Hegira to Jersey

Potent people were popping in and out of No. 820 Park Ave., Manhattan every day last week. Governor Lehman had traveled down from Albany to try once again to straighten out Mayor O'Brien's fumbled finances. Bankers were summoned to the Governor's home to talk about loans. President Richard Whitney of the New York Stock Exchange was pumped to see if he was bluffing about moving to New Jersey (TIME, Sept. 25). If Mr. Whitney was not bluffing it was plain that the tax schemes cooked up by bumbling Mayor O'Brien and his adviser, Samuel Untermyer, threatened Manhattan with a major economic calamity. To escape the Mayor's new 4-c--a-share stock transfer tax and 5% levy on brokers' gross income, not only the Stock Exchange but the Curb and Produce Exchanges, the over-the-counter dealers and all appendages of Manhattan's vast securities business were ready to join the Jersey hegira. For Mayor O'Brien had inadvertently brought home a great truth to the men who buy & sell the nation's securities: that whether or not Mayor O'Brien's taxes were imposed, security dealers would be far better off in New Jersey than in New York State, 1) They would avoid New York State's transfer taxes which contributed $31,000,000 to Governor Lehman's budget even in the last lean year. 2) All security dealers who lived in New Jersey and all those who chose to move there would avoid the New York State income tax (New Jersey has none). When these facts were generally realized last week things moved swiftly.

Plans for the National Stock Exchange which sought a New Jersey charter were dropped, and a committee headed by Partner Howard Froelick of the big odd-lot house of De Coppet & Doremus launched a New Jersey Stock Exchange, an unincorporated association like the Big Board. President Whitney and all officials of the New York Stock Exchange promptly accepted similar positions in the New Jersey Exchange, thus branding it as official. Of the Big Board's 1,375 members all but 97 (chiefly inactive members like J. Pierpont Morgan and his son Junius) had applied for Jersey membership before the end of the week. Vice President Allan L. Lindley solemnly posted a notice on the New York floor that his firm's main office was now his home in Englewood, N. J.

Not since 1792 when 24 brokers agreed to buy & sell from each other under the big buttonwood tree in Wall Street had the New York Stock Exchange taken such a momentous step.

All that was needed was a new home. President Whitney stopped off in Newark on his way in from Far Hills one morning to inspect Mayor Meyer Ellenstein's Centre Market, a big city-owned white elephant used partly as a parking garage. Mayor Frank Hague of Jersey City showed Founder Froelick Pennsylvania R. R.'s terminal. Real estate boomlets sprang up in both cities as brokers fought for options on office space. Finally President Whitney picked Newark's Centre Market for the exchange proper and Jersey City's Pennsylvania Terminal-- equidistant between the old floor and the new-- for Stock Clearing Corp., a subsidiary which handles much of the mechanical detail.-- Telephone men working 24 hours a day gouged up Newark's Commerce Street to lay a 3,600-wire cable. Carpenters and electricians rushed preparations for the opening Oct. 2. A hitch developed when Centre Market's present tenants, in default of $300,000 rent, obtained an injunction against dispossession. Asked if he would hold Newark to its promise. Founder Froelick snapped, "Hell, no! Alarmed by this attitude, Mayor Ellenstein flew home from Chicago, soon settled the squabble.

Plans last week called for shifting about 15 of the most heavily traded issues as a starter. This would account for nearly one-half of the total daily volume of trading Gradually other active stocks would be added until the bulk of the market was in Newark. Still unsettled last week was the prime point of whether firms, most of which have only one floor member, could use a nonmember alternate. With an alternate on the New York floor and the regular member in Newark, the house would avoid the use of "$2 brokers" who execute orders for other members. The $2 brokers fought the alternate plan tooth & nail. Wall Street was sure that without the burden of New York State taxes trading volume would jump.

Visions of Wall Street going to weeds haunted Manhattan realtors all last week. When Newark firms opened on Sunday and even plunked down renting offices right in Wall Street, they grew panicky. In advertisements U. S. Realty & Improvement Co., owner of many a skyscraper, besought Manhattan citizens to rise and squelch their mayor. The Merchants' Association estimated that the Jersey hegira would lop one-third from the value of all Wall Street property, now assessed at $1,000,000,000, that there would be a permanent population shift across the Hudson River with imponderable consequences to Manhattan business. It was pointed out that the New Jersey Stock Exchange by imposing a small assessment of its own on trading could soon afford to duplicate, if not improve on, the Manhattan plant. Bankers feared not only the loss of tenants in their big buildings but also the lucrative stock transfer business. Forbidden by law to branch to Jersey they might eventually lose a sizable slice of brokers deposits. Mayor O'Brien, badly snubbed in the primaries early in the week finally tried to make peace with the brokers when orchid-buttonholed Mr. Untermyer told him, "I wish that I still believed' that the threats of the Stock Exchange to move away from New York were a bluff, but the conviction has been carried to me that they are going away and that they have already gone." But even if the obnoxious brokerage taxes were eliminated, many brokers, set on the move's other advantages, still urged the exodus.

--Chicago always alert to opportunities to steal Manhattan's financial thunder, last week organized a committee to persuade such Midwest corporations as Chrysler, Corn Products, Deere, General Motors, Nash, National Biscuit, Montgomery Ward to list their stocks in Chicago.

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