252 The Stock Market Crash—And After 
showed their worth during the last half of 1929, 
since there was no stoppage in the even flow of goods 
due to excessive inventories. 
Those who hope for like salutary changes flowing 
from the present situation hold that the stock market 
panic of 1929 was brought about by the system of 
collateral loans that is now being used. There was 
overspeculation and overextension of marginal ac- 
counts. There should have been a restriction in the 
price level of securities to, say, 10 or 15 per cent 
below the peak of September, 1929; but when the 
market began automatically to make this correction, 
it caused forced selling from the weakest marginal 
accounts. This selling brought prices lower, again 
making necessary additional selling by the next 
weaker accounts. At the same time the lowering of 
security prices reduced the purchasing power of those 
who wanted to buy, and a panic ensued. 
If, therefore, we wish to avoid panics of this par- 
ticular type in future, it would seem necessary that a 
new method of financing purchases of securities be 
devised, and that such new method be substituted, at 
least in part, for the present system of margins. 
4 Method That Has Worked 
Over a year ago I wished to purchase a block 
of common stock in one of the companies in 
which I was interested, but realizing the danger of 
carrying this stock in a margin account I cast about 
for a better method. The result of this study was 
an option agreement, by means of which I secured