"It was determined that the principal object of the Committee would be to act as an Employment Bureau, to find positions for unemployed and to relieve distress where it was found to exist. It was understood and arranged for, that any Wall Street employee who had lost a position as a result of the war was eligible, and that no fees whatever be charged. A circular letter was sent to Stock Exchange members and firms appealing for subscriptions, and the matter of selection of a depository of the funds was referred to the Treasurer with power. The work of receiving and recording registration blanks commenced with a rush, over one hundred and fifty were filed the first day, and in a few weeks they numbered over one thousand.
"A very pleasant feature of the work was the cordial 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. The declarations made by the applicants demonstrated beyond any question that the number of men, women, girls and boys for whom prompt assistance in procuring employment was imperatively necessary had been greatly under-estimated, and evidenced an absolute argument endorsing the reasons for the Committee's existence.
"Many who applied were not in immediate need of money, but wanted employment, which the members of the Committee sought for them by individual solicitation of everyone they knew, or knew of, who were employers, and also by careful, judicious and timely advertising in the daily papers. Such satisfactory results were attained, that up to date of this writing, (May 15, 1915), of over seventeen hundred applications received, permanent positions were secured for about seven hundred at rates of compensation that were distinctly gratifying, all conditions considered. Two hundred and thirty were placed in temporary jobs for periods ranging from a few days to several weeks, a number of them being re-employed two or three times.
Four hundred and ninety, having been taken back by their former employers, withdrew their applications.
"Numerous positions obtained for applicants while the Exchange was closed were in lines other than Stock Exchange business, and Wall Street clerks notwithstanding their recognized efficiency being, so to speak, specially trained, it was often found to be difficult, even impossible to make them fit the kind of work to which they were more or less strangers. In view of the fact that this circumstance made the accomplishment desired necessarily slow, the outcome demonstrated that it was reasonably sure.
"The request for subscriptions to the fund met with a hearty and generous response. Some apprehension was felt in this regard, but the splendid result proved to be an agreeable surprise. Appeals for subscriptions to the fund were made only to Stock Exchange members and firms, nevertheless, thanks to the general interest manifested, and the widespread advertising consequent thereto, contributions were received from generous friends outside of Wall Street, to an extent that was simply astonishing. Checks for $1,000 each were not unusual items, and as a rule the request was made, 'please do not publish my name.' A well known artist, in addition to a cash subscription, presented one of his paintings to the Committee. Through the kind assistance of the Chairman of The Stock Exchange Luncheon Club, the picture was sold for the substantial sum of $500.
"The Treasurer, with ample funds at his disposal, was able to meet calls for financial help that were frequent and pressing, and recognizing the desirability of experienced and competent assistance in making the necessarily intimate inquiries, to determine if applicants for relief were worthy, he applied to Mr. Robert W.
DeForest, President of The Charity Organization Society, for expert advice in the matter, and was referred by Mr. DeForest to Mr. Frank Persons, Manager of the New York Bureau, and Miss Byington, in charge of the Brooklyn Branch, who rendered invaluable services in connection with many of the applications, all of which were carefully investigated. Much suffering and distress, and some cases of actual destitution were found to exist, and while a detailed statistical statement would seem uncalled for and not desired at this time, the following brief 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."
This record is deeply gratifying to the brokerage fraternity because it discloses the fact that, even in the midst of a calamity so great that no individual could feel himself beyond the reach of insolvency, the impulse to succor the unfortunate remained as strong as ever among them.
CHAPTER III
THE REOPENING OF THE EXCHANGE
The fact that the Stock Exchange closed on July 31st and did not reopen fully until December 15th, might lead to the supposition that the question of reopening was not taken up before December. Far from this being the case, the truth is that reopening began to be discussed immediately after the institution was closed. Within twenty-four hours of the closing the minority, who had not been at first convinced of the wisdom of that action, joined with the majority in urgently advising that the Exchange be not reopened soon. All through the month of August a growing anxiety over the possibility of some hasty action by the Exchange authorities showed itself among brokers, bankers, and even some government officials. For this anxiety there was never any basis, because the officers of the Exchange having exceptional means of knowing what the dangers were, had no intention of assuming the immense responsibilities of re-establishing the market without the backing and approval of the entire banking fraternity. Gradually the excited solicitude about a premature reopening subsided as the ultra-conservative attitude of the Exchange was understood, and this was followed ere long by the first symptoms of agitation for the establishment of some form of restricted market.
