Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-06
INCREASE IN STOCK
LOANS IS PROBLEM
Bankers Disturbed Over Mounting
Total, Though Security
Prices Shrink.
Special Dispatch to The Star.


NEW YORK, october 5.-The en-
phasis placed this week by the retiring
president of the American Bankers AS
ISOLATION on the volume of loans from
the banks secured by collateral and the
sharp criticism of the British chan
cellor Of the exchequer Of the specula-
ton In the American market, which has
disturbed money rates in Europe and
has probably been the most important
factor In causing the Bank of England
to raise its rediscount rate to 6l2 per
cent have centered attention on the
money situation In its relation to stocks
to q greater extent than at any time
this year.
The rejoinder Of Wall Street to the
financial head Of the British Labor
party is that he might well look to
speculative conditions at home, for in the
HAIRY collapse, involving liabilities es-
timated at 5000, 900, 900, there has been
uncovered a greater 'orgy Of specula-
ton" than in any part OF the American
market. At no time since the bull
movement in stocks began here in 1924
has there been an outcropping OF con-
ditions due to generalization of Ameri-
can securities comparable to that which
sent group Of English promoters to
jail last month.
This does not, however, change the
fact that bankers and business men are
now mote disturbed over the stock
market situation than they have been
in months, with the size of brokers
loans the factor having most to do with
their anxiety. The steady increase in
these loans during a week or 10 days
Of the heaviest shrinkage in investment
and speculative stocks since last March
Is unSettling, because so out of line with
the logical trend Of the times.
In some quarters there Is strong de-
mand for relief from this situation by
the Federal Reserve. 1t takes the form
of q recommendation for a reduction of
the rediScount rate as q means Of slim
ulating business and therefore removing
one of the causes of the first phase of
the present selling-namely. indications
of a recession in some of the important
industries. However. the market has
been weakest lately when money rates
have been cheapest. Some of the low
est prices conceded with the lowest re-
newal rate for money in weeks.
There is little prospect of the Federal
Reserve reducing its rediscount rate
It's policy Is to ease the market at this
season of the year. when commercial
demands are at their peak, by enlarg-
it has been doing steadily since the
middle of August, with the purchases
Of bills steadily increasing, though at
the same time sales of Government Sc
curitieS have been continuing.
The Federal Reserve has clearly lost
control of the loan situation and can
not regain 1t until the policy Of corpo-
rations Of issuing stock to public that
Is stock-minded and putting the pro-
ceeds out on call, and thereby expanding
the loan item, has been halted.
This movement will hA affarfnA an1v
as the public ceases to buy new stocks
as it sees opportunities for quick profits
In them steadily disappear. It has al
ready had a bitter experience Of this
-"rt in connection with the shares of
nurocrou trading corporations that
were placed on large scale in August
and in September.