Evening star., 1931-12-27
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Continued From Fifth Page
and compelled the sale Of securities in
a market that was in no condition to
absorb them
1t was not until the National Credit
Corporation was formed in October that
confidence among bank depositors was
restored, and the number of suspensions
which reached 5l2 in that one month.
fell Off to small weekly totals While
the commercial banks were losing de-
posts the savings and postal savings
banks were gaining in them. The
restoration of deposits to their original
location will be slow process,
Country Bank Problem.
The problem Of the country bank
with respect to the employment of its
future deposits is one that ccmpels
serious attention from its management
as well as from supervising agencies.
The banks in the large cities find uses
for their funds in diversified WAYS. They
are not compelled to resort 10 the pur-
chase OF securities to increase earning
assets. Local demands for money limit
the country banks to real e:tate loans
or to corporation securities Twice
within the past decade there have been
great declines in long-term bonds The
1891 decline has been without parallel
in intensity and scope. The primary
obligation Of a bank is to its deposltors
In the past too much preference has
been given TO its stockholders In the
future wise banking policy will consider
the investment Of larger percentage
OF earning assets in short-term and
moderately fuctuating securities; less
in lOng-term issues
There also will be more Of a disposi-
ton to carry substantial portfolio in
Government securities. 1t is doubtful
II banks in general will for a long
period of years be tempted into any but
the very highest grade Of foreign dollar
obligations.
Outlook for 1882.
There have been six stages of the liqui-
oatlng process in stocks, during which
they have suffered a depreciation of
about 80 per cent and directly Influenced
the 80 per cent decline in the volume Of
business with which is associated the
90 per cent fall in commodity prices.
The first stage was in october -Novem-
Der, 1929, in the acute crisis that sig
nailed the end Of fve-year boom. The
second was in the Spring Of 1880, when
the first real intimation of prolonged
depression was borne in on the minds
CT the American banker and business
man. The third occurred in December,
1880. when confidence was deeply shat
tered by banking failures in the inte-
rior and by the eliminating episode Of
the suspension Of the Bank of the
United States in New York. The fourth
appeared in the MayJune slump this
year, which gave recognition to the
seriousness OF Germany's credit position
The fifth began at the end of August.
carried through September, along with
the Wreckage Of banks, the suspension
of gold payments by Great Britain, and.
finally, the threat to American credit
IN the heavy Withdrawals of gold from
the United States by European nations,
and was only checked in tie early part
OF october with the formation of the
National Credit Corporation.
Basis Of New Fortunes.
The sixth is that which during De-
cember has been due to a combination
OF fear and diStrust of the American
railroad financial structure and Of alarm
over GermanyS outlook. During this
last phase of depreciation markets for
stocks and bonds and for institutional
shares have exhibited less resistance
than in any of the earlier periods, and
have reached levels where courageous
and discriminating purchases should be
the basis Of future American fortunes.
During the next 80 or 80 days there
is promise of developments that will
tend to stabilize both markets for Sc
curities and for commodities. No
healthy minded person can fail to ap-
preclate the need and probabilit for
action in domestic and foreign situa-
tionS to avert what would be world
wide crisis in credit The reality of
this crisis to those who must suffer
from its consequences is now thoroughly
understood For this reason the faith
prevails that the next step will be up
ward instead of downward; forward and
not backward
Trend of Industry.
Charts describing the trend Of busi-
ness generally show perpendicular lines
in recording the volumes of industrial
output as we'll as in the distribution of
many kinds of merchandise. Most of
the seasonal gains have been we'll below
the normal average. The end OF the
year finds industrial production at a
smaller percentage than that Of De-
cember. 1880, which stood for some
time as the low point of the depression.
slight upward curves during the II
months, as in the second quarter of
1881, when production averaged per
cent above its low level in the December
quarter last year; since then a rather
steady falling of which, between May
and November, amounted to nearly Is
per cent. This was due to such inf1u-
ences as the drop from 38 per cent in
June in iron and steel production to
about 30 per cent in the mid-Autumn
season, followed by one of 25 per cent
at the holiday period: also to the de-
cline in automobile output, which, for
10 months to October 81, was off nearly
30 per cent Car loadings were down
nearly 20 per cent from a year ago.
Recessions in the production in lumber
were in line with the steady monthly
unfavorable comparisons in building
construction with last year.
Price Stability Sought.
Likewise there has been q decrease,
If only the moderate one OF AZ per
cent, In electrical production, greatest
in the central Industrial region and In
the mining centers of the Northwest
and Southwest. Until recently there
was an excess output by the producers
OF oil and of copper. The former have
learned the lesson Of overproduction
and from it have been able to develop
certain degree of price stabilization
for their products; the latter are only
now getting control of condition that
has brought copper metal from 30 to 40
per cent below prices of year ago.
In the arrangement just completed it
is expected that the worlds mines will
in the future only be yielding q month
ly tonnage approximating monthly con-
sumption.
In different directions than 4 sTi-