THE REOPENING OF THE EXCHANGE

The fact that the Stock Exchange closed on July 31st and did not reopen fully until December 15th, might lead to the supposition that the question of reopening was not taken up before December. Far from this being the case, the truth is that reopening began to be discussed immediately after the institution was closed. Within twenty-four hours of the closing the minority, who had not been at first convinced of the wisdom of that action, joined with the majority in urgently advising that the Exchange be not reopened soon. All through the month of August a growing anxiety over the possibility of some hasty action by the Exchange authorities showed itself among brokers, bankers, and even some government officials. For this anxiety there was never any basis, because the officers of the Exchange having exceptional means of knowing what the dangers were, had no intention of assuming the immense responsibilities of re-establishing the market without the backing and approval of the entire banking fraternity. Gradually the excited solicitude about a premature reopening subsided as the ultra-conservative attitude of the Exchange was understood, and this was followed ere long by the first symptoms of agitation for the establishment of some form of restricted market.

As we have already shown the restraints of July 31st were relaxed one by one with the lapse of time. First a market at or above the closing prices was organized under the Committee on Clearing House; then Committees to facilitate trading in listed and unlisted bonds were formed; and finally a market was provided for unlisted stocks. All these devices, however, while they brought about readjustment and diminution of strain, did not constitute a reopening of the Stock Exchange, and the restoration of that great primary market, in some restricted way, became more and more a subject of public interest and concern.

As we have seen, the fundamental reason for closing the Exchange was that America, when the war broke out, was in debt to Europe, and that Europe was sure to enforce the immediate payment of that debt in order to put herself in funds to prosecute this greatest of all wars. To use an illustration popular in Wall Street at the time, there was to be an unexpected run on Uncle Sam’s Bank and the Stock Exchange was the paying teller’s window through which the money was to be drawn out, so the window was closed to gain time. How to reopen this window in such a way as not to pay out any more money to the foreign creditor than would suit our own convenience was the problem which soon began to agitate many ingenious minds. As time went on plans for performing this difficult feat poured in upon the Committee of Five in constantly increasing volume, and they were frequently accompanied by a request on the part of their authors that, when adopted, the credit for their success be publicly attributed to them. An edifying confidence was thus shown in what were usually the most visionary of these schemes.

Space does not permit the presentation of all these multitudinous suggestions, but as a matter of information we shall quote extracts from some of them. In point of time, the first communication to the Committee on this subject came on August 4th when a prominent banker appeared in person, and gave vent to the following oracular utterance: “When the Exchange reopens it should not do business from ten till three, but should open from ten o’clock to one. All transactions should be for cash, and must be delivered and paid for the same day, no contract to be allowed to stand over night.” He also made the prediction, which was amply verified, that many weeks would elapse before the Exchange could be reopened at all. Some little time elapsed before anything further was presented on the subject, but by the end of August the flood of plans began and went on increasing until the Exchange resumed business.

On August 31st a communication was received from a well known “Statistical Organization” for “Merchants, Bankers and Investors” which said, in part: “In behalf of my clients, who are exceedingly interested in making it possible for the Stock Exchanges to open safely, I am getting the opinion of important bodies relative to the proposed legislation suggested on the enclosed slip, or any other which you think would serve the purpose.” On the enclosed slip was the following proposed legislation “to enable the Stock Exchanges to open.”

“Be it enacted: That until the President considers European conditions fairly normal it shall be a misdemeanor in this country to buy, sell, transfer, give, or accept as collateral, shares of stock or evidences of indebtedness extending over one year, unless accompanied by a certificate showing that the owner is a United States citizen, together with such evidence as the Secretary of the Treasury may require that the securities have been owned by United States citizens since July 30th, 1914.”

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

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

In September a letter was received from a Western banker suggesting that the slogan “Buy a share of stock” if started “would achieve success, and by so doing would greatly benefit the stock market situation. This movement would have to be started so as not to create the impression among the many thousands of people it would reach, that it was merely a movement for the purpose of benefiting the stock brokers, but that it would be instrumental in relieving the strain on every conceivable business. Were such a movement accepted, and should it meet with results worthy of the plan it would be found out when the smoke clears away that American people would own American railway and industrial shares. This could be only for the great benefit of this country but for Europe as well, for the reason that if Europe knew that there was a good absorbing power here it necessarily would not dump its stocks at frightful sacrifices.”

