New-York tribune., 1919-08-04
Finance and rade
Financial Bureau.
Telephone Bcekn,an 5000.
Wall Street

| just ended. The failure of the marke
to continue it's advancing tendenc.
| naturally evoked much discussion, fo
with the country apparently runnin,
into even greater prosperity and large
foreign business that is to develol
| with the arranging of satisfactory
long-term credits on behalf of our for
eign customers, it might be supposed
that still higher prices for, specula-
| tive securities were in prospect. INC
one can say that the sustained rise IN
stock market values has reached its
peak. Nor can it be said that specula-
| tion has run itself out through sheer
exhaustion as a result of several
months of great activity. 1t can be
stated. however, with positiveness that
there is an acute shortage of credit
available for stock market purposes
that is likely to grow worse rather
than better; that the banks have about
reached the limits of their capacity
for extending credit for speculative
purposes; and even were they in a
it is a question whether they would
do so in view of the attitude of the
Federal Reserve Board authorities,
who take the stand that legitimate
business comes first. After those de-
mands are satisfied the stock market
can take what is left.
1t was estimated last week that the
combined loan account of stock ex-
change houses in Wall Street had
reached an aggregate of about one
and three-quarter billion dollars. That
would be something like billion dol
lars more than the total of such loans
when the artificial restrictions were
lifted from the money market last
January. These figures afford an idea
of what has happened in Wall Street.
With speculative activity in the stock
market running for full six months,
share days, the demands on the credit
supply have steadily increased. De-
spite the fact that larger margin re-
quirements have been the demand Of
traders in stocks, loans have gone
higher and higher until a point has
been reached where even the brokers
admit that the situation is unhealthy
There have been days recently when
the scarcity of money supplies reflected
in the soaring of call loan rates. One
day last week, when big payments on
account of maturing obligations neces-
STATED the calling of loans by the
banks, call rates jumped to 20 per cent
That is symtomatic. Having got
loans up to the present level within
striking distance of $4,000 100000, the
nifty is how the situation can be cor
rected.
Indications point to action on the
part of the Federal Reserve Board be.
fore long in the direction of increasing
the discount rates Of the Reserve
banks. That would almost instantly
have the effect of causing considerable
liquidation of banking credits, since il
would tend to force member banks tt
reduce, so far as possible, their Dor
rowings at the Federal Reserve insti
tutions. In fact, the tendency has beer
in the direction of reduction of re
discounts for several weeks. One
week recently the member banks in the
New York district alone reduced thei1
Bank of New York by approximately
$780, 100000. This is in accordance
with the wishes of the Federal Reserve
Board, which is decidedly of the opin.
ion that loans must be held in checl
to prevent further initiation. Ane
after the needs of productive enter.
prise have been fully provided fol
steps will likely be taken gradual!
to force a contraction in other direc
tions. This would naturally NEAR
a contraction Of stock market
loans. Any movement toward this end
however, would naturally be handled
in a manner that would least disturb
the financial structure. 1t must b,
70 a ov,ob boroA ftot TO ndino inuoCt
ments must be protected if the Ameri
can investor is to buy the foreign Sc
curities that will be sold in this marke
in the course of the next few years.
An important adverse influence upor
the stock market, growing more ant
more potent as time passes, has beer
the huge mass of new security issue:
brought out on the wave of speculation
for the advance. 1t is estimated that il
the first seven months of the current
year approximately a billion and {
half dollars worth of new corporate
securities have been marketed. Th,
great bulk of these securities, many
into the hands Of the investment pub
| lic In July alone approximate.
$350,0O0,O0O of new issues were sold
The effect Of the sale of this enormous
amount of new securities has been t,
tie up great volume of liquid capital
Wall Street has seen many bull mar
kets in the past brought to an end o,
the wholesale fotation of new issues
In the present case the stock marke
has acted of late as if the absorptiv
power of the public had been exhauste,
for the time being. 1t remains to b.
seen, however, whether or not tn
check applied to the market during tn
past week is to be of long duration
Many observers insist that standsr
securities, regardless of the wil'
flights of many of the ipdustria
specialties, have not yet fully dis
counted the rising tide of prosperity.
The interest of the financial com
munity is focused at the momen
upon the imperative need of hastenin
plans for the liberal extension of cred
it's to our overseas clients. The credi
needs of France, Italy and Belgium i
the next year, put at minimum, ar
estimated by q banker just returne
from the other side at S1,100,0OO, ,OO(
In addition England must borrow her
chases. AS matters now stand, tn
exchanges have fallen to point wher
the English buyer of American good
must pay a premium of IL per cen
on such purchases; French importer
SO per cent. The adverse exchang
situation is already tending to restric
buying, and the only solution of tn
problem is to be found in the grantin
Of long term credits to those countries
\