“A million in the hands of a single banker is a great power,” said Walter Bagehot; “he can at once lend it where he will, and borrowers can come to him because they know or believe that he has it. But the same sum scattered1 in tens and fifties through a whole nation is no power at all; no one knows where to find it or whom to ask for it.” This explains the power of Wall Street. Money flows there for the same reason that water flows downhill. The great agricultural districts of the West, for example, will gather from their crops this year several hundred millions of dollars. They have no real economic use for all this money in the farming districts; the large commercial and industrial undertakings2 that help to make America rich and powerful are not in that neighborhood.
Particular trades settle in particular districts, and the money they require must be sent to them from other districts. “Commerce is curiously3 conservative in its homes;” the steel trade concentrates100 in and around Pittsburg, the grain trade at Chicago, wholesale4 merchants in special lines are always to be found huddled5 together in our big cities in neighborly intimacy6; and once a trade has settled in one spot it remains7 there. The millions that go West to pay the farmer must therefore go elsewhere to pay others as fast as a demand for money arises, because the price that will be paid for it elsewhere is greater than the price it will bring in the farmer’s pockets. This is doubly true because, as we have said, there are no imperious demands for money for commercial undertakings in the farmer’s neighborhood, and, even if there were, home enterprises are seldom attractive; curiously enough there is a familiarity about them and their local promoters that breeds contempt. Besides, these millions are scattered in small sums all over the agricultural States; there is no cohesion8, no concentration.
What then becomes of these vast sums? They are deposited in the local banks, and the local bankers, who are wisely permitted by law to deposit three fifths of their legal reserves in a city bank, promptly9 transfer the funds that are not required at home to the bank that will pay interest on them. In this way large capital accumulates, and when we say this is a wise provision of the law we mean that scattered101 reserves in local country banks are of no more avail in emergencies than the five-dollar bills in the people’s pockets; but, gathered into one great central fund that will aggregate10 a sum large enough to provide every solvent11 bank and business house with ample support in times of distress12, they accomplish a purpose worth talking about.
This is the way they do in Europe, but say “Central Bank” in America, and people are frightened out of their wits. They say politics would dominate it; “the interests” would control it. The bigness of things seems to paralyze them. But to attack a thing merely because it is big and powerful is no argument. In a country full of big things it does not ring true; it is un-American, and, as for the bogy of a centralized banking13 control, there is infinitely14 more of it in New York to-day, under the existing system, than there could possibly be under the plan proposed by the original Aldrich measure. However, the idea of a great Central Bank is not the subject under discussion.
When money flows into the New York banks the popular notion seems to be that it is used to facilitate speculation15 on the Stock Exchange. But this is only one of its many sources of employment. It will supply the payroll16 at Pittsburg, it will ship grain to Europe, it will discount the102 bills of merchants, it will return to the West and South when they call for it to move the next crop. If Canada or Europe wants it, and bids high enough for it, they will get a share of it. Wherever capital is most profitable, there it will turn; it will rapidly leave any country that cannot pay for it. It is the old simile17 of water finding its own level. The first step consists in gathering18 the idle hoards19 of individuals into banks; the next consists in centralizing these deposits where they will be available for other sections of the country that have use for them.
In order to attract these funds and so facilitate the business of the country smoothly20 and economically, the New York banks are accustomed to paying 2 per cent. interest on such deposits. Critics who seem to feel that there is something objectionable in the laws of gravitation, would prevent country banks from depositing in the cities by forbidding the payment of interest on deposits by national banks. But the laws that govern national banks, as Mr. Horace White suggests, are not the laws that govern State banks and trust companies, and, as these would gladly pay the 2 per cent. interest on deposits, they would be given an unfair advantage.41 Critics also say103 that country banks should not be allowed to keep three fifths of their reserves in city banks, but then they would be at a disadvantage with the State banks in their neighborhood, since the prohibition21 would not apply to them. Moreover, if country banks were not thus permitted to deposit three fifths of their reserves, what would they do with their funds? For long periods the money would remain idle, and idle funds are as unhealthy for the community as they are for the banks.
There is no other way but for the country banker to take care of his customers first, and then send as much of his surplus as the law permits to the centre that will pay him the best return and the safest return. This is good business; it makes money; it is sound economics. And before the critic goes into a paroxysm over the fear that speculation in stocks will absorb all this wealth once it finds its way to New York, let me remind him, to cite but one instance, that short-time commercial paper, representing actual commodities moving to market, has the first call. The Minneapolis miller’s ninety-day bill, accepted by a reliable merchant and based on an actual carload of flour, has in all normal times a preferred claim on the banker’s funds.
