Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-09-04
.RED|SCOUNT RAISE
EFFECT |SAWA|TED
Bank Reviewer Finds but
Little Change in Credit
Situation.
Special pispatch to The star.

Special Dispateh to The Star.
NEW YORK, September 4-Another
evidence of the lack of harmony among
members of the Federal Reserve Board
as well as with directors of the regional
banks In the discussion over the redis-
count policy Is contained in the Sep
tember circular of the National City
Bank of New York.
The president of this bank, Charles
2. Mitchell, is q director of the Federal
Reserve Bank OF New York. 1t was he
who early took an aggressive stand for
a 6 per cent rediscount rate, which the
Federal Reserve Board turned down re-
peatedly until August 0 when the coun-
try was surprised to read that the APP
plication for higher rate had been
granted.
Money Market Review.
In its September review of the money
market the National City Banks cir
cular states: 1T is true that earlier in
the year this bank strongly urged an
increase in the rediscount rate to 6
per cent as a measure for bringing bank
rates more nearly In line with prevail
ing open-market rates" 1t discusses
the effect Of the rate changes and also
the policy of reducing the buying price
Tor bills and concludes with the state
fectiveness Of contradictory measures
OF this sort (raising the discount on
the one hand and dropping the rate
on bills on the ether particularly in
the light of what has happened since
their adoption"
Rasing an analysis on the further
statement in the National City circular
TO the effect that thus far it must be
admitted that the tangible results of
the recent Federal Reserve rate action
nave not been impressive" a study of
tne trend OF the money market and of
FEDERAL Reserve items of acceptance.
bills discounted and purchased and
Government securities, as we'll as that
OF brokers loans, fully verifies the con-
cluSlon made by this institution.
On august the item of bills bought
IN tne open market by the Federal
reserve Banks was $79.158.OOO. The
Following week, when the new buying
rate f1rst went into effect, it Jumped
70 about $1lS.00000O. A week later II
was Sl82. $4,000 and last week Sl56,-
4'0O0. In four weeks the increase was
~, $4,000. AT the same time the Fed
erai reserve Bank sold Government Sc
cufltleS to the extent of SO 300 600
with decreases that were supposed to
ease the credit situation In the four
weeks the borrowings of the banks of
tne Federal Reserve were reduced to
S9l 100000. This may be credited tn
the new policy.
Next take the question of the effect
OF the contradictory policy of the
FEDERAL Reserve as an easing-monev
measure. and apply it to call loans.
The rate on these loans on August o
was 3 per cent. On August IA il was
z per cent and held there until August
~. For the past week the rate has
been per cent
Brokers' Loans.
Brokers' loans declined $50, 900 900 as
result OF the sweeping break in stock
prices on August 8, but since then
nave increased S265 ,000,0 with a total
increase OF $933,O00,000 from the low
point OF the Summer last June.
FINALLY, the effect of the rediscount
policy OF the Federal Reserve on the
speculation in stocks has been nil. for
atter declining an average of IS points
IN the August break. industrials have
moved up an average of over 40 points
ana ralls have advanced an average eff
nearly 20 points,
Another complication that has de-
veloped has to do with the Bank of
England situation, which is affected
by the low rate for sterling on which
New York banks today engaged over
81 100000 gold for import. This nat
urally reopened the question of whether
London will be able much longer to
continue with 512 per cent redis-
count rate while losing gold to New
York, Paris and Berlin.