Evening star., 1932-07-03
Democratic Convention and
Lausanne Farley Determine
Course of Prices.
REVISI0NS OF DIVIDENDS
DEPRESS MANY ISSUES
U. S. Federal Reserve Board Is
Pushing It's New Policy of
Controlled Credits.
Special Dispatch to The star.

Special Dispatch to The star.
NEW YORK, July 2.-The Democratic
convention in Chicago this week and
, the conference on reparationS at Lau-
same have been the controlling inf1u-
ences in security markets. The one has
had depressing effect, while the in
creaslng signs of compromise agree
ment between Germany, France and
Great Britain have stimulated interest
in foreign dollar bonds, advancing some
OF those most affected by the negotia-
tions to the highest figures in month.
The effect on stocks of dividends re-
duced or omitted in the latter part OF
June carried over into this weeks mar
ket and was added to by the action OF
the directors of the AtchiSon, Topeka
e. Santa Fe Railroad and the Westing-
house Electric Co. in suspending pay
ments on their junior shares. Several
corporations that had been expected to
lower payments, due to the falling OF
in their business, took the position that
the reserves they had accumulated from
the profits of good business years should
be shared with their stockholders. This
again raises the question of how far a
company should go in these times in
holding its cash and, by so doing limit
ing the profitable employment OF
capital.
The number of stockholders who are
receiving little or no return on their
investments is growing at about the
same rate as the unemployed or par
tally employed in industry. The dlvl-
dend distributions on July l were about
35 per cent less in dollars than those OF
year ago.
Few Interest Defaults.
One happily may record the fact that
there were comparatively few defaults
when the semi-annual interest payment
day came around. Those announced
were mainly of foreign obligations whose
unfavorable outlook has long been re-
flected in market quotations. AS time
goes on and no improvement in business
occurs, it will be increasingly dif1lcult
for corporations that expanded their
facilities and their fixed interest obll-
cations between 1925 and 1880. and now
have to deal with a low volume OF
production. declining prices for mer-
chandise and commodities and meager
demand for their products, to cover
their debt service Consequently there
is a growing school of opinion that some
other process than that involved In the
credit t-controlled program Of the Federal
Reserve Board will be required TO coun-
teract the forces of deflation.
Bankers speak guardedly OF the rem
edies which they consider TO De most
effective, but there is little doubt tnat
MANY of them in the past three months
have begun to question the value OF an
isolated gold policy and are now de-
batting in their minds the benefit OF
devaluation of the dollar. Nations. mu-
nicipalities and corporations cannot
continue to carry burden OF debt, that
grew without restraint in the period OF
extraordinary prosperity, when all OF
the factors that once permitted pay
ments on this debt have turned so
much against them.
Credit Policy at Work.
The Federal Reserve Board is still
confident that its purchases OF Govern
ment securities and the creation OF ex-
cess banking reserves will eventually
help in checking deflation and in slim
ulating business. With this weeks in
crease of $40. 100000 in Government
holdings. the Federal Reserve banks
have taken over 81 ,050, 900, 900 into
their portfolio in the last four months.
They now hold 10 per cent of the Gov
ernment debt. The greater portion OF
the other 90 per cent is in the pos
session of the banks and large corpo-
rations. Ours is not Government bond
owning public, although there has been
an increasing trend in this direction the
past year as the safety of many cor
poration securities has been questioned
and alarm has spread among depoSitors
of banks. The Federal Reserve au-
thorities believe that by August their
credit policy will begin to show def
mite results. 1t viii then have been
in operation six months, during which
time it has had to compete with the
heaviest outflow of gold in the countrys S
history
The public is rather skeptical Of the
value of extreme ease OF money and
superabundance of credit as a panacea
for the business ills from which the
country is suffering. 1t finds little
practical value in them, for there is no
let-up in the liquidation of bank loans
secured by stocks and bonds, tendency
which the Federal Reserve program was
expected to correct.
Seasonal Trade Factors.
The abnormally low volume Of busi
ness now being reported reflects a sea-
son that is customarily one of suspended
animation In industry. 1t is character
ized by the partial shutting down of
factories during the vacation period
This year advantage will be taken of
the limited demand to extend the period
of restricted operations. There will also
be a certain amount of unwillingness to
make commitments owing to the presi-
Dental campaign, although there is little
in TIE platform of either party to dis
turb the average business mans mind.
Copyright, 1922
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