The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1910-07-25

New York, July 24-Until the afternoon
session on Thursday the stock market
was as composed, orderly. and stable as
could be wished by the most ardent ad-
vocate Of the rest cure for financial Ills.
Then an event no more consequential
than the reduction OF ? per cent in the
annual dividend rate on National Lead
stock preciptated renewal Of liqulda-
ton and short selling which did not cease
until average prices Of both industrial
and railroad stocks had made new low
records for the year.
IN the reduction OF the National Lead
dividend there was the element OF COM
plete surprise which in sensitive markets
event, and there was also. on the part Of
the management. a seemingly studious
secretiveness which aroused suspicion,
evoked distrust. and overcame the en-
duranee Of scores OF spectators and in
vestors who had long and impatiently
carried stocks. But it is idle 10 attribute
to the National Lead episode. unsavory
as it seems, all OF the\severe setback
that the stock market\sUStained.
PeSsimism Breaks Out.
once the reacticnary movement gained
Roadway. pessimism broke cut anew and
more violently among Wall street specu-
lators The reduction OF the National
Lead dividend was hailed as a precursor
OF a long period or decreased dividends.
UnfavOrable crop news was again mag
nihed 10 the exclusion OF all favorable
reports. Business Improvement IN many
important lines was overlooked In the
search for unfavorable reports from
minor branches OF trade. Even the money
situation. IN which the Improvement has
been extraordinary in the last two weeks.
was presented il gloomy colors. tUnder
the circumstances IL was no more un-
natural than it was unfortunate that
hundreds OF timid investors sacrificed
their holdings.
In the bearish comment upon develop
ments IN money the movement for the
formation OF associations under the
emergency currency law and the COM
pilation OF national hank returns as Of
June 80 were featured Only one asso-
citation, and that in the District OF Column
bia, has been formed since the emergency
currency law was enacted two years ago,
and now that arrangements are under
way for the formation OF such associa-
tons throughout the country, the con-
tention is that such associations would
not be formed unless the necessity OF
taking out emergency currency con-
fronted the banks.
Deduction Is Logical.
1t is a deduction so obviously logical
that 1t has gained wide credence: yet it
Is as far from the correct reason as was
Secretary Cortelyou's construction OF the
law from that but recently made by
Secretary MacVeagh Mr. Cortelyou
maintained that under the provisions OF
the Jaw no bank could withdraw from an
association formed0under the act so Ions
as there remained outstanding any
emergency currency issued for the ac-
count OF sny member OF the association.
Under this construction the big banks
must have remained sponsors for emer-
gency currency and have had their stand
Ing affected thereby so long as the Titles,
bank in the association kept some OF the
currency outstanding after all emergency
had passed.
To the larger institutions in this and
other reserve centers the idea Of such an
eventuality was intoIerable. and though
there were other minor objections It was
almost altogether on this account chat the
proceedings for the formation Of associa-
tons here and elsewhere were abandoned
almost as soon as they were started two
years ago. A ruling of Secretary Mac
Veagh has now removed this objection
and all over the country steps are being
taken TO make possible operation OF the
law just as under the same ruling they
would have been taken two years ago
when If ever in the country's financial
history money was a drug upon the
market. The movement is essentially
formal and Is so construed by all bankers
Nevertheless, in the revival OF pessi-
mistie utterances in the closing DAYS OF
last week Il was associated with the
complete returns Of the national banks TO
the Comptroller Of the Currency In re-
ports as OF date June 80. Briefly. these
returns showed a percentage Of legal re-
serve OF 21-22, as compared with 2l.n in
tie last previous report. March o. and
24H in June last year, a contraction of
100000 in loans as compared with
March last. but an expansion OF Ss95. OOo.
/ GOO, as compared with June last year. a
decrease Of $4,000 900 in cash since March
| and OF s6sO0o,ooo since June. 1905 It was
the loan account lhat called forth the
greatest criticism, the argument being
made that a greater contraction should
have been shown In the loans OF country
banks because Of efforts by bankers IN
the reserve cities to induce the smaller
banks to curtail loans and avoid an over.
extension OF credits.
Warnings Not Needed.
The contraction argument was that a
contraction OF but $4,000 in the tota
loan account showed that the warnings
had not been needed. But It was not
explained just how the critics expected
country banks. most of whose loans are
10 farmers or 10 merchants dependent
upon the farmers. greatly TO reduce loans
until the farmers had harvested and sold
their crops. The point is crucial in any
fair discussion OF the situation. In re.
spect 70 1t there stands out sharply and
most significantly the fact that extension
OF credits was stayed and even slightly
curtailed between March % and June 80
which corresponds precisely TO that De-
Rod Of the year in which farmers moss
require money for the cultivation OF
their fields.