Evening star., 1932-05-01
DECLINE IN STOCKS
|. SENDSL|ST DOWN
TONEW Low MARK
Month Ends With Averages
Close to Levels of Last
September.
SHARP RECESSION LAID
TO TAX UNCERTAINTIES
Effects of Easy Credit Policy of
Federal Reserve May Appear
in August.
BY CHARLES F. SPEARE.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, April 30.-Fear of what
Congress will or will not do has led to
heavy liquidation this week in the best
of the listed industrial, railroad and
public utility stocks at new low prices
April is ending with the largest average
decline in the stock market since last
September.
What Congress is unwilling to do to
enforce economy in Government and
to relieve the country of anxiety over
an unbalanced budget is offsetting much
of the benefits which were promised
by the creation of the Reconstruction
Finance Corporation, the enactment of
the Glass-Steagall banking bill and the
controlled credit policy of the Federal
Reserve System.
1t is true that there have been de-
velopments during the week in the
business world that have disturbed in
vestorS, such as the omission of divi-
dends on the common and capital stock
Of the United States Steel Corporation
and the Pennsylvania Railroad These
had been anticipated. Warning had
been given of them. Stocks actually
advanced following the dividend an
nouncementS. There have also been
critical situations in connection with
the payment of number of May
railroad obligations. These have been
relieved. The statistics from the busi-
ness world have not shown improve
ment, especially in iron and steel and
automobile output though there is some
slight evidence that the low stages of
production and distribution are being
reached in a number of directions. The
mind of the merchant and manufac-
turer, the retailer, the railroad executive
and the investor was beginning to be
reconciled to these circumstances. 1t
cannot, however, be so readily ACCOM-
modated to the spectacle of Congress
that refuses to consider the credit of
the Nation as its first interest when the
stabiliZation of this credit is one of the
few remaining props under the present
capitalistic system.
Investor and Merchant Confused.
1t is no wonder that the public re-
fuses to buy stocks or to cease selling
them when, week after week, it receives
a new shock from Washington or from
a scandal like that affecting the Kreuger
properties or from collapse like that
of the insult holding companies, which
is now affecting dividend payments of
associated concerns. The lack of leader
ship in Wall Street, as well as in
Washington. in which all of the un-
favorable facts are emphasized by bank
ers and captains of industry. adds to
the confusion of mind Of the investor
and the small merchant.
Banks still refuse to take the ordi-
nary risks of business in spite of the
for fo aid In
dustry has been given them without
sacrifice of their cherished condition of
liquidity. Since the early part of Feb
ruary the Federal Reserve banks have
purchased $3.50 100000 of Government
securities thereby creating an excess of
bank reserves. Rates for money are
so low that the TreaSurys offering this
week of per cent one-year certificates
of Indebtedness was eight times over
subscribed, and the 3 per cent two
year notes covered IL times. The active
part of the easy-credit program has
been confined to the past two months,
but it is understood that the Federal
Reserve authorities do not expect to
see positive benefits from it for
another 80 days.
This would bring us to the first of
August, when there should be normally
the same kind of seasonal revival IN
trade that is looked for in March. In
the interval foreign developments are
likely to play as great part in in
ternal events in determining the pros
poets for trade and the trend of Securi-
ties markets. The elections in Ger
many last Sunday were not a helpful
influence in international affairs. Those
which take place in France tomorrow
add to the worries of statesmen who
must be responsible for what comes
from the Lausanne Preparations Con-
ference in June.
Loss In Purchasing Power.
The drain on the cash resources Of
corporations that are doing from one
half to one e-Quarter of their turnover
of a few years ago is reflected this week
in the increasing number of dividends
that were reduced or omitted In the
three years prior to 1882 the United
States Steel Corporation paid to its
l8O. 600 common stockholders the aver
age annual amount of S54 900 900. In
1882 it will distribute less than IS 5,000,-
900 to them. The Pennsylvania Rail-
road in these years paid to the 248000
holders of it's capital stock an annual
average amount of S45,000,000 What
they are likely to get in 1882 is about
81. .0OO.0 900. The loss in dividends by
railroad shareholders in the past year
approximates $275, 100000. The total
decrease in dividend payments on cor
poration and institutional stocks that
have a listed market or are actively
dealt in elsewhere is approaching ST.
500 900 ,000
When to this loss in purchasing
power is added the low buying ability
of more than 100000 unemployed and
as many more who have had their
wages or salaries reduced by from to
so per cent, the stagnant conditions in
retail trade are more readily under
stood In addition one of the most
important groups numerically is receiv
ing less than the cost of production for
what it raises on the farm and has
scarcely enough income to cover the
most limited of living costs. These are
the circumstances that compel Congress
and the lawmakers of the various States
to legislate along lines that will tighten
the burdens of the taxpayers and force
all civil servants to accept substantial
cut in their rate Of compensation. Con-
ttnued resistance by groups who argue
for special privileges will lead eventually
to a demand by taxpayers for economies
much greater than the maximum now
proposed.
Test of Reserves Policy.
The next three months will not only
bring a test of the effectiveness of the