This discounting of commercial paper is the104 ideal function of banking, to quote Mr. White, and if there were always a sufficient supply of good bills to absorb all the bank’s loanable credit, with an inflow of cash from maturing bills equal to the outgo of new ones, there would be no occasion for bankers to look elsewhere to keep their funds mobile—and the critic would be out of work.42 But this does not often happen, because the bank’s loanable funds normally exceed the amount of acceptable paper, and at such times the banker makes advances on goods or securities, and, if goods and securities are not pressing for loans, he will place his funds elsewhere, where a demand exists. But securities for which there is always a ready market are such thoroughly23 good collateral24 for loans that bankers are glad to get them.
The stockbroker25 is, in a way, a dealer27 in merchandise. Whether he buys for investment or for speculation—and remember that the boundary line between investment and speculation is often shadowy and indistinct—he pays cash for everything he buys. He then seeks advances of credit upon his wares28 just as the merchant does, supplementing his own capital and the deposits (margins) of his customers with call or time money from the banks. To deny him these facilities is exactly the same as to deny credit to a merchant;105 both are doing a perfectly30 legal business, and both contribute to the economic welfare of the community.
The popular idea is that loanable funds thus borrowed by Stock Exchange houses constitute a diversion of money from the merchants who need it. Not so. Even if the banks were disposed to use all their loanable funds in mercantile loans and discounts they could not do so, because a part of these funds may be called for at any time, and it is not good banking to lend too large a proportion of call money on time. The merchant wants 30, 60, and 90 day money, and he wants it at a rate not to exceed 6 per cent.; the stockbroker is compelled by the nature of his business to borrow a large part of his money on call, and he pays whatever the banks choose to charge for it. Incidentally it may be said that no usury31 law is violated, even if 100 per cent. is charged, because the New York law legalizes any rate of interest on call loans of $5000 and upward, secured by collateral.43
106 As a matter of fact, far from being put at a disadvantage by the banking methods that provide call loans to Stock Exchange houses, the merchant or manufacturer enjoys banking facilities which the Stock Exchange may never hope to enjoy. The merchant is able to secure banking accommodations upon his personal credit, that is, by discounting his own promissory notes or single-name paper unsecured by pledge of collateral. But the stockbroker, however ample his resources and his credit, can only obtain loans upon collateral securities. Any attempt to resort to his personal credit or his personal paper would be construed32 as a confession33 of weakness, and his good name at the banks would suffer accordingly.
Persons who conjure34 nightmares over the practice107 of the banks in loaning surplus funds to stockbrokers35 are deceiving themselves. Instead of losing by this system, every merchant and manufacturer in the land profits by it in greater or less degree. The stockbroker deals in the bonds and shares of great railway and industrial companies, which, in order to succeed, must be able to sell their certificates to the public and so raise the money necessary to provide the extensions and new construction that are constantly demanded by the public. If fresh capital could not be enlisted37 in this way, additions and improvements would cease. The merchant who requires the railroads to ship his goods, and the manufacturer whose demands for new side-tracks, cars, and other equipment are unceasing, are therefore directly interested in the maintenance of a broad and stable speculative39 market for securities at all times, because in that way only are funds to be raised for the requirements of trade and industry. There would have been no railroads in this country had there not been speculators to build them, nor could the money have been raised had there not been other speculators to buy the shares with the aid of the banks.
Prevent the banks from lending money to facilitate stock-market operations and business ceases; interfere40 with it or hamper41 it and confidence108 is impaired42, and when these things happen the industrial system collapses43 in terror. Such has been the experience of modern times. Until a system is devised whereby large undertakings may enlist38 public support in other ways than by offering securities in our great Exchanges and by maintaining a market for them there, it is useless to talk of interfering45 with that necessary relationship which exists between the banks and the stock market. On the one hand we have the cobwebs and windy sophistries46 of politicians and doctrinaires; on the other hand the test of proved effectiveness in the conduct of business. And the country’s business cannot stop; it must go ahead.
In the last six years more than a billion shares of stock have changed hands on the New York Stock Exchange, together with bonds of a market valuation exceeding five billions of dollars, and, under the rules, each purchase made was paid for in full by 2:15 P.M. of the day following the transaction. If all these purchases had been made for cash—i. e., if every customer of every brokerage house paid in full for his purchases, there would be no use for bank loans to brokers36; there would be no speculation, and hence no progress. Securities purchased in the six-year period quoted were, in the majority of instances, bought on margin29, that is, they were only partially47 paid for by the purchasers,109 the balance required being furnished by the broker26 from his capital and by the banks from their loanable funds.
There is a popular fallacy as to the amount of actual cash required to finance these enormous Stock Exchange transactions; persons who are not well informed often entertain the impression that it is much larger than it really is. As a matter of fact considerably48 more than 90 per cent. of the business of the banks is done through the Clearing House, an institution designed, as every one knows, to minimize the transfer of actual cash and to simplify the payment of balances. If these clearings seem large—they are, in fact, twice as large in New York as in all the other cities of the union added together—it is not alone because more speculation in securities takes place in New York, but because this happens to be the centre where many other cities balance their claims against each other.
