The New York Money Market

THE NEW YORK MONEY MARKET The focus of the American money market is New York. There are other subsidiary money centres such as Chicago, St. Louis and San Francisco, but the facilities of these secondary markets are not sufficiently extensive to attract a large volume of funds. The growth of a money market is conditioned not only by the opportunities that it offers for the profitable employment of funds but equally by the facility with which it permits their release. New York offers large possibilities in both directions. Security operations in New York require enormous sums. Flotations of new securities on a large scale for governmental and large private business corporations are handled by New York houses. The annual offering of new securities reaches from five to ten bil lion dollars. Between the initiation of such new issues and their final absorption by investors large sums are needed by the officiat ing bankers, and such sums are normally borrowed. Speculative operations in stocks and bonds in the New York market conducted usually on a marginal basis likewise require great sums.

New York is also the bill and commercial paper market of the country. Dealers in bankers' acceptances have their headquarters in New York city. They buy such acceptances or "bills" as fast as these are created, paying for them mostly with borrowed money, and then turn them over to any bank, firm or individual having free funds to invest. Similarly the commercial paper dealers and brokers have their main offices in New York. So-called "com mercial-paper" is made up of the single-name promissory notes of large, nationally known firms who finance some of their operations through the creation and sale of these instruments.

Foreign Exchange Market.

The American foreign exchange market centres are in New York. New York banks and banking houses have large foreign departments. They have branches, agencies, offices or correspondents in the chief centres of the world. Foreign exchange of all kinds and in all forms is bought and sold in the New York market. Most interior banks do not have a large enough foreign business to justify the organization of an independent foreign department. Hence for their foreign

business they rely on their New York correspondents. For New York this represents the confluence of innumerable streamlets of foreign exchange business which, however, when finally brought together constitute a mighty tide. Rates determined in the New York market are telegraphed to all interior points and supply the basis on which business is done. The conduct of the foreign ex change business, however, requires the constant maintenance in New York of large balances belonging to interior institutions.

New York's position of leadership in manufacturing and com merce contributes to its financial leadership. It is not only the chief manufacturing city of the country but also the principal port, the leading city in wholesale distribution, and the centre of the printing and publishing trades. Large sums are constantly needed in New York to finance its manufactures, its domestic and foreign commerce and its output of newspapers, magazines and books.

Structure of the New York Money Market.

The founda tion of the money market is naturally the Federal Reserve sys tem. This system holds the monetary reserves of the country. It supplies currency when there is need for it. As Treasury agent it supplies gold for export and makes imports of gold available for domestic credit operations. The main dealings of the Federal reserve banks are with member banks and with the Government, although they also carry accounts for foreign banks, and, for exchange and check collection purposes, with domestic, non-mem ber banks. They may also engage in open-market operations in bankers' acceptances and in governmental securities. The active conduct of affairs on the supply side of the money market is, how ever, primarily the affair of the ordinary banks. These are national banks, organized under Federal law, and State banks and trust companies chartered under the laws of New York State. Besides the large banks and trust companies there are also agencies of foreign institutions and domestic and foreign private banking firms of all kinds.