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THE NEW YORK
STOCK EXCHANGE IN
THE CRISIS OF 1914
BY
H. G. S. NOBLE
PRESIDENT


--


- ~- -~ - --


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 in[i]


282428




INTRODUCTION
teresting 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
[ii]




INTRODUCTION
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.


[iii]




a ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~



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
[3]




THE NEW YORK STOCK EXCHANGE
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
[ 4 1




IN THE CRISIS OF 1914
over night and plunge us back into mediaeval 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
[5]




THE NEW YORK STOCK EXCHANGE
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
[6]




IN THE CRISIS OF 1914
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,/vhich have been
based upon the expectation of an unmnterrupted market,
are left in hopeless and critical s/spense if this market
is suddenly removed, and it becomes apparent that
to close the Exchange is manifestly to inflict farreaching 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 crisisassuming 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[7]




THE NEW YORK STOCK EXCHANGE
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
[8]




IN THE CRISIS OF 1914
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
[91




THE NEW YORK STOCK EXCHANGE
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
[10 ]




IN THE CRISIS OF 1914
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 unan[I 11 ]




THE NEW YORK STOCK EXCHANGE
imously 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 un[ 129 ]




IN THE CRISIS OF 1914
willingly 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
[13 1]




THE NEW YORK STOCK EXCHANGE
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 14j%; 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
[14 1




IN THE CRISIS OF 1914
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
[15]




THE NEW YORK STOCK EXCHANGE
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.
[ 16]




IN THE CRISIS OF 1914
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.


[17]




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
[18 ]




IN THE CRISIS OF 1914
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 cooperate
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
[19 1




THE NEW YORK STOCK EXCHANGE
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
[ 20 1




IN THE CRISIS OF 1914
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 informa[21 ]




THE NEW YORK STOCK EXCHANGE
tion 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
[ 22 ]




IN THE CRISIS OF 1914
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 3st, 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."
[ s3]




THE NEW YORK STOCK EXCHANGE
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 a:nce
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 cooperated 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 coSperation 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
[ 24 ]




IN THE CRISIS OF 1914
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 dosed, 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
[ 25]




THE NEW YORK STOCK EXCHANGE
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 cooperation 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 cooperated 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
[ 26]




IN THE CRISIS OF 1914
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 de[ 27 ]




THE NEW YORK STOCK EXCHANGE
liveries 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 thi;s
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
cooperation 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.
[ 28]




IN THE CRISIS OF 1914
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,"
t 29]




THE NEW YORK STOCK EXCHANGE
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 cootperation of the Clearing House banks should be sought
in solving the difficulty. The Committee of Five there[30]




IN THE CRISIS OF 1914
upon 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.
[81 ]




THE NEW YORK STOCK EXCHANGE
"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."
[ 32 ]




IN THE CRISIS OF 1914
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
[33]




THE NEW YORK STOCK EXCHANGE
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 81st, 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."
[34 1




IN THE CRISIS OF 1914
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
[35 1




THE NEW YORK STOCK EXCHANGE
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 re[36]




IN THE CRISIS OF 1914
open 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 moneylending institutions were to be urged to cooperate 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
[37 




THE NEW YORK STOCK EXCHANGE
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 organ[ 38 




IN THE CRISIS OF 1914
ized 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 cooperating 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.
[39]




THE NEW YORK STOCK EXCHANGE
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
[40 ]




IN THE CRISIS OF 1914
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
[41]




THE NEW YORK STOCK EXCHANGE
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
[421




IN THE CRISIS OF 1914
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 estab[43]




THE NEW YORK STOCK EXCHANGE
lished 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
[44 1]




IN THE CRISIS OF 1914
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
[45 ]




THE NEW YORK STOCK EXCHANGE
efficiency of the intimate cooperation 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 cooperated 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
] 46]




IN THE CRISIS OF 1914
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
[47]




THE NEW YORK STOCK EXCHANGE
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.,andWhite,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
[48 ]




IN THE CRISIS OF 1914
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 cooperation
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 19 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 un[49 ]




THE NEW YORK STOCK EXCHANGE
listed 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
[50 1




IN THE CRISIS OF 1914
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
[51 ]




THE NEW YORK STOCK EXCHANGE
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
[ 52 ]




IN THE CRISIS OF 1914
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
[53]




THE NEW YORK STOCK EXCHANGE
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 cooperation 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
[54]




IN THE CRISIS OF 1914
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
[55 ]




THE NEW YORK STOCK EXCHANGE
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.
[56]




IN THE CRISIS OF 1914
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 t& suggest that some concerted
action be taken to meet this emergency, if only as a
[57]




THE NEW YORK STOCK EXCHANGE
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
[58]




IN THE CRISIS OF 1914
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
cooperation 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.
[59]




THE NEW YORK STOCK EXCHANGE
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
[60 ]




IN THE CRISIS OF 1914
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 ser[61]




THE NEW YORK STOCK EXCHANGE
vices 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 resume 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."
[62]




IN THE CRISIS OF 1914
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.


[68]




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.
[64]




IN THE CRISIS OF 1914
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
[65 ]




THE NEW YORK STOCK EXCHANGE
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 oa 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."
[66]




IN THE CRISIS OF 1914
"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 ab[67]




THE NEW YORK STOCK EXCHANGE
sorbing 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
[68]




IN THE CRISIS OF 1914
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.
[69]




THE NEW YORK STOCK EXCHANGE
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
[70]




IN THE CRISIS OF 1914
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 reestablishing 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
[71]




THE NEW YORK STOCK EXCHANGE
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,
[ 72]




IN THE CRISIS OF 1914
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
[73]




THE NEW YORK STOCK EXCHANGE
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
[ 74]




IN THE CRISIS OF 1914
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,
[75 ]




THE NEW YORK STOCK EXCHANGE
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:
[76 




IN THE CRISIS OF 1914
"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, VicePresident 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.
[77]




THE NEW YORK STOCK EXCHANGE
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
[78 ]




IN THE CRISIS OF 1914
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- news[79 ]




THE NEW YORK STOCK EXCHANGE
papers, 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 butpostponement 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
[80 ]




IN THE CRISIS OF 1914
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
[81 1




THE NEW YORK STOCK 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
[82]




IN THE CRISIS OF 1914
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 Comm'ittee 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 rescision 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.
"9 Dealings in such stocks as shall be specified by, and be under
the supervision and reguation of the Committee, shall be for
[ 83]1




THE NEW YORK STOCK EXCHANGE
'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."
[ 84]




IN THE CRISIS OF 1914
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
[85]




THE NEW YORK STOCK EXCHANGE
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
Ie 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.
[ 86 1




IN THE CRISIS OF 1914
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 unforseen 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
cooperation. 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
[87]




THE NEW YORK STOCK EXCHANGE
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, cf 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
[ 88]




IN THE CRISIS OF 1914
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
JUl.:X 


[89]




THE COUNTRY LIFE PRESS
GARDEN CITY, N. Y.




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