Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-02-17
SPECTATORS FEAR
U. s. BANKS POWER
Warning of Federal Reserve
Results in Heavy Selling.
Prices Sag.
BY CHARLES F. SPEARE.
Special Dispatch to The Star

speculation by advancing its rediscoun
rate or filling the market with Govern
ment securities and acceptances, hai
cast a shadow over Wall Street thi
week and produced a ragged price lis
for stocks.
On Monday about one-third of las
weeks average loss was regained. Sub
Eequently the market experienced
periods of heavy liquidation, though
with counter movements in some of tn,
public utilities and eoppers, losing al
Of its early improvement and Frida,
running up against the obstacle of II
Der cent call loans.
The month of February 50 far ha,
Been true to tradition as being . periot
OF utfsettlement in securities. At thu
same time 1t has gone contrary tx
other years with respect to rates fol
money.
Scope Of Trading Narrower.
The nervousness exhibited is an ad.
mission that the prices of stocks are
high and that many of them have beer
overexploited. Protective measures in
the way OF high marginal requirements
pave had their effect both in produc-
Ing liquidation and in narrowing the
scope of trading. 1t will be difficult to
disturb the multitudes of spectators
so long as they are fortified by equities
OF the present size.
The only concrete development in the
money situation has been the rise this
week in the rates for bankers accep-
tances. These rates have moved uu
steadily since the first of the year and
now stand from quarter to half per
cent above the Federal Reserve redis-
count rate. This is an anomalous con-
6ition and one that ordinarily would
1Qreshadow an early change to a higher
IHel in the bank rate. However. ira
ditionS and old practices in banking
IS In speculation, have been going by
The board for so long that what NAV
have been probability in other years
may now be only a new way Of taking
care Of a distracting situation.
There is no denying the fact that the
new rates for acceptanees are an addi-
tional tax on business, especially that
of an international character, and that
they are one of the ways in which the
trade Of the country Is being handicap
ped by the absorption of such large
portion of liquid capital in the market
Tor securities. @
Rediscount Policy Is Problem.
The Federal Reserve is between two
1Fes. Eliminating the political phase OF
the controversy over its policies as re-
lated to speculation. and which Is an
noying, but not serious. the system
must decide very soon whether it will
adopt higher rediscount policy, and
by this is meant a per cent and not
sufficient volume of liquidation to ease
money permanently, or maintain the
status quo in per cent rate in order
70 mOllifV business interests
There are many who feel that it
would be better to have high bank
rate, and with It temporary dis
turbance in business, that to continue
with a moderate rate under which in
tlustry might 60 along fairly well, but
would always be fearing the eventual
results of transportation and the en-
ployment of more money and more time
and attention in the market than 1t
deserves
There is another side of the question
that should be concerning the Federal
Reserve authorities. It has to do with
the effect Of speculation, and therefore
Of high money rates, on the investment
market. This week bonds have steadily
declined in price until they reached an
average full point under the high of
January. Many issues are even lower
1928 and 1t is necessary to go back two
or three years to find prices comparable
TO those that have been quoted lately
on numerous standard mortgages. The
remaining Liberty bonds and the long
term United States Treasury certificates
are all considerably lower than they
were In the silent panic In securities of
this group last Summer.
Large institutions and estates have
ceased buying bonds because of the I'M
promising outlook for money, and cor
porations that still refuse to sell specu-
lative issues are having difficulty In OBJ
tanning satisfactory bids on proposed
offerings. Speculative conditions are
going to cost the United States Gov
eminent pretty penny when it ar
ranges its March refunding operations
There have been no important refund
ing loans by corporations in months
Maturing obligations that carry the ole
low rates of interest will have to be
taken care of on higher interest basis
which is in marked contrast with the
situation year ago this month on the
eve of $1,000,000,000 emission OF and
Az per cent replacement mortgages BY
railroads and public utilities.
Course of Trade Smooth.
Business moves along on an even keel
Outwardly it shows no symptom of be.
ing disturbed by the events in tbs
money market or in the market fol
stocks. Here, as In Wall Street, 1t /.
the anxiety over what may happen t.
affect temporarily or permanently it.
course that is beginning to affect new
commitments and to develop state Of
mind that might quickly be reflected
IN smaller trade volumes. The bushes;
OF the Federal Reserve is to preserve
the confidence Of the commercial worlt
while repairing. some Of the damage
done by its earlier policy of low inter.
est rates. 1t is in the position of {
navigator, who, in order to make time
has gone off his course and struck {
reef and who must in the midst o.
troubled seas repair his ship and get hi,
passengers safely ashore.
There are elements in the business
situation that may well lead to higher
prices for certain groups of securitie:
In spite OF general reactionary tend.
ency. One Of these has to do with tn,
consultations taking place in the pub.
nc utility field, which are not limiteC
In scope to the United States. They in
volve enormous transfers of propert,
from one group of owners to anothe
and readjustment in prices of stock
to mt the ideas of buyers and sellers. I
Is difficult to reconcile many of thes
prices with the advantage resulting
from mergers. They seem as extraya
CANT as those paid during the past few
years for control of certain railroad
systems where the economies of con
solidation are moderate. Whether O
not the judgment of those who ar
asking these trades is good or bad /
cannot be denied that they have grea
influence on certain sections of tn
market and that this overflows into re
lated securities.
Copper Situation Strong.
The copper metal situation also ha
Its strong features which protects COP
per stocks against the full force of at
tack on less favored shares. With cop
per metal above is cents. a price ha
now been reached that will attract sun