Evening star., 1916-12-10
HIGH CALL MONEY
DOESN'T HIT TRADE
Reserve Banking System
Leaves Stock Spectators
to Sweat Alone.
GOLD INFLOW AGAIN HUGE

NEW YORK, December 9.-The sudden
advance in call money in New York this
week to the highest point reached since
the Inauguration of the federal reserve
system was due in a large measure to
the heavy reduction of the surplus re-
serves of the New York clearing house
banks, and in a lesser degree to the wise
policy of discrimination in the selection
of collateral which the bankers have put
into execution. Though only a compare
lively small amount of money has been
loaned at rates in excess of per cent, it
is significant that the federal reserve
system has not effected a guaranty against
high loaning rates to spectators on the
stock exchange. This, in fact, is not its
function, and its establishment was re-
lated to the commercial, rather than the
speculative. activities of the country.
Business Not Alarmed. -
If a IS per cent rate for call money had
been posted at any time prior to the
establishment of the federal reserve sys-
TEN, the incident would have been re-
garded throughout the country as an in
dcation that loanable funds for every
purpose had become scarce, and bankers
were accordingly sitting tight on the re-
features of the reserve system available,
however, no such condition need prevail,
insofar as the commercial situation is con-
cerned. There viii always be plenty of
funds for commercial purposes, and. were
the Wall street banks disposed to redis-
count their commercial bills, they would
have ample funds for distribution in the
speculative channels.
But the banks which once looked
on call loans on the stock exchange
as the best secondary reserve which
they could have, now consider COM
mercial paper available for rediscount
at the reserve bank so much better
that they are unwilling to transfer
loans to use in stock exchange loans
Trade Comes First.
This is right and proper; for it is
of far greater Importance that the
trade of the country should ever have
at its command full supply of funds
at as low rates as are consistent with
sound banking than it is that specu-
lative operations on the stock exchange
should have the benefit of low borrow
ing rates. The demag agogue who has been
pointing the finger of scorn at Wall
street as the headquarters of a gigan-
tic gambling ring should observe the
manner in which the banks have dis
eliminated in favor of commercial su
premacy this week.
When, in the latter part of last
week, the American bankers who are
acting as financial agents of the en-
tente allies withdrew from the mar
ket the proposed offering of British
and French treasury notes. it was pre-
dicted that further influx of gold
into the country was inevitable This
week has witnessed the fulfllment of
that prediction, and it is estimated
that a new total of 100000 in gold
has been brought from across the Ca
madam border
1t is also reliably stated that fully
800, 100000 in gold, in addition to the
aoove mentioned amount. is within easy
reach of international bankers in New
York, and will be brought in if this
weeks import does not have the de-
sired effect of reducing loaning rates.
During the calendar year which is
now drawing to a close, a gold move
ment of the greatest magnitude in the
direction of this country has been in
operation. 1t is estimated that in round
figures $500, 000, 900 in gold has been re-
ceived through the port of New York,
notwithstanding that the banking in
stitutions of this city hold less gold in
their vaults than they did one year ago.
A great deal of this yellow metal is
held by the federal reserve bank in ac-
cordance with the announced decision
of the reserve board to build up
strong and substantial gold reserve.
Including the gold settlement fund and
the gold redemption fund, the latest
statement of the reserve board shows a
total of $59S,000,000 in gold coin and
certificates held in the vaults Of the
reserve banks.
w. S. COUSINS.