In October a junior member of one of the big private banking houses appeared personally and stated that, in his opinion, both domestic and foreign security holders should be treated alike; that sales should be conducted as usual; that on reopening transactions should be restricted and only sales be published and no bids or offers. His idea of restriction at the start was that all stock purchased should be paid for on the basis of 10% cash and the balance in certificates of deposit for cash, which certificates were to be non-negotiable except between banks. A Committee could, from time to time, remove the restrictions from such securities as seemed no longer to require them. The banks should be asked to agree not to call any present loans and to be very sparing in calling for margins.

Close upon the heels of this plan came a letter signed “A Friend of the People” which said “Let the Stock Exchange be opened strictly for the sale of American securities held by foreign stock holders. If they wish to throw their stocks over we can buy them at our own price. After six or eight days’ selling from Europe the Exchange could be open to the world. By that time the market should be on a rising scale and safe for all.”

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

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

“Could not a plan be formulated between the Stock Exchanges, investment bankers and Federal Reserve Banks, by which the securities could be valued on their intrinsic and market values at such prices that would be considered reasonable to be obtained in the next two or three years; that the lenders be guaranteed against any losses from recession below the stipulated point at which the securities might later be liquidated, say sometime during the year 1917, if it had not been voluntarily liquidated without loss before. Loans so insured would have to be in force on securities carried prior to a certain date, probably before the Exchange opened, if not last July 30th, and that an insurance premium would be charged which would be considered slightly more than adequate. Any surplus could be eventually pro-rated to the policy holders. There would need to be no obligation to take out such insurance unless the borrowers preferred. The banks might, however, force them to do so in many cases or pay off loans.”

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

With the above came a letter from a correspondent whose thoughts carried him back to the old days of buyers’ and sellers’ options, when most of the security business was done on 30 or 60 day contracts. He proposed that the Exchange be reopened so that “all trades made be ‘buyer 60’. No other bids or offers to be valid.” This would postpone for two months the settling day for the expected liquidation, and he felt certain that by that time there could be no trouble in meeting obligations. Unfortunately at the time he wrote there was no way of obtaining assurance of this happy outcome. The same idea in a somewhat different form came from another correspondent who, instead of deferring payment by a buyer’s option, proposed that stocks and bonds be sold on a 10 per cent. basis “That is, the seller of 100 shares of Union Pacific at 112 will deliver to buyer 10 per cent. of amount sold, and receive a check for $1,120, together with a contract in which the buyer agrees to take 10 per cent. more, or say 10 shares at the end of six months, 10 shares in 9 months, 10 shares in 12 months, 10 shares in 15 months,” etc., etc., at the original price of $112 per share. This plan seemed to contemplate a bequest of unsettled contracts to future generations of unsuspecting brokers. The author of it was particularly solicitous that, in the event of its adoption, his name should be handed down to posterity along with the unfulfilled contracts.

An idea of very wide prevalence, which was touched upon in nearly all communications to the Committee and which even some bankers approved, was that a preliminary step to reopening should be an agreement by the banks not to call loans made prior to July 31st, 1914, for some specified period of time. This idea was very thoroughly discussed and looked into by the Committee. It was found to present great practical difficulties, but was never definitely abandoned until the resumption of business was shown to be possible without it.

The advice which was received by the Committee of Five with regard to reopening was divided into two classes. There was that large body of suggestions, some of which we have described above, which were volunteered either in letters or in interviews, and there was the advice of well known bankers and men of financial prominence which the Committee itself solicited. In the latter class figured a member of one of the largest private banking houses in New York whose opinions and counsel were of inestimable value. This gentleman, gifted with clear insight and a thorough grasp of the situation, and generously anxious to be of service to the Committee, pointed out from the start that the reopening of the Exchange hung upon a favorable swing in the balance of trade. When the indebtedness of the United States to Europe could be offset by our exports the danger of 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 by all kinds of people, but remember that in the end the responsibility will fall upon you, therefore listen attentively to everything you are told but act on your own independent judgment.” This wise course was successfully followed, and the change in the trend of foreign exchange came, as he predicted, much sooner than was expected.

