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.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter XI. The security collateral loan market

Collection:: Economics Books

SECURITY COLLATERAL LOAN MARKET 303 Services of the Call Loan Market in the 1919-21 Crisis.— In the critical period of 1919-21, the Stock Exchange loan market, although by legal discrimination denied the rediscount privilege at the Reserve Banks, came powerfully to the assist- ance of commercial loans, when their vaunted ability of “self- liquidation” had in practice badly broken down.?® In 1919-20 commercial bankers were able to extend fur- ther credit through commercial loans to farmers, merchants and manufacturers largely through liquidation of stock market loans, which declined from their peak of $1,518,084,000 on November 14, 1919 to $973,074,000 on October 1 5, 1920, while all loans, discounts, and investments of the Federal Re- serve member banks rose from $15,422,357,000 on the former date to a peak of $17,283,096,000 on the latter date. These figures on the accompanying chart (Figure 23) are sufficient to show that within this critical period of about a year, $545,010,000 was obtained by deflating the stock market, and loaned with $1,316,629,000 additional, for other purposes.®® Yet this is just the period when it was claimed that money was withheld from merchants, farmers, and manufacturers to lend to wicked stock market speculators! As Governor Ben- jamin Strong pointed out in the “Agricultural Inquiry” hear- ings in 1921: I wish to call the commission’s attention to the important fact . + . that the peak, in volume, of loans on the New York Stock Exchange was in the first part of November, 1919. . . . From that point it is almost a precipitate decline down to the present time, whereas the volume of all loans by all reporting banks during that period increased and did not reach their peak until October . . . of 1920, nearly a year later. If any inferences are justified . . . they would be, I think, two: one that, as is commonly regarded to be the case, financial markets anticipate movements more promptly than other markets, and, second, that the liquidation in the New York stock market started a year earlier than the liquidation throughout the country; and the effect of it was actually to release credit for purposes such as agricultural and industrial and commercial uses. | 2 See testimony of Governor Strong, Agricultural Inquiry, pp. 626-682, and also n “Stabilization” hearings, pp. 369, 438. % See Chapter 11, p. 55, and Appendix IIe.

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