Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-23
STOCK LOANS SEEN
ASCLOG TO CREDIT
UnIiquidated Accounts, May
Interfere With Easier
Money Conditions.

Collateral loans which banks all over
the country took over from brokers
during the Stock Market crash last Fall
for the most part still unliQuidated and
may stand In the way Of continuous
easy money when the commercial de-
mand for funds Is established again.
Expressing this opinion, the j. Henry
Schroeder Banking Corporation points
out, in its contribution to the quarterly
review Of j. Henry Schroeder e. Co. Of
London, some OF the possible con-
sequences of money firmnesS this year.
One such effect might be q check to
the expected increase in business acti-
witty and in the creation Of q strong
bond market which Is regarded as
necessary to sound business recovery
AN upward swing In building acti-
witty from its present. relatively low
level" says the Schfoder firm, SIS
virtually impossible without the con-
tinuance of easy money, and the build
ing industry, Of course, Is one Of the
largest consumers OF steel. Furthermore,
In tina automobile industry the producer
dealer relationships need very careful
handling. Finally, great deal Of un-
certainty exists concerning the success
ful handling Of the surplus corps IN
the United States"
Commercial Paper Rates.
Nothing that commercial paper rates
at their present levels are little induce
ment for member banks to buy bonds
for their investment account, the Schro-
der Review says: Before money can
ease much further. the banks of the
country must be provided with surplus
funds, either through gold imports or
through open market operations of the
Federal Reserve banks. Gold imports
seem improbable as long as capital is
needed abroad in such large amounts,
and there may be some further
exports of gold in spite Of the distinct
tendency toward lower money quota
lions in markets outside Of the United
States. Perhaps the chief argument for
q continued easy money policy on the
part of the Federal Reserve banks is
the necessity for q further ease In
money rates before q real bond market
so necessary for the fulhllment of the
building program-can be created.
Furthermore, the recent weakness In
agricultural commodity prices, even
though temporary, and the need for
credit to care for crop SURPRISES in the
United States, are additional factors
which might lead to the purchase of
additional Government securities by
the Reserve banks. The Reserve banks
OO0A0 Ad0 pAUOgOONlOOO W bAACA
present holdings of Government
securities before they would be Of the
level of these holdings toward the end
Of 1927, in which year it will be re-
membered the Federal Reserve banks
pursued generous open market policy"
Long and Short Credit.
Distinguishing between q long and a
short time view of credit, the Schroeder
flrm says: while there is considerable
reason to expect comparatively easy
money conditions during 1890, the fact
must not be overlooked that the scale
Of business activity in the United
States j. steadily increasing, and that
maladjustment in the production and
distribution of goods absorbs an in
creasing proportion of the countrys
available credit. In other words, the
long time trend in money rates is
upward.
"It seems clear that while the BUSH
ness cycle of the United States which
began in 1922 is not yet finished, this
country has passed through the most
prosperous phase of that cycle. There
is, therefore, strict necessity for caution
in the fields OF both business ard
finance"