FINANCIAL REVIEW OF 1886. 



335 



and banks were indisposed to loan freely on 

 call, and they did nothing below 3 per cent. 

 In April there was an easier tone for money, 

 caused by the improved condition of the banks, 

 resulting from the satisfaction of the demand 

 from the interior, and a little less anxiety was 

 felt regarding the silver question, the defeat 

 by the House of Representatives, on tbe 8th, 

 of Mr. Eland's bill providing for free coinage 

 of silver, and the conviction that the policy of 

 the Treasury Department would enable gold 

 payments to be maintained, largely contribut- 

 ing to this feeling of relief. During the first 

 week in May there was a slight flurry in money, 

 and an advance to 7 per cent, on call, caused 

 by the rioting at Chicago, but the rate subse- 

 quently fell off, and the average for the month 

 was not above 4 per cent. About the middle 

 of May the banks restricted their loans because 

 of low reserves and the concentration in three 

 of the institutions of about 85 per cent, of the 

 whole surplus, and commercial paper was only 

 in fair supply, although the demand was not 

 urgent. Rates were then quoted at 4 to 4J 

 per cent, for short acceptances, 4 to 5 for 

 jobbers' paper, and 4 to 6 for good single 

 names. In June, bankers' balances loaned at 

 1 and at 7 per cent., the higher rate being re- 

 corded toward the close, and it was inferred 

 from the fact that there was only a light in- 

 quiry for loans on time on stock collateral, the 

 best bid being 3^ per cent, for the remainder 

 of the year, that money was likely to remain 

 easy. During the last few days in June, how- 

 ever, the tone of the market changed in con- 

 sequence of a calling in of loans by some of 

 the banks and trust companies, in order to pre- 

 pare for the July disbursements of interest and 

 dividends, and early in the following month 9 

 per cent, was recorded. The average subse- 

 quently fell off to 2J and 3 per cent., and the 

 market was easy until toward the end of the 

 month, when it became active not only on call 

 but for commercial paper. Banks refused to 

 loan at less than 4 per cent, on prime security, 

 and only a few were in a position to offer 

 money at the Exchange by reason of low re- 

 serves and calls upon them by their correspond- 

 ents at the interior. This threw the demand 

 upon the Stock Exchange, and the average for 

 bankers' balances gradually rose to 4 per cent. 

 The banks being practically out of the market 

 for paper, rates advanced, and 60 to 90 day 

 indorsed notes were quoted at 4 to 4^ per 

 cent. ; four months' jobbers' names, at 4 to 5, 

 and good single-name notes having four to six 

 months to run, 5 and 6| per cent. During the 

 first week in August money became still more 

 active on call, and the supply at the Exchange 

 being limited, opportunity was afforded for 

 manipulation. Two of the largest banks were 

 then carrying two thirds the total surplus re- 

 serve, and the remainder was distributed among 

 three other banks. Those in a condition to 

 buy paper refused to take any below 5 to 6 

 per cent., and time-loans on stock collateral 



commanded 4 and 5 per cent, for four months, 

 the rate depending upon the character of the 

 security. Eastern banks had full employment 

 for all their funds ; Western institutions were 

 engaged in supplying the demands of grain- 

 buyers and stock-raisers, and they were almost 

 daily drawing upon their New York deposits. 

 During the second week in August there was 

 a manipulated advance in tbe rate for money 

 at the Stock Exchange to 40 per cent., for the 

 purpose of unfavorably influencing the stock 

 speculation. On the following day, after the 

 demand had been supplied, the rate fell to 1 per 

 cent., but 7 was a fair average for both days. 

 The bank return of the 12th showed that two 

 of the institutions were Carrying nearly the 

 whole of the $8,647,250 surplus, leaving the 

 remainder either at or below the 25 per cent, 

 limit. This condition of the banks induced a 

 few of them to call in loans, the trust com- 

 panies had to meet a demand for some of their 

 deposits, and they in turn called upon the 

 banks, so that the activity in money had a 

 legitimate basis. On the following week there 

 was a flurry in money, during which the rate 

 was marked up to 20 per cent., caused by the 

 financial troubles at Boston, growing out of 

 the defalcation of Gray, the Indian Orchard and 

 Atlantic Mills treasurer, but, as was the case 

 in the previous week, the rate the next day fell 

 to 1, and the average thereafter was not above 

 7. With the object of relieving the stringency 

 in the money market, the acting Secretary of 

 the Treasury, on the 19th, issued a call for $15,- 

 000,000 3-per-cent. bonds. In the closing week 

 of the month there was an advance in money 

 to 9 per cent., caused by the calling in of loans 

 by some of the trust companies, but the aver- 

 age was not above that of the previous week. 

 Some of the life-insurance companies and other 

 institutions were then making loans on stock 

 collateral at 6 per cent, for the remainder of 

 the year, but they required first-class security 

 and ample margin. There was no sale for 

 commercial paper at the close of August, ex- 

 cept at high rates, and not more than one of 

 the city banks was purchasing notes. For this 

 reason, quotations for paper were nominal. 

 On the last day of the month, the Secretary of 

 the Treasury gave notice that any part of $10,- 

 000,000 3-per-cent. uncalled bonds would be 

 redeemed if presented before September 15, and 

 this order was subsequently modified so as 

 to include any uncalled bonds. There were 

 then outstanding two calls, one for $15,000,000 

 and another for $10,000,000 ; but as most of 

 these bonds were owned by the banks, and 

 held as security for circulation, redemptions 

 were slow, and the relief to the market almost 

 imperceptible. Gold imports commenced dur- 

 ing the middle of August, and these aided to 

 some extent in enabling the banks to meet the 

 drain to the interior and for customs. Early 

 in September the average for call loans was 

 6 to 7 per cent, and the extremes 1 to 9. 

 The Treasury disbursed comparatively large 



