Evening star., 1925-04-26
BY ]. A. FLEAIING.

BIT i. A. FLEMING.
or Washington than ever before, and
the bankers, whose chief aim in bust
ness is the accumulation of deposits,
ought to be very happy.
While they admitted that they are
in fairly good humor, there Is a small
fly OF large proportions in their honey
that prevents their perfect enjoyment
of the situation.
Now they are asking, first them
selves, then each other, and finally
discussing freely the question, What
are We going to do with it?'
1t is a fact that there isn't much
demand for loans, other than from
real estate operators and their clients
an inquiry that national banks are
not permitted to meet TO any great
extent. These loans are by their very
nature non-liquid, and must be more
or less restricted, for the acceptance
Of a deposit carries with ii the under
standing that the cash will be avail
able when desired.
Merchants Light Borrowers.
Merchants are not in the market as
borrowers 10 any extent: business is
fair with them. but they have not for
gotten the lesson OF the buyers strike
and the losses sustained in the en-
forced liquidation following the infia-
ton period. They are still replenish
ing stocks from day to day. They do
some little borrowing, but not much.
Usually in times of business activ-
ity merchants are accustomed to carry
fair surplus stocks in warehouses,
pending the depletion of their shelves
TO a condition requiring replenishing.
Such a condition is now non-exfstent
and the merchants are counting on
less sacrifice when clearing sales are
needed.
The secondary loan market, !"
meaning the Wall Street demand for
call loans, is also discouraging these
days. Rates are around 31a per cent
and the demand is not sufficiently con-
tinuous to keep cash constantly en-
ployed.
Trust companies generally are pay
ing 2 per cent on checking accounts
and national and savings banks 3 per
cent on savings, while time funds and
some savings deposits call for per
cent. Hence there is no satisfaction
in 31a per cent loans.
Local Conditions Noted.
The investment demand for securi.
ties locally is greatly restricted, this
in spite of the firm appearance made
by the market.
It is but natural that the un-
certainty that still surrounds the
probable distribution of the Potomac
Electric escrow money to the Wash
ington Railway and Electric Co.
common stockholders should prevent
free trading in these shares. This
and the high prices, due to steady
gains in other parts of the list, have
brought more or less dullness, re-
lfeyed by occasional spruts of activity
and displays of strength.
The average man seems content
lust now to leave his dividend and In
terest in the banks, awaiting more
propitious time-the settlement OF
unsettled problems-before investing
In the meantime bankers are hold.
ing as strictly as possible TO the
per cent rate on loans. There is no
inducement for cut in that as il
would not increase the demand to
any material extent.
This limited demand for loans Is
nearly national in its character.
The great Federal reserve system
| is supposed to earn its dividends and
nav it's expenses from the rediscount'
| ing of loans made by banks to thelr
customers. There is 50 little re-
discounting going on that the reserve
| member institutions in the open
market for bills and acceptances.
Margin or Cash Down?
Am / liable to lose more, in the
! event of a break in the market, II
| buy on margin than II l purchase
for cash, buy outright l believe YOU
| call it," said the new customer to the
old-time broker.
he ~
always been a difference of opinion 1r
| that matter. Most of the wise ones
contend that it is foolish to speculate
| on margins, while they hold that in
vestments' for cash are by all odds
| the safest.
| II differ from them entirely. From
| the standpoint of saving interest an'
the viewpoint of economy the pur
! chase backed by cash payment Is de
sirable, and yet the very fact Una
outright payment has been made. ma
often cost the trader much more thai
he or she would have lost had th'
| purchase been made on margin.
| This seems to answer your ques
| ton in q way, but an illustration VIII
press home the point desire to make
| MRS. Jones, an indefinite person
ality, places her order for 100 share
1 of stock and to guarantee her trad
| Q6DOSltS d oL v1.ooo.
! is a raid against the specific stoci
| involved, and a break of five points
with q call for additional margin.
| 'It is possible that Mrs. Jones vii
respond with the needed cash, mayhal
| to 9. second call, but the chances ar
that the second call will take ava.
| ali her desire to invest or speculate
and she will get from under witt
| losses limited, while Mrs. Smith
equally an indefinite parsonage, VII
| pay cash for her purchase, lock TIT
stock up in her strong box, and per
haps go off jaunting here or there.
sit is of course equally possible
that she may stay at home and hincl
at the first drop, cry on the second
| stfffen her upper lip on the third ant
| make up her mind that they can no
take her stock away from her tina
way, and then when 1t has dropped
| so points or even more, throw th'
| certificate on the brokers' desk will
| the order to get me out the best yoi
can, you got me into It,
"It is a fact" continued the broker
\ that an investment may be made OIL
| margin just as well as by full casf
/ payment. The trader who borrow'
1 from his bank on one security that n
may purchase outright another Il
| practically trading on margin,
| THE margin trader may lose hi
| entire margin and also be responsible
for further loss before liquidation o
| his stock; the buyer outright ma.
| hold on to his stock at less expens