Furthermore, when critics who do not understand the subject look askance at the volume of loans of the New York banks, they must remember that the lending power of such institutions is always four times greater than the supply of money in its vaults49. The reserve of 25 per cent. which the banks are required to maintain means that every million dollars of actual cash added to their funds110 renders possible an expansion of four million in loans, and every withdrawal50 of funds involves a proportionate reduction of these loans. These matters are self-evident. The point to bear in mind is that through this expansion and contraction51 of loans stock-market operations are increased or diminished by almost automatic processes. “Money talks” is an old aphorism52. In this case it is not money that talks, but credit, and the credit extended to stockbrokers by the banks is always wisely regulated to meet conditions as they arise.
The customer of a brokerage house buys, let us say, 1000 shares of St. Paul at 120, on which he deposits a partial payment or margin of $15,000. The bank will loan to the broker 80 per cent. of the market value of the stock, or $96,000, which, added to the $15,000 deposited by the customer, leaves $9000 which the broker supplies from his firm’s capital. The broker gives to the bank, with the securities, a note on one of the bank’s printed forms, which gives the bank absolute authority to sell the collateral whenever the margin shall have declined to less than 20 per cent. This note is so sweeping53 in its terms, and gives the bank such complete power, that a reproduction of it, in small type, would fill two pages of this book.
111 It empowers the bank to sell as it pleases—if the broker fails to pay the loan on demand, or to keep the margin at 20 per cent.—all the securities in the loan; it authorizes54 the bank to seize any deposit the broker may have in the institution; the bank may itself purchase all or any part of the securities thus sold, and all right of redemption by the broker is waived55 and released. This instrument would seem, per se, a pretty strong hold on the broker, but the bank’s security does not end there. In making the loan the bank knows that the borrower is a member of the New York Stock Exchange, and that presupposes capital, with at least one Stock Exchange membership, worth to-day about $60,000. It knows, too, that a fundamental rule of all Stock Exchange brokers is to protect the bank at all hazards, not merely because the personal honor of the broker is involved, but because the business could not be conducted otherwise.
It is apparent from a consideration of all these elaborate precautions that the lending of funds to stockbrokers is a safe business, indeed in all the criticism directed against Wall Street methods I have not yet heard it questioned. The department of the bank entrusted57 with such matters watches the tape with vigilance to see that the112 20 per cent. margin is not impaired; if it should happen to be impaired, the broker’s messenger is almost always on hand anticipating with his additional collateral the call that the banker will make. So excellent is Stock Exchange collateral, thus secured and thus protected, that the losses resulting from this class of business are infinitesimal. I am not a banker, but I hazard the opinion that it constitutes, in fact, the minimum risk in all the departments of the bank’s business.
In any case, when trouble comes and panic conditions prevail, it requires no stretch of the imagination to say that the stockbroker’s loan is a better loan than that of, let us say, the silk merchant, for he, perhaps, cannot easily repay. He is under immense liabilities in various directions and he has many obligations; whereas the stockbroker feels every minute of the day that his first duty is to the bank; the customer who owns the securities in the loan must either deposit sufficient margin or the broker will sell him out, in which case the loan at the bank is paid off. Finally, it may be added that in the October panic of 1907, when merchants’ failures were announced daily, and when certain banks and trust companies closed their doors, not a single failure was announced on the New York Stock Exchange.
113 Another objection often lodged58 by critics of present-day banking conditions, has to do with the practice of New York banks in the over-certification of brokers’ checks. These over-certifications are held to be objectionable because the National Banks are forbidden by law to certify59 for a sum greater than the drawer has on deposit. In practice it works out this way: The broker’s clearing-house sheet of to-day tells him what payments he has to make, so on the following morning he acquaints his bank with the fact that payments are to be made necessitating60 certifications beyond the amount of his deposit. He then sends to the bank the promissory note of his firm, payable61 on demand, and the bank credits his account with the proceeds. As the day advances the broker’s checks come in and are credited to the account, which is always balanced and the note paid off before the close of the day’s business. The risk is nominal62.
Of course a few hours elapse between the certification and the receipt of the broker’s checks, and in this brief interval63 it would be possible for a dishonest man to abuse the privilege extended him, but the fact that such a thing does not happen affords tenable ground for the belief that it will not happen. The bank does not deal with an individual, but with a firm, and it knows114 that the firm has a membership in the Stock Exchange, with a cash balance on deposit in the bank that extends the accommodation. Any banker will bear witness that the business is quite satisfactory and that it involves no loss. Moreover, this certification of stockbrokers’ checks is essential to the maintenance of broad speculative markets, and, whether that portion of the public that criticises the practice likes it or not, speculation is a necessary part of our business life.
