SECURITY COLLATERAL LOAN MARKET 297
After the renewal rate has been posted near the money
desk, the rate for new call loans may fluctuate upward or
downward in accordance with subsequent conditions of supply
and demand. Some days no fluctuation at all occurs, while on
others the fluctuations may be great. In any case, the first cur-
rent rate of the day is posted near the money desk beside the
renewal rate, and as changes in the former occur, the latest
current rate is at once posted. As long as rediscounting of
security collateral loans at the Federal Reserve Bank is for-
bidden, comparatively violent fluctuations in their rates are
bound occasionally to recur.
Are Call Loans Safe?—It has long been recognized by
practical American bankers that call loans on listed security
collateral constitute the safest and most available form of
short-term loan in this country.?* For this safety there are
many good and sufficient reasons. Their collateral can speedily
be sold on the Stock Exchange, and Exchange quotations are
speedily made available to lenders by the ticker. The loans
bear an ample margin of collateral value in excess of the
amount loaned upon them, and sometimes an additional con-
cealed margin in the form of collateral issues marked by the
lender below current prices. The lender can demand more or
better collateral, re-mark the prices of collateral, or call the
whole loan, at once. In addition, call loans are contracted in
the name of Stock Exchange firms whose credit, in many cases,
would be ample for unsecured banking accommodation. Every
such Stock Exchange borrowing firm is sub ject to the discipli-
nary rules of the Exchange, which forbid reckless and unsound
dealings, to the inspection of its financial condition by the
“questionnaire system,” and by many effective indirect methods
of financial survey. Finally, each Stock Exchange firm must
possess at least one Stock Exchange “seat” which is unmort-
gaged and available for creditors in case of suspension for
“See Appendix XIk.
