The Birmingham age-herald., 1920-10-18
WILLIAMS bLAMES HIGH INTEREST FOR
 VALUE SHR|NKAGE
Says Small Group Fixes Rates Governing Interest Charged Brokers In Nearly All
 New York Banks
By Associated Press

Washington, October 174-unju stifia able interest asked on demand loans by New York city banks has been au active con- tributing cause of the huge shrinkage of all security values during the past year, declared tonight in formal statement. He charged that call money rates in New York were the highest in tho world. and rates fixed daily by small group Of stock brokers governed the in. terest charged on brokers loans in near iy New York banks
 'I,e raising or lowering of the re uewal" rates on the exchange" said Mir Williams, "is frequently accompanied by upward or downward movement in stocks and securities; those responsible for the fixing of the rate. therefore, have an opportunity. whether exercised or not. of profitting largely by operations on the stock market. which is so often and directly affected by the call money situation. I do not, of course, undertake to say that this formal money commit tee does take improper advantage of their fore knowledge. but there are crit its WHO StVtfely ccISuIt tHe tAlSLiIiS arrangements.
 GRIP ON COMMERCE
 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. It permits such interferences as fallibie human Judgment. whin of interest may direct the natural and orderly movements of money, the life blood of business. The matter of arbitrary fixing of money rates at the money center, possibly re- versing the natural and healthy flow and affecting. directly or indirectly. bil- lions of dollars of security values and other property. is left to a. small and varying number Of private citizens with, out official responsibility. deciding in ! and in secret.
 "rhe evils of such could be recited The reach to the remotest cc community of the union and the tendency Is to reverse one of the Fundamental pur- poses of the federal treasury act. which is 10 promote orderly distribution of money through the country 10 meet the reeds of commerce and agrieulture.
 Excessive interest rates offered in New yorp. artficially draft out of the coun- try through their banks and legitimate l ere rprises starved while feeding specu- 'rtive movement which may be adding l nothing to real industrial or commercial 1 wealth.
 DEPRESS BOND PRICES
 CT reiterated the statement previously made that the excessive rates on call 1 money arbitrarily fixed and tolerated in | New York. Tn my opinion. have been a | potent influence in depressing seriously l Inc prices of all investment bonds and 1 standard shares. the shrinkage in which | he past twelve months has amounted | the depression in Liberty | bonds, several billion dollars.
 MT. Williams declared that although l he renewal rate fixed by the rate con1- | nttee was not regarded aG compulsory | by the stock exchange authorizes. It | was admitted by practically | every bank that it's rate on call loans vas changed to conform with the posted ! ate. As q result, Mr. Williams said. ,t would be vain obviously for a borrower .o hope to obtain money in New York It lower rate by shifting his loan to tome other bank.
 The statement of the New York banks hat all broker loans were raised or low ,red simultaneously did not bear up un- Ter his investigation. Mir. Williams as | ihowed apparent discrimination on 1, oans equally well secured and for simi- ar purposes.
 Concerning the "coterie7 of brokers i sbich fix the call interest rate. Mr. williams said that inquiry disclosed 1t Isnaily consisted of -four to eight or nore and that the stock exchange | sualy was represented by "the prcsi- lent or one or more of it's governors.
 The fluctua tions of the ''posted'' inter- | st rate on brokers loans had ranged | rom to r per cent between Novem- ,er 10, i9is and July i7, last. On July l he recalled he had issued statement Lssailing the high rate and declared Una: ince that date the posted rate had moi | ,xceeded 10 per cent.
 Tt is no part of the functioning of gov .rnment officials to moralize on specl- ative operations" Mir. Williams sad. .My attention is dema nded when sueh operations produce conditions retarding he development of the country and en- lingering the stability of it's business individuals and investors generally are drawn away from iegi'i-
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