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
Book online «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
Committee into safe waters succeeded in running it on a reef of his
own creation.
Immediately on ascertaining the true situation the following notice
was sent out on Saturday:
"The Special Committee of Five announces that having consummated
its plan for bond transactions on the Exchange under certain
specified restrictions, 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 24th inst. If
the recommendations of the Special Committee are adopted by the
Governing Committee the plan will go into operation at an early
date."
Some of the newspapers having announced positively that this new move
with regard to bonds would take place on Monday, the 23rd, they were
very indignant that it should be postponed without supplying them with
a good and sufficient reason. The Committee, on its part, feeling
that it was 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 which, up to that time, they had been
fortunate in escaping. One journal amicably stated that this incident
merely emphasized a fact which had all along been obvious, namely that
the Committee were, and had been from the start, totally incompetent
to perform the task intrusted to them.
While a gentle shower of epithets fell upon their devoted heads the
Committee proceeded with their work and, having obtained the necessary
authority from the Governing Committee, they sent out the following
ruling on November 24th:
"That so much of rule No. 21 as applies to dealings in listed
bonds through the Clearing House be rescinded, to take effect at
the close of business on Friday, November 27th, 1914. Beginning
on Saturday, November 28, 1914, dealings in bonds listed on the
Exchange will be permitted on the floor of the Exchange between
the hours of ten 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 those allowed by the Committee, or in evasion
of the Committee's rules, are prohibited. All rules of the
Exchange governing delivery and default on contracts covered by
this resolution shall be in force on and after Saturday, November
28th, 1914, but the closing of contracts 'under the rule' shall
be subject to the foregoing provisions."
Thus on Saturday, November 28th, the doors of the Stock Exchange were
once more thrown open and a restricted market in listed bonds was
established on the floor under the watchful eye of the Committee of
Three. There was some hesitancy at first 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 subsequent ruling, by instructing all purchasers of bonds to
report to the Committee when such bonds were not delivered by 2.15
P.M. on the day following the purchase, it was hoped to impede any
sudden or violent liquidation of foreign securities.
* * * * *
The restoration of the bond market to the floor was a complete
success, and at about the same time a general revival of public
confidence showed itself in a rise in prices first in the street
market and then in the 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 character was made out and submitted
to the Bank Clearing House Committee, and with their concurrence it
was decided to place these upon the floor of the Exchange to be traded
in at or above certain prescribed minimum prices.
At a meeting of the Governing Committee on December 7th the following
resolution was adopted: "That the Committee of Five is hereby
empowered to permit dealings 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 to enforce stock loan
contracts whenever in its judgment it may deem best so to do, and that
the resolution of July 31st, 1914, be modified in this respect."
A list of minimum prices was fixed upon that averaged some two or
three points below the closing prices of July 31st, and on December
11th the Committee issued a ruling prescribing the conditions for the
partial resumption of stock dealings on the Exchange. We here present
it in full:
"The Special Committee of Five rules that Rule 13 be rescinded,
in so far as it applies to stocks admitted to dealings in the
Exchange from time to time by the Committee of Five, said
rescission to take effect at the close of business on Friday,
December 11, 1914.
"Beginning on Saturday, December 12, 1914, dealings in certain
specified stocks listed on the Exchange will be permitted on the
floor of the Exchange between the hours of ten and three o'clock
each day except Saturday, when dealings shall cease at twelve
o'clock noon.
"Dealings in such stocks as shall be specified by, and be under
the supervision and regulation of the Committee, shall be for
'cash' or 'regular way' _only_ and not below the minimum prices
authorized by the Committee from time to time. Transactions at
prices below those allowed by the Committee, or in evasion of its
rules are prohibited.
"A list of stocks to be admitted to dealings on the Exchange
accompanies these rulings. Minimum prices on same will be
announced on December 11, 1914.
"All stocks quoted on July 30th at or below 15 per cent., or $15
per share, may be dealt in without restriction as to price, but
are included in the list for your guidance, and will be marked
'Free' in the price column.
