Evening star., 1935-11-03
HIGHER CALL RATE
REGARDED ASSIGN
OF BETTER TIMES
Growing Demand for Money
Indicated-IdIe Funds
Continue to Climb.
BOARD MOVE TO CURB
HUGE EXCESS is TALKED
Opportunity Seen to Refute
Charge That Policies Are Guided
by Political Expediency.
BY CHARLES F. SPEARE.
Special Dispatch to The Star,

Special Dispatch to The Star.
NEW YORK, November 2.-What
may later prove to be the most sig
nificant event this week in the domes-
tic money market was the advance in
the call loaning rate to "a of per
cent. This indicates a tendency. It
does not, however, suggest any reduc-
ton in the available supplies Of
loanable capital.
1t Is not likely to be followed by a
change in the discount rate of the
Federal Reserve banks. 1t may senti-
mentally affect long-term paper. It
has not produced any reaction in
high-grade bonds. In all, it is an
augury of better business, for unless
there had been visible growing de-
mand for money, both for investment
and speculative purposes, the institu-
tions that set the new quotation on
loans would not have had the temerity
to propose it.
The new money rate comedies with
the steady inflow Of gold from Europe
and the piling up Of excess bank re-
serves. Apparently there is some
thought in the minds of bankers that
action may soon be taken by the gov
ernors Of the Federal Reserve Board
to reduce the size of the mountain
of. unemployed credit in order to an
ticipate and check the tendency
toward imitation.
Bankers Hear Warning.
At the investment bankers conven-
tion Tuesday, Benjamin M. Anderson,
jr.. economist, pointed to the fact that
between 1922 and 1929 member bank
reserves rose s600,000,000 and that
this was sufficient to support the great
credit expansion of that period. Now.
in two years, excess reserves have
risen $4,000 900 900. Mr.. Anderson's
recommendation is that a brake be
placed on this tendency by the sale Of
Government securities, Of which the
Federal Reserve System holds approx
imately $2,500 ,000, 900. and by putting
into practice that phase Of the bank
ing act which calls for higher reserve
requirements by the banks when they
seem to be approaching the zone Of
imitation danger.
There Is an opportunity here for
the governors of the Federal Reserve
Board to meet the charge of the rad
icals In the banking world that their
policies will always be determined by
political expediency. Many persons
feel that it is q fair-weather instru-
ment.
Whether it is or is not will be de-
termined by its earliest pronounce
ments after its organization next year.
These must obviously have some
relation to the financial operations Of
the Government in connection with
its relief program. With resistance
growing to the mounting deficit in
the national budget, it will be more
difficult. henceforth, to obtain the Co.
operation of the banks in subscribing
to new long-term issues.
Gold Inflow Diminishing.
Moderate amounts of gold have been
engaged for import this week from
France and from England. But the
flight of capital from Europe is dimin-
ishing as the tension over the Italo-
Ethiopian situation and its collateral
effects lessons. The latest statement
Of the Bank of Italy shows the sever
ity of wars costs on the economy of
Italy. whose gold reserves have de-
clined $l52, 100000 in the last five
months.
Business activity in the United
States Is not proceeding at the pace OF
September or Of that during the first
half Of october. 1t Is still, however
moving in the direction it assumed
early in the Summer. In a number OF
industries, as well as in the instance
of railroad car loadings, 1t Is expected
to reach its peak for the year this
month. Iron and steel production ap-
pears to be stabilized around So per
cent Of capacity. The September
quarter gave steel manufacturers
enough business to permit them To
show encouraging comparisons in in
come and in dividends with q year
ago.
Car loadings are at the highest level
OF the year and the greatest In amount
in four years. From now on they are
likely to taper of, as movements of
grain, iron ore, lumber and live stock
diminish under seasonal contraction.
The September rail statements OF
earnings reported this week indicate q
net income Of $4,000, 900, compared
with a deficit in September, 1894, OF
$4,000, 900.
Farmers Income Rising.
Farm income continues to rise.
Politically this Is related to the "corn-
hog" vote this week. From an eco
nomic standpoint it is reflected in the
reduction that has occurred in rates
Of interest on farm mortgages. Some
OF the best are now eagerly sought
after by the life insurance companies
at 4 and ~ per cent. Incidentally,
these same institutions recently have
been the largest buyers of New York
City mortgages since 1929 at rates be-
tween and AZ per cent. Some short
paper has been taken at 3k per cent.
The industrial recovery is indicated
In the figure Of 350,000 workers who
returned to manufacturing and retail
trades in September. On the other
hand, the date when 3,500,000 unem-
ployed were to be absorbed by Federal
projects. has passed. Still the roll OF
the idle Is q huge one.
The month Of November begins with
the level Of stocks 40 per cent above
that of last March. In November,
1884, the average moved up over s
points. This was at the beginning OF
q bull movement that has had only
slight interruption In the last year