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 reëstablishing 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."