Evening star., 1932-02-14
Sudden Squirt in Securities
and Commodities Follows
Government Aid Plan.
INDUSTRIAL OPERATIONS
REVEAL LITTLE CHANGE
Business World Is Awaiting Re.
suits From Banking Legislation
Pending Before Congress.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

NEW YORK, February 13-Since the
middle of last June there have beer
five incidents or developments that
have had pronounced effect on secur.
tiles and, in each case, have helped te
revive dropping prices
The flrSt was announcement of the
1-year moratorium. This was respon-
slble in large part for the average rise
in stocks during June of about 20 points
The second was the formation in Octo-
ber OF the National Credit Corporation
whose anticipated aid to banks pro.
duced another 20-point rally
In January the Reconstruction Fl
| nance Corporation bill was passed, with
favorable reaction to this in the form
| of a l5-point average rise, although
some part of it should be credited tc
the fourth constructive event-namely
the reduction in railway wages Just
before the Lincolns birthday holiday
this week announcement was made iI
Washington of proposed new banking
legislation to remedy temporary fault.
in the machinery for distributing bank
ing credits. This stopped the decline
in stocks and bonds and out of it ha.
come the strongest recovery Of the
year.
Relief Given Banks
Each one of these developments ha.
produced some permanent good, al.
though none has measured up to eX.
pectations. The frequency with which
emergency measures have been pro.
noted has had the natural effect Of
creating some skepticism as to theil
nSar
a complete collapse of credit in Europe
The National Credit Corporation, while
functioning slowly and cumbersomely
has. especially in the past two months
relieved many dangerous banking sit.
uations. The psychological effect Of the
Reconstruction Corporation has beer
that of promoting feeling Of hope a.
against the utter lack of confidence
that prevailed prior to its formation
Possibly the fact that the Union
Pacific directors this week felt justi-
fed in maintaining their regular com.
mon stock dividend may be regarded
as evidence of assurance that this
dividend can be earned with the lower
operating costs obtained through the
wage cut Politically it does not looh
like a good move.
1t remains to be seen how far the
proposed and suddenly formulated
banking legislation will assist in correct.
ing conditions that now confront mem.
Der institutions and will balance the
effects of additional fears on the part
of European financiers that this coun-
try is definitely entering a period oi
initiation.
More Aggressive Policy.
One of the most important changes
is the attitude of the leaders in Wash
lngton and in the banking world tow
ard pressing problems The do-noth-
ing policy. which obtained throughout
the greater part of 1881, has been re-
placed by one of aggressiveness and a
co-ordinated political and financial pro-
gram to attack every weak point in the
business and banking situation and
surround it with the necessary pro-
lection. There is very frank depart
ure in both the Treasury and Fedora
Reserve philosophy of banking from
that which has recently prevailed While
1t IS admittedly IN the direction of mod
crate and temporary initiation. this is
preferable to an endless period of de.
fatlon and proceeds on the same prin-
clpie adopted where pathological con-
dltlons are at isSue-namely, that OF
Ob'iiS a oOi dllu ueDluUdUeO Dd-
tlent by gradually putting him to work
In this case it is credit and currency
that need revitalizing. From a statis-
tlcal standpoint the latter appears to
pc abundant. The amount of Federal
Reserve notes in circulation in the past
year has increased about 81 200, 900 900
or 30 per cent. But credit is more
dlfflcult to obtain today than it was
last February. 1t is not being employed
because its posSeSSors withhold it from
employment. The December statement
OF the New York City banks indicated
that they had about a so per cent
cover for deposits. Hoarding is not BY
any means confined to individuals
Probably the worst hoarders today are
the banks. 1t is as necessary that the
banks release credit for legitimate busi-
ness purposes as that their former de.
posltors return currency from its hidins
places. The method by which credit i.
to be enlarged under the revised bank.
ing regulations is by permitting the re.
discounting of paper not now eligible
Tor that purpose. According to the
language OF the White House state
ment, the bill will improve the facili.
ties OF access of the member banks tc
the Reserve banks, by providing fol
eral Reserve banks to member banks
that have no further eligible or accept.
able paper, upon the security of sounC
assets not now technically eligible fol
discount
This opens the door to processes tr
credit expansion that have been fought
against by the trainers of the Federal
Reserve act, but which are entirely
reasonable and legitimate in an emer.
gency and are not to extend for over
period of one year. It annuls the
much feared features of the Glass bill
The confusing question in the layman's
mind is why the Reconstruction Corpo-
ration, which was primarily set UP to
carry the banks through their crisis
has SO soon found it necessary to give
over this part of its work to another
agency.
France Withdraws Gold.
ter that cannot be overlooked. 1t has
to do with the steady withdrawal OF
gold by France and the prospect that
during the next six or nine months
she will repatriate practically all OF
the yellow metal now held here to her
credit. Emphasis is placed on the in
crease in the amount of free gold
permitted under the new act and on
putting the Federal Reserve System in
strong position while this exodus is
taking place It is to be remembered
that France has a national election In
April and that every move she now
makes openly, either political or finan-
cial, has a bearing on the issues in
volved in this election. When it Is
over there Is likely to be q franker and