The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1920-10-18
New YOrkCall Money
Rates HiGheStknOwn
Comptroller of Currency Assails
Methods of Few Controlling
Bankers.
ALL SECURITIES AFFECTED
Ultimate Purposes of Federal
Reserve Act Are Reversed
BY High Interest.
cay Associated Prsss.)


Washington, Oct. tT.-Unjustiflable
interest exacted on demand loans" by
New York City banks has been an ac-
tive contributing cause of the huge
shrinkage in all security values dur
ing the past year, Comptroller of the
Currency Williams declared tonight In
q formal statement He charged that
call money rates in New York were
the highest in the world and that '.re-
newal rates fixed daily by small CO.
terie Of stock exchange brokers gov
erned ths interest charged on brokers'
loans In nearly all New York banks" !"
The raising or lowering of the re-
nevRal' rate on the exchange said Mr..
Williams, lis frequently accompanied
by upward or downward movements in
stocks and securities; and those re-
sponsible for the fixing Of the rate
have the opportunity whether exercis-
ed or not. of profiting largely by oper-
atfong on the stock market which is
so often and directly affected by the
Ioall money situation. l do not. of
course, undertake to say that this for
NAL money committee does take i'm
proper advantage of their foreknowl-
edge; but there are critics who severe
lly censor the existing arrangements.
Certainly all prudent and thinking
business man will agree that there is
danger In the concentration of such
opportunity and power in the hands
OF few persons. Temptations to
use this power for individual profit
must arise and human nature is not
changed by high position in the finan-
cial worsd.
~Povsar 60 fix money rates for all or
nearly all Of the banks IN New York
7 City ana 10 change them daily is a
grip on the heart of our commerce.
| 1t permits such interferences as in
fallible human judgement, whim or
interest may direct with the natural
and orderly movements OF money, the
life blood of business. The matter OF
arbitrary fixing money rates at the
money center, possibly reversing the
natural and healthy now and effecting,
directly or indirectly. billions OF dol
lars Of security values and other prop
erty. Is left to a small and varying
number OF private citizens without Of
fcial responsibility deciding in mo-
ment and in secret.
The evils and dangers OF such
methods could be recited indefinitely
They reach TO the remotest corners OF
the Union and its possessions and
touch harmfully every class OF people,
The direct tendency is to reverse one
Of the fundamental purposes OF the
federal reserve act, which Is TO pro-
mote orderly distribution of money
through the country to meet the
needs of commerce and agriculture.
Excessive interest rates offered in New
York artiflcially draw money away
from outside communities through
their banks aald often leave legitimate
enterprises starved or pinched while
feeding speculative movements which
may be adding nothing to real indus
trial or commercial wealth.
II reiterate the statement previously
made that the excessive rates on call
money, arbitrarily fixed and tolerated
in New York, in my opinion. have
been a potent influence in depressing
seriously the prices of all investment
horss and standard shares. the shrink
age which in in the past IL months has
amounted, including the depreciation
in Liberty bonds, to several billion
dollars
Mr.. Williams declared that although
the renewal rate fixed by the rate
committee was not regarded as com-
pulsory by the stock exchange au-
thorities. it nevertheless was admit
ted by practically every bank that its
rate on call loans was changed to con-
form with the posted rate. As re-
suit, Mr.. Williams said. 1T would be
vain obviously for borrower to hope
to obtain money in New York at a
lower rate by shifting his loan to some,
other bank"
The statement of the New York
banks that all broker loans were raised
or lowered simultaneously did not bear
up under his investigation. Mr.. VIII
liams asserted. He cited records which
he said showed apparent discrimiIa-
tion" on loans equally we'll secured
and for similar purposes.
Concerning the 'coterie" Of brokers
which fix the call interest rate. Mr..
Williams said that inquiry disclosed
it usually consisted of -four to eight
or mores and that the stock exchange
usually was represented by ethe presi-
dent or one or more Of its governors
He said the fluctuations of the posted
interest rate on brokers loans had
ranged from eight AZ percent between
November 10, 1919. ad July II. last.
on July 81. he recalled. he had issued
. statement assailing the high rates
and declared that since that date the