New-York tribune., 1917-07-17
Money Goes to
1OP. as Banks
Call In Loans
Withdrawal Of Govern
ment Deposits Depletes
Reserves

Tension in the local money market,
caused largely by the withdrawal last
week of approximately sl5O,Ooo,oOO IN
United States government deposits
from local banking institutions, reached
a climax Yesterday when the interest
rate on day-to-day demand loans used
by Wall Street to finance its stock
market operations jumped to 10 per
cent. This was the highest rate since
the furry OF last December, when loans
on call were made at Is per cent. IL
was per cent above the rate touched
during the money market stringency
in June. incidental to the fotation OF
the Liberty Loan.
Big Decline in Reserves
Tho acuteness Of the money market
was revealed on Saturday, when the
weekly bank statement disclosed re-
serves in excess of legal requirements Of
only s36144,940, whereas in recently
preceding weeks the figure has fuctuat-
ed between $4,000, 900 and 100000.
Under the old banking system, where
banks in central reserve cities had to
maintain reserves of % per cent. the
local institutions would have reported
a deficit on Saturday.
Call money opened at 6 per cent In
the "money crowd" on the floor Of the
Stock Exchange yesterday. as 1t be-
came apparent that the banks were
limiting their loan offerings. Subse-
ouently, when some Of the largest IN
stitutions in the financial district pc
gan TO call outstanding loans, the rate
began TO mount, and early IN the atter-
noon the scramble of brokers TO OBTAIN
new credit accommodations IN place OF
those called sent the rate 10 ~ per
cent. At that level about $1,000, 1000
was placed. In all, about s35,0OO,OOO
was loaned out, of which S25,OOO,OOO
was placed at per cent. After the
demand for now loans had been filled
tho rate fell off TO a close OF per
cent.
Few Banks Rediscount
One Of the large commercial banks
was reported TO have called between
sS 0Oo. 600 and s1O,OOO000 of its out
standing call loans yesterday. lt de,
veloped after the furry had suosided
that a few of the banks went to the
Federal Reserve Bank and arranged Tor
temporary advances against short-term
commercial paper, in order TO provide
them with fresh funds. One estimate
placed the total of such advances TO
member banks of the Federal Reserve
Bank at approximately S50,OOO,OOO:
The officer of a large national bank
expressed the opinion late yesterday
that the sharp rise In the call rate
would attract funds from the interior
which would tend to relieve the strin-
corcv This banker did not think,
however, that there would be return
to easy money for some time to come
i being his opinion that the call loan
rate would probably hold around D to
per cent for a while. The stlfening
Of the rate was not unexpected IN
banking circles, although few bankers
looked for a rise TO 10 per cent.
To-day an issue Of S200,000,OOO OF 5
ner cent Treasury certificates OF IN
debtedness placed by the government
with the banks on May 10 falls due:
II is understood that the great bulk OF
the certificates was converted into Lib.
ertv Loan bonds, so that the actual
amount of cash which the government
will be called on to disburse VIII pc
relatively small. For this reason the
completion of the transaction is not
expected TO help the money market,
bankers who were asked yesterday
regarding the possibility of fresh inn
ports of gold from Canada on British
account to ease conditions in this
market said they had no knowledge of
such impending operations. Attention
was called to the fact. however, that
in May and June, when the Liberty
Loan operation caused firm money
rates, approximately s13O,OOOOOO in
gold was shipped here from Canada,
and served TO strengthen the position
of the banks, thus assisting in forcing
interest rates down.