New-York tribune., 1921-02-07

| Another influence which DELAYS the
passing Of money stringency is the
fact that ordinary banks are still enor-
mously indebted to the twelve Federal
Reserve banks. Funds released by a
cheapening Of the basis ON which bust
ness can be conducted will not be Of
fered in abundance, even to the most
speculative borrowers, but will instead
| first be employed to efface the indebt-
ednsss of the member banks at the
Federal Reserve institutions. There is
strong pressure on the banks to do
this, and it Is evidently the policy of
Reserve officials to keep rediscount
rates high to continue the present in
centives. Then, too, money rates are
sensitive to the interplaying forces of
supply and demand, and the world
wide demand for credit capital is likely
long to remain avid.
An unexpected tightening of call
money rates depressed security prices
last week. The decline was not precip-
'tate, yet after period Of vacillation
the market assumed definite trend.
The selling represented mainly the ef-
forts of professional traders to profit
from transient development in the
market for credit.
The failure Of money rates to meet
the anticipation of those who expected
a quick easing has checked the upward
movement IN the bond market, and this
condition, heightened by the flooding
Of the market with great variety of
new issues, made the price tendency
reactionary last week. And, though the
majority Of bond experts think that we
are for long period in the midst of
an upward surge, many investment
bankers anticipate further temporary
reaction.
Nine per cent call money, the high
est rate since November's furry. has
brought back hp Wall Street the reali-
cation that It's credit problems still
loom large and must be seriously reck-
oned with in any weighing up of
financing market factors. To many the
stringency in the money market has
come as rude shock. 1t Is doubtless
temporary development, but its ef-
feet has been none the less real To
certain measure the financial COM
munity had been building its plans
for the immediate future upon hopes
Of continued ease in money at this
center. Last weeks money stringency
proved these hopes not we'll founded.
While The Tightening at this point
has appeared more or less local de-
veiopment, having to do mainly with
the call money market, its causes are
deep and reach back into the interior.
Reports of commercial agencies have
indicated of late that, though liquida-
tion has proceeded far In theSEast, es-
pecially in the large centers of popu-
lation, the process has Jagged in the
agricultural districts of the West and
the South.
Here is the crux Of the present cred
ID troubles. The interior is drawing
upon New York for financial assistance
at season of the year when normally
it should be accumulating a surplus of
funds to send to us. Interior banks,
which are having to carry large
amounts Of commodities and raw food
stuffs, cotton, wool, tobacco and grain
| which the producer either cannot sell
| or will net sell because Of the drastic
fall in prices, have had to draw heavily
against their balances here.
Then, again, much credit has been
tied up by the failure of the govern
4 ment to pay the railroad corporations
II and. in addition, many corporations
with lines Of credit at the banks have
Il found it impossible to meet their obli-