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Volume 135 New York, Saturday, July 23 1932

7 he Financial Situation

DISCUSSION this week in financial circles has

centered chiefly on the legislation enacted byCongress at its closing session on Saturday night oflast week, and more particularly the $2,122,000,000Unemployment Relief Bill and the Bill for the crea-tion of a system of Federal Home loan banks. Presi-dent Hoover in a statement issued by him on Sundaysaying he expected to sign the Relief bill (which hedid on Thursday of this week) inasmuch as most ofthe features to which he objected had been eliminat-ed from the bill, furnished a pretty good outline ofthe character of that measure. He pointed out thatthe bill contained three major features, as follows:"FirstThrough provision of $300,000,000 of temp-

orary loans by the Reconstruction Corporation tosuch States as are absolutely unable to finance therelief of distress, we have a solid backlog of assur-ance that there need be no hunger and cold in theUnited States. These loans are to be based upon ab-solute need and evidence of financial exhaustion. Ido not expect any State to resort to it except as alast extremity."SecondThrough the provision for $1,500,000,000

of loans by the Reconstruction Corporation for re-productive construction work of public character onterms which will be repaid, we should ultimatelybe able to find employment for hundreds of thousandsof people without drain on the taxpayer."ThirdThrough the broadening of the powers of

the corporation in the character of loans it can maketo assist agriculture, we should materially improvethe position of the farmer."

President Hoover also adverted to "the obnoxiousfeatures which had been injected into the legislationfrom time to time by members of the House of Repre-sentatives and had so long delayed action" but which, had now been eliminated. These we need not enumer-ate here, since they failed of passage and that mattertherefore is of only academic interest.The Relief bill however also contains certain pro-

visions amending the Federal Reserve Act, to whichthe President did not refer in his statement, but towhich great interest attaches, because of their greatimportance. One of these amendments marks a com-plete departure in the loaning provision of the Fed-eral Reserve Banksin other words it authorizesthe Reserve Banks for the first time to make directloans to corporations and individuals, which pre-viously they were wholly without authority to do,and the propriety and wisdom of which departure iscertainly open to question. Through this amend-ment the Federal Reserve Banks are put in positionfor directly competing with member banks in the

- matter of ordinary every day business, thereby com-pletely changing the character and functions of theReserve institutions, making it possible for the Fed-eral Reserve Banks to act in the capacity of an ordi-

Number 3500

nary mercantile bank, something they were neverintended to do, and no longer leaving them distinc-tively Reserve institutions, dealing only with themember banks, but rather putting them in the posi-tion of an ordinary bank of loan and discountthatis, if there is no limit to the new powers granted.The change in that respect is so great and so radicalthat we introduce here the provision referred to infull text:"Sec. 210. Section 13 of the Federal Reserve Act,

as amended, is further amended by adding after thesecond paragraph thereof the following new para-graph:'In unusual and exigent circumstances, the Federal

Reserve Board, by the affirmative vote of not lessthan five members, may authorize any Federal re-serve bank, during such periods as the said boardmay determine, at rates established in accordancewith the provisions of section 14, subdivision (d), ofthis Act, to discount for any individual, partnership,or corporation notes, drafts, and bills of exchange ofthe kinds and maturities made eligible for discountfor member banks under other provisions of this Actwhen such notes, drafts, and bills of exchange areindorsed and otherwise secured to the satisfactionof the Federal Reserve bank: Provided, That beforediscounting any such note, draft, or bill of exchangefor an individual, partnership, or corporation theFederal Reserve bank shall obtain evidence that suchindividual, partnership or corporation is unable tosecure adequate credit accomodations from otherbanking institutions. All such discounts for indi-viduals, partnerships or corporations shall be sub-ject to such limitations, restrictions, and regulationsas the Federal Reserve Board may prescribe.'"It will be observed that the provision is a broad

one, but at the same time is specifically limited to"unusual and exigent circumstances" from whichit is to be inferred that there was no intention inthe mind of the framers of the act to alter in essencethe general structure of the Federal Reserve Systemand it is to be presumed that the Federal Reserveauthorities in having recourse to the new privilegeaccorded will be governed accordingly. "In unusualand exigent circumstances" the Federal ReserveBoard by the affirmative vote of not less than fivemembers may authorize any Federal Reserve Bankduring such periods as the said Board may de-termine to discount for any individual,partnership or corporation, notes, drafts and billsof exchange" etc. Let it be disinctly understoodthat the Federal Reserve Banks cannot act alonein making discounts for individuals, partnershipsor corporations but can act only after approval bythe Federal Reserve Board and by the affirmativevote of not less than five members and then only"in unusual and exigent circumstances." We are

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

502 Financial Chronicle July 23 1932inclined to think that the Federal ReserVe author-ities can be trusted to avail of ' the new Privilegewith due caution and 'restraint and in accord withthe spirit, the purpose and the strict terms of theamendatory provision.

TN the case of the Federal Home Loan Bank Bill1 interest centers not so much in the provisionsfor the creation of this new system of banks witha capital of $105,000,000 to be subscribed for bythe Federal Government and to include a minimumof eight and a maximum of twelve Federal HomeLoan Banks, with intent to furnish financial aidto home owners, through rediscount of home loanmortgages, held by various types of corporationsinterest centers not so much in the establishmentof this new body of banking institutions as it doesin the rider attached to the bill designed to conferNational bank circulation privileges to all U. S.Government bonds bearing 3%% interest or less.This is a distinctly inflationary measure permittingthe putting out of roughly one billion dollars ofadditional national bank notes. We discussed thisrider, attached to the bill at the instance of SenatorBorah, and which is a modified form of the provisionwhich Senator Carter Glass of the Senate Bankingand Currency Committee offered as a substitute forthe Goldsborough billwe discussed this provisionfor $995,000,000 new circulation and showed thatit carried a distinct menace to the stability of ourbanking system. Through this rider an aggregateof $2,973,871,200 of U. S. issues will be available assecurity for additional national bank circulation,or far in excess of the $995,000,000 new circulationwhich the national banks would be privileged totake out. The full text of the Borah-Glass rider is asfollows:"Sec. 29. That notwithstanding any provisions of

law prohibiting bonds of the United States frombearing the circulation privilege for a period ofthree years from the date of enactment of this Actall outstanding bonds of the United States hereto-fore issued or issued during such period, bearinginterest at a rate not exceeding 3 3-8 per centum perannum, shall be receivable by the Treasurer of theUnited States as security for the issuance of circu-lating notes to national banking associations, andupon the deposit with the Treasurer of the UnitedStates by a national banking association of any suchbonds such association shall be entitled to receivecirculating notes in the same manner and to thesame extent and subject to the same conditions andlimitations now provided by law in the case of 2 percentum gold bonds of the United States bearing thecirculation privilege; except that the limitation con-tained in section 9 of the Act of July 12, 1882, asamended, with respect to the amount of lawfulmoney which may be deposited with the Treasurerof the United States by national banking associa-tions for the purpose of withdrawing bonds heldas security for their circulating notes, shall notapply to the bonds of the United States to which thecirculation privilege is extended by this section andwhich are held as security for such notes. Nothingcontained in this section shall be construed tomodify, amend, or repeal any law relating to bondsof the United States which now bear the circulationprivilege."As used in this section, the word "bonds" shall

not include notes, certificates, or bills issued bythe United States."In our previous discussion of this Borah-Glass

rider we indicated some of the considerations thatwould unquestionably influence the taking out of

additional circulation by, national banks especiallyat the financial centers, where many banks hold hugeamounts of U. S. bonds and who would be temptedto avail of the circulation privilege to the utmostat only a very trifling margin of profit. Now comesa statement from Washington saying that accord-ing to statistics made available on July 20 at theTreasury department approximately $24,000,000might be added to the annual earnings of nationalbanks if those banks avail of the new note issuingpower which the Borah-Glass rider provides. Bankscan make profits of as much as 2.59% on theprice of bonds we are told which they must buy(assuming that they do not already own the bonds).

It is pointed out that inasmuch as the bondswhich the Borah-Glass amendment makes eligibleas collateral for new national bank notes are sellingbelow par, the banks could secure $100,000 in newnotes by spending $99,000, to buy Treasury bondsof 1943-47 which are selling about one dollar underpar and by pledging them as security for the newnotes. By obtaining these notes and lending themthe banks would make, it is calculated, $8,513 oneach $99,000 compared with $5,940 in earnings ifthe bank invested the original $99,000 directly. Thisincrease in profits which amounts to $2,573 on each$99,000, or 2.59%; is due to the fact that the banksunder the law continue to draw the interest on thebonds which they have pledged as collateral for thenew notes. At the same time they are collecting in-terest from the new notes which presumably theywill invest. Since the national banks are to be grant-ed the right to issue approximately one billion dol-lars in new notes by the Borah-Glass amendmentthey will have to spend only about $995,000,000 or$990,000,000 in purchasing the necessary bonds at thepresent low prices. If their profit on this investmentaverages 2.59% the total addition to their profits willbe, it is calculated, as already noted, in the neighbor-hood of $24,000,000. This is on the assumption thatthe banks are not now in possession of the bondsand would have to go into the market to acquirethem. As a matter of fact, the larger banks, in thefinancial centers, hold large amounts of U. S. Gov-ernment securities and presumably these includeconsiderable amounts of the eligible issues. Accord-ingly, they would not have to go to market to ac-quire them.In taking out new notes 5% must be left at theTreasury as a redemption fund and a tax of 1/2 of1% annually must be paid on the circulating notes,but this and the charge for printing the notes, arethe only charges that must be deducted unless thebonds are selling at a premium when the bank buysthem, in which latter event the bank must establish

