The New York herald., 1921-02-07
FINANCIAL NEWS
AND COMMENT
Money Situation and Railroad
Outlook Topics of Leading
Interest in Week.
RATES TIGHTENED AGAIN
Unfavorable Developments Do
Not Cause Extensive De-
clines in Stocks.
RATES TIGHTENED AGAIN
nr MILLIAM w. CRAIG.

The topics Of chief financial interest al
the moment deal with the state of money
and the outlook for the railroads 1t i.
not too much to say that these are of al
absorbing interest. now that-the German
indemnity question has passed out OF the
field of hopeful expectation of settle
ment into another where further ,negoti-
alton appears unavoidable. There has
been IN the last few days fresh tight
ening Of mony rates to a degree Nsurpris-
ing TO those confident observers OF the
market who believed that the January
/ easement marked the entrance of an era
OF plenty. On all sides where the sub
ject has any appeal at all one hears the
question. What is the matter with
money!" The explanations were many
last week. some comprehensive, but none
sufficient to forecast the movement of
rates next week or next month. In New
York the question is probably somewhat
more potent than elsewhere. because the
business of financing day to day opera
tions in securities requires heavy turn
over OF loans. The advance of call
money interest from rate of per cent
to rates of and 10 per cent. a year
does not carry the same significance In
an interior city as in New York But
the same IS less true Of fixed period
loans secured by stocks and bonds as
collateral and is not true at all, of dis
count rates on mercantile bills And
last week the merchant who discounted
his paper in New York saw what ap-
peared a fortnight ago to be a slightly
easier tone of commercial paper turned
back into the firm 7M and per cent.
quotation that had prevailed during the
last quarter Of 1920 and nearly all of
the current year 70 date.
Influences Peculiar to New York.
Some of the influences behind money
rates. are peculiar to the New York
market and others have general appli-
cation. The Federal Reserve Bank OF
New York is carrying not far from one
third to the entire loan account Of the
reserve system It's total reserve is less
than one-sixtb Of the reserve of all the
twelve banks combined. OF late cut
ting down of loans at certain reserve
banks has appeared to be at the expense
of the New York bank; at least. at the
expense OF member institutions of the
Second District, which have lost deposits
heavily.
Normally, money should be getting
easier juet now, but instead il has been
growing dearer. AS the loan burden in
New York is tending to grow while it is
receding In some OF the Southern and
Western reserve bank centres, IL would
seem that esnerial need elsewhere is
causing the change. AS far as can be
determined. however the situation of
money and credit is pretty much the
same everywhere: that is. as affecting
the renewed tendency of interest rates
upward. The best banking opinion holds
that until a vast mass of credit tied up
in slow moving products and commodi-
ties can be extracted no persistent move-
ment of interest rates downward can
be looked for.
It will be recalled that call and time
money rates early last December eased
slightly, following the price cutting cam
paign of October and November. The
same thing happened then that has just
happened--a brief period Of easier
money and then rather quick return
to the former rates. II looked then, and
il looks now as though there had been
a partial loosening up of frozen credit
through the sale OF goods being carried
on loans, and when the slack had been
taken mp by the retirement OF a certain
amount OF bank loans again money be-
came tight. If this theory is good then
II appears as though the process OF de-
fiation to . normal basis and the return
10 fairly low interest rates is following
a series Of steps. But bank returns the
country over indicate that the steps are
IN the right direction.