Evening star., 1932-07-03
Effort to End Depression
Has Begun to Show Results

dSO. WIen HaDlUIleS were SZoz.UUU, ,UUU
Both in the number of concerns affected
and in the size of their commitments
the record Is one of progressive and
cumulative effect of the influences above
described
Shrinkage in Dividends.
Another consequence. though not Sc
vital a one, is shown in the records OF
dividends reduced or omitted this yeaf
According to Standard Statistics there
were 1867 unfavorable dividend an
nouncements in the January-May pc
riod compared with 837 in the corre-
spending months of 1881 and sharp
increase in the ratio of dividends passed
to dividends lowered; also a decided
drop in those on which favorable action
had been taken. 1t is estimated that
81 800 600 900 is a conservative calcula-
ton of the Shrinkage in dividend pay
ments this year to holders OF corpora
ton and institutional stocks compared
with what they received on these sama
securities in 1890. OF this amount
over $300,000.000 represents deductions
from the pay roll to holders of the
stocks of 40 different railroads, of which
no fewer than 35 have passed dividends
on all classes of shares.
The copper share group is now on a
pon-dividend basis. Only few CT the
iron and steel companies continue to
pay dividends on their senior issues
Nominal dividends are being paid by
the three strongest automobile compa-
nies on their common CT capital stocks
a fourth is distributing a fair amount
on its capital and a fifth is maintaining
! the dividend on its preferred. Nearly
all of the large motion picture compa-
R,To ffyarv = h. lar
gregations of capital in the industrial
world, have suspended dividend pay
ments. Others are in receivership or
! threatened with bankruptcy proceed
ings. Communications companies have
/ experienced persistent decline in their
earnings. with three of them no longer
/ able to show profits that would justify
dividend payments.
The industries that have stood up
best during the depression are these
dealing in foodStuffs and tobacco and
! the chain grocery and drug stores.
/ Their record for sustained dividend
/ payments is sharply in contrast with all
I others in their field.
Confidence First Essential.
The immediate problem is that of re-
storing some portion of their previous
earning power to hundreds of corpora
tions that have been impoverished by
three lean years of business. How ca l
it be done and how long will it take to
do it?
The first essential is to repair the
shattered confidence of the public.
This may be effected more quickly by C
stabilization and then a slow improve
ment in security prices than in any
other way, for it is an undisputed fact
that the daily visibility of sagging que
tations has had evil consequences
throughout the banking and business
wcrld. 1t has made towards of those
who worship before the altars of Wall
Street.
| 1t may be said that securities can
not recover until the basic facts in
our national economy improve. This
is not true Stocks invariably discount
in advance pending changes in indus
| try Today industry, more than ever
before, sets its pace to that of secu-
rites.
In the restoration of this confidence
what may be termed the official side
of Wall Street has an important part
to play. The unwillingnesS of the pub
! lie to buy securities during the past
six months is not altogether due to
lack of funds or to a disregard for
intrinsic values In no small measure
It results from a suspicion that 1t has
! not been fairly dealt with by Wall
/ Street in the last few years Proof of
1 this is ample in the Kreuger scandal,
in the collapse of the insult holding
company securities, in the evidence be-
! fore the Senate committee of rigging
of markets by individuals and institu-
tions who capitalized their knowledge
~ fIaa "a !
made investors the victims of their
greed. and by an obvious campaign Of
short selling during the agonizing Pc
riod Of market liquidation.
If the public has come to the con-
clusion that the New York Stock Ex-
change has been more concerned over
its membership than in protecting the
/ investing public. the fault is the ex-
changes own, for it has shown COM
paratively little disposition to institute
/ reforms except when public opinion has
been aroused to an extent that abuses
had to be corrected. It will take years
OF exceptionally good behavior for Wall
/ Street to regain the confidence that it
possessed prior to 1880.
Attitude of Banks.
Another process required in order to
re-establish confidence is a more ac-
tive functioning of banking facilities.
The burden of proof today Is against
the banks in the controversy over their
attitude toward borrowers. They con-
tinue to maintain high ratios of re-
serves in cash. Government securities
and in short-term corporation notes.
There are many instances where this
is good business judgment and is de-
manded in the interests of depositors.
1t has, however, for the past nine
months been carried to an extreme.
There will be no revival in industry
until more liberal program is adopted.
In order to encourage this, without
affecting the credit position of the
| banks, the Federal Reserve Board in
augurated a plan of buying Govern
ment securities, and has made pur-
chases in the past three months of
$950.000, 900, created as much as $500. =
O00. 900 of excess reserves without pro-
ducing corresponding effect on the
attitude of its members. They appear
to be waiting for that day when each
OF the unfayorable domestic or inter-
national factors in the situation is sat
isfactorily adjusted and when the risk
of lending money will be at a mini
mum.
The spread of confidence that would
follow improved markets for securities
and more generous accommodation
by bankers to the requirements of bor-
rowers would gradually lead, first. to a
release of funds that have been held
back because of fear and have not
been normally employed in the buyinp
of necessities. and. second. to an ex-
pansion in industry whose sequel would
be more employment larger pay rolls,
a greater purchasing power and an in
creasipg ability to meet obligations now
in state of suspense.
The fundamentals of the business sit
uation are sound with respect to the
| volume OF goods in the hands of pro-
| ducers and distributors. There are
scarcity situations in many directions.
| The average annual wear and tear re-
quirements of the country have not