New-York tribune., 1921-05-05

lG.,, York Institution Fol-
lows Lead Of Boston in
nrop From z r. G. Action
Not Entirely Z Surprise
I.iIux Of Gold 4 Factor



III. Federal Reserve Bank Of New
.s,t u, s took otacial cognizance yesterday
], 4. trend toward easier credit con-
s'.ions at this center and in the coun-
$, Il large BY reducing its discount
"a g affecting advances to member
Nh. against commercial paper from
: sm per cent The Z per cant rate
"A b.sn in effect since June i, 1920,
"a marked the high-tsAe Of the gem
.val credit stringency as reflected in
IL official bank rate.
roYn,al announcements of this action,
Ss,.shadowed in the reduction on
1ts,iI IA Of the Federal Reserve Bank
81 Hosfora,s rate from to per cent
"a Il the Bank of EngIandss mini
ssm rate of discount last week from
ssn6H per cent, was made by Ben
t,nin Strong jr., governor OF the
tccsl bank. shortly after the close of
fSe financial markets.
Nj changes were made in the rates
e advances by the Reserve Bank to
& venber Z, banks in this district against
iInitsd States Government securities,
wb;ch stand at 6 per cent, and on adj
rsrees against bankers acceptances,
vhich hold at the same level.
The New Rates
The formal statement issued at the
hank and addressed to member banks
Il tte New York district reads as fol-
lows:
aYox are advised that this bank has
established the following rates of dis
rourt effective from the opening OF
basiness ON Thursday, May 3, 1921,
I'd effective until further notice, and
suuerseding all existing rates:
Commercial Paper
aFor advances not exceeding fifteen
dsys secured by all classes of eligible
commercial paper, excepting bankers
stceptsnces, and fop rediscounts Of
saeh paper, 61s per cent.
U. s. Government Securities
aFor advances not exceeding fifteen
DAYS on Liberty Loan bonds, Victory
notes or United States Treasury GER
tifca.es of indebtedness and customers
notes secured by one of the foregoing,
md for rediscounts of customers
notes, so secured, for periods not ex-
eeeding ninety days, 6 per cent.
Bankers Acceptances
aFor advances not exceeding fifteen
days secured by bankers acceptances,
and for rediscounts of same not ex-
eseding ninety days, 6 per cent"
The action Of the bank, as is re-
quired under the Federal Reserve act,
vas formally approved by the Federal
! Reserve Board at Washington and re-
fleets the opinion of the members of
the governing body of the country's
banking system that the peak of the
credit crisis has passed.
The cut in the bank rate was viewed
yesterday as a departure from the
policy Of the system of following the
outside market in commercial credits
rather than taking the lead, for the
prevailing rats for commercial paper
discounts in the outside market is.
holding around to 7A per cent. Re-
serve Bank officials have stated re-
Gently that under normal conditions
she Reserve Bank rate would probably
be held above the outside market rates.
Signs Of gradual easing in the
sredit situation in the United States
Is we'll as abroad have been noted for
several weeks, Two weeks ago the
first break from the high level Of Re-
serve Bank discount rates came when
the Boston bank lowered its rate from
to6sper cent. At the time it was
explained that this was in keeping
with the trend Of the times toward
gteat relaxation in credits. Last week
when the Bank of England cut it's rate
!rom z to 6M per cent representative
bankers here said it was only ques-
uon Of short time before there would
pc general lowering of discount rates
acre: Within the last week commer-
gal borrowers of the best credit stand
ing have been able to sell their prime
paper ON straight 6M per cent basis.
sitnough the general market has been
noiding "a to Y per cent above that
level The opinion was expressed yes
t.sloay that the cut in the bank rate
a aere would likely be followed by a
Z ssursaer decline in outside market rates.
Explanation of Drop
Two factors explain the, more COM
soHaDie position of the Federal Re
serve banking system. They are the
sssslsordlnary influx of gold from all
9aiM of the world and the steady re-
aucllon In member bank borrowings
e. ~ t1e twelve Federal Reserve banks,
fae latter development being due to
~ general liquidation in business and
&aa1stry On April 27 last the ratio of
kosai reserves to deposit and Federal
snsssrve note liabilities combined for
{le Twelve Reserve banks, as shown in
= asAe su consolidated statement of the sys-
ss;. ssn, stood at 65 per cent, compared
NY m,I q os,l per cent the previous week
eas ~ s1:4 per cent year ago. In the
Sass Sa q the Federal Reserve Bank Of
sw ssss lork the ratio on the same date
Sssvvo ssss 8 At o5.b per cent, against 53.9 per
year ago. - : 80 W.
% "a me last twelve months the gold
tssssses tsss OF the Federal Reserve sys-
4 10 az g. -, whole have increased from
sts'sso:szv u sssn o00 to $2,317 ,569 900, gain
+ ss..;N 4, P0oo ,oaS,0O0, accounted for almost
,s,'say ~ \. by the food of gold pouring
M ~" me country. At the same time
ss.;r Borrowings of member banks
sstst ts.ast government securities and
SssSIa SsSa pAper from the several Reserve
& 40 - ma nave fallen from $2.535. .O71 900
ssoy oyscoo ~ .lS9 goo, reduction Of $47l.-
Vvo IN the course Of q wear.
,.ts tsafs that a lowering of discount
\ Has Hsss might invite a renewal Of infIa-
sws saaay tendencies, entertained in some
IantssN' are not warranted, leading
eral fas,said SAID yesterday, and the gem
faye .sgllng was that the change would
: Ssneaclai effect upon sentiment.
LOW, Jones Wins Suit