As we have already shown the restraints of July 31st were relaxed one by one with the lapse of time. First a market at or above the closing prices was organized under the Committee on Clearing House; then Committees to facilitate trading in listed and unlisted bonds were formed; and finally a market was provided for unlisted stocks. All these devices, however, while they brought about readjustment and diminution of strain, did not constitute a reopening of the Stock Exchange, and the restoration of that great primary market, in some restricted way, became more and more a subject of public interest and concern.
As we have seen, the fundamental reason for closing the Exchange was that America, when the war broke out, was in debt to Europe, and that Europe was sure to enforce the immediate payment of that debt in order to put herself in funds to prosecute this greatest of all wars. To use an illustration popular in Wall Street at the time, there was to be an unexpected run on Uncle Sam's Bank and the Stock Exchange was the paying teller's window through which the money was to be drawn out, so the window was closed to gain time. How to reopen this window in such a way as not to pay out any more money to the foreign creditor than would suit our own convenience was the problem which soon began to agitate many ingenious minds. As time went on plans for performing this difficult feat poured in upon the Committee of Five in constantly increasing volume, and they were frequently accompanied by a request on the part of their authors that, when adopted, the credit for their success be publicly attributed to them. An edifying confidence was thus shown in what were usually the most visionary of these schemes.
Space does not permit the presentation of all these multitudinous suggestions, but as a matter of information we shall quote extracts from some of them. In point of time, the first communication to the Committee on this subject came on August 4th when a prominent banker appeared in person, and gave vent to the following oracular utterance: "When the Exchange reopens it should not do business from ten till three, but should open from ten o'clock to one. All transactions should be for cash, and must be delivered and paid for the same day, no contract to be allowed to stand over night." He also made the prediction, which was amply verified, that many weeks would elapse before the Exchange could be reopened at all. Some little time elapsed before anything further was presented on the subject, but by the end of August the flood of plans began and went on increasing until the Exchange resumed business.
On August 31st a communication was received from a well known "Statistical Organization" for "Merchants, Bankers and Investors"
which said, in part: "In behalf of my clients, who are exceedingly interested in making it possible for the Stock Exchanges to open safely, I am getting the opinion of important bodies relative to the proposed legislation suggested on the enclosed slip, or any other which you think would serve the purpose." On the enclosed slip was the following proposed legislation "to enable the Stock Exchanges to open."
"Be it enacted: That until the President considers European conditions fairly normal it shall be a misdemeanor in this country to buy, sell, transfer, give, or accept as collateral, shares of stock or evidences of indebtedness extending over one year, unless accompanied by a certificate showing that the owner is a United States citizen, together with such evidence as the Secretary of the Treasury may require that the securities have been owned by United States citizens since July 30th, 1914."
In answer to this proposition the Secretary of the Stock Exchange sent the following reply:
"Answering your letter of August 29th, 1914, I am instructed by the Special Committee of Five appointed by the Governing Committee to say that in its opinion such legislation as referred to would be ruinous to the credit of the United States throughout the world for many years to come."
In September a letter was received from a Western banker suggesting that the slogan "Buy a share of stock" if started "would achieve success, and by so doing would greatly benefit the stock market situation. This movement would have to be started so as not to create the impression among the many thousands of people it would reach, that it was merely a movement for the purpose of benefiting the stock brokers, but that it would be instrumental in relieving the strain on every conceivable business. Were such a movement accepted, and should it meet with results worthy of the plan it would be found out when the smoke clears away that American people would own American railway and industrial shares. This could be only for the great benefit of this country but for Europe as well, for the reason that if Europe knew that there was a good absorbing power here it necessarily would not dump its stocks at frightful sacrifices."
In October a junior member of one of the big private banking houses appeared personally and stated that, in his opinion, both domestic and foreign security holders should be treated alike; that sales should be conducted as usual; that on reopening transactions should be restricted and only sales be published and no bids or offers. His idea of restriction at the start was that all stock purchased should be paid for on the basis of 10% cash and the balance in certificates of deposit for cash, which certificates were to be non-negotiable except between banks. A Committee could, from time to time, remove the restrictions from such securities as seemed no longer to require them.