a fund to amortize the premium, before the bondsmature. A table setting forth these items as theywould apply to a National bank seeking $100,000 innew notes on the basis of Treasury bonds of 1943-47,which are selling at about $99,000 per $100,000, fol-lows:"Receipts: Cost of bonds, $99,000; circulation

obtainable, $100,000; interest on bonds, $3,375; in-terest 6% on circulation minus reserve, $5,700; grossreceipts, $9,075:"Expenses: Tax, $500; expenses, $62.50; totaldeductions, $562.50; net receipts, $8,512.50.Interest on cost of bonds at 6%, $5,940; amount

of profit, $2,573.50; per cent of profit, 2.59%."Whether one accepts these calculations as strictly

applicable (they assume the rate of interest to be


Volume 135 Financial Chronicle 5036%, which would be true only in the case of theremoter local communities) all the indications pointto the taking out of considerable amounts of ad-ditional circulation. Supposing this to happen, whatthen? We have little faith in the claim that ifpaid out into circulation, the notes will come backand have to be redeemed. One or two other things,however, might happen. Some of the Federal Re-serve notes might be forced out of circulation andbe replaced by national bank notes. This would notbe an altogether bad thing, seeing that during thelast twelve months the amount of Federal Reservenotes in circulation has been expanded in amountof considerably more than a billion dollars, thisweek's return of the twelve Federal Reserve Banksshowing $2,861,948,000 of Federal Reserve notes inactual circulation on July 20, 1932, as against only$1,730,752,000 on July 22, 1931, but it would never-theless be a deplorable change, since Federal Re-serve notes require the keeping of a gold reserve of40%, while the national bank notes thrust out intheir place require no reserve whatever.But there is still another possibility, namely that

the putting forth of huge additional amounts ofbank notes will result in a new expulsion ofgold from the country. Any such probability is notto be passed over lightly especially at a time whenconfidence in the stability of the country's bank-ing mechanism still remains considerably disturbed.No one can speak with definiteness as to what thefuture may have in store, but this inflationary riderto the Federal Home Loan Bank bill is clearly a stepin the wrong direction and to be viewed with mis-giving if not with anxiety and apprehension.

A DEVELOPMENT this week of the highest im-portance and of far-reaching consequence isthe action of the Interstate Commerce Commission,announced late on Thursday, in approving the group-ing of the railroads in eastern trunk-line territoryinto four great railroad systems, consisting of theNew York Central, the Pennsylvania, the Baltimore& Ohio and the Chesapeake & Ohio-Nickel Plate. Bythis action the Commisson discards its own five-system scheme promulgated in December, 1929, theWabash which was to form part of fifth trunk-linesystem being now allotted to the Pennsylvania Rail-road, but the latter being kept out of New Englandand being also required (along with its affiliate, thePennroad Corporation), to sell or place with trust-ees all stock owned by the two in the New York, NewHaven & Hartford Railroad and the Boston & Maine.Many of the roads allotted to each of the four greatrailroad systems are already in the possession of suchsystems or under their control. In a general way itmay be said, that the New York Central remainsas it stands, with the addition of the Virginian Rail-way and the Delaware, Lackawanna & Western (ex-cept the branch from Chenango Forks to Oswego,New York), and gets a one-fourth interest in theLehigh & New England. The Pennsylvania Railroadremains as it stands with the addition of the Wa-bash and the Norfolk and Western. The Baltimore& Ohio is confirmed in its possession of the Reading,the Central New Jersey and several other roadsand in addition gets the Western Maryland. TheChesapeake & Ohio remains as it is including theErie Railroad and the Pere Marquette and in ad-dition gets the Lehigh Valley, Chicago & EasternIllinois and Bessemer and Lake Erie.

Of the eleven Interstate Commerce Commissionersonly two dissented outright, while four concurredwith statements of objections to certain allocations.It is pointed out in the newspapers that the plailas now promulgated by the Commission differs froththe carriers own plan only in several major particu-lars and therefore seems likely to find complete ad-ceptance by them. The Virginian goes to the NO/York Central intact, whereas the railroads wouldhave divided it between the Chesapeake & Ohio andthe Norfolk & Western. The "Ifonon" is divided be-tween the Southern Railway and the Atlantic CoastLine, whereas it would have gone to the Baltimore& Ohio under the plan of the carriers. Instead ofthe carriers proposal to make the Hudson RiverBridge lines common property, with all four trunklines holding a quarter interest in each, the Com-mission leaves the Delaware & Hudson independent;It allocates the Lehigh & Hudson River line amongall four equally and it leaves the New York, On-tario & Western outidde the merger and in posses-sion of the New York, New Haven & Hartford Rail-road as a "necessary link in an important routeconnecting the Port of Oswego on Lake Ontariowith the Port of Boston."The effect of this arrangement, it is pointed out

in the daily papers, is to leave the New Englandroutes to be dealt with separately. The modifiedplan also leaves unallocated the Seaboard Airlineand a number of short line connections intended togo with it The newspapers further note that theCommission's action represents the first time ineleven years that the Commission has put its stampof approval on a plan which the railroads concernedconsider "workable" and therefore action towardthe carrying out of the plan seems likely, thoughat the present moment conditions by reason of theexisting business depression which has hit the rail-roads harder than any other division of human ac-tivity does not appear favorable for proceeding inaccordance with the provisions of the plan. The ap-proval however by the Commission of the four-systemplan and which the carriers deem workable marksan important step forward and sooner or later theplan will be carried out and the benefits and ad-vantages expected to grow out of it accrue all around.

THE Commerce Commission's action comes at thevery time when the railroads are engaged in anappeal to the public in which they describe their con-dition as serious and pledge themselves to avoid allpreventable waste through excessive competitionand ask popular support of their efforts to amelio-rate their unfortunate condition. The manifesto wasissued through the Association of Railway Execu-tives which met on Wednesday at the Hotel Bilt-more to ratify it. The Association represents 225,-000 miles of railroad, that is all the Class One rail-roads and also the short lines. The official state-ment referred to contains the declaration that "noone familiar with the situation can seriously doubtthat the railroads, if given equality of opportunity,will surmount their present difficulties as they al-ways have in the past. To accomplish this, however,we believe it is essential, in addition to all that therailroads may do for themselves, that the existingregulation of the railroads should be relaxed soas to restore freedom of managerial control, with-out return to the fundamental evils of unjust dis-crimination, which regulation should always pre-vent and that the same kind and measure of regula-tion should be extended to all other agencies withwhich they must compete."


504 Financial Chronicle July 23 1932The , significance of all this lies in the fact that

it shows that railway managers are alive to the needsof the situation and are actively engaged in de-vising means for remedying the deplorable conditionin which the carriers today find themselves, moredeplorable than at any previous time in the entirerailroad history of the country. Sooner or laterthe railroads will once more come into their ownand this week's events mark progress in that di-rection.

THIS week's condition statements of the Fed-eral Reserve Bank reflect changes of ratheran indifferent nature. It will be noted in the firstplace that there has been only a relatively smallfurther addition to the holdings of U. S. Govern-ment securities, which is to be hailed with satisfac-tion, in view of the Borah-Glass rider to the FederalHome Loan Banking bill, which confers the circu-lation privilege upon a large mass of U. S. Govern-ment securities thereby laying the basis for an ex-pansion of close to $1,000,000,000 in the volume ofnational bank notes outstanding. It is to be ob-served, however, that though the further acquisitionof U. S. Government securities during the week hasbeen relatively small, there has nevertheless beensome increase and to that extent marks further ad-vance in the wrong direction. In brief the amountof U. S. securities held by the twelve Federal Re-serve Banks has risen from $1,821,132,000 July 13to $1,836,175,000 July 20 and at the latter figurecompares with only $678,001,000 twelve monthsago on July 22, 1931. The same remark is to be madewith reference to the amount of Federal Reservenotes in actual circulation. This also shows a furtherexpansion during the week, that is from $2,835,750,-000 July 14 to $2,861,948,000 July 20, whereas onJuly 22 last year the amount of Federal Reservenotes in circulation footed up only $1,730,752,000.In other words the process of expansion still con-tinues.It should be observed furthermore that the in-

crease in the amount of Reserve credit outstanding(as measured by the total of the bill and securityholdings) is somewhat larger even than the increasein the holdings of Government securities or in theamount of Federal Reserve notes in circulation. Theincrease in the total of the bill and security holdingshas been from $2,404,258,000 July 13 to $2,431,429,-000 at which latter figure comparison is with $933,-810,000 on July 22 of last year, showing an ex-pansion for the twelve months in the volume of Re-serve credit outstanding in the amount roughly ofS1,500,000,000. The further increase during theweek arises out of the fact that while as an offsetto the increase in the holdings of U. S. Governmentsecurities there was a reduction from $61,621,000July 13 to $51,902,000 July 20 in the holdings ofacceptances purchased in the open market, on theother hand there was an increase from $515,570,000to $537,565,000 in the discount holdings of the twelveReserve institutions, the latter reflecting direct bor-rowing by the member banks.One would suppose from what has been said above,

that there must have been a further increase in theamount of U. S. Government securities pledged aspart collateral for Federal Reserve notes outstand-ing, but such has not been the case. Instead theamount of Government securities pledged for Re-serve notes has been reduced from $639,900,000 to$632,400,000, being a decrease for the week of $7,500,000, and this follows $42,100,000 decrease in the

previous week. The Reserve banks were able to in-crease their gold reserve during the week from $2;-588,097

,,000 to $2,608,862,000; nevertheless as this

was accompanied by an increase in the amount ofFederal Reserve notes outstanding and also an in-crease in the deposit liabilities, the ratio of total re-serves to deposit and Federal Reserve note liabilitiescombined has been further slightly reduced, fallingfrom 56.3% to 56.2%. Investments of foreign cen-tral banks in domestic acceptances continue theirdownward course, even though the amount of suchinvestments was so heavily reduced in previousweeks, .the holdings of acceptances by the Reserveinstitutions for account of foreign central bankshaving been further reduced during the week from$68,541,000 to $65,735,000. Foreign bank depositswith the Federal Reserve institutions also continuesmall although during the week the amount of suchdeposits increased from $9,862,000 to $11,423,000.

