Remedies and Preventives of Panic 253 
the control of a block of stock that was entirely 
undisturbed during the decline. Had there been 
more such option agreements in use and fewer 
margin accounts I feel sure that the market would 
have given a much better account of itself. 
The Appendix presents a complete copy of this 
agreement, omitting only the name of the company 
and the specific price at which the stock changed 
hands. 
In a margin account the purchaser of the security 
obtains a loan against the security as collateral, this 
loan being subject to call at any time. Theoretically 
such a loan is the safest type of loan, since the 
lender may at any time demand repayment, and, 
failing to receive it, he may sell the collateral held 
on the market. But it was found in actual practice 
during the panic that it was impossible to sell in so 
short a space of time all the collateral that stood 
behind weakened loans, therefore many lenders were 
forced to abstain from calling their loans, if only to 
protect themselves from the losses that would ensue. 
The securities behind these loans then hung over the 
market to be sold as soon as prices rose sufficiently 
to liquidate the loans. We have seen, therefore, 
that while in ordinary times the collateral loan may 
be perfectly safe, in times of stress it is not safe. 
Because of the ease with which surplus funds may 
be put into the call loan market and withdrawn when 
needed, and in view of the ordinary safety of such 
loans, they are usually made at a very low interest 
rate. We have become accustomed, due to the large