The Washington times., 1928-11-30
BANK S|T UAT ION
RE VIE WE'D BY
VIII ING
By HARRY GUsACK
Financial Editor


T tion during. the fiscal year, 1928
was characterized by a tremendou.
outflow OF gold. totaling $497, ,962, 900
the lowering Of interest rates, fol
lowed BY sharp rise during the lat
ter half OF the year, and remarkable
activity on the stock exchanges, thu
Secretary OF Commerce William f.
Whiting states IN his annual repor
]. to the President just made public.
Industry enjoyed prosperous
year, and a level rarely. ii ever, be
fore attained, marked activity in all
branches of business throughout the
country at the end of the year, the
Secretary,s survey declared. The re-
port. in part, says:
Three outstanding events char
acterized the banking and financial
situation during the fiscal year
under review. Most notable is the
tremendous outflow OF gold. Closely
allied with this sudden reversal in
gold movements was the lowering OF
interest rates. followed by sharp
rise during the second half OF the
fiscal year. In the third place, there
was remarkable activity on the
!. stock exchanges, prices OF stocks in
general rising rapidly in the face OF
unusually high rates for both call
and time loans against securities.
Stocks Advance
The year as a whole, like most
: recent periods was one Of sharply
advancing values of stocks. The
price index OF 229 stocks averaged
1918 in May, 1927; it rose. with no
important recessions. to 221.8 for
May, 1928; and it closed the year at
s1O4 for June. This was net T.
crease OF more than 25 per cent
during the year. This rise was ac-
eompanied by an increase in
brokers' loans, as reported BY the
New York Stock Exchange. from
1850 900 to $4.SsS:0O0, 900. The
New York stock market thus al
sorbed about $1,S29, 900 900 Of adj
ditional short.term funds during the
rear.
The fiscal year opened with rates
for both calamonev and prime COM
naefcial paper at about Az per cent
!. and with prime bankers acceptaaces
At about 3ss per cent. The dis
count rate OF an reserve banks was
lper cent.
The rate on prime commercial
paper remained rather stable
around the per cent level from
August to March, while that on
bankers aeceptances ruled at as
10 az per cent from August to
December. Call money rose sharply
= in December, when the average
nate was about 43s per cent Dur
ng the second half of the fiscal
year all money rates rose appre-
.iably, the rise in call money being
luite marked. Comparing the av-
srage rates on the several types
II paper in June. 1923, with those
prevailing in July, 1927, 1t is found
hat while the average rate for call
money. at SCI per cent. was mp by
more than 2 per cent. the averages
.or prime commercial paper ard
9ankers' aeceptances. at 4.s8 per cent
md 4.07 per cent, respectively, were
ligfer by only one-half OF / per
sent.
Interest Rates Rise
This rise in interest rates during
he second half of the fiscal year
effected the heavy outflow OF gold
hat began in September and con
he period. The outflow was the
'esult Of several conditions, namely.
he lower level of rates in the New
York money market as compared
with those prevailing in leading
money markets abroad IN the late
summer and fall of 1927. the desire
II central banks in several foreign
countries to strengthen their gold
soldlngs. and the large volume of
soreign loans issued in this country
In July. 1927, the reserve banks
began lowering their discount rates
TO 3h per cent. 1t was felt that with
the serious stringency in Europe,
Teasy money here would help for
eign countries to meet their autumn
temand for credit and exchange"
thereby aiding the foreigner with
his seasonal imports from the United
states and benefiting thel American
farmer and manufacturer. In the
fall and winter the outward move.
n1A1t of gold became pronounced
snd the level of interest rates he
eaz1ae higher. Asa consequence the
reserve banks raised their discount
rates TO 4 per cent in January and
February and TO 4n per cent in
April and May.
: The gold exports were extraordi.
harily large. In the previous fiscal
> Eeaf the net inflow of gold was
k147 $4,000. The inflow continued
In July and August, but at slower
> rate. Then for 10 months there was
very strong outward moyement
r the net outflow for the fiscal year
being $497 ,962 900. Despite this re.
auction in our gold reserves, which
had long been expected this country
stili has a large stock of free gold, -
the Federal reserve ratio for July 8
1928. having been no less than 65.A
per cent.
1t Is a satisfaction to observe
= That practically all of this exported
. gold was used to fortify the cur
tencies Of the eworId, being taken by
countries preparing for return to
, he gold standard, as in the case
If France, Brazil and Uruguay. or
ev those that have returned to the
gold standard in srecent years, such
- England, Germany. Italy, and
s Poland.
The trends in the commercial
ranking situation are indicated in
me weekly statements of the "re
e norting" member hanks of the Fed
eral Reserve system, approximately
e $50 In number. whose resources con
stitute a large proportion of tho
total resources OF all member banks
= Between June 29. 1927. and June
g, 1928 their loans and discounts
Increased from S14,7T0, ,000, 900 t.
$3.50, ,000.0 or G.G per cent: thei,
investments from s6.099 900, 900. ol
o.5 per cent: and their time deposits
from $685., 900 900 to $1,000, 900. 300
s. or I1.S per cent. while their net de