D IVIDEND reductions and omissions by corp-orations have been somewhat less numerousthe present week. Stone & Webster, Inc., omittedaction on the quarterly dividend normally payableon Aug. 15. The Royal Typewriter Co. omitted thesemi-annual dividend of 31/2% on the 7% cum. pref.stock. The Houston Oil Co. of Texas omitted thesemi-annual dividend due Aug. 1 on the 6% cum.pref. stock. The Southern Colorado Power Co.passed the dividend payable about Aug. 25 on theclass A stock. The Liquid Carbonic Corp. reducedthe quarterly dividend on common from 50c a shareto 25c a share after having previously been reducedfirst from $1 a share to 75c a share and then to50c. On July 22, the Houdaille-Hershey Corp. de-ferred the quarterly dividend of 621/2c a share dueJuly 1 on the $21/2 cumul. cony. class A stock.

EXPORTS and imports of merchandise for Juneare again very low. The preliminary statementfor that month shows exports of $115,000,000 andimports of $121,000,000. In merchandise exportswere valued at $132,292,000 and imports $112,275,000and in both instances the figures for these twomonths were the lowest for a great many years.For June 1931 exports were $187,077,000 and im-ports $173,455,000, the decrease in exports for thatmonth this year being $72,077,000 or 38.5 per cent,while imports for June this year are $52,455,000lower, a loss of 30.2 per cent.For the fiscal year ending June 30, exports have

amounted to $1,950,126,000, compared with $3,083,-430,000 for the preceding year, a reduction of $1,133,-304,000 or 36.6 per cent. Covering the same period,imports were $1,741,038,000 against $2,432,074,000for the earlier year, the decline in imports being$691,036,000 of 28.4 per cent. Relatively importsfor June are much better than for the other records,but in both exports and imports values have nowsunk to so low a level that little comfort is to behad in any of the late comparisons. As to the figuresfor the twelve months, it is necessary to go back to1910-11 for a record of either exports or importsbelow $2,000,000,000 for that period of time. Thebalance of trade is now on the import side. For Juneit was $6,000,000. For the twelve months howeverthere was an export trade balance in amount of$209,088,000, while for the fiscal year 1930-31 thebalance of trade on the export side was $651,356,000.Imports last month were increased slightly because


Volume 135 Financial Chronicle 505

of the rush of certain commodities to escape thenew revenue tax law. In August of last year therewas a small import trade balance; also, in May,1929, but this condition occurs only occasionally.Exports in June were at an unusually low total.

All values at this time are considerably reduced.What could have been purchased for $115,000,000now would have cost at the prices prevailing a yearago at least $130,000,000 or more. Take for examplecotton. Exports of cotton in June were 366,500bales, 106,900 bales more than in June of last year.Yet the value of cotton exports last month was belowthat of a year ago. Cotton exports last monthamounted to $13,362,100 compared with $13,516,600a year ago. At last year's prices cotton exports forJune this year would have been $19,000,000, some-thing over $5,640,000 more than the amount recordedfor the month just closed. With this difference addedto last month's exports, the comparisons would makequite a different showing. With cotton exports inJune at the reduced value that appears, other ex-ports than cotton for that month were only $101,-640,000, a decline of 41 per cent in a comparison withJune 1931.Preliminary figures published from week to week

have indicated the large gold export movement inJune. The total was $226,117,000, against gold im-ports of $18,395,000, a net loss for that month of$207,722,000. In June of last year gold imports werein excess of exports to the amount of $63,847,000.For the twelve months ending with June, gold ex-ports have far exceeded any previous record, thefigures being $1,233,843,000 and gold imports $518,-353,000, the excess of exports being $715,490,000.For the twelve months of the previous fiscal year,gold exports were $107,093,000 and imports $403,-796,000, imports exceeding exports by $296,703,000for that period.

MERCANTILE insolvencies in the United Statesduring June did show some decline from thehigh number of each of the five months since thepoling of 1932, but the reduction is somewhat lessproportionately than in other years. Businessfailures in the United States during June, accord-ing to the records of R. G. Dun & Co., numbered2,688 with liabilities of $76,931,452 against 1,993similar defaults in June of last year for $51,-655,648. The number was 34.9% larger than thatof a year ago, while for the indebtedness, the in-crease this year was 48.9%.For the six months of 1932 there have been 17,-

423 business failures recorded involving $537,-284,288 of liabilities compared with 15,107 in thefirst half of 1931 for $370,497,369. For the pastsix months the increase in number over a year agohas been only 15.3%, but the liabilities are largerthis year to date by 45.0%

Failures were larger in each of the three classesinto which the figures are separated than theywere a year ago and perhaps the tradIng sectionmakes the least satisfactory showing. In June ofthis year there were 1,910 trading defaults involv-ing $36,123,111. Manufacturing failures numbered449 for $25,454,100, while for the third division em-bracing agents and brokers the number was 164owing $15,354,240. In June 1931 there were 1,435trading defaults for $25934,212; 444 manufactur-ing concerns, owing $21,908,716, and 109 of agentsand brokers with liabilities of $3,812,720.

Defaults were particularly heavy last month inpractically all trading divisions especially in the

large divisions covering grocers, general stores,dealers in clothing, dry goods, shoes and leatherlines, furniture, hardwire, drugs and jewelry. Inpractically all of these divisions the liabilitieswere very heavy. For the manufacturing class theincrease in June this year was largely in the lum-ber and building division, for clothing, machinery,and tools, iron and foundries, bakers, printing andengraving, leather goods including shoes, and earth-enware and glass. Among agents and brokers anumber of defaults among mortgage and invest-ment concerns added materially to the liabilitiesthis year.

THE stock market this week .has again shown an

improving tendency, following in this thecourse of the bond market which has been persist-ently strong, constituting a feature of decided en-couragement. Fluctuations in the share list havebeen narrow and the volume of trading small untilFriday when there was a decided spurt of activity.The definite adjournment of Congress late on Sat-urday night has been a favorable feature, but on theother hand there is not much satisfaction to be de-rived from a contemplation of the huge amountsinvolved in the unemployment relief bill and thereis considerable uncertainty as to how the rider at-tached to the Federal Home Loan Bank Bill, addingvastly to the amount of national bank notes thatcan be issued, is going to work. Commodity pricesdisplayed renewed weakness in many instances butwith an upward reaction on Friday. The exportprice of copper has fallen to the unprecedentedly lowfigure of 4.50c. Cuban raw sugar has also suffereda setback after the previous sharp advance, theprice of cotton has been only indifferently main-tained, and grain prices continued to rule low andmanifested a declining tendency until the sharp re-covery on Friday. Foreign developments have alsobeen far from encouraging, and in particular, theplacing of Prussia under a political dictatorship hasfurnished occasion for more or less concern, thoughthe price of German bonds in this market has beenwell maintained all things considered.

On the other hand, accounts regarding the steeltrade spoke of the possibility of some slight changefor the better in the not very remote future. Thus,the "Iron Age" in its weekly review estimated steelproduction at about 16% of capacity, the same asthe previous week, and went on to say that whilebusiness was not yet manifesting definite improve-ment it was holding its own, suggesting that a bot-tom had been struck from which advances would bemade when autumn seasonal influences make them-selves felt. Moreover, price weakness which hadbeen particularly pronounced among primary ma-terials seems to be disappearing. Furthermore, out-standing self-liquidating projects that were likelyto go ahead as the result of Government loans wouldcall for more than 1,000,000 tons of steel as well asconsiderable metal working equipment. On Friday,the news that the Inter-State Commerce Commis-sion had given its assent to the grouping of therailroads in Eastern trunk line territory into foursystems as suggested by the carriers, instead of thefive carrier system proposed in the plan offered bythe Inter-State Commerce Commission in December1929 acted as a stimulus and carried prices stillhigher, the railroad share list in particular, beingstrong. The same piece of news also caused an up-ward reaction in many of the commodity markets,


506 Financial Chronicle July 23 1932wheat values in particular showing marked recov-ery. Of the stocks on the New York Stock Exchangelist only 30 stocks established new low records forthe year during the week. The call loan rate on theStock Exchange has continued to rule unalteredat 2%.The volume of trading was light most of the week,

but showed a revival of activity on Friday. At thehalf-day session on Saturday last the sales on theNew York Stock Exchange were 350,180 shares;on Monday they were 612,410 shares; on Tuesday465,320 shares; on Wednesday 627,440 shares; onThursday 924,820 shares, and on Friday 1,447,855shares. On the New York Curb Exchange the saleslast Saturday were 31,435 shares; on Monday 61,-010 shares; on Tuesday 64,495 shares; on Wednes-day 80,310 shares; on Thursday 83,960 shares, andon Friday 103,219 shares.As compared with Friday of last week, prices

are quite generally somewhat higher. General Elec-tric closed yesterday at 11 against 10 on Friday oflast week; North American at 17% against 17;Standard Gas & Elec. at 11% against 111/4; PacificGas & Elec. at 22 against 20'7/8; Consolidated Gasof N. Y. at 391/4 against 375/8 ; Columbia Gas & Elec.at 7% against 6%; Brooklyn Union Gas at 571/2against 551/4

; Electric Power & Light at 4 against31/2; Public Service of N. J. at 33% against 327/8;International Harvester at 13'7/8 against 13; J. I.Case Threshing Machine at 271/4

against 25%; Sears,Roebuck & Co. at 131/2 against 13; MontgomeryWard & Co. at 6 against 51/4;

Woolworth at 28against 267/8 ; Safeway Stores at 38 against 351/8;Western Union Telegraph at 18% against 16%;American Tel. & Tel. at 76% against 747/8; Inter-national Tel. & Tel. at 51/2

against 5%; AmericanCan at 34% against 347/8 ; United States IndustrialAlcohol at 181/8 against 17; Commercial Solventsat 63/* against 534; Shattuck & Co. at 7 against61/2, and Corn Products at 31% against 301/4.

