Evening star., 1933-02-19
Michigan Bank Troubles and
Transportation Report Force
Market Lower.
LIQUIDATION IN EQUITY
LIST SEEMS THOROUGH
Dollar Weaker in Exchange Mar
ket-1ncreased Money Rates
Laid Partly to Hoarding.
BY CHARLES F. sPEARE.

| Special Dispatch to The Star
NEW YORK, February 10 The
harsh and unexpected episodes In our
national and business life this week,
with all of their implications, could
not have failed to produce a certain
amount Of liquidation in securities. The
significant fact is that they did not Gre
ate an even greater degree of uneasi-
ness among investors.
The meaning of this Is that stocks
have been more thoroughly liquidated
tnan any other group of values
On the other handathe most recent
developments subtract from what had
appeared to be encouraging symptoms.
The present average price level, being
the lowest since last October, repre-
sents the loss of confidence that has
taken place since that time, rather than
measuring a change in fundamental
conditions.
Banking News q Surprise.
The business world was unprenared
for the announcement of a State-wide
banking moratorium in Michigan that
greeted 1t Tuesday morning. It had
lor some months been assured that the
banking situation was sound and that
while there might be weaknesses in
other directions that will have to be
supported, the crisis In banking was
passed last Summer. Consequently.
there was a distinct shock in the spec
tacle OF an entire State, in which is
located one Of the largest and most
acuve cities in the country, having its
banking facilities entirely withdrawn
IN order to prevent the suspension of
one bank.
At the heart of this situation is a
Danking practice of investing large por-
lions OF the money of depositors in
those types Of paper that are not mar
ketaole and, while profitable to hold in
Ialr weather, are liability in times of
disturbed public sentiment.
1ne Mlchlgan incident recalls the in
tlmatlons repeatedly credited to the di-
rectors OF the Reconstruction Finance
corporation that no major banking
trouble would be permitted to develon'
rms might be supported by the fact
tnat, while no institution in Detroit
mas suspended, deposits of over 500
oanks and aggregating $1,250, ,0OO. 600
nave been frozen" for prescribed pc
rloo. That there Is greater reluctance
on the part of the Reconstruction Fl
nance Corporation directors to assist
weak institutions and corporations and
taat their philosophy is more toward
def1ation than imitation Is apparent
each week.
Rail Report Scanned.
This Is also one Of the outstanding
conclusions reached in the report Of
the National Transportation COMMITTEES
just published 1t goes contrary to the
opinions held in orthodox railroad and
banking circles, and especially where
the errors of judgment in financial
matters have been greatest.
Here the position of the stockholder
and OF the Junior bondholder in roads
that have abused their credit and have
built up mountain of debt in promot-
ing illegitimate developments is one
where early and substantial sacrifices
must be accepted.
Creditors must take a realistic atti-
tude and write down their losses to an
approximation of the values which the
market today places on their securities.
1t seems utterly unreasonable for the
Reconstruction Finance Corporation to
be asked to make additional railroad
loans against collateral that is itself
quoted on practically a defaulted price
basis.
Money Rates Firmer.
Some effect Of the banking disturb
ance has been noted In the foreign ex-
change market, with weakness in the
dollar such as has developed on every
occasion in the past year when there
was suggestion of financial trouble in
this country or strongly expressed senti-
ments in favor of imitation. There has
also been slight hardening in time
money rates, due to Withdrawals in be-
half nf interior ha nkc ard n
parent increase in boarding.
This tendency is exhibited in an in
crease this week of $149, 100000 in
money in circulation to a total Of S.
854,000,0 900, a figure above the previous
high for the depression, reached last
July.
Copyright, 1881