The work of the Stock Exchange

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Monograph

Identifikator:: 1831284952

URN:: urn:nbn:de:zbw-retromon-225876

Document type:: Monograph

Author:: Meeker, James Edward http://d-nb.info/gnd/126597340

Title:: The work of the Stock Exchange

Edition:: Revised edition

Place of publication:: New York

Publisher:: The Ronald Press Company

Year of publication:: [1930]

Scope:: XVI, 720 Seiten; Illustrationen, Diagramme

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter XI. The security collateral loan market

Collection:: Economics Books

302 THE WORK OF THE STOCK EXCHANGE there by merchants, farmers, and others, it is well to remember that: (1) usually call loan rates rule below local interior in- terest rates on bankers’ advances, and thus provide no incentive for diverting funds to New York; (2) local interior bankers are guided by self-interest to lend their funds locally rather than on call in New York, since the former loans create de- posits, and thus increase the local bank’s size and income and also build up the local community and turn fresh loans and deposits into the local bank, while New York call loans possess none of these advantages to the local lender; (3) such call loans as local interior banks make are therefore due to the need of placing a certain amount of the bank’s funds in unques- tionably safe and liquid investments, under penalty of the suspension or insolvency of the bank itself; and (4) the exten- sive insolvencies of local American banks during recent years go to show that many such institutions have, for the good of their own communities no less than their own, loaned too little rather than too much of their funds in the New York call loan market.?® In recent years there has been a noticeable tendency for companies to provide themselves with working capital by issu- ing new stocks or bonds rather than making short-term com- mercial loans at the banks. Such new issues as a rule cannot be immediately and completely sold to outright investors, and the amount remaining ovér and .above investment purchases must be carried in the market floating supply by security loans for which they serve as collateral. The practical effect in banking of this marked tendency is, that security loans are now largely resorted to instead of commercial loans to furnish not only fixed but also working capital to our corporations. As company mergers and consolidations proceed, and as our companies themselves continue to prosper, this trend away from commercial to security loans has constantly become more pronounced, and ultimately it may revolutionize the basic methods and technique of American commercial banking. 8 See Appendix XIk.

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