Evening star., 1931-12-16
WHITNEY DEFENDS
STOCK SHORT SALE
Exchange President Explains
Method of Borrowing SeCuri-
ties in Market Operations.
BY the Associated Press.

SYRACUSE, N. Y, December l6.-
Assailing the critics of short selling as
unwilling to be convinced even by the
most conclusive statistics, Richasd Whit
ney. president of the New York Stock
Exchange, yesterday renewed his defense
of short selling as an economic necessity
in free and open market.
Faced with the prospect of a con-
gressional investigation of the supposed
Vaccinations of bear raiders, the ex-
changes executive head attacked the
use of imaginative statistics and the
attempts to discredit short selling by
indirect and devious ways He ao-
dressed the Syracuse Chamber of Com
merce.
Mr.. Whitney cited statistics to show
that not short selling but LIQUIDATION
has smashed prices on the STOCK eX-
change" disclosing, for instance, that
the IS stocks with the heaviest short
interest had the most solid market and
the narrowest price fluctuations.
Short Position Declines.
On the other hand. he said, the Is
stocks with the greatest decline IN per-
centage of value have virtually no short
interest: and that of the Is with the
greatest dollar decline, only three had
considerable short interest at any time
He emphasized that the total snort
rosition has declined l850,000 shares In
The period between May Is and Novem..
hsr 40 and that of the total sales OF
264 400 900 shares in that period, gen.
erolls estimate shows only per cent aS
sold short. ,s
To say this per cent" he said,
"was the cause of the decline Is e
pffort nf the 20
19er cent which represented the sale OF
securities owned outright or on margin.
Attacking the use of imaginary ng.
,res" to support "preconcelVed IDEAS,
MFR, Whitney quoted from nnanclal
writer figures purporting to show on
a certain date Approximately 80 per
cent of the selling in North American
was for the short account, oo per ceIit
of Consolidated Gas; IS per cent OF
United Corporation; 30 per cent ot
limited States Steel, and 10 per cent OF
General Electric. Mr. Whitney found
on the contrary, that short selling IN
North American that day actually was
~ per cent: in Consolidated Gas, 10
ner cent. in United Corporation. "a
I,er cent: in United States Steel, "a
f,er cent: in General Electric, II per
cent.
single stock at any time, Salo MI
Whitney. was 406000 in General MO-
tors. This figure may seem very ialge;
hut YOU must remember that General
Motors has 43,500,000 shares OF COM
mon stock and therefore the short in
terest was actually less than per cent
of the total capital Of the company.
Borrowing of Stocks.
Mr.. Whitney defended the lending OF
stocks on the ground that 1t Is as legltl-
mate to pledge money for collateral as
cHIlateral for money He stressed the
erparent lack of information OF many
people that a borrower of stocks must
put up money for stocks and that the
s'interest" paid on the stock loan often
runs higher than interest on borrowed
suppose" he said, you were bor-
rowing 100 shares of stock which was
selling at rs; you would have to deposit
with the lender $500. If the premium
on this stock was quoted at one-slX-
teenth and you continue this loan Tor
80 days you would have to pay pre-
MUM of S187.50. This Is equivalent to
80 per cent per anum on the money
value of the stock which you borrowed y
Mr.. Whitney held that increasing
premiums will curb the short interest
when it becomes excessive, just as hlgh
interest rates curb money borrowing for
margin speculation. He explained also
that a broker may not lend stock with
out customers permission.
IF a market place for securities is to
function in the economic order OF
things" Mr.. Whitney concluded. 'it
must fairly and honestly permit the
forces of supply and demand to deter
mine prices.
In so far as the exchange is con-
cerned. the defense of short selling is
not a matter Of opinion, it is matter
pf pripcipln"