The morning journal-courier., 1908-01-13
FINANCIAL REVIEW Release Of Large Supplies of Credits Clears Banking
 Situation. SPECULATIVE SPIRIT ACTIVE Return of Bank Funds to Central Re serve Points Shows Absence
 of Distrust.
SPECULATIVE SPIRIT ACTIVE

New York, Jan. 12.--The rapid clear Ing up Of the banking situation and the release of large supplies of credits to the money markets were the inn portant features of last weeks events in the financial world. The New York bank statement of the previous week gave the first decisive outline of the turn in the situation. The statement on Saturday showing a s6,00o,0O0 sur plus has brilliantly confirmed the weeks impressions. The effect has spread throughout the money markets of the world and has sent supplies back into the loan market with some thing like rush. It was obvious that funds which had been withheld through lingering spirit of distrust of the banks position or as precau- ton against possible extra demands were returning freely to central re- serve points. The basis of credits is greatly expanded by this process, ow- ing to the provision of the banking law which permits banks outside the reserve, centers to count as reserve tWo- thirds of their cash when deposited with banks in the reserve cities and banks in the reserve cities to count as reserve half of their cash when on deposit with the central reserve cities. The re-deposit of these funds, there fore, does not decrease the loaning power of the depositing banks, while 1t expends that of the depositary banks fourfold for each dollar deposited.
 The surrender of the privilege of deposit of part of their cash in the re- serve and central reserve cities and its recall home in the panic was the central factor in producing the bank ing crisis and the retention of this cash was the cause of the prolongation of the crisis and the maintenance of the premium on currency. The anx- iety caused by that prolongation up to the end of the year may be said to be now completely dissipated so far as acconmodatien to solvent business is co scerned New York has ceased to Saw gold from London and rapid re- cuperation of the Bank of England bullion holdings has followed The Bank of France marked down it's of- ficial discount rate from to 1-2 per cent, at which it had stood previous to our crisis and market rates of dis count receded in all the foreign markets. In New York the most inn portant effect of the new developments was the springing up of an active de- mand for commercial paper from the money lenders, which effectively re- lieved the deadlock in that depart ment and quieted the fears of wide spread embarrassment in the mercan- tile world from inability to secure ex- tension of large maturing obligations Increased offerings of funds in time loans rapidly dissipated the premiums over the legal interests rates, which Is also the rate borne by clearing house certificates Rapid retirement of these instruments will be result.
 In the securities market the effect of this increase of facilities for conduct Ing speculative operations has been pronounced The resulting outbreak of speculation showed increasing animal tion and was stimulated by various professional devices and by the dis semination of rumors of important de- velopments. Some of these were def- nitely disproved by events and some failed of confirmation without causing more than a temporary check to the course of the speculation for the re- covery. The need of a large uncov- cred short interest was an important contributing factor to the rapid ad- vance which developed and furnished the material for much of the demand forced by the bidding up of prices by the; organized bull party in the mar ket.
 In other directions there were not lacking evidence of the effects on busi- ness and industry of the reaction and the iialting and irregular movement of the stock market early in the week was the reflection of these The receiv- ership for the Chicago Great Western brought into question the ability of a number of other railroads to provide for coming maturities or large note is-
 
 sues put out during the stress of last week. Emharrassments in the dia mond trade uncovered one field of radi- cal impairment of demand caused by the decline in prosperity and aroused misgivings of analogous conditions in other trades.
 The organs of the iron and steel trade lore witness to the drastic cut in the ccuntry's iron outpu which ha followed tiie business reaction. Railroad earn ings reflect the falling off in traffic and traffic officials discern no sign of future Improvement while plans for curtailment and economy are reported from the railroad world generally Waiting capital requirements are large and some sensitiveness was shown tc announcement of governments loans abroad Of the sale of additional New York city revenue bonds and of the probable early withdrawal of addition al sums of government deposits witt the national banks. The repair of banl facilities was on so impressive a scale however, as to carry an effect of good cheer and encourage the revival of tht speculative spirit to a material extent