New-York tribune., 1919-11-12
Money Jumps
Sensationany as
Bankers Meet

Lever III Twelve Years:
Reserve Board Officials
Discuss Situation Here
! While Governor w. P. c. Harding
and Albert Strauss of the Federal Re-
serve Board at Washington were in
Wall Street yesterday comforting with
bankers on the acute money market
situation arising out Of the huge ex-
! pansion of loans, call money rates at
| the New York Stock Exchange leaped
sensationally to 25 per cent, full 5
per cent over the previous high of the
year. thereby establishing the highest
i level since December, 1907. In October
| the rate went to 1875 per cent.
Earlier in the day outstanding call
loans, which probably aggregate at
present mere than 81 ESQ 00O, 600, had
been renewed on basis of Ia per cent,
the highest level sinle 1908. The com
bination OF a serious shortage of stocb
exchange credit, as evidenced by the
squeeze in rates, and numerous wild
and disquieting rumors regarding the
the Reserve board members, caused
heavy liquidation of speculative securi-
ties at the exchange, with resultant
sharp decline.
Seek First Hand Information
After their conference with the local
bankers at the Fedora. Reserve Bank
of New York. Governor Harding and
Mr.. Strauss stated that they had come
on here for the purpose of getting
first hai.d information on the credit
situation.
Governor Harding said there was
nothing alarming in the situation in
reply to a question as to the position
Of the local banks, and added that he
lights on the money market with a
view to reporting back to his col
leagues on the board. He asserted that
liquidation of bank loans is proceeding
satisfactorily. Asked rs to the basis
for rumor which gained wide circu-
ation yesterday that another increase
in the rediscount rates of the Federal
Reserve Bank, more drastic than the
advance Of last week, was planned, the
governor said the report was not justi-
tied. Later in the afternoon IN reply
TO inquiries respecting rumors that the
directors of the local Reserve bank
wou Increase rates at their meeting
to-day, it was stated by Mr.. Strong
governor of the local bank, that there
was no basis for any such rumor.
In discussing the purpose of the CON
ference with the bankers, Mr.. Strauss.
the other member of the Reserve
| beard said that he and Governor
Harding wanted to inform themselves
cf conditions here and 20 ascertain
| the general conditions of speculation.
Asked whether by speculation he re-
ferred to stock market speculation,
Mr. Strauss replied in the affirmative.
Wild Speculation
A banker who sat in the conference
with the Reserve Board members yes
terday declared last night that while
there has been wild speculation all
over the country in securities, cotton,
oil lands, real estate and commodities.
! the fact remained that the excesses in
the stock market had produced the
most serious effect since the sensa-
tional movements in prices of volatile
industrial stocks were kept more prom
inently in the public eye. The psy-
Geological effect of the security mar
ket specu alton, the banker said, was
extremely bad, as it tended to have q
dcmoralizing effect on the rest OF the
country and made for unrest.
Developments yesterday bore out the
contention of financial observ ss who
have been insisting for wcs6 past
that active steps were being taken TO
curb speculation in securities. While
none of the bankers who attended the
conference yesterday would say what
the result of the meeting here will be,
it was learned that on November 19
the members of the Federal Reserve
Board will meet in Washington. and
the following day the members of the
Advisory Council will also hold ses-
sion at the capital. 1t is to be ex-
pected that the general credit situa-
tion III the country will come up for
consideration at that time. and whether
any further action will be taken will
depend upon developments in the mex.
few days.
Near Lending Limit
In summing up the money market
position a banker OF high standing said
yesterday that for a long time people
have had. the impression that the re-
sources Of the Federal Reserve System
were limitless; that the member banks
could 60 on borrowing at the reserve
institutions as long as requirements
necessitated such operation In the
New York district the Federal Reserve
Bank has accommodated the market
with nearly 81 900, 100000, which has
brought the bank about to the limit
OF ltS capacity without the acquisition
Of larger gold reserves. With the
banks unable to increase their borrow
ings at the Reserve Bank further. they
must find other ways for meeting the
legitimate demands Of business, this
banker said, and the most logical step
would be to force the liquidation of
stock market loans which, by reason
Of the enormous speculation since the
beginning of the year have expanded
to more than 81 500,000,000.
The last statement of the Federal
Reserve Banks. as of November 7, in
dicates the great reduction in the re-
serve percentage of the institutions
against derosit and note liabilities In
the case Of the New York bank the re
serve percentage was down to A0.6, or
barely above the 40 per cent limit set
by law below which reserves are not
supposed to go.
Banking Position
The following table shows the rel
atve positions of the twelve member
banks in recent weeks as regards re-
serve percentage against deposit and
note liabilities:
Bank. Nov. Oct 81 Aug. c3
Per cent Per cent Per cent
New York: ....... 4o.2 Ais 62.4