Evening star. [volume] (Washington, D.C.) 1854-1972, 1916-12-03
BY I. A. FLEMING.

BY I. "A. FLEMING.
Washington bankers decline to be
quoted on the warning of the federal
| reserve board against investments In
unsecured Treasury bills and the sub
seouent action of Morgan and Company.
under orders from Great Britain and
| France, in withdrawing these bills
| from the market on the date named for
the sale.
AS A rule, however. they believe that
| the warning was seasonable and With
| in reason. but that it's influence might
have been fully as effective and action
more diplomatic. so far as the na1lohs
| in interest are concerned. had the views
| of the board been given in confidence
to Morgan and Company. rather thah
through the medium of general pub
| licity.
Others believe that the board has
reversed itself in welcoming bills OF
short maturity. even win rene " a
privileges. issued for goods for export
and in now warning against theif az
ceptance when offered "ienou'
newal
Expert Opinion. .....
The available expert opinion at 'iiis
time comes with the discussion OF the
warning in the December circular OF
the National City Bank. from which
the following extracts are made:
with the opinion of the board as
to the importance of keeping the panhs
! in liquid condition and of not loahlns
down to the legal limit we are IN ehtlle
accord There were never greater
tempta tons to use money and credit
than in this country today. The de-
mand for products OF every KIND eN-
ceeds the supply. and profits are SUN
that there are great inducements W
individuals to enlarge their operations
and buy into companies that are max
ing large earnings. These are the con
ditions which, in conjunction with easy
money, have always produced over
expansion and subsequent disaster.
THE board admits that this danger
will exist fn case the infowing gold
should remain uncontrolled and be per-
mtted to become the basis of unde.
sirable loan expansion and OF lnf1atlon
There is no way of controlling the
money supply of this country. That
idea should be allowed to remain the
exclusive possession of the truSt-bust-
ers. The importations of gold go into
the banks, but they go in as deposits
and the lending or purchasing power
remains first with the depositors 1t is
possible and we believe desirable to
collect this gold into federal reserve
banks, but if the reserve banks acquire
1t they must give either their notes or
an equivalent credit on their books in
exchange. Up to the limit of the lend
ing power of the member banks. the
reserve banks have no control over ex-
pansion: it is only as the member
banks desire to re-discount that the
reserve banks have any power over
them.
What degree of cooperation does
the board expect to obtain among 81
900 banks? Can it persuade them TO
stop competing with each other for
business; to restrain their eagerness
to accommodate desirable customers
and to stop paying interest on deposits !:
The command over bank deposits is
rot final with officers, but rests with
bank patrons and when bank patrons
want to expand loans that are usually
able to do it.
With the abstract opinion that the
banks of this country ought not to tie
in foreign treasury bills, or any one
class of paper, no issue can be taken
a national bank is prohibited by law
from lending more than 10 per cent OF
its capital and surplus to any one
borrower and although the controller
of the currency has ruled that this
does not apply to the obligations of
governments, we regard the rule as
good one to follow upon general prIn-
ctpleS.
Million Shares a Day.
Time was when Wall street consid-
cred itself prosperous if the sales rec
ord reached a million shares day
During the month OF November every
full business day produced record of
more than l,eQ0.0o0 shares and some Of
them over $500, 600 shares. And the pub
lie was Specializing more or less wildly
With business enormously active in
every section of the country the de-
/ mand for money has made itself felt,
even on the big surplus reserves that
the banks have accumulated, and the
chances are now for a period of higher
money rates and enlarged use of the
rediscount privileges Of the federal re-
serve banks.
New York naturally has suffered from
the transfer of funds. losing sl19.o50.-
Federal Regional Bank of the New
York district, and s130,565.0 900 to the
United States government, through the
medium of the daily clearinEs.~
The surplus reserves OF az nation ma
! banks as Of September ~. 1886 $4,000,
as compared with sss2.s50, 173 on the
| second day of September, 1915.
I Much of the excess reserves have
been transferred to the federal reserve
banks vaults. -
A Favorable Indication.
| One of the most favorable signs in
1.-THE trend of stock market speculation
is found in the disposition on the part
of investors and speculative traders to
transfer operations from the industrial
list to the railroad stocks. to an extent
that has produced something of re.
vival Of business in this class OF Sc