The New York Stock Exchange in the Crisis of 1914

lected the President of the Exchange as their Chairman. The acute crisis was over, the danger of a catacly

the limited machinery of the old Board of Brokers, a continuous market developed partly in the street and partly in a basement room called the "Coal Hole" and flourished during the day, while in the evening it was continued in the lobby of the Fifth Avenue Hotel. This market did more business than was done upon the Exchange itself, and a few years af

long would the banks and financial institutions which were lending money on Stock Exchange collateral refrain from calling loans when they were deprived of any measure of the value of their security? Over its own members the New York Stock Exchange might exercise a rigid control, and it could safely be assumed that the other Stock Exchanges of the country would co?p

e first step decided upon was to communicate with the Bank Clearing House Committee. Mr. Francis L. Hine, President of the Clearing House, was invited to

entire country was sound but that the situation in Europe justified extreme prudence and self-control on the part of the United States; that the closing of the Stock Exchange was a wise precaution by reason of the dis

n certified, and a notice was thereupon sent out instructing members to call for their drafts at the usual hour. Thus all the differences due on the day's trans

ring the previous fortnight had made their deliveries by borrowing stock in New York; that the stock purchased in London was due to arrive on this side, and that the usual process of financing it by returning the previously borrowed stock had been cut off through the suspension of unfulfilled contracts. This was likely to lead to very grave emba

brought before the Committee, during its long tenure of office, in which individuals sought for a special privilege to sell securities they were anxious to market while trading in general was forbidden. In this case the applicants were referred to that section of the Constitution of the Exchange

d when the gravity of the situation became clearer to the community, a great anxiety developed that the re-opening should, above all, not be premature. Realizing that the fear of sudden

ange, in answer to inquiries as to when the Exchange wil

for some time longer until the constant reiteration by its officers of their intention

their cooperation, influencing their conduct, and obtaining information. The resolution of the Governing Committee by virtue of which the Committee of Five was brought into being merely stated that questions such as these should be considered and reported back "at the earliest possible moment." Clearly here was an impossible situation. The immense detail of the work w

n July 31st, be, and it hereby is, authorized during the present closing of the Excha

ted in the history of the Exchange, for never before had such powers and such responsibilities been put in the hands of so few indivi

confronted with a request for a ruling on the question of how far members were to be restrained from

the duty of loyal members to comply. If cases come into your office where it is absolutely ne

ss stringent than what came later when the growth of a

k place, would be disseminated by the press and might spread panic among security holders and money lenders. The auctioneers in New York, Boston, Philadelphia, and Chicago were at once approached, not only directly but through their bankers and other advisers. It was a disagreeable task as these auctioneers had to be urged to cease

was no easy matter. The closing of the Stock Exchange placed the financial news writers of the daily press in a curious position. With them were allied that group of financial writers connected with the various Wall Street news agencies, the several financial journals that are exclusively devoted to Wall Street affairs, and the fi

g to excessive cable charges for foreign dispatches. Thus the newspapers suffered a rapidly diminishing revenue, and they found it necessary to discharge many of thei

ifested to publish certain news of the day which, while interesting to the public, tended to handicap the efforts of those bent only on reassurance and calm counsel. At times it became somewhat difficult to prevent the publication of some of these matters, particularly of the prices made in the so called "gutter" market which sprang up in New Street. And yet on the whole nothing could have exceeded the fairness and the spirit of co?peration of these gentlemen in this trying time. One newspaper even went so far as to cease the publication of a remunerative page of small advertisemen

of the great factors without which the critical days of the sus

rliest moment that attention could be given to it the Committee of Five requested the Chairman of the Stock Exchange Clearing House to place before it the exact figures of the outstanding contracts. These figures when presented showed that there were stock balances open on Clearing House order amounting to $38,700,000 and Ex-Clearing House contracts amounting to about $61,000,000. Roughly speaking there had been ab

en in the midst of the crisis the Committee deemed it wise to offer every possible facility for the immediate settle

f the Governing Committee suspending deliveries until further notice does not mean that settlement may not be made by mutual consent

ous meetings, giving their personal attention in assisting members, and using a care that involved both tact and arduous labor. Through their efforts such extraordinary progress was made, in this complex and difficult task, that by September 22nd announcement was made that the deli

anic was at its height, this huge volume of unsettled contracts was met and consummated by voluntary co?peration and without compulsion of any kind. In some few cases s

he New York Stock Exchange in adhering to the practice of daily settlements. In all the great European centers, where trading on the fortnightly settlement basis is in vogue, the restoration of dealings was terribly complicated by the herculean task of clearing up back contracts that extended over many days. In New York, when conditions so shaped themselves as to warrant reopening the Excha

ek, beginning to-morrow, Wednesday," and that they would be accompanied by sight drafts which would have to be financed. This alleged great volume of securities had been sold in this market for foreign account and borrowed in New York in order to make the immediate deliveries that our day to day system requires.