Numerous other prominent men who were turned to for assistance showed the greatest willingness to render every service within their power, and placed the Committee under heavy obligations. There was one case where the zealous desire to work out a very detailed solution of the reopening problem brought a ray of humor into these otherwise serious and anxious discussions. A certain private banker presented his scheme in approximately the following words: “Before you can reopen the Exchange you must be in a position to know to what extent Europe is going to throw our securities upon this market, and the only way to obtain this information is to send some members of your Committee abroad. This delegation should go first to London and settle there for a long enough time to get intimately acquainted with leading persons in the financial world. This could be done by cultivating social intercourse, dining and consorting with these people until a frank statement from them could be obtained concerning the probable volume of American securities for sale.”

As this statement proceeded visible signs of painful emotions manifested themselves among the Committee. The Exchange had already been closed three months, and they were being informed that a plan requiring a lapse of some six months more must be carried out before the happy day of resumption would be in sight. The banker having paused for a few minutes’ reflection, resumed: “Then there is France. Many American securities are held there, and as under their system the action of individual investors is largely controlled by the financial institutions, it will be quite feasible to determine the probable selling of French investors when you have got in intimate touch with these institutions.” Another additional six months’ delay loomed to the vision of the demoralized Committee, and sad words of reproachful protest were about to burst from some of them when their mentor again broke the chilly silence of the meeting room. “Now that I think of it there is Switzerland. The Swiss are a thrifty and saving people and undoubtedly have much money in our properties. In spite of her neutrality Switzerland will feel the economic pinch of this war and her people will have to liquidate many of their foreign holdings. It will be wise, therefore, for you to extend your inquiries from France into Switzerland.”

Here the reaction came, the heart-sick feeling which had plunged the respectfully attentive Committee into gloom vanished, and mirthful emotions so possessed them that it was a hard task to maintain proper dignity and decorum. The temptation to inquire whether this contemplated trip around the globe was to include an effort to trace some American railroad bond into the sacred precincts of Thibet, or a dash to the South Pole to search the abandoned luggage of some deceased explorer, was resisted, and the worthy banker whose imagination had taken such distant flights retired unconscious of the very mixed emotions he had aroused. In the light of the actual reopening that took place only six weeks later this interview becomes a curiosity worth preserving.

Along with other prominent men who consented to meet and consult with the Committee there came Sir George Paish and Mr. Basil G. Blackett. These two gentlemen had come over from England to consult our government and our banking fraternity with regard to the abnormal exchange situation created by the outbreak of war. Before the Committee of Five they, of course, dwelt mainly upon the question of reopening the market. Sir George Paish, being by nature an optimist, took a very roseate view of the outlook, so much so that some members of the Committee were at first disposed to fear (his mission being that of a collector of debts who sought prompt payment) that his diagnosis of the situation was prompted more by his hopes than by his convictions. He proceeded to Washington, where he spent a considerable time negotiating with the national authorities, and on his way home he again appeared before the Committee, on November 23rd, and stated his belief that the Exchange could be reopened at once.

In the light of what followed it is plain that Sir George Paish’s views were very nearly correct and not by any means over-optimistic. The rapidity with which the readjustment of exchange solved the problem presented to the American market was entirely in harmony with his predictions and very flattering to his judgment. His companion, Mr. Basil G. Blackett, was a reticent young man who seldom intruded himself into the discussion, but it was noticeable that whenever he was asked for an expression of opinion he showed himself to be thoroughly informed as to facts and sound in judgment. The Committee was certainly under an obligation to these gentlemen for the time they were willing to give to its deliberations. In this connection it is a pleasure to record that the authorities of the London Stock Exchange showed a similarly friendly disposition. All through the period of crisis communications passed between the London and New York Exchanges and were accompanied by a most friendly spirit of mutual assistance.

While plans for reopening the Exchange were discussed from an early date, nothing definite took shape up to the end of October, and at that time the Committee of Five were still in the dark as to how long business would continue to be suspended. Whether the New Year would find Wall Street still bound and muzzled was an open question on November 1st. As the month advanced, however, a very rapid change in conditions began to manifest itself. On November 10th two significant steps were taken. Mr. Smithers, Chairman of the Unlisted Stocks Committee, appeared and stated that his Committee intended making a report recommending their own discontinuance. He was followed, on the same day, by Mr. E. R. McCormick, Chairman of the Board of Representatives of the Curb Market Association, who urged that the time for a formal reopening of the Curb was at hand. On the following day the Committee on Unlisted Stocks, having submitted a proposed circular which they wished to issue in announcement of their dissolution, the Committee of Five adopted the following rule:

“The Special Committee of Five being of the opinion that the market for unlisted stocks has arrived at a condition that makes supervision of dealings no longer necessary, hereby approve the act of the Committee on Unlisted Stocks in dissolving their organization.

