Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-01-24
HIGHER DISCOUNT
. WILL AID MARKET.
:
living of 6 Per Cent Rate by
Federal Reserve Banks Clears
the Atmosphere
TRADING GREATLY REDUCED

sn,;ol MeM reyiew today says: Mondays
noUs;on Of the securities market was the
- orc of the week in which stock
on,s sa,cs materially exceeded 100000
.hores n showing with respect to bust
''oss rarely. If over, seen before. when 1t
;s considered how rapidly the stock list
hos crown in the last two or three
years.
In otbec words, sales of half mil
,;on shares in a day now would be
oou;vnlent to about half that number
tben. This is by way of emphasizing
rho extent to which the public has with
,lrowp from the market altogether or
cntrcpchcd themselves in strong margi-
noI safcty TO await events. Brokers have
advised caution in the first instance
because of cncroachiDg restrictions in
tbcir borrowing opportunities.
Their attitude was forcefully sup
nortcd by uncertainties inherent in the
nrocess of solving national and inter
national economic and political prob
lens. Whatever resources the indi-
yidual buyer of securities may have had.
the business of the stock market had
to be financed by means of brokers
loans with the banks. Two or three
months ago the banks began restricting
the Federal Reserve Bank and later
by advances in the rediscount rates.
Discount Fixed at Per Cent
The movement culmiEatcd in the cur
rent week in discount rate of 6 per
cent for commercial acceptances estab-
liShcd by the Federal Reserve Banks of
New York, Boston and Philadelphia.
announced on Thursday, The financial
atmosphere has been cleared thereby.
Wall street has long been coming to II
realization that the economic need and
demand for money as distinguished from
less essential requirements. including
speculative ventures of various sorts.
was a fact to be faced. 1t can now
face that fact frankly and adjust itself
accordingly. Some comfort may be de-
rived perhaps from the knowledge that
speculation in other than securities.
commodities for example. has at last
been touched. Frozen credits tied M
ir storage supplies will be thawed out
bit.
If the banks have to pay as high for
borrowing at the Federal Reserve Bank
as they can demand for loans for less
essential enterprises. it is conceivable
that funds, to some extent. at least may
become more readily availall lie for stock
market purposes in time. On the other
hand the central banking authority is in
better position than ever to exercise a
curb on speculative ventures i'm whatever
quarter. Now for the first time both the
United States and England have bank
rate higher than the open market rate.
which is as it should be. because it gives
control over commercial and industrial
expansion and should in consequence
improve the investment situation. 1t
ensures. in short. a more equitable dis
tribution of loaning funds, but cmpha-
sizes concurrently that money cannot be
in easy supply for those who cannot
show pretty good reason for seeking
accommodation.
Remedy Was Needed
The jump from 49i per cent for
commercial bills to per cent was draS
tic and astonishing. but the best bank
ing opinion saw no reason for gradu-
ating the advance. The remedy was
needed in order to put the country on
sound credit basis. It's application
may not effect cure at once, may even
aggravate for a time the symptoms of
the distemper, but a beginning had to
be made. The medicine was not sweet
to the taste of the Stock Exchange, but
1t impressed itself as wholesome.
What the effect will be on securities
prices in the near future can be but con
jectural. Certainly the market gave no
sign before or after the announcement
II was freely asserted that the market
had fully discounted it. 1t would be
truer, perhaps, to say that long discus
sion of the probabilities had made the
market Indifferent, an attitude favored
by the technical position created by the
nominal condition of the time money
market and lack of incentive for the
banks to come forward with call loans
in volume. At the same time specu-
lative holdings of stocks had been 81
largely liquidated that the demand for
money had been greatly curtailed. This
mand for per cent money this week.
On Monday call renewals were made
nj per cent with new loans at per
cent. Tuesday renewals were Z per
cent with drop to q per cent, and on
Wednesday and Thursday. q per cent
ruled all day. Yesterday loans renewed
A at G per cent advanced to S per cent
and closed at per cent. The short in
tcrcSt in stocks has grown to large pro-
portions and a cushion has thereby been
placed under the price list, but this can =
not be taken as guaranty that prices
will not recedc further. There are pre-
scnted opportunities for taking covering
profits at the same time that money or
other conditions continue to make il
profitable to take the short side of the
market.
Plan Foreign Investment Trusts
The financial situation presented
many aspects of interest through the
week. While financing projects under
the provisions of the Edge bill have moi
proceeded very far because the Fedora
Reserve Board has not orslnized ma
chincry for the purpose as yet, there
was good deal of discussion about tn,
organization of foreign investmen
trusts.
Report had it that several larg,
houses in the Street were preparing t,
form a $50, 900 900 investment trust il
which Paul NJ. Warburg was said to b'
the leading spirit.
1t was announced that the Belgian
loan of S25. 900, 900 was not only full
subscribed the same day that it wa
offered, but that subscriptions sent il
more than doubled the amount askc'
1Or' 1t was also announced that th
Treasury Department had given tn
stamp of approval to the 500 900 .0O'
Italian dollar loan, the first iustallmen
to be underwritten by Italian banks OF
lnlS side At the Pan American tinan
cal conference, which opened in Wash
llnston at the beginning of the week
me Latin American republics state
their financial needs and several o
Them expressed desire for loans Il
mus market for the purpose of refund
ing existing indebtedness and in addi
lIon to take care of railroad require
ments.
>. Aside from the advance in the re
dlScount rate, the most interesting fea
ture of the week was the adverse move