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    THE NEW YORK
    STOCK EXCHANGE IN
    THE CRISIS OF 1914


    BY
    H. G. S. NOBLE
    PRESIDENT


    [Illustration]


    GARDEN CITY     NEW YORK
    THE COUNTRY LIFE PRESS
    1915

    _Copyright, 1915_
    THE COUNTRY LIFE PRESS




INTRODUCTION


The year 1914 has no precedent in Stock Exchange history. At the
present time (1915), when the great events that have come to pass are
still close to us, even their details are vivid in our minds and we
need no one to rehearse them. Time, however, is quick to dim even
acute memories, and Wall Street, of all places, is the land of
forgetfulness. The new happenings of all the World crowd upon each
other so fast in the financial district that even the greatest and
most far-reaching of them are soon driven out of sight. This being the
case, it has seemed to the writer of these pages that some record
should be kept among the brokerage fraternity of what was so great an
epoch in their history, and that this record could best be written
down by one who happened to be very favorably placed to know the story
in its entirety.

Of course the archives of the Exchange will always contain the minutes
of Committees and other documentary material embodying the story of
the past, but this dry chronicle is never likely to see the light
except when unearthed by law courts or legislative committees. It
seems worth while, therefore, to disentangle the essential thread of
the tale of 1914 from the mass of unreadable detail in the minute
books, and put it in a shape where those who are interested may look
it over.

This is not an easy task. To differentiate the interesting and the
essential from the mass of routine material is, perhaps, not very
difficult, but to present this segregated matter in a form that will
not be monotonous is much more of a problem. The proceedings of a
Committee that has been in continuous session must, when written down,
partake of the nature of a diary, and to that extent be tiresome
reading. We shall, therefore, have to ask the indulgence of any one
who happens to look into these pages, and beg him to pass over the
form for the sake of the substance. That the substance itself is of
deep interest goes without saying. It was given to the Stock Exchange
to play a great part in a momentous world crisis, and it must be of
profound interest to know how that part was played.

Stock Exchanges are a relatively recent product of modern
civilization, and like new comers in every field they are suspected
and misunderstood. The most complex of all problems are economic
problems, and the functions of Stock Exchanges form a most intricate
part of political economy. It has, consequently, been a noticeable
phenomenon in all contemporary industrial society that the activities
of the stock markets have been a constant subject of agitation and
legislative meddling. Most of this meddling has been based upon
ignorance and misunderstanding, but in a broad view this ignorance and
misunderstanding are excusable owing to the novelty and above all the
great complexity of the factors at work. One of the needs of the time,
therefore, is that the public, and their representatives in the
Legislatures, should be enlightened as fast as possible with regard to
the immensely important uses of these institutions, and to the
operation of their very delicate machinery.

The World crisis of 1914 forced upon us an object lesson on the
question of speculative exchanges in general which ought to be of
lasting profit. For years agitators had been hard at work all over the
country urging the suppression of the Cotton Exchanges, and claiming
that they contained gamblers who depressed the price of the cotton
growers' product. In the summer of 1914 the dreams of these agitators
were realized. The Cotton Exchanges were all closed and the cotton
grower was given an opportunity of testing the benefits of a situation
where there was no reliable agency to appraise the value of cotton.
The result may be summed up in the statement that the reopening of the
Cotton Exchanges met with no opposition. A similar object lesson was
furnished in the case of the Stock Exchanges. They were all closed,
and for a few weeks some profound thinkers in the radical press stated
that the country was showing its ability to dispense with them. When
the time for their reopening came, however, there was no agitation to
prevent it. On the contrary it was hailed as a sign of the resumption
of normal financial conditions in the United States.

This evidence that the experience of 1914 has cast a much needed light
on the public value of speculative exchanges, gives a further excuse
for describing in some detail how the experience was passed through by
that greatest of all these institutions, the New York Stock
Exchange.




THE NEW YORK STOCK EXCHANGE IN THE CRISIS OF 1914




The New York Stock Exchange




CHAPTER I

THE CLOSING OF THE EXCHANGE


The Stock Exchange is in the second century of its existence and in
that long period of time (long relatively to the number of years
during which Stock Exchanges have been known to the world) it has been
forced to close its doors only twice. The first occasion was the great
panic of 1873, the after effect of civil war when trading was
suspended for ten days; the second came with the outbreak of the world
War in the close of July, 1914. These two remarkable events differ
profoundly in the gravity of the circumstances which brought them
about. In 1873, although the financial disturbance was one of the
greatest the United States has ever experienced, the trouble was
mainly local and did not seriously involve the entire world. The
Exchange was not closed in anticipation of a catastrophe but was
obliged to shut down after the crash had taken place, in order to
enable Wall Street to gather up its shattered fragments. The measure
of this crisis was the ten days during which trading was suspended.

Far different from these were the circumstances surrounding July 31st,
1914. On that eventful date a financial earthquake of a violence
absolutely without precedent shook every great center of the
civilized world, closing their markets one by one until New York, the
last of all, finally suspended in order to forestall what would have
surely been a ruinous collapse. The four and a half months during
which this suspension continued stand to the ten days closing of 1873
in a proportion which fitly illustrates the relative gravity of the
two historic upheavals.

In the light of these facts we are justified in asserting that the
events of 1914 are the most momentous that have so far constituted the
life and history of the New York Stock Exchange, and consequently that
some record of, and commentary upon, these facts may be of value to
the present members of that body and of interest and profit to its
future members.

It is in the nature of panics to be unforeseen, but the statement may
be truly made that some of them can be more unforeseen than others.
The panic of 1907 was preceded by anxious forebodings in the minds of
many well informed people, whereas the Venezuela panic in 1895, being
due to the sudden act of an individual, came out of a clear sky. To
the latter class distinctively belongs the great convulsion of 1914.
While the standing armies of Europe were a constant reminder of
possible war, and the frequent diplomatic tension between the Great
Powers cast repeated war shadows over the financial markets, the
American public, at least, was entirely unprepared for a world
conflagration. Up to the final moment of the launching of ultimata
between the European governments no one thought it possible that all
our boasted bonds of civilization were to burst over night and plunge
us back into mediæval barbarism. Wall Street was therefore taken
unaware, and so terrific was the rapidity with which the world passed,
in the period of about a week, from the confidence of long enduring
peace to the frightful realization of strife, that no time was given
for men to collect their thoughts and decide how to meet the
on-rushing disaster.

Added to the paralyzing effect of this unheard of speed of action,
there came the disconcerting thought that the conditions produced were
absolutely without precedent. Experience, the chart on which we rely
to guide ourselves through troubled waters, did not exist. No world
war had ever been fought under the complex conditions of modern
industry and finance, and no one could, for the moment, form any
reliable idea of what would happen or of what immediate action should
be taken. These circumstances should be kept clearly in mind by all
who wish to form a clear conception of this great emergency, and to
estimate fairly the conduct of the financial community in its efforts
to save the day.

The conditions on the Stock Exchange, when the storm burst, were in
some respects very helpful. Speculation for several years had been at
a low ebb, so that values were not inflated nor commitments extended.
Had such a war broken out in 1906, with the level of prices then
existing, one recoils at the thought of what might have happened.
Furthermore, the unsettled business outlook due to new and untried
legislation had fostered a heavy short interest in the market, thereby
furnishing the best safeguard against a sudden and disastrous drop.
This short interest was a leading factor in producing the
extraordinary resistance of prices in New York which caused so much
favorable comment during the few days before the closing. It were well
if ill-informed people who deprecate short selling would note this
fact.

During the week preceding July 31st, therefore, in the face of a
practical suspension of dealings in the other world markets, the New
York market stood its ground wonderfully. The decline in prices,
though it became violent on July 30th, showed no evidence of collapse.
There was a continuous market everywhere up to the last moment, and
call money was obtainable at reasonable prices. Here was a perplexing
problem when the closing of foreign Bourses raised the question of how
long we should strive to keep our own Exchange open.

To close the recognized public market for securities, the market which
is organized and safeguarded and depended upon as a standard of
values, is an undertaking of great responsibility in any community. To
take this step in New York, which is one of the four preeminent
financial centers of the world, involved a responsibility of a
magnitude difficult adequately to estimate. Upon the continuity of
this market rest the vast money loans secured by the pledge of listed
securities; numberless individuals depend upon it in times of crisis
to enable them to raise money rapidly by realizing on security
investments and thus safeguarding other property that may be
unsaleable; the possessor of ready money looks to it as the quickest
and safest field in which to obtain an interest return on his funds;
and the business world as a whole depends upon it as a barometer of
general conditions.

Add to this the fact that speculative commitments by individuals from
all over the world, which have been based upon the expectation of an
uninterrupted market, are left in hopeless and critical suspense if
this market is suddenly removed, and it becomes apparent that to close
the Exchange is manifestly to inflict far-reaching hardship upon vast
numbers of people. It is also sure to be productive of much injustice.
In bad times sound and solvent firms are anxious to enforce all their
contracts promptly so as to protect themselves against those that are
overextended; an obligatory suspension of business compels these
solvent firms, in many cases, to help carry the risks of the insecure
ones and deprives the provident man of the safety to which he is
entitled.

