CREDIT TRANSACTIONS IN SECURITIES 187 
to pay such dividends as may be declared upon stock of which 
he is short and which he has to borrow. 
The Purchaser’s Attitude.—With these preliminaries ar- 
ranged, White & Co. proceed to sell for Thompson 100 shares 
of Corn Products on the floor of the Stock Exchange to 
Brown, another broker, at 100. Brown, the buyer, does not 
know or care whether White's customer is selling outright or 
on credit. He has made an agreement on the floor of the 
Exchange to pay $10,000 for 100 shares of Corn Products. 
Unless he pays for the stock by the next day, he may be subject 
to the severe penalties imposed by the Stock Exchange when 
a broker fails to meet his obligations. Furthermore, he knows 
that White & Co. are under the same compulsion to deliver 
to him the 100 shares of Corn Products by the same time. 
Where White & Co. will get this stock is no concern of his. 
Meanwhile White & Co. have assumed the responsibility of 
delivering by 2:15 p.M. of the next day, stock which they do 
not possess. It may happen that Corn Products declines to 
95 that same day, thus permitting Thompson to buy 100 shares 
at this price and make a profit of 5 points—or $500—minus 
commissions, etc. If this is done, White & Co. can deliver 
to Brown by the next day, the stock thus purchased and so 
obviate any further difficulty in the transaction. Yet in a 
majority of cases, stock which has been sold short will not 
decline quite so conveniently. Probably, then, Thompson will 
wish to remain short of the stock for some time. 
Function of the “Loan Crowd.”—To avoid just this 
dilemma which brokerage houses would otherwise experience 
in making deliveries of stock which had been sold short by 
their customers, a system of borrowing and loaning stocks has 
developed on the floor of the Stock Exchange, which is a 
counterpart of the system also developed there for borrowing 
the “call money” with which the margin purchases of brokers’ 
“See Chapter XII. p. 312.