"L

It

IFE" published the other day a cartoon with a significant title. showed the Broad Street front of the New York Stock Exchange. In the street stood a patrol wagon. From the entrance of the building to the wagon stretched a line of respectable and prosperous-looking men. Overseeing their journey from Stock Exchange to patrol wagon were policemen with drawn night-sticks. The title of the picture was "Raiding a Gambling Joint."

The significance of this cartoon lay not so much in the truth of what it intimated, about which there are at least two widely divergent opinions, as in its timeliness. It is popular in these days of "money trust" accusations and investigations to vilify the Stock Exchange, to call it a gambling joint, to denounce its members as oppressors of the poor and devourers of widows' houses.

Is it true? Is the Stock Exchange, as has been said even by a prominent writer on economics, a "gambling hell"? Is it an institution which perhaps we ought to suppress? Of course it ought to be suppressed if it is primarily a gambling joint, just as we have suppressed the Louisiana lottery and, at least partially, race-track gambling, and as we ought to suppress bucket shops, pool-rooms, poker joints, and the little Monte Carlos that an indulgent Police System has allowed to flourish in other parts of the city.

Let us look at these questions in the light of what the Stock Exchange really is and does. Let us approach the subject with an open mind and an inquiring eye and see what light an examination of the facts throws upon the duty of the Stock Exchange to the public and of the public in relation to the Stock Exchange. Heat is an admirable thing in its place, but it never yet has been made to do the work of light.

Before we look at the Stock Exchange in operation, let me set down certain theses which I believe an examination of the facts

will support. I will present them in the popular rather than the logical order. They are these:

1. Many of the operations on the Stock Exchange are virtually gambling.

2. Many individuals lose money on the Stock Exchange who can ill afford to lose it.

3. The free opportunity provided by the Stock Exchange for speculation makes it easy for many men with inadequate knowledge and insufficient resources to indulge in speculation.

4. The facilities of the Stock Exchange are used at times by experienced and unscrupulous men and groups of men, many of whom, however, are not members of the Exchange, to take advantage of inexperienced outsiders.

5. Nevertheless, the Stock Exchange has a very real reason for being.

6. The function which it primarily performs is a legitimate, a useful, and indeed an indispensable one to modern business and industry.

7. Neither speculation, trading on margin, nor short selling, when kept in its proper place and not abused, is contrary to good law, good economics, or good morals.

8. But all of these three are at times used in ways that, if not illegal, are certainly uneconomic and immoral.

9. Finally, the problem which in this day we must face in relation to the Stock Exchange, and which the Stock Exchange must face for itself, is, How to preserve and develop its normal and indispensable function while curbing and eliminating to the greatest extent possible the misuse of its facilities.

With these theses in mind let us go down to Wall Street and see what we find there.

THE BOARD ROOM

It is a quarter before ten on a morning in May in the year of grace nineteen hundred thirteen. We are standing at the railing of the narrow gallery that runs along one side of a great room.

A clever painter has recently given expression, through an exhibition of his work in a New York gallery, to the idea that rooms, even when they are entirely free of people, have personalities of their own. The room we are in is an admirable illustration of his idea. Even in its proportions it is unlike other rooms. To the eye it is a vast hollow cube a hundred feet in length and breadth and height. As a matter of fact, the eye is not an accurate guide, for no two of the room's dimensions are the same; but the impression remains, differentiating this from other rooms a great hollow cube.

Two walls, the east and the west, are all windows. The other two bear in their middle sections what look like great blackboards divided into a thousand little squares. The narrow gallery we are in runs along the east wall. Its windows look out across Broad Street at its intersection with Wall Street to the United States Sub-Treasury and the longfamous building with the chiseled name over the door, J. P. Morgan & Company. With the death of the great financial leader only two months past, the building from which his influence went out over the whole financial world is already melting away under the eager hands of the house-wreckers.

In the middle of the north wall is a tiny balcony. There stands the venerable chairman. a black skull-cap on his white head, in his hand the gavel which will in a moment give the signal for the opening of a new day.

headquarters for certain stocks, and each of them takes its familiar name from the most prominent stock traded in about it. A few of the posts have two or three nicknames interchangeable at the whim of the moment.

Seven

Number One is the Steel post; two, the Great Northern Preferred or Consolidated Gas post; three, the Pennsylvania post; four, the Sugar or Money post; five, the Atchison or Missouri Pacific, or, in the shorthand vernacular of the Floor, the Atch. or Mop. post. Six is known either as the New York Central, the Northwestern, or the Can. post. takes its name from Baltimore and Ohio. Eight is known as Katy (which, being interpreted, means Missouri, Kansas, and Texas). Nine. is the Union (Union Pacific) post, ten the General Electric, and eleven the Reading post. Twelve is interchangeably Smelters (American Smelting and Refining Company) and Copper (Amalgamated Copper). Thirteen is Southern Pacific, fourteen Chesapeake and Canadian Pacific, fifteen Petroleum (so called from California Petroleum and Mexican Petroleum), and sixteen B. R. T. (otherwise Brooklyn Rapid Transit) and Lehigh Valley.

