Evening star., 1932-03-27
Markets Reflect Uncertainty
Over New Measure to Meet
Government Deficit.
RECOVERY IN BANKING
SITUATION CONTINUES
Political Factors Still Influence
Problem of German Reparations
and War Debts.
BY CHARLES F. SPEARE.


trolling influence in markets for both
investment and speculative securities is
tne character of the tax bill to be
ADOPTED by Congress, now that it has
oeIlnltely rejected the sales tax measure.
BUSINESS had been encouraged by the
cooperation between the administration
ana leaders of the two political parties
IN their speedy promotion of legislation
that brought an end to the banking
Crisis. It Is now deeply concerned over
the revolt in Washington and the threat
that the Government budget may not
be balanced and the deficit will have
to be covered by further borrowing.
IhlS introduces a new and disturbing
FACTOR into situation that was becom-
ing more hopeful and out of which
greater confidence in the future was be-
ing created
German Strain Increases.
This comedies with further apprehen-
sion over the German credit position,
which has been steadily growing worse
until there is now daily discussion of a
possible moratorium on external debts
before the June reparations conference
conVeneS. Indications are that all of
the April l maturities will be met. The
test of Germany's capacity to pay will
come in the next three months, when a
number OF important commitments on
dollar and foreign currency bonds ma
ture.
According to the Basel report on the
Young plan, the service on German
long-term foreign currency private debts
this year amounts to between 6700O0,-
600 and 820,000,000 gold reichmarks, or
approximately $165. 100000 to S205 ,000,-
600. Roughly, one-third of this has
already been met. The problem is that
OF accommodating enough exchange at a
time of unfavorable trade balances to
cover the remainder. Until after the
French elections in May there is no
hope OF an accommodation by Euro
pean creditors of Germany. For this
reason 1t is feared that she may be COM
PEELED to ask for the postponement of
amortization contracts and the renewal
OF loans falling due this Spring. The
sentimental effect of this would be more
unsettling than the financial loss to
bond or note holders. AS the problem
IS one depending on politicians, rather
than bankers, for its solution, the i'm
mediate outlook is not encouraging.
Brighter Banking Picture.
The same favorable trends observed
IN the domestic banking situation that
nave obtained for the past month were
emphasized again this week in a sub
Stantlal reduction in the amount of
hoarded money and minimum of bank
failures. Supplementing these is an
attitude on the part of larger banks
toward commercial clients of a more
helpful nature and willingness to
grant credit where this is supported by
satisfactory statements. 1t is true how
ever that business men generally
throughout the country are diSinclined
TO make new commitments, even where
there is encouragement to borrow, as
they are faced by an unsettled market
for commodities and observe the reluc-
tance of the public to purchase goods
even at the present comparatively low
prices at wholesale or retail. Retail
sales in metropolitan districts are off
sharply. Among the department stores,
sales declines in the first half of March
were as much as 20 per cent. A sig
niflcant feature of the dividend changes
this week is the number of payments
on department store stocks that have
peen reduced or passed and the scant
net earnings shown by others that have
continued their regular distributions to
shareholders.
There has also been a disappointing
production in automobile output. Wheat
and cotton have been upset by the fears
That portion of last years crop might
be dumped on the market. Metals have
shown irregularity, though copper has
peen steady. A rise in the price Of
crude oil is one of the exceptions to
the general movement Of commodities
Colder weather stimulated the move
ment of hard and soft coal and gave
considerably more traffic to the rail-
roads and temporary overbalanced the
loss in their loadings of merchandise
and miscellaneous freight.
The February statements Of the car
riers show the benefit of the wage re-
duct1on in quite number of net in
creases and a smaller percentage of
net loss, for those roads that have so
far reported than of gross receipts The
prospect, however, for the first half of
the calandar year is not such that rail-
road arrangements are willing to con-
tinue a policy of paying dividends out
of surplus. This is illustrated in the
poStponement of dividends on North
ern Pacific capital stock this week and
the reduction in the rate on Reading
Co. common shares.
. Phase of Receding Depression.
The greatest number of the week s
! dividend changes have been among
banks, real estate mortgage companies
an- other corporations that function
along financial lines rather than in the
| field of manufacturing or distribution.
This reflects a depreciation in their Sc
curltieS more than reduction in their
profits from operations. 1t is a phase
| OF the general situation that is to be
| expected toward the end of every de-
preston. In real estate, particularly
where securities have been sold to the
| public, we are now witnessing the final
"mopping up" stage. This includes the
| placing OF such issues on an adjusted
basis, where bond holders should begin
to realize something on their invest
ment and have the satisfaction of an
| actual instead of a nominal or artifi-
| cial market for their securities. In
many large situations the speculative
second and third mortgage participants
have been eliminated. Sound manage
mentS are now in control and are meet
| ing the requirements of tenants with
| 1882 incomes and not attempting to
rent on the 1929 scale of prices This,
also, is one of the characteristic revi-
Sions of broad capital structure that
appears toward the end Of long busi-
ness decline.
A part Of the indifference by busi-
ness men to make forward commitments
is undoubtedly due to the approaching
presidential campaign. Years of ma
tional election have been traditional
periods of slow trade, as they have
involved possibilities in the way of
political changes and political policies