520 
APPENDIX 
asually in accord with the prevailing local term settlement, which 
except in Berlin is for the fortnight. 
Normally, also, the European stock broker or dealer will finance 
himself from one term settlement to another by what amounts to our 
New York practice of borrowing and lending shares. This is done 
without security margins, and is therefore a prevalent source of 
danger to both borrowers and lenders. To protect the latter, however, 
such loans (called “contango loans” in England, and reports on the 
Continent) are made in the form of an allied purchase and sale. 
When a “bull” position, for example, is carried over, the borrower 
sells the security to the lender for cash and simultaneously buys it 
back from him for the fortnightly account; similarly, a “bear” posi- 
tion is carried over by the borrower buying the security for cash and 
selling 1t again for the next settlement. 
(XIb) The Bank of England has long discounted “Lombard loans,” 
as security loans are called in the London and Continental markets. It 
Is true that usually the collateral for such loans has in recent years 
been short-term Treasury notes, known as “floaters,” but no statute 
restrains the Bank from discounting loans upon other securities, and 
this has been and is done. Ordinarily the Bank keeps its rediscount 
rates above market rates to avoid inflation by subsidizing rediscount, 
and.in order to favor commercial over financial loans it keeps the 
Lombard loan rediscount rate over the rediscount rate for bills. 
In the Banque de France, a list is published of the securities 
acceptable as collateral for loans; in this list are included not only 
bonds of the French State, and of French colonies, departments and 
municipalities, but also the shares as well as the bonds of French 
railways. 
In the Reichsbank, thg Dawes Plan prohibited the discount of 
loans on German government securities for fear that it might lead to 
renewed mark inflation. However, the Reichsbank can discount loans 
on other securities, particularly perhaps the bonds of agricultural 
mortgage banks. See also the testimony of Governor Beniamin Strong 
in the “Stabilization hearings,” p. 318. . 
(XIc) When the United States entered the war in April, 1917, a 
Liberty Loan Committee of prominent New York bankers was at 
ance organized to facilitate the flotation of the inevitable U. S. Gov- 
ernment War Loans. Later, a sub-committee known as the “money 
committee” was appointed to supervise the New York money market 
during the critical period of strain caused by the Liberty Bond flota- 
tons. As stated in a subsequent report by the Federal Reserve Agent