market, and during
the furious speculation of 1906 1t wa'
estimated that interior banks and for
elgn banks had advanced abou
81 ,U0O. 600, 900 to Wall Street borrowers
The situation now Is very different. al
the foreign banks are>1ot In position
to lend here. while money rates at mos
interior markets are quoted at leve
which would OFFER n natural incentive
| for the banks of those cities to make
their loans at home. But the none,
market Is the most difficult OF all mar
kets to control The governing factoi
| is invariably tho rate of interest Offered
! and If the bid is high enough the loaI
is usually made, provided the collatera
| is satisfactory and the capital. II neeC
! be- can be quickly recalled.