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Unsound Banking Practices

Page history last edited by Mr. Hengsterman 12 years ago

Call Money - a term used for funds used ti finance stocks held on margin. At this time a speculator could buy stocks for a little as 10 percent margin, borrowing the rest from the broker.

 

Banks and even industrial corporations flocked to lend money to brokerage firms at 12%, while the brokers in turn lent it to their customers at 20%. Bethleme Steel had $150 million and Chrysler had $60 million in the call money market by the end of the summer of 1929

 

Banks began borrowing money from the Federal Reserve through a discount window of 5% and lending it to brokers. When a bank borowed at 5% they would lend it out at 12%, making a 7%return on someone else's money. 

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