Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-04-21
EASING OF CREDIT
CONDITIONS NOTED
d "
Stock Market Shows Ten
= ~
dency to Rally, but Gains
Are Small.
BY CHARLES F. sPEARE.
Special Dispatch to The Star.

NEW YORK, April 20.-The stock
market this week has been in trading
area where it was easier to produce a
rally than to bring about decline. In
other words, Wall Street was in the
mood to open its arms to any SuggeS-
ton of Improvement in the credit sit
uation and to close its eyes to the seri-
Gus aspects of international affairs.
Some shares have been heavy, notably
the scopperS, which broke through the
March IS level, while others have been
buoyant. recovering a substantial part
Of the decline of last month. The aver
age of prices in the second half OF the
week has more than overcome Its loss
in the first half.
No progress has been made. however,
in correcting conditions that have
caused unsettlement IN securities ana
a growing consciousness in business cir
cles that Wall Street activities during
the past year have gradually been sap
ping the strength of the industrial body.
In spite Of the efforts at credit contrac-
ton brokers' loans this week showed
only a nominal decrease.
Split on Bank Rate Rise.
There is sal a strong and representa-
tive group In the Federal Reserve Sys-
tenn, including Charles E. Mitchell,
City Bank in New York. and Gov. Hard
ing of the Reserve Bank in Boston,
who firmly emphasize on all occasions
the desirability of raising the rediscount
rate to 6 per cent, and, II that is not
effective, to a higher rate. Some OF
those who have large speculative COM
mitments and are incidentally interest,"
, ed in the general good OF the country
are protesting against the policy OF the
Federal Reserve. :,
For the first time since the bull
movement got in full swing, brokers are
finding their customers selling on rallies
instead of following them upward. The
market shows increasing signs OF
staleneSs.
Can money rates this week have
averaged 734 per cent, compared with
3D. per cent 1t cannot be said that
cent two weeks ago This is progress
sive Improvement of the right kind. 1t
looks better than it is actually. Time
loans have been shaded, but with money
maturing December Is commanding
BIZ per cent it can not be said that
credit conditions are yet such as to
, Justify unlimited use of funds in the
stock market. The banks this week
increased their borrowings at the
Federal Reserve and the item of outside
brokers, loans expanded.
Investment Market Healthier.
Bonds have shown an improvement
TO which they were entitled by reason
of the oversold condition of the market
and the absence of new supplies of
high-grade issues over a period OF
months.
The recovery has extended from
United States Liberty bonds and Treas
RI
grade corporation issues and has been
assisted not only by the technical con-
dition Of the market, but by the broader
investment field provided under the
recent savings bank act in New York
State.
The test of the investment market
VIII come when syndicates begin to
offer new securities. Judging from
comments this week none of the large
underwriting concerns is ready to take
/" this chance. Dealers are persistently
turning down participations on the valid
ground that they cannot afford to
take what may be slow-moving securi-
ties with carrying costs per cent.
There is no longer fear that the in
1lation In credit and in securities will
affect commodities. The copper metal
slump corrects an artificial price con-
dition that must be charged in no
small degree TO those who were at the
same time manipulating copper stocks.
Other metals than copper have been
declining, and other commodities also,
including wheat, corn and cotton. The
agricultural group of farm products
has been affected as much by political
conditions as by this years production
outlook Taking all these commodity
conditions together, they have produced
the lowest commodity average in over q
year.
Local Markets Affected.
Frozen credit" is not confined to
securities of standard character and
listed on the New York Stock Exchange.
One of the most serious of many situa-
lions that will have to be worked out
involves the interior stock exchanges,
where it has been found almost impos-
sible to sell few hundred shares Of q
local. stock when the market in New
York is weak Everything Is all right
so long as there is smooth going here,
but, the interior banks have to finance
q great deal of paper that has no mar
ket except locally.
There have been two or three occa-
sions when serious crisis at these In
terror centers has just been avoided
The Federal Reserve is watching these
situations closely. It will take q long
time to liquidate them.
There Is another development thai
helps to sustain prices and accounts fol
the willingness of investors to buy ant
hold securities on which the immediate
income return is small. This is the
practice of financing with stocks. i
results in numerous valuable rights,
such as those announced this week b.
the United States Steel Corporation
and the Baltimore & Ohio Railroad
These are equivalent in money return
to the shareholder to dividend increases
but they do not commit the borrowing
corporation to policy Of higher divi
dend rate.
They followed the program Of tn
American Telephone & Telegraph Co
which is committed to q fixed dividen
of 9 per cent per annum and to alter
nate years Of financing with stock Is
sues. The rights" last year wer
worth $14.50 a share. This year ther
will be additional rights" in the pre-
posed issue of convertible bonds. tn
money value of rights" includin
those not only of corporations, but {
banks, insurance companies and IN
vestment trusts, during the past yes
and half represents huge total.
Americas stake In Europe.
Tf1e result Oh the fepdLdGAuLS ucBUtle
tons between Germany and the allil
may have serious consequences In tn
country. America already has q iart
stake in Europe In the amount OF do
lar loans, estimated at "a, 300 ,000, 900, I
which So per cent are in German
alone.
This Is not all. Continuance Of OF
foreign trade at the recent scale
values depends considerably on add
tional loans to the continent. VIII
some of those made In 1927 and l9:
were not Of a very choice variety ar
were for questionable purposes, Q mi
fority were quite legitimate and ha'
helped to build up Europe, increase n
purchasing power and provide meal
Of buying what this country has 70 9