Evening star., 1928-12-04
BY JOHN r. SINCLAIR.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK. December $50 much
is being written about stock market
speculation. brokers' loans, Federal Re-
serve policy and credit conditions that
it is well to keep in mind few basic
facts
Last week loans to brokers on stock
and bond securities by the A reporting
member banks of New York City again
increased 132,768, 900. making the in
crease in the last two weeks slightly
more than 5000 100000. Brokers loans
now stand at $3.50 900 000-a so per
cent increase during the last IL months.
This is the first important fact to keep
in mind.
Fact No. 2-Member banks increased
their borrowing from the Federal Re-
serve banks almost $200,000,000 last
week. Discounts in the IL banks rose
from 99,946,000 on November 81 to
$500 100000 on November %. Larger
increases have occurred in the past,
but what is significant is that of the
total of $50, ,294, 900 in Federal Reserve
borrowings by the member banks dur
ing this last week no less than $146,-
$4,000 occurred at the Federal Re-
serve Bank of New York. which serves
New York City, at present the frenzied
4A1AoAAAld1 [E1lbG1 O1 GllG IdItULl.
Borrowers at u. S. Reserve.
"Regrettable but perhaps unavoidable
While the present frenzied speculation
on the Stock Exchange continues" is
the way the conservative Commercial
and Financial Chronicle of New York
expresses the situation this week.
Some of the largest banks in the
East, having huge sums lent on "call,"
are likewise heavy borrowers at the
Federal Reserve 1t is suggested by
some that these banks are violating the
spirit OF the Federal Reserve act. A
resolution already has been introduced
into Congress asking power to publish
the names of all banks that are lenders
on the cali market and at the same
time borrowers from the Federal Re-
serve banks.
1t is evident that the matter has
reached the point where some drastic
action may result, unless the larger
banks of the East take a firm stand
and stop the present drift.
The Federal Reserve discount rates
continue higher than the rates quoted
in either Paris or London. AS a re-
suit, hundreds of millions of dollars
have come. from European nations into
the American money market. One
foreign money on call" at approx
mately $1,000,000,O00
So large has been the drain from
Europe that unless money rates soften
in the United States, Europe will be in
the position of having to raise its own
rates at this time, when it is trying to
simulate business; or. in lieu of dis
turbing the bank rate, the gold move
ment back to the United States, already
started, will continue
Rates and Speculation.
The experience of the last six months
tends to confirm the opinion that rates
are not entirely the controlling factor
In a credit situation. High money
rates on cali have not prevented the
continuance of stock speculation, and
will not so long as profits can be made
above carrying charges.
Eight of the Federal Reserve Banks
now maintain per cent rate, while
the four others have continued ON a
Az per cent basis. If the banking in
terests unite ION control by co-opera-
tion," the Federal Reserve rediscount
rates in the East can be lowered. The