When such facts as these are duly weighed by the agencies having the
authority to close the stock market, it becomes clear that duty
dictates a policy of hands off as long as a continuous market persists
and purchasers continue to buy as the decline proceeds. This was well
illustrated in the acute panic of 1907 when an enormous open market
never ceased to furnish the means by which needy sellers constantly
liquidated, and the possessors of savings made most profitable
investments. To have closed the Exchange during that crisis--assuming
it to have been possible--would have been an unmixed evil. The violent
decline in prices was the natural and only remedy for a long period of
over-speculation, and it would have been worse had it been
artificially postponed.

Considerations of this general character, up to July 30th, caused the
authorities of the New York Stock Exchange to take no action, although
the other world markets had all virtually suspended dealings. On July
30th, the evidences of approaching panic showed themselves. An
enormous business was done accompanied by very violent declines in
prices, and, although money was still obtainable throughout the day,
at the close of business profound uneasiness prevailed.

       *       *       *       *       *

On the afternoon of July 30th, the officers of the Stock Exchange met
in consultation with a number of prominent bankers and bank
presidents, and the question of closing the Exchange was anxiously
discussed. While the news from abroad was most critical, and the day's
decline in prices was alarming, it was also true that no collapse had
taken place and no money panic had yet appeared. The bankers' opinion
was unanimous that while closing was a step that might become
necessary at any time, it was not clear that it would be wise to take
it that afternoon, and it was agreed to await the events of the
following day. Meanwhile, several members of the Governing Committee
of the Exchange had become convinced that closing was inevitable and,
in opposition to the opinion of the bankers, urged that immediate
steps be taken to bring it about. It may seem strange to people
outside of Wall Street that the night before the Exchange closed such
apparent indecision and difference of opinion existed. It was,
however, a perfectly natural outcome of an unprecedented situation.
The crisis had developed so suddenly, and the conditions were so
utterly without historic parallel, that the best informed men found
themselves at a loss for guidance.

During the evening of July 30th the conviction that closing was
imperative spread with great speed among the large brokerage firms. Up
to a late hour of the night the President of the Exchange was the
recipient of many messages and telegrams from houses not only in New
York, but all over the country, urging immediate action. The paralysis
of the world's Stock Exchanges had meanwhile become general. The
Bourses at Montreal, Toronto and Madrid had closed on July 28th; those
at Vienna, Budapest, Brussels, Antwerp, Berlin, and Rome on July 29th;
St. Petersburg and all South American countries on July 30th, and on
this same day the Paris Bourse was likewise forced to suspend
dealings, first on the Coulisse and then on the Bourse itself. On
Friday morning, July 31st, the London Stock Exchange officially
closed, so that the resumption of business on that morning would have
made New York the only market in which a world panic could vent
itself.

The Governing Committee of the Exchange were called to meet at nine
o'clock (the earliest hour at which they could all be reached, for it
was summer and many were out of town) and at that hour they assembled
in the Secretary's office ready to consider what action should be
taken. In addition to the Committee many members of prominent firms
appeared in the room to report that orders to sell stocks at ruinous
prices were pouring in upon them from all over the world and that
security holders throughout the country were in a state of panic. It
would be hopeless to try to describe the nervous tension and
excitement of the group of perhaps fifty men who consulted together
under the oppressive consciousness that within forty-five minutes (it
was then a quarter past nine) an unheard of disaster might overtake
them. It was determined that the Governing Committee should go into
session at once as there was so little time to spare. Just as they
started for their official meeting room a telephone message was
received from a prominent banking house stating that the bankers and
bank presidents were holding a consultation and suggesting that the
Exchange authorities await the conclusion of their deliberations.

There is an employee of the Exchange whose duty it is to ring a gong
upon the floor of the big board room at ten o'clock in the morning.
Until that gong has rung the market is not open and contracts are not
recognized. This employee was instructed not to ring the gong until he
had received personal orders to do so from the President; a permanent
telephone connection was established with the office in which the
bankers were conferring, and amid a horrible suspense the outcome of
their conference was awaited. For twenty minutes this strain
continued. It was a quarter before ten and only fifteen minutes
remained in which to act. Meanwhile the brokers were fast assembling
upon the board room floor, orders were piling in upon them to sell at
panic prices, ten o'clock was approaching, and although all felt that
the opening should not be permitted no one had a word from the
Governing Committee as to what was going to be done.

       *       *       *       *       *

At a quarter of ten, no word having come from the bankers, the
receiver of the telephone which had been connected with their meeting
place was hung up, and the Governing Committee were called in session
to take action. As they took their seats two messages reached them.
One was brought by a prominent member of their body who had gone to
the office of the President of the bank Clearing House and had been
told by him, after consulting with some of his fellow officers, "We
concur; under no circumstances is it our suggestion, but if the
Exchange desires to close, we concur." The other was sent, through a
member of the Exchange, from one of the leading bank Presidents who
stated that closing would be a grave mistake and that he was opposed
to it.

The roll was called and thirty-six out of the forty-two members
answered to their names. The Chair having announced the purpose of the
meeting, Mr. Ernest Groesbeck moved that the Exchange be closed until
further notice. This motion was carried, not unanimously but by a
large majority. Mr. Groesbeck then moved that the delivery of
securities be suspended until further notice, and, this being carried
unanimously, made a third motion that a special Committee consisting
of four members of the Governing Committee and the President be
appointed to consider all questions relating to the suspension of
deliveries and report to the Governing Committee at the earliest
possible moment. The third motion, like the second was carried
unanimously and the Committee adjourned. It was then four minutes of
ten. On the instant that the first motion closing the Exchange was
passed, word was sent to the ticker operators to publish the news on
the tape. In this way the seething crowd of anxious brokers on the
floor got word of the decision before ten o'clock struck. Immediately
upon the adjournment of the Committee Mr. George W. Ely the Secretary
of the Exchange ascended the Chairman's desk in the board room and
made the formal announcement, which was greeted with cheers of
approbation. The President promptly appointed Messrs. H. K. Pomroy,
Ernest Groesbeck, Donald G. Geddes, and Samuel F. Streit to
constitute, with himself, the Committee of Five, and the long suspense
and anxiety of four months and a half began.

These events, which were crowded into a few feverish hours, and which
seemed to those who participated in them more like a nightmare than
like a reality, present some aspects that are especially worthy of
detailed description. It is noticeable that the vote to close the
Exchange was not unanimous. This shows the immense complexity of a
situation, which, even at the last moment, left some two or three
conscientious men undecided. It is a fact of profound importance, and
one that never should be forgotten by stock brokers or by the public,
that the Exchange closed itself on its own responsibility and without
either assistance or compulsion from any outside influence. Many false
assertions by professional enemies of the institution have been made
to the effect that the banks forced the closing, or that its members
were unwillingly coerced by outside pressure. The facts are that the
influential part of the membership, the heads of the big commission
houses, made up their minds on the evening of July 30th that closing
was imperative, and that on the morning of July 31st their
representatives in the Governing Committee took the responsibility
into their own hands, the bankers having been unable as yet to reach a
conclusion.

Immediately after the closing the President of the Exchange visited
the prominent bank president who had served notice at the last moment
of his disapproval of this procedure. He was found in his office in
consultation with a member of one of the great private banking houses.
Both the bank president and the private banker agreed that, in their
opinion, the closing had been a most unfortunate mistake. It was an
opportunity thrown away to make New York the financial center of the
world. The damage was done and would have to be made the best of, but
had the market been allowed to open the banks would have come to the
rescue and all would have gone well. These gentlemen admitted that the
Exchange was to some extent excusable owing to the negligence of the
bankers in not notifying them that they were ready to protect the
money market.

It may safely be stated that within twenty-four hours after this
interview neither the two bankers in question nor any one else in Wall
Street entertained these opinions. The rise of exchange on London to
$7--a rate never before witnessed; the marking of the Bank of
England's official discount rate to 10%, accompanied by a run on that
institution which resulted in a loss of gold in one week of
$52,500,000; the decline of the Bank's ratio of reserve from the low
figure of 40% to the paralyzing figure of 14-5/8%; together with the
fact that the surplus reserves of our New York Clearing House banks
fell $50,000,000 below their legal requirements, were reasons enough
in themselves to convince the most skeptical of the necessity of what
had been done.

The frightful gravity of the situation which had arisen became clearer
and more defined in people's minds a few days after the first of
August than it was on the morning of July 31st. European selling had
been proceeding for some time before the outbreak of War and in the
last few days before closing had been temporarily arrested by the
prohibitive level of exchange and the risk of shipment at sea. The
American public itself, however, was seized with panic on the evening
of July 30th, and on the morning of July 31st brokers' offices were
flooded with orders to sell securities for what they would bring and
without reference to values. Had the market been permitted to open on
that Friday morning the familiar Wall Street tradition of "Black
Friday" would have had a meaning more sinister than ever had been
dreamed of before.

In all previous American panics the foreign world markets were counted
upon to come to the rescue and break the fall. Imports of gold,
foreign loans, and foreign buying were safeguards which in past crises
had been counted upon to prevent utter disaster. On this occasion our
market stood by itself unaided; an unthinkable convulsion had seized
the world; panic had spread; even the bargain hunter was chilled by
the unprecedented conditions; there were practically no buyers. A half
hour's session of the Exchange that morning would have brought on a
complete collapse in prices; a general insolvency of brokerage houses
would have forced the suspension of all business; the banks, holding
millions of unsaleable collateral, would have become involved; many
big institutions would have failed and a run on savings banks would
have begun. It is idle to speculate upon what the final outcome might
have been. Suffice it to say that these grave consequences were
prevented in the nick of time by the prompt and determined action of
the Stock Exchange, and by that alone.