“Ruling N, dated September 24, 1914, is hereby rescinded.”

It is needless to say that this action, together with its ratification by the Committee of Five, was first submitted to and approved by the Clearing House banks. Unlisted stocks comprised a group of properties which were practically not held abroad, and the reason for holding them under close restraint at first was the danger of the sentimental effect on a panicky situation in case their prices should undergo a violent decline. It having been demonstrated that such a decline was not to be feared, the Committee in charge were only too glad to relinquish the difficult duty of supervising the trading and open a free market. It was further decided that the restraint upon free quotation and publication of prices be simultaneously removed from the unlisted dealings.

As a natural sequence to the above action, on November 12th, the Curb Association issued the following notice:

“To the Members of the New York Curb Market Association:

“GENTLEMEN:

“It has been decided that the improvement in the general financial situation has removed the necessity for restrictions over trading in unlisted stocks, therefore you are hereby notified that the New York Curb Market will officially resume business on Monday, November 16th, 1914, at 10 o’clock A.M.

“This action on the part of the Chairman of the New York Curb
Market Association has received the approval and sanction of the
Committee of Five of the New York Stock Exchange.

“E. R. MCCORMICK,
“Chairman.”

On November 13th, the Committee of Five ruled that:

“Unrestricted trading in Listed Municipal and State Bonds for domestic account may now be resumed, but that all transactions for future delivery must be submitted for approval, as heretofore, to the Sub-Committee of Three on Bonds at the Clearing House of the New York Stock Exchange.”

On November 16th, Mr. Frank W. Thomas, Vice-President of the Chicago Stock Exchange and also Chairman of their “Trading Committee,” appeared before the Committee of Five and stated that it was the intention of the authorities of their Exchange to meet on the coming Wednesday to discuss the advisability of opening on Monday, November 23rd. He asked for information regarding the attitude of the New York Stock Exchange in the matter of securities listed on both exchanges. The Committee requested him not to permit dealings in Chicago, in such securities, at prices below the minimum prices established in New York.

Thus one after another came the evidences of a sudden transformation in the financial conditions and of a consequent movement toward the resumption of business, all of which rested fundamentally on an immense increase of our exports and the resulting favorable movement of foreign exchange.

Encouraged by these happenings the Committee of Five actively took up numerous plans for letting down the bars. There had been for some time considerable pressure exerted by those members of the Exchange who were distinctively bond brokers, to have the bond business transferred from the Clearing House to the floor of the Exchange. They thought that this step would make a wider and more satisfactory market for bonds and that the supervision of the Committee of Three could be exerted in one locality as well as in the other. In view of the rapid improvement in conditions, and the fact that unlisted bonds had been given an unrestrained market by the dissolution of the Committee of Seven, it was thought that the moment had come for taking this step in advance. Preparations were at once set on foot to restore the restricted bond market to the floor and thereby insure that partial opening of the doors of the Exchange which would be the entering wedge to ultimate resumption.

Unfortunately the plans of the Committee in this regard were not sufficiently safeguarded. Through some unforeseen leak the news of their intentions got abroad, and brought on some awkward consequences. The first of these was the appearance of a private banker, the same one who early in August had predicted a long period of suspension, to protest against greater freedom in bond dealings. He foresaw terrible results if this rash act were permitted and claimed to have information that European holders of bonds were awaiting this chance to swamp the market. The Committee were not much alarmed by this gentleman’s warnings and were proceeding with their nefarious scheme when a further warning was addressed to them. There was a certain member of a Stock Exchange firm who was on friendly terms with some of the Washington authorities, and who seems to have felt it his duty to see that the Exchange did nothing to give offense in these high quarters. When this individual learned what the Committee had in mind he sent word that it would be prudent for them to let a particular government officer know their plans before putting them into execution. Thinking that this warning must be based on some special information the Committee at once authorized this gentleman to inform his friend in the Government of their plan. This was on Wednesday, November 18th, and the intention of the Committee was to place the bond market upon the floor of the Exchange on the following Monday. On Thursday this well meaning but somewhat misguided go-between reported that he had communicated with Washington and that his friend there had expressed the desire to see some member of the Committee before any further steps were taken.

