Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-10-18
GRIP OF STOCK EXCHANGE
ON CONNER OF NATION
DENOUNCED BY WILLIAMS

III making advances In rates, to In
loans mado to their own regular
customers who kept deposit accounts
with their banks and that these regu-
lar customers were treated different
Street borrowers. it is also worthy
or note that demand loans, secured
by stocks and bonds. made by banks
10 their own officers and to the oili-
GERS OF other banks are also gen.
orally exempted from the high in
tcrcSt rates.
1t is also fair to state that tho
reports In this Office show that de-
spite the huge volume of loans made
at fancy rates. less than one-RaIf OF
the national banks in New York City
reported that the demand loans made
lot their own accounts at rates OF
each bank over s10.oO0.0O0 between
october ], 1919. and July 81, 1920.
S34s,000.000 Loans on Demnnd.
In their reports to this Office OF
OF New York City reported that they
were lending on demand, on bond
and stock collateral. over $34s.OOO.-
The national banks in New York
city also reported that on August /.
1920. the amount of money which
they, were loaning on demand, on
bond and stock collateral. in New
and correspondents was 1924 900. 900
1t is fair to assume that the trust
companies and state banks In New
York City were lending on demand on
stocks and bonds as much us the ma
tional banks.
"Thc Stock Exchange authorities
state that the posting of the re
newar rate on the floor OF the Stock
sorry with the banks 10 charge such
renewal rate. Attention. however,
must be called to the fact that nearly
every national bank In New York
City has admitted that when the rate
is posted. the rates charged on 'brok-
crs' or Street loans are changed to
conform to the prevailing call money
rate and the only alternative for a
borrower is to pay his loan or be
As nearly every bank in New York
charges the so-callcd renewal rate
on what are known as Wall Street or
brokers loans. ii would he vain, oh
viousIy, for a borrower to hope to OBJ
tain the money in New York at a
lower rate by shifting his loan to
some other bank.
Despite the statement OF the banks
generally that the interest rates on
brokers loans are raised or lowered
simultaneously with the fluctuations
in the New York call money market.
many instances Of apparent discrimi-
nation were developed which show
wide differences in the rates charged
on demand loans equally well secured.
For example. when the renewal rate
for n certain day within the last
twelve months was posted, on the
Stock Exchange at l6 per cent re-
port OF one particular New York bank
showed that on. that date this bank
was charging on loans for itself and
per cent on si.90O,000.
per cent, per cent. II per cent
and Is per cent on Sl,i2S,00O.
Is per cent on S750.000:
90 per cent on :d?s,lSos,0OSSo.
20 per cent on s3.550.QOo.
80 per cent on 100000.
THE coterie of brokers who fix the
rate, which appears to have
such binding force upon the banks
in New York City In the case OF brok-
crs' loans. does not limit Its activi-
ties to leans, but these brokers also
execute orders for stocks and bonds
on the floor OF the exchange. Inquiry
of the Stock Exchange rs to the num-
Der of brokers who are usually con-
cerncd in the fixing OF the money
were. as rule, 4 to or more,
the Stick Exchange being usually re-
presented by either the president or
one or more OF it's governors, In the
Traces Rate Fluctuations.
ION November 10, year ago. this
brokers committee announced that
the renewal rate on call loans would
be IL per cent. The following day,
II. they raised ii to II per
cent. On November IS. the rate was
raised to 10 per cent; November Ia.
her 81 it was made per cent, al
though other loans were made as low
as 6 per cent. on December IS. ii
was 6 per cent; December %, 1t was
raised to 10 per cent: on the 29th, to
II per cent: on the Goth. to Is per
cent, and remained At that rate until
5, when il was lowered to
10 per cent. on January 81, the re-
day, February /. it was advanced
tc IS per cent; dropped to IA per
cent on February .; advanced to II
per cent on February .. and remain
cd at II per cent until February o.
when II was reduced 10 II per cent.
On February II. it was per cent:
raised again on February 26 to 10
per cent and continued at 10 per
cent until March 4. when it was re-
duced to o per cent. On April lG.
cent. In May the highest renewal
ratio was per cent. In June. the
rate was per cent from the 25th to
the goth. July opened with Il 10 per
during the month. hut returned again
to per cent on the 10th, 18th and
9th. IT is gratifying to note that
since the publication of the comp
trollcr's statement Of July 81, regard
ing excessive interest rates. the re-
newai rate does not appear 20 have
been advanced again as high as 10
per cent.
1T seems clear from tho figures
submitted that the amount OF de-
mand or call loans in the national
and State banks and trust compa nj g
in New York City, plus the loans
placed by them for their correspond
ent banks, which arc affected by the
rate fixed by this committee CT the
Stock Exchange. probably exceeds one
thousand million dollars. AS ] point
ed out in previous statement. on
this basis an advance in the re-
newar rate from 6 per cent to is
per cent for one day would add $500
600 to the net profits Of the lending
banks for that day. In the first part
CT January of this year, for example,
the 10 per cent renewal rate exact
cd for six successive days meant, on
this basis, net interest pront OF
about 100000 or more. for those
six days.
'"rhe raising or lowering OF the
renewal rate on the exchange Is fire.
quently accompanied by upward or
downward movements In stocks and
securities: and those responsible fer
the hNing OF the rate therefore have
the opportunity, whether exercised
or not, OF pronting largely by opera
ttons on the stock market, which is
so often and directly affected by tho
call money situation. 7 do not, 81
course. undertake. to say that this
informal money committee does take
knowledge: but there are critics who
severely censure the existing ar
engagements. Certainly all prudent
and thinklnS business men will agree