       *       *       *       *       *

Any decisive step whether right or wrong always finds its critics.
There were a few people who criticised the Exchange for closing too
soon and thought that the feeling of panic was increased by this
action. These few were mostly converted from their opinions as the
situation became clearer. There was a larger number who took the
ground that the Exchange had not closed soon enough, and urged that
had the step been taken a few days sooner a considerable decline in
values would have been prevented. It is strange that the latter
critics did not stop to reflect on how great an advantage it was, all
through the anxious days of August, to have had the New York market
liquidated as far as it could be without disaster, and the level of
closing prices relatively low. How vastly greater would have been the
task of safeguarding the situation in the face of declining prices in
the "New Street Market" had the closing prices on the Exchange been
ten or fifteen points higher. The truth is that the Exchange was
closed at the very best possible moment. The market was kept open as
long as liquidation could safely be carried on (thus immensely
diminishing the pressure to be withstood during the suspension) and it
was closed at the very instant that a collapse was threatened.

The above facts suggest some reflections with regard to the agitation
for governmental interference with or control of the Exchange. The act
of closing necessitated the prompt decision of men thoroughly familiar
with the circumstances in a period of time actually measured by
minutes. If it had been necessary to reach government officials
unfamiliar with details, convince them of the necessity of action, and
overcome the invariable friction of public machinery, the financial
world would have been prostrated before the first move had been made.
If the Exchange had been an incorporated body, and had been closed in
the face of the difference of opinion and possible conflict of
interests that existed at the time, it would have been possible for a
temporary injunction to have been brought against its management
restraining its freedom to meet the emergency. Long before the merits
of such an injunction could have been argued in court the harm would
have been done, and ruin would have overtaken many innocent people.
The full power of a group of individuals thoroughly familiar with the
conditions to act without delay or restraint prevented a calamity
which can safely be described as national.

It is a fact, which will probably never be appreciated outside of the
immediate confines of Wall Street, that the Exchange was unexpectedly
thrown into a position where the interests of the whole country were
put in its hands, and that through the prompt and energetic action of
the thirty-six men who faced the awful responsibility on July 31st
financial America was saved. It is true that in saving the community
they saved themselves, but so do the soldiers who win upon the
battle-field, and in neither case is the obligation cancelled by the
selfish considerations involved. When in future the perennial outcry
against the Exchange is being fostered by those whose minds are
exclusively occupied with the evils that are inseparable from every
human institution, let us hope that once in a while some friendly
voice may be raised to remind the world of July thirty-first, nineteen
hundred and fourteen.




CHAPTER II

THE PERIOD OF SUSPENSION


During the same morning on which the momentous action of closing was
taken the Committee of Five met and elected the President of the
Exchange as their Chairman. The acute crisis was over, the danger of a
cataclysm had been averted, but the situation that remained was big
with problems full of menace and uncertainty.

Just what effect the closing of the market would have was a matter of
doubt. On all previous occasions when the facilities of the Exchange
had been inadequate, or had been shut off, an unregulated market had
established itself in public places and proceeded uncontrolled. Thus
during the Civil War, when the volume of speculation had completely
outgrown 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 after the War, many of its members, who had
organized into the "Open Board of Brokers," were admitted to the Stock
Exchange in a body. The suspension of business in 1873 was too brief
to allow of the formation of a market such as the above, but, while it
continued, cash transactions for securities were being carried on
every day in the financial district.

Would results such as these obtain on this occasion? Much depended
upon the length of time before the Exchange could re-open, but this in
itself was a problem for which no one could venture a solution. Again,
a vast volume of contracts made on July 30th had been suspended. How
long could the enforcement of these contracts be successfully
prohibited, and above all how 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 coöperate
with it, but numberless outside agencies existed such as independent
dealers unaffiliated with exchanges, and auctioneers, any of whom
might establish a market. If declining prices were made through media
of this description, and the press felt called upon to furnish them to
the public, the closing of the Exchange might not suffice to prevent
panic and disaster.

Oppressed by these considerations, and by an appalling sense of
responsibility, the new Committee of Five began its labors in the
morning of July 31st. The 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 meet the Committee of Five which
he did, a little later in the day, and presented to them the
following statement of the action taken by the Clearing House.

     "There was a meeting of the Clearing House Committee this morning
     in view of the closing of the New York Stock Exchange. It was the
     opinion of the Committee that the business and financial
     condition of New York and the 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
     disposition of all Europe to make it the market for whatever it
     wished to sell, and that in this country there was no occasion
     for any serious interruption of the regular course of business,
     either financial or mercantile."

After the retirement of Mr. Hine, the Chairman of the Committee on
Clearing House of the Exchange stated that all the checks given to the
Clearing House had been 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 transactions of July 30th were
settled, and a first encouraging step was taken. It was also decided
to permit the offering of call money on the floor of the Exchange.

The Committee held its second meeting on August 1st and the first of
the long series of problems growing out of the closing of the market
was at once presented to it. A letter from a brokerage house doing
business with Europe was received in which it was pointed out that
"arbitrageurs" who had sold stocks in New York and bought them in
London during 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 embarrassment because call money had practically
disappeared and houses to whom this foreign stock was consigned might
not be able to meet their obligation to pay for it as it arrived.
There being no arrivals of foreign stock expected that day, the
Committee deferred action, and thus gained time to think out ways and
means of meeting the difficulty.

The second problem presented came in the form of a request for
permission to sell securities outside of the Exchange. The firm of S.
H. P. Pell & Co. had suspended, and a house which had been lending
them money wished to be authorized to sell out the collateral. This
was the first of many cases 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 in which it is
provided that members having contracts with insolvents shall close out
these contracts in the Exchange when the securities involved are
listed. The Exchange being closed, this provision answered the
question without necessitating any independent action on the part of
the Committee.

       *       *       *       *       *

From the moment of the closing of the Exchange a growing pressure
arose to determine just when and how it should be re-opened. The
desire for information on this point was widespread, and 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 and ill considered action
on this question was becoming dangerous to the restoration of
confidence, the Committee of Five, at its meeting of August 3rd
authorized the following statement.

     "Announcement is made by the President of the Stock Exchange, in
     answer to inquiries as to when the Exchange will open, that ample
     notice of such opening will be given."

In spite of this notice fear that the Stock Exchange might act
injudiciously lingered for some time longer until the constant
reiteration by its officers of their intention to act only in
conjunction and in consultation with the banks permanently allayed it.

By Monday, August 3rd, a steady stream of letters had begun to pour in
upon the Committee asking advice and direction upon any number of
questions raised by the closing of the market, and offering every kind
of suggestion and advice. In addition to this it soon became evident
that interviews would have to be held with large numbers of people for
the purpose of securing 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 which was beginning to
unfold itself could never be handled by so large a body as the
Governing Committee itself. Realizing that this difficulty must be met
without a moment's delay the Committee of Five requested the calling
of a special meeting of the Governors for twelve o'clock the same day
and presented to them the following resolution, which was unanimously
adopted.

     "RESOLVED: That the Special Committee of Five, appointed by the
     Governing Committee on July 31st, be, and it hereby is,
     authorized during the present closing of the Exchange, to decide
     all questions relating to the business of the Exchange and its
     members."

This action of the Governing Committee, while it was rendered
necessary by the peculiar requirements of the situation, was
unprecedented in the history of the Exchange, for never before had
such powers and such responsibilities been put in the hands of so few
individuals. It was one of a series of "war measures" by means of
which ends were achieved that would not have been reached in any other
way.

Clothed with complete authority the Committee met again in the
afternoon of August 3rd and was at once confronted with a request for
a ruling on the question of how far members were to be restrained from
dealing outside of the Exchange. After a lengthy discussion the
following was approved as their opinion.

     "It was the intention in closing the Stock Exchange that trading
     should be stopped and it is the duty of loyal members to comply.
     If cases come into your office where it is absolutely necessary
     to trade, do so as quietly as possible and prevent the quotation
     from being published."

It will be noticed that the policy adopted here was less stringent
than what came later when the growth of an outside market increased
the dangers of the situation.

       *       *       *       *       *

With the question of outside dealings there at once arose the closely
connected question of the danger arising from having price quotations
of such dealings made public. The quotation machinery of the Exchanges
had been silenced by the closing of those institutions, but there
remained the public auctioneers whose sales, if they took 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 doing business, but
it was rendered unexpectedly easy by the courtesy and friendliness
with which they coöperated for the general welfare. So loyal were
these various agencies that not a single sale, either of listed or
unlisted securities, occurred in any auction room of the country until
the urgent phases of the crisis had passed.

It was not in auction rooms alone, however, that prices might be made;
dealings were liable to occur in any unexpected locality, and it was
urgent that prices of an alarming character should be kept from the
public. For this most important purpose the coöperation of the press
was absolutely necessary. To obtain this, at the outset, 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 financial
correspondents of out of town newspapers. All told there were about
one hundred salaried men in these various groups, men experienced in
financial affairs, widely known and respected, engaged in a work which
had never been interrupted and which, as far as could be foreseen,
promised to furnish them with a continuous vocation.

