Ciphering

20 COMPANIES LENT 20 BILLIONS IN 1929 IN CALL LOAN BOOM.

Newspaper headlines like that crackled throughout the land last week as the Senate Banking & Currency Committee let fly a final broadside before starting hearings this week on the securities control bill, Ferdinand Pecora, committee counsel, was quite aware that such a revelation would leave John Citizen convinced that Big Business had outdone itself in helping to blow up the speculative bubble of 1929. ''If the complete story were available, the amount would have been many times 20 billions of dollars," Inquisitor Pecora added. It would, according to Inquisitor Pecora's method of ciphering. "Other" (i. e. not bank) loans to brokers were a major factor in the pre-crash credit inflation. Often known as "bootleg loans," they were beyond the reach of Federal Reserve control. Call loans are payable on demand, are secured largely by active listed stocks, are practically riskless. During 1929 the interest rate on call loans ranged between 5% and 20%. No good corporation treasurer could overlook that opportunity to use his idle funds. But the peak of all loans to all members of the New York Stock Exchange was $8,500,000,000--just one-half the figure which Inquisitor Pecora said was advanced by one company alone. By his calculations Standard Oil Co. of New Jersey had loaned $17,000,000,000. What Inquisitor Pecora had done was to foot up every individual loan that Jersey had made, disregarding the fact that many of the loans were outstanding only a few days, that the money was loaned over & over. Jersey had made 20,466 loans during 1929, yet its daily average of outstanding loans was only $69,000,000. On Inquisitor Pecora's list Bethlehem Steel was far ahead of Jersey in amount outstanding on any one day ($157,000,000; but because it had made fewer loans (911) its total call loans during 1929, according to Mr. Pecora's ciphering, were only $539,000,000. If a company with $1,000,000 in cash loaned it to 365 different persons for one day each, by the end of one year the company would appear on the Pecora list as having loaned a total of $365,000,000.

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