New-York tribune., 1918-01-24
WALL STREET OFFICE,
Mills Building. IL Broad 81.


funds of all kinds. The banks are
lending money freely on call, because
in that way their balances can be
employed with the utmost liquidity.
They are extremely loath, however.
to make loans which cannot be speed
lily converted into cash. Therefore
there is practically no demand either
for commercial paper or for collat-
eral loans Of fixed maturity. 1t is
because of this reluctance to tie up
funds that the supply of call money
is considerably in excess of the de-
mand.
The chances are that the ease in
the demand section of the money
market will be only temporary and
that before long we shall see con-
traction of offerings, with rates
climbing up to, and perhaps beyond,
the high level which prevailed al
most throughout December, accom-
panied by further hardening of time
money. Whether or not the rate
will be permitted to rise above per
cent, the point at which the money
pool hitherto has stepped in to pre-
vent a squeeze, is question about
which it is idle to speculate; but If
allowed to take it's own course
furry of considerable Importance
might easily occur before the hota-
tion of the next Liberty Loan, espe-
cially if there should be any sub
stantial increase in the volume of
dealings on the Stock Exchange. In
this connection o. letter sent to New
England banks by the governor of
the Federal Reserve Bank of Boston
is suggestive. Mr.. Morse called at
tention to the fact that a new loan
campaign is to be expected within
the next three or four months, and
continued:
In anticipation the Secretary of
the Treasury will make a series Of
offerings of certificates of indebted
ness. First offering is now made for
s400,000,00O. dated January %, due
April %. 1918. These offerings will
probably average $500 900 900 week,
and long and persistent demand
will be made on resources of the
banks, which will require very care
full handling.
That this burden may be evenly
divided, the following plan has been
proposed:
That each bank in this district be
asked to subscribe an amount equal
to " per cent Of it's total resources
each week. SO. long as necessary to
take up New England's share. Per-
centage of 11s per cent is not large
for one week, but in eight or ten
weeks amounts to a considerable
sum. The certificates will be paid in
three months. either in cash or used
to make payments on subscriptions to
coming loan. They will be available
as security for redeposits and may
be used as collateral for loans at
Reserve Bank.
If there is not general response
a few banks will have to bear the
burden, which is not only unjust, but
carries a certain risk that should be
avoided, for it is hardly necessary to
say that somehow or other the gov
ernmcnt must get the money neces-
sary to carry on the war.
If these figures are correct, the
banks will be called upon to buy
about S3,5OO,OOO,O00 of the certif-
Gates in the next three months, and
in that event not far from billion
would find Judgement in the banking
institutions of this city. 1t might
easily amount to much more than
that, for the country banks have
been notoriously backward in taking
their share Of the Treasury certiti
Gates. Under the circumstances a
tight money market is to be expected.
A tight money market, in turn, would
make for continued restriction of ac-
tivity in trading on the Stock Ex-
change.
The plan proposed by Mr.. Morse
has not been considered by the New
York or other Federal Reserve banks,
as far as could be learned in the
financial district yesterday, but it
was enthusiastically indorsed by
some prominent bankers. The ad-
vantages which would accrue from
the adoption Of this scheme are i'm
portant. The burden of financing
the governments needs ,n+;l II &c