In reply to your letter of the 11th inst. you are advised that a table showing the percentage of banks violating the law in regard to real estate loans, reserve, excessive loans and borrowed money, appears on page 22 of the Comptroller's report for this year, a copy of which is being mailed to you, under separate cover, as requested.

A copy is also being sent to F. W. Crozier, c/o The Romaine, Middleton Avenue, Cincinnati, Ohio.

Respectfully,

докаже

Deputy Comptroller.

(See Page 283)

Central will advance, ready to take his winning if it does, and with $10,000 up in the hands of the broker as a security wager to cover commissions and pay the "loss" to the customer behind some "selling" broker, who took the other side and bet that New York Central would go down. Neither wants to bother with any certificate of stock. The customer who "sold" had no actual stock to sell or deliver. The customer who "bought" got no stock and did not want any. Both are interested only in the shifting quotation figures on the blackboard or tape as the game goes on. If there was any sort of real delivery by the last to the first man, there certainly was none to the 99 between, not even mental delivery, for they did not expect or want any actual stock. Each just bet the price would advance. If these had been genuine sales, it would have required 100,000 shares and $10,000,000 money to make the deliveries. As it was a gamble, 1,000 shares was enough to make the sham "de livery" for the whole 100 "deals" and $1,000,000 to protect the 100 brokers in case quotations happened to go down instead of up. But even the first buyer did not actually get any stock. The certificate never was legally transferred to him on the books of the company. There was no stock actually delivered to him. He never saw any stock, or expected to. His broker got the 1,000 share certificate. It was indorsed in blank and thus transferable by mere delivery to "bearer." Without any consent or action by the customer, the broker takes this certificate to his own bank and pledges it as collateral security for his own note for $80,000, or 80 per cent of its market value. If broker defaults, the bank hands the certificate to a different broker who sells same to anybody desiring it. The bank pays itself and the expenses from the proceeds and gives the balance, if any, to the defaulting broker.

Unless the legal title to the 1,000 shares vested in the customer, clearly there was no "delivery" and the deal was a mere gamble, a wager or bet on the quotation price, and as such illegal and a violation of the New York state constitution which prohibits gambling.

On the other hand, if there was delivery, and title vested in the customer, then the broker has committed a felony and violated the statutes of New York by converting to his own use the property of another, pledging his customer's stock at the bank as security for his own personal debt. Margin dealing in either case is an illegal, criminal pro

ceeding, and the distinguished and able Attorney General should know of that fact. If he does, why is he apologizing for what is conceded to be the greatest of the many Wall Street evils, defending the stock exchange in its lawless course?

In the above situation only 1,000 shares of actual stock worth $100,000 is involved, and yet $1,000,000 cash is up as a security wager with 100 brokers who charge their customers per cent commission on $10,000,000 for "buying" and another % per cent on $10,000,000 for "selling" and also 6 per cent "interest" on an imaginary $9,000,000 while the deal is pending; also the state transfer tax. And the Attorney General is said to see nothing improper in this proceeding. Likewise he seems to see nothing improper in over half the national bankers violating the United States laws that he took an oath to enforce, for he takes no action in the matter.

It is believed that in a United States Court money lost in a margin deal can be recovered by the victim in a suit against the broker. This view should be tested in the

courts.

Congress is the only power that can throttle or curb this most deadly of Wall Street's instruments for the spoilation of all the people. If Congress had acted twenty-five years ago, more than 10 billion dollars of wealth now dangerously concentrated would have remained scattered in the pockets of a large portion of the 94,000,000 people of the United States.

CHAPTER XII.

PANICS NATURAL OR ARTIFICIAL?

Inside Facts About 1907 Panic.

The "Aldrich Plan" is loudly advertised as a sure "cure all" for every panic. The country needs a "preventive" rather than "cure." This can be provided only if we discover and disclose the cause or causes of these repeated calamities. Are panics natural and therefore inevitable, or artificial, and for that reason unnecessary and avoidable? Do they just "happen" or are they "sent"? Are they the work of Providence or of Man? If panics are not a visitation of Divine Wrath, if they are man-made, who does it and for what reason?

Investigation leads us first to ascertain where panics start. History and common knowledge answer as to that. It is conceded that every American panic began in Wall Street. Why? Are they accidental or incendiary? If accidental, due to financial conditions likely to produce panic, we can avoid panics only by removing these panic-inciting conditions. To do that we must go where they exist, to Wall Street. We must learn why these conditions prevail, who creates them, and for what purpose.

On the other hand, if panic is incendiary, deliberately started, we must find out just who does it, how it is done, and for what object or objects. This done, it will be relatively easy to find and apply an effective remedy.

The first overt act at the beginning of every financial panic is the violent and sudden contraction of bank credit, the wholesale and imperative calling in of bank loans. This always will cause panic instantly. This panic-inciting step by the banks may be involuntary or voluntary. If deposits are withdrawn by depositors through fear or otherwise, cash reserves shrink and banks must contract loans about ten times such withdrawals. This is involuntary and not the fault of the banks. Big Business thus can force the banks to cause panic through violent contraction of bank