notice, in case the borrower neglects to respond to the call for payment This agreement obviates the necessity of a new note each

of the loan.

time a new loan is made.

The violation of the national bank law against overcertification is in most cases more technical than actual; for as soon as the broker gets his stock and arranges his loan he is able to make every check good, and by his arrangement with the bank he is bound to maintain his average daily balance of $50,000, or whatever other amount may be agreed upon. The larger the average balance the larger the certification.

But even the appearance of violation of law may be open to criticism, and therefore the national banks are gradually withdrawing from this business and other institutions are taking their place. The institutions also are beginning to adopt other systems, which have the merit of simplicity and freedom from possible illegality. Many of them are making morning loans to brokers of an amount that will cover their probable certification for the day. These loans are based on the "single-name paper" of the broker-that is to say, his individual, unindorsed note. With such a loan the broker has to his credit a deposit at the bank sufficient for the day's probable business, and technical overcertification is avoided. The practical result is the same under either system. The latter has the merit of avoiding the appearance of evil.

The amount of certification required in the operations of the stockmarket is stupendous. On the deliveries made in the Stock ClearingHouse transactions the certification actually required in 1901 was nearly $11,000,000,000. The Stock Clearing-House clears about 85 per cent of all the sales of stocks. The remaining 15 per cent, as well as transactions in bonds, must therefore be taken into account in any estimate of total certification required. The bonds alone added at least another billion, and it is safe to say that the business of the New York Stock Exchange exclusively, in 1901, required a certification of $14,000,000,000, or an average of about $45,000,000 daily. This was over one-fifth the average daily clearances of the Bank Clearing-House.

It may be asked, What does a bank make by certifying brokers' checks? In the example given the bank gains the use of $50,000, the required daily balance of the broker. But as the national bank is, by law, required to keep a reserve of 25 per cent, its net gain by this operation is the use of $37,500. Its profit is the interest it earns

by the loaning of that amount. If it were not profitable the bank would not engage in the business.

While the great mass of these stock exchange loans are on call, most brokers seek to secure a certain proportion of their required line of credit on time. Formerly time loans were made by months, but now by days. Thus there are thirty-day, sixty-day, and ninetyday loans. The rates for time loans are generally higher than for call, except in times of severe stringency in the money-market, and banks are commonly very conservative in making such loans for long periods. The bank's deposits being subject to withdrawal on demand, it follows that it can lock up only a comparatively small part of its resources in the form of time loans. The stock-broker, though paying more for his credit than he would on his call-loan basis, escapes the liability of having all his loans called at one time.

after date for value received the undersigned promise to pay to the order of THE NATIONAL CITY BANK OF CHICAGO

Dollars

at its banking house in Chicago, Illinois, with interest AFTER MATURITY at the rate of seven per cent per annum until paid and with costs of collection and
a reasonable attorney fee if not paid at maturity. Presentment for payment, notice of non-payment, protest, and notice of protest are each and all hereby
waived by the makers, endorsers, and guarantors, jointly and severally. Any indebtedness owing from said bank or legal holder hereof to the undersigned or
to any endorser or guarantor may be appropriated and applied by said bank or legal holder on this note at any time without demand upon or notice to anyone.

SIGN

HERE

AND
BELOW

The undersigned jointly and severally hereby deposit with and pledge to THE NATIONAL CITY BANK OF CHICAGO as collateral security for the pay-
ment of the above and foregoing note and of all other liabilities of the undersigned to said bank or the legal holder of said note (whether direct or contingent,
joint, or several heretofore or hereafter contracted and whensoever or howsoever acquired by said bank or legal holder) the following property, the present
value of which is $.
.viz:

