New-York tribune., 1920-02-09
H0lU Wall Street Gets
Money for Speculation
far-Reaching Change in System by Which the
Financial Needs of the Stock Market Are Met
Is Now in the Process of DEVELOPMENT

WdEN an eminent sage brightly OBJ
served for the first time a few
cons ego that money was the root OF
all evil, he gave key to understanding
the troubles Of the bulls in the stock
market during the last few days.
Money-call money at the New York
Stock Exchange and foreign money In
the exchange market-caused the much
ado in Wall Street last week. and is,
even now, uppermost in the conscious
ness of those who indulge in the bar
ter OF securities or commodities.
Money is subject Of consuming In
although some of the authorities free
ly discuss the situation for the guild
ance Of the public, others think it q
subject about which too much talk is
superfuous, and therefore refrain
from any. This article is not designed
/ to be another contribution to tho end
less debate of recent days as to whether
money will become tighter" or
"easier," but is merely an attempt to
describe for the benefit of the layman
who bears the burden how the wheels
go round in the call money market.
How Does 1t Happen?"
Call loans were made at % per cent
last Tuesday on the call money mar
ket. 10 the person who is carrying
stocks on margin this simple announce
for the current months, but just why
and how frequently elude his grasp.
How does the banker get in touch with
the broker, or how are rates for loans
determined, and when and where are
they made?
When the supply and demand of any
OBJECT OF barter approximately bal
ance free market comes into being.
But at present in the call money mar
ket the demand so far outruns the sup
ply that there is strictly "sellers'
market" The bank with monev to
lend on call for stock market uses
specifies at which rate it shall be lent,
and the borrowing brokers, mentioning
no rate, merely apply for the amount
OF money--more strictly, credit--that
they desire.
The banks and trust companies.
which are the great sources of money
On which speculation feeds, are repre-
snted on the floor of the New York
Stock Exchange by the money Crowd"
II you can call four or five men
crowd. Some of the money brokers
also deal in stocks, but S. Vernon
Mann is specifst and works only
at his money table, where the borrow
ing activities at the exchange center.
James t. Blake, representing the ex-
change, presides over the table and
keeps tabs on the sums wanted bv
brokers and offered by banks. His rec
ords make the business of lending more
systematic and more automatic, and
take much of the routine off the shoul-
ders of the so-called money crowd.
"First Come, First Served
Actual lending of money begins
about 1880 in the morning, after the
banks have heard from the Clearing
House how they stand for the day
put pefore the money market opens
brokers begin to place their requests
Tor funds with the money brokers or
Mr.. Blake, and after the banks have
communicated how much they will lend
the actual ALLEGATION of the credit is
largely question of following the old
MAXIM, First come, first served" The
requests OF the borrowers are taken -up
in the order in which thew were re-
ceived, and if, as is usually the case
these days, when the Federal Reserve
soard is directing campaign away
from overexpansion, the supply Of
money available for the day is less
than the demand, .he requests of
brokers for funds are scaled down
Usually the bank wanting to lend, say,
$1,000, 900 will direct the money broker
to distribute it in units of perhaps
100000. The banks. as a rule, prefer
TO spread their loans to various
houses, and the brokers would rather
borrow from ten banks than from one,
because the loans are subject to call
at any time, and the chances of having
the entire amount called are fewer
when the loan comes from great
many institutions.
Lending to the brokers is only one
of many activities of the banks. They
finance cotton transactions, commercial
operations, buy acceptances and stocks
and bonds for their own account, pur-
chase bills of exchange and various
other instruments of credit And after
given days work has been done the
banker compares his loans, discounts
and investments with his reserves and
determines whether ste has surplus of
money to lend or whether he needs to
pull in the reins to build up his re-
serves. Call loans in the stock market
IN normal times are the most LIQUID of
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