It may be pertinent64 to remark in this connection that the law prohibiting these certifications by National Banks is unnecessary and unwise, as is evidenced by the facility and safety with which it is honored in the breach65. State Banks in New York are under no such restriction66, nor has it occurred to our lawmakers that a necessity for the prohibition exists. The experience of these banks in the matter of certifications, like that of the National Banks, shows that the business is safe and sound. If the merchant discounts his paper for thirty, sixty, or ninety days, why prevent a similar accommodation to stockbrokers for an hour or two? Both are engaged in a strictly67 legitimate68 business upon which the welfare of the community in greater or less degree depends, and the fundamental115 purpose of a bank is to promote and encourage such business. That is what banks are for, and bank officers are supposed to know something about how, when, and where accommodations may be extended with safety to all concerned.
Mr. Horace White cites the year 1909 as an illustration of the employment of loanable bank funds by brokers which brings up another point. For long periods in that year, money loaned on call on the floor of the New York Stock Exchange at 1? per cent., while our banks were paying 2 per cent. to the interior banks to which the money belonged. This does not necessarily mean that the banks were losing money; because the greater part of these funds was employed in time loans and in commercial discounts at 3 and 4 per cent., thus raising the average income rate. There is also to be considered the unearned increment69 which the bank gains by “holding” its depositor, even though no large profit accrues70 from the funds thus deposited.44
As the ratio of reserves to liabilities at that time was much above the legal requirement, it might be inferred from this and from the 1? per cent. rate that money was easy; but it was not, as many persons in commercial pursuits learned when they tried to borrow it.116 There was a great deal of money that was not being used in daily business, and one of the reasons was that the period was one of distrust. Stockbrokers got funds at 1? per cent. while many other borrowers were required to pay stiffer rates, because the banks that controlled the money market—i. e., the loanable funds—were unwilling71 to part with them except for short periods and on instantly marketable security, and this state of mind on the part of the New York bankers was shared by the bankers of Europe. It was good banking, because it was prudent72 and conservative. In other words, at a time when danger threatened, bankers in all important centres of the world regarded Stock Exchange collateral as ideal security, and, as we have seen, the aggregate of their loanable funds pressing on the market kept call rates down to 1?. If in times of doubt and distrust this form of collateral proves its safety, is it not a fair hypothesis that it is safe at all times?
If the critics are correct in their contention73 that pressure of easy money in the New York market holds out inducements for foolhardy speculation on the Stock Exchange, the year 1909, just cited, should have witnessed a great boom in securities. If speculators could borrow at 1? per cent. on securities that netted 5 and 6 per cent., the theory117 of our adversaries74 is that this disproportion entices75 a large number of people into such speculative ventures that inflation takes place, followed by collapse44. That nothing of the sort occurred shows that critics, like other less gifted persons, may err22; it shows, too, what every thoughtful person knows, that booms are not created on the Stock Exchange, which merely reflects in its dealings external conditions of all sorts, among them psychological processes which neither brokers nor money markets may hope to control. As a matter of record, 1909 showed but little increase in the volume of business transacted76 on the Stock Exchange as compared with 1908, and the increase, such as it was, represented nothing more than a natural recovery from the paralysis77 following the débacle of 1907, plus an investment of funds at attractive levels. The same state of affairs prevailed in 1910. From June to December of that year call money rates almost never exceeded 3 per cent., and time money might be had at from 3? to 5, yet far from stimulating78 speculation—far from revealing an excessive employment of bank funds by stockbrokers—transactions both in shares and bonds dwindled79 to insignificant80 proportions.
Cheap money is by no means a “bull argument” from the Stock Exchange point of view, because118 it arises from dull conditions in commerce and industry, and there can be no boom in the securities which represent the nation’s business unless mills and factories and railroads are prosperous. There have been more bull markets with tight money, or with money in the neighborhood of 6 per cent., than in cheap money markets of the sort just described. This is not equivalent to saying that a prolonged rise can be conducted through a period of dear money. As a matter of Stock Exchange experience such a condition seldom arises, because the Stock Exchange discounts the future, foresees those economic conditions that spell prosperity for the country, and advances the prices of securities on a money market that has not yet felt the demands of improved conditions.
