Evening star., 1933-03-19
Rebound This Week Held Due
to Settlement of Financial
Crisis.
BANKS HAVE LESS NEED
FOR new U. S. CURRENCY
Return of Gold and Other Forms
of Money by Hoarders Strengthens
Government Credit.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

Ia SAhAsALC f. Oh chnEs
Special Dispatch to The Star
NEW YORK. March 18-This has
been an epoch-making week in the eco
nomic as we'll as in the political history
Of the country. It has witnessed the
end of the acute phase of the banking
crisis, which was followed by one Of
the most remarkable demonstrations of
confidence in the security markets on
record.
Underlying this was a complete
change in the temper of the public
toward the conditions 1t had feared
and the expression of emotions that
were the reverse of those that possessed
all communities fortnight ago.
The reopening Of the banks in the
II Federal Reserve cities on Monday
and the progressive increase in the
number of institutions obtaining their
licenses to operate has re-esta blished
what may be regarded as nearly normal
banking conditions throughout the
country. Although hundreds of banks
failed to meet the requirements of the
examiners, it is apparent that not more
than 10 per cent of the total banking
resources Of the United States have
been involved in necessary prohibition
Of the operation of institutions with a
weak capital structure.
Less Fear Of Defiation.
The return of gold and gold certifi-
Gates, along with other forms Of legal
money, is strong evidence Of respect for
the banks now open. In the New York
Federal Reserve district approximately
5000, 900, 900 in gold and gold certificates
has been redeposited. The total for
the entire country is well above $780,
000, 900. Under the circumstances the
need for the new emergency currency
has diminished, and the fears Of in
hation. growing out Of the injection of
this mass Of currency into the monetary
system, have decreased.
The rise in common stocks sufficient
to erase all Of the declines in February
and the advance in commodities Is not
specifically an inf1ationary movement.
It reflects two conditions. First. it Is
an expression of relief over the salts
factory termination Of the bank "holi-
day" and, coincident with it, the emer-
gency legislation by which the credit of
the Government will be re-established;
second, 1t gave opportunity for buying
by those who had become convinced
that both securities and commodities
were fully debated and on an invest
ment basis. but who were unwilling to
venture into either market until the
banking position had been corrected
The more adventurous had begun to
accumulate stocks and staple commod-
tiles even before the disintegration
among the banks began to appear.
Bonds Rise Significant.
It is to be observed, also, that bonds
as well as stocks became buoyant as
soon as the trading limitations in them
were lifted. This was natural sequel
to the new outlook for Government
credit The same could not be said of
corporation bonds, whose position with
respect to coverage of interest require
ments had been adversely affected by
a month of the greatest stagnation in
business that the country has expert
enced in half century. If. therefore,
imitation had begun, such bonds should
have declined and moved in a direction
opposite to that of common stocks.
They should, furthermore, have taken
this trend If there had been any grave
doubt Of the ability of the United States
to remain on the gold basis.
Allowing for the relief which the in
vestment market gained by reason Of
reconstructed banking situation. it is
apparent that, in the opinion Of In
vestors and spectators, bonds were
nearly as debated in price as common
stocks and that q certain percentage Of
the public that had been Withholding
funds was ready to place them in Sc
lected issues. Another condition which
corporation bonds refused to consider
was the rise in money and the fact that
the most recent Government financing
was at rates more favorable to the bor-
rover than those obtaining on many
high h-grade railroad and public utility
Last Major Operation.
The main tendencies in the general
situation are still more Of deflation-
ary than of an inflationary character.
They appear to reflect the current eco
nomic philosophy of the Roosevelt ad-
Certainly the closing of
a large number of banks throughout
the country debates the deposits OF
these institutions. The reduction IN
Government expenses has the same ef-
feet upon those whose salaries are low
cred in order to permit 1t. In the field
of private enterprise there have been
other conspicuous manifestations OF de-
1ation this week in numerous dividend
cuts and in the prospect Of lower in
IcICSL IhCCS dllo SOiIlC lOoc VI ~ A1SARoA
for large body Of holders of real es-
tate mortgages. These, however, may
all be regarded as the last of the major
operations required to place the credit
of the Government and that Of its in
stitutions and corporations on a sound
basis.
Having arrived at this inevitable stage
in our national economy, it is possible
to look ahead with greater confidence.
The credit of the Government has been
the improved status OF
the banks has been accepted, and the
debated condition of the security mar
kets and of staple commodities has
been recognized. There Is an abun-
dance of money with which to promote
business. The latent and repressed
buying power Of the public is known to
be of great size. This should be in
creased by the projects which the ad-
is sponsoring for the relief
of the farmers and of the unemployed
in industrial centers. The greatest aid
to recovery, however, Is the fact that,
instead of being obsessed by fear, the
great mass of the people are now con-
scious of the change that has occurred
and are recovering the spirit Of initia-
tive which they had nearly abandoned
(Copyrisht, 1933)
Unfavorable Dividend Changes. -.