Allied Chemical & Dye closed yesterday at 491/4against 481/2 on Friday of last week; AssociatedDry Goods at 3% against 31/4

; E. I. du Pont de Ne-mours at 24 against 251/2; National Cash RegisterA at 8 against 7%; International Nickel at 5%against 51/4 ; Timken Roller Bearing at 111/2 against91/4 ; Mack Trucks at 131/2

against 131%; Johns-Manville at 12 against 121/); Gillette Safety Razorat 16% against 151/2; National Dairy Products at17% against 16%; Texas Gulf Sulphur at 16%against 151/8; Freeport Texas at 15% against 125/8;American & Foreign Power at 3% against 31/8;United Gas Improvement at 141/8 against 13%; Na-tional Biscuit at 271/2 against 25%; Coca Cola at807/8 against 781/2; Continental Can at 22% against21%; Eastman Kodak at 383% against 38%; GoldDust Corp. at 127/8 against 11%; Standard Brandsat 11% against 11; Paramount Publix Corp. at 2%against 1%; Krenger & Toll at 1-16 against 1-16;Westinghouse Elec. & Mfg. at 191/2

against 18%;Drug, Inc., at 29'7/8 against 28; Columbian Carbonat 207/8 against 20; Reynolds Tobacco class B at291/2

against 283%; Liggett & Myers class B at 47against 451/2; Lorillard at 14% against 13%; Amer-ican Tobacco at 561/2 against 55%, and YellowTruck & Coach at 2 against 1% bid.The steel shares are also slightly higher. United

States Steel closed yesterday at 24% against 237/8on Friday of last week; Bethlehem Steel at 103%against 9%, and Vanadium at 81/2 against 81/8. Inthe auto group Auburn Auto closed yesterday at

541/2 against 511/8 on Friday of last week; General

Motors at 91/8 against 9; Chrysler at 7% against6; Nash Motors at 97/8 against 10%; PackardMotors at 17/8 against 13,4; Hudson Motor Car at5% against 6%, and Hupp Motors at 21/4

against1%. In the rubber group Goodyear Tire & Rubberclosed yesterday at 10 against 81/2

on Friday of lastweek; B. F. ' Goodrich at 31/2

against 2% bid;United States Rubber at 3% against 21/2, and thepreferred at 61/2

against 51/8.The railroad shares enjoyed a short spurt up-

ward on Friday on the action of the Inter-StateCommerce Commission in approving the plan forgrouping the Eastern Railroads according to thefour system plan. Pennsylvania RR. closed yes-terday at 9% against 81/4 on Friday of last week;Atchison Topeka & Santa Fe at 27 against 24;

Atlantic Coast Line at 131/2 against 12; Chicago,Rock Island & Pacific at 31/2 against 2%; New YorkCentral at 13% against 127/8; Baltimore & Ohio at8 against 61/8; New Haven at 91/8 against 9; UnionPacific at 36% against 33; Missouri Pacific at 2%

against 21/s; Southern Pacific at 91/2 against 91/8;Missouri-Kansas-Texas at 31/4 against 27/8; South-

ern Railway at 414 against 3%; Chesapeake &Ohio at 13 against 117/8 ; Northern Pacific at 103%against 91/2, and Great Northern at 8% against

The oil shares have continued firm. StandardOil of N. J. closed yesterday at 277/8 against 26%on Friday of last week; Standard Oil of Calif. at23 against 20%; Atlantic Refining at 141/2 against121/2, and Texas Corp. at 121/2

against 1034.In the copper group Anaconda Copper closedyesterday at 4 against 4 on Friday of last week;Kennecott Copper at 7 against 6%; AmericanSmelting & Refining at 8 against 81/8 ; PhelpsDodge at 47/8 against 5; Cerro de Pasco Copper at5 against 41/4

bid, and Calumet & Ueda at 21/8against 1'7/8 bid.

Irregular price movements prevailed this week onstock exchanges in the leading European financialmarkets. Trends at London, Paris and Berlin alter-nated between modest recessions and equally smalladvances, and net changes were quite unimportantfor the week. Revelation of full details of the Laus-anne agrements tended to restrict trading in allmarkets, and the dullness became even more pro-nounced on news of the dictatorship in Prussia.These incidents and the prospect of further inter-national conferences on economic and politicalquestions tended to offset the satisfaction felt re-garding the progress now everywhere apparent inthe strictly financial sphere. The London market isstill absorbed in the huge war loan conversion oper-ation, and no new issues of securities are announced,currently, in order to place no obstacles in the wayof the conversion. It is estimated in some unofficialquarters that applications for conversion of the 5%issue into 31/2% stock already total more than 1,-000,000,000, or half the total. Monetary improve-ment, however, finds no correspondence anywherein Europe in business gains. Stagnation is every-where prevalent, and is reflected in further increasesin the totals of unemployed workers in the leadingindustrial countries. British unemployed at the endof June numbered 2,747,343, an increase of 6,037 inthe course of that month, while the German total onJuly 15 was 5,492,000, an increase of 16,000 sincethe end of last month.


Volume 135 Financial Chronicle 507The London Stock Exchange was dull at the open-

ing, Monday, with most changes in the direction oflower levels. British funds were slightly easier ona much reduced volume of trading, and industrialstocks likewise sold off a little. Anglo-American trad-ing favorites improved on optimistic advises fromNew York. Tuesday's dealings were again listless,with prices in all sections down. British funds recov-ered part of their losses before the close and thechanges were insignificant. Textile stocks weresteady in the industrial group, but others driftedlower. The international section followed the gen-eral trend, partly as a result of disquieting reportsfrom Germany. The tendency improved at the open-ing, Wednesday, but the cheerfulness was shortlived. British funds were better at the start and heldpart of their gains, but a sharp slump in Germanbonds unsettled the remainder of the market.. Brit-ish industrial securities were marked down, and in-ternational stocks also sagged. Although dealingsThursday were agin quiet, improvement in priceswas noted in many sections. Home rail stocks ad-vanced when the usual interim dividend was declaredon all preference issues of the Southern Railway ofBritain. German bonds recovered, and Anglo-Amer-ican stocks also moved forward. British funds werequiet and lower, while industrial stocks were irreg-ular. There was a good tone yesterday in all sectionsof the market in London.The Paris Bourse began the week with a very firm

trend, which was maintained throughout the session.Adjournment of the Parliament late the previousSaturday for the summer induced much buying ofsecurities, owing to the prospect of a period of pol-itical tranquillity. Rentes were particularly firm,while other sections also advanced. The tendencyTuesday was hesitant, and in the end most securitiesshowed losses. The recessions were small, however,in comparison with the grains of the previous day.The market opened with a weak tone Wednesday,and prices continued to recede slowly throughout thesession. Unfavorable news from Germany causedmuch of the liquidation, which resulted in fairly ex-tensive losses throughout the list. Events in theReich continued to impress the Paris Bourse, Thurs-day, and most securities again lost ground. Buyingwas resumed at the lower levels, and some groupsrecovered most of the losses before the session ended.Substantial buying appeared at Paris yesterday, andprices advanced.The Berlin Boerse was dull and lower, Monday, ow-

ing largely to the increasingly bloody clashes of thepolitical campaign. The possibility of drastic actionby the Reich Government was recognized and kepttransactions at a minimum. Declines were small,and exceeded a point in only a few issues. TheBoerse was even more listless, Tuesday, and pricesagain drifted slowly downward, with net recessionsexceedingly modest. Political developments Wed-nesday occasioned a certain nervousness in financialcircles, but no great amount of selling followed. Thetone was soft, but offerings were so small that theydid not affect prices much. After an uncertainopening Thursday, prices recovered on the Boerse.Business remained small and the gains were hardlymore pronounced than the previous declines. Pricesdeclined slightly yesterday in an uncertain marketat Berlin.

Official debates have been ended for the time beingregarding the interpretations of the Lausanne accordon German reparations and the secretly concluded

gentlemen's agreement making the effectiveness ofthe pact altogether dependent on revisions of thewar debts due from the former Allied Governmentsto the United States. A declaration of the Frenchofficial viewpoint on the treaty of July 9 and theAnglo-French accord of July 13 was made byPremier Edouard Herriot before the Chamber ofDeputies last Saturday. The Chamber session wasadjourned soon thereafter, and as none of the greatParliaments of the world is now in session, it wouldseem that the question of interpretation will be al-lowed to rest for the present. In their last state-ments on the Lausanne accord and its accompanyingand subsequent agreements, leading European states-men were at one in declaring that these arrangments"are directed against no one." It can hardly besaid, however, that the differences in interpretationwhich set the chancelleries bickering last week havebeen entirely cleared up.It was emphasized in Paris Government circles on