This news hit the plans of the Committee somewhat after the manner of a submarine torpedo. They had everything in readiness for Monday, and the newspapers, which had also got wind of their intentions, had already announced to the public unequivocally that a restricted bond market would be started on that day. With such limited time to act in there was nothing to resort to but postponement and a notice was immediately given to the press in the following words:

“The Special Committee of Five states that while the plan outlined by the newspapers concerning a further extension of the present method of dealing in bonds was substantially that under consideration by the Committee, the magnitude of the interests affected has led to unforeseen difficulties which will necessitate further consideration. When a decision is reached ample notice will be given to the public officially.”

A letter was at once sent to the Government official notifying him of the readiness of the Committee to visit him at his convenience, and the following day, Saturday, he very courteously sent them a telegram explaining that the suggestion of an interview had in no way emanated from him but that he had misunderstood the intermediary (who had communicated by telephone) and supposed that the interview was being sought by the Exchange. So this mighty tempest in a tea pot resulted from the excessive zeal of an outsider who while trying to pilot the Committee into safe waters succeeded in running it on a reef of his own creation.

Immediately on ascertaining the true situation the following notice was sent out on Saturday:

“The Special Committee of Five announces that having consummated its plan for bond transactions on the Exchange under certain specified restrictions, the same will, in accordance with the Constitution of the Exchange, be submitted to the Governing Committee at the regular meeting to be held on the 24th inst. If the recommendations of the Special Committee are adopted by the Governing Committee the plan will go into operation at an early date.”

Some of the newspapers having announced positively that this new move with regard to bonds would take place on Monday, the 23rd, they were very indignant that it should be postponed without supplying them with a good and sufficient reason. The Committee, on its part, feeling that it was undesirable to publish the details of an awkward misunderstanding with a public official, who would not want his name dragged into a matter that he had in no way concerned himself with, refused to furnish the reason. This at once let loose upon them those vials of reportorial wrath which, up to that time, they had been fortunate in escaping. One journal amicably stated that this incident merely emphasized a fact which had all along been obvious, namely that the Committee were, and had been from the start, totally incompetent to perform the task intrusted to them.

While a gentle shower of epithets fell upon their devoted heads the Committee proceeded with their work and, having obtained the necessary authority from the Governing Committee, they sent out the following ruling on November 24th:

“That so much of rule N as applies to dealings in listed bonds through the Clearing House be rescinded, to take effect at the close of business on Friday, November 27th, 1914. Beginning on Saturday, November 28, 1914, dealings in bonds listed on the Exchange will be permitted on the floor of the Exchange between the hours of ten and three o’clock each day except Saturday, when dealings shall cease at twelve o’clock noon. Such dealings to be under the supervision and regulation of the Committee, and to be for ‘cash’ or ‘regular way’ only and not below the minimum prices as authorized by the Committee from time to time. Transactions at prices other than those allowed by the Committee, or in evasion of the Committee’s rules, are prohibited. All rules of the Exchange governing delivery and default on contracts covered by this resolution shall be in force on and after Saturday, November 28th, 1914, but the closing of contracts ‘under the rule’ shall be subject to the foregoing provisions.”

Thus on Saturday, November 28th, the doors of the Stock Exchange were once more thrown open and a restricted market in listed bonds was established on the floor under the watchful eye of the Committee of Three. There was some hesitancy at first as to whether these bond transactions should be quoted on the ticker in the accustomed way, but before the day of opening came it was decided to report them as usual. By requiring that all trades should be for “cash” or “regular way” and, in a subsequent ruling, by instructing all purchasers of bonds to report to the Committee when such bonds were not delivered by 2.15 P.M. on the day following the purchase, it was hoped to impede any sudden or violent liquidation of foreign securities.

