Evening star., 1933-08-13
BONDS EASE OFF j.
+ I. IN QUj|ET, TRADING
All Drop Except IndustriaIs,
!. but Do Not Go as Low
as Recent Dip.
BY BYRON SELLER.

Special Dispatch to The Star
NEW YORK, August 12.-Bonds
moved slowly lower this week in the
typical sort OF trading that usually
characterizes the dull dog days of Aug
gust. Although the averages did not
dip to the level of three weeks ago,
when the crash CT stocks softened
couponed securities. they were all lower,
excepting industrials.
High-grade rails, which earlier in
the week reached their highest levels
since 1881, showed the widest decline,
with second-grade carriers and public
utilities following in order named. In
view Of the featureless character of
trading even the Cuban loans were
down only slightly and their turnover
relatively light in view Of the serious
political situation there-attention
again veered to the new securities act.
Registration of 81 proposed new Sc
curity offerings. aggregating $150,800,
900 since July 81, the effective date Of
the Rayburn- Fletcher securities act,
served to direct investment banking
conversations into new security chan
nels.
interpretations of the act are as nu-
merous and diverse as its individual
proponents or opponents. This writer
processes to be able to give wcrth-
while opinion on the act or its many
implications.
Test Cases Awaited.
The consensus in the financial COM
munity seems to be that many ap-
parent contradictions and doubtful
points will be cleared up from time to
time as the Federal Trade Commission
announces rules or interprets regula-
tions in the light of changed conditions.
Meanwhile many investment bankers
prefer neither to buy nor sell new issues
until test cases clear up moot points.
Proponents of the securities act point
to the large total of new securities.
Opponents reply that many new specu-
lative securities, which under other
circumstances would be marketed IN
the United States, are being foated
In Canada or Great Britain.
Supporters and critics of the act
agree that it will restrict new issues,
change many underwriting practices,
and, in combination with the many
new stock and commodity regulations,
limit speculation. They ascribe, how
ever, widely different motives to the
act The supporters claim the act was
passed only to prevent public losses.
The opponents allege that this act and
future laws are designed to regulate
agricultural and industrial production.
Regulation of commodities is conceded
by the administration, both in laws
and public statements. The national
industrial recovery act undertakes to
regulate industries.
Already Controlled.
OF the corporations represented by
bonds or shares, railroads and utilities
aleady are controlled and regulated by
the Government. Banks are regulated
by both State and Federal Govern
ment. Hence only industrial securities
lack regulation today.
Opponents of the securities act state
that if the Government aims to control
most effectively through shutting off
the supply of new capital Then the
Government could prevent speculation
and stop industrial expansion
One Of the pressing problems in this
country concerns excess plant capacity.
Many industrial codes state or indi-
cate that member companies must not
increase capacity Some add that COM
panies cannot install machinery to re-
place existing equipment.
Assuming that industry cannot get
new capital, or can do so only with
difficulty the opponents of the new
securities act ask: Where, then, can
industry get new capital?" They an
swer that if the Government cuts off
the new capital supply from the public,
it must accept such responsibility.
Doubtless the Government would cheer
fully undertake such a task, raising
money on its own credit and relending
or reinvesting it in such industries as
can show satisfactory credentials and
which accept stringent Government
regulation.
Two Outlets Left.
The public deprived of an outlet for
its savings, through virtual prohibition
of new issues and curtailment of COM
modify and security trading, would have
to put surplus funds either in Govern
ment bonds or real estate or both. Some
investment bankers openly ask whether
the new securities act was designed to
protect the public or to rehabilitate the
real estate market. In view of the un-
fortunate experiences that many in
vestors have had with foreign loans,
their savings are not likely to flow
abroad
The more conservative commentators,
however, believe that there will be de-
veloped two separate types of security
markets. The one designed for public
offering will be closely controlled and
regulated by the Government. The