stock from one set of brokers to another, and would have raised the dangerous question of a general enforcement of contracts in borrowed securities. It was an interesting illustration, among some others to be subsequently experienced, of the manner in which certain minds can become entirely absorbed in that aspect of a question which deals solely with personal interest. After careful discussion it was determined that the co?peration of the Clearing House banks should be sought in solving the difficulty. The Committee of Five thereupon sent a commun

ad been obtained, the figures stated by the banking houses which were seeking assistance being only estimates. The representatives of the Stock Exchange agreed to obtain this exact information at once, and having returned

and amount of drafts which you expect will be presented to you from Europe on any steamers arriving to-day or subsequently. They would partic

our reply, so far as you can, the banks, trust companies

cuss this matter with any one outside your own firm. Your answer is expecte

welve other houses stated it as a possibility but not a certainty that securities might reach them on the steamers above mentioned to the amount of about four millions; and, finally, twelve firms sent replies stating that they either expected no securities or had made the necessary arrangements to finance what was coming. These facts-so far belo

with the Committee of Five at 9 a.m. to-morrow, Thursday, the 6th inst., in the Secretary's office,

000 were about to be landed in New York is interesting as showing the hysterical state of mind to which many business men had been reduced at that time. The actual amount of stocks sold to arrive, against which borrowings had been effected in New York, was finally shown to amount to $20,000,000. That this amount was not increased at an embarrassing period in these important negot

unavoidably overlooked which should have had immediate attention. Conspicuous among these was the question of the rate of interest to be charged upon open cont

ugust 5th on all unsettled contracts for delivery of securities, except that interest shall cease when a

in the bond to July 31st, and that between July 31st and August 5th they are 'flat'; interest thereafter

ittee thought it wise to avoid a retroactive ruling, and imposed the 6 per cent. rate from August 5th. Injustice was done, in some cases, by permittin

of the Exchange had not yet appreciated the necessities and dangers of the situation. This came

g directly to one of the Trust Companies here, and made offerings of bo

the Secretary to make

you that in the opinion of said Committee the offering down of securities in places where money is loaned on securities is most reprehensible, and that m

that, August 1st being only one day after the closing, a thorough ap

ications either by letter or by personal appearance filled the days sometimes from nine o'clock in the morning until six in the afternoon. The communications asked advice and made sug

he "Ticker" by distributing the rulings in circular form, and thus insure the possession by every member of a full copy of the entire number. It is a gratifying fact, both from the standpoint of the Committee and of the Stock Exchange, that no one of the very numerous rulings was a failure or had to be rescinded

stant inquiries as to whether purchases or sales of securities were in any

intention that all dealings in securities should cease, pending the a

o sense of a speculative character, or conducted in public. Any member, however, taking part in such transactions must have in mind, his loyalty

Baltimore was received urging that the Exchange reopen for dealings in bonds only, and the newspa

reopening of the Exchange until in their judgment the financial situation warra

hould stand. With regard to the former the Committee ruled on August 5th that "until further notice, from and after this date, the interest rate on all borrowed and loaned stocks shall be 6%

ck loans, should be figured at this level. The making of any prices below those of July 30th was to be resisted by every available means, and the money-lending institutions were to

ew stock loans to replace those in which this privilege had been exercised. The matter of facilitating these new stock loans was taken up by the Stock Exchange Clearing House, and this together w

work was taken on August 11th, w

borrower fails to so return, the interest thereon shall cease. The Clearing House of the Exchange is

ocks at current interest rates and the Clearing House Committee b

11th, relative to the inte

ate the rate of interest is subject to agreement between the

prevent dealing, the unaffiliated bankers and money institutions were refraining even from the private sale of bonds in which they were interested, so that for a brief period there was a practically complete embargo on the marketing of securities. Naturally enough, so absolute a restraint brought on a pressure which was bound to force a v

hey took up a position south of Exchange Place and close to the office of the Stock Exchange Clearing House. Their dealings increased gradually as time went on and never ceased entirely until the Exchange reopened. In all probability the existence of thi