The banks should be asked to agree not to call any present loans and to be very sparing in calling for margins.
Close upon the heels of this plan came a letter signed "A Friend of the People" which said "Let the Stock Exchange be opened strictly for the sale of American securities held by foreign stock holders. If they wish to throw their stocks over we can buy them at our own price.
After six or eight days' selling from Europe the Exchange could be open to the world. By that time the market should be on a rising scale and safe for all."
This gentleman showed some originality in his view that the foreigner should be invited to sell at once, instead of being legislated out of the market as so many other advisers proposed. He seemed to be quite oblivious of the difficulties, however, that would have been encountered in inducing American security holders to stand by in pensive calm while the foreigners unloaded to their heart's content.
Early in November a Philadelphia banker wrote a long and intricate letter the full details of which we have not space to reproduce, but it contained the following fragment which is interesting in its way:
"Could not a plan be formulated between the Stock Exchanges, investment bankers and Federal Reserve Banks, by which the securities could be valued on their intrinsic and market values at such prices that would be considered reasonable to be obtained in the next two or three years; that the lenders be guaranteed against any losses from recession below the stipulated point at which the securities might later be liquidated, say sometime during the year 1917, if it had not been voluntarily liquidated without loss before. Loans so insured would have to be in force on securities carried prior to a certain date, probably before the Exchange opened, if not last July 30th, and that an insurance premium would be charged which would be considered slightly more than adequate. Any surplus could be eventually pro-rated to the policy holders. There would need to be no obligation to take out such insurance unless the borrowers preferred. The banks might, however, force them to do so in many cases or pay off loans."
At about this time many letters and suggestions were received centering round the main idea that the market be opened exclusively for such stocks as were not much held in Europe. Just as a correspondent cited above seemed to believe that American security holders could be compelled to remain inactive while foreigners sold their holdings, so these people imagined that holders of one class of securities could be kept quiet while the prices of some other class were declining in a free market.
With the above came a letter from a correspondent whose thoughts carried him back to the old days of buyers' and sellers' options, when most of the security business was done on 30 or 60 day contracts. He proposed that the Exchange be reopened so that "all trades made be 'buyer 60'. No other bids or offers to be valid." This would postpone for two months the settling day for the expected liquidation, and he felt certain that by that time there could be no trouble in meeting obligations. Unfortunately at the time he wrote there was no way of obtaining assurance of this happy outcome. The same idea in a somewhat different form came from another correspondent who, instead of deferring payment by a buyer's option, proposed that stocks and bonds be sold on a 10 per cent. basis "That is, the seller of 100 shares of Union Pacific at 112 will deliver to buyer 10 per cent. of amount sold, and receive a check for $1,120, together with a contract in which the buyer agrees to take 10 per cent. more, or say 10 shares at the end of six months, 10 shares in 9 months, 10 shares in 12 months, 10 shares in 15 months," etc., etc., at the original price of $112 per share. This plan seemed to contemplate a bequest of unsettled contracts to future generations of unsuspecting brokers. The author of it was particularly solicitous that, in the event of its adoption, his name should be handed down to posterity along with the unfulfilled contracts.
An idea of very wide prevalence, which was touched upon in nearly all communications to the Committee and which even some bankers approved, was that a preliminary step to reopening should be an agreement by the banks not to call loans made prior to July 31st, 1914, for some specified period of time. This idea was very thoroughly discussed and looked into by the Committee. It was found to present great practical difficulties, but was never definitely abandoned until the resumption of business was shown to be possible without it.
The advice which was received by the Committee of Five with regard to reopening was divided into two classes. There was that large body of suggestions, some of which we have described above, which were volunteered either in letters or in interviews, and there was the advice of well known bankers and men of financial prominence which the Committee itself solicited. In the latter class figured a member of one of the largest private banking houses in New York whose opinions and counsel were of inestimable value. This gentleman, gifted with clear insight and a thorough grasp of the situation, and generously anxious to be of service to the Committee, pointed out from the start that the reopening of the Exchange hung upon a favorable swing in the balance of trade. When the indebtedness of the United States to Europe could be offset by our exports the danger of 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 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: