e present decade, it will be recalled how
great a part foreign floating capital played in financing the
ill-starred speculation here which culminated in the panic of May 9,
1901. Europe in the end of 1900 had gone mad over our industrial
combinations and had shovelled her millions into this market for the
use of our promoters. What use was made of the money is well known. The
instance is mentioned here, with others which follow, only to show that
all through the past ten years London has at various times opened her
reservoirs of capital and literally poured money into the American
market.

Even the experience of 1901 did not daunt the foreign lenders, and in
1902 fresh amounts of foreign capital, this time mostly German, were
secured by our speculators to push along the famous "Gates boom." That
time, however, the lenders' experience seemed to discourage them, and
until 1906 there was not a great deal of foreign money, relatively
speaking, loaned out here. In the summer of that year, chiefly through
Mr. Harriman's efforts, English and French capital began to come
largely into the New York market--made possible, indeed, the "Harriman
Market of 1906." This was the money the terror-stricken withdrawal of
which during most of 1907 made the panic as bad as it was. After the
panic, most of what was left was withdrawn by foreign lenders, so that
in the middle of 1908 the market here was as bare of foreign money as
it has been in years. Returning American prosperity, however, combined
with complete stagnation abroad, set up another hitherward movement of
foreign capital which, during the spring and summer of 1909, attained
amazing proportions. By the end of the summer, indeed, more foreign
capital was employed in the American market than ever before in the
country's financial history.

To take up the actual operation of loaning foreign money in the
American market, suppose conditions to be such that an English bank's
managers have made up their minds to loan out L100,000 in New York--not
on joint account with the American correspondent, as is often done, but
entirely independently. Included in the arrangements for the
transaction will be a stipulation as to whether the foreign bank
loaning the money wants to loan it on the basis of receiving a
commission and letting the borrower take the risk of how demand
exchange may fluctuate during the life of the loan, or whether the
lender prefers to lend at a fixed rate of interest, sa