In June, July, and August, for example, conditions may warrant a hope of bountiful harvests, while general business is dull and idle money abundant. Such a prospect81 is always discounted, other things being equal, by a rise in securities, and money that is not yet required to market the crops thus finds employment as loans on Stock Exchange collateral. Later on, when reviving business leads the interior banks to call their New York balances, the depository banks meet the demand by calling loans and by advancing119 rates. The speculative movement on ’Change is then checked or reversed just in proportion to the demand for money elsewhere. It may continue for a while if the discounting process has not been complete, or if there remains a wide disparity between interest rates for money and net returns on securities; or if the independent resources of the city banks are large enough to furnish comfortable interest rates even after the westward82 drain has commenced, but, generally speaking, “the move is over,” to quote the vernacular83, by the time business men want their money. Nine times out of ten any monetary84 strain that results thereafter is not due to speculative operations in securities nor to any other cause attributable to the Stock Exchange.
A word should be said here concerning the Stock Exchange Clearing House, because just as the Clearing House of the associated banks ascertains85 and pays the balances of its members with a minimum outlay86 of coin and legal tender notes and with great economy of time and labor56, so the Stock Exchange Clearing House stands the strain of an enormous business, reduces the volume of checks and deliveries, and relieves both the banks and the stockbrokers of an amount of risk and confusion that would be well-nigh intolerable.
120 In order that the layman87, for whom these pages are written, may understand what this means, it may be said that if 500,000 shares of stock are sold in a day on the Stock Exchange, and if we assume the average price of these stocks to be 50, the checks paid out on that day would be $25,000,000, and in a year at that rate certifications would be necessary involving the stupendous total of $7,500,000,000. This clumsy if not impossible method the Clearing House was designed to avoid. Moreover, the actual daily transfer of such a volume of securities is largely obviated88 by the Clearing House system, and thus another and highly important economy is effected.
The Stock Exchange Clearing House is managed by a committee of five members of the Board of Governors of the Exchange. Each day the seller of stocks sends to the office of the buyer his “deliver” ticket, and the buyer sends to the seller his “receive” ticket, this transaction constituting a “comparison” by both parties, and an evidence that the transaction has been entered on their books. Before 7 P.M. of that day these tickets, and the sheet comprising the record, are sent to the Clearing House. This sheet contains a “receive” and “deliver” column, with all the transactions in each security grouped together, and with a balance—i. e., a debit89 or credit,121 struck at the bottom. If there is a credit, a draft on the Clearing House bank is attached; if a debit, a check for the balance accompanies the sheet.
When the Clearing House receives this sheet a simple and a very ingenious process ensues which relieves the broker of a great deal of trouble, risk, and labor. If he has bought and sold, let us say, an equal amount of stock, comprising numerous transactions, instead of having to draw checks for all these separate trades, the Clearing House settles the whole day’s transactions by a single check for the actual balance. If his numerous purchases and sales do not balance, and if there are various lots of stock to receive and deliver, the Clearing House eliminates a host of intermediaries and puts him into direct touch with one firm to whom he delivers, and with one from whom he receives. He may have had no transaction with the firms thus arbitrarily assigned to him; that makes no difference. The books of the Clearing House always balance; somewhere a firm is entitled to a receipt of stock, and somewhere another firm will be found to deliver it to him.
Nothing could be simpler and more economical than the manner in which the two are brought together. In such a system, the number of shares actually delivered is reduced by the Clearing122 House to one third of the number represented by the broker’s actual transactions, while the amount of money which he must command to meet his daily engagements represents, on an average, only 25 per cent. of the actual capital that would be required were it not for the excellent system thus afforded him. Persons who wonder at the magnitude of Stock Exchange transactions, and who jump to hasty conclusions as to the actual capital involved, may well reflect upon the manner in which this method reduces to a minimum the stockbroker’s drafts upon the banks.
In a larger sense, if the critic in these matters affecting the relationship of banks to stockbrokers feels aggrieved90 at what he thinks is an improper91 diversion of funds, he must remember that the comparative scarcity92 of capital to-day—which is at the bottom of his complaint—is not due in any sense to Stock Exchange speculation, for there has been almost no extensive speculation in this quarter from 1907 down to November, 1912. To find the cause of the scarcity of capital—and it is unquestionably scarce—he must consider the immense destruction of tangible93 wealth in the last decade, and the extraordinary tendency to convert floating forms of capital into fixed94 and immobile forms.
The amount of money expended95 in State123 roads since automobiles96 came into popularity is probably ten times more than it was before; at the election in November, 1912, a fresh total of $50,000,000 was voted for “good roads” by the electorate97 in New York State. The building of the Panama Canal has cost or will cost about $365,000,000; all over the country large municipal or state works are under construction; here in New York the contract for the Erie Canal calls for $150,000,000, and for the city’s new water-supply system—the Ashokan basin and the Kensico reservoir—$177,000,000, each contributing a share to the depletion98 of the normal supply of working capital. Meantime, to cite another instance, Congress appropriates $160,000,000 to pensions in a single year, and $40,000,000, as a recent writer puts it, “for that particular form of graft99 which consists in giving a $30,000 post office to a thirty-cent village.” The railroads of the country alone require to-day sums of money equivalent to the working capital represented by all our bountiful harvests of 1912.
