The New York Stock Exchange in the Crisis of 1914

p before December. Far from this being the case, the truth is that reopening began to be discussed immediately after the institution was closed. Within twenty-four hours of th

officers of the Exchange having exceptional means of knowing what the dangers were, had no intention of assuming the immense responsibilities of re-establishing the market without the backing and approval of the entire banking fraternity. Gradually

Committees to facilitate trading in listed and unlisted bonds were formed; and finally a market was provided for unlisted stocks. All these devices, however, while they brought about readjustment and dimin

n Uncle Sam's Bank and the Stock Exchange was the paying teller's window through which the money was to be drawn out, so the window was closed to gain time. How to reopen this window in such a way as not to pay out any more money to the foreign creditor than would suit our own convenience was the problem which soon began to agitate many ingenious minds. As time went

t to the following oracular utterance: "When the Exchange reopens it should not do business from ten till three, but should open from ten o'clock to one. All transactions should be for cash, and must be delivered and paid for the same day, no contract to be allowed to stand over night." He also made th

are exceedingly interested in making it possible for the Stock Exchanges to open safely, I am getting the opinion of important bodies relative to the proposed legislation suggeste

t as collateral, shares of stock or evidences of indebtedness extending over one year, unless accompanied by a certificate showing that the owner is a United States

the Secretary of the Stock Exc

ppointed by the Governing Committee to say that in its opinion such legislation as referred to

people it would reach, that it was merely a movement for the purpose of benefiting the stock brokers, but that it would be instrumental in relieving the strain on every conceivable business. Were such a movement accepted, and should it meet with results worthy of the plan it would be found out when the smok

uld be restricted and only sales be published and no bids or offers. His idea of restriction at the start was that all stock purchased should be paid for on the basis of 10% cash and the balance in certificates of deposit for cash, which certificates were to be no

ale of American securities held by foreign stock holders. If they wish to throw their stocks over we can buy them at our own price. After six o

ut of the market as so many other advisers proposed. He seemed to be quite oblivious of the difficulties, however, that would have bee

etter the full details of which we have not space to reproduce, but

ecession below the stipulated point at which the securities might later be liquidated, say sometime during the year 1917, if it had not been voluntarily liquidated without loss before. Loans so insured would have to be in force on securities carried prior to a certain date, probably before the Exchange opened, if not last July 30th, and

eld in Europe. Just as a correspondent cited above seemed to believe that American security holders could be compelled to remain inactive while foreigners sold thei

ligations. Unfortunately at the time he wrote there was no way of obtaining assurance of this happy outcome. The same idea in a somewhat different form came from another correspondent who, instead of deferring payment by a buyer's option, proposed that stocks and bonds be sold on a 10 per cent. basis "That is, the seller of 100 shares of Union Pacific at 112 will deliver to buyer 10 per cent. of amount sold, and receive a check for $1,120, together with a contract in which the

ing should be an agreement by the banks not to call loans made prior to July 31st, 1914, for some specified period of time. This idea was very thoroughly discussed and looked in

gentleman, gifted with clear insight and a thorough grasp of the situation, and generously anxious to be of service to the Committee, pointed out from the start that the reopening of the Exchange hung upon a favorable swing in the balance of trade. When the indebtedness of the United States to Europe could be offset by our exports the danger of re?stablishing our market would become negligible, and this shrewd adviser predicted that the desired reaction in foreign exchange was much closer at hand than was generally

xious discussions. A certain private banker presented his scheme in approximately the following words: "Before you can reopen the Exchange you must be in a position to know to what extent Europe is going to throw our securities upon this market, and the only way to obtain this information is to send some members of your Committee abroad. This delegati

ere, and as under their system the action of individual investors is largely controlled by the financial institutions, it will be quite feasible to determine the probable selling of French investors when you have got in intimate touch with these institutions." Another additional six months' delay loomed to the vision of the demoralized Committee, and sad words of reproachful protest were about to burst from some of them when their me

whether this contemplated trip around the globe was to include an effort to trace some American railroad bond into the sacred precincts of Thibet, or a dash to the South Pole to search the abandoned luggage of some deceased explorer, was resisted, and t

ttee of Five they, of course, dwelt mainly upon the question of reopening the market. Sir George Paish, being by nature an optimist, took a very roseate view of the outlook, so much so that some members of the Committee were at first disposed to fear (his mission being that of a collector of debts who sought prompt payment) that his

Basil G. Blackett, was a reticent young man who seldom intruded himself into the discussion, but it was noticeable that whenever he was asked for an expression of opinion he showed himself to be thoroughly informed as to facts and sound in judgment. The Committee was certainly under an obligation to these gentlemen for the time they were

the month advanced, however, a very rapid change in conditions began to manifest itself. On November 10th two significant steps were taken. Mr. Smithers, Chairman of the Unlisted Stocks Committee, appeared and stated that his Committee intended making a report recommending their own discontinuance. He was followed, on the same day, by Mr. E. R. McCorm

has arrived at a condition that makes supervision of dealings no longer necessary, her

