The New York herald., 1922-05-29
$5,OO0,OOO PUBLICS
Loss in 27 FAILURES
in THECONSOLDATED.
Poorer Classes Are Heaviest
Sufferers Because of
Recent Crashes.
JAIL FOR ONE BROKER
Many Closed Offices We're
New, Using Prestige of
Organization.
BIG DISCREPANCIES Barred
One Firm Had 500 Assets,
100000 Liabilities Since
Drive Started.
BIG DISCREPANCIES Barred

Nearly $4,000, 900 of the money lost
by investors in the failures Of broker
age houses in the recent furry in the
financial district at the time of the
publication of THE New York HERALD's
series of articles on the bucket shop
evil was lost through twenty-seven
defunct houses which were members
of the Consolidated Stock Exchange.
These firms in nearly all instances
showed greater discrepancies between
assets and liabilities when their doors
We're closed than did the firms which
were not members Of the Consolidated.
The figures also show. through the
fact that in many instances the LA
bilities were not large. that the firms
connected with the Consolidated were
taking the money of the poorer class
OF investors
Saturdays papers contained the
news that a former member of the
Consolidated, Nathaniel Goldberg. had
been convicted in the Court of Cen
eral Sessions of larceny in having
persuaded q milliner to turn over to
him her life savings of $500, as col
lateral for phantom stocks. In April
OF last year, when she demanded her
money or the stocks she was sup
posed to have purchased. she received
neither and next day Goldberg failed.
The questions therefore arise: What
is the Consolidated Stock Exchange?
How does it do business? What are
<>+ ,,,I,1 What
Is the need for its existence? AS FAR
as it is possible to do so without ac-
cess to the books of the Consolidated,
THE NEW YORK HERALD purposes an
swering these questions in series OF
articles, of which this is the first.
Originally for OIL and Mining.
The Consolidated Stock Exchange
was created in 1875, not as market
in which general securities might be
bought and sold but as consolida-
ton of several smaller boards or ex-
changes doing a business in petroleum
and mining paper. The petroleum Sc
urities were then extremely active.
especially so-called certificates which
well owners received in exchange for
their product At that time many of
the prominent stock houses in the
financial district held membership.
In the course of time the petroleum
security business dwindled and the
mining department had somewhat the
better OF the situation. A stock de-
partment was added for the negotia-
ton of general stocks. but this at first
was small, inasmuch as the New York
Stock Exchange was then the only
recognized market for general stocks.
The stock department OF the Con-
solidated grew. however, and 1t became
in years the one real department of
the Consolidated. as the trading in oil
and mining stocks either dwindled or
was taken away by the curb market.
This development brought about a
condition which to-day Is the secret
of the situation In which the Consoli-
dated is placed. In the old days. as
far as petroleum and mining securities
were concerned. the Consolidated was
primary market. Trades made there
set prices for securities-original
prices. based on the law of supply and
demand and the actual giving and
taking OF securities.
Quotations thus made were quoted
elsewhere as a guide to the value in
an actual market of a given oil or
mining stock at given time. Securi-
ties were listed by the Consolidated
and thus gained a recognition or
standing they had not previously had
just as such stocks are now listed on
tLe Curb market.
Lists NO Stocks of It's own.
But with the general securities the
Consolidated never had, and has not
now, the same standing. II lists no
stocks of its own, Independent voli-
tion ii makes no quotations: II is.
Us one might say. "the handbook OF
the financial district" dependent both
for the commodities in which Il deals
and the prices at which Il holds those
goods on the actions and activities of
an organization not only entirely sepa-
rate from itself but also to a great ex-
tent in competition with II.
To put the case bluntly, the
Consolidated Stock Exchange deals
In the securities which the New
York Stock Exchange lists and deals
IN and II buys and sells those securi-
ties at the prices fixed by the trading
not on its own floor but on the floor of
the New York Stock Exchange. II is
absolutely a secondary market" II
the New York Stock Exchange went
out OF business tomorrow the Consol-
dated simply could not exist.
But as secondary market" the
Consolidated. despite Its almost de-
pcndence. holds a distinct place and.
measurably at least serves a purpose.
The unit of trading on the big