The restoration of the bond market to the floor was a complete success, and at about the same time a general revival of public confidence showed itself in a rise in prices first in the street market and then in the Stock Exchange Clearing House itself. Encouraged by these symptoms the Committee of Five at once formulated a plan for carrying the reopening a step farther. A list of stocks which were not international in character was made out and submitted to the Bank Clearing House Committee, and with their concurrence it was decided to place these upon the floor of the Exchange to be traded in at or above certain prescribed minimum prices.

At a meeting of the Governing Committee on December 7th the following resolution was adopted: “That the Committee of Five is hereby empowered to permit dealings on the floor of the Exchange in such stocks as it may designate under restrictions prescribed by it. That the Committee of Five is hereby authorized to enforce stock loan contracts whenever in its judgment it may deem best so to do, and that the resolution of July 31st, 1914, be modified in this respect.”

A list of minimum prices was fixed upon that averaged some two or three points below the closing prices of July 31st, and on December 11th the Committee issued a ruling prescribing the conditions for the partial resumption of stock dealings on the Exchange. We here present it in full:

“The Special Committee of Five rules that Rule 13 be rescinded, in so far as it applies to stocks admitted to dealings in the Exchange from time to time by the Committee of Five, said rescission to take effect at the close of business on Friday, December 11, 1914.

“Beginning on Saturday, December 12, 1914, dealings in certain specified stocks listed on the Exchange will be permitted on the floor of the Exchange between the hours of ten and three o’clock each day except Saturday, when dealings shall cease at twelve o’clock noon.

“Dealings in such stocks as shall be specified by, and be under the supervision and regulation of the Committee, shall be for ‘cash’ or ‘regular way’ only and not below the minimum prices authorized by the Committee from time to time. Transactions at prices below those allowed by the Committee, or in evasion of its rules are prohibited.

“A list of stocks to be admitted to dealings on the Exchange
accompanies these rulings. Minimum prices on same will be
announced on December 11, 1914.

“All stocks quoted on July 30th at or below 15 per cent., or $15 per share, may be dealt in without restriction as to price, but are included in the list for your guidance, and will be marked ‘Free’ in the price column.

“All stocks admitted to dealings as above, which were being cleared through the Stock Exchange Clearing House at the close of business on July 30, 1914, will be similarly cleared from the opening of business on the 12th day of December, 1914.

“All stocks admitted to dealings, which were being dealt in ‘Ex-Clearing House’ at the close of business on July 30, 1914, will be similarly dealt in from the opening of business on the 12th day of December, 1914.

“Stocks admitted to dealings on the Exchange will cease to be dealt in through the Stock Exchange Committee on Clearing House. Stocks not so admitted will continue to be dealt in through the Committee on Clearing House until further notice.

“All rules of the Exchange governing delivery and default on contracts covered by these rules shall be in force on and after the 12th day of December, 1914, but the closing of contracts ‘Under the Rule’ shall be subject to the foregoing provisions.

STOCKS LOANED

“The Loan Market for stocks will reopen at ten o’clock, A.M. on the 12th day of December, 1914, for such stocks only as are admitted to dealings on the Exchange, from and after which date all rules of the Exchange governing the borrowing and loaning of such stocks shall be in force, but the closing of contracts ‘Under the Rule’ shall be subject to the foregoing provisions.

“The above rule shall apply to stocks borrowed and loaned prior
to and since July 30, 1914.

“Borrowed and loaned stocks will be cleared as before July 30th
last, but only in cases where such stocks are admitted to
dealings on the Exchange.

“Loans of stocks not admitted to dealings on the Exchange will
continue to stand until further notice, unless otherwise agreed
to by both parties to the contract.”

On Monday, December 14th, the next business day after the limited list of stocks had been placed upon the floor of the Exchange, it was reported to the Committee that the volume of transactions taking place in the Stock Exchange Clearing House, in the stocks not yet admitted to the floor, had risen to such proportions as seriously to embarrass that institution. As this activity was taking place on a rising market and signs of increasing confidence were constantly multiplying, the Committee quickly resolved, on the same day, to transfer all stocks to the floor on the following morning, and notice to that effect was at once sent out. The unexpected appearance of this notice on the tape was greeted with cheers of approbation in the Exchange, and on December 15th the long hoped for reopening of the entire market had become a reality.

