Evening star., 1924-01-13

UNLIMITED FUNDS
READY FOR LOANS
$oo,ooo,ooo in Call Money Is Of.
fered in Wall Street With
r No Borrowers.
IOANING RATES DECLINE
fedsrsl Reserve. Bank Report
Proves Big Surprise.
1oAN1NG RATES DECLINE
BY GEORGE r. HUGHES.

hf GEORGE r. HUGHES.
Special Dispatch to The star.
NEW YORK, January 12.-The out
standing feature of the financial sit
uauon at the end of the week is to
oo round In the money market
The statement of the Federal Re-
serve Bank of New York. made pub-
Tic Friday, was one of the most
remarkable In months, showing as
IL did an increase in the ratio of total
reserves to deposit and note liabiii-
tes almost without precedent. In a
week. this reserve jumped from T4.7
per cent to S5.9 per cent. In the
same time gold reserves increased
from ss73.4s2.oo0 to $s4s.2os.42o.
ABOUT per cent. For the system as
whole the reserve ratio rose from
EoIo reserves were up $4,000. 900 over
tne preceding week and $67,60O.Q00
over the same week a year ago For
me me New York bank the increase for
TINS showing was undoubtedly due
10 the return to the banks of gold
N1thdrawn for holiday purposes No
matter what the explanation, the re-
suit is striking.
s5O.OOO.OOO for Loans.
similar story is told by the trans
1ctlons in call money on the New
aork stock Exchange during the
week. It is estimated that rot less
tnan $6O,00O,000 was offered by lend
ers without finding a borrower, and
on Friday the quotation for call
5unds dropped to az per cent, the
lowest since last September.
Authorities are not agreed as to the
iong1range g effect of this enormous
surplus or money on the price of
commodities and of securities. Most
OF them take the view that the d.
rectors of the federal reserve system
VIII be able to curb any approach to
dangerous credit imitation. it will be
remembered that las. March, when
something similar seemed to be i'm
ton a flood of warnings which not
only slowed down speculation. but
brought about a perceptible hesita-
ZION In trade, business men still hav-
ing vlyld recollection of the COL
lapse of 1921. At that time the curb
was effective. Nevertheless all
through the year gold continued to
pour into the United States. and all
preo1ctions as to turn in the tide
proved erroneous. AS 1T stands to-
day, with the business outlook slow
ly but steadily improving, the coun-
try is again confronted with the
problem OF what shall be done with
this surplus of money. Here and
doubt as to whether the potential
temptation to imitation can per-
manently be resisted.
Higher Prices Likely,
Regardless of theories as to the
ultimate result, it is generally agreed
maj the immediate effect must be de-
mand at higher prices for ali grades $
OF fxed-fnterest-b bearing securities
That is actually what has happened
IN ne bond market this week Funds
"hich could find no. outlet in the
. h We been used in
the purchase OF government securi-
.--, ..s anu snort term. and in
the higher grades of railroad bonds
ana choice preferred stocks.
The market for securities of this
kind has been consistently strong.
Perhaps the most remarkable ex-
ample is that of the 100000, 900 in
american Telephone and Telegraph
5ia per cent debentures offered last
November Not only has this large
amount been successfully absorbed.
but slowly and surely the quotation
has crept upward. Another interest
ing test will come next week, when
volume. Investment bankers are con-
fident this test will be successfully met
They feel sure that 1t is now a sell-
ers and not buyers market for new
offerings.
All Eyes on Washington.
\ The Importance of the Developments
at Washington during the week must
not be overlooked. even while empha-
sizing money market probabilities
The brighter outlook for tax reduc-
tion of the variety favored by the
Secretary of the Treasury has un-
strength of the investment market
1t has brought about certain
amount of anticipatory buying of
taxable securities, the yield on which
at present is unattractive to investors
with large incomes, but which would
1ary Mellon Neither must tho
strengthening sentiment in favor Of
abolishing the further issue of tax
accomplishment of that end. however.
is SO far ahead that the market has
not yet begun to discount 1t.
Interest in railroad stocks as we'll
as in bonds was stimulated this week
by the decision of the Supreme Court
transportation act. Traders jumped
TO the conclusion that the so-called
weaker roads would reap the benefit
Of the reserve fund established from
whose profits exceeded the fair return
fixed by the Interstate Commerce
Commission. They failed to take into
consideration the fact that every
thing depends upon the final fixing of
valuations, on which an enormous
amount of work remains to be done.
The roads also may be depended
upon to contest In the courts valua-
tion figures which do not meet their
ideas.
Legislative Action Awaited.
AS a matter of fact, taking valua-
tionS already tentatively arrived at
and. the best available estimates for
the xest, the number of roads earn
ing more than 8 per cent on vaiua-
tions is not large. A recent analysis
showed that out of seventy-four
of the principal roads only twelve, or
about Is per cent. were earning more
than per cent on their estimated
property values. For the entire year
1928 the railroads as a whole are
estimated to have earned about 81
per- cent on property value, which
compares with Ala per cent in 1922
and 3.i3 per cent in 1921.
Once the Legislative situation as to
the railroads is cleared up, rail Sc
rurities may be expected to sell more
nearly on their merits.
tCopyright, 1924.l