The first effect of the war was a general curtailment of newspaper
advertising, a rise in the price of paper, and a greatly increased
cost of the news of the day owing to excessive cable charges for
foreign dispatches. Thus the newspapers suffered a rapidly diminishing
revenue, and they found it necessary to discharge many of their
employees and to reduce the salaries of others. With the Stock
Exchange closed, naturally the salaried financial writers were among
the first to feel this hardship.

Those whose services were retained throughout this crisis were
confronted with divided responsibilities. It was their duty to
interpret a mass of more or less fantastic rumors at a time when
nerves were overwrought and points of view magnified and distorted.
They wished to prevent the publication of anything of an incendiary
nature, while at the same time a necessity arose for presenting to the
public the news to which it was entitled. Placed in such a position
there was a very natural impatience here and there to have the
Exchange reopened, while now and then a tendency became manifested 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 coöperation of these gentlemen in this trying time.
One newspaper even went so far as to cease the publication of a
remunerative page of small advertisements having to do with dealings
in outside securities. This was done at the request of the Committee
without hesitation. Others coöperated in the suppression of
advertising on the part of questionable people, while correspondents
of out of town newspapers, both foreign and domestic, cheerfully
acceded to requests to suppress all disturbing financial reports. In a
word, the financial department of the whole newspaper press accepted
the situation philosophically, bearing their losses without complaint
and supporting without cavil the restrictive measures which it was
necessary to employ.

This loyal conduct of the press and of the auctioneers was one of the
great factors without which the critical days of the suspension of
business could not have been successfully surmounted.

       *       *       *       *       *

It will be remembered that in the morning of July 31st, the Governing
Committee not only voted to close the Exchange but also declared that
the delivery of securities should be suspended until further notice.
The motive of this latter action was to prevent the possible
insolvencies that were likely to be forced if purchasers were
compelled to pay for their securities in the absence of a call money
market. At the earliest 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 about $100,000,000 of stock sold in the
Exchange on July 30th, the delivery of which to the purchasers had
been suspended by the action of the Governing Committee. Obviously a
first great step toward clearing up the situation and preparing the
ground for the ultimate reopening of the market was to get this great
volume of contracts settled, so that if any failures were inevitable
they would be disposed of beforehand.

It being probable that many of the purchasers of stock on July 30th
were in a position to finance their purchases even in the midst of the
crisis the Committee deemed it wise to offer every possible facility
for the immediate settlement of contracts when the purchaser was in
this position. They therefore issued the following notice on August
4th:

     "The Special Committee of Five appointed to consider questions
     connected with the closing of the Exchange state that the
     resolution of the Governing Committee suspending deliveries
     until further notice does not mean that settlement may not be
     made by mutual consent wherever feasible. The Clearing House of
     the Exchange is prepared to advise and assist, and inquiries
     should be made in person there."

At the request of the Committee of Five the Committee on Clearing
House at once undertook the task of assisting members of the Exchange
in closing up these contracts and used its clerical force for that
purpose, thus involving much careful and detailed work. They held
daily continuous 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 delivery of all Clearing House balances
had been completed with the exception of those of the few firms whose
affairs were in the hands of receivers. These were settled shortly
afterwards and at the same time the great volume of Ex-Clearing House
contracts were also completely fulfilled.

This is one of the most extraordinary and gratifying experiences of
the great crisis. In about seven weeks, at a time when money was
unobtainable and the condition of panic was at its height, this huge
volume of unsettled contracts was met and consummated by voluntary
coöperation and without compulsion of any kind. In some few cases
selfishness or indifference delayed action on the part of individuals,
but these were all brought to a final adjustment by the influence and
persuasion of the Committee.

This achievement not only reflects undying credit upon the members of
the Exchange by showing both the sound condition of their business and
their zeal to act for the general welfare, and creates a deep sense of
obligation to the Clearing House Committee who for many long weeks
worked unceasingly to overcome the difficulties that beset the path,
but it justifies and confirms the wisdom of the 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 Exchange, the back contracts of
its members had all been settled up _two months_ before. Had our
system, like the European, involved "trading for the account," every
additional day of back contracts added to the $100,000,000 worth of
July 30th would have stood in the way of a final settlement, and the
reopening of the market (which was long postponed as it was) would
have been much further delayed.

       *       *       *       *       *

On August 4th, a problem which had loomed upon the horizon the day
after the closing of the Exchange, was brought squarely before the
Committee. A delegation of houses dealing in securities for European
account appeared and stated that approximately $40,000,000 to
$50,000,000 of securities were to arrive "this week, 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. The suspension of the fulfillment of
contracts declared by the Exchange made it impossible to return this
borrowed stock, and the houses doing this business were therefore
obliged either to allow the drafts to go to protest or finance the
incoming stock until the free enforcement of contracts was again
permitted.

With money practically unobtainable, and general panic prevailing, it
is needless to say that these statements of the delegation of houses
doing foreign business were a severe shock to the Committee of Five. A
remedy proposed by one or two of these banking houses was that the
people from whom they were borrowing stock should be required to take
it back. This simple expedient, while eminently satisfactory from the
standpoint of the borrower of stock, was not very helpful to the
Committee, as it would merely have shifted the problem of financing
the 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 coöperation of the Clearing House banks should be
sought in solving the difficulty. The Committee of Five thereupon
sent a communication to the Bank Clearing House committee setting
forth all the circumstances connected with the expected consignment of
securities as stated by the delegation of banking houses and requested
an appointment to meet them, or a sub-committee of their members, and
discuss the matter. The appointment was obtained for the following
morning, August 5th, and the Chairman and Mr. H. K. Pomroy were
appointed a sub-committee to confer with the Bankers and directed to
take Mr. Richard Sutro with them as a representative of the houses
doing foreign business.

At the meeting with the Clearing House bankers it was very properly
decided that a solution of the problem could only be reached when an
exact knowledge of the amount of money required to pay for the
incoming securities had 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 stated the circumstances
to the Committee of Five, it was directed that the following
communication be sent to a list of members of the Exchange who, it was
understood, were to have foreign drafts presented to them:--

     "The Special Committee of Five requests that by three o'clock
     to-day they may have in their possession from you information as
     to the number and amount of drafts which you expect will be
     presented to you from Europe on any steamers arriving to-day or
     subsequently. They would particularly like to know how much you
     expect on each steamer. In case any of these have already been
     financed please so state in your communication.

     "The Committee would also like to have you tabulate in your
     reply, so far as you can, the banks, trust companies or bankers
     from whom you expect drafts to be presented.

     "This communication is confidential and it is requested that you
     do not discuss this matter with any one outside your own firm.
     Your answer is expected by bearer, in order that the financing of
     these drafts may be facilitated."

By three o'clock, the same afternoon, replies had been received from
thirteen houses that they expected securities on the _Olympic_ and
_Mauretania_, and had also received advices of other securities
forwarded but did not know on what steamers; the drafts to be
presented they said would be approximately for four and one half
millions. Replies from twelve 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 below the estimate at first presented to
the Committee--came as a great relief, and were at once taken before
the Bank Clearing House Committee. After a careful discussion with
these gentlemen the Committee of Five again met and sent the following
communication to the firms who had reported that securities and drafts
were about to be tendered to them.

     "Members of the Exchange to whom foreign drafts are presented for
     payment, are requested to confer with the Committee of Five at 9
     A.M. to-morrow, Thursday, the 6th inst., in the Secretary's
     office, with details of such transactions in hand, when efforts
     will be made to facilitate the adjustment."

The next morning the few firms who had drafts to meet on that day were
provided with the necessary loans by two banks and a trust company at
8 per cent. The amount of securities due from Europe was undoubtedly
large, but the great bulk of it had not been shipped and the shipment
of it was postponed for many weeks afterward. The extraordinary
statement that $40,000,000 or $50,000,000 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 negotiations was due in large measure to the action of the
Committee in calling together the various foreign arbitrage houses,
and securing from them an agreement to cable to their correspondents
in Europe not to make further shipments of securities, because
borrowed stocks could not be returned and deliveries effected. This as
it turned out was an important step in the right direction.

       *       *       *       *       *

Owing to the sudden and severe pressure of business to which the
Committee of Five was subjected almost from the moment of its
organization, some matters were unavoidably overlooked which should
have had immediate attention. Conspicuous among these was the question
of the rate of interest to be charged upon open contracts which the
action of the Governing Committee had suspended. This matter was not
reached until the meeting of August 4th, when the following ruling
was made:

     "The Special Committee rules that interest on the delivery at the
     rate of 6 per cent. shall accrue from August 5th on all unsettled
     contracts for delivery of securities, except that interest shall
     cease when a receiver of securities gives one day's notice to a
     deliverer that he is ready to receive and pay for same.

     "The Special Committee further rules that sales of bonds on July
     30th carry interest at the rate specified in the bond to July
     31st, and that between July 31st and August 5th they are 'flat';
     interest thereafter to be 6 per cent. on the amount of money
     involved, subject to the exemption stated in the previous
     ruling."

In view of the fact that no action had been taken up to August 4th and
that a number of private settlements had been arranged in the meantime
the Committee 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 permitting a lapse of five days when no interest charge
was required, but this injustice was cheerfully borne owing to the
unusual exigencies of the situation.

