The New York Stock Exchange in the Crisis of 1914 by Henry George Stebbins Noble (romantic books to read TXT) 📖
- Author: Henry George Stebbins Noble
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and anxious 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 delegation should go first to London and settle there for
a long enough time to get intimately acquainted with leading persons
in the financial world. This could be done by cultivating social
intercourse, dining and consorting with these people until a frank
statement from them could be obtained concerning the probable volume
of American securities for sale."
As this statement proceeded visible signs of painful emotions
manifested themselves among the Committee. The Exchange had already
been closed three months, and they were being informed that a plan
requiring a lapse of some six months more must be carried out before
the happy day of resumption would be in sight. The banker having
paused for a few minutes' reflection, resumed: "Then there is France.
Many American securities are held there, 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 mentor again
broke the chilly silence of the meeting room. "Now that I think of it
there is Switzerland. The Swiss are a thrifty and saving people and
undoubtedly have much money in our properties. In spite of her
neutrality Switzerland will feel the economic pinch of this war and
her people will have to liquidate many of their foreign holdings. It
will be wise, therefore, for you to extend your inquiries from France
into Switzerland."
Here the reaction came, the heart-sick feeling which had plunged the
respectfully attentive Committee into gloom vanished, and mirthful
emotions so possessed them that it was a hard task to maintain proper
dignity and decorum. The temptation to inquire 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 the worthy banker whose
imagination had taken such distant flights retired unconscious of the
very mixed emotions he had aroused. In the light of the actual
reopening that took place only six weeks later this interview becomes
a curiosity worth preserving.
* * * * *
Along with other prominent men who consented to meet and consult with
the Committee there came Sir George Paish and Mr. Basil G. Blackett.
These two gentlemen had come over from England to consult our
government and our banking fraternity with regard to the abnormal
exchange situation created by the outbreak of war. Before the
Committee 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
diagnosis of the situation was prompted more by his hopes than by his
convictions. He proceeded to Washington, where he spent a considerable
time negotiating with the national authorities, and on his way home he
again appeared before the Committee, on November 23rd, and stated his
belief that the Exchange could be reopened at once.
In the light of what followed it is plain that Sir George Paish's
views were very nearly correct and not by any means over-optimistic.
The rapidity with which the readjustment of exchange solved the
problem presented to the American market was entirely in harmony with
his predictions and very flattering to his judgment. His companion,
Mr. 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 willing to give to its deliberations. In this connection it is a
pleasure to record that the authorities of the London Stock Exchange
showed a similarly friendly disposition. All through the period of
crisis communications passed between the London and New York Exchanges
and were accompanied by a most friendly spirit of mutual assistance.
* * * * *
While plans for reopening the Exchange were discussed from an early
date, nothing definite took shape up to the end of October, and at
that time the Committee of Five were still in the dark as to how long
business would continue to be suspended. Whether the New Year would
find Wall Street still bound and muzzled was an open question on
November 1st. As 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. McCormick, Chairman of the Board of
Representatives of the Curb Market Association, who urged that the
time for a formal reopening of the Curb was at hand. On the following
day the Committee on Unlisted Stocks, having submitted a proposed
circular which they wished to issue in announcement of their
dissolution, the Committee of Five adopted the following rule:
"The Special Committee of Five being of the opinion that the
market for unlisted stocks has arrived at a condition that makes
supervision of dealings no longer necessary, hereby approve the
act of the Committee on Unlisted Stocks in dissolving their
organization.
"Ruling No. 23, dated September 24, 1914, is hereby rescinded."
It is needless to say that this action, together with its ratification
by the Committee of Five, was first submitted to and approved by the
Clearing House banks. Unlisted stocks comprised a group of properties
which were practically not held abroad, and the 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 Committee in charge were only too glad to
relinquish the difficult duty of supervising the trading and open a
free market. It was further decided that the restraint upon free
quotation and publication of prices be simultaneously removed from the
unlisted dealings.
As a natural sequence to the above action, on November 12th, the Curb
Association issued the following notice:
"To the Members of the New York Curb Market Association:
"GENTLEMEN:
"It has been decided that the improvement in the general
financial situation has removed the necessity for restrictions
over trading in unlisted stocks, therefore you are hereby
notified that the New York Curb Market will officially resume
business on Monday, November 16th, 1914, at 10 o'clock A.M.
"This action on the part of the Chairman of the New York Curb
Market Association has received the approval and sanction of the
Committee of Five of the New York Stock Exchange.
"E. R. MCCORMICK,
"_Chairman_."
On November 13th, the Committee of Five ruled that:
"Unrestricted trading in Listed Municipal and State Bonds for
domestic account may now be resumed, but that all transactions
for future delivery must be submitted for approval, as
heretofore, to the Sub-Committee of Three on Bonds at the
Clearing House of the New York Stock Exchange."
On November 16th, Mr. Frank W. Thomas, Vice-President of the Chicago
Stock Exchange and also Chairman of their "Trading Committee,"
appeared before the Committee of Five and stated that it was the
intention 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 Exchange in the matter of securities listed on both exchanges.
The Committee requested him not to permit dealings in Chicago, in such
securities, at prices below the minimum prices established in New
York.
Thus one after another came the evidences of a sudden transformation
in the financial conditions and of a consequent movement toward the
resumption of business, all of which rested fundamentally on an
immense increase of our exports and the resulting favorable movement
of foreign exchange.
Encouraged by these happenings the Committee of Five actively took up
numerous plans for letting down the bars. There had been for some time
considerable pressure exerted by those members of the Exchange who
were distinctively bond brokers, to have the bond business transferred
from the Clearing House to the floor of the Exchange. 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 dissolution of the Committee of
Seven, it was thought that the moment had come for taking this step in
advance. Preparations were at once set on foot to restore the
restricted bond market to the floor and thereby insure that partial
opening of the doors of the Exchange which would be the entering wedge
to ultimate resumption.
* * * * *
Unfortunately the plans of the Committee in this regard were not
sufficiently safeguarded. Through some unforeseen leak the news of
their intentions got abroad, and brought on some awkward consequences.
The first of these was the appearance of a private banker, the same
one who early in August had predicted a long period of suspension, to
protest against greater freedom in bond dealings. He foresaw terrible
results if this rash act were permitted and claimed to have
information that European holders of bonds were awaiting this chance
to swamp the market. The Committee 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
execution. Thinking that this warning must be based on some special
information the Committee at once authorized this gentleman to inform
his friend in the Government of their plan. This was on Wednesday,
November 18th, and the intention of the Committee was to place the
bond market upon the floor of the Exchange on the following Monday. On
Thursday this well meaning but somewhat misguided go-between reported
that he had communicated with Washington and that his friend there had
expressed the desire to see some member of the Committee before any
further steps were taken.
This news hit the plans of the Committee somewhat after the manner of
a submarine torpedo. They had everything in readiness for Monday, and
the newspapers, 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 day. With such limited time to act in
there was nothing to resort to but postponement and a notice was
immediately given to the press in the following words:
"The Special Committee of Five states that while the plan
outlined by the newspapers concerning a further extension of the
present method of dealing in bonds was substantially that under
consideration by the Committee, the magnitude of the interests
affected has led to unforeseen difficulties which will
necessitate further consideration. When a decision is reached
ample notice will be given to the public officially."
A letter was at once sent to the Government official notifying him of
the readiness of the Committee to visit him at his convenience, and
the following day, Saturday, he very courteously sent them a telegram
explaining 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 by the Exchange. So this mighty tempest in a tea pot resulted
from the excessive
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