306 THE WORK OF THE STOCK EXCHANGE
from individual or corporate thrift rather than from banking
operations, and only to a partial extent can banks control its
flow, increase or decline. Credit, which represents a temporary
substitute for wealth, is created mainly by banks and can there-
fore be controlled and reduced by them. Both capital and
credit naturally flow into the surplus capital market for security
loans to the extent that they are not needed elsewhere for
commercial loans and the like, and the more abundant they
are, naturally the greater security loans tend to become. The
limits upon credit expansion naturally consist in banking sol-
vency and the maintenance of the gold standard. The chief
limits to the creation of capital are the earning power and
thrift of the nation, rather than any mechanical feature of our
banking or currency system.
In respect to the demand or security side of the question,
security loans tend to increase as the amounts of new security
flotations become larger, as old securities become more nego-
tiable through listing on a stock exchange, as wealth itself
tends to become more negotiable by being expressed in the
form of securities, as securities rise in price and thus require
more funds to carry the same number of bonds or shares in
the floating supply, and as resales of securities from investors
back to market traders tend to increase the proportion of
outstanding securities carried in the market floating supply.
“Brokers’ Loans,” 1926-29.—Borrowings of New York
Stock Exchange members increased from $3,513,174,154 on
February 1, 1926 (when the Exchange began to collect and
publish these statistics) to a “peak” of $8,549,383,979 on
October 1, 1929, and thereafter declined to $3,084,768,065
on February 1, 1930. This expansion during 1926-29 gave
rise to a controversy concerning ‘brokers’ loans” of almost
national scope, which at this writing has not altogether sub-
sided. During this period the demand for the loans arose
principally from rising share prices, large flotations of new
securities. expansion of listings on the New York Stock Ex-