The Committee of Five by this act brought their own rule to a close. Arbitrary power had been put in their hands to be exercised while the Exchange remained closed, but now that it was reopened authority naturally returned to its legitimate channels. The Committee therefore presented the following report to the Governing Committee on December 15th:

“The Special Committee of Five beg leave to report that in as much as the crisis that existed on July 31st, 1914, has passed, and financial affairs in this country have resumed a practically normal condition, the necessity for the Committee’s continuance no longer exists and hence they request to be discharged. Before being discharged they desire to express their appreciation of the trust and confidence placed in them by the Governing Committee. They also wish to express to the members of the Exchange their appreciation of the manner in which their rulings have been respected, even though in many cases it involved great sacrifices.

Resolved, That the report of the Special Committee of Five be
received, and the Committee be discharged.”

Thus, like the sudden and unexpected shifting of a dream, the Committee of Five who so recently had almost despaired of fixing a date for reopening the Exchange, found the Exchange open and themselves a memory of the past. The abruptness of their exit was tempered, however, in the following manner. As above described, the reopening was accompanied by the restraint of certain arbitrary minimum prices below which securities could not be sold. It was felt that, owing to the critical and indecisive state of the war, there was a continuing possibility of some news that might renew a crisis in the market. While this possibility lasted the maintenance of minimum prices furnished an automatic check upon sudden panic which would avoid raising the question of a second closing of the Exchange. In order to regulate these minimum prices and so change them from time to time as to keep in accord with normal supply and demand, it was necessary to appoint a Committee, and the original Five were continued in office with this sole regulative power. As bonds were similarly restricted, the Committee of Three also lingered on the scene for the same purpose. The two Committees performed this unusual function up to the first of April, 1915, when the very marked improvement in conditions led to the abandonment of this last vestige of artificial restraint.

It is instructive, as showing the workings of some minds, that although the Committee of Five, in its capacity of regulator of minimum prices, issued a public statement that they were under no circumstances going to valorize or sustain prices but merely expected to maintain a safeguard against some unforeseen shock to confidence, many people wrote them urgent letters asking that in certain properties a minimum should be maintained which would render selling impossible. It was quite futile to try to disabuse some of these correspondents of the idea that no decline should be allowed in properties that they were interested in.

To one who meditates upon the singular experience which was thus abruptly brought to a close, there are a few features of it which stand out as meriting the especial attention of all members of the Stock Exchange. First of all it was most impressively shown what apparently hopeless tasks can be accomplished by loyal 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 embarrassed will bring enormous pressure upon the authorities of the Exchange to renew the drastic expedients of the famous thirty-first of July. It is to be sincerely hoped that there will always be firmness enough in the Governing Committee to resist this pressure. The great world war coming, as it did, without warning was a rare and epoch-making event that warranted unheard of action and to indulge in such action for any lesser cause would be utterly disastrous.

The Committee of Five seems to have been brought into existence under a lucky star. That five men called together so suddenly in such an emergency should have worked with absolute harmony for so long a time is quite remarkable. Their unanimity was never troubled but once. On one of the first few days of their career a rather positive and aggressive member, arguing with a colleague, said “you must remember that you are only one of this Committee.” The Committeeman thus addressed responded with calm determination “and you must not forget that you are not the other four.” This encounter excited much amusement among the remaining members and was the one and only occasion where anything resembling a serious difference appeared.

In addition to being blessed with harmony they were very fortunate in having passed rulings for so long a time without giving forth anything that had to be recalled. In view of the complexity of the conditions, fortune must have aided in this as well as judgment. They were, of course, treated to much wisdom (after the event) by their critics. They were told that they might have opened the Exchange sooner after the actual opening had proved a success, and they were informed in the editorial columns of a prominent journal that their fear of foreign liquidation had been an “obsession” which lacked justification. These critics never were heard from while the event was in doubt, and consequently the Committee did not profit much by their learned sayings.

It can be stated with confidence that the intelligent resourcefulness of the Stock Exchange, in conjunction with the splendid public spirited work of the New York banks and the press, warded off a calamity the possible magnitude of which it would be difficult to measure. The success of this undertaking should be a source of pride and emulation to those future generations of brokers who will have to solve the problems of the great financial market when in the words of Tyndall, “you and I, like streaks of morning cloud, shall have melted into the infinite azure of the past.”