July 15 that the European powers had no intentionof forming a united front against the United Stateson the question of war debts. The assertions of theBritish Government on this point were acceptedwithout reserve. No denial was made, however, ofM. Herriot's previously reported statement to theChamber Finance Commission that Britain wouldbe unable to effect a separate debt agreement here-after with the United States. Confusion arose be-cause two separate statements were made, thePremier said. "In referring to the gentlemen'sagreement", M. Herriot continued, "I said that thisagreement would prevent any single debtor of theUnited States from making a new arrangement with-out the knowledge of the others. This provision hasnothing to do with the pledge the two countries haveexchanged to cooperate in dealing with Europeanecohomic and political problems, to which Belgiumand Italy have already adhered. I entirely approvethe declaration from London that this accord ex-pressly excludes from its purview any questions af-fecting non-European countries."When the new agreements were discussed before

the Chamber of Deputies last Saturday, PremierHerriot made it clear that the Lausanne accord onreparations is provisional. He expressed the hopethat it would become definite and binding, but addedthat ratification will not be requested of the FrenchParliament until a satisfactory arrangement hasbeen made with the United States. The Franco-British accord, he added, is directed against no oneand is intended to insure "the continuation of thatharmonious work of reconstruction of Europe whichwas begun at Lausanne." The explanation of theaccord previously made by Sir John Simon of GreatBritain, who said that it did not apply to the wardebts owed the United States, was accepted withoutreserve by the French Premier. "I believe," he saidin conclusion, "that in the Lausanne agreement andby the pact of confidence with England we have madea great step toward the establishment of real peace,which is desired by all the peoples. A confident un-derstanding between France and England is the cen-tral pillar on which alone we can build."In European circles other than the official ones

quite as much bewilderment was caused as in theUnited States by the successive revelations of theLausanne accord, the gentlemen's agreement whichconditions it, and the Anglo-French treaty of comity.There was elation at first in London, dispatches said,but when the gentlemen's agreement was disclosedand the unfavorable reaction in the United States


508 Financial Chronicle filly 23 1932

reported, apprehension followed. The fears werenot lessened when President Hoover made it amplyplain on July 15 that he did not propose to allowthe American people to be "pressed into any line ofaction" by any European combination, either openor implied. Mr. Hoover's statement caused a sharplyunfavorable reaction in Paris, where it was remarkedthat American antagonism to a united front on thepart of the European debtors is far from helpful inthe world situation. In Berlin the successive develop-ments occasioned rather gloomy views, reports said,notwithstanding the stand taken by the von PapenGovernment against any linking of reparations andthe war debts.The Lausanne agreements and the Anglo-French

accord have also received some consideration at thehands of the League of Nations Council, which helda meeting for this purpose on July 15. Sir JohnSimon, Foreign Secretary of Britain, explained theaccords to the Council, which listened in stony sil-ence. He attempted to allay the suspicions occa-sioned by the Anglo-French accord which, he said,contemplates no new organization but is designed to"sustain the work undertaken by the European com-mittee of the League." He expressed the hope thatit would augment the League's influence, and to thisstatement Rene Massigli of France assented, but allother Council members refrained from all comments.A resolution was finally adopted incorporating theLausanne conference fully into the framework of theLeague. It was also agreed that a world monetaryand economic conference is to be held, in accordancewith the Lausanne treaty, but selection of a timeand place for this conference was left to a committeeon which Great Britain, France, Germany, Italy,Japan and Norway are to be represented. The com-mittee was authorized to invite representatives fromother States and it is assumed that delegates fromthe United States, Belgiuni and possibly other coun-tries will join the committee in its preliminary con-sideration of the world conference.

Delegations of nine nations of the British Empiregathered in Ottawa, Thursday, for the opening ofthe long-heralded Imperial Economic Conference,from which so much is hoped in the way of improvedEmpire trade. The gathering is likely to last aboutsix weeks, and the sessions will be devoted mainlyto the delicate questions of inter-Imperial trade pref-erences and their effects on the relations of theUnited Kingdom and the Dominions with other coun-tries. Decisions taken at Ottawa may be far-reach-ing, and the course of the conference will be followedwith keenest interest in all parts of the world. Mostof the discussions will be private, however, and itmay well be that the actual results of the conferencewill be unknown to any save the participating dele-gations until final resolutions are adopted and treat-ies published. The participants are the UnitedKingdom, Canada, Australia, New Zealand, New-foundland, South Africa, Southern Rhodesia, Indiaand the Irish Free State. Premier Bennett of Can-ada is host to the meeting, and he was elected Pres-ident immediately after the Earl of Bessborough,Governor-General of Canada, delivered a message ofgreeting from King George.Stanley Baldwin, President of the Council in the

British Cabinet and head of the United Kingdomdelegation, followed Lord Bessborough and outlinedthe general purposes of the imposing gathering. Thereal importance of the conference, he said, lies inthe fact that it marks a point where two roads di-

verge, "one leading to the development of purely na-tional interests, and the other to closer Imperialunity and the recognition of advantages in mutualtrade co-operation." Great Britain has alreadygiven the Dominions the privilege of free entry intothe ports of the United Kingdom, Mr. Baldwinpointed out, and the Dominions have given prefer-ence to Great Britain. But the opportunities formutual preferences have by no means been exhausted,he continued, as Empire trade is still only 30%among the Dominions and 70% with foreign coun-tries. Pointing out that there is a world tendencytoday toward larger economic units, Mr. Baldwinremarked that complete free trade within the Empiremay not be possible, but opportunities may arise for"making commercial arangements with other groupsof nations such as could hardly be reached if eachGovernment acted alone." He suggested, according-ly, that the conference devote itself to clearing outthe channels of trade among the Empire units. "Ifwe approach the problem with a view to seeing howmuch each can contribute to the common stock, weshall not need to concern ourselves with the relativeadvantages obtained by each," the British leader de-clared.Prime Minster Bennett, of Canada, gave a further

impetus to the movement for inter-Imperial tradepreferences in a speech as President of the confer-ence. He made a definite proposal for wider pref-erences for British goods, in exchange for greaterBritish preferences to imports from Canada. Sucha system of preferences exchanges would be endur-ing, he said. Representatives of the Dominions wereurged by the Canadian Prime Minister to decide nowwhat course they intend to take and to follow itwithout deviation. Although the proposal was di-rected to the United Kingdom, the offer was ex-tended also to all other parts of the Empire, and inany degree that it might be found mutually advan-tageous. "There are two ways of obtaining increasedpreferences, either by lowering trade barriers amongourselves or by raising them against others," Mr.Bennett continued. "The choice is governed largelyby local considerations, but subject to that it seemsto us that we should follow the first rather than thesecond course. However great our resources, wecannot isolate ourselves from the rest of the world."The Australian and New Zealand delegations there-upon indorsed the Canadian proposal for reciprocaltrade preferences, and the public session was ad-journed and private negotiations started.

Despite earnest endeavors on the part of BritishGovernment and Irish Free State leaders, differencesin views on the land annuities question have nowprogressed to the point where measures of reprisalhave been taken or are contemplated by both partiesto the dispute. The action of the Irish Free StateGovernment in withholding payments due on the3,000,000 land annuity and on 1,800,000 of otherannual payments has precipitated a tariff war thatcan only results in deplorable trade dislocations andin losses to both Britain and Ireland. The principleof arbitration was speedily accepted by both parties,but the form of the proposed tribunal has been astumbling block, Britain insisting on an Empirecourt while Ireland desires external judgment onthe plea that the "dice would be loaded against her"in an Empire tribunal. Under authority grantedby the House of Commons in London, duties of 20%on almost all Irish products imported into England


Volume 135 Financial Chronicle 509were imposed July 14. A final effort to avert thistariff war was made by Prime Minister MacDonaldand President de Valera at a conference in Londonlate July 15, but an official announcement indicatedthat "neither party was able to depart from the posi-tion taken up in published dispatches." Mr. deValera returned to Dublin, and at a long Cabinetmeeting last Sunday, plans were formulated for theimposition of comparably heavy duties on Englishmerchandise sold in Ireland. The Dail and the Sen-ate passed emergency tariff acts this week, and thetask of adjusting small differences in the measureswas quickly undertaken. The Irish duties are likelyto be imposed today, and English merchants haverushed a flood of goods into ports this week in an-ticipation of the higher levies. Free State exports toEngland, meanwhile, have fallen to a fraction oftheir former totals.

Republicanism in Germany has received a severeblow, and one from which it will not readily recover,as the result of a series of decrees, issued Wednesdayover the signature of President Paul von Hindenburg,which virtually dismissed from power the State Ad-ministration of Prussia and placed control of theState in the hands of Chancellor Franz von Papen,Junker head of the Reich Cabinet. The action wastaken under the highly elastic Article 48 of the Wei-mar Constitution, which confers extraordinary pow-ers upon the President in the event of any nationalemergency. The rioting and agitation of the cam-paign for the Parliamentary election have causedthe deaths of 92 persons and serious hurt to 200others during the past month, and it was ostensiblyin order to restore public order and security inPrussia that the decrees were issued. It is generallybelieved, however, that their significance extends farbeyond that immediate aim and that they representa bold stroke of policy on the part of Chancellor vonPapen and his close associate, General Kurt vonSchleicher, who are the personal Cabinet appointeesof President von Hindenburg.The grave step now taken by Chancellor von Papen

and his Defense Minister, General von Schleicher,has every appearance of following closely the de-mands made by National Socialist or Fascist leaders.Extensive gains were made by Adolph Hitler and hisFascist followers in all recent State elections inGermany, and President von Hindenburg dismissedthe Clerical Dr. Bruening from his post as ReichChancellor on May 31, because his Centrist Govern-ment no longer appeared to represent popular opin-ion in Germany. It was announced early in Junethat Parliamentary elections would be held through-out the Reich on July 31, and in the meanwhile Col.von Papen was asked by President von Hindenburgto take the Chancellorship. Orders previously issuedby Dr. Bruening for the suppression of the Fascistarmy of Adolph Hitler were quickly rescinded byChancellor von Papen, and permission to wear uni-forms also was restored to these legions, which num-ber 400,000.

