Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-24
STOCKS WEAKENED
BY CREDIT STRAIN
Continuing High Money Rates
Are Taking Vitality Out
of Market.
By CHARLES r. SPEARE.

NEW YORK, March 23.-The mills
Of the gods on the seats of the money
power in New York, Washington and
Chicago have been grinding extremely
slowly, but between the upper and the
neither stones they have been gradually
squeezing vitality from the stock mar
ket.
Money rates and rates of Federal Re-
serve discounts have become national
problem. The pinch of high money on
business can no longer be regarded as
academic.
There is an old play in which the
villain enters with threatening mien.
exclaiming, II will now sharpen my
knife" In the succeeding acts he re-
peats, II will now sharpen my knife"
has been issuing intimations and warm
ing for several months and adopting a
somewhat browbeating attitude toward
Wall Street. but 1t has not yet sharp
ened its knife or thrust it home.
Money Situation Bewiidering.
It is a strange and bewildering Situa-
ton. The rediscount rate has stood at
per cent for the past eight months.
Since 1t was raised to that figure time
money rates have advanced from 5s4
per cent to s per cent. Call money has
ranged between 6 and IL per cent. With
this weeks rise in bankers acceptances
to 55a per cent, they are / per cent
higher than in July and are likely to
60 still higher. The cost OF money to
commercial borrowers has likewise ad-
vanced and Is approximately per cent
above the bank rate.
At the Economic Club dinner on Mon
day evening Gov. Harding OF the Fed
erai Reserve Bank of Boston openly ad-
vocated per cent rediScount rate
and the abandonment of the policies of
moral suasion. having in mind what
happened in 1920 and in 1921 because
of the tin1id policy of the Federal Re-
serve Board in 1919.
At this same dinner the stock broker
age element responded joyfully to the
lambasting which one OF the speakers
Thursday aftrnoon ticker tape festooned
the financial district after 1t was an
nounced that no change had been made
in the discount rate.
1t is foolish to say that there is
no contest between Wall Street and
the Federal Reserve. The latter has
the power to end it quickly and will
eventually win out With brokers loans
increasing at their present rate and
abundant signs that business is being
affected already by high money and
the diversion of funds to Wall Steet,
delay In exercising proper discipline to
band of greedy spectators is difficult
to understand
Banks Position Stronger.
The end of the March quarter is like
" to see another severe pinch in
money rates, though perhaps not as
serious as that in December. Corpora
ton requirements then will be heavy.
A portion of them must be met by
the withdrawal of funds for the ac-
count of Others" from the call mar
ket. This throws the burden on the
banks, which, fortunately, are in
stronger position to carry 1t than they
were three months ago.
The business of buying stocks or
trading In them has been less profitable
since the first of January than In any
similar period during 1928. Taking into
account the high carrying charge for
those who are dealing on margin
which charges in january and In Feb
ruary were approximately 9la per cent
and 8 per cent and so far this month
represent the highest average since
money began to rise-and the irregular
price movements meanwhile, 1t will be
found that moderate profits were alb
sorbed by interest rates. As matter
of fact, except in the coppers, iron
and steel. few of the public utility
and motor stocks, there is very little
premium at present over prices pre-
Guiding the rails. oils, merchandising
and numerous trade mark issues, are
actually lower
The market, as whole, has had
practically no permanent trend this
month. It has been only the nimble
trader who has been able to make his
living from it. It has had violent
swings each way, with the present tend
ency decidedly downward and this
weeks average decline erasing most of
the gain OF the two previous weeks Not
only have stocks been heavy, but
secondary reaction has occurred in
bonds, following the temporary improve
ment that took place out of compliment
to Secretary Melons advice to buy in
vestment securities. The recently Of
fered 434 per cent Treasury certificates
are already selling at discount and
II 1t were necessary today to bring out
another large issue of notes 1t would
be found that Government short-term
credit is approximately on per cent
basis.
Copper Continues to Rise.
The outstanding incident in the BUSH
ness world this week, intimately asso-
ciated with movements in securities
was the further rise of cents pound
in copper metal. This has its bearish
as well as its bullish aspects, for 1t
means that many manufacturers can
not afford to pay the going rate for
copper and will either attempt to use a
thSfi fnY 1tvpNif fhair VI
From the standpoint of the producers
the situation Is an ideal one, for they
will have the benefit of long-term con-
tracts at prices ranging from 10 cents
upward during the greater part of 1929.
It is obvious what this means to them
in the way of earnings and what share
holders in these companies may expect
to receive in dividends.
There is an actual scarcity of copper
today. Given such condition and an
extreme quotation there nearly always
price and food the market. This is
what is feared in the trade some time
during 1880.
Another important development in
the business world was the settlement
of the gasoline war on the Pacific Coast,
which has been ruinous to- the dis
tributors In that territory and which
follows closely after the steps taken to
stabilize the petroleum industry not
only In this country but in South Amer
lea, from which enormous supplies have
been coming the past two years. Price
sterilization and industrial and banking
consultations are the conspicuous tend
encies so far this year and should have
a sustaining effect during the period
of liquidation in securities that sooner
or later is bound to come.
Larger Banking Units.
The trend toward large banking units
represents a certain amount of COM
petition and effort to maintain prestige
for size. There are deeper elements
connected with it. One of them has