Again, from the stockbroker’s point of view, if he buys securities on margin for a customer, he (the broker) must either carry them with the jobber or with another broker, or he will have to pay the government tax himself. Naturally he hastens to loan them, because, should the client sell the securities in the course of the next account when they would have to be delivered, the broker would lose the tax. He avoids this loss by instructing a jobber to contango or carry-over the securities until the following account day. On the other hand, if the broker is certain that his client has purchased his securities for a long pull on a margin basis, he will often pay for the stock himself, transfer it to his own name, and willingly submit to the government tax, knowing that he can recover the outlay from the handsome rate of interest charged the client.
Another vital point of difference between the London and the New York Stock Exchange lies in the nature and volume of the business done. Americans are prone to think of their foremost Exchange as one which, in the volume and extent of its transactions, compares favorably with the great Bourses of the world; they like to think of New York as the financial centre of the universe, and they paint rosy pictures of America as a great creditor nation. But they err in each of these ambitious dreams. The New York Stock Exchange, with all its magnitude, cannot compare with its London prototype; New York is by no means the financial centre of the world, and America is not a creditor, but a debtor nation.
Perhaps in time America’s relationship to England and to the rest of the world may change in these matters--certainly its increase in per capita wealth and real property is such as to justify the hope--but at present the day when we may speak of American financial supremacy seems a long way off. We have not yet forgotten, for example, the panic of 1907, and our helpless situation as revealed by our demand for gold, nor are we likely soon to forget the funds that were then promptly supplied us by London without any dangerous depletion of the Bank of England’s reserve. So smoothly, so automatically are these large affairs conducted by the Bank that the outflow of gold to New York found a prompt response in the inflow from twenty-four countries, including the Colonies. Within six weeks after the American drain began, the bank’s stock of bullion actually exceeded its original store. Small wonder that Englishmen are proud of their bank; and that London should have become the world’s centre for the investment of capital and the diffusion of credit.