One Hundred Millions

In 1895. President Cleveland was embarrassed by a dogged, recalcitrant Congress. Gold was flowing from the U. S. An alarmed Europe scrambled for its balances. The Treasury's gold holdings were down to $41,000,000. Merchants and bankers momentarily expected the end of specie payments.

In his little grey banking house John Pierpont Morgan the Elder let a black cigar droop from his lips. Through the door peered the late Edward Dean Adams, little known to Wall Streeters but a tower of strength to bankers. "Hello, Adams," muttered Mr. Morgan, "It's still going out."

Banker Adams dropped a document on Banker Morgan's desk. It was a power-of-attorney from the Deutsche Bank to buy $200,000,000 worth of U. S. bonds. Quickly James Stillman and other bankers were called, a syndicate formed, $62,000,000 of bonds bought from the Treasury. Stocks rose, the flow of gold was halted, trade began to revive as word spread that the emergency had been met.

Last week was not so dark but the picture was parallel. Gold withdrawals continued, came to $152,000,000 in ten days. Foreign exchanges remained above the point where it was profitable to export gold. Stocks were all at new lows, the bondmarket dropping in a manner terrifying to bankers, insurance companies and all investors. Then overnight there came a change in the domestic if not the international picture. Bonds soared and the stockmarket churned upwards after twelve weeks of almost steady declines.

Motivation of the change was the prospect of a balanced Federal Budget. New York banks, previously aloof from the bondmarket because of fears regarding Congress (TIME, June 6), made good their promise that a balanced Budget would send resources sweeping into the investment market. Suddenly formed and announced was an American Securities In- vesting Corp. into the coffers of which 20 Manhattan banks poured $100,000,000.

A. S. I. C. will be no pool to stabilize the market, then disband, but a real investment concern, buying bonds to make a profit. While A. S. I. C. was expected to concentrate on first-class bonds, all values rebounded last week on the psychology that at last firm bottom had been found. The following cross-section of the bond-market showed last week's lows and the closing prices two days after A. S. I. C.'s formation:

Low Last

A. T. & T. deb. 5s 91 1/2 96 1/2

Atchison Gen. 4s 75 84

Bali. & Ohio ist 5s 64 72

Boston & Maine 5s 43 55

Columbia G. & E. 5s 59 7/8 67

I. T. &T. 5s 16 26

Liggett & Myers 5s 100 102

N. Y., N. H. & H. 6s 49 3/4 70

Western Electric deb. 5s 89 1/8 94

Youngstown Sheet & Tube 5s 4 1/29 55

Pleasing to Wall Street was the fact that the stockmarket's rise came despite the fact that the short interest as of May 31 was the smallest reported since the Exchange began giving out figures--2,140,000 shares against 2,758,000 May 2 last and 5,589,000 May 25, 1931.

In Cleveland and Atlanta last week committees were formed to pump Federal Reserve credits into use as Owen D. Young's committee is doing in Manhattan, Sewell Lee Avery's in Chicago. Head of the Cleveland group of 15 is Lewis Blair Williams of Hayden, Miller & Co. (investment bankers), vice-chairman of Federal Reserve Bank of Cleveland. The Atlanta committee of twelve will be under the chairmanship of George Simmons Harris, president of Exposition Cotton Mills and director of Federal Reserve Bank of Atlanta.

Although A. S. I. C. had the approval of Owen D. Young's Committee of Twelve it was entirely the project of Manhattan bankers. .Seventeen prominent bankers will be on its directorate, J. P. Morgan & Co. in the lead--Thomas William Lament as president, George Whitney as chairman. It is expected that $100,000,000 is not A. S. I. C.'s limit, that eventually stocks as well as bonds may be bought.

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