On this same day the Committee received the first communication which
indicated that some members of the Exchange had not yet appreciated
the necessities and dangers of the situation. This came in the form of
a letter from the Baltimore Stock Exchange which contained the
following passage:--

     "A representative New York Stock Exchange house has been guilty
     of going directly to one of the Trust Companies here, and made
     offerings of bonds dealt in on both your Exchange and our own, at
     a large concession."

The Committee directed the Secretary to make the following reply:--

     "In the matter of your letter of August 1, 1914, I am instructed
     by the Special Committee appointed by the Governing Committee on
     July 31, 1914, to inform 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 members
     of this Exchange ought not to engage therein. If possible, I
     would like the name of the member of the New York Stock Exchange
     who made such offer."

It may be urged in extenuation of the act of the Stock Exchange house
that, August 1st being only one day after the closing, a thorough
appreciation of the gravity of the situation had not yet become
general.

       *       *       *       *       *

By August 5th the work of the Committee had assumed the form that was
to continue unremittingly until the Exchange reopened four and one
half months later. A constant stream of communications 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 suggestions of every conceivable kind, but,
above all, they were loaded with problems and difficult situations
which had grown out of the breakdown of the financial machinery in
general.

The labors of the Committee in striving to straighten out this
formidable tangle of business affairs led to their issuing a series of
rulings, which were binding upon all members of the Exchange. These
rulings were sent over the "Ticker" whenever they were passed, but on
August 5th it was decided to supplement the "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, and that they were all accepted without cavil or serious
criticism by the members. In the relatively few cases where an
indisposition to live up to these rulings was brought to the attention
of the Committee, an appeal from them to loyalty and good judgment
never failed to bring a recalcitrant member to terms.

On this day, August 5th, a special circular was sent out to answer the
constant inquiries as to whether purchases or sales of securities were
in any way permissible during the period of closing. It contained the
following:

     "When the Governing Committee ordered the Exchange closed it was
     their intention that all dealings in securities should cease,
     pending the adjustment of the financial situation and the
     reopening of the Exchange.

     "It is possible that cases may occur where an exception would be
     warranted provided such dealings were for the benefit of the
     situation, and in no sense of a speculative character, or
     conducted in public. Any member, however, taking part in such
     transactions must have in mind, his loyalty to the Exchange,
     whether or not he is living up to the spirit of the laws, and
     that he is not committing an act detrimental to the public
     welfare."

On August 7th the question of the reopening of the Exchange again came
to the front. A letter from Baltimore was received urging that the
Exchange reopen for dealings in bonds only, and the newspapers were
so urgent for some statement on the subject that the Committee
authorized the following:

     "The Special Committee of Five will not recommend to the
     Governing Committee the reopening of the Exchange until in their
     judgment the financial situation warrants it, and as before
     stated, ample notice will be given of the proposed opening."

The question of borrowed and loaned stocks came up at this time in two
aspects, one the interest rate to be charged, and the other the
determination of the market price at which such loans should 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%." In the latter case they
ruled (August 10th) that "borrowed and loaned stocks must be marked to
the closing prices on Thursday, July 30th, 1914, at the request of
either party to the loan."

The effect of this second ruling was to establish the policy of
regarding the closing prices of July 30th, as the market for
securities, so that all loans, whether cash loans or stock 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 be urged to coöperate by
recognizing them as a basis for exacting margins. As long as this
policy could be successfully carried out the danger of financial
collapse would be averted.

It having been ruled that a lender of stock, by notifying the borrower
of his willingness to take the stock back, could stop the interest
charge on the contract, a considerable demand arose for new 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 with the negotiations for
voluntary settlement of back contracts now brought upon the Clearing
House Committee that great volume of work which increased steadily
until the reopening of the Exchange.

One step tending to increase this work was taken on August 11th, when
the Committee ruled as follows:

     "Whenever a loaner of stocks gives one day's notice of
     willingness to have the same returned and the borrower fails to
     so return, the interest thereon shall cease. The Clearing House
     of the Exchange is prepared to advise and assist in making new
     stock loans and inquiries should be made in person there."

The effect of this ruling was to create a borrowing demand for stocks
at current interest rates and the Clearing House Committee became the
agency through which these stock loans were negotiated.

A further ruling, on August 11th, relative to the interest rate was to
this effect:

     "That on all loans of stock made between members after this date
     the rate of interest is subject to agreement between the parties
     to the transactions, but should not exceed 6 per cent."

By the eleventh of August the question of the growth of an outside
unregulated market began to force itself upon the attention of the
Committee. All the organized Stock Exchanges of the country were
closed, the auctioneers had loyally agreed to abstain from making
sales, the "Curb" or recognized outside market was faithfully
coöperating to 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 vent somewhere. At first an occasional group of mysterious
individuals were seen loitering in New Street behind the Exchange. A
member of the Committee of Five, who was prone to see the humorous
side of things even in those dark days, remarked as he observed them
late one afternoon "the outside market seems to consist of four boys
and a dog."

Before long, however, this furtive little group developed into a good
sized crowd of men who assembled at ten o'clock in the morning and
continued in session until three in the afternoon. At first they met
immediately outside of the Exchange, but later they 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 this market was a safeguard as long as its dimensions
could be kept restricted. An absolute prohibition of the sale of
securities, if continued too long, might have brought on some kind of
an explosion and defeated the very end which it was sought to
achieve.

This irregular dealing, as long as it remained within narrow limits
and was not advertised in the press, furnished a safety valve by
permitting very urgent liquidation. It was, however, 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, responsible interests should
begin to take part in and help to create an open air market, the very
disasters which the closed Exchange was intended to prevent might be
brought about.

It was necessary, therefore, that the Stock Exchange authorities
should do all in their power to hold the development of this market in
check. With this end in view they not only prohibited their own
members from resorting to it, but they exerted what influence they
could upon others not 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 finance the operations conducted in
the Street were persuaded to refrain from continuing to do so, and the
press, while giving publicity now and then to the very low figures at
which some leading stocks were quoted, was induced to avoid the
practice of regularly tabulating these prices.

It having become apparent that some members of the Exchange, while
obeying the mandate to do no trading in New Street, were indirectly
helping the practice along by clearing stocks for the parties who
were making the market there, the Committee ruled (August 11th) "that
members of the Exchange are prohibited from furnishing the facilities
of their offices to clear transactions made by non-members while the
Exchange remains closed."

The final outcome was that the New Street market did more good than
harm. It relieved the situation by facilitating some absolutely
necessary liquidation, and never grew to such proportions as to
precipitate disaster, but during the long suspense and uncertainty of
the closing of the Exchange it was a constant and keen source of
anxiety to the Committee of Five.

       *       *       *       *       *

Toward the end of the first fortnight after the closing of the
Exchange, the communications received by the Committee made it plain
that there were quite a large number of purchasers, attracted by the
low figures reached in the last day's trading, who were ready and
anxious to buy securities at or above the closing prices. Obviously
purchases of this kind by 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 have permitted as far
reaching a relaxation of restraint as this in so critical a time would
have entailed too great a risk. If any one of the eleven hundred
members had proved disloyal in the exercise of so dangerous a
privilege and privately negotiated sales at prices below those of the
closing, the whole plan of sustaining values might have been
jeopardized.

After considering the matter very carefully the Committee concluded
that the machinery and clerical force of the Stock Exchange Clearing
House could be advantageously used to supervise and control
transactions of this character, and, on August 12th, they issued the
following ruling:

     "Members of the Exchange desiring to buy securities for cash may
     send a list of same to the Committee on Clearing House, 55 New
     Street, giving the amounts of securities wanted and the prices
     they are willing to pay.

     "No offer to buy at less than the closing prices of Thursday,
     July 30, 1914, will be considered.

     "Members of the Exchange desiring to sell securities, but only in
     order to relieve the necessities of themselves or their
     customers, may send a list of same to the Committee on Clearing
     House, giving the amounts of securities for sale.

     "No prices less than the closing prices of Thursday, July 30th,
     1914, will be considered."

Thus was established a market in the Stock Exchange Clearing House
which was kept in operation until the complete reopening of the
Exchange. Immense labor and difficulty were brought upon the Clearing
House Committee in order to handle and supervise this unusual method
of trading, 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 willing to trade in similar amounts and at similar prices. In
order to consummate a trade the Clearing House would notify both
parties, leaving it to them to carry out the delivery and payment, and
requiring them to inform the Clearing House when the transaction had
been completed.

       *       *       *       *       *

The first effect of furnishing this means for establishing a
restricted market was very encouraging. A very considerable amount of
business began at once to be entered into. Many people with ready
money, who felt that securities had fallen to bargain prices, appeared
as purchasers and relieved the necessities of those who had been
embarrassed by the war crisis. A little later, however, when the
progress of 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 30th closings, and business in the Clearing House almost
ceased, but in the later Autumn, when the rapid rise in the volume of
American exports began to foreshadow a readjustment in foreign
exchange, the New Street prices rose again to the Clearing House level
and a relatively small business in the "outlaw" market was transformed
into a relatively large business conducted under the supervision of
the Exchange.

It is an interesting detail, worth mentioning, that the ruling of the
Committee quoted above, which established a market in the Clearing
House, used the permissive word "may" in stating that orders to buy
and sell might be sent to that institution. This was soon taken
advantage of by a few individuals 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 substituting the word
"must" for the word "may." The great responsibility attached to
promulgating rulings, which were to be the law during this critical
period, is made more apparent when it is realized that the ill
considered use of a single word might bring on unforeseen and perhaps
dangerous consequences.

