J K Galbraith on margin rates

A great river of gold began to converge on Wall Street, all of it to help Americans to hold common stock on margin. Corporations also found these rates attractive. At twelve percent Wall Street might even provide a more profitable use for the working capital of a company than additional production A few firms made this decision. Many companies started lending their surplus funds on Wall Street. By early 1929, loans form these non-banking sources were approximately equal to those from banks. Later they became much greater. 

There were still better ways of making money. In principle, New York banks could borrow money from the Federal Reserve Bank at five per cent and re-lend it in the call market for twelve. In practice they did. This was, possibly, the most profitable arbitrage operation of all time. Only a drastic increase in the Fed's rediscount rate would have made it unprofitable. In fact, higher interest rates would have been distressing to everyone but the speculator.