Each post, therefore, has its sobriquet. At each post a certain list of stocks is traded in, varying from half a dozen to nearly twoscore in number. At the Steel post, Number One, for instance, will be found: United States Steel, common and preferred, known to the world of Wall Street as · Steel;" Chicago, Minneapolis, and St. Paul, common and preferred, known as "St. Paul;" Utah Copper; Louisville and Nashville; Atlantic Coast Line.

At the Katy post, Number Eight, will be found thirty-nine stocks, including such prominent ones as Bethlehem Steel, National Biscuit Company, and International Harvester Company, and such unfamiliar ones to the uninitiated as Weyman-Bruton Company, Quicksilver Mining and Assets Realization Company.

No. 4 is also known as the Money post, for there the representatives of the banks are found by brokers who have bought stocks and must make the necessary loans to "carry" them.

Along the west wall of the Floor are batteries of telephone instruments ranged in alcoves that look not unlike the coat-racks in a hotel or club coat-room. Each member has a telephone connecting with his office. and a clerk in constant attendance on it,

though two members may sometimes share a clerk for purposes of economy.

HOW THE BROKER IS TIED TO THE OUTSIDE WORLD

Now we discover the purpose of the big blackboards on the walls. All through the day we will see the little squares up there winking and blinking their summons to the different members on the Floor to come to their telephones. As we watch the board, suddenly one of the squares splits in two, the upper half drops over with a kind of a comic flop, and instead of a little black square we see a number-" 450 "-in white on a black background. Member Number 450 is wanted at the telephone. The pattern made by the white figures on the blackboard is constantly changing. Now, one after another, at regular intervals, half a dozen numbers appear spotted over the board. For every recurring number some man on the Floor has started toward his telephone. Then three or four drop with a simultaneous flop, galvanizing into simultaneous motion across the Floor three or four other members. Meanwhile half a score of others have popped back into the uniform black expanse, and the imagination can picture half a score of members reaching their telephones and receiving messages from their clerks or taking up the receivers to talk with office partners or inquiring customers. Just to watch the shifting patterns on the board is fascinating. To consider their significance is no less so. Here is a twentieth-century messenger service, substituting for the lagging foot of the uniformed page the instantaneous action of electricity and light.

It is fascinating to watch it; it is even more fascinating to consider its symbolism. The hundreds of brokers on the Floor are not isolated individuals, each man playing "off his own bat." The Floor is not a place shut off from the rest of the world where a group of privileged individuals, freed from responsibil:'v except to their own interests and desires, juggic and manipulate the security values of a Nation's industry and commerce. It is not the brokers who buy and sell on the Stock Exchange; it is the people, the country, one might almost say, the world. The broker on the Floor is tied by a telephone wire to his office. His office, in turn, is tied by telegraph lines, by telephone wires, by cables, by the mails, to customers, plain citizens

even as you and I," dwelling from Dan to

Beersheba, from the Narrows to the Golden Gate, from the Soo to the delta of the Mississippi.

GAMBLING JOINT OR MARKET PLACE?

"Life" has tried to work out from the manifestations of the popular temper in these days of Wall Street-phobia a definition of the Stock Exchange-" a gambling joint."

Let us, writer and readers together, try to work a definition out of the thoughts suggested by the blinking numbers on the wall"a public market place where the people of a great Nation buy and sell stocks and bonds through brokers who are members of the Exchange."

Of course there is a class of members who have no outside connections with the public, who do "play off their own bat.” But they

are a minority, and their activities are supplemental and not antagonistic to the work of the commission brokers whose clients are the public.

Of course, also, the movements of prices on the Exchange are not always the unassisted result of the law of supply and demand. Big operators and groups of operators can and do at times raise and lower prices in ways that may be called artificial and for ulterior purposes. Pools are created from time to time to put prices up or to hammer them down. Among the methods which have been used in the past for bringing about such results is manipulation-creating artificial prices through "wash sales" and "matched orders," fictitious transactions in which no stocks actually change ownership. Whether this manipulation still continues and to what extent is a debated question. Such writers on the subject as Mr. Lawson would give us to believe that manipulation is "as easy as lying" and far more usual. Prominent members of the Exchange say that manipulation is no longer possible, that under the new rules of the Exchange and their rigid enforcement, and under the new laws of the State making fictitious transactions or "wash sales" a felony, "no man would dare to try it." Whether manipulation through fictitious sales is still possible and still practiced or not, the Governors of the Exchange are making determined efforts to render it impossible.

But the exceptions merely bring the truth of the rule into greater prominence. The members of the Stock Exchange, broadly speaking, buy and sell for the public.