During the month of August a constantly increasing pressure from every
conceivable direction was exerted to break down the dam with which the
Committee was striving to hold back the natural flow of dealings in
securities. By letter and by personal appearance before the Committee
individuals, in and out of the Exchange, strove to induce them to
countenance transactions at prices below the arbitrary level 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 Consolidated
Stock Exchange to establish some kind of restricted public dealing on
their floor. The Committee of Five were obliged to labor hard and
assiduously to hold this pressure back and keep the dam intact, and
its efforts were ably and loyally seconded by the Committee of the
Bank Clearing House whose great influence was unremittingly exerted to
prevent the danger of premature action of any kind.

On September 1st the Clearing House banks were anxious to determine
what was the amount, measured in money, of securities sold in New York
by Europe and not yet received. The object of 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 Committee of Five summoned before them
representatives of all the houses doing a foreign business and
requested them to send answers, as promptly as possible, to the
following two questions:

     _First:_ "Amount due Europe for securities received to date and
     not yet paid."

     _Second:_ "Amount due Europe for securities already sold but not
     received from Europe."

On the following morning answers were handed in showing that the
amount received and not yet paid for was $699,576.11, and that the
amount due Europe 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 publicity or disturbance of
confidence, is interesting as showing the efficiency of the intimate
coöperation between the banks and the Stock Exchange.

       *       *       *       *       *

Among the many agencies for dealing in securities, whose activities
were suddenly cut off on July 31st, the first in importance next to
the Stock Exchanges themselves were the so-called bond houses. These
firms, which included in their number many prominent private bankers,
were dealers on a great scale in investment bonds, and when the
thunderbolt of war struck they were carrying large lines of those
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 coöperated in closing up the
market, and abstained from negotiating their securities even in the
most private manner. By the middle of August, however, a number of
them began to show decided restlessness over the embargo upon their
business. The cutting off of their accustomed income, while expenses
continued as usual, was not what influenced them, for this hardship
was shared by all Wall Street, but the enforced carrying of securities
in bank loans at so critical a time when they felt that these
securities might be disposed of became a grievance.

It was urged by many of them that the careful placing of these
securities would be a great aid to the situation because every
investor who made a purchase would facilitate the liquidation of their
loans, ease the strain on the money market, and diminish the volume
of securities for sale. There was undoubtedly much to be said in favor
of this view 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 they certainly would, no one could foretell what the
consequences might be. Many large institutions, such as Insurance
Companies and Savings Banks, had funds invested in bonds, and many
money lenders held loans upon bonds as security; what would be the
effect upon these interests if a declining market even in unlisted
bonds should be publicly quoted?

Influenced by this grave uncertainty the Committee of Five resisted
the pressure brought upon them by certain representatives of the bond
dealers who raised this question first on the nineteenth of August.
Several of these gentlemen represented important firms and
institutions which were not members of the Exchange, and their freedom
from any obligation to be controlled by the Committee created a
situation which threatened to become strained. 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
made them the best judges of what risks it was as yet safe to take. A
series of meetings consequently took place between the Bank Clearing
House Committee, the representatives of the bond houses, and the
Committee of Five. At the first of these meetings the bank Presidents
leaned very decidedly to the views of the Stock Exchange, and it was
decided to postpone any consideration of a departure from the status
quo for at least a fortnight.

The general situation remaining very critical all through August, no
further steps were taken until September 8th. By that date a new
factor had intruded itself into the situation. Certain corporate
obligations were about to come due and the refunding of these
obligations, whether in fresh issues of bonds 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 of Seven," appointed by the bond dealers, were
requested to formulate a plan for this purpose. This Committee of
Seven consisted of members of the firms of: Brown Brothers & Co.;
Guaranty Trust Co.; Harris, Forbes & Co.; Kissel, Kinnicutt & Co.; Wm.
A. Read & Co.; Remick, Hodges & Co., and White, Weld & Co.

On September 9th, this Committee issued the following notice to bond
dealers:

     "Your Committee is pleased to report that New York City's
     financial needs have been taken care of satisfactorily, thereby
     considerably clearing the foreign exchange situation which
     existed when our communication of September 3d was sent out.

     "The Committee is therefore of the opinion that the placing of
     securities owned by dealers with their private customers should
     be approved where the securities can be sold without disturbing
     the collateral loan situation and your Committee will be glad to
     continue to advise whenever such opportunities arise. Anything
     tending toward public quotations or the creating of the
     impression of an active or even semi-active market would
     unquestionably seriously disturb the loan situation.

     "Transactions with bargain hunters should not be countenanced and
     your Committee will not approve the closing of transactions
     coming under this head. Prices should conform to the spirit which
     has prevailed during the past few weeks.

     "Recognizing the support which banks and other lenders of money
     have given to dealers in securities, it should be the policy of
     such dealers when securities are sold to apply the proceeds
     toward the liquidation of loans.

     "The Committee has considered questions of maturing obligations
     of cities and corporations and believes that the present
     situation does not warrant any attempt to issue long time bonds,
     but that such refunding should be accomplished through short time
     financing.

     "The Clearing House Committee and the Stock Exchange Committee
     have expressed appreciation of the coöperation shown by the
     dealers in listed and unlisted securities and if all will
     endeavor to live up to the spirit of the policy thus far adhered
     to we are sure there will be no cause for criticisms on the part
     of the banks or the Stock Exchange Committee.

     "Your Committee of Seven will continue to meet in the Directors'
     Room of the Chase National Bank daily, from 11 A.M. to 12 M., for
     advice on any cases where we can be of any assistance whatever."

The practical plan adopted was as follows:

Bond houses having securities of their own for sale could place them
with their clients at prices approved by the Committee of Seven. All
purchasers and sellers 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 Exchange Clearing House when
dealing in listed bonds, and these two agencies were empowered to
determine minimum prices below which sales could not be made.

It will be seen that a very important step in the direction of
relaxation of restraints was here taken. Not only was the prohibition
of all dealings which had marked the beginning of the crisis
withdrawn, but prices below the closing sales of July 30th were to be
permitted subject to the supervision of a Committee.

       *       *       *       *       *

As has already been stated, the Committee on Clearing House had their
hands full from the time the Exchange closed, first with bringing
about the settlement of the contracts of July 30th, and secondly with
carrying on the business of making new contracts 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 should not be sold. To meet this difficulty
it was decided that a small additional Committee of men known to be
thoroughly familiar with the bond business should be organized, and
that it should be their duty to control the liquidation of listed
bonds.

The carrying out of this plan at first met with a technical obstacle.
The power to appoint a Special Committee rested exclusively with the
Governing Committee of the Exchange; in order to secure action a
special meeting of that body would have to be called; in the early
weeks of September 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 members of the Governing Committee,
who possessed the desired qualifications, to volunteer their services
as an advisory body in the matter of fixing prices for listed bonds.
The three members selected were Messrs. C. M. Newcombe, Vice President
of the Exchange, W. H. Remick, and W. D. Wood.

On the 19th of September these three gentlemen cheerfully undertook
the difficult and onerous task urged upon them, and for three months
they abandoned their own private interests 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 that should at once be effective and yet not lead to
demoralization, they placed themselves among the foremost of those to
whom the financial community owes a debt of gratitude.

       *       *       *       *       *

By the latter part of September methods, as described above, had been
found for facilitating a restricted liquidation of listed stocks, and
of listed and unlisted bonds. Nothing, however, had been done to make
an outlet for unlisted stocks. The "Curb" market and certain prominent
unaffiliated houses dealing in these securities had loyally 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 circumstances
differed, however, in one particular. The bond dealers had
spontaneously created for themselves the very efficient Committee of
Seven who took their affairs in hand, but the interests involved in
unlisted stocks did not show the same solidarity, and it was necessary
for the Committee of Five to take a hand in initiating action.

With this end in view they consulted Mr. Herbert B. Smithers, of the
firm of F. S. Smithers & Co., concerning the feasibility of having a
committee formed to pass upon and control a resumption of dealings in
unlisted stocks. Mr. Smithers was singled out for the reason that he
was a member of the Stock 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 24th he appeared
before the Committee of Five accompanied by Messrs. A. C. Gwynne, F.
H. Hatch, A. H. Lockett, and E. K. McCormick. These gentlemen
announced that they were willing to act, with Mr. Smithers as their
Chairman, and a plan for the control of the market in unlisted stocks
was agreed upon.

In order to clothe this Committee (which included two Stock Exchange
members, two representatives of prominent outside dealers, and the
President of the Curb Association) with authority, the Committee of
Five directed members of the Exchange to 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
Stock Exchange houses, it was probable that their action would
determine that of unattached dealers. This expectation was, in the
main, borne out, and business in unlisted stocks began to be carried
on actively under the jurisdiction above described.

It is necessary to record, however, in the interest of preserving a
correct picture of the happenings of this momentous time, that the
smooth and gratifying operation of the various other Committees, which
sprang into being to handle the numerous problems presented, was not
entirely repeated in this case.

The conditions surrounding unlisted stocks seemed on the surface to be
identical with those pertaining to unlisted bonds. In both cases a
business that was partly in the hands of Stock Exchange members and
partly in those of outside concerns was to be presided over by a mixed
Committee representing both interests. In the case of the Bond
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 concerned, and
that being themselves dealers in the properties the trades in which
were under their supervision, these gentlemen could not be trusted to
act fairly in making their rulings. After much preliminary growling
which vented itself in interviews with the Committee of Five, this
antagonistic sentiment crystallized into a written protest.

