New-York tribune., 1919-12-05
psnl Nj. Warburg Asserts
Present System Places
the New York Board in
an Unsound Condition
Acceptance Council Acts
Exchange Official Says New
Method Could Not Be Used
With Existing Facilities

y
asy urged the abolition OF the present
srstem of daily settlements on the New
York Stock Exchange and the sabstitu-
i;on Of weekly or fortnightly settle
ments. The former vice governor OF
tho FEDERAL Reserve Board asserted
that the present procedure places the
.rchang in an "unsaund condition" and
nreyents the country from enjoying "a
cempiete ard perfect banking system"
After Mr. Warburg had explained
that the second part of the program
II establishing "a system of centralized
-ese-ve banking predicated upon re-
liable discount system" had not yet
been accon plished, members present at
the first annual meeting of the Accept
au:e Council in the Woo.worth Build
ing unanim ously voted to appoint a
committee to take steps that would
facilitate the reform.
Under the term settlement system
brokers would make deliveries of stock
TO one another every two weeks. or
other peri'ds agreed upon. instead of
the day after he sale. as at present.
Under the fortn ~htly settlement 1t has
teen estimated that three times the
volume of deliveries would have to be
made but not more. because of the
greater number Of offsets over the
(on~er reriod The system. of trading
4 ~
based on credit instead of cash, as at
present.
New Facilities Expccted
In behalf OF the Stock Exchange
Samuel F STREET, chairman of the
Clearing House Committee replied
tha. however desirable or undesirable
the innovation might be in theory.
facilities were rot yet adeqra,e tor
institutirg the change He called at
tert;on t1 the fact that TIE new hyTi-
cal ecu m ent which W ud be used for
clearing balances and loans O. brokers,
in add ton to the existing machinery
for clearing stocks, would be ready by
Exchanre program viii be introduced
gradually he sad and it will take
several months be ORE the exchange
officials will lnow whether he new
machinery win be abe to meet the de-
mards of n system # term settlements.
such as the l. andon Stock Exchange
and the continental hourscs use.
"I want to cMDhas re very trongly,"
said NJ. strcit "thst if to day The New
York Sock Exc Nanre approved IF and
desired 20 :. q p a term Element 1t
would be .mpos sible and i'm racticab e
until our rlesent plan has worked out
success 'u'ly."
ance G uncii which is supp rted finan-
cialy b. the leading icndNrs f call
morey, inl c.fcl t'at they hooed to
get ac.ion and id ~ot want.to get lost
in intermiaabe survey and investi-
cations
Wou'd { ehew Delay
D. J T Ma " 3rth. vicc- pres dent
Of tie Bank Of Pittsburgh wa par
ricularly ins stent III unnecessary de-
Law eA1uld be avo ided and TO accom-
plish his purpose ntr rduced an amend
ment to tie res o'ution o. the council
which au hoYzed the new commi tee
ito take such teps as may seem ad
eisab.e in the case" This was
adopted
Before amended the resolution read:
Resolved That the chairman Of the
executive committee be auth r'2cd TO
arport a committee consisting OF
members of the executive counci and
other individual 9 to study the advIsa-
o'lity Of and ways or means of modi-
tying the present sv~'em of settle
and substituting therefor some system
Of periodical settlement"
After POINTING out that the develop
nent Of acceptances in this country
vas disapnointi1" because Of the prev
aence o. treasury cert ficates of in
debtednos~ and of the call loan market,
Mr.. Warburr sac that the certificates
would SION be retired and then gave
MS remedy for removing the other
hurdle
"As long as this system continues
ne sad. "as org as the banks all over
the country DUMP their idle funds upon
Ee Sock Exchange. treat ng these
Stock Excl anre loans and New York
na snces invested therein as their
quickest end most important secondary
reserve, just so long IS tie Stock Ex-
Grange in an uns0urd condition and
lust so long will it be impossible to
secure for our country the benefits
OF wide discount market and effective
bank rates.
The Bar to Perfection
"As long as the Stock Exc ange call
loans retain their prominence as
secondary reserves Of too many banks
and as ong as Stock Exchange de-
nands fix the call loan rate in the
argest money center of the world.
we shall not enjoy a complete and
perfect banking system. Nobody will
deny that for machine moving as
last and involving as gigantic trans
aefiens as the New York Stock Ex-
change a change of system is most
dlMcu't task 1t is obvious that il
should be undertaken only with the
Greatest possible precautions.
But the difficulty should not scare
into inactivity and indefinitely de-
lssy when we know that eventually the
;nahee has get to be made. When
arastic banking reforms were first
lreed III" most prominent bankers
we're cprosed to them for the reas On
mat they were prospering under the old
system and because they said il
seu'd be impossible and dangerous
y . tinker with sc immense and at
Was time. so delicate structure.
Sone the less. the system was re-
modelled without any seri us disturb
sace and those were proved to have
seen right who predicted TO prosper
~, sss bankers that if they could pro sper
ssah an unsafe system they wou d
certain to enjoy an even greater
system. 0"''"'"s
All present our gold position IS
~" protected by a trede balance so
la,nnwnelmingly in cur favor. In the
aos run however our country will
~ oe abe safely to accompl;sh its