In their campaigning of the last month the Fas-cists have been described by all observers as resort-ing to increasingly truculent measures, which theydirected especially against Communists and Social-ists. The disorders of the campaign have consistedentirely of clashes between these factions of the ex-treme Right and the extreme Left. There is amplereason for assuming a close connection between theFascists and the leaders of the present Reich Cab-

inet, and the decrees issued on Wednesday were fore-shadowed by definite demands on the part of Fascistsleaders early this week that the Socialist "caretak-ers" Government of Prussia be dismissed and a Fed-eral Commissioner appointed to rule the State.There is a suspicion in many quarters, however, thatGeneral von Schleicher, who is regarded as the realruler in Germany, is using the Fascists for his ownends, which remain undisclosed.

In the first of the emergency decrees issued lastWednesday, Chancellor von Papen was appointedFederal Commissioner for Prussia, with full author-ity to depose the acting Government, headed by Dr.Otto Braun, and Dr. Carl Severing, both SocialistsThe regime of the State of Prussia, like that of theReich itself, is extra-Parliamentary. Fascists rodeinto control of the Prusian Diet in the recent Stateelection, but Premier Otto Braun and Minister ofthe Interior Severing retained their offices by rul-ings designed for that purpose. The two Socialistleaders of Prussia were nevertheless regarded as the"saviors of the German Republic," owing to theirenergetic intervention against Monarchist and Fas-cist plots.

'With the new emergency decree in hand, Chancel-lor von Papen called upon Dr. Braun and Dr. Sever-ing to retire from office, but this they refused to do,maintaining that the action was illegal. The aims ofChancellor von Papen and General von Schleicherwere then carried out by force, and the legal back-ground for this procedure was established throughissuance of a further decree declaring that a state ofemergency existed in Berlin and the Province ofBrandenburg. Chancellor von Papen named MayorFranz Bracht of Esen as Prussian Minister of theInterior. General Kurd von Rundstedt was ap-pointed 'military commander of Berlin and thesurounding area of Brandenburg, and Dr. KurtMelcher was appointed chief police executive of Ber-lin. These new oficials joined in removing forciblynot only Dr. Braun and Dr. Severing, but also AlbertGrzesinski, Socialist Police President of Berlin, andhis chief deputy, Bernhard Weiss. The Reichswehr,or regular army of Germany, was employed in mak-ing these changes.In decreeing martial law or a state of emergency,

many of the most important articles of the WeimarConstitution were declared suspended. The guar-antees abrogated include freedom from unwarrantedarrest, inviolability of private dwellings, secrecy ofthe mails and other communications, freedom of thepress and speech, the right of peaceable assembly,the sanctity of private property, "and suspension ofother otherwise pertinent statutory limitations."At the same time severe punishment was prescribedfor anyone contravening or inciting contravention oforders issued by the new Prussian regime. Activitiesconsidered dangerous to the public safety are to bepunished by imprisonment for a term of years andby possible confiscation of property, while for somecrimes the punishment of death was indicated.Every effort was made by the new authorities, at

the same time, to persuade the German people thatthe measures do not constitute a change in the re-lations of the central Government with those of theStates. They will be revoked as soon as a Constitu-tional Government is formed in Prussia and they ap-ply only to that state, it was said. The state of emerg-ency will also be temporary, the authorities stated.The Government heads of the South German States


510 Financial Chronicle July 23 1932of Bavaria, Wuerttemberg and Baden, promptly pro-tested against the measures, declaring them uncon-stitutional. Appeal is to be made by these States tothe German Supreme Court at Leipzig against whatthey regard as a dangerous infringement of theirrights. The deposed leaders of the Prussian Govern-ment plan to take similar action. In many cirlces,it is believed that the separatist movement in SouthGermany will gain much impetus from the presentdevelopments.The developments of the day caused only modest

excitement among the citizens of Berlin, who pre-served a tranquil attitude. Berlin reports indicated,however, that there was considerable resentment un-der the surface calm regarding the imposition ofmartial law. The Supreme Court announced Thurs-day that it would hold a hearing on the appeals ofthe South German States today (Saturday.) Thedevelopments gave rise to a decided movement amongother parties than the Fascists and Dr. Hugenberg'sNationalists to join forces in opposition to the Junk-er Cabinet. Chancellor von Papen made an offerto take over the Centrist and Democratic members ofthe former Prussian regime into a new coalitionMinistry, but the Cabinet voted to stand by Dr.Braun and Dr. Severing and peremptorily rejectedthe offer. Communist and Social Democratic lead-ers began, Thursday, an attempt to foment a gen-eral strike throughout the Reich, but the Governmentcountered these endeavors by seizing the headquart-ers, where strike leaflets were being printed, and bythreatening to execute every strike leader, if one iscalled. Despite the stern measures, additional pol-itical rioting dveloped in Berlin and in Saxony,Thursday, and two further deaths resulted.

Premier Benito Mussolini of Italy effected thefirst sweping Cabinet changes in his Fascist regimein more than three years, Wednesday, when ForeignMinister Dino Grandi, four other Ministers andeleven Under-Secretaries of State were relieved oftheir posts. The changes were made, according to theofficial explanation, in observance of the system of"rotation," under which it is desired to give talentedFascists equal opportunities to be Cabinet members.Premier Mussolini assumed the portfolio of ForeignAffairs himself, and also kept the Corporations post,vacated by Guiseppe Bottai. As he formerly heldthe Home Affairs portfolio, Signor Mussolini nowholds three Cabinet posts, in addition to the Premier-ship. Finance Minister Antonio Mosconi was re-placed by Guido Jung, former financial counselor tothe Italian Embassy at Washington. Balbino Giul-iano, Minister of Education, relinquished this officeto Francesco Ercole, rector of the University of Pal-ermo, and Alfredo Rocco, Minister of Justice, wasreplaced by Pietro de Francisci, rector of the Uni-versity of Rome. Announcement was made on thefollowing day of the appointment of Dino Grandi asItalian Ambassador to the Court of St. James's, helduntil his death six weeks ago by Antonio Bordonaro.As the Italian Emissary at London, Signor Grandiis expected to attend international conferences inEurope in behalf of the Italian Government, asPremier Mussolini is not likely to leave Italian soil.The change in the Foreign Ministry caused muchsurprise, and it was indicated in Rome, dispatchessaid, that Premier Mussolini does not wish to givethe impression that he repudiates the policy fol-lowed by Signor Grandi. "The Premier is said tofeel," a dispatch to the New York Times states,

"that the present is a difficult time in internationalrelations and renders it necessary for him to assumethe entire responsibilty of Italy's foreign policy."

Diplomatic negotiations for the development ofthe St. Lawrence waterway, carried on by the Amer-ican and Canadian Governments for more than adecade, were concluded last Monday, when a com-prehensive treaty was signed at a simple ceremonyin the State Department at Washington. The treatywill be subject to ratification by the United StatesSenate and the Canadian Parliament, and it is al-ready indicated that extensive hearings will be heldby the Foreign Relations Committee of the Senatebefore the project comes up for debate in that body.Announcements that the negotiations had been con-cluded were made by President Hoover to the Amer-ican people and by Premier Bennett to Canadians,and the treaty was promptly published. It marks,President Hoover said, "another step forward in this,the greatest internal improvement yet undertaken onthe North American Continent." Premier Bennettpointed out that the treaty is timely, as the costs ofconstruction are less than at any other time sincethe war. It will be, he added, the "enduring proofof friendship between the United States and Can-ada."

The treaty provides, Mr. Hoover explained, for theconstruction of a 27-foot waterway from the sea toall Canadian and American points an the GreatLakes. "Such a depth," he said, "will admit prac-tically 90% of ocean shipping of the world to ourLake cities in the States of New York, Ohio, Mich-igan, Indiana, Illinois, Wisconsin and Minnesota.Tts influence in cheapening transportation of over-seas goods will stretch widely into the interior fromthese points. Its completion will have a profoundlyfavorable effect upon the development of agricultureand industry throughout the mid-West. The largeby-product of power will benefit the Northeast. Thesebenefits are mutual with the great Dominion to thenorth."

Ten years will probably be required for completionof the project, Mr. Hoover indicated, and it is ex-pected that the normal growth of traffic in thisperiod will more than compensate for any diversionsfrom American railways or ports. Engineeringestimates place the cost of the project at $543,-000,000 of which approximately $272,000,000 are tobe expended by the United States. Part of the ex-penditures has already been made, and the totalamount of new funds to be expended by the UnitedStates is estimated $258,000,000. The cost will belowered somewhat, Mr. Hoover said, by the develop-ment of about 1,100,000 horsepower on the Americanside of the international line, the disposal of whichis reserved as a purely domestic question in theUnited States. The Canadian project of a two-stagedevelopment has been adopted, instead of the orig-inal American project of a single stage development,it was pointed out. "The project is of first import-ance to the whole Continent," Mr. Hoover said inconclusion. "The many and extremely complexengineering, legal, commercial and internationalproblems have been worked out by the represent-atives of both countries in a spirit of co-operationof which all North America can be justly proud."


Volume 135 Financial

T HERE have been no changes this week in thediscount rates of any of the central banks.Rates are 11% in Greece; 81/2% in Bulgaria; 7%

in Austria, Rumania, Portugal and Lithuania; 61/2%in Spain and in Finland; 6% in Colombia; 5.11%in Japan; 51/2% in Estonia and in Chile; 5% inGermany, Italy, Hungary and Czechoslovakia; 41/2%in Norway; 4% in Sweden, Denmark, Danzig andIndia; 31/2% in Belgium and in Ireland; 21/2% inFrance and in Holland, and 2% in England and inSwitzerland. In the London open market discountsfor short bills on Friday were 5/8@7/8% as against34@7/8% on Friday of last week, and 13-16@7/8%for three months' bills as against 7/8@15-16% onFriday of last week. Money on call in London onFriday was 1/2%. At Paris the open market ratecontinues at 17/8%, and in Switzerland at 11/2%.

