Stockmarket to be Closed?

Week II of Hitler's war against the West was also week II of a Wall Street panic. Down another eight points went the Dow-Jones average of 30 industrials to 114.75. Volume of stocks dumped totaled 10,370,000 shares, against over 17,000,000 shares moved during panic week 1 (TIME, May 27). One reason why the panic slowed down: most shoestring margin accounts, many small, outright holders, were already sold out. Furthermore, bargain hunters held off in the hope that stocks like Bethlehem Steel might soon be given away closer to 40 (when the $3.75 it has paid in the last twelve months would promise a 9.4% return) than to last week's closing price of 69 1/2.

But before bargain hunters could decide whether to wait for lower prices, one big question had to be answered. Would the President proclaim a National Emergency, approve of SEC's closing the Exchanges? Clamor for such a step grew noisier. The Wall Street Journal chided the clamorers, editorialized: "The Securities and Exchange Commission and the authorities of the New York Stock Exchange are to be congratulated upon their refusal to interfere. . . . The wisdom of this policy is demonstrated by the fact that there has been an actual market throughout the entire decline, with no more than one or two cases where for a very few minutes dealings were suspended to enable an orderly meeting of demand with supply."

But to Administration officials, the question of closure was far from settled by the slowed rate of selling last week. Given a few more really bad days (which the invasion of England would give it), the market still stood in danger of waking up next morning to find itself closed, as it did in July 1914. Administration advocates of such drastic action are still in the minority. But, backed by a barrage of letters, telegrams and phone calls to SEC from small investors pleading for a moratorium, they argue for closure as follows:

> This is a National Emergency, not a mere trade depression. It is having an unreasonably bearish psychological influence on the market. Example: although steel securities are down, steel production has been moving up. A moratorium would give dazed security holders a breathing spell in which to realize how cheap they have made stocks in relation to current earnings and National Defense prospects.

> Continued panic, wiping out untold collateral behind all kinds of business & personal loans, would force many a small security holder to drop insurance policies, mortgages, autos, just as though a major depression were getting under way.

> Such panic losses are cutting deeply into the capital that will be needed to finance public & private investment for National Defense.

Against this, most of Wall Street and the New Deal preferred to keep the market open. Brokers naturally wanted to continue pocketing commissions on two-and-three-million-share days. Administration skeptics discounted the small investors' pleas because a suspicious number had been telephone calls from women using the same patter, apparently instructed by panic-provokers. In addition they argued:

> Even if the over-the-counter-market were closed too, personal and Black Bourse trading would probably continue at greater & greater declines from the last closing. Banks would probably continue collaterizing securities for loans of more & more conservative discounts.

> With no open market for securities, investors' pressure for cash would undoubtedly precipitate endless dumping of Government bonds. Government bonds are overpriced, extremely vulnerable to decline if dumping begins. To protect banks from such a second panic, the Federal Reserve would doubtless have to pour many hundreds of millions of dollars into price-pegging purchases.

> Closed markets and the spread of the panic to Government bonds might cause as much business & credit liquidation, property & income losses, as further panic in the open market.

Upshot of this dilemma: New Deal advocates of both policies joined in urging the President to quote Junius Spencer Morgan's classic advice never to sell America short. Since real National Defense will involve many more billions of Government money than he has yet asked for, a declaration laying these billions on the line would remind security holders of a grim but bracing fact: that the more bearish the outlook becomes for the Allies, the more bullish it becomes for business activity in the U. S.

This file is automatically generated by a robot program, so reader's discretion is required.