On October 1st, the following statement was presented to the Committee
of Five.


     "GENTLEMEN:

     "Owing to a general feeling of dissatisfaction amongst members
     and non-members of the New York Stock Exchange resulting from the
     formation of a Committee of Five to supervise dealings in
     Unlisted Securities, we, the undersigned, desire to suggest the
     following recommendations for your consideration:

     "_First_: The personnel of the Committee be changed to the effect
     that same be composed of parties not identified as dealers.

     "_Second_: That in stocks which have an open or active market,
     transactions may be made without restriction or necessity of
     report to the Committee, when at or above the closing prices of
     July 30, 1914.

     "_Third_: That where securities have not had an active or open
     market the bid prices as published in the _Chronicle_ of August
     1st, be accepted as the closing prices.

     "_Fourth_: That in the case of securities where the Committee may
     deem it possible to trade at prices below those prevailing on
     July 30th, they establish minimum prices good for as long a time
     as the Committee deems practical, and that a list of these prices
     be furnished to those making application for same."

     "We think that if the above recommendations are put into force,
     it will do away with the criticism which has been made as to the
     Committee as at present constituted, and by so doing increase the
     efficiency of this Committee on Unlisted Securities, by securing
     thorough and hearty coöperation on the part of all brokers and
     dealers in these issues."

In reply to this appeal the Committee of Five pointed out that
whenever, in other cases, the action of a Committee had been invoked
to supervise the transaction of business, confidence in the integrity
of that Committee had been general and unquestioned. The Committee of
Seven, the Committee on Clearing House, the Committee of Three, and
the Committee of Five themselves had all been vested with dictatorial
powers over 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, substituting other individuals in their
places, would merely stimulate fresh antagonism that might wreck the
entire project. The fact that these men were dealers in outside
properties especially fitted them to pass upon the reasonableness of
the prices that were to be made, and there was no more reason to
question their integrity of purpose than there would be to doubt that
of any individuals who might take their place.

A firm stand was thus taken in defence of this new Committee, and they
succeeded in carrying on their work successfully up to the time when
the amelioration of conditions enabled them to disband. It must be
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
what impediments they could in the path of this Committee, and thereby
furnished the only exception to the wonderful exhibition of loyalty
and self effacement that manifested itself in every other department.

       *       *       *       *       *

When the Exchange suddenly closed its doors, an immense number of
people, consisting of employees of the Exchange itself and the
clerical forces of all the many brokerage houses, were rendered idle.
As soon as it became evident that the suspension of business was going
to be indefinitely prolonged, the grave question arose as to the
extent to which these people would be thrown out of employment. The
Stock Exchange at once set the generous example of deciding to retain
its entire force 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 difficulties. The result was that a few strong
houses, with philanthropic proclivities, carried their clerical forces
through on full pay, but the majority were obliged to cut them down in
various ways. In some cases the full force was retained on greatly
reduced salaries, in others salaries were reduced and part of the
force discharged, and the net result was that a great number of
unfortunates were either thrown into unemployment altogether or placed
in very straightened circumstances.

It is an interesting fact, bearing on the popular superstition that
Wall Street is peopled by unprincipled worshippers of the dollar who
are incapable of those finer qualities of character which are confined
exclusively to other walks of life, that there is no region in which a
quicker response to the call 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 of the Street
a movement was at once set on foot to start measures of relief and
assistance. Perhaps the best way to convey an idea of the form which
this assistance took is to quote from a report on the subject made by
one of those who generously gave his time to the work. What follows is
in his own words.

"A phase of the extraordinary and unprecedented conditions prevailing
in the Financial District, commonly known as 'Wall Street,' was the
necessity for cutting down office expenses, and though many firms
carried their salary list intact, a considerable number laid off from
one half to two thirds of their employees, and subsequent events
developed the fact that some of them discharged practically their
entire force.

"About the middle of September, the distress said to exist among the
Wall Street employees, who had lost their positions as a result of the
war in Europe, prompted Mr. C. E. Knoblauch to suggest 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, and further evidences of the
existence of a wider field for the work than was at first realized,
culminated in a call for a meeting in the office of Tefft & Company
and immediate organization.

"Officers having been duly elected, the personnel of the Committee was
declared to be as follows:--James B. Mabon, W. H. Remick, Graham F.
Blandy, R. H. Thomas, W. W. Price, G. V. Hollins, C. E. Knoblauch, C.
J. Housman, G. M. Sidenberg, Townsend Lawrence, T. F. Wilcox, Erastus
T. Tefft, Chairman; Charles L. Burnham, Secretary; Edward Roesler,
Treasurer.

"The title of the Committee was formally agreed upon as 'The Wall
Street Employees' Relief Committee.'

"Through the courtesy of Mr. Clarence Mackey, the offer of a suite of
rooms on the second floor of the Commercial Cable Building, 20 Broad
Street, for the use of the Committee, at no charge for rent, was
gratefully accepted, and arrangements for occupation were made at
once. Mr. Oswald Villard, through a member of the Committee, evidenced
his interest by offering temporary use of rooms in the _Evening Post_
Building for the purposes of the Committee.

"It was determined that the principal object of the Committee would be
to act as an Employment Bureau, to find positions for unemployed and
to relieve distress where it was found to exist. It was understood and
arranged for, that any Wall Street 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
depository of the funds was referred to the Treasurer with power. The
work of receiving and recording registration blanks commenced with a
rush, over one hundred and fifty were filed the first day, and in a
few weeks they numbered over one thousand.

"A very pleasant feature of the work was the cordial coöperation
encountered on all sides. Helping hands were extended everywhere. The
newspapers gave many 'reading notices,' and special advertising rates,
and the news bureaus printed any and all notices as and when
requested. The Stock Exchange Library Committee and 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, and those selected were of great
assistance in preparing the card index system, which was used and
found to be practical and eminently satisfactory. Appreciated
assistance was promptly tendered by The Telephone Clerks' Association,
The Association of Wall Street Employees, and The Wall Street
Telegraphers' Association.

"Several cases of sickness, some very serious, were taken care of by
Dr. L. A. Dessar, who gave free medical service to all applicants
recommended by the Committee, and provided 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 assistance in procuring employment was imperatively necessary
had been greatly under-estimated, and evidenced an absolute argument
endorsing the reasons for the Committee's existence.

"Many who applied were not in immediate need of money, but wanted
employment, which the members of the Committee sought for them by
individual solicitation of everyone they knew, or knew of, who were
employers, and also by careful, judicious and timely advertising in
the daily 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 considered. Two hundred and thirty were
placed in temporary jobs for periods ranging from a few days to
several weeks, a number of them being re-employed two or three times.
Four hundred and ninety, having been taken back by their former
employers, withdrew their applications.

"Numerous positions obtained for applicants while the Exchange was
closed were in lines other than Stock Exchange business, and Wall
Street clerks notwithstanding their 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 more
or less strangers. In view of the fact that this circumstance made
the accomplishment desired necessarily slow, the outcome demonstrated
that it was reasonably sure.

"The request for subscriptions to the fund met with a hearty and
generous response. Some apprehension was felt in this regard, but the
splendid result proved to be an agreeable surprise. Appeals for
subscriptions to the fund were made only to Stock Exchange members and
firms, nevertheless, 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 request was made, 'please do not publish my
name.' A well known artist, in addition to a cash subscription,
presented one of his paintings to the Committee. Through the kind
assistance of the Chairman of The Stock Exchange Luncheon Club, the
picture was sold for the substantial sum of $500.

"The Treasurer, with ample funds at his disposal, was able to meet
calls for financial help that were frequent and pressing, and
recognizing the desirability of experienced and competent assistance
in making the necessarily intimate inquiries, to determine if
applicants for relief were worthy, he applied to Mr. Robert 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 which were carefully
investigated. Much suffering and distress, and some cases of actual
destitution were found to exist, and while a detailed statistical
statement would seem uncalled for and not desired at this time, the
following brief résumé of the Committee's 'relief work' will
undoubtedly prove to be of interest.

"Financial assistance was extended to about one hundred individuals
and families; rent was paid for thirty-nine; food purchased for
forty-six; clothing was furnished in seven instances; five persons
were placed in hospitals; there were a considerable number of cases
where the Committee in 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 helped but did not want charity,
so to meet that emergency a form of voucher was used, which
acknowledged the receipt of a 'loan' without interest, to be repaid at
the convenience of the 'borrower.' That applied to _cash_ of course,
payments for groceries, rent, etc., were simply receipted for.

"The results achieved, in the opinion of many, would seem to warrant
an amendment to the original idea that a return to normal conditions
would involve the dissolution of the Committee, and the proposition
that it be made a permanent organization is being seriously
considered."

This record is deeply gratifying to the brokerage fraternity because
it discloses the fact that, even in the midst of a calamity so great
that no individual could feel himself beyond the reach of insolvency,
the impulse to succor the unfortunate remained as strong as ever among
them.




