Great Falls daily tribune. [volume] (Great Falls, Mont.) 1895-1921, 1920-10-18
John Shelton Williams,
Currency Comptroller,
Condemns Methods Of
New York Bankers.
Responsible for Shrink
age of Billions in Values
of Investment Bonds,
He Claims.

Washington. Oct "Unjustifiable
interest exacted on demand loans by
New York City banks has been an active
contributing cause of the huge shrink
age" in all security values during the
past year. John Shelton Williams, comp
night. He charged that call money rates
in New York were the highest in the
world and that renewal rates fixed
daily by small ''coterie' of stock ex-
change brokers governed the interest
charged on brokers' loans in nearly all
New York banks"
THE raising or lowering Of the re
newar rate on the exchange" said Mr..
Williams, is frequently accompanied by
upward or downward movements in
stocks and securities, and those respon-
sible for the fixing Of the rate. there
fore have the opportunity. whether ex-
ercised Or not, of profiting largely by
operations on the stock market. which
is 50 often and directly affected by the
call money situation. | do not of course,
undertake to say that this informal
money committee does take improper
advantage of their foreknowledge, but
there are critics who severely censure
the existing arrangements.
Danger in Method
Certainly all prudent and thinking
business men will agree that there is
danger in the concentration of such op-
portunity and power in the hands of
few persons. Temptation to use this
power for individual profit must arise
and human nature is not changed by high
position in the financial world
Power to fix money rates for all, or
nearly all of the banks in New York
City and to change them daily is a grip
on the heart of our commerce. It per-
mits such interferences as falible Eu-
man Judgment. whin1 or interest may di-
rect with the natural and orderly move
ments of money. the life-blood of bust
ness. The matter of arbitrarily fixing
money rates at the money center, possi-
bly, reversing the natural and healthy
flow and affecting. directly or indirectly.
billions of dollars of security values ard
other property, is left to a small and
varying number of private citizens with
out official responsibility, deciding in
moment and in secret.
Harmful to Nation
''The evils and dangers of such meth
DDS could be recited indefinitely. they
reach to the remotest corners of the
union and its possessions and touch
harmfully every class of people. The di-
rect tendency is to reverse one of the
serve act, which is to promote orderly
distribution of money through the cotlu-
try to meet the needs of commerce and
agriculture. Excessive interest rates
offered in New York artificially draw
money away from OUTSIDE communities
through their banks and often leave le-
gltimate enterprises starved ar pinched
while feeding speculative movements
which may be adding nothing to real
industrial or commercial wealth
II reiterate that egcessiYe rates on
call money, arbitrarily fixed and toIerat-
ed in New York, in my opinion, have
been potent influence in depressing
seriously the prices of all investment
bonds, has amounted, including the de-
probation in liberty bonds, to several
billion dollars
Mr.. Williams declared that although
the renewal rate fixed BY the rate com
mittee was regarded as compulsory by
the stock exchange authorities. it never
theless was admitted by practically every
bank that its rate on call loans was
changed to conform with the posted rate
As result, Mr.. Williams said. 1T would
be vain obviously for borrower to hcDe
to obtain money in New York at lower
rate by shifting his loan to some other
bank
The statement Of the New York banks
IHab all bTDheI lodHS we're TdlSeu or low
cred simultaneously did not bear up un-
der his investigation, Mr.. Williams as
serted. He cited records which he said
showed apparent discrimination" on
loans equally well secured and for sim
far purposes.
For example, he continued, when
the renewa lrate for certain day within |
the last l. months was posted on the |
stock exchange at 16 per cent. the report |
of one particular New York bank showed |
that on that date this bank was charging |
on loans for itself and its correspondents !
Z per cent on S4,9O0,0O0; 8, 8 IA and Is |
per cent on $1,42S 900; IS per cent on |
$3.50, 200; 20 per cent on $40. 100000: %
per cent on $3,550.000 and 80 per cent |
on 100000"
Four to Eight Men Fix 1t.
Concerning the ''coterie'' of brokers /
which fix the call interest rate Mr. Viii I
liams said that inquiry disclosed it usual |
ly consisted of -four to eight or more
men" and that the stock exchange usually
<Continued Page Two,