Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-18
STOCK PRICE GAIN
LAID TO IMPROVED
BUSINESS OUTLOOK
Equities Advance During the
Week, Despite Drop in
Bond Values.
BROKER LOANS REVEAL
LIQUIDATED CONDITION
Downward Revision in Dividend
Rates Shows Signs of Near
ing End.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, October 1.-THE stock
market this week has been able to di-
vorce itself somewhat from the depress-
ing influence of the bond list, though
this has mainly been in the group of
railroad shares. Each day has brought
its rumors that something was to be
done to lift the weight from the rail-
road bond market and to provide an
agency to which the carrier. with an
! approaching maturity and little cash
might go and obtain the funds neceS-
sary to carry over an emergency period
There have also been Eour-to-hour re-
ports that the Interstate Commerce
Commission was about to hand down
its decision in the Is per cent freight
rate case and that voluntary wage re-
auctions had been promised by the
railroad brotherhoods in the event that
the rate decision proved unfavorable
The public has finally become rather
fatigued and impatient over all that
might or may be projected to save
| the situation. In the absence OF con-
crete evidence, 1t has either withheld
its money from the markets though
! firmly believing in the bargain char
acter OF present prices. or else has con-
tinued turning its securities into cash.
Funds Lying Idle.
1t Is recognized that at least half of
the troubles of the banks this year
have been due to depreciation in their
securities. This is the common ex-
PLANTATION that follows bank suspensions
1t would seem reasonable. therefore. to
protect the banks by giving protection
to the bond market. Inasmuch as
there is more ready cash in the banks
today than ever in their history, why
should not there be the direct employ
ment of idle funds in the sterilization
Of all good quality corporation mort
cages, to say nothing of the obliga-
tons Of the United States? The banks
readily responded to an appeal for sub
scriptions to enormous German and
British credits several months ago and
are not to be blamed for this. 1t was
part of their job to help situations In
which this country is intimately as
ISOLATED. It is now an equal obliga-
ton on their part to look after affairs
at home and to mobilize credits In de-
Tense of domestic markets. One is
tempted at times to subscribe to the
cynical philosophy Of those who main
tain that out Of the misfortunes of the
many the comparative few are now
able to profit.
The Federal Reserve could not be ex-
pected to go on taking the loss Of its gold
at the present proportions without
making 1t less profitable to those who
were withdrawing. Already two-thirds
Of the amount which has been claimed
could be exported without changing our
credit status has left the United States
The dollar is at discount abroad and
apparently in low repute in such excep-
tional countries as Poland Even the
F'renchman. who has been boarding
Ave- -in ) t., 60,
francs. The reaction in Europe to our
banking relief scheme has been unfa-
vorable chiefly because of the expert
ence with initiation, which the foreigner
feels must come out of the new credit
plan. The most striking phenomenon
in international finance this month has
been the manner in which those Euro
peans who have debaSed themselves be-
fore the dollar for the past year now
rise up to abuse and discount it.
Problem for Treasury.
The advance in the rediscount rate
to 81. per cent has imposed a serious
problem in Treasury financing on Sec
rotary Mellon and his advisers. Gone
are the days when an issue Of 3ls per
cent notes could quickly sell at a pre-
MUM of 124 points and a per cent
be covered, even though by a small
margin, and 90-day bills be put out on
less than a q of l per cent basis to
meet an Unsuitable demand from those
who are now selling the 31s and per
cents. If there is cooperation between
the Federal Reserve Board and the
Treasury Department it has not been
convincingly proved in the promulga-
ton of the discount policy that has
created the greatest decentralization in
Government bonds witnessed since the
public liquidation of Liberties in 1920.
The liquidated condition of the stock
market, further indicated this week in
the drop in brokers' loans below ST.
600 900 900. has permitted it to hold
steady in the face of unfavorable cor
poration reports for the December quar-
ter and reductions in the dividends of
such companies as Pullman and West
ern Union. There has been slowing
up in the number of important divi-
dends lowered or omitted. This may be
temporary or suggest that the average
corporation has about adjusted itself
| to its decline in gross earnings and, on
more efficient basis Of operations,
feels 1t can maintain the current divi-
sion of profit among shareholders.
Col. Leonard P. Ayres points out this
| week LIldG AL CliS
past two years have declined more
rapidly than dividends have been re-
duced There is a strong disposition
among corporation managers to main
tain dividend payments at moderate
| rates, rather than pass them, so long
as this does not weaken the position
of senior securities. The tremendous
increase in the number of stock own
ers in the past few years imposes quite
a different responsibility on corpora
lions than those facing them in the
panic of 1921.
Clearer Skies Abroad.
Developments abroad this week have
been more favorable. The efforts al
| Geneva to check the war spirit ir
Japan have been successful, thereby re-
| lieving an international situation al
| ready weighed down with the crisis in
| Central Europe and in Great Britain
| The Bruening government in Berlin
has once more obtained vote of con-
| fidence and is in position to deal
! with its chief internal troubles and to
show a good face in its relations with
France. Many persons have been sur
prised to see the record of German
foreign trade in September. which in
cludes the highest credit balance since
the war, raising the total excess of ex-
ports over imports for the nine months
to $454 100000. At this rate there is
no reason why Germany cannot con-
tinue to find the exchange for paying
her dollar obligations, which she has