Aside from these matters the critic should remember, in fair play, that the currency famines which occur with periodic frequency in our country are due in large measure to the non-elastic nature of the currency, to its persistent100 absorption by the Treasury101, and to the rigid102 restrictions103 which124 these abnormalities impose on the volume of banking credit. Conditions such as these contributed in no small measure to our last great panic, and led to a premium104 on currency that made us a laughing-stock among the nations. There has been no such money delirium105 in England since the Napoleonic wars; no such condition in Germany since the empire was founded, and nothing approaching it in France, even in the commune and the war with Prussia. Yet in America we go on wobbling uncertainly under the makeshift act of 1908, with its currency associations and its emergency measures, and with the added fear of what may come when the Act expires in 1914.
The situation in America is substantially this: Business drives ahead at a tremendous pace, with perils106 on every side, chiefly anxious to be undisturbed. Matters run along smoothly for a while; then something happens—there is too much optimism or too much confidence—and a smash. It is not due to speculation in securities, because, as in 1907, the stock markets are the first to see what is coming and to discount it. But speculation in lands, or in manufacture, or in railroad construction go on and on; there is too much work for the dollar to do; the currency system breaks down; here and there a financial institution125 closes its doors; public confidence is shattered, and the whole credit system is disturbed.
Then there arises a noble army of critics who, with the best intentions but with insufficient107 knowledge and study, set to work to remedy conditions they do not understand by methods untried and unpractical, that only add to the general confusion. More harm than good results when the physician, brusquely entering the sick-room, tells the patient he is a very sick man, denounces the lobster108 that poisoned him, and departs with a general condemnation109 of shellfish, but without prescribing suitable remedies. Persons who denounce the relationship existing between banks and stockbrokers are in most instances upright citizens of high character, but until a little patient study of conditions has enabled them to speak with authority upon matters that are necessarily complex and delicate, they cannot accomplish any really useful purpose. “The wicked are wicked, no doubt,” said Thackeray, “and they go astray, and they fall, and they come by their deserts; but who can tell the harm that the very virtuous110 may do?”
The three leading groups of banking interests in Wall Street are said to represent $500,000,000 of available capital each; the deposits in what are called the “trust banks” amount to between126 $700,000,000 and $800,000,000, while the banks of the whole country hold deposits of $16,000,000,000. The savings111 banks now hold $4,450,822,522 which is owned by 10,009,804 depositors.45
As we have not yet reached the point of abolishing property altogether, we may concede that these great combinations can do for individual business and for the country at large what cannot be done without them. They furnish the large sums which, from time to time, are required by the Government, the State, the town, the manufacturer, the tradesman, and the speculator, and to each of these—especially the speculator—the tremendous development of this country is due. Because of speculation in securities, the 26,000 million dollars’ worth of capital represented on the New York Stock Exchange by the stocks and bonds of railroad and industrial corporations have found a public market through which necessary capital has been raised, and the total increases yearly by about one billion dollars. This is “big” business, to be sure, but it is the bigness of the whole people, for the welfare of each is the welfare of all.
Such large affairs naturally set people thinking; men want light; they want to know, entirely112 aside from the doctrines113 of political platforms and stump127 orators114, to what extent the relation of capital to business meets the test of proved effectiveness and economic worth. Especially do they seek information in this oft-discussed matter of speculation in securities and of the bank’s relationship to it; and here, fortunately, there is no lack of results by which that relationship may be tested.
Pragmatism tells us that as phenomena115 appear, become mighty116, and persist in accordance with natural processes, so they demonstrate their ultimate good and their obvious usefulness. In its especial application to the matters we have discussed, pragmatism teaches us to wait for results in estimating a particular business method, and then to study it in its relation to all business. Applying this test to the use of loanable bank funds by those who deal or speculate in the things that represent American enterprise, we find that the very existence of these enterprises depends upon the maintenance of these methods. Finally, both the banks and the Stock Exchange are the trustees of the property of others, and in that capacity their reciprocal relations are certain to be attended by greater caution than if they dealt in a freehanded way with their own property. The magnitude of their undertakings spells responsibility, and responsibility breeds sobriety.
