Evening star., 1933-01-01

NIldIlSSS Dc IOLIlulutcu III Ifle UdIlhuls
laws and in the methods OF administer
ing the funds which depositors turn
over to the banks. No other country
has witnessed the degree Of banking in
solvency that has occurred In the
United States, where more than 10000
banks have confessed insolvency In q
little more than one decade
While 1t Is true that much smaller
proportion Of banks within the Federal
Reserve System have failed than those
outside. 1t is fact that Federal Reserve
System protection to depositors In q
crisis has not met expectations. It was
pointed out by President Hoover in his
last message to Congress that Great
Britain and Canada have had no bank
ing failures Of consequence during the
period when nearly 5000 banks closed
in the United States, although they
were under stresses no less violent than
our own.
Consequently. 1t Is proper to consider
reforms in the banking system and
probably adopt the branch banking idea,
which has been found to operate su3-
cessfully elsewhere. Unless the bankers
themselves take the lead In a recon-
struction of the banking system and
waive their personal prejudices and per-
quisites, they will face rebellious pub
lie which will demand through It's rep
resentatives In Congress and in State
Legislatures kind OF banking that they
very we'll may wish to avoid.
Glut in Money Market.
The money situation in the second
half OF the year has become even more
abnormal than in the first six months.
It is now possible to borrow through
the first quarter of 1888 at ! of l per
cent. This compares with from per
cent to 3ia per cent for the same ma
turtles year ago II the borrower
wishes to obtain accommodations up to
the end of next June he may do so at
less than l per cent.
The l per cent official "call money
rate is entirely nominal, for there is
no demand from Wall street for such
money, with business on the exchange
running in small daily volume and with
brokers complaining that they have no
use for their capital. Brokers loans are
5 per cent of the total OF such loans
in September 1929.
The rediscount rate OF the Federal
Reserve Bank Of New York, which was
reduced to az per cent at the end OF
June, stands at that figure today, as
does that Of the Federal Reserve Bank
OF Chicago. The remaining 10 districts
are still quoting the rate of 81 per
cent, which obtained in 1881.
State Of Industry and Trade.
It is estimated that our national in
come this year will be something less
than $4,000, ,000, 900, or the Smallest
amount since 1914 It is approximately
IS per cent under that In 1929. This
includes the returns from agriculture,
industry and transportation, as we'll as
wages and compensation for services.
For instance, the drop in the value OF
farm products this year is said to have
decreased the income of producers by
rs per cent after they had experienced
a drop Of over 40 per cent in their re-
turns In 1881. Since the high peak OF
pay rolls In the first half Of 1929 there
has been decline Of 60 per cent in the
dollar amount Of this item, which in
cludes a rs per cent decrease this wear.
The pay roll diminished much more
rapidly than the numbers of unem-
ployed, rejecting not only lower
schedule OF pay but shorter work
week.
Taking what economists call the "un-
earned increment" we find that 1t has
snrunk rapidly during the year. The
nigh peak Of dividends on stocks in the
last three years was reached in March,
1880. The low point wss touched on
December l this year. The decrease
amounts to an average Of so per cent.
AS q conservative estimate it NAV be
said that, since 1929, the reduction In
dividend payments on stocks represents
the sum Of s2,500, ,ooo. 900.
Realty Defaults Heavy.
II Is believed there are at least S.
oOo,oOO,000 real estate mortgage bonds
In oefauit and that most of these de-
laultS nave occurred since 1929. The
average rate of interest paid on such
bonds was B "a per cent. There are ap-
proximately sl,T25, 100000 OF foreign
dollar bonds, mostly those Of South
American and Central Europe, that have
ceased paying interest. The public
utility defaults this year, owing to the
collapse OF the insult pyramid, run into
large figures.
The indicated business failures are s
to 10 per cent greater in number than
IN 1881. For the three years Of the
depression, the business mortality record
indicates that about $4,000 retail and
wholesale firms. manufacturers, banks
and jobbers have suspended operations,
involving liabilities Of nearly $1,000
100000.
It is obvious that all Of this plays an
important part in the dificulty of re-
viving business, owing to the restricted
purchasing power of the corporation or
individual, and that 1t has an intimate
bearing on the problems Of the Gov
ernment, as well as of States and mu-
inequalities respecting their finances.
Outlook for 1888.
The conflicts in the first half of 1888
will be between those who honestly be-
lieve that it is the best policy to carry
along institutions and corporations on
Government credit and to recognize old
values as real values, and the other
body of opinion that insists on accept
ing conditions as they are and dealing
with them accordingly Sentiment has
been steadily veering around tosthe lat
ter point of view, but how much fur
ther public opinion will support it re-
mains to be seen.
AS in all depressions, there are condi-
tions controlling results that are new
and present unsolved problems. In the
present instance the greatest OF these
are overproduction Of commodities anc
what appears to be permanent surplus
OF skilled labor. On the success thai
the new administration at washington
may have in dealing with the involved
economic and social conditions OF the
day will the degree of recovery nex'
year largely depend.
Copyright, 1880
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