, continually accompanied by the great danger that it might grow to large and threatening proportions. If, in consequence of the facilities which these unattached brokers were offering

t to lend it their support. The banks and money lenders were urged not to recognize the declining prices which were established there as a basis for margining loans, as such recognition might tend to increase the dealings. One or two large institutions which, at first, were disposed to

e practice along by clearing stocks for the parties who were making the market there, the Committee ruled (August 11th) "that members of the Exch

absolutely necessary liquidation, and never grew to such proportions as to precipitate disaster, but during the long susp

y investors who happened to be in a position to take securities out of the market, promised to bring relief to interests whose position was critical and thus to fortify the general situation. This facility could not be extended in the form of a general permission to the members of the Exchange to make transactions privately at or above closing prices. To ha

rical force of the Stock Exchange Clearing House could be advantageously used to supervise and

list of same to the Committee on Clearing House, 55 New Street, giving

e closing prices of Thursday, Ju

ieve the necessities of themselves or their customers, may send a list of same

ng prices of Thursday, July 30

ng, and the extraordinary success with which it was carried through has entitled them to the lasting gratitude of their fellow members. The business was conducted by having a large clerical force tabulate the orders received and bring purchasers and sellers together who were wi

the war took on a more discouraging aspect, this "Clearing House Market" fell to the arbitrary minimum of the closing prices with a large excess of selling as compared to buying orders, and the "New Street Market" grew in proportion. During the darkest days of depression the prices of a few leading stocks such as U. S. Steel and Amalgamated Copper dropped in the Street ten points or more below their July 30

ls who proceeded to conduct private transactions among themselves. Their excuse was that if transactions were merely permitted in the Clearing House it became optional as to whether they should take place there or elsewhere. Within a few days thereafter the Committee amended the ruling by substituti

el of the closing. In addition to this agitation among individuals and firms, restlessness began to show itself in some of the other Exchanges. At one time the Stock Exchange of a great neighboring city, which had permitted restricted dealings exactly similar to those carried on in New York, wished to have those dealings regularly quoted in the newspapers; at another time a movement developed on the C

obtaining this information was to know what demand would be made upon the loan market if, at any time, these securities should be shipped. At the suggestions of the bankers the Commit

for securities received

or securities already sold b

on securities sold but not yet received was $18,236,614.15. The rapidity and accuracy with which this important information was obtained, without any

ose bonds on borrowed money which, in the ordinary course of events, would have been placed among their numerous clients. When the crisis of early August had developed, all these houses (some of them not being members of the Stock Exchange) loyally co?perated in closing up the market, and abstained from negotiating their securities even in the most private manner. By the middle of August, however,

w when looked at from the standpoint of the effect upon the bond houses themselves or upon the loan market, but there was another aspect of the question which was less reassuring. If these houses started, at this terribly critical time, to place their securities among their clients at declining prices, and if these prices became known, which the

rained. In all cases of this kind, where an independent outsider and the Committee could not come to an understanding, the practice had become established of appealing to the Clearing House Bankers to act as a court of last resort. The banks, with their power to call loans, exerted an influence which could reach every nook and corner of the business world, and, at the same time, their immense facilities for feeling the financial pulse

or in short term notes, was going to make it necessary to withdraw the prohibition against placing investment securities upon the market. When this necessity became clear it was decided that some strict supervision and safeguarding of the sale of bonds and notes was necessary and the so-called "Committee o

mmittee issued the follow

een taken care of satisfactorily, thereby considerably clearing the foreign exch

an be sold without disturbing the collateral loan situation and your Committee will be glad to continue to advise whenever such opportunities arise. Anything ten

tee will not approve the closing of transactions coming under this head. Pric

n to dealers in securities, it should be the policy of such dealers when

ons and believes that the present situation does not warrant any attempt to issue long

the dealers in listed and unlisted securities and if all will endeavor to live up to the spirit of the policy thus fa

Room of the Chase National Bank daily, from 11 a.m. to 12 m., for

plan adopted w

llers of bonds, acting as brokers only, were required to file their orders with the Committee of Seven when dealing in unlisted bonds, and with the Stock E

ot only was the prohibition of all dealings which had marked the beginning of the crisis withdrawn, but p

racts for members wishing to trade in securities at or above the closing prices. It was impossible, therefore, for the members of that Committee to give personal attention to the difficult problem of determining the prices below which listed bonds s

sentiment was still in so critical a state and every act of the Exchange was so keenly watched that it was feared the holding of an extraordinary meeting might start rumors and cause alarm. In view of these considerations the Committee of Five hit upon the makeshift of inviting three mem

ests and devoted their entire time to it. Owing to the intelligent and judicious manner in which they handled the delicate problem of conducting a liquidation in listed bonds

ally played their part in suspending dealings, but symptoms began to show themselves of possible revolt, and the Committee of Five set to work to find a safety valve for this department also. The device of a supervisory Committee had proven so efficacious in other directions, that it was naturally turned to in this instance. The circu