THE Bank of France statement for the weekended July 8, reveals a decrease in gold hold-ings of 63,871,732 francs. The total of gold is now82,407,812,725 franc A in comparison with 56,646,-581,780 francs a year ago and 44,912,083,721 francstwo years ago. Credit balances abroad declined 67,-000,000 francs while bills bought abroad gained 64,-000,000 francs. Notes in circulation show a reduc-tion of 385,000,000 francs, reducing the total ofnotes outstanding to 81,547,569,635 francs. Thetotal of circulation last year stood at 77,953,685,160francs and the previous year at 72,293,027,455francs. A decrease appears in French commercialbills discounted of 312,000,000 francs while theitems of advances against securities and creditor current accounts show increases of 4,000,000francs and 290,000,000 francs respectively. The pro-portion of gold on hand to sight liabilities standsthis week at 76.31% as compared with 56.32% ayear ago and 51.10% two years ago. Below we fur-nish a comparison of the various items for threeyears:

BANK OF FRANCE'S COMPARATIVE STATEMENT.Changes Status as of for Week. July 15 1932. July 17 1931 July 18 1930.Francs. Francs. Francs. Francs.

Gold holdings_ _ Dec. 63,871,732 82,407,812,725 56,646,581,780 44.912,083,721Credit bale. abr'd_ Dec. 67,000,000 4,458,521,085 8,659,194,558 6,737,672,426aFrench commerc'l

bills discounted_ Dec.312,000,000 2,830,739,918 4,562,717,599 5,131,812,631bBUls bought abed Inc. 64,000,000 1,844,854.743 16,990,303,647 18,991,211,020Adv. agt. securs__ Inc. 4,000,000 2,794,362,854 2,839.214,961 2,725,894,225Note circulation_ _ Dec.385.000,000 81.547,569,635 77,953,685,160 72,293,027.455cred. curt'. accts _ Inc. 290,000,000 26,449 387,211 22,622,497.772 15,594,950,099proportion of goldon hand to sightliabilities__ -Ino. 0.01% 76.31% 56.32% 51.10%a Includes bills purchased in France. b Includes bills discounted abroad.

THE Bank of England statement for the weekended July 20 shows a gain of 217,610 in goldholdings which, together with a contraction of 512,-000 in note circulation, brought about an increaseof 730,000 in reserves. Gold holdings now total137,422,347 in comparison with 150,044,584 a yearago. Public deposits fell off 3,668,000 while otherdeposits rose 5,425,431. Of the latter amount 5,-264,725 was to bankers accounts and 160,706 wasto other accounts. The ratio of reserve to liabilityis slightly changed at 34.53% as compared with34.43% a week ago. The ratio was 49.3% last year.Loans on government securities increased 445,000and those on other securities 596,386. The latterconsists of discounts and advances which fell off463,997 and securities which increased 1,060,383.The discount rate is unchanged at 2%. Below wefurnish comparison of the various items for fiveyears:

Chronicle

BANK OF ENGLAND'S COMPARATIVE STATEMENT.

511

1932July 20

1931July 22

1930July 23

1929July 24

1928July 25

Circulation _a_ 365,758,000 356,098,249 384,137,682 367,332,145 136,015,840Public deposits 13,379,000 16,373,298 9,904,246 11,684,787 11,637,201Other deposits 121,751.271 92,943,628 103,472,542 97,493.380 106,838,109Bankers accounts. 88,023,928 60,179,250 67,265,603 61,009,441Other account8 33,727.343 32,764,378 .36,206,939 36.483,919

Governm't securities 66,230,656 34,375,906 51,355.547 50,781.855 28,278.885Other securities_ _ _ . 40,315,295 39,075,446 29,200,737 33,099,759 48,418,199Mut. & advances 14,307,079 7,098,770 7.098,343 9,426,937Securities 26,008,216 31,976,676 22,102,394 23,672,822

Reserve notes & coin 46,663,000 52,946,336 50,896,217 43.368,013 59,754,547Coln and bullion- .137,422.347 150,044,584 155,033,899 150,700,158 176,030,387Proportion of reserve

to liabilities 34.53% 49.3% 44.89% 39.72% 5054%Bank rate_ 2% 355% 3% 335% 45.4%a On Nov 29 1928 the fiduciary currency was amalgamated with Bank of England

note issues adding at that time 234,199,000 to the amountBa oink of Englandnotes outstanding.

THE Bank of Germany in its statement for thesecond quarter of July records a decline in goldand bullion of 52,028,000 marks. The total of bul-lion is now down to 754,109,000 marks, in com-parison with 1,366,092,000 marks a year ago and2,618,731,000 marks two years ago. A decrease ap-pears in reserve in foreign currency of 1,322,000marks, in bills of exchange and checks of 166,656,-000 marks, in other assets of 3,368,000 marks andin other daily obligations of 63,092,000 marks.Notes in circulation contracted 80,301,000 marks,reducing the total of the item to 3,796,300,000marks. Circulation a year ago aggregated 4,161,-809,000 marks and two years ago 4,186,916,000marks. The items of silver and other coin,notes on other German banks, advances, invest-ments and other liabilities register increases of 37,-920,000 marks, 2,303,000 marks, 41,875,000 marks,7,000 marks and 2,124,000 marks respectively. Nochange occurred in the item of deposits abroad. Theproportion of gold and foreign currency to notes cir-culation is down to 23.5%, as compared with 35.8%a year ago. A comparison of the various items forthree years is shown below:

REICHSBANK'S COMPARATIVE STATEMENT.Changesfor July 15 1932 July 15 1931 July 15 1930

Assds Reichsmarks. Retchsmarks. Relehrmarks. Reichrmarb.52,028,000 754,109,000 1,366,092,000 2,618,731,0000! which depos. abr'd.No change 87,150,000 81,652,000 149,788,000Res've in torn curl

Reerve in font curr_ _ _ _Dec. 1,322,000 137,549,000 124,367,000 183,851.000Bills of exch & checks._Dec.166,656,000 2,986,854,000 2,753,439,000 1,486,029,000Silver and other coin_ _Inc. 37,920,000 252,653,000 78.723.000 162.162,000Notes on 0th. Ger. bks.Inc. 2,303,000 8,688,000 9,221,000 20,168.000Other assets Dec. 3,368,000 764,561,000 856,386.000 729,431,000

LiabilitiesNotes in circulation_ _ _Dec. 80,301,000 3,796,300,000 4,161,809,000 3,186,916,0000th. daily rnatur. oblig.Dec. 63,092,000 338,621,000 307,124,000 426,712,000Other liabilities Inc. 2,124,000 712,993,000 720,240.000 264.122,000Propor. of gold & torn

curr. to note circul'n 0.9% 23.5% 35.8% 67.0%

inp ATES for money i nthe New York market werenot materially changed this week from previous

levels. The easy tendency occasioned by the lackof demand for accommodation and the open mar-ket operations of the Federal Reserve Banks wasstill in evidence, and some shading of quotations ontime loans was reported. Call loans on the NewYork Stock Exchange were 2% for all transactions,whether renewals or new loans. Banking housefunds were offered every day in the unofficial or"street" market at 1%, or a concession of 1% fromthe official rate. An offering of $75,923,000 in 91-day United States Treasury discount bills wasawarded Monday at an average discount of 0.40per cent, this figure comparing with an average fig-ure of 0.39 per cent on a similar issue awarded aweek earlier. Brokers loans against stock and bondcollateral declined $13,000,000 for the week to Wed-nesday night in the compilation of the Federal Re-serve Bank of New York. Gold movements for thesame weekly period consisted of exports of $6,006,-000, imports of $2,035,000, and a net decrease of$18,247,000 in the stock of metal held earmarked forforeign account.


512 Financial Chronicle .July 23 1932

DEALING in detail with call loan rates on theStock Exchange from day to day, 2% wasthe ruling quotation all through the week both fornew loans and renewals. There has been no changein the market for time money during the week.Rates are quoted nominally at 11/4@11/2% for alldates. The market for prime commercial papercontinues good but offerngs are scarce and dealersare somewhat handicapped on that account. Quo-tations for choice names of four to six months' ma-turity are 21/2@23/4%. Names less well known are3%. On some very high class 90-day paper occas-ional transactions at 2% were noted.

pRIME bankers' acceptances have continued quietthis week. Only a limited number of bills wereavailable and these were quickly disposed of. Ratesare unchanged. The quotations of the AmericanAcceptance Council for bills up to and includingthree months are 7/8% bid, % asked; for fourmonths, 1% bid and 7/8% asked; for five and sixmonths, 11/4% bid and 11/8% asked. The bill buyingrate of the New York Reserve Bank is 1% for 1-90days; 11/8% for 91-120 days, and 11/2% for maturitiesfrom 121-180 days. The Federal Reserve Banksagain show a decrease in their holdings of accept-ances, the total having dropped from $61,621,000 to$51,902,000. Their holdings of acceptances for for-eign correspondents also decreased, falling from$68,541,000 to $65,735,000. Open-market rates foracceptances are as follows:

SPOT DELIVERYBid Asked Bid Asked Bid Asked180 Days

150 Days 120 DaysPrime eligible bills___-11/4

11/4 11/4 1 Vii 1 7/8Bid Asked Bid Asked Bid Asked90 Days 60 Days 30 Days

Prime eligible bills_-_- 7/8 3/4 7/8 3/4 Va 3/4, FOR DELIVERY WITHIN THIRTY DAYS

Eligible member Banks 1 Y4 % bidEligible non-member banks 11/4% bid

THERE have been no changes this week in therediscount rates of the Federal Reserve Banks.The following is the schedule of rates now in effectfor the various classes of paper at the different Re-serve banks:DISCOUNT RATES OF FEDERAL RESERVE BANKS ON ALL CLASSES

