San Antonio light. [volume] (San Antonio, Tex.) 1911-1993, 1923-04-01
Wall Street Trembles When
Federal Reserve
Board Meets.
BUT NOTHING HAPPENS
ANY Further Advance
Would Have Stopped
Rise in Markets.
BY BYRON SELLER

New YOrii, March 31.-To the ex-
clusion of almost every other topic,
the financial community during the
week just past has been concentrated
on the annual spring conference in
Washington Of the twelve Federal
Reserve banks with the Federal Re
serve board. Every scrap of informa
ton, every report or rumor plausible,
has been seized upon by an eager and
eredulous audience.
Not content with the speculation
of the Washington correspondents,
seekers after news deluged the board,
inquiring what action, if any, was to
be taken to discount rates. This went
to such an extent that the board fl
nally tartly inquired from those who
had sent in kilograms the source of
their information. adding that, when
the board had anything to say, a duly
authorized announcement would be
made.
Interest in the policy of the Fed
eral Reserve system is maniteStly
justified. but there was never any
reason to believe that a formal de-
cision as to rediscount rates would be
given out from Washington when, as
a matter OF fact. an application in the
change in the rate would have to orig
mate with one or more of the Federal
Reserve banks and then be passed up
on by the board.
Speculation Is Stopped.
When the conference adjourned,
therefore. the financial community had
just about as much information as TO
the intentions Of the governors as II
had when the conference convened.
The only result of the conference was
to halt speculation in both stocks and
commodities.
1t is interesting to observe how
deep aud lasting an impression was
made by the action of the banks in
1919. In fact. the effect upon the
speculative fraternity was SO great
that it has come to believe, at least
il so appears, that any further ad-
vance in the rediscount rates would
in itself stop, at once and completely,
any further rise in the rise of either
securities or commodities.
And yet conditions are today tota'
ly different from those prevailing in
the late fall of 1919. At that time
ratios Of reserve to liabilities were
around 30 per cent but now around
~ per cent. The action taken, then.
was forced by the necessity of con-
serving the systems resources. There
is no necessity. now. notwithstanding
some further increase in discounts.
Ii is also fair topic for discussion
as TO exactly, what is the function OF
the reserve bank system in the mat
ter of its rediscount rate policy. Shall
the rate be fixcl at that point which
will simply protect banking resources.
or shall it be fixed with view 10
checking what appears to- be banking
authorities to be excessive speculation
and undue expansion?
Politics a Factor.
There are few students hcretical
enough to assert that paterral author
ity over the entire economic situation
is outside the province of the Federal
Reserve banks and the members OF
the Federal Reserve board, and. as
unfortunate as it may be, political
considerations will probably influence
the answer to the question. At any
rate. either the SPECTATOR or investor
who overlooks the political factor will
make a mistake.
The interest for all in the probable
ity of an early advance in rediscount
rates is, of course, the effect upon
prices.
There is. however. another factor
to be taken into consideration. In adj
dition to the price advance which is
the natural reaction from the collapse
Of couple of years ago and the in
evitGble accompaniment of expanding
business, there is also to be reckoned
with the effect of the enormous sup
ply of gold which has accumulated
within the United States. In itself
this abnormal gold supply acts TO raise
prices or, at least, to keep them from
falling.
Gold Decreases During Week.
The weekly bank statement shows
a total decrease in gold reserve OF
$40 800. coo. but. even so. the total rs
still SSS, 100000 above what it was a
year ago. When any of this surplus
will begin to flow back TO Europe.
Were it is so badly needed, is any
mans guess. Until that time comes
his obstacle TO price reaction ought
not be overlooked
The business situation remains as IT
was about week ago. Perhaps about |
he most significant development is
he advancing tendency in wages. |
could be easily checked by |
INV large amount of bidding against |
ZACH other by employers of labor. The
most hopeful feature is the conserva-
ism and caution with which practical
Y all merchants and manufacturers
ire operating.
Railroad earnings during February
we're not quite so good as those OF
he month preceding. Probably. how
ver. this was due largely to unfavor-
lble operating conditions. 1t is an
,rror to take this as the reason for
he reluctance of investors to accumu-
ate railroad stocks.
Government Action Feared.
1t is more likely that the real rea-
on for the failure Of the long predict
a bull market in the rails TO mater
alize is the fear Of more government
Only this week the In
erstate Commerce Commission noti-
led the railroads that they must re-
,ort the amount by which net earn
ngs exceed g per cent on valuation
md that half that amount must be
urned over to the government.
II is hard to arouse speculative en-
husiasm in the securities of any cor
,oration whose excess earnings do not
lccrue to the stockholders. There is no