Evening star., 1934-02-25
BiIlion-DolIar Excess Re.
serves Are Seeking
Profitable Outlet.
EASIER POLICY SEEN
IN COMMERCIAL LOANS
Return Of Absentee Rail Bankers
Hailed With Plans for New
York Central Issue.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.


NEW YORK, February 24.-In a
week whose activities have been con-
tracted by holiday and by the severe
weather, the net results in the stock
market have been unimportant. Those
In the bond market, however. are
significant, for the average price of
listed issues has reached the highest
OF the year and many dealt in off the
exchange have touched the best levels
in several years.
The immense reservoirs of hank
credit are oyerf1owing into the invest
ment market. Second-grade bonds,
despite some reaction at the weeks
close, have advanced into the price
area occupied some months ago by
flrst-grade issues, and third-grade
mortgages have moved up into the
line held then by those rated Just
above them
There Is a constant adjustment 60
ing on between the quotations of diff
ferent groups of securities, with all
the time a leveling down of the in
come yield. Long-term prior lien rail-
ROAD bonds are on per cent basis;
equal rated public utilities sell to
return slightly more; shcrt-term rail-
road equipment issues are urgently
sought after at a 1.50 to per cent
return; State and city loans command
nigh premiums, and Government
credit IS rising. The latest 9l-day
treasury bills were taken at a much
better price than week ago.
Commercial Loans Expanding.
All this means that the bilion-dol-
lar excess reserves of the national
banks are seeking profitable invest
ment. But it still emphasizes the
cautious policy of the reserves trus-
tees In placing capital where It is
quickly available, At the same time
there Is evidence that commercial
credit is being more freely offered.
that banks are seeking good loans and
welcoming borrowers who we're put
aside in 1882 and 1888. The volume
OF such accommodation grows slowly
from month to month,
The best feature is the return OF
the absentee railroad bankers to the
held in which they are expected TO
function; namely, that of giving sup
port to their longtime railroad
clients: The o,o0o, 900 syndicate
formed this week TO underVrite tbe
New York Central convertible bond
issue breaks the ice around a situation
long tightly frozen.
The present banking attitude is
quite different from that toward other
maturitieS Of other railroad systems
winch the Government has been COM
PEELED to meet alone since the early
part OF 1882. The balance sheets and
earnings statements of some of the
applicants for credit were better then
than they are today.
Measuring the Recovery.
A year ago today we were moving
swiftly toward the collapse of the
American banking system. This is
mentioned as it provides background
ana perspective for the present situ-
atlon. 1t Is useful also in creating
a degree of optimism for those who
cannot rid themselves Of the thought
that the country is still in a bad
mess Perhaps a few statistics will
convince them that a radical change
mas occurred. If they will abandon
the idea that real prosperity is onlv
that OF the scale of 1929, they will
discover that great amount of
business is now actually being done
BY some measurements it is larger
than in 1882: by others it EQUALS
that of 1881, both periods when the
turnover was only on an average Is
70 50 per cent below the early months
BY comparison with the end of
February, 1888, we have iron and
steel production at Az per cent of
capacity against l9 per cent a wear
ago; electric power output 11.6 Der
cent higher; automobile production
gaining 200 per cent; lumber output
nearly double; car loadings showing
about 10 per cent increase: building
contracts estimated for the March
quarter at S500,O0O,O0O as against
less than s20O,OOOOOO in 1888, and
retail sales from is to IS per cent
higher.
Along with this record of expanding
trade has been a comparative change
In the commodity price situation. The
wholesale index of 784 commodities
today stands at about "a per cent of
the 1926 average. A year ago it was
60 per cent.
(Copyright, 1934)