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scattered
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undertakings
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curiously
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wholesale
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| n.批发；adv.以批发方式；vt.批发，成批出售 | |
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huddled
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intimacy
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| n.熟悉，亲密，密切关系，亲昵的言行 | |
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remains
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| n.剩余物，残留物；遗体，遗迹 | |
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cohesion
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| n.团结，凝结力 | |
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9
promptly
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| adv.及时地，敏捷地 | |
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10
aggregate
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| adj.总计的，集合的；n.总数；v.合计；集合 | |
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solvent
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| n.溶剂；adj.有偿付能力的 | |
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12
distress
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| n.苦恼，痛苦，不舒适；不幸；vt.使悲痛 | |
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13
banking
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| n.银行业，银行学，金融业 | |
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14
infinitely
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| adv.无限地，无穷地 | |
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15
speculation
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| n.思索，沉思；猜测；投机 | |
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16
payroll
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| n.工资表，在职人员名单，工薪总额 | |
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17
simile
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| n.直喻，明喻 | |
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18
gathering
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| n.集会，聚会，聚集 | |
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19
hoards
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| n.（钱财、食物或其他珍贵物品的）储藏，积存( hoard的名词复数 )v.积蓄并储藏（某物）( hoard的第三人称单数 ) | |
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20
smoothly
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| adv.平滑地，顺利地，流利地，流畅地 | |
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21
prohibition
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| n.禁止；禁令，禁律 | |
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22
err
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| vi.犯错误，出差错 | |
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23
thoroughly
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| adv.完全地，彻底地，十足地 | |
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24
collateral
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| adj.平行的；旁系的；n.担保品 | |
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25
stockbroker
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| n.股票（或证券），经纪人（或机构） | |
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26
broker
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| n.中间人，经纪人；v.作为中间人来安排 | |
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27
dealer
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| n.商人，贩子 | |
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28
wares
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| n. 货物, 商品 | |
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29
margin
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| n.页边空白；差额；余地，余裕；边，边缘 | |
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30
perfectly
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| adv.完美地，无可非议地，彻底地 | |
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31
usury
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| n.高利贷 | |
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32
construed
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| v.解释（陈述、行为等）( construe的过去式和过去分词 )；翻译，作句法分析 | |
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33
confession
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| n.自白，供认，承认 | |
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34
conjure
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| v.恳求，祈求；变魔术，变戏法 | |
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35
stockbrokers
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| n.股票经纪人( stockbroker的名词复数 ) | |
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36
brokers
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| n.（股票、外币等）经纪人( broker的名词复数 )；中间人；代理商；（订合同的）中人v.做掮客（或中人等）( broker的第三人称单数 )；作为权力经纪人进行谈判；以中间人等身份安排… | |
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37
enlisted
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| adj.应募入伍的v.（使）入伍， （使）参军( enlist的过去式和过去分词 )；获得（帮助或支持） | |
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38
enlist
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| vt.谋取(支持等)，赢得；征募；vi.入伍 | |
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39
speculative
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| adj.思索性的，暝想性的，推理的 | |
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40
interfere
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| v.(in)干涉，干预；(with)妨碍，打扰 | |
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41
hamper
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| vt.妨碍，束缚，限制；n.(有盖的)大篮子 | |
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42
impaired
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| adj.受损的；出毛病的；有（身体或智力）缺陷的v.损害，削弱( impair的过去式和过去分词 ) | |
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43
collapses
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| 折叠( collapse的第三人称单数 )； 倒塌； 崩溃； （尤指工作劳累后）坐下 | |
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44
collapse
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| vi.累倒；昏倒；倒塌；塌陷 | |
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45
interfering
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| adj. 妨碍的 动词interfere的现在分词 | |
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46
sophistries
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| n.诡辩术( sophistry的名词复数 )；（一次）诡辩 | |
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47
partially
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| adv.部分地，从某些方面讲 | |
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48
considerably
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| adv.极大地；相当大地；在很大程度上 | |
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49
vaults
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| n.拱顶( vault的名词复数 )；地下室；撑物跳高；墓穴 | |
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50
withdrawal
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| n.取回，提款；撤退，撤军；收回，撤销 | |
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51
contraction
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| n.缩略词，缩写式，害病 | |
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52
aphorism
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| n.格言，警语 | |
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53
sweeping
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| adj.范围广大的，一扫无遗的 | |
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54
authorizes
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| 授权，批准，委托( authorize的名词复数 ) | |
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55
waived
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| v.宣布放弃( waive的过去式和过去分词 )；搁置；推迟；放弃（权利、要求等） | |
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56
labor
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| n.劳动，努力，工作，劳工；分娩；vi.劳动，努力，苦干；vt.详细分析；麻烦 | |
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57
entrusted
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| v.委托，托付( entrust的过去式和过去分词 ) | |
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58
lodged
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| v.存放( lodge的过去式和过去分词 )；暂住；埋入；（权利、权威等）归属 | |
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59
certify
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| vt.证明，证实；发证书(或执照)给 | |
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60
