204 THE WORK OF THE STOCK EXCHANGE
ties. With call loans they can instantly retire the whole loan
at will, and with time loans this can be done if the borrower
does not in every way satisfy their collateral requirements.
In addition to these extensive powers of self-protection,
there is often a second and more or less concealed margin
provided on security loans, arising from the fact that the lender
can “mark” any collateral security at any price he wishes. If,
for example, he considers Steel too high at 160, he may refuse
:0 lend on it above a marked value of 140. This practice is
mostly employed after considerable price advances in the mar-
ket. This was very conspicuously the case in the summer of
1929 before the panic. During the crisis, however, lenders
relaxed margin requirements on loans from about 50% to
about 25%, which afforded valuable relief to the rapidly de-
clining stock market, and proved the desirability of maintain-
ing flexible margin requirements.
Lenders usually are willing to accommodate borrowers by
allowing the latter to get certificates wanted for delivery out
of their loan envelopes, provided that they “substitute” other
securities equally acceptable. While this practice considerably
complicates the work of security lenders’ offices, it is necessary
in keeping the delivery system of the whole stock market
prompt and flexible.
It may be that the plans now contemplated by the Stock
Exchange for the central Uepositing of securities and their
handling by security-checks, after the admirable German prac-
tice, may ultimately relieve New York banks of their present
irksome duties with substitutions, by having these effected in a
central security depository.
Acceptance of Collateral.—The loan envelope having been
prepared in accordance with the verbal understanding concern-
ing the loan made at the money desk, the borrower’s messenger
takes it to the office of the lender, or may send it thither
through the Stock Clearing Corporation. The lending officer
2l See Chapter XIII. p. 359.