AND MATURITIES OF ELIGIBLE PAPERFederal Reserve Bank Rate in

Effect onJuly 22

DateEstablished

PreviousRate

Boston 31/2 Oct. 17, 1931--

21/2New York 21/2 June 24, 1932 3Philadelphia 31/2 Oct. 22, 1931 3Cleveland 31/2 Oct. 24, 1931 3Richmond 31/2 Jan. 25, 1932 4Atlanta 31/2 Nov. 14, 1931 3Chicago 21/2 June 25, 1932 31/2St. Louis 31/2 Oct. 22, 1931 21/2Minneapolis 31/2 Sept. 12, 1930 4Kansas City 31/2 Oct. 23, 1931 3Dallas 31/2 Jan. 28, 1932 4San Francisco 31/2 Oct. 21, 1931 2'/a

STERLING exchange is dull, though ruling onaverage much better than the closing quotationson Friday of last week, when a wide selling move-ment of sterling began in Paris. Following the closeof the European markets on Monday foreign ex-change operators reported that France was sellingfrancs and buying sterling at a moderate rate. Thismovement resulted in lifting the market quotationsfor sterling above the closing rate on Friday of lastweek, which was 3.541/2 for cable transfers. OnThursday French operators reversed their positionand began to sell sterling, with the result that themarket again eased off. The range this week hasbeen between 3.541/8 and 3.565/8 for bankers' sightbills, compared with a range of between 3.581/8down to 3.537/8 last week. The range for cable trans-fers has been from 3.54% to 3.567/8, compared witha range of from 3.5814 down to 3.54 a week ago.

There is no essential change in the sterling situationfrom the past several weeks. The market has dis-covered from experience that the London bankingauthorities are disinclined to permit the rate to fallbelow 3.55 or thereabouts, as they are equallyaverse to permiting it to move much higher. Withina moderate range of fluctuation the Britsh author-ities pay no head to the quotations.Lower quotations for sterling at the present time

do not indicate that funds are moving from Londonto other centers. On the contrary, funds continueto seek the London market and money is in greatabundance there. Nevertheless it is equally truethat for the past few weeks there has been a steadyflow of funds from London and the other Europeancenters to the New York security market, althoughup to the present time the volume has not beensignificant. Foreign exchange operators are hesi-tant to take a technical position with regard tosterling, as it is impossible to discover the plansof the British financial authorities. The only thingdefinitely known is that Neville Chamberlain,Chancellor of the Exchequer, 'recently stated pos-itively in the House of Commons that Great Britainhas no intention of returning immediately to thegold standard. Nevertheless bankers are disinclinedto be guided by this statement, as the opinion pre-vails widely that there will be a return to goldsooner than expected. A few weeks ago on the an-nouncement of the great conversion program for theBritish War 5's to a 31/2% basis, foreign exchangeoperators both here and in Europe took alarm, fear-ing that the immensity of the operation would ne-cessitate inflation, an increase in the fiduciary is-sue, and probably some loss of gold. The amountto be converted totals 2,084,944,000. It was fearedthat a great many holders of the war 5's would de-mand redemption rather than conversion. Theexact status of the conversion will not be knownuntil September 30, when the right to demand cashfor holdings will lapse. However, all dangers whichthe market feared are past, for on Monday it wasannounced from London that the ultimate positionof sterling will not be adversely affected by any pos-sibility of currency inflation. Of 1,130,000, appli-cations received in respect of the conversion proj-ect up to the close of business on Saturday last,more than 90% have assented to the conversion, andfurther assents are expected. However, even shouldthe 90% ratio persist, approximately 200,000,000of cash would be required.Foreign exchange operators are also hesitant to

take a technical position until after the OttawaBritish Empire economic conference comes to aclose, as important developments are likely to resultfrom the conference bearing directly on the futureof stering. There can be no doubt that the Bankof England and the British Treasury are consist-ently preparing to return to the gold standard, butno decisive steps in this direction can be.consistentlytaken until after the deliberations at Ottawa. Again,the market is puzzled over the probable trend ofthe Bank of England discount rate. The present2% rate is the lowest since 1897 and is as low asthe Bank has ever posted. There is neverthelessrenewed talk of a further reduction in the rate to11/2%, as open market rates in London continueeasy and clearly out of line with the officialrate. Call money against bills for several weeks hasbeen comfortable around %% to 3/4%, the lowerrate generally prevailing. Two-and three-monthsbankers' bills are 3/4% to 7/8%, four-months bills are


Volume 135 Financial Chronicle 51315-16% to 1%, and six-months' bills 11/8% to 1%%.The Bank of England and the British Treasury con-tinue to buy gold in small amounts in the openmarket, paying the difference between the Bank'sofficial buying rate of 84s 10d and the market prem-ium through the Sterling Equalization Account.This week gold seems to have sold in the Londonopen market at between 115 s 5d and 11,6 s id. OnTuesday it would seem that the British Treasurybought 172,500 gold in the open market. On Wed-nesday the Treasury bought 250,000 in the openmarket. On Thursday the Bank of England bought1,521 in gold bars. On Friday the Treasury bought150,000 of gold. This week the Bank of Englandshows an increase in gold holdings of 217,610, thetotal standing at 137,422,347 on July 20, whichcompares with 150,014,584 a year ago.At the Port of New York the gold movement for

the week ended July 20, as reported by the FederalReserve Bank of New York, consisted of imports of$2,035,000, of which $1,742,000 came from Canadaand $293,000 chiefly from Latin American coun-tries. Exports totaled $6,006,000 to France. TheReserve Bank reported a decrease of $18,247,000 ingold earmarked for foreign account. In tabularform the gold movement at the Port of New Yorkfor the week ended July 20, as reported by theFederal Reserve Bank of New York, was as follows:

GOLD MOVEMENT AT NEW YORK, JULY 14-JULY 20, INCL.Imports Exports

$1,742,000 from Canada $6,006,006 to France293,000 chiefly from Latin

American countries

$2,035,000 total $6,006,000 totalNet Change in Gold Earmarked for Foreign Account

Decrease: 618,247,000

The above figures are for the week ended Wednes-day evening. On Thursday $119,500 of gold wasreceived from Mexico. There were no exports ofthe metal on that day but gold earmarked for for-eign account increased $1,740,900. Yesterday therewere no imports of gold, but $6,000,700 was ex-ported to France, which was offset by a decrease oflike amount in gold held earmarked for foreignaccount. During the week approximately $4,184,000of gold was received at San Francisco from Japan.Canadian exchange continues at a severe dis-

count, although there was a gradual improvementin favor of Montreal toward the close of the week.On Saturday last Montreal funds were 13 9-16%discount, on Monday at 14%, on Tuesday at 13%70,on Wednesday 131/8%, on Thursday 12 11-16%, andon Friday at 12 11-16%.

Referring to day-to-day rates, sterling exchangeon Saturday last was dull but steady. Bankers'sight was 3.541/[email protected]%; cable transfers 3.54%@3.541/2. On Monday trading was quiet, with thepound fractionally firmer. The range was 3.54%@3.55 for bankers' sight and 3.543/[email protected]/4

for cabletransfers. On Tuesday sterling was firmer. Bank-ers' sight was 3.551/[email protected]/4 ; cable transfers 3.555/[email protected]%. On Wednesday sterling continued to ad-vance. The range was 3.561/[email protected]% for bankers'sight and 3.561/[email protected]/8 for cable transfers. OnThursday sterling was dull and a chade easier.Bankers' sight was 3.551/[email protected]%; cable transfers3.551/[email protected]/2. On Friday sterling was easier; therange was 3.54 [email protected]/8 for bankers' sight [email protected]% for cable transfers. Closing quota-tions on Friday were 3.551/8 for demand and 3.55%for cable transfers. Commercial sight hills finished

at 3.543/4; 60-day bills at 3.533,/4; 90-day bills at3.531/2; documents for payment (60 days) at 3.53%,and seven day grain bills at 3.54%. Cotton andgrain for payment closed at 3.543/4.

EXCHANGE on the Continental countries iseasier than at any time in many weeks. Asa matter of fact all the leading currencies of theworld with the exception of Swiss francs and Hol-land guilders are below par with respect to thedollar. German marks are steady, as all exchangeoperations in Germany are under the strict controlof the Reichsbank actng through governmental de-crees. Political events in Germany, account ofwhich will be found on another page, can have nobearing on the course of mark exchange. As re-peatedly pointed out here, the Reichbank under thebanking law of 1924 cannot reduce its rediscountrate below 5% while its ratio of reserves is below40%. The market confidently expects that in viewof the altered situation since the Lausanne confer-ence, a way will be found for the Reichsbank tolower its rediscount rate to bring it in line withthe trend of money rates in all the large centers.Reports indicating such a step are more persistentthis week. According to the bank law the Reichs-bank would require the consent of the Bank forInternational Settlements to effect a reduction inits rediscount rate. Dr. Hans Luther, president ofthe Reichsbank, is reported to have discussed thediscount question at Basle, but such discussion isnot enough because under The Hague agreementthe Reich Government itself must secure the consentof the Bank for International Settlements to anyalteration in the 1924 bank law. It is understoodthat the Bank for International Settlements doubtson intrinsic grounds the wisdom of reduction of theReichsbank rate, and the market recalls that theReichsbank's cut to 7% in December was unfavor-ably criticized at Basle. From the point of viewof Berlin, money rates there are considered rela-tively easy. The private discount rate is 41/2%and this rate is believed to foreshadow a reductionin the Reichsbank discount rate. The DeutscheBank und Disconto-Gesellschaft has estimated thatthe deficit in Germany's devisen balance, whichmust be made up by the export surplus for the cur-rent year, will amount to between rm

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