APPENDIX

631

for renewals and the annual average rate on new loans since 1922
as follows:

Year

[922
[023
1024
1925
(926
[927
(928
[020

CE
“aw

Pde

a ® 4 9 ® 9 8 ©

Difference
¢,

069

€

co
0n2

FL

Also, when either borrowers or lenders, or both, feel that renewal
rates do not accurately reflect the fair current price for call money,
their tendency is greater to call rather than renew, and to attempt to
make new loans later at more favorable rates. In consequence, the
volume of turnover at the money desk will increase. Yet it is significant
 that when this turnover has been proportionately greatest, it
has amounted to only a negligible fraction of total outstanding call
loans, thus indicating the high degree of recognized accuracy with
which renewal rates are made.
(XIk) The safety of stock market loans to lenders has frequently
been pointed out by leading financial authorities and students. In the
La Follette Resolution hearings (February-March, 1928), O. W. M.
Sprague, Professor of Banking and Finance in Harvard University
stated (p. 31, ef seq.) :
“There are at the present time 26,000 banks in the United States.
Five years ago there were nearly 30,000. Between 3,000 and 4,000
have failed in that period of five years. It is, therefore, I think,
pertinent to inquire whether banks have failed because of brokers’
loans, and also to inquire whether, if obstacles are placed in the way
of using funds for brokers’ loans, the number of bank failures might
be affected, either to increase or decrease them . . .
“These 26,000 banks are in the main local banks. The rates on
their local business are in general higher than the rates upon brokers’
loans . . . They invest in brokers’ loans primarily because they
do not find in the local situation a volume of satisfactory loans sufficient
 to absorb all of their funds, consistent with safety . . . that
prevails throughout virtually the entire country . . .
“During 1920 we had a period of inflation during which prices on
and and of commodities were rising rapidly, and it was practically
impossible during that period of abnormal advance in prices for banks
ro fail: but those banks which put all of their funds into a local situa-