Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-03-17

companies and In the management Of
corporations newly formed to take over
long ESTABLISH industries for the sole
purpose Of making an underwriting
profit On the sale Of securities. There
have been enough abuses In oil these
directions to bring out serious situa-
ton when the public stops buying stocks
and returns to its regular pursuits.
It would be difficult to say whether
relatively as large proportion OF the
available credit of the country was alb
sorbed In commodities during 1919 and
1920 as in securities since 1927. At
one time in 1919 Stock Exchange Dor
rowings were estimated as high as
81, $50 600. 900. compared with approx
imately $500, 000,00 today. Liquida-
ton later cut this figure down to about
$500 600. 900. Practically all Of the
loans in the earlier period were pro-
vided by the banks. Today over half
dividuals and are outside the control
Of the Federal Reserve authorities.
It is interesting and somewhat anus
ing to read from comments Of 10 years
ago the same criticisms of the Federal
Reserve policies as are now being made.
For instance, In January, 1920, the
Financial Chronicle said:
The time for timidity has passed.
Bold and reSolute action Is needed.
Making minor increases in discount
rates. while further imitation is being
promoted through new note issues,
seems like trifiing with q serious situa-
ton. II the Federal Reserve authorities
would inaugurate real and effective con-
troll of the situation, which II allowed
TO continue unchecked would become
full Of menace. they have the matter
entirely in their hands"
Again in November of that year the
same publication states: BY availing
Of the apparently limitless resources OF
the Federal Reserve banks an after-war
speculation was built up that has no
parallel In history. The Fed
eral Reserve authorities saw the danger
Is to II months ago and sought to
apply the brakes. but 1t was then too
late. The movement had gained too
much headway."
Easy Money Not in Sight.
The sequel of the apparent ineptitude
OF the Federal Reserve authorities in
the first instance was q political con-
troversy that lasted for several years
Another OF equal intensity Is likely to
grow out Of what has happened In the
past IL months.
The conclusion of the matter Is that
there is no early prospect OF easy
money, that it will take many months
to effect liquidation in stocks SUFFICIENT
to bring them back to an investment
basis and that the new factors of COM
mon stock psychology, corporation
lending and income taxes on profits
realized on sales may retard a decline
that Is long overdue.
The country is better able to stand
shock from defiation in securities than
1t was from the fall In commodities.
for in the past decade 1t has increased
its wealth several times more than in
any previous period. Instead OF having
to deal not only with acute domestic
but with political and eco
nomic panic all over Europe as In 1920,
it Is about to participate In the bene-
fits Of a settlement Of reparations debts
that will remove the last barrier to
progress on the continent and increase
the value Of the many billions worth of
foreign investments which Americans
have purchased In recent years.