Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-10-18
Controller Williams Charges
Shrinkage of Billions to
Coterie of Bankers.

banks has been an active contributing
cause of the huge shrinkage" in all
security values during the past year.
Mr.. Williams declared. 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-
est charged on brokers' loans in
nearly all New York banks"
| 1.-The raising or lowering of the
renewal rates on the exchange, SAID
Mr.. Williams. "is frequently accom-
panied by upward or downward move
ments in stocks and securities. and
those responsible for the fixing of the
| rate therefore have the opportunity,
whether exercised or not. of prof1ting
| largely by operations on the stock
market. which is so often and directly
| affected by the call money situation.
| L do not. of course. undertake to say
| that, this formal money committee
does take improper advantage OF their
| fore-knowledge: but there are critics
who severely cenSure the existing
arrangements.
| Discusses Rate Fixing.
! Power to fix money rates for all or
| nearly all of the banks in New York
city. and to change them daily. is
| grip on the heart Of our commerce.
/ 1t permits such interferences as fall
! lible human judgment. whim or in
| terest may direct with the natural
! and orderly movements of money. the
I life blood of business. The matter of
arbitrary fixing of money rates at the
| money centers. possibly reversing the
| natural and healthy flow. and effect
ing. directly or indirectly. billions of
property. is left to small and vary
! ing number of private citizens with
out official responsibility, deciding in
! a moment and in secret.
| 1.-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.
| II reiterate the statement previously
made that the excessive rates on call
| money. arbitrarily fixed and tolerated
J been a potent influence in depressing
seriously the prices of all investment
bonds and standard shares, the shrink
age in which in the past twelve months
has amounted. including the depre-
citation in liberty bonds. to several
Charges determination.
The Statements of the New York
banks that all broker loans were
raised or lowered simultaneously did
not bear up under his Investigations.
Mr.. Williams asserted. He cited
records which. he said. showed ZAP
parent discrimination" on loans
equally well secured and for similar
1 purposes.
''For example" he continued. when
the renewal rate for a: certain day
within the last twelve months was
1rt1 IL, CfO IL OA
per cent. the report of one particular
New York bank showed that on that
date this bank was charging on
loans for itself and it's correspondents,
II per cent on s4;soo,oo0; 8. II and
Is per cent on s1,42S.oOo: IS per cent
on $4,000: 20 per cent on $42,-
100. 900, 25 per cent on s3,550.O00 and
so per cent on 100000"
I Concerning the "coterie'' of bank
ers which fix the call interest rate.
Mr.. Williams said that inquiry dis
closed it usually consisted of Il
to or more and that the stock
exchange usually was represented by
"the president or one or more of
tions Of the posted" interest rate
on brokers' loans had ranged from
Is to II per cent between November
10. 1919. and July Il. last. On July
81. he recalled, he had issued a state
ment assailing the high rates. and
declared that since that date the
posted" rate had not exceeded 10
per cent.
Eject Of Rates Stated.
The effect of these rates is seen
when the general managers or execu-
tives of railroads or other large cor
porations visit New York to raise
money necessary for the redemption
of retiring loans or for the extension
! and promotion of new business. The
bankers and bond houses solemniy
point to the high rates paid for call
money" and corporations whose credit
abundantly justified a ) per cent or
6 per cent interest basis, have been
forced to pay per cent or per cent
or 10 per cent on loans for one year,
three years or Ave to ten years. and
are sometimes persuaded by the
bankers through whom they OBJ
tain the funds that they are doing
we'll to get money even on such
terms, because money on call has
been advanced often artifcially to II
per cent or Is per cent or 20 per
cent for few days at time.
The same cause that cripples and
hampers great railroad system or a
municipal government also deprives
and injuries or ruins a country store
keeper. small farmer or the owner
of a large or little manufacturing en-
terprise.
The high rates for call money in
New York have thus shut Off large
part of the investment demand for
securities. which. during the past
twelve months. largely because of
these disturbing conditions, have
been forced down to the lowest prices
reached in forty years.
1T is my belief that if the call
money rates in New York had been
mainta ined at S per cent or at the
maximum rates which are charged
in other money centers. as ! believe
could have been done with reason
able degree of cooperation upon the
part Of the New York banks. the un-
precedented shrinkage in security
prices in the past twelve months
would not have taken place and the
apparent loss of billions of dollars
in values would have been avoided
"swOrn Reports" Quoted.
Sworn reports to his Office. Mr. Will
Hams said however that more than
900 loans had been made by the
New York banks between October I.
1919. and August I. 1920. at rates
of IL. 90. % and 80 per cent" In
three of the largest banks loans
made at those rates and between
those dates aggregated more than
$500. 000 900. he said. The figures. he
added, represent only the loans made
II by the banks for their own account.
and not for their correspondent banks.
The records also show" Mr.. Will
liams declared. that the total loans
outstanding. upon which interest at
| by a portion of these banks on forty
TWO different days, for which reports
were received from them, aggregated
over 81 100 900 900