necessitating
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| 使…成为必要，需要( necessitate的现在分词 ) | |
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61
payable
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| adj.可付的，应付的，有利益的 | |
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62
nominal
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| adj.名义上的；(金额、租金)微不足道的 | |
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63
interval
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| n.间隔，间距；幕间休息，中场休息 | |
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64
pertinent
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| adj.恰当的；贴切的；中肯的；有关的；相干的 | |
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65
breach
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| n.违反，不履行；破裂；vt.冲破，攻破 | |
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66
restriction
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| n.限制，约束 | |
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67
strictly
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| adv.严厉地，严格地；严密地 | |
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68
legitimate
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| adj.合法的，合理的，合乎逻辑的；v.使合法 | |
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69
increment
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| n.增值，增价；提薪，增加工资 | |
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70
accrues
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| v.增加( accrue的第三人称单数 )；（通过自然增长）产生；获得；（使钱款、债务）积累 | |
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71
unwilling
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| adj.不情愿的 | |
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72
prudent
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| adj.谨慎的，有远见的，精打细算的 | |
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73
contention
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| n.争论，争辩，论战；论点，主张 | |
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74
adversaries
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| n.对手，敌手( adversary的名词复数 ) | |
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75
entices
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| 诱惑，怂恿( entice的第三人称单数 ) | |
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76
transacted
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| v.办理（业务等）( transact的过去式和过去分词 )；交易，谈判 | |
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77
paralysis
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| n.麻痹(症)；瘫痪(症) | |
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78
stimulating
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| adj.有启发性的，能激发人思考的 | |
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79
dwindled
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| v.逐渐变少或变小( dwindle的过去式和过去分词 ) | |
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80
insignificant
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| adj.无关紧要的，可忽略的，无意义的 | |
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81
prospect
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| n.前景，前途；景色，视野 | |
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82
westward
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| n.西方，西部；adj.西方的，向西的；adv.向西 | |
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83
vernacular
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| adj.地方的，用地方语写成的；n.白话；行话；本国语；动植物的俗名 | |
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84
monetary
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| adj.货币的，钱的；通货的；金融的；财政的 | |
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85
ascertains
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| v.弄清，确定，查明( ascertain的第三人称单数 ) | |
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86
outlay
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| n.费用，经费，支出；v.花费 | |
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87
layman
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| n.俗人，门外汉，凡人 | |
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88
obviated
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| v.避免，消除（贫困、不方便等）( obviate的过去式和过去分词 ) | |
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89
debit
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| n.借方，借项，记人借方的款项 | |
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90
aggrieved
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| adj.愤愤不平的，受委屈的；悲痛的；（在合法权利方面）受侵害的v.令委屈，令苦恼，侵害( aggrieve的过去式)；令委屈，令苦恼，侵害( aggrieve的过去式和过去分词) | |
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91
improper
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| adj.不适当的，不合适的，不正确的，不合礼仪的 | |
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92
scarcity
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| n.缺乏，不足，萧条 | |
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93
tangible
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| adj.有形的，可触摸的，确凿的，实际的 | |
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94
fixed
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| adj.固定的，不变的，准备好的；(计算机)固定的 | |
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95
expended
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| v.花费( expend的过去式和过去分词 )；使用（钱等）做某事；用光；耗尽 | |
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96
automobiles
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| n.汽车( automobile的名词复数 ) | |
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97
electorate
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| n.全体选民；选区 | |
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98
depletion
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| n.耗尽，枯竭 | |
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99
graft
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| n.移植，嫁接，艰苦工作，贪污；v.移植，嫁接 | |
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100
persistent
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| adj.坚持不懈的，执意的；持续的 | |
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101
treasury
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| n.宝库；国库，金库；文库 | |
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102
rigid
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| adj.严格的，死板的；刚硬的，僵硬的 | |
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103
restrictions
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| 约束( restriction的名词复数 )； 管制； 制约因素； 带限制性的条件（或规则） | |
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104
premium
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| n.加付款；赠品；adj.高级的；售价高的 | |
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105
delirium
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| n. 神智昏迷,说胡话;极度兴奋 | |
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106
perils
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| 极大危险( peril的名词复数 )； 危险的事（或环境） | |
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107
insufficient
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| adj.(for，of)不足的，不够的 | |
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108
lobster
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| n.龙虾，龙虾肉 | |
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109
condemnation
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| n.谴责; 定罪 | |
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110
virtuous
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| adj.有品德的，善良的，贞洁的，有效力的 | |
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111
savings
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| n.存款，储蓄 | |
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112
entirely
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| ad.全部地，完整地；完全地，彻底地 | |
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113
doctrines
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| n.教条( doctrine的名词复数 )；教义；学说；（政府政策的）正式声明 | |
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114
orators
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| n.演说者，演讲家( orator的名词复数 ) | |
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115
phenomena
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| n.现象 | |
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116
mighty
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| adj.强有力的；巨大的 | |
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