ock Exchange whose firm was among the most prominent dealers in these securities, and the prompt and energetic way in which he undertook the task proposed to him soon convinced the Committee that they had not erred in resorting to him. He set about organizing a Committee at once and on September 24

submit proposed dealings in unlisted stocks to them and abide by their rulings. The Stock Exchange Committee could, of course, only control its own members, but it being a fact that a very large part of the unlisted business emanated from Stoc

of this momentous time, that the smooth and gratifying operation of the various other Committees, whic

d Committee of Seven this supervision was accepted and cheerfully lived up to by practically all concerned. A different situation soon developed in unlisted stocks. Almost immediately certain individuals in the business began to assert that the unlisted Committee was a self appointed body which did not represent the people most concerne

ing statement was presente

ntl

Exchange resulting from the formation of a Committee of Five to supervise dealings in Unlisted Secu

changed to the effect that same be compo

actions may be made without restriction or necessity of report to

r open market the bid prices as published in the Chron

low those prevailing on July 30th, they establish minimum prices good for as long a time as the Commit

de as to the Committee as at present constituted, and by so doing increase the efficiency of this Committee on Unlis

r a business in which their members were personally engaged. In order to render trading in unlisted stocks a possibility, at the time, similar powers must be granted and similar confidence must be given to some one. The Unlisted Stock Committee were not self-appointed because they came into being at the instigation and suggestion of the Committee of Five, and to disband them after they had started upon their work, su

regretfully recorded, however, that the petty jealousy and distrust which had appeared in connection with this episode continued to show themselves in a desultory way until the end. A few individuals threw w

without reduction of wages, and this decision was carried through for the entire four and one half months of suspension. A more difficult problem, however, confronted the brokerage houses. Many of these firms had very heavy office rents and fixed charges of various kinds; their business had been showing meager profits and even losses for some years and, the length of the period of closing being impossible to forecast, they did not dare to undertake burdens that might get them into di

of the needy can be obtained than on the floor of the Stock Exchange. Even though the brokers were facing an indefinite period of starvation themselves, with expenses running on one side and receipts cut off on the other, the moment it became clear that severe suffering had come upon the clerical forces o

ecessity for cutting down office expenses, and though many firms carried their salary list intact, a considerable number laid off from one

uggest that some concerted action be taken to meet this emergency, if only as a temporary expedient. A number of informal discussions of the subject with fellow members of the Exchange, an

. Remick, Graham F. Blandy, R. H. Thomas, W. W. Price, G. V. Hollins, C. E. Knoblauch, C. J. Housman, G. M. Sidenberg,

rmally agreed upon as 'The Wall St

the use of the Committee, at no charge for rent, was gratefully accepted, and arrangements for occupation were made at once. Mr. Oswald Villard, thro

eet employee who had lost a position as a result of the war was eligible, and that no fees whatever be charged. A circular letter was sent to Stock Exchange members and firms appealing for subscriptions, and the matter of selection of a depos

the Secretary's Office placed their typewriting, multigraph and circular printing facilities at the Committee's disposal, furnished the rooms with desks, chairs, etc., and supplied all necessary stationery. The Stock Exchange force of telegraphers and other employees practically in a body volunteered their services, a

d hospital treatment when required. The declarations made by the applicants demonstrated beyond any question that the number of men, women, girls and boys for whom prompt assis

papers. Such satisfactory results were attained, that up to date of this writing, (May 15, 1915), of over seventeen hundred applications received, permanent positions were secured for about seven hundred at rates of compensation that were distinctly gratifying, all conditions

recognized efficiency being, so to speak, specially trained, it was often found to be difficult, even impossible to make them fit the kind of work to which they were m

less, thanks to the general interest manifested, and the widespread advertising consequent thereto, contributions were received from generous friends outside of Wall Street, to an extent that was simply astonishing. Checks for $1,000 each were not unusual items, and as a rule the requ

W. DeForest, President of The Charity Organization Society, for expert advice in the matter, and was referred by Mr. DeForest to Mr. Frank Persons, Manager of the New York Bureau, and Miss Byington, in charge of the Brooklyn Branch, who rendered invaluable services in connection with many of the applications, all of

whole or in part took care of funeral expenses; old debts for medical attendance and drugs; agency fees and surety bonds; life insurance premiums, board and lodging, etc., etc. Many applicants for assistance proved to be merely temporarily embarrassed, they were willing and anxious to be h

ginal idea that a return to normal conditions would involve the dissolution of the Committee

t, even in the midst of a calamity so great that no individual could feel himself beyond the r