September 24, 1914,

e reason for holding them under close restraint at first was the danger of the sentimental effect on a panicky situation in case their prices should undergo a violent decline. It having been demonstrated that such a decline was not to be feared, the Commit

ction, on November 12th, the Curb As

the New York Curb

ntl

ity for restrictions over trading in unlisted stocks, therefore you are hereby notified that the Ne

urb Market Association has received the approval and sanct

. McC

air

the Committee of

ed, but that all transactions for future delivery must be submitted for approval, as heretofore

n of the authorities of their Exchange to meet on the coming Wednesday to discuss the advisability of opening on Monday, November 23rd. He asked for information regarding the attitude of the New York Stock

and of a consequent movement toward the resumption of business, all of which rested fundamental

ange. They thought that this step would make a wider and more satisfactory market for bonds and that the supervision of the Committee of Three could be exerted in one locality as well as in the other. In view of the rapid improvement in conditions, and the fact that unlisted bonds had been given an unrestrained market by the

e were not much alarmed by this gentleman's warnings and were proceeding with their nefarious scheme when a further warning was addressed to them. There was a certain member of a Stock Exchange firm who was on friendly terms with some of the Washington authorities, and who seems to have felt it his duty to see that the Exchange did nothing to give offense in these high quarters. When this individual learned what the Committee had in mind he sent word that it would be prudent for them to let a particular government officer know their plans before putting them into exe

, which had also got wind of their intentions, had already announced to the public unequivocally that a restricted bond market would be started on that da

dealing in bonds was substantially that under consideration by the Committee, the magnitude of the interests affected has led to unforeseen

plaining that the suggestion of an interview had in no way emanated from him but that he had misunderstood the intermediary (who had communicated by telephone) and supposed that the interview was being sought b

true situation the following n

the same will, in accordance with the Constitution of the Exchange, be submitted to the Governing Committee at the regular meeting to be held on the

as undesirable to publish the details of an awkward misunderstanding with a public official, who would not want his name dragged into a matter that he had in no way concerned himself with, refused to furnish the reason. This at once let loose upon them those vials of reportorial wrath

proceeded with their work and, having obtained the necessary authority from

n and three o'clock each day except Saturday, when dealings shall cease at twelve o'clock noon. Such dealings to be under the supervision and regulation of the Committee, and to be for 'cash' or 'regular way' only and not below the minimum prices as authorized by the Committee from time to time. Transactions at prices other than tho

as to whether these bond transactions should be quoted on the ticker in the accustomed way, but before the day of opening came it was decided to report them as usual. By requiring that all trades should be for "cash" or "regular way" and, in a s

Stock Exchange Clearing House itself. Encouraged by these symptoms the Committee of Five at once formulated a plan for carrying the reopening a step farther. A list of stocks which were not international in characte

lings on the floor of the Exchange in such stocks as it may designate under restrictions prescribed by it. That the Committee of Five is hereby authorized

g prices of July 31st, and on December 11th the Committee issued a ruling prescribing the condi

to stocks admitted to dealings in the Exchange from time to time by the Committee of Fiv

the Exchange will be permitted on the floor of the Exchange between the hours of ten and

shall be for 'cash' or 'regular way' only and not below the minimum prices authorized by the Committee from tim

e Exchange accompanies these rulings. Minimum pric

e, may be dealt in without restriction as to price, but are included in t

Stock Exchange Clearing House at the close of business on July 30, 1914, will be

g House' at the close of business on July 30, 1914, will be similarly d

he Stock Exchange Committee on Clearing House. Stocks not so admitted will conti

these rules shall be in force on and after the 12th day of December, 1914, but the

KS L

dmitted to dealings on the Exchange, from and after which date all rules of the Exchange governing the borrowing and loaning

stocks borrowed and loaned pr

fore July 30th last, but only in cases where such

nge will continue to stand until further notice, unles

he floor, had risen to such proportions as seriously to embarrass that institution. As this activity was taking place on a rising market and signs of increasing confidence were constantly multiplying, the Committee quickly resolved, on the same day, to transfer all stocks to the

be exercised while the Exchange remained closed, but now that it was reopened authority naturally returned to its le

necessity for the Committee's continuance no longer exists and hence they request to be discharged. Before being discharged they desire to express their appreciation of the trust and confidence placed in them by t

ecial Committee of Five be received

s felt that, owing to the critical and indecisive state of the war, there was a continuing possibility of some news that might renew a crisis in the market. While this possibility lasted the maintenance of minimum prices furnished an automatic check upon sudden panic which would avoid raising the question of a second closing of the Exchange. In order to regulate these minimum prices and so change them from time to time as to keep in accord with n

ng to valorize or sustain prices but merely expected to maintain a safeguard against some unforeseen shock to confidence, many people wrote them urgent letters asking that in certain properties a minimum should

hs he would have been laughed to scorn, and yet this supposed impossibility was performed by the joint and determined action of the financial community. On the other hand, and as a counterpart to this valuable experience, it must never be lost sight of that the extraordinary war measures of 1914 may be a danger to the future if they are misinterpreted. There is a possibility (even a probability) that when ordinary crises arise in times to come, people who find themselves fi

was never troubled but once. On one of the first few days of their career a rather positive and aggressive member, arguing with a colleague, said "you must remember that you are only one of this Committee." The Committeeman thus addressed respo

judgment. They were, of course, treated to much wisdom (after the event) by their critics. They were told that they might have opened the Exchange sooner after the actual opening had proved a success, and they were informed in the editorial columns of

f a calamity the possible magnitude of which it would be difficult to measure. The success of this undertaking should be a source of pride and emulation to those future generations of brokers w

E

NTRY LI

CITY,

riber'

se changes to the text t

from 11 A.

"A" or "P"), l

nk that if ... (a

escision --

nforseen --