Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-10
STOCKS ARE BID Up
DESPITE WARNINGS
Speculative Fever Continues,
Although Activity Is CurtaiI-
ed by Money Rate.
BY CHARLES F. SPEARE.
pecial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK. March eff the Fed
eral Reserve has made any progress this
week in its campaign to curb specula-
tive excess. It's has not been apparent
on the surface. Activity has fallen of
in the stock market, but that is about
all
There has been no important liquida-
tons, and no indication of any change
of heart on the part of the determined
band of spectators. who have held the
market in their grip SO long.
The budget of news has been enough
to shake confidence in any market less
firmly intrenched than this one.
To summarize money is tighter than
at any time in eight years. Twice this
week call loans have been arranged on
the exchange at IL per cent. This has
happened before this year, but only
around the first of January, when divl-
dend and interest disbursements nor
mally make for hardening money rates.
It is an extraordinary occurrence IN the
first week of March.
Money at High Point.
Time money and commercial paper
are right at the highs of the year and
that means the highs since defiation
times. No encouragement is to be gained
from study of the weekly statement OF
the Federal Reserve banks. AS Tor
brokers loans, the weeks increase OF
around s140.O00,000 was a surprise to
the Street, which had been counting on
a decline Then there was the state
ment of Paul Warburg, belaborlng the
Federal Reserve for not raising the re-
discount rate long ago. 1t was a vlriie
~ times
past would In itself have been enough 70
break the market
All these items of news were avail
able for appraisal on Friday morning.
The market paid no attention to them.
With a gesture of defiance, Radio was
bid I'D 35 points on top OF 5I-poht
rise on the day before. Other industrial
stocks advanced in price, completey
ignoring every unfavorable consloeTa-
tinn IT is true that the averages Tor
the industrials are lower on the week,
hit, the mounting total Of brokers loans
shows that the situation is still full OF
dangers.
Loan Control Difficult
What the next move will be is hard to
saw. How can the Federal Reserve con-
troll the loan account? the returns
for this week show that OF the SI4u,-
100000 increase, SGT 600 600 was IN Ioalis
for account of New York City banks,
sI4 600 600 in loans for account OF out
of-town banks and 100000 900 in loans
for account of 'otherS." Perhaps the
Reserve system can discourage member
banks from employing their 1unos IN
the call loan market, but the eHectiVe
method of persuasion to be used on cor
porations has evidently not yet been
discovered. Ill.
AS far as the New York City banks
are concerned, collateral loans TINS week
are actually lower than they were IN
the corresponding week OF 1873. TheTe
was some increase in the total for out
of-town banks. but the great gain has
been in the ''others" account. The lat
ter stands now at S2,823 100000, COM
pared with SI,2l5, 100000 a year ago.
Now and then some authority arises TO
commend those high minded corpora
tions that do not feed fuel TO the specu-
Iative flames, but there appears 70 oe
plenty of others entirely willing to pront
that way.
AS matter of fact, the temptation
is well nigh irresistible. II a corpora
ton can loan money IN the STOCK
market at and 9 per cent or even
higher. and that entirely without risk,
whv should it not do so? Business is
good and in most lines profits are salts
factory, but it takes good management
to make money as easily and as surely
in business as it can be, made in call
loans. Remember, there is no record
of any loss sustained in day-to-day
loans on gilt-edge Stock Exchange
collateral.
Confidence in Prosperity.
What then will be the outcome? Is |
there no way Of calming the specula- |
tive fever? There is one possibility |
which has been given scant attention so |
far. 1t is improbable in the extreme |
that even spectators, to say nothing |
of investors, are going to keep on
indefinitely buying stocks yielding 3
and per cent, or sometimes less, with |
money borrowed at and 9 per cent, |
sometimes more. So far this has been
done In the belief that the stocks so
purchased could be sold to some one
else at higher price-and so far that
theory has worked out in practice.
It has worked out, however, be-
cause confidence was high in steadily
increasing business prosperity. But high
money does not affect speculative mar
kets alone. It has a direct relation to
industry itself. Once let cloud APP
pear on the business horizon and the
whole picture will be changed.
MS is all uuPiSdodnG diOClIldtAFC,
but it has to be faced. The reason
commonly assigned for the reluctance
of the Federal Reserve to raise discount
rates has been the fear that business
would be injured. Mr. Warburg
answered this argument in his state
ment this week when he said that
''those who express the fear that in
creases in the Federal Reserve redis-
count rate might hurt business, over
look the far greater hurt the country
will have to suffer if their advice to
permit the situation to work itself out
were followed" He adds that we have
had in effect a or per cent bank
rate for the past six months, for it is
that rate which has disorganized inter
national financial relations