"All stocks admitted to dealings as above, which were being
cleared through the Stock Exchange Clearing House at the close of
business on July 30, 1914, will be similarly cleared from the
opening of business on the 12th day of December, 1914.
"All stocks admitted to dealings, which were being dealt in
'Ex-Clearing House' at the close of business on July 30, 1914,
will be similarly dealt in from the opening of business on the
12th day of December, 1914.
"Stocks admitted to dealings on the Exchange will cease to be
dealt in through the Stock Exchange Committee on Clearing House.
Stocks not so admitted will continue to be dealt in through the
Committee on Clearing House until further notice.
"All rules of the Exchange governing delivery and default on
contracts covered by these rules shall be in force on and after
the 12th day of December, 1914, but the closing of contracts
'Under the Rule' shall be subject to the foregoing provisions.
STOCKS LOANED
"The Loan Market for stocks will reopen at ten o'clock, A.M. on
the 12th day of December, 1914, for such stocks _only_ as are
admitted to dealings on the Exchange, from and after which date
all rules of the Exchange governing the borrowing and loaning of
such stocks shall be in force, but the closing of contracts
'Under the Rule' shall be subject to the foregoing provisions.
"The above rule shall apply to stocks borrowed and loaned prior
to and since July 30, 1914.
"Borrowed and loaned stocks will be cleared as before July 30th
last, but only in cases where such stocks are admitted to
dealings on the Exchange.
"Loans of stocks _not_ admitted to dealings on the Exchange will
continue to stand until further notice, unless otherwise agreed
to by both parties to the contract."
On Monday, December 14th, the next business day after the limited list
of stocks had been placed upon the floor of the Exchange, it was
reported to the Committee that the volume of transactions taking place
in the Stock Exchange Clearing House, in the stocks not yet admitted
to the 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 floor on the following morning, and notice to that effect was at
once sent out. The unexpected appearance of this notice on the tape
was greeted with cheers of approbation in the Exchange, and on
December 15th the long hoped for reopening of the entire market had
become a reality.
* * * * *
The Committee of Five by this act brought their own rule to a close.
Arbitrary power had been put in their hands to be exercised while the
Exchange remained closed, but now that it was reopened authority
naturally returned to its legitimate channels. The Committee therefore
presented the following report to the Governing Committee on December
15th:
"The Special Committee of Five beg leave to report that in as
much as the crisis that existed on July 31st, 1914, has passed,
and financial affairs in this country have resumed a practically
normal condition, the 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 the Governing Committee.
They also wish to express to the members of the Exchange their
appreciation of the manner in which their rulings have been
respected, even though in many cases it involved great
sacrifices.
Resolved, That the report of the Special Committee of Five be
received, and the Committee be discharged."
Thus, like the sudden and unexpected shifting of a dream, the
Committee of Five who so recently had almost despaired of fixing a
date for reopening the Exchange, found the Exchange open and
themselves a memory of the past. The abruptness of their exit was
tempered, however, in the following manner. As above described, the
reopening was accompanied by the restraint of certain arbitrary
minimum prices below which securities could not be sold. It was 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 normal supply and demand, it was
necessary to appoint a Committee, and the original Five were continued
in office with this sole regulative power. As bonds were similarly
restricted, the Committee of Three also lingered on the scene for the
same purpose. The two Committees performed this unusual function up to
the first of April, 1915, when the very marked improvement in
conditions led to the abandonment of this last vestige of artificial
restraint.
It is instructive, as showing the workings of some minds, that
although the Committee of Five, in its capacity of regulator of
minimum prices, issued a public statement that they were under no
circumstances going 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 be maintained which would render selling
impossible. It was quite futile to try to disabuse some of these
correspondents of the idea that no decline should be allowed in
properties that they were interested in.
* * * * *
To one who meditates upon the singular experience which was thus
abruptly brought to a close, there are a few features of it which
stand out as meriting the especial attention of all members of the
Stock Exchange. First of all it was most impressively shown what
apparently hopeless tasks can be accomplished by loyal coöperation. If
at any time up to July, 1914, any Wall Street man had asserted that
the stock market could be kept closed continually for four and
one-half months he
Comments (0)