At any time said bank or legal holder of said note may call for additional security satisfactory to the said bank or legal holder of said note, and failure to
furnish the same within twenty-four hours of such call shall make said note and all other liabilities of the undersigned, or either of the undersigned, to said
bank or legal holder at once due and payable without notice or demand to anyone. Said call for additional security may be made by giving any of the
undersigned oral or written notice thereof or by mailing such written notice addressed to any office, place of business, or usual abode of any of the under-
signed. The undersigned and each of the undersigned hereby give said bank or any of its officers, agents, or assigns full and irrevocable power and authority
to sell, assign, and deliver said property and all substitutes therefor and additions thereto, or any part thereof, at any time and from time to time, without
advertising or demanding payment or giving notice of any kind to anyone, at any broker's board or public or private sale, at the option of said bank or legal
holder, and said bank or legal holder may be a purchaser at said broker's board or public sale or sales. The net proceeds of said sale or sales shall be applied
upon said note or other liabilities of the undersigned to said bank or legal holder whether then due or not due, as, and in, the proportion said bank or the
legal holder of said note may designate, and the surplus if any shall be paid to the undersigned or to any of the undersigned. In the event of a deficiency
the undersigned and each of the undersigned promise to pay such deficiency forthwith after such sale. The word 'liabilities' used herein includes a reasonable
attorney fee, and all costs, charges, disbursements, and expenses, legal or otherwise, to which said bank or legal holder may be subjected by reason of enfor-
cing collection of the foregoing note by suit or otherwise, and by reason of holding or selling any securities or collateral belonging to the undersigned, or either
of the undersigned, alone or jointly with others. The said bank or legal holder of said note is hereby expressly empowered at its option to receive dividends
and all stock increases and other special dividends which may be made upon collateral held hereunder. The said bank or legal holder of said note is hereby
expressly.empowered at any time to collect, compromise, compound, extend, or renew said pledged securities and any additions thereto and substitutes there-
for or any part thereof.

Business Address:

SIGN

HERE
AND
ABOVE

41. INTEREST RATES IN THE NEW YORK MONEY MARKET' BY WILLIAM A. SCOTT

The published rates on money loaned on the New York market include two sets of quotations under the head "Call Loans," namely, call loans at the stock exchange and at banks and trust companies; seven under the head "Time Loans," namely, 30-, 60-, and 90-day, and 4-, 5-, 6-, and 7-month; and three under the head "Commercial Paper," namely, double-name, choice 60- to 90-days, and two varieties of single-name, prime 4- to 6-months, and good 4- to 6-months. In the weekly summaries contained in the Commercial and Financial Chronicle the minimum and maximum quotations for each class of loans are given. A comparison of these quotations reveals some interesting facts.

The five varieties of time loans quoted regularly often differ from each other in magnitude and range. A comparison of the minimum quotations for the last eleven years reveals the general rule that the rate tends to rise as the length of the loan increases, but to this rule. there are many exceptions. For example, in 126 weeks of the period the minimum rates were identical for all classes of time loans. The 90-day and 60-day minimum rates were identical in 308 weeks, the 4-months and 90-day in 320 weeks, the 5-months and 4-months in 374 weeks, the 6-months and 5-months in 501 weeks.

The difference between these quotations rarely exceeds one-half of 1 per cent, and the general rule seems to be that the influence of time in raising the rate grows less as the length of the loan increases. For example, there is apt to be a greater difference between the quotations of 60 and 90-day paper than between 90-day and 4-months. Likewise, there is a greater difference between 90-day and 4-months than between 4-months and 5-months paper.

The range of time loans is much less than that of call loans, being rarely above one-half of 1 per cent in a given week, and on all classes being zero during the great majority of the 572 weeks investigated. The tendency for the rate to vary during the week grows stronger as the period of the loan increases. In the case of 60-days loans, for example, there were variations in only 162 of the 572 weeks, while in that of 90-day loans there were variations in 190 weeks, and in that of 4-months loans, in 238 weeks.

Adapted from "Rates on the New York Money Market, 1896-1906," Journal of Political Economy, XVI (May, 1908), 273-98.

During the greater part of the last eleven years the rates on all classes of time loans have averaged higher than those on call loans. This was true of the annual averages of these rates for seven of the eleven years and of the monthly averages for 86 of the 132 months of the period. The exceptions to this rule, however, are important.

A comparison of the quotations on commercial paper reveals the same kind of differences that are noted in the case of call and time loans. The minimum rate on double-name paper is usually below

that on single-name, but during 254 of the 572 weeks of the period it was identical with that on prime single-name paper. The difference, when one exists, is usually one fourth of 1 per cent. The range for single-name paper is usually greater than for double-name and the fluctuations are more frequent. As compared with the rates on time loans running for the same period, that on commercial paper, as a rule, averages higher. The exceptions to this rule correspond in time to those mentioned above, in which the call-loan rate averaged above that on 60-day time.

The chart above indicates the fluctuations in the following rates: the minimum rate on 60-day time loans, the minimum rate on 60to 90-day commercial paper, and the average call-loan rate at the