Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-09
LOWER BANK RATES
TO ASSIST TRADE.
Reduction in Rediscounts Is
Expected to Act as Spur
to Industry.
BY ]. C. ROYLE.

Further reduction of the rediscount
rates of the Federal Reserve Banks OF
New York and Chicago is not to be ex-
pected for two or three months at least.
1t is likely that all the other Reserve
banks Will come to per cent and that
they, In turn, will maintain that rate
until warm weather comes. These facts
nave become apparent in Government
financial circles. 1t is felt that the re-
duction of the New York and Chicago
rate to per cent, followed by drops
TO 4 = per cent by all others except st.
Louis was sufficient to fulfill the pur-
pose OF the Federal Reserve Board. while
further reduction might again set up
conditions similar to those which eX-
isted before the stock market break.
Inc New York reduction was not I'M
expected, but it was essential that it
De not made before London reduced
ltS rate or there would have been
perfect stream of gold crossing the
ocean. It is believed here that the
lowering of the rate will act as a spur
to industry. 1t may even give a breath
or two OF oxygen to the scarcely breath
ing stock market. The revival in volume
of trading recently which brought with
1t at least one 1900, 000-share day was
not diSpleasing to the powers that be
around the Treasury Department.
Unguarded Stocks.
On the other hand, the rate now
established Is not calculated to cause
the issue Of any huge volume of stocks
1t is the attitude of the Treasury De-
partment that there are too many I'M
guarded stocks running around now. 1t
1t felt that the imitation in the stock
market brought out scores of security
issues which might better have never
been the subject of bid and asked quo
tations. 1t is pointed out that this
has been the case in previous financial
upheavals such as 1893, when real
estate was the subject of speculation:
in 1906 when the mining stock boom
was at its height in the Juror of the oil
excitement in California and Texas and
other States, and during the Florida
land excitement.
This should not be taken as indi-
eating there will be no new financing
New financing is absolutely essential if
the programs as laid out by the indus
trial railroad and utility leaders of the
country are to go through. But this
financing will be industrial, not promo
tional, in character. In other words,
the number of new corporations Is
likely to show a drop from it's peak of
1929. The existing rates are sufficiently
low to allow for this type of issues, but
not low enough to encourage speculative
financing.
1t is worthy of note that much
financing is being done privately. Such
issues are being taken up privately and
never offered to the public at all. One
authority places the volume of new
bond and note financing in January at
$740, $4,000, as compared with Sl6,-
$4,000 in new publicly offered stock
offerings.
Trend Toward Bonds.
There are indications of a trend
toward bonds as compared with stocks
In the current issues. This is specially
true in railroad and utility financing.
There is reason to believe that this
trend is welcome one so far as the
Federal Reserve Board and the Treas
ury Department are concerned. The
strength of the market for new bonds
is indicated in the drop in yield in Sc
cur1ties Of the higher grades.
The Federal Reserve Board is not
going to make rates for any of the
regional banks or exert pressure on
them, but 1t is felt that If the low rates
are not maintained it might check pro-
grams to stimulate producers to 90
ahead with plans for meeting future de-
mand which will develop when the
weather gets warm. Moreover, there is
a good deal of insistence around the
Capital that rates for the farmer be
made as correspondingly low as those
for the industrialist. The st. Louis
rate is likely to drop also as soon as
the dement's to agriculture and industry
In that section resulting from such ac-
ton are fully realized. One Treasury
omclal Is known to feel there is no
reason why the cut should not be made.
(Copyright, 1900