Evening star., 1936-01-25
INITIATION RUM0R
PERSISTS IN BOOST
|0F STOCK MARGINS
Surprise Action of Federal
Reserve Board Arouses
Wide Discussion.
EXPECTED TO BE CURB
ON SPECULATIVE BOOM
White House Denies Possible
Monetary Statement-Bonus
Possibilities Watched.
BACKGROUND

Easy margin requirements, by
Which security spectators Oere al
lowed to purchase" stocks BY 1d-
pancing Uery small percentage OF
quoted price Uas one OF major
weaknesses in market boom OF
1928-29.
Control OF market manipulation
Uas ADVOCATED in Roosevelt cam
paign for presidency; was effected
in passage OF securities and er-
change act OF 1884. By terms OF
act Federal ReserUe Board Dds au-
thorized to fir margin requirements.
Complicated formula placed this
requirement at IS per cent Of pur-
chase price in most cases, higher
in others, lo,Der in teU.
BY the Associated Press.
Eyes glued on ticker tape. officials
| watched today for the effects Of the
Federal Reserve Boards surprise
action in jamming brake on the
stock market.
Acting without advance hints, the
board announced last night 222 per
cent boost in the cash ante pur-
chaser must put up if he desires to
buy securities on margin.
The new rule, applying to most
securities, though not all. says that
beginning February l the buyer will
have to put up 55 per cent OF the
purchase price, instead of As as here
tofore.
Move Regarded as Stringent.
The move was regarded as strin.
gent, and much speculation irnme-
diately arose as to its cause. Reserve
Board members would not talk, but
one official said privately it was in
tended to curb any incipient specula-
tive boom in stocks.
Speculative markets had expert
enced touch of inflationary fever in
the last week Imitation rumors had
run through foreign exchange circles
yesterday.
The boards action came at the
close of day in which President
Roosevelt laughed away a barrage OF
questions from reporters who wanted
to know whether any gold, silver or
other monetary action were impend-
ing.
One runor, to the effect that a
monetary statement might be ex-
pected from the White House today,
brought fiat statement from presi-
Dental secretary that he knew Of no
such action in the ofhng.
Whether the imminent enactment
of the S2,491 100000 soldiers bonus
and other Government spending in
prospect had anything to do with the
Reserve Boards action was not stated
in any official quarter.
In the view of some experts. the
bonus bill carries inf1ationary poten-
/ tialities because. they say, it entails
further heavy borrowings by the Gov.
| ernment. On the other hand, con.
gressional advocates Of currency infla-
ton have criticized the bill because
it did not call for printing money to
pay the bonus.
The action taken by the board
headed by Gov Mariner S. Eccles
came as surprise to some other
officials. Opinion as to the necessity
of boosting margin requirements ap-
peared to be divided with some of.
/ ficials indicating a belief that most
recent stock activity was not un-
healthy.
| A month ago Eccles himself said
the stock situation was sound, since
most transactions were on a cash
basis. Since that time, however.
brokers loans have increased some
5000 100000. This, in the opinion of
some observers, may have contributed
| to a decision to take stitch in
time"
Existing Accounts Not Concerned.
Spokesmen for the board stressed
that the new requirements do not apply
to existing accounts, but merely to
new transactions after February !. In
the case of certain low-priced securi-
ties, the margin requirements will
remain Is per cent, as in the past.
| The boards order said ''the maxi
mum loan value of registered securi.
ties (other than exempted securitles)
shall be As per cent (instead Of SIS
per cent? of the current market value
of the security in those cases in
which this amount is greater than
the lowest market price of the Sc
curity during the prescribed base
| period"
The altered regulations become eff
| fective on the same day that a new
Federal Reserve Board, as reorganized
under the 1885 banking act, ASSUMES
control.
WALL STREET UNDISTURBED.