Would results such as these obtain on this occasion? Much depended upon the length of time before the Exchange could re-open, but this in itself was a problem for which no one could venture a solution. Again, a vast volume of contracts made on July 30th had been suspended. How long could the enforcement of these contracts be successfully prohibited, and above all how long would the banks and financial institutions which were lending money on Stock Exchange collateral refrain from calling loans when they were deprived of any measure of the value of their security? Over its own members the New York Stock Exchange might exercise a rigid control, and it could safely be assumed that the other Stock Exchanges of the country would coöperate with it, but numberless outside agencies existed such as independent dealers unaffiliated with exchanges, and auctioneers, any of whom might establish a market. If declining prices were made through media of this description, and the press felt called upon to furnish them to the public, the closing of the Exchange might not suffice to prevent panic and disaster.
Oppressed by these considerations, and by an appalling sense of responsibility, the new Committee of Five began its labors in the morning of July 31st. The first step decided upon was to communicate with the Bank Clearing House Committee. Mr. Francis L. Hine, President of the Clearing House, was invited to meet the Committee of Five which he did, a little later in the day, and presented to them the following statement of the action taken by the Clearing House.
"There was a meeting of the Clearing House Committee this morning in view of the closing of the New York Stock Exchange. It was the opinion of the Committee that the business and financial condition of New York and the entire country was sound but that the situation in Europe justified extreme prudence and self-control on the part of the United States; that the closing of the Stock Exchange was a wise precaution by reason of the disposition of all Europe to make it the market for whatever it wished to sell, and that in this country there was no occasion for any serious interruption of the regular course of business, either financial or mercantile."
After the retirement of Mr. Hine, the Chairman of the Committee on Clearing House of the Exchange stated that all the checks given to the Clearing House had been certified, and a notice was thereupon sent out instructing members to call for their drafts at the usual hour. Thus all the differences due on the day's transactions of July 30th were settled, and a first encouraging step was taken. It was also decided to permit the offering of call money on the floor of the Exchange.
The Committee held its second meeting on August 1st and the first of the long series of problems growing out of the closing of the market was at once presented to it. A letter from a brokerage house doing business with Europe was received in which it was pointed out that "arbitrageurs" who had sold stocks in New York and bought them in London during the previous fortnight had made their deliveries by borrowing stock in New York; that the stock purchased in London was due to arrive on this side, and that the usual process of financing it by returning the previously borrowed stock had been cut off through the suspension of unfulfilled contracts. This was likely to lead to very grave embarrassment because call money had practically disappeared and houses to whom this foreign stock was consigned might not be able to meet their obligation to pay for it as it arrived. There being no arrivals of foreign stock expected that day, the Committee deferred action, and thus gained time to think out ways and means of meeting the difficulty.
The second problem presented came in the form of a request for permission to sell securities outside of the Exchange. The firm of S. H. P. Pell & Co. had suspended, and a house which had been lending them money wished to be authorized to sell out the collateral. This was the first of many cases brought before the Committee, during its long tenure of office, in which individuals sought for a special privilege to sell securities they were anxious to market while trading in general was forbidden. In this case the applicants were referred to that section of the Constitution of the Exchange in which it is provided that members having contracts with insolvents shall close out these contracts in the Exchange when the securities involved are listed. The Exchange being closed, this provision answered the question without necessitating any independent action on the part of the Committee.
From the moment of the closing of the Exchange a growing pressure arose to determine just when and how it should be re-opened. The desire for information on this point was widespread, and when the gravity of the situation became clearer to the community, a great anxiety developed that the re-opening should, above all, not be premature. Realizing that the fear of sudden and ill considered action on this question was becoming dangerous to the restoration of confidence, the Committee of Five, at its meeting of August 3rd authorized the following statement.
"Announcement is made by the President of the Stock Exchange, in answer to inquiries as to when the Exchange will open, that ample notice of such opening will be given."
In spite of this notice fear that the Stock Exchange might act injudiciously lingered for some time longer until the constant reiteration by its officers of their intention to act only in conjunction and in consultation with the banks permanently allayed it.