Evening star., 1933-06-18
Growing Confidence Creates
Momentum Wiping Out
Summer LulI.
IMPROVEMENT INDICATED
BY DIVIDEND ACTIONS
Effectiveness of Industrial Control
in JOB Relief and Expansion
Awaited Next Quarter.
BY CHARLES F. SPEARE
Special Dispatch to The Star.

BY CHARLES F. SPEARE.
Special Dispatch to The Star.
NEW YORK, June 17-In this week
OF disturbing and unscheduled events
Eere and abroad it is encouraging to
note that the current of trade still flows
steady and is growing stronger, al
though weak speculative position In
the stock market has been toppled over
by the sudden Relation that dollar
depreciation, on which it had counted
SO heavily, could not go on forever and
that some time there must be "Stabili-
Zatlon, whether brought about by the
London Economic Conference or other
wise.
The temper of the public definitely
has turned to one of confidence and
expectation of better days. 1t is no
longer upset by incidents that were the
occasion Of much apprehension a short
time ago. 1t studies the daily business
records for signs of progress and finds
them In many directions.
The first half Of 1888 is ending with
a momentum in industry that should
give to the normally dull Summe-
months a greater degree of activity than
Is generally realized in that period.
Dividends Show Recovery.
Already the recovery has been sufi-
ctent to permit score or more Of in
dust-ial and public utility corporations
to resume or increase dividends or to
pay of a portion of dividends deferred
1t is true that other concerns are omit
ting payments on their stocks and that
there will be a large number of banks
and trust companies whose rates for
the June quarter will be reduced or
passed. That there is an easing up of
the pressure on all debtors Is apparent
in the smaller totals of real estate fore
closures and in the diminishing business
proving. In May the life companies
wrote more insurance than in any pre-
vous month of the year.
It Is presumed that the effectiveness
OF the industrial recovery act in reliev-
ing unemployment and in expanding
trade, will be apparent by the end of
the next quarter. So great task as it
involves cannot be begun without much
preparation, SO its practical results may
appear slow to an impatient people.
The same attitude is likely to be
taken by bank depositors. who were
hopeful that the Vandenburg feature Of
the Glass-Steagall bill would be pre-
served and their funds guaranteed al
delay proposed leaves 80 per cent of
bank deposits in their present status
and gives the stronger institutions time
to consider whether they will accept
the plan, which they distrust, or go
along with it for the sake of general
banking harmony.
Banks and Speculation.
The plan is vastly improved since
the requirement that State and non
member banks should at once enter the
Federal Reserve System, in order to
enjoy its privileges, has been with
drawn. 1t will not succeed, however,
II the door is opened wide to admit
hundreds Of banks that, even with the
recent rise in securities, have badly
impaired capital position.
No reform Is so much needed in the
opinion of this writer, as that relating
to what had become common banking
practices. These assisted speculation
not only by the banks themselves but
by their depositors. In the same manner
that credit was extended to the latter
when money was cheap and they were
not restrained from borrowing to pur-
chase stocks on margin. so the banks,
in effect, though not technically, specu-
lated in securities when they bought
too large a proportion Of long-term
bonds to their deposit liabilities and
their capital and surplus.
It has been the banks, to an even
greater degree than brokers, who have
forced customers with loans secured by
stocks to liquidate at the low points
Of the depression. This now is one of
the great tragedies Of the times. Many
issues have enjoyed generous recov-
cry and would have repaired much Of
their loss if their owners had been
able to hold on a little longer. 1t Is
the curse of speculation, but the lesson
Of 1t never effects a cure and probably
never will.
Tax Exemptions Opposed.
Eventually the present tax-exempt
feature of Government and municipal
bonds must be discarded. 1t is un-
sound from an economic standpoint and
unjust In its social aspect. The elm
nation OF an amendment in the ma
tlonal recovery act, which would have
taxed the income on securities now free,
was precaution against possible fail
IRE to cover the immediate Govern
nent loans. The decision, however. has
only been postponed. 1t has been claimed
that beer and repeal would balance
he budget. Equally helpful in pre-
,CA wing ClldG SO W lIlC
National Treasury would be the imposi-
ion Of levy on billions of securities
whose owners escape payment of $780,
VOC, 900 annually
Former Secretary of the Treasury Mel
on and his successor, Ogden Mills,
continually preached a change in the
avs that would put an end to whole
iale issues Of bonds giving tax immunity
o individuals who could and should
Jay their share of the Federal taxes.
The argument that markets for such
'onds would be affected if they were to
e made taxable is nonsense. The high
st prices ever quoted for United States
government bonds and the issues of the
Iity of New York were those of 80 years
go, long before the income tax laws
n the United States were considered.
1t obviously would be unfair to make
statute compelling a retroactive tax,
hough, as an emergency measure, there
5 the same justification for it as void
ng contracts containing the gold pay
nent clause. Not a little of the prof.
Igacy Of American cities was due to
heir ability to sell freely of their secur-
lies to investors who considered their
ak exemption primary to the credit of
he borrower. A sound municipality
an always find a satisfactory market
Or its bonds 1t need not depend on
Ak advantages to sell them.
(Copyright. 1889
Import Total Mounting.