APPENDIX 
602 
After the war, the first money shortage since the foundation of 
the Federal Reserve system occurred in 1919-20, due to congestion 
of unsold Liberty Bonds in the banks and enormous mercantile and 
manufacturers’ loans employed to carry huge inventories at high 
prices. The stock market broke in November, 1919, when even 32% 
was charged on a few call loans. During subsequent months, call 
money renewed at rates from 109, to even 15%. 
During 1928-29 the mounting totals of loans on securities, together 
with the restrictive credit policies of the Federal Reserve system, led 
to very high call loan rates. But there was not an actual shortage 
of credit, owing to the great unused potentialties for expanding credit 
still possessed by the Reserve system, as indicated by its high reserve 
ratios. Actually, the 1929 panic broke out when call money had become 
relatively easy, and during the panic no credit shortage was felt. After 
the panic, credit at once became extraordinarily easy and interest rates 
fell to the lowest levels in years. 
(VIId) Corners, like money shortages, are relative rather than 
absolute, and sometimes it is difficult to state just where they begin. 
Most corners are really accidental in origin. If each Stock Exchange 
commission office (including branches) should at one time sell only 
too shares of a certain stock short, a total “short interest” of about 
1,200,000 shares could thus be created. This imaginary situation also 
leaves out of all account the large number of non-member firms who 
are correspondents of Stock Exchange houses. If only 1,000,000 
shares of the stock were outstanding or available for delivery on the 
Exchange, a technical corner would thus be created without any 
anticipation of it by anyone. This is the reason why very large issues 
of stock are more immune from corners than small issues. 
The test of a corner on the Exchange is whether the given stock 
can be freely borrowed. If so, the free and open market has not been 
destroyed. The Business Conduct Committee may investigate the 
case, by calling on Exchange members to report to it at once their 
several positions and commitments in the issue. If no one is attempt- 
ing unfairly to exploit the situation to his own advantage, the stock 
will not be stricken from the list and the situation will as a rule soon 
right itself by the ordinary course of market purchases and sales. As 
a general thing, company officials have no desire to see their stock 
cornered, even if they are nettled by previous price declines due to 
short sales, and almost always they cooperate fully with the Stock 
Exchange in maintaining a free market for their issues. 
Occasionally, however, either persons connected with the manage- 
ment of a company or operators entirely outside its management may