Evening star., 1932-04-17
Aggressive Federal Reserve
Policy Proves Chief Factor
in Arresting DefIation.
DISTURBING SITUATIONS
CLARIFIED DURING WEEK
Middle West Utilities and Interna-
tional Match Difficulties Had De.
pressed Markets.
BY CHARLES F. SPEARE.

NEW YORK, April 16-When Wall
Street learns the worst facts that can
be uncovered in situations that have
been confusing it and also realizes that
it has been selling securities below their
breakdown values and at bankrupt
prices, it always reverses its position,
as it did this week following receiver
ship for the International Match and
the Middle West Utilities companies
and the lowest level for the market
averages during the depression. 1t was
encouraged in this by the aggressive
policy of the Federal Reserve Board
that is working toward a controlled
credit expansion through liberal pur-
chases of Government bonds.
Sentiment in the financial districts,
therefore, plus a favorable technical
market condition have again brought
a check to a disturbing period defiation
IN spite OF the lack of improvement in
the industrial world
The complete collapse of the Krueger
Co., growing out of the criminal opera
tions of its promoter, who appears to
have been one of the worst racketeers
in financial history. and nearly an
equal percentage of loss for the owners
OF the insult holding and operating
companies, as result Of excessive
egotism and greed but from no irregu-
lar practices. represent two of the most
disturbing and perhaps the final chap
ters in corporation miSmanagementp pro-
duced during the infiationary period.
They serve to emphasize the fact that
| securities OF an involved and inter-
related group of corporations are. at the
best, of highly speculative nature and
Of kind that the investor should steer
away from at all times The holding
company was the product Of the period
| when money was abundant and the
urge to speculate general, and when
these two factors we're capitalized by
promoters of various general manage
ment and fixed trusts Great as has
been the shrinkage in the values of
foreign dollar bonds. it does not ap-
proach the ultimate losses that will be
incurred by those who put their good
money into the stocks and debentures
Of American corporations of these two
financial types.
| Long Decline Checked.
| When the market began to rally last
| Thursday it had been declining for
| five weeks, and with great rapidity in
the last fortnight. The industrial aver
age IN this time had dropped 3313 per
cent and the public utility average the
same, while the active railroad group
was off so per cent. Compared with
| the level when the market registered
| its triple bottom" in February, there
had been an average decline Of 10
| points. Liquidation came primarily
| from the banks that felt compelled to
| sell out their weakly margined GUS
| toners. In the three and one-half
months to the middle of April, bank
| loans on securities decreased over $780,
| 000, 900 while brokers' loans again were
| shrinking in spite of the fact that there
was comparatively little left in Wall
| Street houses to be salvaged. This re-
! fiected the hopeless and quite hysterical
| attitude both of the lender, who could
not endure the spectacle of daily fall
ing values, as well as the individual who
was going through a mental panic and
| listening to all sorts of wild stories about
the condition of corporations and who
imagined that a reign of anarchy in
this country was approaching
For the purpose only of directing at
tention to the low estate into which
securities of recognized merit have
fallen under the blight of a national
pessimism and the apparent desire of
the American people to go short of
their country, number of stocks may
be used as illustrations of the condition
of mind in Wall Street this week.
1
share for the first time in over 80 years
and has been lower than when the
system was about half it's present size
and gross earnings we're considerably
less than One-third of the greatly re-
duced 1891 total. Union Pacific has
gone below $50 a share in spite of the
fact that, to 1881, it had been averaging
earnings Of SIS a share per annum and
has today between s40,000.000 and s45,-
600 900 in cash and short-term Govern
ment and equipment certificates which
have been put aside for the benefit OF
shareholders Northern Pacific, With
about S20,000.0O0 cash and securities
and no important maturities that will
come due until late in this century,
is at $40 a share Pennsylvania Is at
| $l2 a share, with the prospect that
another dividend may be paid this year.
Even il it is not, the equities Whicn
rest in the old line subsidiaries OF tnls
road are enough to make this price
ridiculous.
Strong Cash Positions.
Then we have General Electric below
SIS a share. earning little to be sure,
but with $12O.000.000 in cash and Sc
| curities and paying 81 a share; General
| Motors common at S11 a share and
over 5000 900 900 of liquid assets in the
| treasury of the corporation: Standard
| on of New Jersey below $22 a share
which ought to discount fully the diff
ference in its position since the Rocke-
| fellers bid $50 a share for 1t in Novem-
| her 1929: and such outstanding public
utility operating company stocks as
| Consolidated Gas of New York, Com
monwealth Edison and Peoples Gas OF
! Chicago at or below $50 share. There
are scores of other stocks that have
| been quoted the last few days on about
, the same deprecated basis and an equal
! number of bonds whose current market
| values would only be approxlmated IN
, the event of receiverships.
| So broad has become the spread be-
tween the breakdown values of stocks
and their market quotations that wall
street has had a champion this week
| In the person of Senator Smoot OF Utah,
| Uho has helpfully pointed out how alb
| s,Ird IL is for the investor to sell issues
quoted for much less per share than
| their coverage in cash or In marketable
! securities
Easing Money Situation.
J The controlled credit policy of the
Federal Reserve Board is in the nature
| ~ an experiment to ease the money sit
nation and free bank funds for CONNER
| cial uses. 1t is also an acknowledge
ment of the increasing demand, not only
| in Congress, but among business men
| and some bankers, for direct imitation
! through the channel of bank currency.
The sound money issue has been raised
Continued on Fourth Page)