CHAPTER III

THE REOPENING OF THE EXCHANGE


The fact that the Stock Exchange closed on July 31st and did not
reopen fully until December 15th, might lead to the supposition that
the question of reopening was not taken up 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 the closing the minority, who had not been at first convinced of
the wisdom of that action, joined with the majority in urgently
advising that the Exchange be not reopened soon. All through the month
of August a growing anxiety over the possibility of some hasty action
by the Exchange authorities showed itself among brokers, bankers, and
even some government officials. For this anxiety there was never any
basis, because the 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 the
excited solicitude about a premature reopening subsided as the
ultra-conservative attitude of the Exchange was understood, and this
was followed ere long by the first symptoms of agitation for the
establishment of some form of restricted market.

As we have already shown the restraints of July 31st were relaxed one
by one with the lapse of time. First a market at or above the closing
prices was organized under the Committee on Clearing House; then
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
diminution of strain, did not constitute a reopening of the Stock
Exchange, and the restoration of that great primary market, in some
restricted way, became more and more a subject of public interest and
concern.

As we have seen, the fundamental reason for closing the Exchange was
that America, when the war broke out, was in debt to Europe, and that
Europe was sure to enforce the immediate payment of that debt in order
to put herself in funds to prosecute this greatest of all wars. To use
an illustration popular in Wall Street at the time, there was to be an
unexpected run on 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 on plans for performing
this difficult feat poured in upon the Committee of Five in constantly
increasing volume, and they were frequently accompanied by a request
on the part of their authors that, when adopted, the credit for their
success be publicly attributed to them. An edifying confidence was
thus shown in what were usually the most visionary of these schemes.

       *       *       *       *       *

Space does not permit the presentation of all these multitudinous
suggestions, but as a matter of information we shall quote extracts
from some of them. In point of time, the first communication to the
Committee on this subject came on August 4th when a prominent banker
appeared in person, and gave vent 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 the
prediction, which was amply verified, that many weeks would elapse
before the Exchange could be reopened at all. Some little time elapsed
before anything further was presented on the subject, but by the end
of August the flood of plans began and went on increasing until the
Exchange resumed business.

On August 31st a communication was received from a well known
"Statistical Organization" for "Merchants, Bankers and Investors"
which said, in part: "In behalf of my clients, who 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 suggested on the enclosed slip, or any other
which you think would serve the purpose." On the enclosed slip was the
following proposed legislation "to enable the Stock Exchanges to
open."

     "Be it enacted: That until the President considers European
     conditions fairly normal it shall be a misdemeanor in this
     country to buy, sell, transfer, give, or accept 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 citizen, together with such evidence as the
     Secretary of the Treasury may require that the securities have
     been owned by United States citizens since July 30th, 1914."

In answer to this proposition the Secretary of the Stock Exchange sent
the following reply:

     "Answering your letter of August 29th, 1914, I am instructed by
     the Special Committee of Five appointed by the Governing
     Committee to say that in its opinion such legislation as referred
     to would be ruinous to the credit of the United States throughout
     the world for many years to come."

In September a letter was received from a Western banker suggesting
that the slogan "Buy a share of stock" if started "would achieve
success, and by so doing would greatly benefit the stock market
situation. This movement would have to be started so as not to create
the impression among the many thousands of 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
smoke clears away that American people would own American railway and
industrial shares. This could be only for the great benefit of this
country but for Europe as well, for the reason that if Europe knew
that there was a good absorbing power here it necessarily would not
dump its stocks at frightful sacrifices."

In October a junior member of one of the big private banking houses
appeared personally and stated that, in his opinion, both domestic and
foreign security holders should be treated alike; that sales should be
conducted as usual; that on reopening transactions should 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 non-negotiable except
between banks. A Committee could, from time to time, remove the
restrictions from such securities as seemed no longer to require them.
The banks should be asked to agree not to call any present loans and
to be very sparing in calling for margins.

Close upon the heels of this plan came a letter signed "A Friend of
the People" which said "Let the Stock Exchange be opened strictly for
the sale 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 or eight days' selling from Europe the Exchange could be
open to the world. By that time the market should be on a rising scale
and safe for all."

This gentleman showed some originality in his view that the foreigner
should be invited to sell at once, instead of being legislated out of
the market as so many other advisers proposed. He seemed to be quite
oblivious of the difficulties, however, that would have been
encountered in inducing American security holders to stand by in
pensive calm while the foreigners unloaded to their heart's content.

Early in November a Philadelphia banker wrote a long and intricate
letter the full details of which we have not space to reproduce, but
it contained the following fragment which is interesting in its way:

     "Could not a plan be formulated between the Stock Exchanges,
     investment bankers and Federal Reserve Banks, by which the
     securities could be valued on their intrinsic and market values
     at such prices that would be considered reasonable to be obtained
     in the next two or three years; that the lenders be guaranteed
     against any losses from recession 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 that an insurance
     premium would be charged which would be considered slightly more
     than adequate. Any surplus could be eventually pro-rated to the
     policy holders. There would need to be no obligation to take out
     such insurance unless the borrowers preferred. The banks might,
     however, force them to do so in many cases or pay off loans."

At about this time many letters and suggestions were received
centering round the main idea that the market be opened exclusively
for such stocks as were not much held in Europe. Just as a
correspondent cited above seemed to believe that American security
holders could be compelled to remain inactive while foreigners sold
their holdings, so these people imagined that holders of one class of
securities could be kept quiet while the prices of some other class
were declining in a free market.

With the above came a letter from a correspondent whose thoughts
carried him back to the old days of buyers' and sellers' options, when
most of the security business was done on 30 or 60 day contracts. He
proposed that the Exchange be reopened so that "all trades made be
'buyer 60'. No other bids or offers to be valid." This would postpone
for two months the settling day for the expected liquidation, and he
felt certain that by that time there could be no trouble in meeting
obligations. 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 buyer agrees to take 10 per cent. more, or say 10 shares at
the end of six months, 10 shares in 9 months, 10 shares in 12 months,
10 shares in 15 months," etc., etc., at the original price of $112 per
share. This plan seemed to contemplate a bequest of unsettled
contracts to future generations of unsuspecting brokers. The author of
it was particularly solicitous that, in the event of its adoption, his
name should be handed down to posterity along with the unfulfilled
contracts.

An idea of very wide prevalence, which was touched upon in nearly all
communications to the Committee and which even some bankers approved,
was that a preliminary step to reopening 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 into by the Committee. It was found to present great practical
difficulties, but was never definitely abandoned until the resumption
of business was shown to be possible without it.

       *       *       *       *       *

The advice which was received by the Committee of Five with regard to
reopening was divided into two classes. There was that large body of
suggestions, some of which we have described above, which were
volunteered either in letters or in interviews, and there was the
advice of well known bankers and men of financial prominence which the
Committee itself solicited. In the latter class figured a member of
one of the largest private banking houses in New York whose opinions
and counsel were of inestimable value. This 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 reëstablishing 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 supposed. The most valuable of his admonitions, and the
words which did most to strengthen the courage and resolve of the
Committee were these: "You will be given all kinds of advice by all
kinds of people, but remember that in the end the responsibility will
fall upon you, therefore listen attentively to everything you are told
but act on your own independent judgment." This wise course was
successfully followed, and the change in the trend of foreign exchange
came, as he predicted, much sooner than was expected.

Numerous other prominent men who were turned to for assistance showed
the greatest willingness to render every service within their power,
and placed the Committee under heavy obligations. There was one case
where the zealous desire to work out a very detailed solution of the
reopening problem brought a ray of humor into these otherwise serious
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 zeal of an outsider who while trying to pilot the
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 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 financially embarrassed will bring enormous
pressure upon the authorities of the Exchange to renew the drastic
expedients of the famous thirty-first of July. It is to be sincerely
hoped that there will always be firmness enough in the Governing
Committee to resist this pressure. The great world war coming, as it
did, without warning was a rare and epoch-making event that warranted
unheard of action and to indulge in such action for any lesser cause
would be utterly disastrous.

The Committee of Five seems to have been brought into existence under
a lucky star. That five men called together so suddenly in such an
emergency should have worked with absolute harmony for so long a time
is quite remarkable. Their unanimity 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 responded with calm determination "and you must not forget
that you are not the other four." This encounter excited much
amusement among the remaining members and was the one and only
occasion where anything resembling a serious difference appeared.

In addition to being blessed with harmony they were very fortunate in
having passed rulings for so long a time without giving forth anything
that had to be recalled. In view of the complexity of the conditions,
fortune must have aided in this as well as 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 a prominent journal that their fear of
foreign liquidation had been an "obsession" which lacked
justification. These critics never were heard from while the event was
in doubt, and consequently the Committee did not profit much by their
learned sayings.

It can be stated with confidence that the intelligent resourcefulness
of the Stock Exchange, in conjunction with the splendid public
spirited work of the New York banks and the press, warded off 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 who will have to
solve the problems of the great financial market when in the words of
Tyndall, "you and I, like streaks of morning cloud, shall have melted
into the infinite azure of the past."




THE END


[Illustration]

THE COUNTRY LIFE PRESS GARDEN CITY, N. Y.


[Transcriber's Notes:

The transcriber made these changes to the text to correct obvious
errors:

  1. p. 49, from 11 A.M. to 12 M. (note missing "A" or "P"),
              left as published
  2. p. 54, "We think that if ... (added opening quote)
  3. p. 83, rescision --> rescission
  4. p. 87, unforseen --> unforeseen

End of Transcriber's Notes]