550

APPENDIX

concerted action. The whole movement, which has undoubtedly accomplished
 valuable results already, owes much to Mr. Simmons, who
not only initiated it but who has subsequently made addresses in many
parts of the United States and abroad in connection with it.
(IVb) It must be realized that the American security underwriting
and flotation business has grown up under sometimes unique economic
and legal conditions, and that in method and organization it differs
considerably from the practices of foreign financial centers. In London,
for example, underwriting and issuing securities are looked upon as
distinctly separate operations, and frequently a new flotation will be
underwritten by one firm or group and issued by another. In America,
it is almost always the same firm or syndicate which underwrites and
issues. Also, the practice of issuing to secondary “subsyndicates” is
largely peculiar to this country.
In general, European underwriting and issuing technique evolved
during the last century when the leading European countries were
creditor nations. Our business, however, was inevitably influenced
by the fact that through the same formative period the United States
was a debtor nation, where capital was almost regularly more scarce
than legitimate domestic securities. Thus, the emphasis abroad was
upon obtaining new securities to issue, while with us it was upon
obtaining capital. This is perhaps the basic reason why direct security
selling by bond-salesmen has always been a unique American practice.
It is interesting to conjecture just what differences to our underwriting
 and issuing practice our present status as a creditor nation
is likely to produce. It may be that more and more the United States
will have to adapt its practice to the condition of a regular surplus
of capital. The description of American security underwriting and
issuing methods in this chapter must therefore be considered as traditional
 but not necessarily immutable, and notably different from
orthodox European methods.
(IVc) The origin of the New York Curb Market is obscure, but
it first attained permanent size and significance during Civil War
times. For many years it used to meet in the middle of Broad Street
a little south of Exchange Place. Being an open-air market, it lacked
administrative discipline, dependable quotations, or limitations as to
the character either of its members or of the securities in’ which it
dealt. Although basically a useful market, it gained a general reputation
 of “caveat emptor.”
In 1921 the leading firms with representatives on the Curb organized
 an association modeled in general after that of the New York