300 THE WORK OF THE STOCK EXCHANGE
but inevitably necessary in any country whose government or
whose business companies depend on security issuance and
distribution. Without the wisely provided facilities for carry-
ing Liberty bonds in collateral loans (which incidentally proved
highly speculative to millions of holders, and yet which were
rediscountable at the Reserve banks), those enormous war
issues could not have been effectively distributed.
Thus the economic services of security call loans might be
briefly summarized as providing lenders with safe, liquid and
flexible investments and thereby minimizing commodity or land
inflation, and borrowers with funds which, while immediately
used in security speculation and investment, ultimately facili-
tate the security distribution necessary to mass production, low
manufacturing costs, high wages and high average standards
of living in this countrv.?®
Preference for Commercial Loans.—In modern banking
practice, preference is always accorded to commercial over
security loans.?” This is due in part to the fact that when the
tenets of modern commercial banking were formulated in Eng-
land in the beginning of the nineteenth century, the wholesale
merchant was the great outstanding figure in business, and tne
wholesale manufacturer who needed to obtain elaborate pro-
ductive equipment by the sale of company securities had not
yet appeared. But, although this condition has since been
reversed, there is still sound reason for granting preference to
genuine commercial loans over security loans. For the general
function of commercial loans proper is to enable foodstuffs
and merchandise to be freely and readily transported and dis-
tributed from producer to consumer. This process is of course
absolutely necessary not only to modern trade but even in part
to an ability on the part of our population to exist. To take
an extreme case, many mouths in Wall Street would soon go
hungry if the transport of foodstuffs into New York City
could not be readily financed.
2 Appendix XII.
27 See Appendix Xe.
