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 assistance
 of commercial loans, when their vaunted ability of “selfliquidation”
 had in practice badly broken down.?®
In 1919-20 commercial bankers were able to extend further
 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 Reserve
 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 Benjamin
 Strong pointed out in the “Agricultural Inquiry” hearings
 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.