Evening star., 1931-12-27
Bearish Operations Have Lit
tie Effect on Prices, but
Losses Continue.
BONDS SHOW STRENGTH
DESPITE PROFIT SALES
Political Factors Are Exerting Un-
favorable Influence on All
Securities.
Special Dispatch to The Star.

special Dispatch to The Star.
NEW YORK, December 26.-The
Christmas holiday this week has limited
the size of security markets and rem
dered beariSh movements in stocks of
little consequence relative to their near
by trend. On the other hand, there
has been good show Of strength In
bonds. which recovered nearly half of
the average loss since December
before profit taking and a seasonal in
difference checked the rise. This in
terruption in the business OF Wall Street
may be SalutaTy in bringing TO bear on
the situation points Of view that are
not influenced by day-to-day f1uctua-
tionS in prices.
The notable incidents have been of
political nature. affecting national and
international policies. Congress has ad-
journed for fortnight after a heated
discussion on the moratorium bill,
finally aCqueSCed in by large majorities
With this out of the way, it is felt
that the serious business of formulating
laws that will go to the root of the
credit troubles and help to alleviate
them may get better audience
Testimony as to the needs of the
railroads and the banks in the present
emergency fully proves the urgency for
a company set up on the lines Of the
Reconstruction Finance Corporation.
Without such assistance as this might
render 1t will be impossible for many
of the carriers to meet their maturing
obligations in the first half of 1882
Given the help which such an agency
can provide, plus an addition to net op-
Grating income from the higher freight
rates and the anticipated lower wage
scale, it is safe to assume that threat
ened receivershipS may be avoided
CEc yt9
port has been offered this week to rail-
road obligations that had approximated
bankruptcy quotations.
Trade Reports Mixed.
Retail trade this week in different
parts Of the country has been surpriS-
ingly good in view of the strict economy
being practiced by nearly every group of
wage earnerS, as we'll as by those who
live on their incomes and in spite of
unreasonable weather in the large met
ropolitan centers. Wholesale trade,
however, has been unsatisfactory. In
the iron and steel industry the average
rate OF production is the lowest of the
year. The coming week will be one
given up almost entirely in business to
preparing statements of earnings and of
balance sheets and checking inven-
tories. This will not be a pleasant Job
Ava C+AS AlloJOAAVy Va GiLOoC PAL tlSlp
in it,
1t has become an obSeSsion among
bankers that they must, on December
% or 80 of this year, show high
ratio Of cash and Government Secur-
tiles to their liabilities in the form of
deposits. Consequently they have been
reducing substantial portions of their
investment portfolios into money and
compelling the sale in a demoralized
market Of bonds Of good quality that
are carried in collateral loans. One
might ask, what price liquidity? Is it
of greater value to the mass of bank
depositors that the ratio of cash and
Government securities to deposits be 40
to so per cent Gn extreme cases these
run from so to rs per cent?, or that
the earning assets of individual banks
or of banks collectively be held and
protected through an abnormal situa-
ton, and that this same protection be
given to legitimate and long-tested bor-
roWers?
Going further, the policy of establish
Ing high cash ratios carries with it
inhibitions on business. in that the
management of an institution that has
the cash complex will not listen to
any appeal for loans to keep sound
business enterprises going.
Hopeful Signs for 1882.
There is a phase of this banking
policy that is presented as partial justi-
fication for it. 1t applies more to the
larger than to the smaller banks and
among those that have the resources
to permit them this year to set up entries
in their statements exhibiting the
write offs" on their securities. To
counterbalance the effect of this, they
are anxious to display strong liquid
position. In some cases it will be the
practice of banks to carry their securi- |
ties at the market at the end of the
year. In most instances these will be
set up on the basis of cost or of the /
write downs" to the levels compelled |
by the recent rulings of the Federal |
Reserve Board and the national and
State bank examiners.
When this has all been done and the |
necessity for it is over it is believed |
there will be freeing Of credit that
will stimulate markets for investments |
and open up industrial channels that |
have long been closed. This is one of |
the hopeful signs to which the country |
may look after the turn of the year.
(Copyright, 1891 |