“Ont then we lock up the gash for which we sells the stock, ain’t it?” said Wolf.
“Not immediately,” rejoined Claybank, “it must be left in the banks in the usual channels for a time, or there will be no money for them to loan to the buyers of stocks. Having sold our own securities, we will next proceed to sell short at ruling prices to as large an extent as possible.”
“Your plan is admirable,” said Mr. Gray. “We will next arrange at the banks for borrowing all the money that they can spare without suspending payment, and we will compel them to withdraw all loans now out. Through our joint and separate control of, and influence with, the officers and directors, we ought to be able to borrow in this city, and in Boston and Philadelphia, as much as $150,000,000, which, added to $150,000,000 received from sale of our stocks, will give us control of $350,000,000 in cash.”
“Will dey loan so much as $150,000,000 even upon the personal security of such men as we?” said Wolf.
“They will not be asked to do so,” said Gray. “The money borrowed can be sealed up and left as special deposits in their vaults as security for itself, with a small margin of one or two per cent to cover interest.”
“Dot inderest, of we borrow for thirty days at six per cent, on $150,000,000 will amount to three kevawters of a million of tollars; ont that amount we lose out of our bockets; ont the interest on our own $150,000,000 which will be itle for a month will be another three kevawters of a million. It makes US$500,000 each to lose. It is a great teal of money to lose,” said Wolf.
“That,” said Claybank, “is all we lose, and is practically all we risk. It is essential to the success of our plans that for a brief period we shall withdraw from the channels of commerce a large portion of the money of the country. We cannot withdraw it unless we control it; we cannot control it unless we borrow it; and we cannot borrow it without paying bank rates of interest upon it.”
“How,” said Gray, “do you propose to supply the necessary margins for the stock which we sell short? When you borrow stock on a rapidly-falling market, the loaner expects at some time a reaction, and an equally rapid advance, and you will have to give him a pretty big margin beyond the money which you receive from a sale of the borrowed stock.”
“We shall have for that purpose,” replied Claybank, “the $150,000,000 received from the sale of our own stock. This, at fifty per cent fall in prices, will margin borrowings of three hundred millions of stock, and this money we can arrange to have locked up in special deposits as well as the money we borrow.”
“Ont to how low a point shall we put brices before we commence to cover?” said Wolf.