New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-06-12
Furnishing Funds for Our
Foreign Trade Heavy
Tax on Banks Here.
MONEY AT HIGHEST
SINCE END OF 1914
Uncertainty as to the Result of
Political Conventions Re-
stricts Trading.

At last the great reduction in bank
ing surplus. that had brought excess re-
serve in Clearing House institutions
here from a maximum of 224,000,000
last September to s217,475,000 on
Saturday before last, began to tell in
higher rates on collateral loans. On
Tuesday call money got up as high as
per cent, for the first time since
shortly after the Stock Exchange was
reopened, back in 1914 This rate was
no: reached after that, but loans were
made as high as 2 for the rest of the
week. Time accommodation also was
at higher rates, until on Friday 81
per cent was paid for all maturities on
mixed collateral. Efforts were made
to account for this stifening of the
money market by special transactions
that called for credit; but while these
were, of course, less easily effected than
at time of redundant funds, the actual
reason for the advance Law in the
change in the position Of local lending
institutions.
The fact is that New York. as never
before, is financing the foreign trade
Of the United States. In normal times
crop exports send money back into the
interior, but London supplies the funds.
Now an immense outward movement of
goods, that completely overshadows the
ordinary agricultural shipments of the
autumn, is distributing money all over
the country. This is being paid for
Principally in New York funds, not in
sterling bills to be absorbed by the
London discount market.
The Allies are making payment for
goods they buy here to only small
extent in other goods. Mainly pay
ment is IN securities, first i'm the $780,
100000 Of Anglo-French notes. later in
our own stocks and bonds. which have
come back IN "a much greater volume
SO far as possible, an attempt has been
made to place these securities in other
centres, but in a large measure they
have stopped in this city.
Securities Must Be Absorbed.
As Paul Warburg pointed out TO
the bankers of the state at their con-
vention last week. il is important that
securities We take back should be pur-
chased by investors. rather than used
as basis for collateral loans at the
banks. If these issues were steadily
being taken out of the market, the
financial centres would be merely tenn
porarily financing the export move
ment, as IN normal times the London
discount market does when it buys
sterling bills drawn here and accepted
on the other side. As it is, the banks
here may be loading themselves up too
heavily with loans that are not OF
merely temporary character. Last
weeks higher money rates. however,
brought IN lenders from outside to
share some part Of their burden.
The gold imported last year went
for the most part into local banks; new
the greatly increased business needs
Of the country is calling it elsewhere.
At the same time the National Treas
ury is locking up a good deal Of the
precious metal, and will continue TO
absorb gold during this month. when
income taxes are paid. The Federal
Reserve system is doing what 10 can
TO accumulate gold through pay
ing out its notes. which are not avail
able for reserve in member banks. In
addition large sums are held ear
marked for foreign governments.
As yet this shifting of cash and re-
duction Of loGnable funds here has had
material effect only on the rates on
collateral loans. Commercial paper,
while moving slowly. was purchased
last week at 3i2 to ga per cent, one
quarter of per cent higher than the
week before. There was a compare
lively small increase in discounts at
the Federal Reserve banks. and raising
the minimum rate for purchasing &C
ceptances from to 2i2 per cent has
been the only change at the local re-
gional institution.