Business: For the Defense

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This was the situation on Sept. 21 when the Governing Committee of the Exchange met at 9:15 a. m. to consider what steps to take. England had abandoned the gold standard, every Exchange in Europe had closed except the Paris Bourse (TIME, Sept. 28). Two tried courses were open to the Governors: i) to close the Exchange (as was done for a few days in 1873, again for several months in 1914), or 2) to establish minimum prices—a course which had worked well on the reopening of the Exchange in the autumn of the War year. Neither suited the emergency of last month. The Governors decided on a third expedient never before tried in the history of the Exchange. Short-selling was forbidden.

This immediately had the expected effect of bringing into play the 4,241,000-share short interest which rushed in to cover its commitments. Prices rebounded. But in the following days the Governors watched the exhaustion of the short interest with alarm. In two days it decreased 1.079,000 shares. On Sept. 23 it was deemed essential to remove the restrictions, again permit short-selling, create a source of buying power. Although this was done the short interest did not increase rapidly enough to offset real liquidation. Prices declined sharply until Oct. 5 but the Exchange held its ground, made no further move.

President Whitney closed his speech with some remarks on the unpopular "bear raider.'' He denned this species as one who sells stock "not because he believes the stock is too high, but because he believes that by selling quickly and in great volume he can force the price to decline." Stung by the accusation that "bear raiders" were responsible for the last decline in the market Mr. Whitney gave figures to disprove it. On Sept. 21 the short interest of 3,697,000 shares was held in 9.369 accounts, averaged 400 shares each. "Transactions of the vast majority of these people," he said, "could not by any stretch of the imagination be called 'bear raiding.' . . . The exchange is absolutely opposed to 'bear raiding' and has used and will continue to use all of its power to stop this practice."