Evening star., 1925-07-11
INTEREST RATE
MOVEMENTS VARY
Important Changes Have Oc-
Cured Since Reserve Sys-
tenn Was lncepted.
By CHAS. p. SHAEFFER.

Important. changes in interest rates
! have taken place since establishment
of the Federal Reserve system. it is
stated by W. Randolph Burgess, as
sistant agent at the New York Federal
Reserve Bank, in a statement made
public today. He saws the system has
much less influence on the average
level of rates than on temporary fuc.
tuatlons and the relationship between
different rates.
The spread in interest rates between
long and short maturities and between
cities West and East has been reduced.
ne points out. Seasonal fluctuations
nave been reduced. Panic rates have
disappeared. The result has been 70
! give rates greater stability. The busl-
ness man with good credit can be sure
OF funds and does not have to pay an
normally high rates because he has
10 borrow al a particular time or for
d longer rather than d shorter period,
/ or because he lives in a Western
! rather than an Eastern center Thus.
! II is found the banker can be sure of
more continuous employment for his
funds. He can provide business with
more assured banking accommoda.
! tions AT steadier rates
There has been no very large
/ change in the average level Of open
market rates since the reserve svs-
| TEN Was Inaugurated," Mr. Burgess
says. Commercial paper rates have
( tended to be lower and loans on
stock exchange collateral higher. Ths
I tendency thus far has been for bust
ness money 10 be cheaper and for
J Istock exchange money 10 be dearer.
Reasons for Changes.
! There are a number Of expIara-
tons Tor these changes" the speak
! er points out. The Federal Reserve
/ has provided credit elasticity which
makes il much easier for banks 10
ADJUST their reserve positions. In the
I old days there were no ready assured
aids by which d bank could tide over
dlfcult periods as il can now by bor-
rowing from a reserve bank The
non-nember bank can secure accom-
modation from its city correspondent.
which can borrow from the reserve
| bank
/ Besides direct borrowing from =
! reserve bank. there are no additional
1 facilities for the adjustment OF bank
! reserves. In the old days the call
market was the only market from
which funds could be withdrawn i'm
| medlately in need. The Federal re-
/ serve act has now made possible a
/ bankers acceptance or bill market
! The holder Of a. bankers bill can al
! ways get his money at once by sell
/ ing the bill TO a dealer or TO a Federal
| reserve bank. Many banks now carry
/ bills to be liquidated at any time there
! is need. Another market fostered by
! the reserve banks is the market for
| government certificates Of indebted
! ness and Treasury notes"
| As 10 the way the system initiates
| disparity in rates between parts OF
! the country Mr.. Burgess says
Former Settlements Slow.
in the old days there were bar
riers 10 the free flow of funds. il
! took twice as long to make settle
ments as at present. There was usu-
ally a premium or discount on New
( York funds in Western cenrers. These
J barriers hindered automatic correC-
/ ton for high rates by funds from the
center where they We're. in supply TO
1 where they were dear. The Federal
! Reserve system has broken down
many barriers. Check collections have
( been made faster, safer and cheap
Transfers of collected funds are made
/ by telegraph without cost 10 member
! banks. Settlements no longer require
| the shipment OF currency. Banks are
much less dependent on New York,
! since adjustment Of reserves ca be
| effected at their local Federal Reserve
Bank. The money markets Of Chica-
/ go, Boston and other centerS have
| grown in Importance. Since 1914
/ rates were at times twice as high in
! Chicago as in New York. Now the
! spread Is almost negligible.
! 'SeaSonable movement of interest
rates has practically ceased. The eN-
PLANTATION is found in the credit elias
/ tlcity of the system. Since the estab-
! lishment of the Federal Reserve sys-
! tenn we have had no money panics
and no such sudden violent movements
! of interest rates as characterized those
periods. The elasticity of credit and
| currency which the reserve system
provides makes il unlikely that we
shall ever again experience a financial
panic of this sort"
Quarterly Dividend Voted.
| Directors of the Washington Loan
and Trust Co. have declared the usual
quarterly dividend Of per cent pav-
| able on August ! to stock of record
July "a, and have voted the transfer
! of $l50,000 from undivided profits TO
surplus.
| The strong position OF this institu-
| ton is easily viSualized by the present
! statement, which shows a surplus of
! $500, ,000. as against only 81 900 600 of
capital. Every dollar of the surplus
| has been earned.
| Fewer Failures Reported.
! Bradstreet's compilation of business
failures in the United States for the
week ended July 8 places the number
at 304, compared with 342 the week
before and PSI in the corresponding
week last year.